WEEK 1: CASH AND CASH EQUIVALENTS

Sample Problem 1
On December 31, 2020, R&L Company provided the following data:
Cash in bank 3,000,000
Time deposit- 30 days 1,000,000
Money market placement due on 7/30/2021 2,000,000
Saving deposit in closed bank 100,000
Sinking Fund for bond payable due 7/30/2022 1,500,000
Petty Cash Fund 20,000

- The cash in bank included customer check of P200,000 outstanding for 18 months.
- Check of P250,000 in payment of accounts payable was dated and recorded on December 31,
2020 but mailed to creditors on 1/15/2021
- Check of P100,000 dated 1/31/2021 in payment of accounts payable was recorded and mailed
12/31/2020
- The cash receipts journal was held open until 1/15/2021 amount of 450,000 was collected and
recorded on 12/31/2020.

Compute the total amounts:

1. Cash
2. Cash Equivalent
3. Total Cash

Answer:
Cash in Bank 3,000,000
Time Deposit- 30 Day 1,000,000
Petty Cash 20,000
Unemailed Check 250,000
Postdated Check 100,000
Error in Recording (450,000)
Total Cash and Cash Equivalent 3,920,000

Cash In Bank 3,000,000

Petty Cash 20,000
Unemailed Check 250,000
Postdated Check 100,000
Error in Recording (450,000)
Cash in Bank- Adjusted 2,920,000

Cash Equivalents 1,000,000

Sample Problem 2
Lourdes Company had a checkbook balance on Dec 31, 2019 of 7,000,000 and held the following items in
the safe:
- Check payable to Lourdes, dated Jan 5, 2020, included in Dec 31 Checkbook balance 2,000,000
- Check payable to Lourdes, Deposited Dec 20 and included in Dec 31 Checkbook but returned by
bank on Dec 30, Stamped NSF, Check will be redeposited Jan 2, 2020 500,000
- Check drawn on Lourdes’s account and payable to a vendor dated and recorded Dec 31, but not
emailed until Jan 2020 1,600,000

Cash on hand - undeposited collections 400,000

Change Fund 40,000
Time Deposit for Plant Expansion 500,000
Money Market placement 2,500,000
Postage stamps unused 10,000

Compute the total amounts:

1. Cash
2. Cash Equivalent
3. Total Cash

Answer:
Check Book Balance 7,000,000
Postdated Check (2,000,000)
NSF Check (500,000)
Unmailed Check to Supplier 1,600,000
Cash in Checking Account 6,100,000
Cash on Hand 400,000
Change Fund 40,000
Cash 6,540,000

Cash and Cash Equivalents 0

Sample Problem 3
On December 31, 2019, James Company had the following cash balances:

Cash in bank - current account 7,000,000

Petty cash fund 60,000
Time deposit-three months 250,000
Saving deposit 670,000

Cash in the bank included P400,000 of compensating balance against short-term borrowing arrangement.
The compensating balance is legally restricted as to withdrawal.

Compute the total amounts:

1. Cash
2. Cash Equivalent
3. Total Cash

Answer:
Cash in Bank 7,000,000
Petty Cash Fund 60,000
Saving Deposit 670,000
Restricted Cash (400,000)
Cash 7,330,000

Time Deposit 250,000

Cash and Cash Equivalents 7,580,000

SHORT TEST 1

PROBLEM 1
Pygmalion Company had the following balances on December 31, 2020:

Cash in bank - current account 5,000,000

Cash in bank - payroll account 1,000,000
Cash on hand 500,000
Cash in bank-restricted account
for building construction expected to
be disbursed in 2021 3,000,000
Time deposit, purchased
December 15, 2020 and due
March 15, 2021 2,000,000

The cash on hand included a P200,000 check payable to Pygmalion, dated January 15, 2021.

What total amount should be reported as cash and cash equivalents on December 31, 2020?

Answer:
Cash in Bank 5,000,000.00
Cash in Payroll 1,000,000.00
Cash on Hand 500,000.00
Time Deposit - 75 Days 2,000,000.00
Postdated Check - (200,000.00)
Cash and Cash Equivalent 8,300,000.00

PROBLEM 2
Thor Company provided the following data on December 31, 2020:

Checkbook balance 4,000,000

Bank statement balance 5,000,000
Check drawn on Thor's account,
payable to supplier, dated and
recorded on December 31, 2020 but
not mailed until January 15, 2021 500,000
Sinking fund cash 2,000,000

On December 31,2020, what amount should be reported as "cash" under current assets?

Answer:
Bank Statement 5,000,000.00
Unemailed Check 500,000.00
Cash 4,500,000.00

PROBLEM 3
At year-end, Myra Company reported cash and cash equivalents which comprised the following:

Cash on hand 500,000

Demand deposit 4,000,000
Certificate of deposit 2,000,000
Postdated customer check 300,000
Petty cash fund 50,000
Traveler's check 200,000
Manager's check 100,000
Money order 150,000

What total amount should be reported as "cash" at year-end?

Answer:
Cash on Hand 500,000.00
Demand Deposit 4,000,000.00
Petty Cash Fund 50,000.00
Travelers Check 200,000.00
Managers Check 100,000.00
Money Order 150,000.00
Cash year End 5,000,000.00

PROBLEM 4
Burr Company had the following account balances at year-end.

Cash in bank 3,250,000

Cash on hand 125,000
Cash restricted for addition to plant and
expected to be disbursed next year 1,600,000

Cash in the bank included P600,000 of compensating balance against short-term borrowing arrangement.
The compensating balance is not legally restricted as to withdrawal.

What total amount of cash should be reported under current assets at Year-end?

Answer:
Cash in Bank 3,250,000.00
Cash on Hand 125,000.00
Cash Balance 3,375,000.00

PROBLEM 5
Ral Company reported the checkbook balance on Dec 31, 2020 at P5,000,000 and held the following items
on same date:

Check payable to Ral, dated January 2, 2021 in

payment of a sale made in December 2020, not
included in December 31 checkbook balance 2,000,000

Check payable to Ral, deposited December 15

and included in December 31 checkbook
balance, but returned by bank on December 30
stamped "NSF." The check was redeposited on
January 2, 2021 and cleared on January 9, 2021 500,000

Check drawn an Ral's account, payable to a vendor,

Dated and recorded in Ral's books on December 31,2019
but not mailed until January 10,2020 300,000
Certificate of time deposit 1,000,000

What amount should be reported as cash on December 31, 2020?

Answer:
5 Checkbook Balance 5,000,000.00
NSF Check (500,000.00)
Error on Check Drawn 300,000.00
Cash Balance 4,800,000.00

PROBLEM 6
Liwanag Company reported an imprest petty cash fund of P50,000 with the following details:

Currencies 20,000
Coins 2,000
Petty cash vouchers:
Gasoline payments for delivery equipment 3,000
Medical supplies for employees 1,000
Repairs of office equipment 1,500
Loans to employees 3,500
A check drawn by the entity payable to the
order of Grace de la Cruz, petty cash
custodian, representing her salary 15,000
An employee check returned by the bank
for insufficiency of fund 3,000
A sheet of paper with names of several
employees together with contribution
for a birthday gift of a co-employee.
Attached to the sheet of paper is a currency of 5,000

What amount of petty cash fund should be reported in the statement of financial position?

Answer:
Currencies 20,000.00
Coins 2,000.00
Check Drawn 15,000.00
Petty Cash 37,000.00

PROBLEM 7
Yasmin Company provided the following information on December 31, 2020

Petty cash fund 50,000

Current account - First Bank 4,000,000
Current account - Second Bank (overdraft) (250,000)
Money market placement - Third Bank 1,000,000
Time deposit - Fourth Bank 2,000,000

A check for P100,000 was drawn against First Bank current account dated and recorded December 29,
2020 but delivered to payee on January 15, 2021.
The Fourth Bank time deposit is set aside for land acquisition in early January 2021.

What total amount should be reported as cash and cash equivalents on December 31, 2020?

Answer:
Petty Cash Fund 50,000.00
Current Account 4,000,000.00
Undelivered Check 100,000.00
Cash and Cash Equivalents 4,150,000.00

PROBLEM 8
On December 31,2020, Roma Company reported cash of P9,950,000 which comprised the following:

Undeposited collections 600,000

Cash in bank – BDO checking account 4,000,000
Undeposited NSF check received from customer,
Dated December 1, 2020 150,000
Undeposited check from a customer, dated
January 15, 2021 250,000
Cash in bank - BDO fund for payroll 1,000,000
BDO money market instrument, 90 days 2,000,000
Cash in foreign bank restricted 1,500,000
Cash in bank – BDO value added tax account 450,000
Total 9,950,000

On December 31, 2020, what total amount should be reported as cash and cash equivalents?

Answer:
Undeposited Collection 600,000.00
BDO Account 4,000,000.00
Payroll Fund 1,000,000.00
Money Market- 90days 2,000,000.00
BDO Account for Tax 450,000.00
Cash and Cash Equivalents 8,050,000.00

PROBLEM 9
Love Company reported the following information in relation to cash on December 31, 2020:

Checkbook balance, P4,000,000.

Undeposited collections, P400,000.
A customer check amounting to P200,000 dated January 2,2021
was included in the December 31, 2020 checkbook balance.
Another customer check for P500,000 deposited on December
22, 2020 was included in the checkbook balance but
the bank for insufficiency of funds.
This check was redeposited on December 26, 2020 and clear two days later.

A P400,000 check payable to supplier dated and recorded on December 30, 2020 was mailed on January
16, 2021.
A petty cash fund of P50,000 comprised the following on December 31, 2020:
Coins and currencies 5,000
Petty cash vouchers 40,000
Refundable deposit for returnable containers 5,000
TOTAL 50,000
A check of P40,000 was drawn on December 31, 2020 payable to Petty Cash.

What is the adjusted cash in the bank on December 31, 2020?

Answer:
Checkbook balance 4,000,000.00
PostDated Check (200,000.00)
Undelivered Check 400,000.00
Adjusted Cash in bank 4,200,000.00

What total amount should be reported as cash on December 31,2020?

Answer:
Undeposied Collection 400,000.00
Petty Cash:
Coins and Curriencies 5,000.00
Check drawn for Petty Cash 40,000.00 45,000
Total 445,000.00
Adjusted Cash in bank 4,200,000.00
Cash Account 4,645,000.00

WEEK 2: BANK RECONCILIATION

Sample Problem 1
In preparing the bank reconciliation for the month of August , R&L Company provided the following
information:
Balance per bank statement 1,805,000
Deposit in transit 325,000
Return of customer check for insufficient 60,000
Outstanding checks 275,000
Bank service charge for August 10,000

What is the adjusted Cash in Bank?

Answer:
Balance per bank 1,805,000
Deposit in Transit 325,000
Total 2,130,000
Outstanding Checks ( 275,000)
Adjusted Bank Balance 1,855,000

Sample Problem 2
Core Company provided the following data for the purpose of reconciling the cash balance per book with
the balance per bank statement on December 31:
Balance per book 850,000
Balance per bank statement 2,000,000
Outstanding checks, including certified check of P100,000 500,000
Deposit in transit 200,000
December NSF checks, of which P50,000 had been
redeposited and cleared on December 27 150,000
Erroneous credit to Core's account, representing
proceeds of loan granted to another company 300,000
Proceeds of note collected by bank for Core,
net of service charge of P20,000 750,000

What amount should be reported as cash in bank at year-end?

Answer:
Balance per bank 2,000,000
Deposit in transit 200,000
Outstanding checks (500,000 – 100,000) ( 400,000)
Erroneous bank credit (300,000)
Adjusted bank balance 1,500,000

Balance per book 850,000

NSF checks (150,000 – 50,000) (100,000)
Proceeds of note collected 750,000
Adjusted book balance 1,500,000
Note that NSF checks of P50,000 are already redeposited and cleared on December 27.

HOMEWORK

PROBLEM 1
R&L Company showed the following information on August 31:
Balance of cash in bank account 1,300,000
Balance of bank statement 1,200,000
Outstanding checks, August 31:
Number 555 10,000
761 55,000
762 40,000
763 25,000
764 65,000
765 70,000
Receipts of Aug 31, deposited Sep 1. 275,000
Service charge for August 5,000
NSF check received from a customer 85,000
The cashier-bookkeeper had misappropriated P30,000 and an additional P10,000 by charging sales
discounts and crediting accounts receivable.
The stub for check number 765 and the invoice relating thereto showed that it was for P50,000. It was
recorded incorrectly in the cash disbursements journal as P70,000.
This check was drawn in payment of an account payable.
Payment has been stopped on check number 555 which was drawn in payment of an account payable. The
payee cannot be located.

What is the adjusted cash in the bank on August 31?

Answer:
Balance per Book 1,300,000.00 Balance per Bank 1,200,000.00
Add: Notes Collected Add: Deposit in Transit 275,000.00
Less: Service Charge - 5,000.00 Less: Outstanding Check
NSF - 85,000.00 555
Error 765 20,000.00 761 - 55,000.00
Stop Payroll 10,000.00 762 - 40,000.00
763 - 25,000.00
764 - 65,000.00
765 - 50,000.00

Adjusted Cash balance 1,240,000.00 Adjusted Cash balance 1,240,000.00

PROBLEM 2
R&L Company provided the following data relating to the cash transactions and bank account for the month
of July :
Cash balance per ledger ?
Cash balance per bank statement ?
Debit memo for July service charge 5,000
Deposit of July 31 not recorded by bank until
August 1 450,000
Outstanding checks, including certified check of P50,000 750,000
Proceeds of bank loan not recorded in ledger 500,000
Proceeds from customer note, face P400,000,
collected by bank, collection fee of P15,000 435,000
A creditor check had been entered in the book
as P20,000 and was erroneously deducted by
the bank at 200,000
A customer check was returned by bank
marked DAIF 50,000
Correct cash balance 3,000,000

What is the cash balance per ledger?

What is the cash balance per bank statement?

Answer:
Balance per Book 2,135,000.00 Balance per Bank 3,070,000.00
Add: Bank Loan 500,000.00 Add: Deposit in Transit 450,000.00
Proceed Note 435,000.00 Less: Outstanding Checks - 700,000.00
Less: NSF - 50,000.00
Bank Charge - 5,000.00 Error 180,000.00
Collection Fee - 15,000.00
Error

Adjusted Cash balance 3,000,000.00 Adjusted Cash balance 3,000,000.00

PROBLEM 3
R&L had the following bank recon on Nov 30
Balance per bank, Nov 30 3,000,000
Deposit in transit 400,000
Total 3,400,000
Outstanding checks (900,000)
Balance per book, Nov 30 2,500,000
The bank statement for the month of Dec showed the following
Deposits, including P200,000 note collected for R&L 9,000,000
Disbursements, including P140,000 NSF customer check and P10,000 service charge 7,000,000
All reconciling items on Nov 30 cleared through the bank in July.
The outstanding checks totaled P600,000 and the deposit in transit amounted to P1,000,000 on Dec 31.

What is the adjusted cash in the bank on Dec 31?

What is the cash balance per book on Dec 31?
What is the amount of cash receipts per book in Dec?
What is the amount of cash disbursements per book in Dec?

Nov-30 Receipts Disbursement Dec-31

Balance per Book 2,500,000.00 9,400,000.00 6,550,000.00 5,350,000.00
Note Collected
Nov
Dec 200,000.00 200,000.00
NSF Check
Nov
Dec 140,000.00 - 140,000.00
Service Charge
Nov
Dec 10,000.00 - 10,000.00
Deposit in Transit
Nov - 400,000.00 400,000.00
Dec - 1,000,000.00 - 1,000,000.00
Outstanding
Nov 900,000.00 900,000.00
Dec - 600,000.00 600,000.00
Balance per Bank 3,000,000.00 9,000,000.00 7,000,000.00 5,000,000.00

PROBLEM 4
R&L Company prepared the following bank reconciliation on June 30:
Balance per bank 1,200,000
Deposits in transit 100,000
Outstanding checks (200,000)
Balance per book 1,100,000
There were total deposits of P900,000 and charges for disbursement of P600,000 for July per bank
statement. All reconciliation items on June 30 cleared the bank on July 31.
Checks outstanding amounted to P600,000 and deposits in transit totaled P350,000 on July 31.

What is the amount of cash receipts per book in July?

What is the amount of cash disbursements per book in July?
What is the adjusted cash in the bank on July 31?
What is the cash balance per ledger on July 31

Answer:
June Receipts Disbursement July
Balance per bank 1,200,000.00 900,000.00 600,000.00 1,500,000.00
Deposit in Transit
June 100,000.00 - 100,000.00
July 350,000.00 350,000.00
Outstanding Check
June - 200,000.00 - 200,000.00
July 600,000.00 - 600,000.00
Notes Collected
June
July
Service Charge
June
July
NSF
June
July
Balance per Book 1,100,000.00 1,150,000.00 1,000,000.00 1,250,000.00

PROBLEM 5
R&L Company provided following information at month-end:
Cash in bank per bank 8,000,000
Deposit in transit 1,200,000
Outstanding checks, including certified
check of P200,000 1,500,000
Amount erroneously credited by bank to R&L's account 150,000
Note collected by bank for Jane Company, excluding
interest of P100,000 1,100,000
Service charge for the current month 20,000
NSF checks of customers
returned by bank 500,0000
Error in recording a check in the book.
The correct amount as paid by the bank is
P100,000 instead of P200,000
as recorded in the book 100,000
Saving deposit in other bank closed by BSP 1,000,000
Currency and coin on hand 900,000
Petty cash fund 50,000

What is the adjusted cash in the bank at month-end?

What is the unadjusted cash in the bank per ledger at month-end?
What total amount of cash should be reported as current assets?

Answer:
Balance per Book 6,970,000.00 Balance per Bank 8,000,000.00
Add: Bank Loan Add: Deposit in Transit 1,200,000.00
Proceed Note 1,200,000.00 Less: Outstanding Checks - 1,300,000.00
Less: NSF - 500,000.00
Service Charge - 20,000.00 Error - 150,000.00
Collection Fee
Error 100,000.00

Adjusted Cash balance 7,750,000.00 Adjusted Cash balance 7,750,000.00

Adjusted Cash balance 7,750,000.00
Currency Coin 900,000.00
Petty Cash 50,000.00
Cash 8,700,000.00

WEEK 3: PROOF OF CASH

Sample Problem 1
R&L Company presented the following bank reconciliation for the month of November.
Balance per Bank Statement, Nov 3,600,000
Add: Deposit in transit 800,000
Less: Outstanding Checks (1,200,000)
Bank Credit recorded in Error ( 200,000)
Balance per Book, Nov 3,000,000

Data per bank statement for the month Dec follow:

Dec Deposits, including note collected of 1,000,000 for R&L 5,500,000
Dec Disbursement, including NSF Customer Check 350,000 and Service Charge 50,000 4,400,000

All Items that were outstanding on Nov cleared through the bank in Dec, including the bank credit.
In Addition, Checks amounting to 500,000 were outstanding and deposits of 700,000 were transit on
December.

Answer:
Nov Receipts Disbursement Dec
Bank Balance per Bank 3,600,000.00 5,500,000.00 4,400,000.00 4,700,000.00
Add: Deposit in Transit
Nov 800,000.00 - 800,000.00
Dec 700,000.00 700,000.00
Less: Outstanding Check
Nov - 1,200,000.00 - 1,200,000.00
Dec 500,000.00 - 500,000.00
Bank Credit Error - 200,000.00 - 200,000.00
Note Collected
Dec -1,000,000.00 -1,000,000.00
NSF Check - 350,000.00 350,000.00
Service Charge - 50,000.00 50,000.00

Bank Balance per Book 3,000,000.00 4,400,000.00 3,100,000.00 4,300,000.00

Sample Problem 2
R&L Company prepared the following bank reconciliation on Jun
Balance per bank 9,800,000
Deposit in Transit 400,000
Outstanding Check (1,400,000)
Balance per Book 8,800,000
There were total deposits of 6,500,000 and charges for disbursements of 9,000,000 for Jul per Bank
Statement. All reconciliation items on Jun cleared the bank on Jul.
Check outstanding amounted to 1,000,000 and deposits in transit totaled 1,200,000 on Jul.

Answer:
Jun Receipts Disbursement Jul
Bank Balance per Bank 9,800,000.00 6,500,000.00 9,000,000.00 7,300,000.00
Deposit in Transit
Jun 400,000.00 - 400,000.00
Jul 1,200,000.00 1,200,000.00
Outstanding Check
Jun - 1,400,000.00 - 1,400,000.00
Jul 1,000,000.00 -1,000,000.00
Bank Balance per Book 8,800,000.00 7,300,000.00 8,600,000.00 7,500,000.00

SHORT TEST
Problem 1
R&L Company provided the following bank reconciliation on May:
Balance per bank 2,100,000
Deposit Outstanding 300,000
Checks Outstanding ( 50,000)
Correct Cash Balance 2,350,000

Balance per book 2,360,000

Bank Service Charge ( 10,000)
Correct Cash Balance 2,350,000

Data for the Month of June

Bank Book
Checks Recorded 2,300,000 2,400,000
Deposits Recorded 1,700,000 1,800,000
Collection by bank, plus interest 550,000
NSF Check returned with June 100,000
Balance 1,950,000 1,750,000

What is the amount of checks Outstanding on June? 240,000

What is the amount of deposit in transit on June? 950,000
What amount should be reported as adjusted cash in bank on June? 1,350,000

Problem 2
R&L had the following bank recon on Nov 30
Balance per bank, Nov 30 1,350,000
Deposit in transit 500,000
Outstanding checks (600,000)
Balance per book, Nov 30 1,250,000

The bank statement for the month of Dec showed the following:
Deposits, including P100,000 note collected for R&L 3,000,000
Disbursements, including P70,000 NSF customer check and P10,000 service charge 2,500,000

All reconciling items on Nov 30 cleared through the bank in Dec

The outstanding checks totaled P600,000 and the deposit in transit amounted
to P500,000 on Dec 31.

What is the adjusted cash in the bank on Dec 31? 1,750,000

What is the cash balance per book on Dec 31? 1,730,000
What is the amount of cash receipts per book in December? 2,900,000
What is the amount of cash disbursements per book in December? 2,420,000

Problem 3
R&L Company prepared the following bank reconciliation on June 30
Balance per bank 600,000
Deposits in transit 50,000
Outstanding checks (60,000)
Balance per book 590,000

There were total deposits of P90,000 and charges for disbursement of P60,000 for July per bank
statement. All reconciliation items on June 30 cleared the bank on July 31.
Checks outstanding amounted to P10,000 and deposits in transit totaled P50,000 on July 31.

What is the amount of cash receipts per book in July? 90,000

What is the amount of cash disbursements per book in July? 10,000
What is the adjusted cash in the bank on July 31? 670,000
What is the cash balance per ledger on July 31? 670,000

WEEK 4: ACCOUNTS RECEIVABLE & DOUBTFUL ACCOUNTS

Sample Problem 1
Randel Company provided the following information for the current year:
Accounts receivable on January 1 1,300,000
Credit sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collection of accounts written off in prior year
(customer credit was not reestablished) 25,000
Estimated uncollectible receivables per aging
of receivables at December 31 165,000

What is the balance of accounts receivable, before allowance for doubtful accounts on December 31?

Answer:
Accounts receivable January1. 1,300,000
Add: Credit sales 5,400,000
Total 6,700,000
Less: Collection from customers 4,750,000
Accounts written off 125,000 4,875,000
Accounts receivable December 31 1,825,000
The recovery of accounts written off does not affect the balance of accounts receivable because the effect
is offsetting.

Sample Problem 2
Berto Company provided the following data for the current year:
Accounts receivable, January 1 650,000
Credit sales 2,700,000
Sales returns 75,000
Accounts written off 40,000
Collections from customers 2,150,000
Estimated future sales returns at December 31 50,000
Estimated uncollectible accounts at 12/31 per aging 110,000

What is the amortized cost of accounts receivable on December 31?

Answer:
Accounts receivable - January1 650,000
Credit sales 2,700,000
Total 3,350,000
Less: Collections from customers 2,150,000
Accounts written off 40,000
Sales returns 75,000 2,265,000
Accounts receivable - December 31 1,085,000
Less: Allowance for doubtful accounts 110,000
Allowance for sales returns 50,000 160,000
Net realizable value 925,000
The amortized cost of accounts receivable is the same as the net realizable value.

Sample Problem 3
Faith Company provided the following information relating to current operations;
Accounts receivable, January 1 4,000,000
Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, January I 4,800,000
Inventory, December 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000

What amount should be reported as accounts receivable on December 31?

Answer:
Inventory – January 1 4,800,000
Purchases 8,000,000
Goods available for sale 12,800,000
Inventory- December 31 (4,400,000)
Cost of goods sold 8,400,000
Gross margin on sales 4,200,000
Gross sales 12,600,000
Cash sales (2,000,000)
Credit sales 10,600,000
Accounts receivable - January 1 4,000,000
Total 14,600,000
Accounts receivable collected (8,400,000)
Accounts receivable - December 31 6,200,000

Sample Problem 4
Lenny Company prepared an aging of accounts receivable on December 31 and determined that the net
realizable value of the accounts receivable was P2,500,000.
Allowance for doubtful accounts on January 1 280,000
Accounts written off as uncollectible 230,000
Accounts receivable on December 31 2,700,000
Uncollectible accounts recovery 50,000

What amount should be recognized as doubtful accounts expense for the current year?

Answer:
Allowance for doubtful accounts - January I 280,000
Recovery of accounts written off 50,000
Doubtful accounts expense (SQUEEZE) 100,000
Total 430,000
Accounts written off (230,000)
Allowance for doubtful accounts - December 31 200,000

Sample Problem 5
Summer Company's allowance for doubtful accounts was P1,000,000 at the end of 2020 and P900,000 at
the end of 2019.
For the year ended December 31, 2020, the entity reported doubtful accounts expense of P160,000 in the
income statement.

What amount was debited to the appropriate account to write off uncollectible accounts in 2020?

Answer:
Allowance for doubtful accounts - December 31, 2019 900,000
Doubtful accounts expense 160,000
Total 1,060,000
Accounts written off (SQUEEZE) (60,000)
Allowance for doubtful accounts - December 31, 2020 1,000,000

WEEK 5: NOTES AND LOANS RECEIVABLE

Sample Problem 1
On December 31, 2019, Berto Company sold used equipment with carrying amount of P2,000,000 in
exchange for a noninterest bearing note of P5,000,000 requiring ten annual payments of P500,000.
The first payment was made on December 31, 2020.
The market interest for similar note was 12%.
The present value of an ordinary annuity of 1 at 12% is 5.65 for ten periods and 5.33 for nine periods.

What is the carrying amount of the note receivable on December 31, 2019?
What is the gain on sale of equipment to be recognized in 2019?
What amount should be recognized as interest income for 2020?
What is the carrying amount of the note receivable on December 31, 2020?
Answer:
Present Value (500,000 *5.65) 2,825,000
Less: Carrying Amount 2,000,000
Gain of Sale 825,000

Interest Income (2,825,000*.12) 339,000

Total Payment 500,000
Principal Payment 161,000
Present Value 2,825,000
Carrying Amount (31/12/2020) 2,664,000

Sample Problem 2
On December 31, 2019, Lourdes Company sold a machine in the ordinary course of business to Rafael
Company in exchange for a noninterest bearing note requiring ten annual payments of P1,000,000.
The entity made the first payment on December 31, 2019. The market interest rate for similar notes at date
of issuance was 8%.
PV of an ordinary annuity of 1 at 8% for 9 periods 6.25
PV of an ordinary annuity of 1 at 8% for 10 periods 6.71.

What is the amount of sales revenue?

On December 31, 2019, what is the carrying amount of the note receivable?
What amount should be reported as interest income for 2020?
What is the carrying amount of the note receivable on December 31,2020?

Answer:
Present Value (1,000,000 * 6.25) 6,250,000
First Payment 1,000,000
Sales Revenue 7,250,000

Interest Income (6,250,000 *8%) 500,000

Total Payment 1,000,000

Interest Income 500,000
Principal Payment 500,000
Present Value (31/12/2019) 6,250,000
Present Value (31/12/2020) (6,250,000 – 500,000) 5,750,000

Sample Problem 3
Philippine Bank granted a loan to a borrower on January 1,2019.
The interest on the loan is 8% payable annually starting December 31, 2019. The loan matures in three
years on December 31, 2021,
Principal amount 3,000,000
Origination fee charged against the borrowed 100,000
Direct origination cost incurred 260,300
After considering the origination fee charged to the borrower an the direct origination cost incurred, the
effective rate on the loan is 6%.

What is the carrying amount of the loan receivable on January 1, 2019?

What amount should be recognized as interest income for 2019?
What is the carrying amount of the loan receivable on December 31, 2019?
What amount should be recognized as interest income for 2020?
Answer:
Loan Receivable 3,000,000
Direct Origination 260,300
Origination fee charge to borrower (100,000)
Carrying Amount 01/01/2019 3,160,300
Effective Interest 6% .
Interest Income 2019 189,618
Interest Received (3,000,000*8%) 240,000
Amortization 50,382
Carrying Amount 01/01/2019 3,160,300
Carrying Amount 31/12/2019 3,109,918
Effective Interest 6% .
Interest Income 2020 186,595

Sample Problem 4
National Bank granted a 10-year loan to Abbo Company in the amount of P1,500,000 with a stated interest
rate of 6%. Payments are due monthly and are computed to be P16,650.
National Bank incurred P40,000 of direct loan origination cost and P20,000 of indirect loan origination cost.
In addition, National Bank charged Abbo Company a 4-point nonrefundable loan origination fee.

What is the initial carrying amount of the loan receivable on the part of National Bank?
What is the initial carrying amount of the loan payable on the part of Abbo Company?

Answer:
Loan Receivable 1,500,000
Direct Original Cost 40,000
Origination Fee (1,500,000 * 4%) (60,000)
Carrying Amount 1,480,000

Loan Receivable 1,500,000

Origination Fee (60,000)
Carrying Amount 1,440,000

SHORT TEST

Problem 1
On June I, 2019, Yola Company loaned Dale P500,000 on a 12% note, payable in five annual installments
of P100,000 beginning January 1, 2020.
In connection with this loan, Dale was required to deposit P5,000 in a non interest-bearing escrow account.
The amount held in escrow is to be returned to Dale after all principal and Interest payment have been
made.
Interest on the note is payable on the first day of each month beginning July 1, 2019. Dale made timely
payments through November 1, 2019.
On January 1, 2020, Yola received payment of the first principal
installment plus all interest due.

1. On December 31, 2019, what amount should be reported as accrued? 10,000

Problem 2
Frame Company has an 8% note receivable dated June 30, 2019, In the original amount of P1,500,000.
Payments of P500,000 in principal plus accrued interest are due annually on July 1, 2020, 2021 and 2022.

2. What is the balance of note receivable on July 1, 2020? 1,000,000

3. On June 30, 2021, what amount should be reported as accrued interest on the note receivable?
80,000

Problem 3
Nova Company reported the following information on December 31, 2019:
Accounts receivable, net of P500,000 allowance for doubtful accounts 4,600,000
Accrued interest receivable 190,000
Notes receivable 4,000,000

The notes receivable comprised:

P1,000,000 note dated October 31, 2019, with principal and interest payable on October 31, 2020.
P3,000,000 note dated March 31, 2019, with principal and 8% interest payable on March 31, 2020.

During 2020, sales revenue totaled P21,000,000, P18,000.000 cash was collected from customers, and
P600,000 in accounts receivable were written off. All sales are made on a credit basis.
Doubtful accounts expense is recorded at year-end by adjusting the allowance account to an amount equal
to 10% of year-end accounts receivable.

4. What amount should be reported as interest income for 2020? 110,000

Problem 4
At year-end, Jet Company received two P1,000,000 notes receivable from customers in exchange for
services rendered.

On both notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and
payable at maturity.

The note from Hart Company, made under customary trade terms, is due in nine months and the note from
Maxx Company is due in five years.

The market interest rate for similar notes at year-end was 8%. The compound interest factors to convert
future value into present value at 8% follow:

Present value of I due in nine months .944

Present value of I due in five years .680

5. What is the total carrying amount of notes receivable at year-end? 1,782,000

Problem 5
On January 1, 2021, Ott Company sold goods to Fox Company. Fox signed a non interest-bearing note
requiring payment of P600,000 annually for seven years. The first payment was made on January 1, 2021.

The prevailing rate of interest for this type of note at date of issuance was 10%.

PV of an ordinary annuity of 1 at 10% for 6 periods 4.36

PV of an ordinary annuity of 1 at 10% for 7 perióds 4.87
6. What amount should be recorded as sales revenue in January 2021? 3,216,000
7. What is the carrying amount of the note receivable on January 1, 2021? 2,616,000
8. What is the interest income for 2021? 261,600
9. What is the carrying amount of thè note receivable on December 31, 2021? 2,877,600

Problem 6
At the beginning of current year, Jean Company purchased from Carmina Company a 2,000,000, 8%, five-
year note that required five equal annual year-end payments of P500,900. The note was discounted to yield
a 9% rate to Jean Company.

At the date of purchase, Jean Company recorded the note at the present
value of P1,948,500.

10. What is the total interest revenue earned by Jean Company over the life of this note? 556,000

Problem 7
National Bank granted a loan to a borrower on January 1, 2021. The interest on the loan is 10% payable
annually starting December 31, 2021. The loan matures in three years on December 31, 2023.
Principal amount 4,000,000
Origination fee charged against the borrower 342,100
Direct origination cost incurred 150,000
After considering the origination fee charged against the borrower and the direct origination cost incurred,
the effective rate on the loan is 12%.

11. What is the carrying amount of the loan receivable on January 1,2021? 3,807,900
12. What amount should be recognized as interest income for 2021? 456,948
13. What is the carrying amount of the loan receivable on December 31, 2021? 3,864,848
14. What amount should be recognized as interest income for 2022? 463,782

Problem 8
Philippine Bank granted a loan to a borrower on January 1, 2019. The interest on the loan is 8% payable
annually starting December 31, 2019. The loan matures in three years on December 31, 2021.

Principal amount 3,000,000

Origination fee charged against the borrower 100,000
Direct origination cost incurred 260,300
.
After considering the origination fee charged to the borrower and the direct origination cost incurred, the
effective rate on the loan is 6%.

15. What is the carrying amount of the loan receivable on January 1, 2019? 3,160,300
16. What amount should be recognized as interest income for 2019? 189,618
17. What is the carrying amount of the loan receivable on December 2019? 3,109,918
18. What amount should be recognized as interest income for 2020? 186,595
WEEK 6: IMPAIRMENT LOSS

Sample Problem 1
Beach Bank loaned Boracay Company P7,500,000 on January 1 2017. The terms of the loan were
payment in full on January 1, 2021 plus annual interest payment at 11%. The interest payment was made
as scheduled on January 1, 2018. However, due to financial setbacks, Boracay Company was unable to
make the 2019 interest payment Beach Bank considered the loan impaired and projected the cash flows
from the loan on December 31, 2019. The bank accrued the interest on December 31, 2018, but did not
continue to accrue interest for 2019 due to the impairment of the loan. The projected cash flows are:
Date of cash flow Amount projected
December 31, 2020 500,000
December 31, 2021 1,000,000
December 31, 2022 2,000,000
December 31, 2023 4,000,000
The PV of 1 at 11% is 0.90 for one period, 0.81 for two periods, 0.73 for three periods, and 0.66 for four
periods.
What is the loan impairment loss for 2019?
What amount should be reported as interest income for 2019?
What is the carrying amount of the loan receivable on December 31, 2020?

Date Amount PV PV
12/31/2020 500,000.00 0.90 450,000.00
12/31/2021 1,000,000.00 0.81 810,000.00
12/31/2022 2,000,000.00 0.73 1,460,000.00
12/31/2023 4,000,000.00 0.66 2,640,000.00
Total Present Value 5,360,000.00
Loan Receivable 7,500,000.00
Accrued Interest 2018 825,000.00 8,325,000.00
Impairment Loss 2,965,000.00

Amortization Table

No Payment Interest Principal Carrying Amount

5,360,000.00
12/31/2020 500,000.00 589,600.00 - 89,600.00 5,449,600.00
12/31/2021 1,000,000.00 599,456.00 400,544.00 5,049,056.00
12/31/2022 2,000,000.00 555,396.16 1,444,603.84 3,604,452.16
12/31/2023 4,000,000.00 396,489.74 3,603,510.26 941.90

Sample Problem 6
Kalibo Bank loaned P5,000,000 to Caticlan Company on January 1, 2017. The terms of the loan require
principal payments P1,000,000 each year for 5 years plus interest at 8%. The first principal and interest
payment is due on January 1, 2018. Caticlan Company made the required payments during 2018 and
2019. However, during 2019 Caticlan Company began to experience financial difficulties, requiring Kalibo
Bank to reassess the collectability of the loan.
On December 31, 2019, Kalibo Bank has determined that the remaining principal payment will be collected
but the collection of the interest is unlikely. Kalibo Bank did not accrue the interest on December 31. 2019.
The present value of 1 at 8% is as follows:
For one period 0.93
For two periods 0.86
For three periods 0.79
1. What is the loan impairment loss for 2019?
2. What amount should be reported as interest income for 2020?
3. What is the carrying amount of the loan receivable on December 31, 2020?

Date Amount PV Carrying Amount

12/31/2020 1,000,000.00 0.93 930,000.00
12/31/2021 1,000,000.00 0.86 860,000.00
12/31/2022 1,000,000.00 0.79 790,000.00
Total Present Value 2,580,000.00
Loan Receivable 3,000,000.00
Impairment Loss 420,000.00

Amortization Table

No Payment Interest Principal Carrying Amount

2,580,000.00
12/31/2020 1,000,000.00 206,400.00 793,600.00 1,786,400.00
12/31/2021 1,000,000.00 142,912.00 857,088.00 929,312.00
12/31/2022 1,000,000.00 74,344.96 925,655.04 3,656.96

SHORT TEST

Problem 1
On January 1, 2019, Berto Bank made a P1,000,000, 8% loan. The P80,000 interest is receivable at the
end of each year, with the principal amount to be received at the end of five years. At the end of 2019, the
first year's interest of P80,000 has not yet been received because the borrower is experiencing financial
difficulties. The borrower negotiated a restructuring of the loan
The payment of all of the interest for 5 years will be delayed until the end of the 5-year loan term. In
addition, the amount of principal repayment will be dropped from P1,000,000 to P500,000.
The PV of 1 at 8% for 4 periods is .735. No interest revenue has been recognized in 2019 in connection
with the loan.

1. What is the loan impairment loss for 2019? 338,500

2. What amount should be reported as interest income for 2020? 52,920

Problem 2
On December 31, 2019, Macedon Bank has a 5-year loan receivable with a face amount of P5,000,000
dated January 1, 2018 that is due on December 31, 2022. Interest on the loan is payable at 9% every
December 31. The borrower paid the interest that was due on December 31, 2018, but informed the bank
that interest accrued in 2019 will be paid at maturity date.
There is a high probability that the remaining interest payments will not be paid because of financial
difficulty.
The prevailing market rate of interest on December 31, 2019 is 10%.
The PV of 1 for three periods is .77 at 9% and.75 at 10%.

3. What is the loan impairment loss for 2019? 1,253,500

4. What is the carrying amount of the loan on December 31, 2020? 4,166,150
Problem 3
On December 31, 2019, Oregon Bank recorded an investment of P5,000,000 in a loan granted to a client.
The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full
at maturity on December 31,2022.
Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in
making full payment.
The bank projected that the entire principal will be paid at maturity and 10% interest or P200,000 will be
paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2019.
The present value of 1 at 10% for three periods is 0.75, and the present value of an ordinary annuity of 1 at
10% for three periods is 2.49.

5. What is the loan impairment loss for 2019? 752,000

6. What amount should be reported as interest income for 2020? 424,800
7. What is the carrying amount of the loan receivable on December 31, 2020? 4,472,800

Problem 4
On December 31, 2019, London Bank granted a P5,000,000 loan to a borrower with 10% stated rate
payable annually and maturing in 5 years, The loan was discounted at the market interest rate of 12%.
Unfortumately, the financial condition of the borrower worsened because of lower revenue.
On December 31, 2021, the bank determined that the borrower would pay back only P3,000,000 of the
principal at maturity.
However, it was considered likely that interest would continue to be paid on the P5,000,000 loan.
The present value of 1 at 12% is .57 for five periods and .71 for three periods. The present value of an
ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods.

8. What is the amount of cash paid to the borrower on December 31, 2019? 4,650,000
9. What is the carrying amount of the loan receivable before impairment on December 31, 2021? 4,772,960
10. What is the impairment loss for 2021? 1,442,960

LONG TEST

CASH AND CASH EQUIVALENTS

Problem -1
Joe Company had the following account balances on December. 31, 2019:
Petty cash fund 50,000
Cash in bank – current account 4,000,000
Cash in bank – payroll account 1,200,000
Cash in bank - sinking fund 2,000,000
Cash on hand 500,000
Cash in bank - unrestricted account for plant addition
and expected to be disbursed in 2020 1,500,000
Treasury bills- 3 months 1,000,000
The petty cash fund included unreplenished December 2019 petty cash expense vouchers P5,000 and
employee IOU P5,000.
The cash on hand included a P100,000 customer check payable to Joe dated January 15, 2020.
In exchange for a guaranteed line of credit, the entity has agreed to maintain a minimum balance of
P200,000 in the unrestricted current bank account.
The sinking fund is set aside to settle a bond payable that is due on December 31, 2021.

What total amount should be reported as cash on December 31, 2019?

a. 7,140,000

What total amount should be reported as cash equivalents on December 31, 2019?
a. 1,000,000

What total amount should be reported as cash and cash equivalents on December 31, 2019?
a. 8,140,000

Solution 1 Answer a
Petty cash fund 50,000
Cash on hand 500,000
Current account 4,000,000
Payroll account 1,200,000
Treasury bills 1,000,000
Cash in bank unrestricted 1,500,000
Unreplenished petty cash vouchers (5,000)
Employee IOU (5,000)
Customer check postdated January 31, 2020 (100,000)
Total cash and cash equivalents 8,140,000

Problem 2

On December 31, 2019, Lenny Company reported cash account balance per ledger of P9,500,000 which
included the following:
Cash in bank - demand deposit 3,000,000
Time deposit-30 days 500,000
NSF check of customer 200,000
Money market placement due on June 30, 2020 2,000,000
Saving deposit 1,000,000
IOU from an employee 300,000
Pension fund 1,500,000
Customer check dated January 3, 2020 600,000
Customer check outstanding for 18 months 400,000
9,500,000
* Check of P100,000 in payment of accounts payable was dated and unrecorded on December 31,
2019 but mailed to creditors on January 15, 2020.
*Check of P300,000 dated January 31, 2020 in payment of accounts payable was recorded and mailed
December 31, 2019.
*The cash receipts journal was held open until January 15, 2020, during which time P200,000 was
collected and recorded on December 31, 2019.

What is the Adjusted Cash balance on December 31, 2019?

a. 3,100,000

What total amount should be reported as cash and cash equivalents on December 31, 2019?
a. 4,600,000

Solution 2 Answer a
Cash in bank-demand deposit 3,100,000
Time deposit - 30 days 500,000
Saving deposit 1,000,000
Total cash and cash equivalents 4,600,000
Cash in bank - demand deposit 3,000,000
Check postdated January 31, 2020 recorded on
December 31, 2019 300,000
Collections during January 2020 recorded on
December 31, 2019 (200,000)
Adjusted cash in bank 3,100,000

Problem 3
Lenny Company reported the following information in relation to cash on December 31, 2019:
Checkbook balance, P4,000,000
Undeposited collections P400,000
A customer check amounting to P200,000 dated January 2, 2020 was not included in the December
31, 2019 checkbook balance
Another customer check for P500,000 deposited on December 22, 2019 was included in the checkbook
balance but returned by the bank for insufficiency of fund.
This check was redeposited on December 26, 2019 and cleared two days later.
A P400,000 check payable to supplier dated and recorded on December 30, 2019 was mailed on January
16, 2020.
A petty cash fund of P50,000 comprised the following on December 31, 2019:
Coins and currencies 5,000
Petty cash voucher 40,000
Refundable deposit for returnable containers 5,000
A check of P40,000 was drawn on December 31, 2019 payable to Petty Cash. 50,000

1. What is the adjusted cash in bank on December 31, 2019?

b. 4,400,000

2. What total amount should be reported as cash on December 31, 2019?

a. 4,845,000

Solution 3
Question 1 Answer b
Checkbook balance 4,000,000
Undelivered check payable to supplier 400,000
Adjusted cash in bank 4,400,000

Question 2 Answer a
Cash in bank 4,400,000
Cash on hand- undeposited collections 400,000
Coins and currencies 5,000
Replenishment check 40,000
Total cash 4,845,000

Problem 4
Randel Company reported the checkbook balance on December 31,2019 at P5,000,000 and held the
following items on same date:
Check payable to Randel, dated January 2, 2020 in payment of a sale made in December 2019,
included in December 31 checkbook balance 2,000,000.
Check payable to Randel, deposited December 15 and included in December 31 checkbook
balance, but returned by bank on December 30 stamped “NSF." The check was redeposited on
January 2, 2020 and cleared on January 9, 2020 500,000
Check drawn on Randel account, payable to a vendor, dated and recorded in Randel books on December
31, 2019 but not mailed until January 10, 2020 300,000
Certificate of time deposit 90 days 1,000,000

What amount should be reported as cash on December 31, 2019?

a. 3,800,000

Solution 4 Answer-a
Checkbook balance 5,000,000
Postdated (2,000,000)
NSF customer check ( 500,000)
Undelivered company check 300,000
Certificate of time deposit 90 days 1,000,000
Adjusted cash balance 3,800,000

Problem 5
On December 31, 2019, Summer Company had the following cash balances:
Cash in bank -current account 1,800,000
Petty cash fund - all funds were reimbursed at year-end 50,000
Time deposit due February 1, 2021 250,000
Time deposit in bank closed by BSP 1,000,000
Cash in bank don’t included P600,000 of compensating balance against short-term borrowing
arrangement on December 31, 2019. The compensating balance is legally restricted as to
withdrawal.

On December 31, 2019, what total amount should be reported as cash?

a. 1,850,000

On December 31, 2019, what total amount should be reported as cash equivalents?
a. 0

Solution Answer d
Cash in bank 1,800,000
Petty cash fund 50,000
Total cash 1,850,000

BANK RECONCILIATION

Problem 1
In reconciling the cash balance on December 31 with that shown in the bank statement, Sam Company
provided the following information:
Balance per bank statement 4,000,000
Balance per book 2,700,000
Outstanding checks 600,000
Deposit in transit 475,000
Service charge 10,000
Proceeds of bank loan, December 1,
discounted for 6 months at 12%, it is
recorded on Sam Company's books 940,000
Customer check charged back by bank
for absence of counter signature 50,000
Withdrawal of P860,000 incorrectly recorded by bank as 10,000
Check of Sim Company charged by bank
against Sam account 150,000
Customer note collected by bank in favor of Sam Company.
Face 400,000
Interest 40,000
Total 440,000
Collection fee 5,000
435,000
Erroneous debit memo of December 28,
to charge Sam account with settlement of bank loan 200,000
Deposit of Sim Company credited to Sam account 300,000

What amount should be reported as adjusted cash in bank on December 31?

d. 3,075,000

Solution 16-3 Answer d

Balance per book 2,700,000
Add: Proceeds of bank loan
Customer note collected by bank 435,000 435,000
Total 4,075,000
Less: Service charge 10,000
Customer check charged back 50,000 60,000
Adjusted book balance 3,075,000

Balance per bank 4,000,000

Add: Deposit in transit 475,000
Incorrect Withdraw -850,000
Erroneous bank charge 150,000
Erroneous debit memo 200,000 25,000
Total 3,975,000
Less: Outstanding checks 600,000
Erroneous bank credit 300,000 900,000
Adjusted bank balance 3,075,000

Problem 2
In preparing the bank reconciliation for the month of December, Case Company provided the following
data:
Balance per bank statement 3,800,000
Deposit in transit 520,000
Amount erroneously debit by bank to Case's account 40,000
Bank service charge for December 5,000
NSF check 50,000
Outstanding checks 675,000

What is the adjusted cash in bank?

d. 3,645,000
What is the unadjusted cash in bank balance per book?
b. 3,700,000

Solution 2
Question 1 Answer d
Question 2 Answer b
Balance per bank statement 3,800,000
Deposit in transit 520,000
Outstanding checks (675,000)
Bank error - erroneous bank debit 40,000
Adjusted bank balance 3,645,000

Unadjusted book balance (SQUEEZE) 3,700,000

Bank service charge (5,000)
NSF check (50,000)
Adjusted cash in bank balance 3,645,000

Problem 3
Aries Company kept all cash in a checking account. An examination of the accounting records and bank
statement for the month of June revealed the following information:
● The cash balance per book on June 30 was P8,500,000.
● A deposit of P1,000,000 that was placed in the bank's night depository on June 30 did not appear
on the bank statement.
● The bank statement showed that on June 30 the bank collected note for the entity and credited the
proceeds of P950,000 to the entity's account, net of collection charge P50,000.
● Checks outstanding on June 30 amounted to P300,000 including certified check of P100,000.
● The entity discovered that a check written in June for P200,000 in payment of an account payable
had been recorded in the entity's records as P20,000.
● Included with the June bank statement was NSF check for P250,000 received from a customer on
June 26.
● The bank statement showed a P20,000 service charge for May.

1. What amount should be reported as cash in bank on June 30?

a. 9,020,000
2. What is the balance per bank statement on June 30?
d. 8,220,000
3. What is the net adjustment to cash in bank on June 30?
c. Net debit P520,000

Solution 15-8
Question 1 Answer a
Balance per book 8,500,000
Note collected by bank 950,000
Total 9,450,000
Book error (200,000-20,000) (180,000)
NSF check (250,000)
Adjusted book balance 9,020,000

Question 2 Answer d
Balance per bank (SQUEEZE) 8,220,000
Deposit in transit 1,000,000
Outstanding checks
(300,000 - 100,000) certified check ( 200,000)
Adjusted bank balance 9,020,000

Question 3 Answer c
Cash in bank 950,000
Service charge 50,000
Note receivable 1,000,000

Accounts payable 180,000

Accounts receivable 250,000
Cash in bank 430,000
The two entries can be compounded and the net effect is a debit to cash in bank of P500,000.

Problem 4

Boracay Company kept all cash in a checking account. An examination of the bank statement for the month
of December revealed a bank statement balance of P8,470,000.
A deposit of P950,000 placed in the bank's night depository on December 29 does not appear on the bank
statement.
Checks outstanding on December 31 amount to P260,000.
The bank statement showed that on December 25 the bank collected a note for Boracay Company and
credited the proceeds of P935,000 to the entity's account which included P35,000 interest.
Boracay Company discovered that a check written in December for P183,000 in payment of an account
had been recorded as P138,000.
Included with the December 31 bank statement was an NSF check for P250.000 that Boracay Company
had received from a customer on December 20.
The bank statement showed a P15,000 service charge for December.

1. What is the adjusted cash in bank on December 31?

a. 9,160,000
2. What is the unadjusted balance per book on December 31?
b. 8,535,000
3. What is the net adjustment to cash in bank on December 31?
c. Net debit 625,000

Solution 15-9
Question 1 Answer a
Balance per bank 8,470,000
Deposit in transit 950,000
Checks outstanding ( 260,000)
Adjusted bank balance 9,160,000

Question 2 Answer b
Balance per book (SQUEEZE) 8,535,000
Note collected by bank for the depositor 935,000
Book error in recording check (183,000 – 138,000) (45,000)
NSF check (250,000)
Service charge (15,000)
Adjusted book balance 9,160,000
Question 3 Answer c
Cash in bank 935,000
Service charge 15,000
Note receivable 950,000

Accounts payable 45,000

Accounts receivable 250,000
Service charge 15,000
Cash in bank 310,000
The two entries can be compounded and the net effect is a debit to cash in bank of P625,000.

Problem 5
Pearl Company maintains a checking account at the City Bank. The provides a bank statement along with
canceled checks on the last day of each month. The July bank statement included the following
information:
Balance, July 1 550,000
Deposits 1,800,000
Checks processed 1,400,000
Service charge 30,000
NSF check 120,000
Monthly loan payment deducted by bank from account 100,000
Deposits outstanding totaled P100,000 and all checks written by the entity were processed by the bank
except for check of P150,000.
A P200,000 July deposit from a credit customer was recorded as P20,000 debit to cash and credit to
accounts receivable.
A check incorrectly recorded by the entity as P30,000 disbursement was correctly processed by the
bank as P300,000 disbursement.
1. What is the balance per bank on July 31?
a. 430,000
2. What is the adjusted cash in bank on July 31?
b. 480,000
3. What is the cash in bank balance per ledger on July 31?
c. 550,000

Solution 15-10
Question I Answer a
Balance per bank - July 1 550,000
Deposits 1,800,000
Checks processed (1,400,000)
Service charge (30,000)
NSF check (120,000)
Monthly loan payment (100,000)
Book Error (270,000)
Balance per bank - July 31 430,000

Question 2 Answer b
Balance per bank - July 31 430,000
Deposit in transit 100,000
Outstanding check (150,000)
Adjusted bank balance 480,000

Correct amount of disbursement 30,000

Recorded by bank 300,000
Bank error - overstatement of disbursement 270,000

Question 3 Answer c
Balance per ledger- July 31 (SQUEEZE) 550,000
Service charge (30,000)
NSF check (120,000)
Monthly loan payment (100,000)
Book error- understatement of collection 180,000
Adjusted book Balance 480,000

Correct amount of accounts receivable collected 200,000

Recorded by depositor 20,000
Book error - understatement of collection 180,000

MIDTERM EXAMINATION

PART II: PROBLEM SOLVING

Problem 1
Berto Company reported the following information in relation to cash on December 31, 2021:

● Checkbook balance, P4,000,000.

● Undeposited collections, P400,000.
● A customer check amounting to P200,000 dated January 2,2022 was excluded in the December
31, 2021 checkbook balance
● Another customer check for P500,000 deposited on December 22, 2021 was included in the
checkbook balance but returned by the bank for insufficiency of fund. This check was redeposited
on December 26, 2021 and cleared two days later.
● A P400,000 check payable to supplier dated and recorded on December 30, 2021 was mailed on
January 16, 2022.
● A petty cash fund of P50,000 comprised the following on December 31, 2021:
Coins and currencies 5,000
Petty cash vouchers 40,000
Refundable deposit for returnable containers 5,000
50,000
A check of P40,000 was drawn on December 31, 2021 payable to Petty Cash.

1. What is the adjusted cash in bank on December 31, 2021?

a. 4,600,000
b. 4,200,000
c. 4,400,000
d. 3,700,000
2. What total amount should be reported as cash on December 31,2021?

a. 4,645,000
b. 4,845,000
c. 4,600,000
d. 4,650,000
Answer

1. C
Checkbook Balance 4,000,000
Undelivered Check Payable to Supplier 400,000
Adjusted Cash in Bank 4,400,000

2. B
Cash in bank 4,400,000
Cash on Hand- Undeposited collections 400,000
Coins and Currencies 5,000
Replenish Check 40,000
Total Cash 4,845,000

Problem 2
In connection with your audit of Caloocan Corporation for the year ended December 31, 2021, you
gathered the following:
a. Current account at Metrobank P2,000,000
b. Current account at BPI (100,000)
c. Payroll account 500,000
d. Foreign bank account –restricted (in equivalent pesos) 1,000,000
e. Postage stamps 1,000
f. Employee’s post dated check 4,000
g. IOU from controller’s sister 10,000
h. Credit memo from a vendor for a purchase return 20,000
i. Traveler’s check 50,000
j. Not-sufficient-funds check 15,000
k. Money Market Placement 30,000
l. Petty cash fund (P4,000 in currency and expense receipts for P6,000) 10,000
m. Treasury bills, due 3/31/22 (purchased 12/31/21) 200,000
n. Treasury bills, due 1/31/22 (purchased 1/1/21) 300,000
3. Based on the above information and the result of your audit, compute for the cash and cash
equivalent that would be reported on the December 31, 2021 balance sheet.
a. P2,784,000
b. P2,790,000
c. P3,084,000
d. P2,754,000
e. None of the above

Current account at Metrobank P2,000,000

Payroll account 500,000
Traveler’s check 50,000
Petty cash fund (P4,000 in currency) 4,000
Treasury bills, due 3/31/07(purchased 12/31/06) 200,000
Total P2,754,000
Answer: D

Problem 3
In the course of your audit of the Las Piñas Corporation, its controller is attempting to determine the amount
of cash to be reported on its December 31, 2021 balance sheet.
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 (employee to
reimburse through salary deduction).
c. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a 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 90 days.
h. Las Piñas has received a check dated January 2, 2022 in the amount of P150,000.
i. Las Piñas has agreed to maintain a cash balance of P200,000 at all times at PS Bank to ensure
future credit availability.
j. Currency and coin on hand amounted to P15,000.
4. Based on the above and the result of your audit, how much will be reported as cash and cash equivalent
at December 31, 2021?
a. P3,025,000
b. P2,575,000
c. P2,825,000
d. P4,025,000
e. None of these

Savings account at PS Bank 1,200,000

Checking account at PS Bank 1,800,000
Time Deposit 1,000,000
Petty cash fund 10,000
Currency and coin 15,000
Total P4,025,000
Answer: D

Problem 4
You noted the following composition of Malabon Company’s “cash account” as of December 31, 2021 in
connection with your audit:
Demand deposit account 2,000,000
Time deposit –30 days 1,000,000
NSF check of customer 40,000
Money market placement (due June 30, 2022) 1,500,000
Savings deposit in a closed bank 100,000
IOU from employee 20,000
Pension fund 3,000,000
Petty cash fund 10,000
Customer’s check dated January 1, 2022 50,000
Customer’s check outstanding for 18 months 40,000
Total P7,760,000

Additional information follows:

a) Check of P200,000 in payment of accounts payable was recorded on December 31, 2021 but
mailed to suppliers on January 5, 2022.
b) Check of P100,000 dated January 15, 2022 in payment of accounts payable was not recorded
and mailed on December 31, 2021.
c) The company uses the calendar year. The cash receipts journal was held open until January 15, 2022,
during which time P400,000 was collected and recorded on December 31, 2021.
5. The cash and cash equivalents to be shown on the December 31, 2021 balance sheet is
a. P3,310,000
b. P2,910,000
c. P2,810,000
d. P4,410,000
Solution:
Demand deposit account as adjusted:
Demand deposit account per books 2,000,000
Undelivered check 200,000
Window dressing of collection (400,000) 1,900,000
Time deposit -30 days 1,000,000
Petty cash fund 10,000
Cash and cash equivalents 2,810,000 Answer: C

Problem 5
The books of Manila's Service, Inc. disclosed a cash balance of P687,570 on December 31, 2021.
The bank statement as of December 31 showed a balance of P547,800. Additional information that might
be useful in reconciling the two balances follows:
(a) Check number 748 for P30,000 was originally recorded on the books as P45,000.
(b) A customer's note dated September 25 was discounted on October 12. The note was dishonored on
December 29 (maturity date). The bank charged Manila's account for P142,650, including a protest fee of
P2,650.
(c) The deposit of December 24 was recorded on the books as P28,950, but it was actually a deposit of
P27,000.
(d) Outstanding checks totaled P98,850 as of December 31.
(e) There were bank service charges for December of P2,100 not yet recorded on the books.
(f) Manila's account had been charged on December 26 for a customer's NSF check for P12,960.
(g) Manila properly deposited P6,000 on December 3 that was recorded by the bank.
(h) Receipts of December 31 for P134,250 were recorded by the bank on January 2.
(i) A bank memo stated that a customer's note for P45,000 and interest of P1,650 had been
collected on December 27, and the bank charged a P360 collection fee.
Based on the above and the result of your audit, determine the following:
6. Adjusted cash in bank balance
a. P583,200
b. P589,200
c. P577,200
d. P512,400
7. Net adjustment to cash as of December 31, 2021
a. 104,370
b. 98,370
c. 110,370
d. 175,170
Question No. 1
Balance per bank statement, 12/31/21 P547,800
Add: Deposits in transit P134,250
Total 682,050
Less: Outstanding checks 98,850
Adjusted bank balance, 12/31/21 P583,200

Balance per books, 12/31/21 P687,570

Add: Book error -Check No. 748 P15,000
Customer note collected by bank 46,290 61,290
Total 748,860
Less: Dishonored note 142,650
Book error-improperly recorded deposit 1,950
NSF check 12,960
Bank service charges 2,100 159,660
Adjusted book balance, 12/31/21 P589,200
Question No. 2
Unadjusted balance per books, 12/31/21 687,570
Adjusted book balance, 12/31/21 583,200
Net adjustment to cash –credit P104,370

Problem 6
Shown below is the bank reconciliation for Marikina Company for November 2021:
Balance per bank, Nov. 30, 2021 P150,000
Add: Deposits in transit 24,000
Total 174,000
Less: Outstanding checks P28,000
Bank Debit recorded in error 10,000 18,000
Cash balance per books, Nov. 30, 2021 P156,000
The bank statement for December 2021 contains the following data:
Total deposits P110,000
Total charges, including an NSF check of P8,000
and a service charge of P400 96,000

All outstanding checks on November 30, 2021, including the bank credit, were cleared in the bank in
December 2021.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December 31,
2021.
Based on the above and the result of your audit, answer the following:
8. How much is the cash balance per bank on December 31, 2021?
a. P154,000
b. P164,000
c. P150,000
d. P172,400
9. How much is the December receipts per books?
a. P124,000
b. P104,000
c. P96,000
d. P148,000
10. How much is the December disbursements per books?
a. P96,000
b. P89,600
c. P79,600
d. P98,000
11. How much is the cash balance per books on December 31, 2021?
a. P150,000
b. P180,400
c. P170,400
d. P162,000
12.The adjusted cash in bank balance as of December 31, 2021 is
a. P141,600
b. P172,000
c. P162,000
d. P196,000

Suggested Solution:
Question No. 1
Balance per bank, Nov. 30, 2021 P150,000
Add: Total deposits per bank statement 100,000
Total 250,000
Less: Total charges per bank statement 96,000
Balance per bank, Dec. 31, 2021 P154,000

Question No. 2
Total deposits per bank statement P100,000
Bank Debit 10,000
Less deposits in transit, Nov. 30 24,000
Dec. receipts cleared through the bank 86,000
Add deposits in transit, Dec. 31 38,000
December receipts per books P124,000

Question No. 3
Total charges per bank statement 96,000
Less: Outstanding checks, Nov. 30 28,000
December NSF check 8,000
December bank service charge 400 36,400
Dec. disb. cleared through the bank 59,600
Add outstanding checks, Dec. 31 30,000
December disbursements per books 89,600

Question No. 4
Balance per books, Nov. 30, 2021 136,000
Add December receipts per books 124,000
Total 260,000
Less December disbursements per books 89,600
Balance per books, Dec. 31, 2021 170,400

Question No. 5
Balance per bank statement, 12/31/21 154,000
Deposits in transit 38,000
Outstanding checks ( 30,000)
Adjusted bank balance, 12/31/21 P162,000
Balance per books, 12/31/21 170,400
NSF check ( 8,000)
Bank service charges ( 400)
Adjusted book balance, 12/31/21 P162,000

Problem 7
The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,182 137,817
Deposits in transit 8,101 12,880
Outstanding checks 27,718 30,012
Bank service charge 72 60
Customer's 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:
Disbursements in July per bank statement 218,373
Cash receipts in July per Muntinlupa's books 236,452
Based on the application of the necessary audit procedures and appreciation of the above data, you are to
provide the answers to the following:
13. How much is the adjusted cash balance as of June 30?
a. P87,565
b. P107,082
c. (P3,695)
d. P87,765
14. How much is the adjusted bank receipts for July?
a. P253,787
b. P245,537
c. P214,802
d. P245,437
15. How much is the adjusted book disbursements for July?
a. P220,767
b. P181,782
c. P212,517
d. P212,417
16. How much is the adjusted cash balance as of July 31?
a. P137,817
b. P22,513
c. P120,785
d. P120,585
17 .How much is the cash shortage as of July31?
a. P8,250
b. P196,144
c. P71,815
d. P0

Muntinlupa Company
Reconciliation of Receipts, Disbursements, and Bank Balance
For the month ended July 31
Beginning June Receipts July 31 Disb July31 Ending July

Balance per bank P107,182 P249,108 P218,373 P137,917

Deposits in transit:
June 30 8,301 (8,301)
July 31 12,880 12,880
Outstanding checks:
June 30 (27,718) (27,718)
July 31 30,012 (30,012)
NSF check redeposited (8,250) (8,250)
Adjusted bank balance P87,765 P245,437 P212,417 P120,785

Balance per books P15,822 P236,452 P212,529 P39,745

Bank service charge:
June (72) (72)
July 60 (60)
Collection of notes rec
June 71,815 (71,815)
July 80,900 80,900
Adjusted book balance P87,565 P245,537 P212,517 P120,585
Answers: 1) A; 2) C; 3) B; 4) D; 5) D

Problem 8
Von Company provided the following data for the current year in relation to accounts receivable:
Debits
January 1 balance before deducting credit balance of P30,000 530,000
Charge sales 5,250,000
Charge for goods out on consignment 50,000
Shareholders' subscriptions 1,000,000
Accounts written off but recovered 10,000
Cash paid to customer for January 1 credit balance 25,000
Goods shipped to cover January 1 credit balance 5,000
Deposit on long-term contract 500,000
Claim against common carrier 400,000
Advances to supplier 300,000
Credits
Collections from customers, including overpayment of P50,000 5,200,000
Writeoff 35,000
Merchandise returns 25,000
Allowances to customers for shipping damages 15,000
Collection on carrier claim 40,000
Collection on subscription 202,000
18. What amount should be reported as accounts receivable on December 31?
a. 565,000
b. 595,000
c. 545,000
d. 495,000
19. What total amount of trade and other receivables should be reported under current assets?
a. 1,745,000
b. 2,045,000
c. 1,245,000
d. 1,255,000
20. What total amount of other receivables should be reported under noncurrent assets?
a. 1,650,000
b. 1,298,000
c. 1,300,000
d. 1,600,000

Solution
Question 1 Answer b
Accounts receivable - January 1 530,000
Charge sales 5,250,000
Accounts written off but recovered 10,000
Total 5,790,000
Collections from customers (5,150,000)
Writeoff (35,000)
Merchandise returns (25,000)
Allowance to customers for shipping damages (15,000)
Accounts receivable - December 31 565,000
Collections from customers 5,200,000
Overpayment (50,000)
Adjusted collections 5,150,000

Question 2 Answer c
Accounts receivable 595,000
Claim receivable (400,000 – 40,000) 360,000
Advances to supplier 300,000
Total trade and other receivables 1,255,000

Question 3 Answer c
Subscriptions receivable (1,000,000 – 202,000) 798,000
Deposit on contract 500,000
Total long-term other receivables 1,298,000

Problem 9
On January 1, 2019, Easy Company reported accounts receivable P2,000,000 and allowance for doubtful
accounts P100,000 entity provided the following data:
Credit sales Writeoffs Recoveries
2016 11,100,000 260,000 22,000
2017 12,250,000 295,000 10,000
2018 14,650,000 300,000 6,000
2019 15,000,000 200,000 50,000
The collections from customers during 2019 totaled P14,000,000 excluding recoveries.
Doubtful accounts are provided for as a percentage of credit sales
The entity calculated the percentage annually by using the experience of the three years prior to the current
year.
21. What amount should be reported as doubtful accounts expense for 2019?
a. 200,000
b. 300,000
c. 400,000
d. 150,000
22. What amount should be reported as allowance for doubtful accounts on December 31, 2019?
a. 250,000
b. 400,000
c. 100,000
d. 450,000
23. What is the net realizable value of accounts receivable on December 31, 2019?
a. 2,550,000
b. 2,600,000
c. 2,700,000
d. 2,800,000

Solution
Question 1 Answer b

Credit sales Writeoffs Recoveries

2016 11,100,000 260,000 22,000
2017 12,250,000 295,000 10,000
2018 14,650,000 300,000 6,000
38,000,000 855,000 38,000
Rate= 855,000 - 95,000/38,000,000= .01
Doubtful accounts expense for 2019 (1% x 15,000,000) 150,000

Question 2 Answer a
Allowance for doubtful accounts January 1, 2019 100,000
Doubtful accounts expense for 2019 150,000
Recoveries in 2019 50,000
Total 300,000
Writeoffs in 2019 (200,000)
Allowance for doubtful accounts - December 31, 2019 100,000

Question 3 Answer a
Accounts receivable - January 1, 2019 2,000,000
Credit sales in 2019 15,000,00
Collections from customers in 2019 (14,000,000)
Writeoffs in 2019 ( 200,000)
Accounts receivable December 31, 2019 2,800,000
Allowance for doubtful December 31, 2019 ( 100,000)
Net realizable value 2,700,000

Problem 10
On January 1, 2021, Ott Company sold goods to Fox Company. Fox signed a noninterest-bearing note
requiring payment of P600,000 annually for seven years. The first payment was made on January 1, 2022.
The prevailing rate of interest for this type of note at date of issuance was 10%.
PV of an ordinary annuity of l at 10% for 6 periods 4.36
oy of an ordinary annuity of 1 at 10% for 7 periods 4.87
24. What amount should be recorded as sales revenue in January 2021?
a. 3,216,000
b. 2,922,000
c. 2,616,000
d. 2,142,000
25. What is the carrying amount of the note receivable on January 1, 2022?
a. 3,600,000
b. 2,616,000
c. 3,000,000
d. 2,614,200
26. What is the interest income for 2023?
a. 300,000
b. 232,200
c. 261,600
d. 227,562
27. What is the carrying amount of the note receivable on December 31, 2026?
a. 1,493,500
b. 0
c. 1,042,850
d. 547,135

Solution 23-5
Question 1 Answer a
First payment on January 1, 2019 600,000
Present value of remaining six payments (600,000 x 4.36) 2,616,000
Correct sales revenue 3,216,000
Note receivable (600,000 x 6) 3,600,000
Present value of remaining six payments (2,616,000)
Unearned interest income - January 1, 2019 984,000

Question 2 Answer b
Note receivable 3,600,000
Unearned interest income ( 984,000)
Carrying amount - January 1, 2019 2,616,000

Question 3 Answer c
Interest income for 2019 (10% x 2,616,000) 261,600

Question 4 Answer d
Note receivable - December 31, 2019 3,600,000
Unearned interest income- December 31, 2019 ( 722,400)
(984,000 – 261,600)
Carrying amount- December 31, 2019 2,877,600

Problem 11
National Bank granted a loan to a borrower on January 1,2019. The interest on the loan is 10% payable
annually starting December 31 2019. The loan matures in three years on December 31, 2021.
Principal amount 4,000,000
Origination fee charged against the borrower 342,100
Indirect origination cost incurred 150,000
After considering the origination fee charged against the borrower and the direct origination cost incurred,
the effective rate on the loan is 13.7%.
28. What is the carrying amount of the loan receivable on January 1, 2019?
a. 4,000,000
b. 3,807,900
c. 4,150,000
d. 3,657,900
29. What amount should be recognized as interest income for 2019?
a. 400,000
b. 380,900
c. 456,948
d. 501,132
30. What is the carrying amount of the loan receivable on December 31, 2020?
a. 4,000,000
b. 3,674,019
c. 3,864,848
d. 3,750,932

Solution
Question I Answer b
Origination fee received 342,100
Direct origination cost incurred (150,000)
Unearned interest income 192,100

Loan receivable 4,000,000

Unearned interest income ( 192,100)
Carrying amount – January 1, 2019 3,807,900

Question 2 Answer c
Interest income for 2019 (12% x 3,807,900) 456,948
Interest received for 2019 (10% x 4,000,000) 400,000
Amortization of unearned interest income 56,948

Question 3 Answer c
Loan receivable 4,000,000
Unearned interest income - December 31, 2019 (135,152)
Carrying amount 3,864,848
Unearned interest income - January 2019 192,100
Amortization for 2019 ( 56,948)
Unearned interest income - December 31, 2019 135,152

Problem 12
On January 1, 2019, Global Bank loaned P3,000,000 to a borrower.
The contract specified that the loan had a 6-year term and a 9% interest rate.
Interest is payable annually every December 31 and the principal amount will be collected on December
31, 2024. Interest is collected for 2019.
On December 31, 2019, the bank determined that the loan has a 12-month probability of default of 10%
and expected to collect only 90% of the loan.
On December 3 1, 2020, the bank determined that there is a significant increase in the credit risk of the
loan but no objective evidence of impairment.
Based on relevant information, the bank concluded that there is a 30% probability of default over the
remaining term of the loan and it is expected that only 60% of the loan will be collected. Interest is collected
for 2020.
On December 31, 2021, the borrower was under financial difficulty and the loan was considered impaired
because there is now objective evidence of impairment.
The bank agreed that only 40% of the principal will be collected on due date. Interest is collected for 2021.
The present value of 1 at 9% is 0.65 for 5 periods, 0.71 for four periods and 0.77 for three periods.
The entity decided to apply the three-stage approach of determining the impairment of loan.

31. What amount should be recognized as impairment loss for 2019?

a. 1,755,000
b. 1,245,000
c. 124,500
d. 300,000
32. What amount should be recognized as interest income for 2020?
a. 270,000
b. 267,759
c. 223,506
d. 0
33. What amount should be recognized as impairment loss for 2020?
a. 1,722,000
b. 1,200,000
c. 392,100
d. 516,600

34. What amount should be recognized as impairment loss for 2021?

a. 2,076,000
b. 1,559,400
c. 1,800,000
d.0
35. What amount should be recognized as interest income for 2022?
a. 270,000
b. 102,196
c. 90,644
d. 83,160