FINANCIAL ACCOUNTING – 1LONG QUIZ #1

Accounting for Cash and Cash Equivalents, Accounts Receivable,Notes Receivable and Loans Receivable

Problem 1. TRIOWTRI Company maintains its current account with BAMA Bank. The bank statement on December 31, 2013 showed a balance of P638,340.

You gathered the following information: A check for P22,500 received from a customer whose account is current had been deposited and

then returned by the bank on December 28, 2013. No entry was made for the return of this check. The customer replaced the check on January 15, 2014.

A check for P5,720 was cleared by the bank as P7,520. The bank made the correction on January 2, 2014.

A check for P3,500 representing payment of an employee advance was received and deposited on December 27, 2012, but was not recorded until January 3, 2014.

Postdated checks totaling P67,300 were included in the deposits in transit. These represent collections of current receivable from customers. The checks were actually deposited on January 5, 2014.

Various debit memos for drafts purchased for payment of importation of equipment totaling P230,000 were not yet recorded. These purchases were previously set up as accounts payable. Said equipment arrived in December.

Interest earned on the bank balance for the 4th quarter of 2013, amounting to P1,950, was not yet recorded.

Bank service charges totaling P1,260 were not recorded. Deposit in transit and outstanding checks at December 31, 2013 totaled P136,250 and P276,380,

respectively.

Various expenses from the company’s imprest petty cash fund dated December 2013 totaled P16,250, while those dated January 2014 amounted to P5,903. Another disbursement from the fund dated December 2013 was a cash advance to an employee amounting to P3,500. A replenishment of the petty cash fund was made on January 8, 2013.

The company’s trial balance on December 31, 2013 includes the following accounts:Cash in bank – BAMA Bank P748,320Cash in Bank – BSA Bank (restricted account for

plant expansion, expected to bedisbursed in 2014) 700,000

Petty cash fund 30,000Time deposit, placed December 20, 2013

and due March 20, 2014) 1,000,000Money market placement – LPU Bank 4,000,000

Required:1. What is the adjusted petty cash fund balance on December 31, 2013? _______________2. What is the adjusted Cash in bank – BAMA Bank balance on December 31, 2013?

_______________3. Give the necessary entry/entries to adjust Cash in Bank – BAMA Bank.

4. The December 31, 2013 Statement of Financial Position should show “Cash and Cash Equivalents” at _________________.

Problem 2. Andrew Germs is reviewing the cash accounting for LKCM Inc. Andrew’s review will focus on the petty cash fund account and the bank reconciliation for the month ended May 31, 2014. He has collected the following information from the bookkeeper:

Petty Cash Fund The petty cash fund was established on May 2, 2014 in the amount of P10,000. Expenditures from the fund by the custodian as of May 31, 2014, were evidenced by approved

petty cash vouchers for the following:Various office supplies P3,920IOU from employees 1,200Shipping charges 2,298Miscellaneous Expense 1,526

On May 31, 2012, the petty cash fund was replenished and increased to P12,000; currency and coin in the fund at that time totaled P756.

Bank ReconciliationPBI Bank

Bank Statement

Disbursements Receipts BalanceBalance, May 1, 2014 P350,760Deposits P1,120,000Note payment direct from customer(w/ interest of P1,200) 37,200Checks cleared during May P1,246,000Bank service charges 1,080Balance, May 31, 2014 P260,880

LKCM Inc.’s Cash AccountBalance, May 1, 2014 P354,000Deposits during May 2014 1,240,000Checks written during May 2014 1,273,000

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, 2014 is P9,840.

Required:5. What is the amount of petty cash shortage?6. Give the necessary entry/entries to record the replenishment of and increase in the petty cash

fund.7. What total amount of cash should be reported in the May 31, 2014 Balance sheet?

Problem 3. Information about San Mateo-Do Co. are shown below:Nov. 30 Dec. 31

Cash account balance P 20,340 P 48,540

Bank statement balance 107,060 137,820Deposits in transit 8,200 12,880Outstanding checks 27,700 30,100Bank service charges for the month,

not shown on co.’s books 720 600NSF checks returned by bank, not

shown on co.’s books 4,300 8,240Bank collections from company customers,

not shown on co.’s books 72,240 80,900

Additional information: Deposits and credit memos per bank statement P249,100 Canceled checks and debit memos per bank statement 218,340 Cash receipts per cash book 172,880 Checks written per cash book 211,900

Required:8. Prepare a Proof of Cash.

Problem 4. ANGINGAY Co. reported the following information at the end of its first year of operations, December 31, 2013:

Bad Debts Expense P271,000Uncollectible accounts written off during 2013 35,400Net realizable value of accounts receivable 895,000

Required:9. What is the accounts receivable balance at December 31, 2013?

Problem 5. EPALA Co. sells a variety of imported goods. By selling on credit, the company cannot expect to collect 100% of its accounts receivable. At December 31, 2012, EPALA Co. reported the following in its statement of financial position:

Accounts Receivable P2,197,500Less: Allowance for bad debts (133,500)Net Realizable Value P2,064,000

During the year ended December 31, 2013, EPALA Co. earned sales revenue of P537,702,500 and collected cash of P528,070,500 from customers. Assume bad debt expense for the year was 1% of sales revenue and that EPALA Co. wrote off uncollectible accounts receivable totaling P5,349,500.

Required:10. What is the accounts receivable balance at December 31, 2013?11. What is the December 31, 2013 balance of the Allowance for Bad Debts account?

Problem 6. PAPANS Inc.’s accounts receivable subsidiary ledger shows the following information:CUSTOMER ACCOUNT BALANCE INVOICE

Dec. 31, 2013 DATE AMOUNTAruy Inc. P35,180 12/06/13 P14,000

11/29/13 21,180Naku Co. 20,920 09/27/13 12,000

08/20/13 8,920

Syak Corp. 30,600 12/08/13 20,00010/25/13 10,600

Trip Co. 45,140 11/17/13 23,14010/09/13 22,000

Uy Co. 31,600 12/12/13 19,20012/02/13 12,400

Eew Co. 17,400 09/12/13 17,400

The estimated bad debt rates below are based on PAPANS Inc.’s receivable collection experience:Age of Accounts Rate0 – 30 days 1%31 – 60 days 1.5%61 – 90 days 3%91 – 120 days 10%Over 120 days 50%

The allowance for bad debts account had a debit balance of P5,500 on December 31, 2013, before adjustments.

Required:12. Prepare an Accounts Receivable Aging Schedule13. Give the necessary entry to adjust the allowance for bad debts account.

Problem 7. The balances of selected accounts taken from the December 31, 2012 of KAYAKOPA Co. are shown below:

Accounts Receivable P674,000Allowance for doubtful accounts 24,000

The following transactions (in summary) affecting accounts receivable occurred during the year ended December 31, 2013:

Sales (all on account, terms: 2/10, 1/15, n/60) P3,000,000Cash received from customers 3,200,000The cash received includes the following:

Customers paying within the 10-day discount period P1,764,000Customers paying within the 15-day discount period 990,000Recovery of accounts written off 6,000Customers paying beyond the discount period ?

Accounts receivable written off as worthless 22,000Credit memo for sales returns 12,000

It is the company’s policy to provide for uncollectible accounts equal to 1% of sales.

14. How much is the carrying value of the accounts receivable as of December 31, 2013? _____________

Problem 8. On January 1, 2013, PAPASAKABA Co. sells its equipment with a carrying value of P160,000. The company receives a non-interest bearing note due in 3 years with a face amount of P200,000. There is no established market value for the equipment. The prevailing interest rate for a note of this type is 12%.

Required:15. What is the gain or loss to be recognized on the sale of the equipment?16. Prepare a discount amortization table using effective interest method.

Problem 9. On January 2, 2013, LASTNATO Co. sold equipment with a carrying amount of P480,000 in exchange for a P600,000 non-interest bearing note due January 2, 2016. There was no established exchange price for the equipment. The prevailing rate of interest for a note of this type at January 2, 2013 was 10%.

17. How much should LASTNATO Co. report as interest income in its 2013 profit or loss? ___________

18. How much should LASTNATO Co. report as gain or loss on sale of equipment in its 2013 profit or loss? _______________

19. What is the carrying value of the note receivable as of December 31, 2013 statement of financial position? ___________________

Problem 10. On January 1, 2012, CONFUSED Bank loaned P5,500,000 to STRESSED Co. The initial loan repayment terms include a 10% interest rate plus annual principal payments of P1,100,000 on January 1 each year. STRESSED made the required interest payment in 2012 but did not make the P1,100,000 principal payment nor the P550,00 interest payment for 2013. CONFUSED is preparing its annual financial statements on December 31, 2013. STRESSED is having financial difficulty, and CONFUSED has concluded that the loan is impaired.

Analysis of STRESSED Co.’s financial condition on December 31, 2013 indicates that the principal payments will be collected, but the collection of interest is unlikely. CONFUSED did NOT accrue the interest on December 31, 2013.

The projected cash flows are:December 31, 2014 P1,750,000December 31, 2015 2,000,000December 31, 2016 1,750,000

P5,500,000

20. What is the loan impairment loss on December 31, 2013? _____________21. What is the interest income to be reported by CONFUSED Bank in 2014? ______________

22. What is the carrying value of the loan receivable on December 31, 2014? ______________

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