ACT1104 - Intermediate Accounting 1

Practice for Quiz 2: Cash to AR

Problem 1
The following data pertaining to the cash transactions and bank account of Entity P for the month
of may are available to you:

Cash balance, per records, May 31 Php 17,194

Cash balance, per bank statement, May 31 31,948
Bank service charge for may 109
Debit memo for the cost of printed checks delivered by the bank 125
Outstanding checks 6,728
Deposit of May 30 not recorded by bank until June1 4,880
Proceeds of a bank loan of may 30, net of interest of Php300 5,700
Proceeds from a customer’s promissory note, including interest of
Php100 8,100

Check No. 2772 issued to a supplier entered in the accounting records

at Php2,100 but deducted in the bank statement at an erroneous amount
of 1,200

Stolen check lacking authorized signature, deducted from Entity P’s

account by the bank in error 800

Customer’s check returned by the bank marked NSF, no entry has been
made in the accounting records to record the returned check 760

1. What is the correct cash balance at May 31?

Problem 2
Entity A had the following items listed in its trial balance at December 31, 2021

Currency and coins Php 650

Balance in checking account 2,600
Customer checks waiting to be deposited 1,200
Treasury bills, purchased on 11/02/21,
mature on 4/30/22 3,000

Marketable equity securities 10,200

Commercial paper, purchased on 11/02/21,
mature on 01/30/22 5,000

2. What amount will Entity A include in its December 31, 2021 statement of financial position as
cash?

Problem 3
The following data pertain to Entity B on December 31, 2021:
Current account at Bangko Nya Php 1,800,000
Current account at bangko Ko (100,000)
Payroll account at Bangko Mo 500,000
Foreign bank account (in equivalent pesos) 800,000
Savings account in a closed bank 150,000
Postage stamps 1,000
Employee’s post-dated check 4,000
IOU from employees 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler’s check 50,000
Money order 30,000
Sinking fund 2,000,000
DAIF check of customer 15,000
Customer’s check dated 01/01/22 80,000
Time deposits-30 days 200,000
Money market placement (due 06/30/22) 500,000
Treasury bill, due 03/31/22 (purchased 12/31/21) 200,000
Treasury bills, due 01/31/22 (purchased 01/01/21) 300,000

3. The total amount to be reported as cash as of December 31, 2021 is

Problem 4
On December 31, 2021, the cash account of Entity C has a debit balance of Php3,500,000. An
analysis of the cash shows the following:

Undeposited collection Php 60,000

Cash in bank- PCIB checking account 500,000
Cash in bank-PNB (overdraft) (50,000)
Undeposited NSF check received from a customer,
dated December 1, 2021 15,000

Undeposited check from a customer, dated January 15, 25,000

2022
Cash in bank-PCIB (fund for payroll) 150,000
Cash in bank-PCIB (savings deposit) 100,000
Cash in bank-PCIB (money market instrument, 90 2,000,000
days)
Cash in foreign bank (restricted) 100,000
IOUs from officers 30,000
Sinking fund cash 450,000
Listed shares held as temporary investment 120,000
Php 3,500,000

4. Cash and cash equivalents on equity C’s December 31, 2021 statement of financial position
should be

Problem 5
The following items were included as cash in the books of Entity D:

Checking account at security bank Php(1,200)

Checking account at BPI 5,335
Checking account at Citibank used for payment of 5,500
salaries
Postage stamps 107
Employee’s post dated check 2,300
I.O.U from an employee 200
A check marked “DAIF” 1,250
Postal money order 500
Petty cash fund (Php324 in expense receipts) 500
Certificate of time deposit with BPI 5,000
 A gold ring surrendered as security by a customer
who lost his wallet (at market value) 1,500

5. The correct amount that should be reported as cash is

Problem 6
The information below is from the books of the Entity K on June 30:

Balance per bank statement Php 11,164

Receipts recorded but not yet deposited
in the bank 1,340

Bank charges not recorded 16

Note collected by bank and not
recorded on books 1,120

Outstanding checks 1,100

NSF checks-not recorded on books nor
redeposited 160

6. Assuming no errors were made, compute the cash balance per books on June 30 before any
reconciliation adjustments.

Problem 7
The cash in the bank account of Entity M for April showed an ending balance of Php129,298.
Deposits in transit on April 30 was Php10,800. Outstanding checks as of April 30, were
Php59,435, including a Php5,000 check which the bank had certified on April 27. During the
month of April, the bank charged back NSF checks in the amount of Php3,435 of which
Php1,835 had been redeposited by April 20. On April 23, the bank Charged Entity M’s account
for a Php2,200 item which should have been charged against Entity EM, but the error was not
detected by the bank. During April, the proceeds from notes collected by the bank for Entity M
was Php7,548 and bank charges for this service was Php18.

7. How much is the unadjusted balance per bank on April 30?

Problem 8
Entity N has prepared its bank reconciliation at march 31 taking the following information into
account:

Deposits in transit Php 1,500

Outstanding check 2,800
Bank charges shown in the bank
statement but not recorded in the cash 125
book
The adjusted cash book balance per bank reconciliation was a debit balance of Php2,060.

8. What is the balance as shown on the bank statement on March 31?

Problem 9
RC accepted from a customer a P4,000,000, 3-months, 12% interest-bearing note dated 31
August 2022. On 30 September 2017, the entity discounted the note with recourse at Abank at
15%.

However, the proceeds were not received until 1 October 2022. The discounting with recourse is
accounted for as conditional sale with recognition of a contingent liability.

9. How much is the interest earned on this note?

10. How much is the interest earned to maturity?

11. How much is the maturity value of the notes?

12. How much is the discount?

13. What is the amount received (proceeds) from discounting of notes?

14. How much is the carrying value of the notes?

15. What is the loss on notes receivable financing?

16. Give the entry for discounting, assuming the note was discounted without recourse

17. Give the entry for discounting, assuming the note was discounted with recourse
18. Give the entry for discounting, assuming the note was discounted without recourse (do not
recognize loss or gain on discounting)

19. Give the entry for discounting, assuming the note was discounted with recourse (do not
recognize loss or gain on discounting)

Problem 10
Entity A has the following data relating to accounts receivable at the end of the current year:
Accounts receivable Php 1,880,000
Allowance for doubtful accounts 94,000
Allowance for sales discounts 10,000
Allowance for sales return 15,000
Allowance for freight in 3,000
20. What is the net realizable value of New Corp.’s accounts receivable?

Problem 11
Entity J reported the following balances (after adjustment at the end of 2021 and 2020.
12/31/21 12/31/20
Total accounts receivable Php 105,000 Php 96,000
Net accounts 102,000 94,500

21. During 2021, the entity wrote off customer accounts totaling Php3,200 and collected Php800
on accounts written off in previous years. The entity’s doubtful accounts expense for the year
ended December 31, 2021 is

Problem 12
Entity H Provides for doubtful accounts expense at the rate of 3% of credit sales. The following
data are available the current year:

Allowance for doubtful accounts, Php 54,000

January 1
Accounts written off as uncollectible 60,000
Collection of accounts written off 15,000
Credit sales, year-ended December 31 3,000,000

22. The allowance for doubtful accounts balance at December 31, after adjusting entries, should
be
Problem 13
Entity G has the following data relating to accounts receivable for the year ended Dec. 31, 2023:

Accounts Receivable, Jan 1, 2023 P 480,000

Allowance for doubtful accounts, Jan 1, 2023 19,200
Sales during the year, terms 2/10, 1/15, n/60 2,400,000
Cash received from customers during the year 2,560,000
Accounts written off during the year 17,600
An analysis of cash received from customers during the year revealed the P1,411,200 was
received from the customers availing the 10-day discount period, P792,000 from customers
availing the 15-day discount period, P4,800 represented recovery of accounts written-off, and the
balance was received from customers paying beyond the discount period.

The allowance for doubtful accounts is adjusted so that it represents certain percentage of the
outstanding accounts receivable at year end. The required percentage at Dec. 31, 2023 is 125%
of the rate used on Dec. 31, 2022.

23. The doubtful accounts expense for 2023 is

Problem 14
PJ Company showed the following information related to the accounts receivable in order to
estimate bad debts through the use of the aging. The credit of the Company is 30 days on the
average.

Age of Receivables Amount

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

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

Accounts which are overdue for less than 30 days 97%
Accounts which are overdue 31-60 days 90%
Accounts which are overdue 61-90 days 75%
Accounts which are overdue 91-120 days 55%
Accounts which are overdue 121-150 days 30%
Accounts which are overdue for over 150 days 25%
24. What is the carrying value of accounts receivable for statement of financial position
purposes?

Problem 15
Entity H had the following transactions in its first year operations:
Sales (90% collected in the first year) 750,000
Disbursements for costs and expenses 600,000
Purchases of equipment for cash 200,000
Proceeds from issuance of ordinary shares 250,000
Payments on short-term borrowings 25,000
Proceeds from short-term borrowings 50,000
Depreciation on equipment _Ignore 40,000
Disbursements for income taxes 45,000
Bad debt write-offs - Ignore 30,000
25. What is the cash balance at December 31 of the first year?

Problem 16
The following pertains to Entity G on December 31, 2024: Checking account balance
(Php865,000); certificate of deposit Php375,000 due 2/1/2025 (purchased 11/1/2024); postdated
check from customer Php14,000; NSF check received from customer Php11,000; cash advance
to subsidiary of Php290,000; postage stamps on hand Php620; utility deposit paid to electric
company Php8,000; currency and coins in petty cash fund (the entity has not replenished the
fund to the imprest amount of Php5,000).

26. The correct amount that should be reported as cash on December 31, 2024 is