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Intermediate Accounting (ICCT Colleges Foundation)

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 UNIVERSITY OF RIZAL SYSTEM
Binangonan, Rizal
COLLEGE OF ACCOUNTANCY
Intermediate Accounting 1
PRELIMINARY EXAMINATION – Part 2
Second Semester 2020-2021

Exam No. Name: Section: Date:

Last Name, First Name, MI

MULTIPLE CHOICE
INSTRUCTIONS: The questions in the prelim exam part 2 will be based on the following problems.
The reference will be the Company name in bold red letters. Solve the following problems
anticipating all possible questions. The specific question and choices will be provided in the
actual exam. Upload your solutions to our google classroom on allotted time during the exam day.

_____1. Thor Company provided the following data on December 31, 2013:

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, 2013, but not mailed until 500,000
January 15, 2014
Cash in sinking fund 2,000,000

_____2. Burr Company had the following account balances on December 31, 2013:

Cash in bank 2,250,000

Cash on hand 125,000
Cash restricted for addition to plant (expected to be
disbursed in 2014) 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 withdrawal.

_____3. On December 31, 2013, West Company had the following cash balances:

Cash in bank 1,800,000

Petty cash fund (all funds were reimbursed on 12/31/2013) 50,000
Time deposit (due February 1, 2014) 250,000

Cash in bank included P600,000 of compensating balance against short-term borrowing

arrangement on December 31, 2013. The compensating balance is legally restricted as to
withdrawal. In the December 31, 2013 statement of financial position,

_____4. In preparing the August 31, 2013 bank reconciliation, Apex Company
provided the following information:
Balance per bank statement 1,805,000
Deposit in transit 325,000
Return of customer’s check for insufficient fund 60,000
Outstanding checks 275,000
Bank service charge for August 10,000

_____5. In preparing the bank reconciliation on December 31, 2013, Case

Company provided the following data:
Balance per bank statement 3,800,000
Deposit in transit 520,000
Amount erroneously credited by bank to Case’s account 40,000
Bank service charge for December 5,000
Outstanding checks 675,000

_____6. The cash account in the ledger of Kate Company shows a balance of P1,652,000at
December 31. The bank statement, however, shows a balance of P2,090,000 at the same
date. The only reconciling items consist of a bank service charge of P2,000, a large number
of outstanding checks totaling P590,000 and a deposit in transit.
_____7. Orr Company prepared an aging of accounts receivable on December 31, 2013 and
determined that the net realizable value of the account receivable was P2,500,000.
Additional information is as follows:

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

_____8. Blah Company showed the following at year-end:

Allowance for doubtful accounts (debit balance) ( 16,000)

Net sales 7,100,000

The entity estimated its uncollectible receivables at 2% of net sales.

9-10. Apeal Company accepted from a customer P1,000,000 face amount, 6-month, 8%
note dated April 15, 2013. On the same date, the entity discounted the note without
recourse at Union Bank at a 10% discount rate.

11-12. On June 30, 2013, Ray Company discounted at the bank a customer’s
P6,000,000, 6-month, 10% note receivable dated April 30, 2013. The bank
discounted the note at 12% without recourse.

_____13. On January 1, 2013, 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, 2013. The prevailing rate of interest for this type of note at
date of issuance was 10%. Information on present value factors is as follows:

Period Present value of Present value of

1 at 10% ordinary annuity
of 1 at 10%
6 .56 4.36
7 4.87
.51

_____14. Appari Bank granted a loan to a borrower on January 1, 2013. The

interest rate on the loan is 10% payable annually starting December 31, 2013.
The loan matures in five years on December 31, 2017. The data related to the
loan are:

Principal amount 4,000,000

Direct origination cost 61,500
Origination fee received from borrower 350,000

The effective rate on the loan after considering the direct origination cost
and origination fee received is 12%

_____15. Trask Corporation's checkbook balance on December 31, 2001, was

8,000. In addition, Trask held the following items in its safe on December
31:

Check payable to Trask Corporation, dated January 2, 2002, not 2,000

included in December 31 checkbook balance
Check payable to Trask Corporation, deposited December 20, 400
and included in December 31 checkbook balance, but
returned by bank on December 30, stamped "NSF." The
check was redeposited Jan. 2, 2002, and cleared Jan. 7
Post-dated checks 150
Check drawn on Trask Corporation's account, payable to a 1,000
vendor, dated and recorded December 31, but not mailed until
January 15, 2002

_____16. In preparing its bank reconciliation for the month of February, James
Company has available the following information:
Balance per bank statement, February 28 18,02
5
Deposit in transit, February 28 3,125
Outstanding checks, February 28 2,875
Check erroneously deducted by bank from James' account, February 10 125
Bank service charges for February 25
17-19. Use the following information for the next three questions:
The accounting records and bank statement of Entity A show the following
information:

SUBSIDIARY LEDGER
CASH IN BANK - BPI CURRENT ACCOUNT
Date Description Debit Credit Balance
6/1 Bal. forwarded 881,000
6/11 Check #1113 130,800 750,200
6/15 Check #1114 220,000 530,200
826,000
1,496,000
80,000 1,416,000
6/16 Deposit 295,800 380,000 1,036,000
1,196,000
6/22 Deposit 670,000
Check #1115
6/24
Check #1116 160,000
6/28
Deposit
6/29
METROBANK
BANK STATEMENT - ENTITY A
Date Description Debit Credit Balance
6/1 Bal. forwarded 881,000
6/10 Deposit 350,000 1,231,00
0
1,
6/15 Payment 229,00
2,000
1, 0
6/15 Check #1114
220,000
009,00
6/16 Deposit 0
295,800
6/20 Payment 50,000 1,304,80
0
6/22 Deposit 1,254,80
670,000
6/24 Check #1115 80,000 0
1 ,924,80
6/26 Check #1113 130,800 0
2,1,844,80
6/28 Deposit 410,000
0
Additional information: 1,714,00
The payments of 2,000 and 50,000 shown on the bank 0 statement pertain to the
cost of checkbook requested from the bank and124,00 the monthly amortization of a
bank loan, respectively. The loan payment includes payment for interest of
0
8,000.

Deposits shown on the bank statement but not on the cash ledger represent
collections of accounts receivable.

20-22. Use the following information for the next three questions:
Information on ABC Co. is shown below:

Jul 30 Aug 31
Book balance 132,200 180,000
Book debits 60,000
Book credits ?
Bank balance 100,600 169,000
Bank debits 20,600
Bank credits ?
Notes collected by bank 10,000 35,000
Debit memos 7,800 8,900
Understatement of book receipts - 2,800
Deposit in transit 45,000 43,800
Outstanding checks 11,200 3,900

_____23. JG Company had an accounts receivable balance of 40,000 on December

31, 2001, and 65,000 on December 31, 2002. The company wrote off 10,000 of
accounts receivable during 2002, and collected 2,000 on an account written
off in 2000. Sales for the year 2002 totaled 520,000. All sales were on
account.

_____24. RGI Company had an accounts receivable balance of 45,000 on December

31, 2001, and 60,000 on December 31, 2002. The company wrote off 12,000 of
accounts receivable during 2002, and collected 2,500 on an account written
off in 2000. Sales for the year 2002 totaled 550,000. All sales were on
account.

_____25. At the close of its first year of operations, December 31, 2004, Linn Company had
accounts receivable of 490,000, after deducting the related allowance for doubtful
accounts. During 2004, the company had charges to bad debt expense of 90,000 and wrote
off, as uncollectible, accounts receivable of 40,000.

_____26. Before year-end adjusting entries, Bass Company's account balances at

December 31, 2004, for accounts receivable and the related allowance for
uncollectible accounts were 700,000 and 45,000, respectively. An aging of
accounts receivable indicated that 62,500 of the December 31 receivables are
expected to be uncollectible.

_____27. During the year, Jantz Company made an entry to write off a 4,000 uncollectible
account. Before this entry was made, the balance in accounts receivable was 80,000 and
the balance in the allowance account was 4,500. The net realizable value of accounts
receivable after the write-off entry was
a. 80,000. b. c. 71,500. d.
79,500. 75,500.

_____28. The following information is available for Reagan Company:

Allowance for doubtful accounts at December 31, 2003 8,000

Credit sales during 2004 400,000
Accounts receivable deemed worthless and written 9,000
off during 2004

As a result of a review and aging of accounts receivable in early January

2005, however, it has been determined that an allowance for doubtful accounts
of 9,500 is needed at December 31, 2004.

29-30. Use the following information of Gemini Company for the next two
questions:
A trial balance of before adjustments included the following:

Debit Credit
Sales 425,000
Sales returns and allowance 14,000
Accounts receivable 53,000
Allowance for doubtful accounts 760

_____31. For the month of December, the records of Balin Corporation show the
following information:

Cash received on accounts receivable 70,000

Cash sales 60,000
Accounts Receivable, December 1 160,000
Accounts Receivable, December 31 148,000
Accounts Receivable written off as uncollectible 2,000

The corporation uses the direct write-off method in accounting for

uncollectible accounts receivable.

_____32. An analysis and aging of accounts receivable of the Lucille Company at

December 31, 2002, showed the following:
Accounts Receivable .................................. 840,000
Allowance for Doubtful Accounts 36,000 (cr)
(before adjustment) ................................
Accounts estimated to be uncollectible ............... 76,800

_____33. On July 1, 2002, Cornell Corp. received a one-year note with a face value of
900,000 and a stated interest rate of 15 percent in exchange for a machine with a fair
value of 1,000,000. Compute the effective interest rate for Cornell Corp.

- END -

Prepared by:

ERNIE D. TANO, CPA, MBA

Instructor