1.

Tranvia Company revealed the following information on December 31,2017:

Cash in checking account 350,000

Cash in money market account 750,000
Treasury bill, purchased November 1, 2017
Maturing January 31, 2018 3,500,000
Time deposit purchased December 1, 2017
Maturing March 31, 2018 4,000,000

What amount should be reported as cash and cash equivalents on December 31, 2017?
a. 1,100,000
b. 3,850,000
c. 4,600,000
d. 8,600,000

2. Dahlia Company had the following account balances on December 31, 2017:

Cash on hand and in bank 3,000,000

Cash legally restricted for additional to plant
Expected to be disbursed in 2018 2,000,000
Bank certificate of deposit due February 1, 2018
Purchased September 1, 2017 1,000,000

What amount should be reported as cash and cash equivalents on December 31, 2017?
a. 3,000,000
b. 5,000,000
c. 6,000,000
d. 4,000,000

3. Abigail Company provided the following information at year-end:

Cash on hand 500,000

Cash in bank 4,000,000
Petty cash fund 50,000
Commercial paper with maturity of 2 months 1,000,000
Treasury bill with maturity of 6 months 2,000,000
Postdated customer checks 200,000

What total amount should be reported as cash and cash equivalents?

a. 7,550,000
b. 5,550,000
c. 4,550,000
d. 5,750,000

4. Affable Company provided the following information at year-end comprising the cash account:

Cash in bank – demand deposit account 5,000,000

Cash on Hand 400,000
Postage stamps unused 5,000
Certificate of time deposit with the maturity of 3months 1,500,000
Money order 50,000
Manager check 100,000
Traveler check 1,000,000
Postdated customer check 500,000

What total amount should be reported as “Cash” at year end?

a. 8,050,000
b. 7,050,000
c. 6,550,000
d. 6,450,000
5. Thor Company provided the following data on December 31,2017:

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, 2017 but not
mailed until January 31, 2018 500,000
Cash in sinking fund 2,000,000

On December 31, 2017, what amount should be reported as “cash” under current assets?
a. 4,500,000
b. 5,500,000
c. 3,500,000
d. 6,500,000

6. Joana Company had the following account balances on December 31, 2017

Petty cash fund 50,000

Cash on hand 500,000
Cash in bank –current account 4,000,000
Cash in bank –payroll account 1,000,000
Time deposit 2,000,000
Cash in bank –restricted account for plant addition,
expected to be disbursed in 2018 500,000
Cash in sinking fund set aside for bond payable due June 30, 2018 1,500,000

The petty cash fund included unreplenished December 2017 cash expense vouchers of P5,000 and employee
IOU of 5,000
What total amount should be reported as cash and cash equivalents on December 31, 2017?
a. 6,940,000
b. 8,940,000
c. 7,940,000
d. 7,440,000

7. At year–end, Rabid Company reported a cash balance of P5,250,000 which included the following:

Petty cash fund 50,000

Undeposited receipts, including a postdated customer
check of P200,000 1,300,000
Cash in bank 2,500,000
Cash in sinking fund 1,000,000
Vouchers paid out of collections, not yet recorded 250,000
IOUs signed by employees 150,000
Total 5,250,000

What total amount should be reported as “cash” in the statement of financial position at year –end?
a. 3,650,000
b. 3,850,000
c. 4,650,000
d. 4,050,000

8. On December 31, 2017, Kibitzer Company had the following balances in the bank accounts it maintains at First
Bank :

Checking account #101 1,750,000

Checking account #201 (100,000)
Time deposit account – 30days 250,000
90-day treasury bill, due February 28, 2018 500,000
180-day treasury bill, due March 15, 2018 800,000

On December 31, 2017, what total amount should be reported as cash and cash equivalents?
a. 1,900,000
b. 2,000,000
c. 2,400,000
d. 3,200,000
 (9-10)
Aruba Company had a checkbook balance on December 31, 2017 of P8,000,000 and held the following items
in the safe:

Check payable to Aruba, dated January 5, 2018

Included in December 31 checkbook balance 2,000,000

Check payable to Aruba, deposited December 20, and

included in December 31 checkbook balance, but returned
by bank on December 30, stamped “NSF”. The check was redeposited
January 2, 2018,and cleared January 3, 2018. 500,000

Check drawn on Aruba’s account and payable to a vendor, date and recorded
December 31 but not mailed until January 3, 2018 1,500,000

Cash on hand –undeposited collections 400,000

Change fund 40,000
Time deposit for plant expansion 1,000,000
Treasury bill 2,500,000
Money market placement 3,000,000
Postage stamps unused 10,000

9. What total amount should be reported as cash on December 31, 2017?

a. 7,400,000
b. 7,440,000
c. 8,440,000
d. 7,450,000

10. What total amount should be reported as cash equivalents on December 31, 2017?
a. 6,500,000
b. 3,000,000
c. 5,500,000
d. 2,500,000

11. On December 31, 2017, Lamentable Company had the following cash balances:

Cash in bank –current account 6,000,000

Petty cash fund (all funds were reimbursed at year –end) 50,000
Time deposit –three months, due January 15, 2018 2,500,000
Saving deposit 1,000,000

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

What total amount should be reported as “cash and cash equivalents”?

a. 9,500,000
b. 9,150,000
c. 9,100,000
d. 6,950,000

12. Baloney Company had the following account balances on December 31, 2017:

Cash in bank 2,000,000

Cash on hand 125,000
Cash restricted for addition to plant in 2018 1,600,000

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

What amount should be reported as “cash” on December 31, 2017?

a. 1,775,000
b. 2,250,000
c. 2,375,000
d. 3,975,000
13. Kindred Company had the following account balances on December 31, 2017.

Petty cash fund 50,000

Cash in bank –current account 4,000,000
Cash in bank –sinking fund 2,000,000
Cash on hand 500,000
Money market placement with maturity of 3 months 1,000,000

The cash on hand included a P100,000 check payable to Kindred Company dated January 15, 2018

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.

What total amount should be reported as “cash” on December 31, 2017

a. 6,450,000
b. 4,450,000
c. 7,450,000
d. 6,250,000

14. Takeable Company had the following account balances on December 31, 2017:

Cash on hand and in bank 5,000,000

Cash restricted for equipment acquisition in clearly
next year 2,000,000
time deposit 1,500,000
saving deposit set aside for dividend payable on December 31, 2018 1,000,000

What total amount should be reported as “cash” on December 31, 2017?

a. 7,500,000
b. 9,500,000
c. 6,000,000
d. 8,000,000

(15-16)

Ecstacy Company reported the following information at the end of the current year.

Investment securities of P1,000,000. These securities are share investments in entities that are traded in the
Philippine Stock Exchange.

As a result, the shares are very actively traded in the market.

Investment securities of P2,000,000. These securities are government treasury bills.

The treasury bills have a 10-year term and purchased on December 31 at which time they had two months to
go until they mature.

Cash of P3,400,000 in the form of coin, currency, saving account and checking account.

Investment securities of P1,500,000. These securities are commercial papers or money market placements.

The term of the commercial papers is nine months and they were purchased on December 31 at which time
they had three months to go until they mature.

15. What total amount should be reported as cash at the end of current year?
a. 3,400,000
b. 5,400,000
c. 4,900,000
d. 6,900,000
16. What total amount should be reported as cash equivalents at the end of current year?
a. 3,500,000
b. 4,500,000
c. 1,500,000
d. 2,500,000

17. Candid Company provided the following information with respect to cash and cash equivalents at year end:

Checking account at First Bank (200,000)

Checking account at Second Bank 5,500,000
Treasury bonds 1,000,000
Unrestricted foreign bank account in equivalent pesos 2,000,000
Cash in foreign bank restricted due to exchange control 1,000,000
IOU from president 750,000
Credit memo from a vendor for a purchase return 80,000
No sufficient fund customer check 150,000
Petty cash fund, P20,000 in currency and expense receipts for P30,000 50,000

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

a. 5,520,000
b. 7,500,000
c. 7,550,000
d. 7,520,000

18. On December 31, 2017, Roma Company reported cash of P3,350,000 with the following details:

Undeposited collections 60,000

Cash in bank –BDO checking account 500,000
Cash in bank –PNB (overdraft) (50,000)
Undeposited NSF check received from customer,
dated December 1, 2017 15,000
Undeposited check from a customer, dated January 15, 2018 25,000
Cash in bank –BDO fund for payroll 150,000
Cash In bank –BDO saving deposit 100,000
Cash in bank –BDO money market instrument, 90 days 2,000,000
Cash in bank –BDO value added tax account 450,000
Cash in foreign bank restricted 100,000
Total 3,350,000

On December 31, 2017, what total amount should be reported as cash and cash equivalents?
a. 2,910,000
b. 2,810,000
c. 2,760,000
d. 3,260,000

19. Marjorie Company established a petty cash fund P50,000 with the following:

Coins and currency 22,000

Petty cash vouchers:
Gasoline 3,000
Medical supplies 1,000
Repairs 1,500
IOU from an employee 3,500
Check drawn payable to the order of Ann Cruz, petty cash
custodian, representing her salary 15,000
Check of an employee returned by bank marked “NSF” 3,000
A sheet of paper with the names of several employees
Together with a contribution for a birthday party
and attached to the sheet of paper is currency of 5,000

What amount of petty cash fund should be reported?

a. 42,000
b. 27,000
c. 37,000
d. 22,000
20. Admirable Company had a petty cash fund which included the following details:

Coins and currency 2,000

Paid vouchers
Transportation 600
Gasoline 400
Office supplies 500
Postage stamps 300
Due from employees 1,200 3,000

Employee’s check returned by bank marked “NSF” 1,000

Check drawn to the order of petty cash custodian 4,000

What amount of petty cash should be reported?

a. 10,000
b. 7,000
c. 6,000
d. 9,000

21. Damsel Company reported a checkbook balance of P4,000,000 on December 31,2017

A customer check amounting to P200,000 dated December 30, 2017 was not included in the checkbook
balance.

Another customer check for P500,000 deposited on December 22, 2017 was included in the checkbook
balance but returned by the bank for insufficiency of fund.

This check was redeposited on December 26, 2017 and December 28, 2017

Coins and currencies on hand amounted to P300,000

A P400,000, check payable to supplier dated and recorded on December 30, 2017 was mailed on January 15,
2018

A petty cash fund P50,000 with the following summary on December 31, 2017

Coins and currencies 5,000

Petty cash vouchers 43,000
Return value of 20 cases of soft drinks 2,000
Total 50,000

A check of P43,000 was drawn on December 31, 2017 payable to Petty Cash.

What total amount should be reported as “cash” on December 31, 2017?

a. 4,948,000
b. 4,548,000
c. 4,950,000
d. 4,900,000

22. In preparing the August 31 bank reconciliation, Adorable Company provided the following information:

Balance per bank statement 1,805,000

Deposit in transit 325,000
Return of customer check for insufficient fund 60,000
Outstanding checks 275,000
Bank service charge for August 10,000

On August 31, what is the adjusted cash in bank?

a) 1,855,000
b) 1,795,000
c) 1,785,000
d) 1,755,000
( 23 – 24 )In preparing the bank reconciliation at the current month-end, Cardinal Company provided the following
data:

Balance per bank statement 3,800,000

Deposit in transit 520,000
Amount erroneously credited by bank to the entity
Account 40,000
Bank service charge for the current month 5,000
Outstanding check 675,000

23. What is the adjusted cash in bank?

a) 3,685,000
b) 3,645,000
c) 3,600,000
d) 3,605,000

24. What is the unadjusted cash in bank balance per book?

a) 3,550,000
b) 3,660,000
c) 3,610,000
d) 3,655,000

25. Emphatic Company provided the following data at the current month-end:

Balance per book 4,000,000

Bank charges 10,000
Outstanding checks 950,000
Deposit in transit 1,200,000
Customer note collected by bank 1,500,000
Interest on customer note 60,000
Customer check returned NSF 250,000
Payment of depositor note payable charged to account 1,000,000

What is the adjusted cash in bank?

a) 4,300,000
b) 5,300,000
c) 4,250,000
d) 4,000,000

26. Endemic Company provided the following data for the purpose of reconciling the cash balance per book with
the cash balance per bank statement on December 31:

Balance per bank statement 2,000,000

Balance per book 850,000
Outstanding checks, including certified check of P100,000 500,000
Deposit in transit 200,000
December NSF checks, P50,000 of which had been redeposited
And cleared by December 27 150,000
Erroneous credit to Endemic account, representing proceeds
Of loan granted to another entity 300,000
Proceeds of note collected by bank for Endemic, net of
Service charge of P20,000 750,000

What is the cash in bank to be reported on December 31?

a) 1,400,000
b) 1,500,000
c) 1,450,000
d) 1,800,000
 ( 27 – 28 )Adversary 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 is P8,500,000

 A deposit of p1,000,000 that was placed in the bank’s night depository on June 30 does not appear on
the bank statement.
 The bank statement shows on June 30, the bank collected note for Adversary Company and credited
the proceeds of P950,000 to the entity’s account.
 Checks outstanding on June 30 amount to P300,000.
 Adversary Company 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 that Adversary Company had
received from a customer on June 26.
 The bank statement shows a P20,000 service charge for June.

27. What is the cash in bank to be reported on June 30?

a. 9,180,000
b. 9,360,000
c. 9,000,000
d. 3,300,000

28. What is the net adjustment to cash in bank on June 30?

a) Net debit P950,000
b) Net credit P450,000
c) Net debit P500,000
d) Net debit P860,000

29. Laconic Company received the bank statement for the month of April which include the following information:

Bank service charge for April 15,000

Check deposited by Laconic during April was not collectible and
Has been marked NSF by the bank and returned 40,000
Deposits made but not yet recorded by bank 130,000
Checks written and mailed but not yet recorded by bank 100,000

The entity found a customer check for P35,000 payable to the entity that had not yet been deposited and had
not been recorded. The general ledger showed a bank account balance of P920,000.

What is the adjusted cash in bank on April 30?

a. 900,000
b. 865,000
c. 930,000
d. 965,000

30. Beacon Company provided the following information for the month of December:

Cash balance per bank statement 4,000,000

Checks outstanding, including certified check of P100,000 500,000
Customer note collected by bank for Beacon 150,000
NSF checks of customers returned by bank 200,000
Bank service charge shown in December bank statement 20,000
Error made by Beacon Company in recording a check that was
Drawn in December for P100,000 but recorded at P10,000 90,000
Deposit in transit 1,300,000

What is the cash balance per ledger on December 31?

a. 4,900,000
b. 5,060,000
c. 4,880,000
d. 4,970,000

31. On March 31, Decent Company received a bank statement which revealed the following information:
 February 28 book balance 1,460,000
Note collected by bank 100,000
Interest earned on note 10,000
NSF check of customer 130,000
Bank service charge on NSF check 2,000
Other bank service charges 3,000
Outstanding checks 202,000
Deposit of February 28 placed in night depository 85,000
Check issued by Deceit Company charged to Decent account 20,000

What is the cash balance per bank statement?

a. 1,435,000
b. 1,532,000
c. 1338,000
d. 1,557,000

32. Sapphire Company provided the following information for the month of December:

Balance per bank statement December 31 2,800,000

Bank service charge for December 12,000
Interest paid by bank to Sapphire Company for December 10,000
Deposit made but not yet recorded by the bank 350,000
Checks written but not yet recorded by the bank 650,000

The entity discovered that it had drawn and erroneously recorded a check for P46,000 that should have been
recorded for P64,000.

What is the cash balance per ledger in December 31?

a. 2,500,000
b. 2,520,000
c. 2,540,000
d. 2,800,000

33. Gallant Company reported a cash account balance of P4,500,000 before reconciliation.

The bank statement did not include a deposit of P230,000 made on the last day of the month.

The bank statement showed a collection by the bank of P94,000 and a customer check for P32,000 returned
because it was NSF.

A customer check for P45,000 was recorded on the books as P54,000, and a check written for P79,000 was
recorded as P97,000.

What is the correct balance in the cash account?

a. 4,765,000
b. 4,571,000
c. 4,819,000
d. 4,801,000

34. Esoteric Company correctly prepared the following bank reconciliation for the month of December:

Balance per bank statement 2,800,000

Deposit in transit 195,000
Checkbook printing charge 5,000
Error made by Esoteric in recording a check issued in December 35,000
NSF check 110,000
Outstanding check ( 100,000 )
Note collected by bank including P15,000 interest ( 215,000 )
Balance per book 2,830,000

Cash on hand at year-end 200,000

What total amount of cash should be reported?

a. 2,930,000
 b. 3,095,000
c. 2,895,000
d. 3,130,000

( 35 – 36 )Timex 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

35. What is the cash balance per ledger?

a. 2,120,000
b. 3,055,000
c. 2,555,000
d. 2,065,000

36. What is the cash balance per bank statement?

a. 3,700,000
b. 3,070,000
c. 3,050,000
d. 2,370,000

( 37 – 38 )Magnate Company kept all cash in a checking account. An examination of the accounting records and
bank statement for the month ended revealed a bank statement balance of P18,800,000 and book balance of
P19,000,000.

A deposit of P1,450,000 placed in the bank’s night depository on December 31 did not appear on the bank
statement. Checks outstanding on December 31 amounted to P770,000 of which P70,000 had been certified.

The bank statement showed that on December 26 the bank collected a note for Magnate Company and
credited the proceeds of P1,900,000 to the entity’s account which included P200,000 interest.

The entity discovered that check written in December for P1,930,000 in payment of an account had been
recorded as P1,390,000.

Included with the December 31 bank statement was an NSF check for P760,000 that the entity had received
from a customer on December 20. The entity had not yet recorded the returned check.

The bank statement showed a P50,000 service charge for December.

37. What is the adjusted cash in bank?

a. 19,550,000
b. 20,630,000
c. 19,480,000
d. 19,750,000

38. What is the journal entry to adjust the cash in bank?

a. Debit cash in bank P550,000
b. Credit cash in bank P550,000
c. Debit cash in bank P1,900,000
d. Credit cash in bank P1,350,000
( 39 – 41 ) Jane Company provided the following information at month-end:

Cash in bank per bank statement 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 Jane’s account 150,000
Note collected by bank for Jane Company, including interest
Of P100,000 1,100,000
Service charge for the current month 20,000
NSF checks of customers returned by bank 500,000
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 coins on hand 900,000
Petty cash fund 50,000

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

a. 7,750,000
b. 7,900,000
c. 8,050,000
d. 7,550,000

40. What is the unadjusted cash in bank per ledger at month-end?

a. 7,070,000
b. 7,220,000
c. 7,270,000
d. 7,750,000

41. What total amount of cash should be reported as current asset?

a. 8,700,000
b. 9,700,000
c. 8,020,000
d. 8,850,000

( 42 – 44 ) immoderate Bank granted a loan to a borrower on January 1, 2017. The interest on the loan is 10%
payable annually starting December 31, 2017. The loan matures in three years on December 31, 2019.

Principal amount 5,000,000

Direct origination cost incurred 100,000
Indirect origination cost incurred 50,000
Origination fee charged against the borrower 340,000

After considering the origination fee charged against the borrower and the direct origination cost incurred, the
effective rate on the loan is 12%.

42. What is the carrying amount of the loan receivable on January 1, 2017?
a. 4,760,000
b. 5,000,000
c. 4,810,000
d. 4,660,000

43. What is the interest income for 2017?

a. 571,200
b. 500,000
c. 476,000
d. 547,200

44. What is the carrying amount of the loan receivable on December 31, 2017?
a. 5,000,000
b. 4,760,000
c. 4,831,200
d. 4,910,944

( 45 – 46 ) Charitable Bank granted a 10-year loan to Chaste 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.
 Charitable Bank incurred P40,000 of direct loan origination cost and P20,000 of indirect loan origination cost.
In addition, the bank charged Chaste Company a 4-point nonrefundable loan origination fee.

45. Charitable Bank, the lender, has a carrying amount of

a. 1,440,000
b. 1,480,000
c. 1,500,000
d. 1,520,000

46. Chaste Company, the borrower, has a carrying amount of

a. 1,440,000
b. 1,480,000
c. 1,500,000
d. 1,520,000

( 47 – 48 ) On December 1, 2017, Nicole Company gave Dawn Company a P2,000,000, 12% loan. Nicole
Company paid proceeds of P1,940,000 after the deduction of a P6,000 nonrefundable loan origination fee.
Principal and interest are due in sixty monthly installment of P144,500 beginning January 1, 2017.

The repayment yield an effective interest rate of 12% at a present value of P2,000,000 and 13.4% at a present
value of P1,940,000.

47. What amount of interest income should be reported in 2017?

a. 22.333
b. 19.400
c. 21,663
d. 20,000

48. What amount should be reported as accrued interest receivable on December 31, 2017?
a. 44,500
b. 60,000
c. 20,000
d. 0

( 49 – 51 ) Knowhow Bank loaned P5,000,000 to a borrower on January 1, 2015. The terms of the loan require
principal payments of P1,000,000 each year for 5 years plus interest at 8%.

The first principal and interest payment is due on January 1, 2016. The borrower made the required payments
during 2016 and 2017.

However, during 2017 the borrower began to experience financial difficulties, requiring the bank to reassess
the collectability of the loan.

On December 31, 2017, the bank has determined that the remaining principal payment will be collected as
originally scheduled but the collection of the interest is unlikely.
The bank did not accrue the interest on December 31, 2017.

Present value of 1 at 8%
For one period 0.926
For two periods 0.857
For three periods 0.794

49. What is the impairment loss for 2017?

a. 423,000
b. 217,000
c. 222,000
d. 0

50. What is the interest income for 2018?

a. 126,160
b. 142,640
 c. 240,000
d. 0

51. What is the carrying amount of the loan receivable on December 31, 2018?
a. 2,000,000
b. 1,925,640
c. 1,640,360
d. 1,783,000

( 52 – 54 ) Oblation Bank loaned P9,000,000 to a borrower on January 1, 2015. The terms of the loan were
payment in full on January 1, 2020, plus annual interest payment at 12%. The interest payment was made as a
scheduled on January 1, 2016. However, due to financial setbacks, the borrower was unable to make the 2017
interest payment.

The bank considered the loan impaired and projected the cash flows from the loan on December 31, 2017. The
bank has accrued the interest on December 31, 2016, but did not continue to accrue interest for 2017 due to
the impairment of the loan. the projected cash flows are:

Date of cash flow Amount projected on December 31, 2017

December 31, 2018 1,500,000

December 31, 2019 2,000,000
December 31, 2020 2,500,000
December 31, 2021 3,000,000

The present value of 1 at 12% is b.89 for one period, .80 for two periods, .71 for three periods, and .64 for four
periods.

52. What is the loan impairment loss for 2017?

a. 2,370,000
b. 3,450,000
c. 6,630,000
d. 2,450,000

53. What is the interest income for 2018?

a. 795,600
b. 900,000
c. 180,000
d. 0

54. What is the carrying amount of the loan receivable on December 31, 2018?
a. 5,925,600
b. 4,845,600
c. 6,330,000
d. 7,500,000

( 55 – 57 ) Shrewd Bank loaned P10,000,000 to a borrower on January 1, 2015. The terms of the loan require
principal payments of P2,000,000 each year for 5 years plus interest at 10%.

The first principal and interest payment is due on January 1, 2016 and 2017.

However, during 2017 the borrower began to experience financial difficulties, requiring the bank to reassess
the collectability of the loan.

On December 31, 2017, the bank has determined that the remaining principal payments will be collected but
the collection of the interest is unlikely. The bank has accrued the interest for 2017.

The principal payments are expected to be P1,000,000 on January 1, 2018, P2,000,000 on January 1, 2019 and
P3,000,000 on January 1, 2020. Round off present value factors to two decimal places.

55. What is the loan impairment loss for 2017?

a. 1,180,000
 b. 2,000,000
c. 1,290,000
d. 1,780,000

56. What is the interest income for 2018?

a. 531,000
b. 431,000
c. 600,000
d. 500,000

57. What is the carrying amount of the loan receivable on December 31, 2018?
a. 5,000,000
b. 4,741,000
c. 4,310,000
d. 3,122,000

( 58 – 60 ) On December 31, 2017, 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, 2020.

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 4% interest or P200,000 will be paid
annually on December 31 of the next three years. There is no accrued interest on December 31, 2017.

The present value of 1 at 10% for three periods is .75, and the present value of ordinary annuity of 1 at 105 for
three periods is 2.49.

58. What is the impairment loss for 2017?

a. 752,000
b. 600,000
c. 250,000
d. 748,000

59. What is the interest income for 2018?

a. 200,000
b. 424,800
c. 224,800
d. 500,000

60. What is the carrying amount of the loan receivable on December 31, 2018?
a. 5,000,000
b. 3,750,000
c. 4,472,800
d. 4,672,800