Republic Central Colleges
Angeles City
Activities for E4- Accounting for Cash, Receivables and Inventories
Name
Score
A. Cash and Cash Equivalent
1. To be reported as “cash and cash equivalent”, the cash and cash equivalent must be-
a. Unrestricted in use for current operations
b. Available for the purchase of property, plant and equipment
c. Set aside for the liquidation of long-term debt
d. Deposited in bank
a
2. Which of the following is usually considered cash?
a. Postdated checks
b. Money market savings certificates
c. Checking accounts
d. Certificates of deposit
C
blue given in Final FINAC PAT 2020
3. If material, deposits in foreign bank which are subject to foreign exchange restriction
should be classified-
a. Separately as current asset, with appropriate disclosure
b. Separately as noncurrent asset with appropriate disclosure
c. Be written off as an extraordinary loss
d. As part of cash and cash equivalents
b
4. What is the major purpose of an imprest petty cash fund?
a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors
c. To determine the honesty of the petty cashier
d. To effectively control cash disbursements
d
5. When a petty cash fund is used, which of the following is true?
a. The balance of the petty cash fund should be reported on the statement of financial
position as a long-term investment
b. The petty cashier’s summary of petty cash payments serves as a journal entry that is
posted to the appropriate general ledger account
c. The reimbursement of the petty cash fund should be credited to the cash
account
d. Entries that include a credit to the cash account should be recorded at the time the
payments from the petty cash fund are made
c
6. Which is not considered as cash equivalent?
a. A three-year treasury note maturing on May 30 of the current year purchased by the
entity on April 15 of the current year
b. A three-year treasury note maturing on May 30 of the current year purchased by
the entity on January 15 of the current year
c. A 90 day Treasury-bill
d. A 60 day money market placement
b
7. This practice consists of misappropriating a collection from one customer and
concealing this defalcation when collection is made from another customer
a. Kiting
b. window dressing
c. lapping
d. theft
c
8. A check that is drawn, recorded and already given to the payee but it bears a date
subsequent to the statement of financial position.
a. Postdated check delivered
b. undelivered check
c. Stale check
d. bouncing check
a
9. Which of the following should not considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks and personal checks
c. Coin, currency and available funds
d. Postdated checks and IOUs
D
10. Unreleased checks ( checks drawn before statement of financial position but held for
later delivery to creditors)
a. Should be treated as outstanding checks if they are ultimately encashed
b. Should be treated as outstanding checks if the date is shortly after statement of
financial position
c. Should be restored to the cash balance
d. Should be treated as outstanding checks
c
11. AD Company provided you the following information relating to your cash audit.
The checkbook balance of AD Company on December 31, 2019 is P 1,000,000
A customer check amounting to P 50,000 dated Jan. 2, 2020 was included in the
December 31, 2019 balance
Another customer check of P 125,000 deposited on December 22, 2019 was
included in its checkbook balance but returned by the bank for insufficiency of
funds. This check was redeposited on December 26, 2019 and cleared two days
later.
A P 100,000 check payable to supplier dated and recorded on December 30,
2019 was mailed on Jan. 16, 2020.
A petty cash fund of P 25,000 showed the following on Dec. 31, 2019
Coins and currencies P 7,500 Return value of 5 cases of soft drinks P 2,500
Petty cash vouchers 15,000
A check of P 15,000 was drawn on December 31, 2019, payable to Petty cashier
The correct cash balance at December 31, 2019 statement of financial position is
a. P 1,072,500 c. P 1,075,000
b. 1,050,000 d. 947,500
1.000.0000-50,000+100,000+7,500+15,000= 1,072,5000
12. The cash account of AT Company were made available to determine the correct cash
balance at December 31, 2019:
Bank balance at BPI (A P 128,000 check is still outstanding per bank statement) P1,262,000
Currency and coins awaiting deposit 454,000
Deposit in Orient Bank, a closed bank 400,000
Petty cash fund (of which P 10,000 is in the form of paid vouchers) 40,000
Receivables from officers and employees 50,000
Bond sinking fund cash 600,000
The correct cash balance of AT Company at December 31, 2019 is-
a. P 2,356,000 c. P 1,746,000
b. 2,218,000 d. 1,618,000
1,262,000-128,000 +454,000+(40,000-10,000)= 1,618,000
13. You have gathered the following data of AL Company’s petty cash account at
September 30, 2019:
Currencies and coins P 132,000
Petty cash vouchers:
Travel expenses 32,400
Medical supplies 9,600
Postage and stamps 16,000
IOUs to employees 32,000
An employee’s check returned by bank for insufficiency of
funds but re placed by a Treasury check 10,000
A check drawn by the company payable to a A. Presa, petty
cashier representing her salary 152,000
A sheet of names together with contributions for birthday gift of
an employee containing amount of 20,000
The petty cash ledger account has an imprest balance of 400,000
What is the correct Petty cash fund on AL Company’s September 30, 2019?
a. P 284,000 c. P 304,000
b. 294,000 d. 314,000
132,000+10,000+ 152,000= 294,000
14. The cash account in BC Company’s ledger account showed a balance of P 1,766,000 at
December 31, 2019 which was determined to consist of-
Cash in Bank, per BC’s ledger, with a check for P 32,000 still outstanding P 898,000
Undeposited receipts, including a post-dated customer check for P 28,000 488,000
Bond sinking fund- cash 340,000
Vouchers paid out of collections, not yet recorded 19,200
IOUs signed by employee, taken from collections 13,200
Petty cash fund 9,600
At what amount should cash account be reported on BC’s statement of financial position
at December 31, 2019?
a. P 1,335,600 c. P 1,395,600
b. 1,367,600 d. 1,411,600
898,000 + 488,000-28,000+9,600= 1,367,000
15. LA Company’s checkbook balance on December 31, 2019 was P 200,000. In addition,
LA held the following items in its safe on that date:
Check payable to LA dated January 2, 2020 in payment of a sale made in December 2019,
not included in December 31 checkbook balance P 80,000
Check payable to LA, deposited December 15 and included in December 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 20,000
Check drawn on LA’s account payable to a vendor, dated and recorded in LA’s books on
December 31 but not mailed until January 7, 2020 12,000
Check drawn on LA’s account and issued to a customer for returned goods, dated
December 30 but not recorded until January 2, 2020 2,000
The proper amount to be shown as Cash on LA’s statement of financial position at
December 31, 2019 is-
a. P 272,000 c. P 192,000
b. 270,000 d. 190,000
200,000- 20,000+ 12,000-2,000= 190,000
B. Receivables
[Link] of the following items should be included in accounts receivable reported on the
balance sheet?
a. Notes receivable.
b. Interest receivable.
c. Allowance for doubtful accounts.
d. Advances to related parties and officers.
c
[Link] is a generally accepted method of determining the amount of the adjustment to
bad debts expense?
a. A percentage of sales adjusted for the balance in the allowance
b. A percentage of accounts receivable not adjusted for the balance in the allowance
c. An amount derived from aging accounts receivable adjusted for the balance
in the allowance
d. An amount derived from aging accounts receivable not adjusted for the balance in
the allowance
C
18.A credit balance in accounts receivable resulting from overpayments, advanced
payments and sales returns should be classified as –
a. A current a liability
b. A long-term liability
c. A contra asset
d. A note disclosure
A
19. Uncollectible account expense
a. Represent the loss in accounts receivable that eventually turn out to be
uncollectible
b. Is the amount an entity must pay whenever a customer fails to pay his or her account
c. Should not occur if a company properly investigates customers based on credit
history
d. Is the amount an entity must pay to a collection agent to recover amounts on overdue
accounts
A
20. The advantage of relating bad debt experience to accounts receivable is that this
approach-
a. Does not require knowledge of the balance in the allowance for doubtful account
b. Gives a reasonably correct amount of receivables in the Statement of Financial
Position
c. Does not require estimates of uncollectible accounts
d. Relates bad debt expense to the period of sale
B
21. Using the percentage-of-receivables method for recording bad debt expense, estimated
uncollectible accounts are P 45,000. If the balance of the Allowance for Doubtful
Accounts is P 6,000 credit before adjustment, what is the amount of bad debt expense
for that period?
a. P 45,000
b. P 39,000
c. P 51,000
d. P 6,000
45,000- 6,000= 39,000
22. . Using the percentage-of-receivables method for recording doubtful accounts expense,
estimated uncollectible accounts are P 45,000. If the balance of the Allowance for
Doubtful Accounts is P 6,000 debit before adjustment, what is the balance of Allowance
for Doubtful accounts after adjustment?
a. P 45,000
b. P 51,000
c. P 39,000
d. P 6,000
P 45,000 given
23. In 2021 Wilkinson Company had net credit sales of P 2,250,000. On January 1, 2021,
Allowance for Doubtful Accounts had a credit balance of P54,000. During 2021, P 90,000
of uncollectible accounts receivable were written off. Past experience indicates that the
allowance should be 10% of the balance in receivables (percentage of receivables
basis). If the accounts receivable balance at December 31 was P 600,000, what is the
required adjustment to the Allowance for Doubtful Accounts at December 31,2021?
a. P 60,000
b. P 25,000
c. P 96,000
d. P 90,000
Beg balance of Allow 54,000
DA exp Squeeze ?? 96,000 answer
Written of ( 90,000)
Allowance for DA 10% x 600k 60,000
Or Doubtful account expense 560,000+ 90,000- 54,000= 96,000
#44
24. Armenia Company revealed the following information for 2021:
Accounts receivable on January, P 650,000; Credit sales P 2,700,000; Sales Return P
75,000; accounts written off P 40,000; Estimated future sales returns at year-end P 50,000
and Estimated uncollectible accounts receivable at year end per aging- P 110,000. Net
realizable value of Accounts receivable at December 31 is P 925,000
On December 31, 2021, How much is amount collected from the credit customer ?
A. P 1,085,000
B. P 2,150,000
C. P 1,065,000
D. Answer not given
AR= 650,000+ 2,700,000-75,000-2,150,00-40,000 1,085,000
Less: Allowance for SR 50,000
Allowance for DA 110,000 160,00
NRV 925,000
Collection 650,000+2,700,000- (1,085,000 + 40,000+ 75,000)= 2,150,000
#45
25. India Company determined the net value of accounts receivable on December 31, 2021
based on an aging of accounts receivable was P 325,000.
Allowance for uncollectible accounts 1-1-2021 P 30,000
Uncollectible accounts written off during 2021 18,000
Uncollectible accounts recovered during 2021 2,000
Accounts receivable on 12/31/2021 P 350,000
What is the uncollectible accounts expense for the current year?
A. P 5,000
B. P 11,000
C. P 15,000
D. P 21,00
Allowance for DA = 350,000- 325,000= 25,000
Uncollectible accounts expense= 25,000+ 18,000-30,000-2,000= 11,000
The interest on a P10,000, 9%, 90-day note receivable is
a. P 225.
b. P 900.
c. P 75.
d. P 150.
P 10,000 x 9% x 90/360
26. Doane Company receives a P 10,000, 3-month, 6% promissory note from Ray Company
in settlement of an open accounts receivable. What entry will Doane Company make
upon receiving the note?
a. Notes Receivable 10,150
Accounts Receivable—Ray Company 10,150
b. Notes Receivable 10,150
Accounts Receivable—Ray Company 10,000
Interest Revenue 150
c. Notes Receivable 10,000
Interest Receivable 150
Accounts Receivable—Ray Company 10,000
Interest Revenue 150
d. Notes Receivable 10,000
Accounts Receivable—Ray Company 10,000
D
C. Inventories
27. Brilliant Company purchased motorcycles from various countries and exports them to
Europe. Brilliant Company has incurred the following costs during the current year:
Cost of Purchase based on vendor’s invoices P 5,000,000
Trade discounts on purchases already deducted
from vendor’s invoices 500,000
Import duties 400,000
Freight and insurance on purchases 1,000,000
Other handling costs relating to imports 100,000
Salaries of accounting department 600,000
Brokerage commission paid to agents for arranging imports 200,000
Sales commission paid to sales agents 300,000
After-sales warranty costs 250,000
What is the total cost of the purchases?
a. P 5,700,000
b. 6,100,000
c. 6,500,000
d. 6,700,000
28. The inventory on hand at December 31, 2020 for Fairy Company is valued at a cost of
P 950,000. The following items were not included in this inventory:
1. The purchased goods in transit, shipped FOB destination, invoice price of
P 30,000 which includes freight charge of P 1,500.
2. Goods held on consignment by Fairy Company at a sales price of P 28,000, including
sales commission of 20% of the sales price
3. Goods sold to Grace Company, under terms FOB destination, invoice for
P 18,500 which includes P 1,000 freight charge to deliver the goods. Goods are in
transit. The company’s selling price is 140% of cost.
4. Purchased goods in transit, terms FOB shipping point, invoice price P 50,000, freight
cost. P 2,500
5. Goods out on consignment to Manila Company, sales price P 35,000, shipping cost of
P 2,000
Compute the correct amount of inventory on December 31, 2020-
a. P 1,025,000
b. P 1,042,000
c. P 1,033,000
d. P 1,038,000
Inventory per book P 950,000
# 3 ( 18,500 -1,000) /140% 12,500
4 (50,000 + 2,500) 52,500
5 (35,000 /140%) + 2,000 27,000
Total 1,042,000
29. Luigi Company sold selected merchandise on a consignment basis during 2020. Luigi’s
2020 accounting records show the following information:
Inventory, January 1, P 250,000; Inventory on hand, December 31,
P 300,000; Inventory on consignment, December 31, P 45,000; Purchases,
P 1,000,000; Freight-in, P 22,000; Freight-out to customers, P 75,000; and
Freight-out to consignees- P 8,000.
What amount should Luigi report as cost of goods sold in its 2020 income
statement?
a. P 980,000
b. P 972,000
c. P 935,000
d. P 927,000
Inventory, January 1, P 250,000
Purchases, P 1,000,000
Freight-in, P 22,000
Freight-out to consignees- P 8,000.
Inventory on hand, 31, (P 300,000)
Inventory on consignment, Dec31, (P 45,000)
Cost of sales 935,000
30. Duchess Company reported during the current year beginning inventory P 500,000, net
purchases P 2,500,000 and net sales P 3,200,000. A physical inventory at year-end
resulted in an inventory of P 575,000. The gross profit on sales has remained constant
at 25%. The entity suspected that some inventory may have been taken by a new
employee. What is the estimated cost of missing inventory at year-end?
a. P 25,000
b. P 100,000
c. P 175,000
d. P 225,000
Goods available for sales 500,000 + 2,500,000 3,000,000 GAFS
Less cost of sales 75% x 3,200,000 2,400,000 COS
Inventory Dec 31 600,000
Less physical inventory 575,000
Missing inventory 25,000
31. Saturn Company provided the following information for the current year:
Inventory, January 1 P 1,300,000
Purchases 4,600,000
Purchase returns 100,000
Freight-in 200,000
Sales 6,800,000
Sales discounts 100,000
Sales returns 300,000
At year-end, a physical inventory revealed that the ending inventory was only
P 850,000. The gross profit on sales was 30%. The entity suspected that some inventory
may have been pilfered.
What is the estimated cost of missing inventory at year end?
a. P 600,000
b. P 670,000
c. P 1,450,000
d. P 1,520,000
Goods available for sales 1.3 M + 4.6 M - 100K + 200k = 6,000,000
Less cost of sales 70% x 6.8 M - 300 4,550,000
Inventory, Dec 31 1,450,000
Physical inventory 850,000
Missing inventory 600,000
32. The cost of inventories shall comprise all of the following costs, except-
a. cost of purchase
b. cost of conversion
c. other cost incurred in bringing the inventories to their present location and condition
d. abnormal amount of wasted material
D
33. Which of the following costs of conversion cannot be included in cost of inventory?
a. cost of direct labor
b. factory rent and utilities
c. salaries of sales staff (sales department shares the building with factory)
d. factory overhead based on normal capacity
C
34. The inventories of a service provider may simply be described as-
a. billed services c. work in progress
b. unbilled services d. service inventory
C
35. Commodities of broke-traders are measured at-
a. fair value c. cost
b. fair value less cost to sell d. net realizable value
B
36. The costing of inventory must be deferred until the end of the accounting period under
which of the following method of inventory valuation?
a. moving average c. LIFO perpetual
b. weighted average d. FIFO perpetual
B
37. The credit balance that arises when a net loss on a purchase commitment is recognized
should be-
a. presented as a current liability c. presented as an appropriation of retained
earnings
b. subtracted from ending inventory d. presented in the income statement
A
38. The gross margin method of estimating ending inventory may be used for all of the
following except-
a. internal as well as external interim reports
b. internal as well as external year-end reports
c. estimate of inventory destroyed by fire or other casualty
d. rough test of the validity of an inventory cost determined under either periodic or
perpetual system
B
