Test I – Multiple Choice – Theory a.

a deduction from sales in the

1. A cash equivalent is a short-term, highly liquid income statement.
investment that is readily convertible into known b. an item of "other income and
amounts of cash and 40 expense" in the income statement.
a. is acceptable as a means to pay c. a deduction from accounts
current liabilities. receivable in determining the net
b. has a current market value that is realizable value of accounts
greater than its original cost. receivable.
c. bears an interest rate that is at least d. sales discounts forfeited in the cost
equal to the prime rate of interest at of goods sold section of the income
the date of liquidation. statement.
d. is so near its maturity that it
presents insignificant risk of 8. Which of the following concepts relates
changes in interest rates. to using the allowance method in
accounting for accounts receivable?54
2. Bank overdrafts generally should be41 a. Bad debt expense is an estimate
a. reported as a deduction from the that is based on historical and
current asset section. prospective information.
b. reported as a deduction from cash. b. Bad debt expense is based on the
c. netted against cash and a net cash actual amounts determined to be
amount reported. uncollectible.
d. reported as a current liability. c. Bad debt expense is an estimate
that is based only on an analysis of
3. Deposits held as compensating the receivables aging.
balances d. Bad debt expense is management’s
a. usually do not earn interest. determination of which accounts will
b. if legally restricted and held against be sent to the attorney for collection.
short-term credit may be included as 9. Which of the following is included in the
cash. normal journal entry to record the
c. if legally restricted and held against collection of accounts receivable
long-term credit may be included previously written off when using the
among current assets. allowance method?58
d. None of these answer choices are a. Debit Allowance for Doubtful
correct. Accounts, credit Accounts
Receivable
4. The category "trade receivables" b. Debit Allowance for Doubtful
includes43 Accounts, credit Bad Debt Expense
a. advances to officers and c. Debit Bad Debt Expense, credit
employees. Allowance for Doubtful Accounts
b. income tax refunds receivable. d. Debit Accounts Receivable, credit
c. claims against insurance companies Allowance for Doubtful Accounts
for casualties sustained. 10. At the beginning of 2019, Gannon
d. None of these answer choices are Company received a three-year zero-
correct. interest-bearing P1,000 trade note. The
market rate for equivalent notes was 8%
5. Which of the following should be at that time. Gannon reported this note
recorded in Accounts Receivable?44 as a P1,000 trade note receivable on its
a. Receivables from officers 2019 year-end statement of financial
b. Receivables from subsidiaries position and P1,000 as sales revenue
c. Dividends receivable for 2019 What effect did this accounting
d. None of these answer choices are for the note have on Gannon’s net
correct. earnings for 2019, 2020, 2021, and its
retained earnings at the end of 2021,
S
6. What is the preferable presentation of respectively?66
accounts receivable from officers, a. Overstate, overstate, understate,
employees, or affiliated companies on a zero
statement of financial position?45 b. Overstate, understate, understate,
a. As offsets to equity understate
b. By means of footnotes only c. Overstate, overstate, overstate,
c. As assets but separately from other overstate
receivables d. None of these answer choices are
d. As trade notes and accounts correct.
receivable if they otherwise qualify
as current assets 11. Which of the following is true when
7. If a company employs the gross method accounts receivable are factored without
of recording accounts receivable from recourse?
customers, then sales discounts taken a. The transaction may be accounted
should be reported as49 for either as a secured borrowing or

1
 as a sale, depending upon the b. deducted from the bank statement
substance of the transaction.69 balance.
b. The receivables are used as c. added to the balance per books.
collateral for a promissory note d. deducted from the balance per
issued to the factor by the owner of books.
the receivables.
c. The factor assumes the risk of 16. Under the allowance method of
collectibility and absorbs any credit recognizing uncollectible accounts, the
losses in collecting the receivables. entry to write off an uncollectible
d. The financing cost (interest account147
expense) should be recognized a. increases the allowance for
ratably over the collection period of uncollectible accounts.
the receivables. b. has no effect on the allowance for
12. Which of the following is an appropriate uncollectible accounts.
reconciling item to the balance per bank c. has no effect on net income.
in a d. decreases net income.
bank reconciliation?82
a. Bank service charge 17. Which of the following is added to the
b. Deposit in transit cost of inventories?
c. Bank interest a. Storage costs of part-finished goods
d. Chargeback for NSF check b. Trade discounts
c. Refundable purchase taxes
13. A Cash Over and Short account84 d. Administrative costs
a. is not generally accepted.
b. is debited when the petty cash fund 18. Which of the following costs are
proves out over. included in the cost of inventories?
c. is debited when the petty cash fund a. Transport costs for raw materials
proves out short. b. Abnormal material usage
d. is a contra account to Cash. c. Storage costs relating to finished goods
d. Administrative and general overhead
14. The journal entries for a bank
reconciliation85 19. How should trade discounts be dealt
a. are taken from the "balance per with when valuing inventories at the
bank" section only. lower of cost and net realisable value
b. may include a debit to Office (NRV) according to PAS 2?
Expense for bank service charges. a. Added to cost
c. may include a credit to Accounts b. Ignored
Receivable for an NSF check. c. Deducted in arriving at NRV
d. may include a debit to Accounts d. Deducted from cost
Payable for an NSF check.
20. Inventories are measured at
15. When preparing a bank reconciliation, a. Lower of cost and fair value.
bank credits are86 b. Lower of cost and net realizable value.
a. added to the bank statement c. Lower of cost and nominal value.
balance. d. Lower of cost and net selling price.
e. Choices b and d.

Test IV – Multiple Choice - Problem solving (2 points each)

21-22. The following accounts were abstracted from Starr Co.’s unadjusted trial balance at December
31, 2018:
Debit Credit
Accounts receivable P750,000
Allowance for uncollectible accounts 8,000
Net credit sales P3,000,000
Starr estimates that 2% of the gross accounts receivable will become uncollectible. After
adjustment at December 31, 2018, the allowance for uncollectible accounts should have a credit
balance of148
a. P60,000.
b. P52,000.
c. P23,000.
d. P15,000.

. On January 1, 2019, West Co. exchanged equipment for a P400,000 zero-interest-bearing note
due on January 1, 2022. The prevailing rate of interest for a note of this type at January 1, 2019
was 10%. The present value of P1 at 10% for three periods is 0.75. What amount of interest
revenue should be included in West’s 2020 income statement?
a. P0

2
 b. P30,000
c. P33,000
d. P40,000

23-24.On June 1, 2017, Yang Corp. loaned Gant P300,000 on a 12% note, payable in five annual
installments of P60,000 beginning January 2, 2018. In connection with this loan, Gant was
required to deposit P3,000 in a zero-interest-bearing escrow account. The amount held in escrow
is to be returned to Gant after all principal and interest payments have been made. Interest on the
note is payable on the first day of each month beginning July 1, 2017. Gant made timely payments
through November 1, 2017. On January 2, 2018, Yang received payment of the first principal
installment plus all interest due. At
December 31, 2017, Yang’s interest receivable on the loan to Gant should be
a. P0.
b. P3,000.
c. P6,000.
d. P9,000.

25-26. Vasguez Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of P20,000.
During 2017, it wrote off P14,400 of accounts and collected P4,200 on accounts previously
written off. The balance in Accounts Receivable was P400,000 at 1/1 and P480,000 at 12/31. At
12/31/17, Vasguez estimates that 5% of accounts receivable will prove to be uncollectible. What
is Bad Debt Expense for 2015? 115
a. P4,000
b. P14,200
c. P18,400
d. P24,000

27-28.McGlone Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of P15,000.
During 2017, it wrote off P10,800 of accounts and collected P3,150 on accounts previously
written off. The balance in Accounts Receivable was P300,000 at 1/1 and P360,000 at 12/31. At
12/31/17, McGlone estimates that 5% of accounts receivable will prove to be uncollectible. What
should McGlone report as its Allowance for Doubtful Accounts at 12/31/17?116
a. P7,200
b. P7,350
c. P10,350
d. P18,000

29-30. Reviewing the petty cash fund and bank reconciliation for the month ended May 31, 2018 of ABM
Company revealed the following data: 1-9
Petty Cash Fund
1. The Petty Cash fund was established on May 1, 2018, in the amount of P10,000.
2. Expenditures from the fund by the custodian as of May 31, 2018, were evidenced by
approved petty cash vouchers for the following:
Various office supplies P3,920
IOUs from employees 1,200
Shipping charges 2,298
Miscellaneous expense 1,526
3. On May 31, 2018, the petty cash fund was replenished and increased to P12,000; currency
and coin in the fund at that time totaled P756.
4. Bank Reconciliation
BPI Bank
Bank Statement
DEBITS CREDITS
BALANCE
Balance, May 1, 2018 P350,760
Deposits P 1,120,000
Note payment direct from
.customer (interest,P1,200) 37,200
Checks cleared during May 1,246,000
Bank service charges 1,080
Balance, May 31, 2018 P260,880

ABM Company’s Cash in Bank Account

Balance, May 1, 2018 P 354,000
Deposits 1,240,000
Checks written during May, 2018 1,273,400
Deposits in transit are determined to be P120,000, and checks outstanding at May 31 total P34,000.
Cash on hand (besides petty cash) at May 31, 2019, is P9,840.

3
 What is the amount of petty cash shortage?
a. P2,300 c. P300
b. P11,244 d. P0

31-32. The journal entry to record the replenishment of and increase in the petty cash fund includes a
credit to
a. Cash of P10,944 c. petty cash fund of P10,944
b. Cash of P11,244 d. petty cash fund of P11,244

33-34. What amount of cash should be reported for the month ended May 31, 2018, statement of
financial position?
a. P368,720 c. P368,420
b. P356,720 d. P358,880

35-36.For the year ended December 31, 2015, Dent Co. estimated its allowance for uncollectible accounts
using the year-end aging of accounts receivable. The following data are available:
Allowance for uncollectible accounts, 1/1/15 P56,000
Provision for uncollectible accounts during 2015
(2% on credit sales of P2,000,000) 40,000
Uncollectible accounts written off, 11/30/15 46,000
Estimated uncollectible accounts per aging, 12/31/15 69,000
After year-end adjustment, the uncollectible accounts expense for 2015 should be
a. 46,000.
b. P62,000.
c. P69,000.
d. P59,000.

37-38. Nenn Co.’s allowance for uncollectible accounts was P95,000 at the end of 2017 and P90,000 at
the end of 2016. For the year ended December 31, 2017, Nenn reported bad debt expense of
P13,000 in its income statement. What amount did Nenn debit to the appropriate account in 2017
to write off actual bad debts?
a. P5,000
b. P8,000
c. P13,000
d. P18,000

39-40.In preparing its August 31, 2017 bank reconciliation, Bing Corp. has available the
following information:
Balance per bank statement, 8/31/17 P21,650
Deposit in transit, 8/31/17 3,900
Return of customer’s check for insufficient funds, 8/30/17 600
Outstanding checks, 8/31/17 2,750
Bank service charges for August 100
At August 31, 2017, Bing’s correct cash balance is
a. P22,800.
b. P22,200.
c. P22,100.
d. P20,500.

Geary Co. assigned P400,000 of accounts receivable to Kwik Finance Co. as security for a loan of
P335,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note was
10%. During the first month, Geary collected P110,000 on assigned accounts after deducting P380 of
discounts. Geary accepted returns worth P1,350 and wrote off assigned accounts totaling P2,980.

41-42.The amount of cash Geary received from Kwik at the time of the transfer was
a. P301,500.
b. P327,000.
c. P328,300.
d. P335,000.

43-44. Entries during the first month would include a

a. debit to Cash of P110,380.
b. debit to Bad Debt Expense of P2,980.
c. debit to Allowance for Doubtful Accounts of P2,980.
d. debit to Accounts Receivable of P114,710.

4
On February 1, 2017, Henson Company factored receivables with a carrying amount of P300,000 to Agee
Company. Agee Company assesses a finance charge of 3% of the receivables and retains 5% of the
receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in
the income statement of Henson Company for February.

45-46.Assume that Henson factors the receivables on a without guarantee (recourse) basis. The loss to
be reported is
a. P0.
b. P9,000.
c. P15,000.
d. P24,000.

47-48.In connection with the cash account of ANNIE Corporation, you gathered the following
information: 1-15
a. Balance per bank, December 1, 2018 P145,000
b. Total bank receipts (credits) in December 31, 2028 346.000
c. Balance per bank, December 31, 2018 114,500
d. Outstanding checks, November 30, 2018 (including
P12,000 paid by bank in December) 67,000
e. Outstanding checks, December 31, 2018 (including)
.checks issued in November ) 94,162
f.Deposit in transit, November 30, 2018 39,458
g. A customer’s check received on December 4, 2018, was
.returned by bank December 7, marked “NSF”. It was
.redeposited on December 8, 2018. The only entry made
.was to take up the collection on December 4, 2018.
What is the total book receipts in December.
a. P295,399 c. P334,857
b. P306,542 d. P346,000

49-50. With ANNIE Corporation information, what is the total book disbursements in December?
a. P447,519 c. P403,662
b. P331,519 d. P392,519

51-52. German Company has the following data relating to accounts receivable for the year ended
December 31, 2019:
Accounts Receivable, January 1, 2019 P240,000
Allowance for doubtful accounts, Jan. 1, 2019 (2,500)
Sales during the year, all on account, terms:
2/10, 1/15,n/30 1,600,000
Cash received from customers during the year 1,530,000
Accounts written off during the year 9,600
An analysis of cash received from customers during the year revealed that P960,400 was
received from customers availing the 10-day discount period, P352,800 from customers availing
the 15-day discount period, P3,500 represented recovery of accounts written off, and the balance
was received from customers paying beyond the discount period.
German’s year-end balance of allowance for bad debts was estimated to be 5% of the
outstanding accounts receivable as at December 31, 2019, based on the aging of accounts.
What was the accounts receivable balance at December 31, 2019
a. P307,200
b. P270,400
c. P280,700
d. P 265,600
53-54. Using information of German Co. how much is the cash received beyond the discount period?
a. P209,700 c. P213,200
b. P218,900 d. P203,200

55-56. Using information of German Co., how much is the bad debt expense adjustment at the end of
December 31, 2019?
a. P26,135 c. P12,100
b. P14,035 d. P26,035

57-58. Using information of German Co., how much is the accounts receivable to be presented in the
Statement of financial position at December 31, 2019?
a. P280,700 c. P208,700
b. P356,400 d. P256,400

59-60. bonus. Shade letter e.

5
Prepared by:

Noted by:

Ms. Ilene D. Padilla

(CBA-faculty)
Dr. Norma A. Gappi
BSA/BSAIS/BSAT Program Head