ACT1104 - Intermediate Accounting 1

Practice Midterm Exam

1. Entity A had the following items listed in its trial balance at Dec. 31, 2021:

Currency and coins P 650

Balance in checking account 2,600
Customer checks waiting to be deposited 1,200
Treasury bills, purchased on 11/2/21, mature on
4/30/22 3,000
Marketable equity securities 10,200
Commercial paper, purchased on 11/2/21, mature
On 1/30/22 5,000

What amount will Entity A include in its Dec. 31, 2021 statement of financial position as cash
and cash equivalents?
a. P 7,450
b. P 9,450
c. P 12,450
d. P 19,650

2. Bueno’s ledger showed a balance in its cash account at Dec. 31, 2021 of P341,125 which was
determined to consist of the following:

Petty Cash Fund P 1,800

Cash per bank statement with a check for
P 3,000 still outstanding 168,375
Notes receivable in the possession of a collecting
Agency 12,500
Undeposited receipts, including postdated check
For P5,250 and traveler’s check for P 5,000 89,000
Bond sinking fund-cash 63,750
IOUs signed by employees 2,475
Paid vouchers not yet recorded 3,225
Total P341,125

At what amount should Cash on hand and in bank be reported on Bueno’s statement of financial
position?

3. In the course of your audit of the Makati Corporation, its controller is attempting to determine
the amount of cash to be reported on its December 31, 2022 statement of financial position. The
following information is provided:

a. Commercial savings account of P1,200,000 and a commercial checking account balance

of P1,800,000 are held at PS Bank.

b. Travel advances of P360,000 for executive travel for the first quarter of the next year.

c. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of
long-term debt.

d. Petty cash fund of P10,000

e. An I.O.U from a company officer in the amount of P40,000

 f. A bank overdraft of P250,000 has occurred at one of the banks the company uses to
deposit its cash receipts. At the present time, the company has no deposits at this bank.

g. The company has two certificates of deposit, each totaling P1,000,000. These certificates
of deposit have maturity of 120 days.

h. Makati Corp. has received a check dated January 2, 2023 in the amount of P150,000.

i. Makati Corp. agreed to maintain a cash a balance of P200,000 at all times at PS Bank to
ensure future credit availability.

j. Bills and coins on hand amounted to P15,000

k. Cryptocurrencies valued at P100,000

Based on the given information and the result of your audit, how much will be reported as cash
and cash equivalents at December 31, 2022?

Use the following information for the next four questions.

You obtained the following information on the current account of Love Company during your
examination of its financial statements for the year ended December 31, 2020.

The bank statement on November 30, 2020 showed a balance of P76,500. Among the bank
credits in November was a customer's note for P25,000 collected for the account of the company
which the company recognized in December among its receipts. Included in the bank debits
were the cost of checkbooks amounting to P300 and a P10,000 check which was charged by the
bank in error against the Love Co. account. Also, in November you ascertained that there were
deposits in transit amounting to P20,000 and outstanding checks totaling P42,500.

The bank statement for the month of December showed total credits of P104,000 and total
charges of P51,000. The company’s books for December showed total receipts of P183,900,
disbursements of P101,800 and a balance of P121,400. Bank debit memos for December were:
No. 143 for service charges, P400 and No. 145 on a customer’s returned check marked “DAIF”
for P6,000.

On December 31, 2020 the company placed with the bank a customer’s promissory note with a
face value of P30,000 for collection. The company treated this note as part of its receipts
although the bank was able to collect on the note only in January, 2021.

A check for P990 was recorded in the company cash payments books in December as P9,900

Based on the application of the necessary audit procedures and appreciation of the above data,
you are to provide the answers to the following:

4. How much is the deposit in transit as of December 31, 2020?

a. P84,900
b. P44,900
c. P54,900
d. P34,900

5. How much is the outstanding checks as of December 31, 2020?

a. P99,400
b. P90,490
c. P90,790
d. P47,990
6. How much is the adjusted bank receipts for December?
a. P158,900
b. P118,900
c. P128,900
d. P108,900

7. How much is the adjusted book disbursements for December?

a. P56,490
b. P 99,290
c. P98,990
d. P107,900

The accountant for the Muntinlupa Company assembled the following data:

June 30 July 31
Cash Account Balance P 15,822 39,745
Bank Statement Balance 107,082 137,817
Deposit in Transit 8,201 12,880
Outstanding Checks 27,718 30,112
Bank Service Charge 72 60
Customer check deposited July 10, returned
by bank on July 16 marked NSF, and redeposited
Immediately; no entry made on books for return
or redeposit 8,250
Collection by bank of company’s notes receivable 71,815 80,900

The Bank statements and the company’s cash records show these totals:
Disbursement in July per bank statement P218,373
Cash receipts in July per Muntinlupa’s Books 236,452

Based on the application of the necessary audit procedures and appreciation of given
information, you are to provide the answers of the following:

8. How much is the adjusted cash balance as of June 30?

9. How much is the adjusted bank receipts for July?

10. How much is the adjusted book disbursements for July?

11. How much is the adjusted cash balance as of July 31?

12. How much is the cash shortage as of July 31?

13. Bantay Company’s Unadjusted Trial Balance as of december 31, 2023, includes the
following accounts:

Debit Credit
Accounts Receivable 1,000,000
Allowance for Doubtful Accounts 40,000
Sales 15,000,000
Sales Returns and allowances 700,000

Bantay Company estimates its bad debts to be 1 1/2 % of net sales. Determine its bad debts
expense for 2023?
 a. 214,500
b. 272,000
c. 192,500
d. 201,500

14. An Analysis and Aging of Nard’s Corp. accounts receivable at December 31, 2023, disclosed
the following:

Amounts estimated to be uncollectible 1,800,000

Accounts Receivable 17,500,000
Allowance for Doubtful account 1,250,000

What is the net realizable value of Nard’s Corp. receivables at December 31, 2023?

15. The following accounts were taken from Cervantes Inc’s statement of Financial Position at
December 31, 2023.

Debit Credit
Accounts Receivable 4,100,000
Allowance for Doubtful Accounts 100,000
Net Credit Sales 7,500,000

If doubtful accounts are 3% of Accounts receivable, determine the bad debts expense to be
reported for 2023.
a. 23,000
b. 123,000
c. 223,000
d. 225,000

Wright Company reported accounts receivable, net of allowance for doubtful accounts of
P50,000, amounting to P450,000 on December 31, 2022. Data for years 2019 to 2022 are
provided to you by the company:

Year Credit Sales Write-offs Recoveries

2019 750,000 P7,500 Zero
2020 1,125,000 19,000 1,350
2021 1,475,000 26,000 1,250
2022 1,650,000 32,500 2,400

During the 2023, the company reported sales of P5,000,000 of which 40% is on account,
collected P1,500,000 from customers on account (excluding recoveries), written off uncollectible
accounts amounting to P40,000 and recovered P2,500 of accounts written off as uncollectible in
prior years.

Doubtful accounts are provided for as a percentage of credit sales. The company calculated the
percentage annually by using the experience of the three years prior to the current year.

Requirements: Based on the above information, compute the following—

16. The percentage to be used in computing the doubtful accounts expense for 2023 is…
a. 1.60%
b. 1.71%
c. 1.76%
d. 1.86%
17. The company should report doubtful accounts expense for 2023 amounting to…
a. 21,700
b. 34,200
c. 51,300
d. 85,500

18. The amount to be reported as accounts receivable on the statement of financial position ( Net
Realizable value of Accounts Receivable) on December 31, 2023, is…
a. 863,300
b. 913,300
c. 925,800
d. 960,000

On Dec. 31, 2020, Entity U Finished consultation services and accepted in exchange a
promissory note with a face value of P1,200,000, a due date of Dec. 31, 2023, with a stated rate
of 5%, with interest receivable at the end of each year. The fair value of the services is not
readily determinable and the note is not readily marketable. Under the circumstances, the note is
considered to have an appropriate imputed rate of interest of 10%

19. At what amount shall the note be initially measured on Dec. 31, 2020?
a. 1,200,000
b. 1,952,768
c. 1,050,774
d. 1,019,012

20. How much is the discount on notes receivable?

a. 149,214
b. 152,768
c. 60,000
d. 45,077

21. Entity D uses the net price method of accounting for cash discounts. In one of its transactions
on Dec. 15, the entity sold merchandise with a list price of P500,000 to a customer who was
given a trade discount of 20% and 15%. Credit terms were 2/10, n/30. The goods were shipped
FOB destination, freight collect. On Dec. 20, the client returned damaged goods originally billed
at P60,000. Total freight charges paid by the buyer amounted to P7,500. What is the net
realizable value of this receivable on Dec. 31?
a. 265,700
b. 272,500
c. 270,000
d. 280,000

22. On December 31, 2023, a typhoon damaged a warehouse of Genevere Corporation. The
entire company and many accounting records stored in the warehouse were completely
destroyed. Although the inventory was not insured, a portion could be sold for scrap. Through
the use of microfilmed records, the following data were gathered.

Inventory, January 1, P 500,000; Purchases, P 2,200,000; Cash sales, P273,600; Collection of

accounts receivable (including the amount of recovery), P 2,520,000; Accounts
receivable-January 1; P 210,000; Accounts written off, P 9,600; Recovery of accounts written
off; P 3,600; Allowance for bad debts-January 1, P 10,500; Accounts receivable, December 31,
2023, (net of required allowance); P 342,000; Sales returns, P 36,000; Sales discounts, P14,400;
Purchase returns, P60,000; Purchase discounts, P 12,000; Freight in, P 21,600; Salvage due of
inventory, P 60,000; Gross profit percentage on sales, 32%. The Company consistently measures
doubtful accounts in percent of account receivables.

How much is the value of inventory loss ___________.

a. 513,600
b. 519,600
c. 538,080
 d. 574,080

23. CFC Co. recorded the following pertaining to raw materials during January 2013:
Units
Date Received Cost Issued On Hand
1/1 Inventory P 8.00 3,200
1/11 Issue 1,600 1,600
1/22 Purchase 4,800 P 9.60 6,400
The moving-average cost of the raw materials inventory at January 31, 2013 is __________.
a. P8.80
b. P8.96
c. P9.20
d. P9.60

Entity A is preparing its March 31, 2021 bank reconciliation. The following information was
determined:
a. The cash balance per books is Php280,000 while the cash balance per bank statement is
Php320,000.
b. Credit memo – Php20,000
c. Debit memo – Php15,000
d. Deposits in transit – Php75,000
e. Outstanding checks – Php25,000
f. The disbursements per books are overstated by Php45,000.
g. The bank debits are understated by Php40,000.

How much is the adjusted balance of cash?

25. The closing inventory of Pippen Corp. amounted to P2,580,000. The following items were
not included in this inventory amount:

a. Purchased goods, in transit, shipped FOB destination invoice price P30,000 which
included freight charges of P 2,000
b. Goods held on consignment, cost P50,000
c. Goods sold to a customer, in transit, shipped FOB destination, cost P20,000. Shipping
cost to customer, P2,000.
d. Purchased goods in transit, terms FOB seller, invoice price P38,000, freight cost, P3,000
e. Goods out on consignment, cost P43,000
f. Goods sold to a customer, in transit, FOB Shipping point, cost P36,000

The adjusted cost of Pippen Corp’s. Inventory at Dec. 31 should be

a. 2,570,000
b. 2,681,000
c. 2,684,000
d. 2,686,000

26. You are given the following information relating to Pau Trading, a general merchandising
company:
Rate of gross profit on sales 20%
Accounts receivable, Dec 31, 2022 Php 80,000
Collections on accounts receivable in 430,000
2023
Cost of goods available for in 2023 460,000
Merchandise inventory, Dec 31, 2023 100,000

Assuming all sales were on account, what was the company’s Accounts Receivable balance on
December 31, 2023?
 27. The following data are given for Mari Inc.:
Cash Credit Total
Cost of sales Php 50,000 Php 450,000 Php 500,000
Cash received from customers 65,000 585,000 650,000

Assuming merchandise was marked to sell as follows: Cash sales at 30% above cost and credit
sales, at 40% above cost, all of which are collectible. The balance of accounts receivable at the
end of the period was _____.
a. Php12,500
b. Php45,000
c. Php135,000
d. Php147,500.

28. PJ Company showed the following information related to the accounts receivable in order to
estimate bad debts through the use of the aging. The credit of the Company is 30 days on the
average.

Age of Receivables Amount

Under 30 days Php 4,000,000
31-60 days 1,500,000
61-90 days 1,000,000
91-120 days 500,000
121-150 days 200,000
151-180 days 100,000

The Company based on experience has the following percent of collectability:

Accounts which are overdue for less than 30 days 97%
Accounts which are overdue 31-60 days 90%
Accounts which are overdue 61-90 days 75%
Accounts which are overdue 91-120 days 55%
Accounts which are overdue 121-150 days 30%
Accounts which are overdue for over 150 days 25%

What is the carrying value of accounts receivable for statement of financial position purposes?

29. The Kidrock Company sells Product A. During the year, the company moved to a new
location, the inventory records for Product A were misplaced. The bookkeeper has been able to
gather some information from the sales records and gives you the date shown below:

July sales: 57,200 units at P 100

July purchases:
Date Quantity Unit Cost
July 5 10,000 P 65.00
9 12,500 62.50
12 15,000 60.00
23 14,000 62.00
On July 31, 16,000 units were on hand with a total value of P 988,000. Kidrock has always used
a periodic FIFO inventory costing system. Gross profit on sales for July was P2,058,750.

What is the total cost and unit cost, respectively, of the beginning inventory (July 1)?
a. Php1,345,400 and Php62.00
b. Php1,367,100 and Php63.00
c. Php1,353,538 and Php62.38
d. Php1,450,000 and Php66.82.
30. Gold Manufacturing Company was organized in 2022 to produce a single product. The
company’s production and sales records for the period 2022-2024 are summarized below:

Production Sales
No. of Units Production Costs No. of Units Sales Revenue
2022 340,000 P 1,530,000 200,000 P 1,870,000
2023 310,000 1,612,000 290,000 2,300,000
2024 270,000 1,539,000 260,000 2,210,000

All units produced in a given year are assigned the same average cost. Determine the gross
profit in 2024 using FIFO cost flow.
a. 1,699,000
b. 2,688,000
c. 3,712,000
d. 1,402,000

31. Refer to no. 30, compute the amount of ending inventory (FIFO)
a. 808,000
b. 832,000
c. 969,000
d. 865,300

32. Refer to no. 30, compute the amount of ending inventory (weighted average method)
a. 808,000
b. 832,000
c. 969,000
d. 865,300

33. Inventory on hand on December 31, 2023 for Inducil Company is valued at a cost of P
950,000. The following items were not included in this inventory amount. The entity’s selling
price is 140% of cost.

Item 1: Purchase goods in transit, shipped FOB destination, invoice price P30,000 which
includes freight charge of P1,500.
Item 2: Goods held on consignment by Inducil Company at a sales price of P28,000, including
sales commission of 20% of the sales price.
Item 3: Goods sold to Donato Company, under terms FOB destination, invoiced for P18,500
which includes P1,000 freight charge to deliver the goods. Goods are in transit.
Item 4: Purchased goods in transit, terms FOB shipping point, invoice price P50,000, freight
cost, P2,500.
Item 5: Goods out on consignment to Manila Company, sales price P35,000, shipping cost of P
2,000.

What is the adjusted cost of the inventory on December 31, 2023?

a. Php1,040,000
b. Php1,042,000
c. Php1,043,000
d. Php1,073,000
34. The Carmela Corp. applies the lower of cost or net realizable value (NRV) inventory. Data
regarding the items in work-in-process inventory are shown below:
Shorts Pants
Historical Cost P 56,640 P 90,000
Selling price 108,800 108,000
Estimated cost to complete 14,400 20,400
Replacement cost 50,400 95,400
Normal profit margin as a 25% 10%
percentage of selling price

Under the lower of cost or NRV rule, the pants should be valued at ___________.
a. Php76,800
b. Php87,600
c. Php90,000
d. Php95,400

35. Under the lower of cost or NRV rule, the shorts should be valued at ___________.

36. Uniliver Inc. uses the average retail inventory method to account for inventory. The
following information relates to 2023 operations:
Average
Cost Retail
Beginning inventory and Purchases P600,000 P 920,000
Net markups 40,000
Net markdowns 60,000
Sales 780,000

The amount to be reported as cost of sales for 2023 is ____________. (Round off cost rate to 8
decimal places.
a. Php480,000
b. Php487,500
c. Php520,000
d. Php525,000

37. Alpha Company had a beginning inventory as at January 1, 2023 of P 750,000. Purchases
during the year amounted to P 3,750,000; while sales totaled P 4,800,000. Ending inventory
based on a physical inventory taken on December 31, 2023 was P 862,500. Alpha has a gross
profit on sales of 25% in recent years. There were indications of inventory losses due to
pilferages.

The estimated cost of inventory loss at December 31, 2023 is ____________.

38. Conningware Corporation uses the average retail method for its merchandise inventory. Data
for 2023 indicated by the firm’s accounting records are as follows: inventory, January 1, 2023, P
150,250 at cost and P 375,000 at retail; net purchases, P 1,339,750 at cost and P 2,500,000 at
retail; net markups, P 175,000; net markdowns, P 50,000; sales, P 2,375,000. The estimated cost
of goods sold for 2023 is __________. (Round off Cost rate to two decimal places)
a. Php1,139,250
b. Php1,179,562
c. Php1,165,000
d. Php1,170,000
39. Gecko Company, organized in 2021 has used the average method of inventory valuation. Net
income reported under this method is shown below:

2021 2022 2023

Net Income: 180,000 250,000 350,000
Inventory, end:
Average 600,000 750,000 1,000,000
FIFO 620,000 1,000,000 1,200,000

If the FIFO method of inventory valuation was used, how much would be the total net
income for the three years?
a. 980,000
b. 1,000,000
c. 1,230,000
d. 1,350,000

40. On October 15, 2023, a fire destroyed all the stock of equipment of Banda Center in its
rented stockroom. The records of the firm show the following information

2020 2021 2022 2023

Sales 925,000 880,000 790,000 710,000
Cost of sales 758,500 739,200 679,400 624,800
Gross Profit 166,500 140,800 110,600 85,200

Inventory P 130,500
Sales, January 1 to October 16, 2024 960,000
Sales returns and allowances 15,000
Purchases, January 1 to October 15, 2024 890,000
Purchase returns and allowances 12,000
Cost of stock in display room, not destroyed 85,000

The estimated cost of merchandise lost in the fire of October 15, 2024
a. 120,250
b. 48,600
c. 167,500
d. 252,500

Use the following information for the next three questions.

The Dec. 31, 2023 statement of financial position of Lodi Corp. showed Accounts receivable of
P500,000 and Allowance for Bad Debts of P48,000. Following is a summary of accounts
receivable transactions recorded by the entity in 2024:

Credit sales during the year P3,120,000

Accounts collected during the year 3,008,000
Accounts written off as uncollectible 52,000
Recoveries of accounts written off in 2,160
the previous year
On Dec. 31, 2024, an aging of accounts receivable indicated the following:

% of total Probability
Age group receivable amount of collection

Less than 60 days 70% 98%

Between 61 and 120 days 18 85
Between 121 and 180 days 10 50

Over 180 days 2 0

QUESTIONS:
Based on the given information and the result of your audit, answer the following:
41. The accounts receivable as of Dec. 31, 2024 is _____
a. P550,916
b. P548,800
c. P546,684
d. P431,200

42. The allowance for doubtful accounts as of Dec. 31, 2024 is ______
a. P51,156
b. P50,764
c. P40,040
d. P50,960

43. The doubtful account expense as of Dec. 31, 2024 is _______

a. P64,240
b. P65,920
c. P64,000
d. P50,680

44. The cash balance of Winter Company had the following information:
Descriptions November December
Cash balances per book P1,200,000 P1,450,000
Cash balances per bank 1,400,000 1,838,500
Bank service charges 12,000 11,500
NSF checks 100,000 150,000
Notes collected by the bank 350,000 410,000
Deposit in transit 320,000 ?
Outstanding checks ? 185,000
Book debit error 25,000 -
Book credit error 50,000 70,000
Bank credit error - 65,000
Bank debit error 75,000 90,000
Bank receipts 2,550,000
Book disbursements 1,920,000

Note: errors were corrected in the following period. No other errors affecting the cash balances.
Statement 1: The amount of deposit in transit as of December 31, 2022 is P90,000.
Statement 2: The amount of outstanding checks as of November 30, 2022 is P272,000.
A. B. C. D.
Statement 1 False False True True
Statement 2 False True False True
45. On July 1, 2021, Kay Company sold equipment to Mando Company for P1,000,000. Kay
accepted a 10% note receivable for the entire sales price.

This note is payable in two equal installments of P500,000 plus accrued interest on December
31, 2021 and December 31, 2022.

On July 1, 2022, the entity discounted the note at a bank at an interest rate of 12%

What amount of cash was received from the discounting of note receivable?
a. 484,000
b. 493,500
c. 503,500
d. 517,000

46. On December 31, 2021, Chang Company sold a machine in the ordinary course of business
to Door Company in exchange for a noninterest bearing note requiring ten annual payments of
P1,000,000.

The entity made the first payment in December 31, 2021. The market interest rate for similar
notes at date of issuance was 8%.

What amount should be recognized as sales revenue?

a. 7,250,000
b. 5,000,000
c. 6,250,000
d. 8,000,000

47. On December 31, 2021, what is the carrying amount of the note receivable?
a. 4,500,000
b. 4,600,000
c. 6,250,000
d. 6,710,000

48. What amount should be reported as interest income for 2022?

a. 580,000
b. 720,000
c. 500,000
d. 625,000

49. What is the carrying amount of the note receivable on December 31, 2023
a. 5,290,000
b. 5,750,000
c. 5,250,000
d. 6,250,000
50. The auditor for Samantha, Inc. examined the petty cash fund immediately after the close of
business, July 31, 2018, the end of the company’s natural business year. The petty cash custodian
presented the following during th count:

Currency P3,650
Petty cash vouchers:
Postage 420
Office supplies expense 900
Transportation expense 340
Computer repairs 800
Advances to office staff 1,500
A check drawn by Samantha, Inc., payable to the
Petty cash custodian 7,200
Postage stamps 300
An employee’s check, returned by bank, marked NSF 1,000
An envelope containing only a note for a gift for a
retiring employee 1,890
P18,000

The general ledger shows an imprest petty cash fund balance of P18,000.

How much is the petty cash shortage or overage?

51. How much is the adjusted petty cash fund?

The Vigan Company included the following in its notes receivable as of December 31, 2023:
Note receivable from sale of land Php 880,000
Note receivable from consultation 1,200,000
Note receivable from sale of equipment 1,600,000

In connection with your audit, you were able to gather the following transactions during 2023
and other information pertaining to the company’s note receivable:

● On January 1, 2023, Vigan Company sold a tract of land. The land, purchased 10 years
ago, was carried on Vigan Company’s books at a value of P500,000. Vigan received a
noninterest-bearing note for P880,000. The note is due on December 31, 2024. There is
no readily available market value for the land, but the current market rate of interest for
comparable note is 10%

● On January 1, 2023, Vigan Company finished consultation services and accepted in

exchange a promissory note with a face value of P1,200,000, a due date of December 31,
2025, and a stated rate of 5%, with interest receivable at the end of each year. The fair
value of the services is not readily determinable and the note is not readily marketable.
Under the circumstances, the note is considered to have an appropriate imputed rate of
interest of 10%.

● On January 1, 2023, Vigan Company sold equipment with a carrying amount of

P1,600,000 to X company. As payment, X gave Vigan Company a P2,400,000 note. The
note bears an interest rate of 4% and is to be repaid in three annual installments of
P800,000 (plus interest on the outstanding balance). The first payment was received on
December 31, 2023. The market price of the equipment is not reliably determinable. The
prevailing rate of interest for notes of this type is 14%.
Based on the given information and the result of your audit, answer the following: (Round off
present value factors to four decimal places and final answers to nearest hundred)

52. The consultation service fee revenue that should be recognized in 2023 is
a. 901,600
b. 1,050,800
c. 1,095,800
d. 1,200,000

53. The gain on sale of equipment that should be recognized in 2023 is

a. P257,280
b. 331,600
c. 412,400
d. 800,000

54. The noncurrent notes receivable as of December 31, 2023 is

a. 1,825,800
b. 2,494,000
c. 2,605,706
d. 2,625,700

55. The current portion of long-term notes receivable as of December 31, 2023 is
a. 800,000
b. 1,468,200
c. 1,600,000
d. 1,680,000

56. The interest income to be recognized in 2023 is

a. 156,000
b. 435,800
c. 459,500
d. 464,000

57. AAA Company received from a customer a one-year, P375,000 note bearing annual interest
of 8%. After holding the note for five months, AAA Company discounted the note at an effective
interest rate of 10%. The amount received by AAA Company from the note discounting is

58. AAA Company found itself in financial difficulties and decided to use its accounts receivable
as a means of obtaining cash to continue operations. On July 1, 2023, AAA factored P750,000
of accounts receivable for cash proceeds of P695,000. No bad debt allowance was associated
with these accounts.

On December 17, 2023, AAA assigned the remainder of its accounts receivable, P2,500,000 as
of that date, as collateral on a P1,250,000, 12% annual interest rate loan from Mavs Company.
AAA received P1,250,000 less 2% finance charge.
Additional information:
Allowance for bad debts, 12/31/2023 P 32,000
Accounts receivable, excluding factored and assigned receivables 500,000
Estimated uncollectibles, 12/31/2023 (based on accounts receivable) 3%

None of the assigned accounts had been collected by the end of the year. How much were the
proceeds from factoring and general assignment of the accounts receivable?
59. On December 1, 2023 AAA Company assigned on a non-notification basis receivables of
P4,200,000 to OKC Bank for a loan equivalent to 80% of the receivables. A 5% service fee
based on the assigned accounts shall be deducted in advance aside from the stated interest of the
loan which was 12% per annum.

AAA Company collected assigned accounts of P2,900,000 and remitted the collections to OKC
Bank in partial payment of the loan. OKC Company applied the loan first to the interest and the
balance to the principal.

The notes payable amount in the December 31, 2023 balance sheet is _______________.
a. Php394,900
b. Php428,500
c. Php460,000
d. Php493,600.

Sylvie Corp. has a current account in BDO. Your examination of the company’s cash reveals the
following:
a. Balances taken from the company’s general ledger:
Cash balance, November 30, 2023 P637,860
Cash balance, December 31, 2023 576,420
Receipts, December 1 - 31, 2023 306,220
b. Balances taken from the December bank statement:
Bank balance, December 31, 2023 P637,220
Bank balance, November 30, 2023 685,180
Disbursements (debit) 356,080

c. Outstanding checks, November 30, 2023 (P26,140 was paid by the bank in December),
P64,140.
d. Deposit in Transit:
November 30, 2023 P15,260
December 31, 2023 16,140
e. Checks written and recorded in December; not included in the checks returned with the
December bank statement, P36,080.
f. A bank credit memo was issued in December to correct an erroneous charge made in
November, P1,500.
g. Note collected by the bank in December (company was not informed of the collection),
2,060.
h. A check for 2,020 (payable to supplier) was recorded in the Check register in December
as P3,000.
i. A check for P2,240 was charged by the bank as P2,420 in December.
j. Sylvie Co. issued a stop payment order to the bank in December. This pertains to a check
written in December which was not received by the payee. A new check was written and
recorded in the Check Register in December. The old check was written off by a journal
entry also in December, P780.
k. Bank service charge, November 30, 2023, P60.

Requirements: Based on the above information, compute the following—

60. What are the total book disbursements in December?

61. What are the total bank receipts in December?

62. What are the total outstanding checks on December 31?

63. What is the adjusted bank balance on November 30?

64. What are the adjusted book receipts in December?

65. What are the adjusted bank disbursements in December?

66. What is the adjusted book balance on December 31?

On December 24, a fire destroyed the raw materials warehouse of Pau Manufacturing Corp.
There was no purchase of raw materials from the time of the fire until December 31.

Inventories January 01 December 31

Raw materials Php 90,000 ?
Factory supplies 6,000 5,000
Goods in process 185,000 210,000
Finished goods 220,000 225,000

The accounting records show the following data:

Sales Php 1,200,000
Purchases of raw materials 400,000
Purchases of factory supplies 30,000
Freight-in raw materials 15,000
Direct labor 220,000
Manufacturing Overhead 75% of direct labor
Gross Profit rate 35% of sales

67. The cost of the raw materials destroyed by the fire was
a. Php176,000
b. Php140,000
c. Php80,000
d. Php75,000

68. On January 1, 2023, ABC Co. sold machinery costing P2,000,000 with accumulated
depreciation of P950,000 in exchange for a 3-year, 3%, P900,000 note receivable. Principal is
due in three equal annual installments. Interests on the outstanding principal balance are also due
annually and are to be collected together with the periodic collections on the principal. The
prevailing interest rate for this type of note is 12%. How much is the carrying amount of the
receivable on December 31, 2023?
a. 530,261
b. 1,000,562
c. 673,531
d. 789,361

69. On January 1, 2023, ABC Co. sold machinery costing P2,000,000 with accumulated
depreciation of P950,000 in exchange for a 3-year, P1,200,000 note receivable. Principal and
interest at 3% are due on January 1, 2026. The prevailing interest rate for this type of note is
12%. How much is the carrying amount of the receivable on initial recognition date?
a. 1,311,272
b. 2,000,000
c. 933,337
d. 854,136
The next two items are based on the following information.
The Petty Cash Fund of GDM Company has an Imprest balance of P10,000. The following items
are found in its drawer on December 31, 2021:
Currencies and coins
10 pcs. @ P 100 ?
8 pcs. @ P 50 ?
30 pcs. @ P20 ?
Unreplenished paid vouchers for expenses and loans dated Dec. 16-31, 2021:
Supplies 1,200
Loan to office director 1,800
Unused supplies
200
Check drawn by office manager dated 12/30/21 2,500
Check drawn by employee dated 1/18/22 1,500
Check drawn by customer dated 12/25/21 1,000
Envelope containing cash donations for the departed
parent of one employee, (no currencies attached) 500

70. How much is the correct amount of petty cash fund on Dec. 31, 2021?

Bonus Question:
71. What is the amount of shortage or overage?
a. Php1,000 over
b. Php1,000 short
c. Php1,500 short
d. Php1,500 over