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# University of Santo Tomas

## Alfredo M. Velayo College of Accountancy

Junior Philippine Institute of Accountants
CASH & CASH EQUIVALENTS
Problem 1: (Burkina Faso Corp.)
In the course of your examination of the cash in bank account of Burkina Faso Corp., you
obtained the following information:
(a) The bank statement on May 31, 2015 showed a balance of P 1,836,000.
(b) Among the bank credits in May was customers note for P 600,000 collected for the
account of the company which the company recognized in June among its receipts.
(c) Included in the bank debits for the month of May were service charges amounting to
P 7,200 and a P 240,000 check which was charged by the bank in error against
Burkina Faso Corp.s account.
(d) You also ascertained that there were deposits-in-transit amounting to P 480,000 and
outstanding checks totaling P 1,020,000 by the end of May.
(e) The bank statement for the month of June showed total credits of P 2,496,000 and
total charges of P 1,224,000.
(f) The companys books for June showed total debits of P 4,818,600, total credits of P
2,443,200 and a balance of P 2,913,600.
(g) Bank debit memos for June were:
No. 781 for service charges, P 9,600
No. 782 on a customers returned check marked DAUD for P 144,000.
(h) On June 30, 2015, the corporation placed with the bank a customers promissory note
with a face amount of P 720,000 for collection. The Corporation treated this note as
part of its receipts although the bank was able to collect on the note only in July
2015.
(i) A disbursement check of P 45,000 was recorded by the corporation as P 450,000 in
the month of May. This error was corrected in the books in June.
(j) Another check for P 23,760 was recorded in the company cash disbursements books
in June as P 237,600.
Question(s):
1. How much is the unadjusted cash balance per ledgers as of May 30, 2015?
2. How much is the adjusted cash balance as of May 30, 2015?
3. What is the correct deposit-in-transit as of June 30, 2015?
4. What is the correct outstanding checks as of June 30, 2015?
5. How much is the adjusted cash balance as of June 30, 2015?
Problem 2: (Chile Co.)
The cash account in the ledger of Chile Co. had a balance of P 105,600 at December 31,
2016. An investigation of the account, however, disclosed the following:
(a) The sales book was left open up to January 5, 2017, and cash sales totaling P 15,000
were considered as sales in December.
(b) Checks of P 9,300 in payment of liabilities were prepared before December 31, 2016,
recorded in the books, but not mailed or delivered to payees.
(c) Post-dated customer collection checks totaling P 7,800 are being held by the cashier
as part of cash. The companys experience shows that post-dated checks are
eventually realized.
(d) Customers check for P 1,500 deposited with but returned by bank marked DAIF on
December 27, 2016. The return was not recorded in the books.
(e) The cash account includes P 40,000 earmarked for the purchase of a small
equipment which will soon be delivered.
Question(s):
6. What is the amount of cash to be shown on the statement of financial
position on December 31, 2016?

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Villaluz

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
In connection with your examination of El Salvador, Inc. for the year ended December 31,
2015, you gathered the following information:
Current account at PNB

## Current account at Chinabank

Payroll account
Foreign bank account restricted (in US\$)*
Postage stamps
Employees post-dated check
IOU from president
Credit memo from a vendor for a purchase return
Travelers check
Customers NSF check
Money orders
Petty cash fund (P 12,000 in currency and coins and expense vouchers
for P 18,000)
Treasury bills, due 3/31/16 (acquired 12/31/15)
Treasury bills, due 2/1/16 (acquired 1/1/15)
Change fund
Bond sinking fund

6,000,00
0
(300,000
)
1,500,00
0
60,000
3,000
12,000
30,000
60,000
150,000
45,000
90,000
30,000
600,000
900,000
10,000
1,000,00
0

## * Exchange rate as of 12/31/15 is US\$1: P 50.

Question(s):
7. What is the total cash and cash equivalent to be reported in the December
31, 2015 statement of financial position?
8. What amount should be presented as part of Non-current assets?
Problem 4: (Bosnia and Herzegovina Co.)
The accountant of Bosnia and Herzegovina Co. prepared the following bank reconciliation at
December 31, 2015:
Balance per bank statement
Deposit in transit
Note collected by bank
Total:
Less:
Outstanding checks
Balance per general ledger

P 350,000
175,250
15,000
P 540,250
(246,750)
P 293,500

## In the course of your examination, you noted the following:

(a) At December 31, 2015, the bank statement and the general ledger showed balances
of P 350,000 and P 293,500, respectively.
(b) The cut-off bank statement showed a bank charge on January 3, 2016 for P 25,000
representing a correction of an erroneous bank credit.
(c) Included in the list of outstanding checks were the following:
A check payable to a supplier dated December 28, 2015, in the amount of P
15,000 delivered on January 4, 2016.
A check representing advance payment to a supplier in the amount of P
37,200, the date of which is January 5, 2016 and released In December 2015.
(d) On December 31, 2015, the company received and recorded a customers check
dated January 2, 2016 amounting to P 50,000.
Question(s):
9. What is the correct amount of outstanding checks as of December 31,
2015?
10.What is the correct cash balance on December 31, 2015?
11.How much was the cash shortage?

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Villaluz

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Barbados Company records contained the following:

## Outstanding checks, October 31, P 90,000.

Customers DAUD check recorded in November but returned in October, P 6,000.
Bank service charges in October and recorded in November, P 2,400.
Total credits to the cash account in all journals during November, P 190,400.
Checks and charges returned by the bank in November including a November service
charge of P 3,000 and NSF check of P 12,000, P 195,000.

Question(s):
12.What is the amount of outstanding checks as of November 30?
Problem 6: (Burma Co.)
The following information was revealed in trying to reconcile the bank statement balance as
of February 28 with the Burma Co.s records as of the same date:
Total credits per February bank statement were P 310,000.
Among the bank credits in January was a customers note collected by the bank for
the account of the company which the company recognized in February. Proceeds
were P 30,300.
Client books for February showed total debits of P 420,000.
Deposits in transit on January 31 were P 15,000.
The bank credited the clients account in February for P 50,000 representing loan
approved and granted by the bank. Burma made no entry for this.
A deposit of P 4,300 was recorded by your client as P 3,400 in June. The bank
recorded the deposit at its correct amount.
Question(s):
13.How much were the deposits in transit as of February 28?
Problem 7: (Cote Divoire Co.)
A count of the petty cash fund of Cote Divoire Co. on January 5, 2016, 9 am revealed the
following composition:
Bills and coins

Vouchers:
Dated December 2015
Dated January 2016
IOUs from employees (all dated December 2015)

7,30
0
850
200
4,20
0

## Employees check dated

December 25, 2015
January 10, 2016
Unsigned pay envelope to an employee (the envelope
has been opened with no money inside)

2,80
0
4,25
0
5,00
0

## The petty cash fund per records is P 15,000.

Question(s):
14.How much is the cash shortage or overage?
15.What is the correct amount of petty cash fund to be reported in the
statement of financial position as of December 31, 2015?
Problem 8: (Cyprus Co.)
You are examining the general cash account of the Cyprus Co. for the fiscal year ended
September 30, 2015. You obtained the following information:
Per
books
Beginning balance, August 31, 2015
Deposits

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Villaluz

665,000

Per
bank
statement
780,000
2,500,000

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Cash receipts journal
Checks cleared
Cash disbursements journal
September bank service charge
Note paid directly
NSF check
Balance, September 30

2,520,000
(2,354,600)

(2,380,000
)

(8,500)
(610,000)
(36,000)
270,000

805,000

August 31 bank
reconciliation
Balance per bank
Deposits in transit
Outstanding checks
Balance per books

780,000
60,000
(175,000
)
665,000

(1) Checks clearing that were outstanding on August 31 totaled P 165,000.
(2) Checks clearing that were recorded in the June disbursements journal totaled P
2,050,000.
(3) A check for P 100,000 cleared the bank, but had not been recorded in the cash
disbursements journal. It was for a purchase of merchandise.
(4) A check for P 39,600 was charged to Cyprus but had been written on a different
companys bank account.
(5) Deposits included P 60,000 from August and P 2,440,000 for June.
(6) The bank charged Cyprus account for an NSF check totaling P 36,000. The credit
manager concluded that the customer intentionally closed its account and left the
city. The check was turned over to a collection agency.
(7) A note for P 595,000, plus interest, was paid directly to the bank under an agreement
signed three months ago. The note payable was recorded at P 595,000 on Cyprus
records.
Question(s):
16.What is the amount of deposits in transit as of September 30, 2016?
17.What is the amount of outstanding checks as of September 30, 2016?
18. What is the adjusted book disbursements on September 30?
19.What is the adjusted bank balance on September 30?
Problem 9: (Eritrea Corp.)
A count of the petty cash fund of Eritrea Corp. in the morning of January 6, 2016 showed the
following compositions:
Bills and coins:
Denomination
P 1,000
500
200
100
50
20
10
5

No. of pieces
5
10
5
10
10
20
25
50

## Unreplenished paid vouchers:

12/28 Transportation
12/30 Office repairs
12/30 Miscellaneous
12/30 Due to employees
1/1 Gasoline
Unreplenished unpaid vouchers:
1/3 Gasoline
1/3 Transportation

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500
300
900
1,000
1,000
800
1,500

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Checks on hand:
12/29 T. Jones, employee
11/26 M. Rivera, employee, returned by the bank
marked NSF
12/27 Eritrea Corp., payable to the custodian

2,000
1,000
10,00
0
900

## Cash receipt voucher for a return of an expense advance

Question(s):
20.How much is the cash shortage or overage, if any?
21.What is the correct petty cash fund balance to be reported as of December
31, 2015?
Problem 10: (Kiribati Co.)
In the course of your examination of Cash of Kiribati Co. as of and for the period ended
December 31, 2015, the following is a list that comprise the companys Cash and cash
equivalent account:
Current account at PCIB
Savings account at DBP
Current account at Eastwest Bank
Undeposited checks, bank drafts, and money orders on hand
Travel fund
Interest and dividend fund
Payroll fund
Pension fund
Change fund
Bond sinking fund
Petty cash fund, imprest balance
Cash in HCI Bank (closed)
Postage stamps
IOU from employees
Credit memo from a vendor for a purchase return
Investment in debt securities, due 3/31/16 (acquired 12/31/15)
Investment in debt securities, due 2/28/16 (acquired 2/1/15)
Investment in equity securities

3,000,00
0
2,000,00
0
(240,000
)
987,000
50,000
120,000
400,000
250,000
25,000
500,000
30,000
300,000
3,000
30,000
60,000
600,000
9,000,00
0
1,000,00
0

## You noted the following:

(1) The current account at PCIB included the following:
(a) P 75,000 check to a supplier, in payment of an outstanding invoice dated
December 1, 2015. The check was issued as of December 31, 2015 but dated
January 2, 2016.
(b) P 120,000 check to a supplier, in payment of another outstanding invoice dated
December 18. The check which was dated December 30, 2015 was still on hand
as of December 31, 2015. This check was delivered to the payee on January 4,
2016.
(c) P 180,000 check to another supplier dated December 31 and released on the
same date for the payment of an invoice dated December 24.
(2) The savings account at DBP included a P 500,000 compensating balance related to a
5-year, 12%, P 5,000,000 bank loan dated January 1, 2013. The terms of the loan
called for the legal restriction on withdrawal from the said compensating balance at
any time during the year term of the loan.
(3) The undeposited checks, bank drafts and money orders included the following items:
(a) P 180,000 check from a customer dated 4/30/15.
(b) P 125,000 check from a customer dated 1/16/16.
(c) P 155,000 check from a customer dated 11/27/15, returned by the bank with the
November bank statement marked DAIF, yet to be redeposited.
(d) P 127,000 check from an employee dated 12/22/15.

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## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
(e) P 80,000 check from a manager dated 12/16/15 returned by the bank marked
NSF.
(f) P 150,000 postal money order.
(g) P 120,000 bank drafts.
(4) Cash, in the custody of the petty cashier, on December 31, 2015 were:
(a) Bills and coins totaling P 7,000.
(b) Replenishment check of P 11,500.
(c) P 10,000 worth of unreplenished paid petty cash vouchers.
(5) All other funds were accounted for as equaling cash or securities on hand.
(6) Kiribati made an estimate that only half of the cash in HCI Bank shall be recovered
but the period of recovery is indefinite.
(7) The investment in equity securities comprise of the following:
(a) P 400,000 investment in ordinary shares acquired on 12/1/15 which are intended
for short-term profit purposes. Kiribati intends to sell this by 3/1/16.
(b) P 300,000 investment in ordinary shares acquired on 11/30/14 which Kiribati is
intending to hold as available for sale (AFS).
(c) P 300,000 investment in preference shares acquired on 12/1/15 redeemable at
the option of the issuer by 2/28/15.
Question(s):
22.What is the adjusted Current account at PCIB that should be presented as
part of Cash and cash equivalents?
23.How much from the Savings account with DBP shall be presented as part of
Cash and cash equivalents?
24.How much from the Current account with Eastwest bank shall be presented
as part of Cash and cash equivalents?
25.How much from the undeposited checks, money orders and bank drafts
shall be presented as part of Cash and cash equivalents?
26.How much is the adjusted petty cash fund?
27.How much from the total cash funds shall be presented as part of Cash and
cash equivalents?
28.How much from the debt and equity securities shall be presented as part of
Cash and cash equivalents?
29.What is the total cash and cash equivalents to be reported by Kiribati in its
December 31, 2015 statement of financial position?
-END OF CASH & CASH EQUIVALENTSRECEIVABLES
Problem 1: (Bahamas Co.)
The Trade Accounts Receivable account of Bahamas Co. showed a balance of P 264,500 on
December 31, 2015. Below are the items that affected the trade accounts receivable
account for the year 2015:
January 1 balance, net of P 9,000 credit balance
Charge sales
Charge for consignment sales
Shareholder subscriptions
Recovery of previously written-off accounts
Refunds to customers with credit balances
Deposit on contract
Claim against the common carrier for shipping damages
IOUs from employees
Receipts from customers, including overpayment of P 10,000 and the
recovery of accounts written off
Accounts written off
Returns of merchandise
Allowance to customers for shipping damages
Collections on carrier claims

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106,000
1,250,000
25,000
60,000
5,000
5,000
50,000
5,000
1,000
50,000
10,000
(1,240,000
)
(7,000)
(5,500)
(3,000)
(2,000)

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Collection on shareholder subscriptions
Total:

(45,000)
264,500

(a)
It was ascertained that 50% of the outstanding trade accounts receivable balance
are still currently collectible. The credit sales term is 5/30 n/60. Based on past
experience, 25% of the customers whose accounts are still current normally pay
within the discount period.
(b)

30% of the trade accounts receivable is 60 days past due and is expected to be
90% collectible.

(c)

20% of the trade accounts receivable is more than 120 days past due and is
expected to be 50% collectible.

Question(s):
1. What is the correct balance of the trade accounts receivable?
2. What is the carrying value of the trade accounts receivable?

## Problem 2: (Costa Rica Corp.)

Your examination of Costa Rica Corp.s accounts receivable and its related allowance for
uncollectible accounts expense revealed the following information:
(a)

The general ledgers of Costa Rica Corp. have the following balances:
Accounts receivable
Allowance for uncollectible
accounts
Net realizable value

(b)

360,000
(1,320)
358,68
0

## An aging of Costa Rica Corp.s accounts receivable per subsidiary ledgers, on

December 31, 2015 contained the following information:
Days
outstanding:
Under 30 days
30 60 days
61 120 days
121 180 days
Over 180 days

Amount:
P

240,00
0
48,000
36,000
24,000
12,000
360,0
00

(c)

Investigations revealed that half of the over 180 days account is definitely
uncollectible and that a P 12,000 customer credit balance for an advance
payment for a future delivery was included in the under 30 days account.

(d)

## Based on past experiences, the corporation believes that the following

uncollectible percentage are reasonable:
Under 30 days
30 60 days
61 120 days
121 180 days
Over 180 days

0%
3%
15%
30%
60%

(e)

The credit sales term is 10/15 n/30. As per past experience, 20% of the customers
whose accounts are still current are expected to take advantage of the cash
discount.

(f)

Also you have ascertained that 5% of the current account should be provided for
probable future sales returns.

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Villaluz

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Question(s):
3. What is the adjusted accounts receivable balance?
4. What is the correct doubtful accounts expense for the period?
5. What is the carrying value of Costa Rica Corp.s accounts receivable as of
December 31, 2015?
6. Assuming that the allowance for doubtful accounts had a P 1,680 debit
balance before adjustments, what is the doubtful accounts expense?
Problem 3: (Georgia Co.)
From the start of operations to December 31, 2015, Georgia Co. provided for uncollectible
accounts receivable under the allowance method. Georgias usual credit terms are 2/30
n/60.
The balance in the allowance for bad debts was P 65,000 at January 1, 2015. During 2015,
sales totaled P 5,000,000 (of which 10% are cash sales), interim provisions for bad debts
were made at 2% of credit sales; P 45,000 of bad debts were written off; and recoveries of
accounts previously written off amounted to P 7,500. Georgia installed a computer facility in
November 2015, and an aging of accounts receivable was prepared for the first time as of
December 31, 2015.
A summary of the aging is as follows:
Classification by
Month of sale:
November December
July October
January June
Prior to 1/1/15

Balance in
each category:
P
1,140,000
600,000
400,000
130,000
2,270,000

Estimated uncollectible
percentage (%):
1.5
8.0
35.0
70.0

Based on the review of the collectability of the account balances in the prior to 1/1/15
category, additional accounts totaling P 30,000 were written off as of December 31, 2015.
Effective with the year ended December 31, 2015, Georgia adopted the revised company
Further review revealed that P 700,000 of the November December balance were
December sales and 30% of the amount is anticipated to be collected within the discount
period the following period.
Question(s):
7. What is the correct balance of the allowance for bad debts at December 31,
2015?
8. What is the carrying value of the accounts receivable at December 31,
2015?
Problem 4: (Marshall Islands Co.)
In the course of your examination of Marshall Islands Co.s receivables account as of
December 31, 2015, you found out that the account comprised the following items:
Trade accounts receivable, assigned (proceeds from assignment
amounted to P 650,000)
Trade accounts receivable, factored (proceeds from factoring done on
a without-recourse basis amounted to P 250,000)
20% trade notes receivable, discounted at 40% upon receipt of the
180-day note on a without recourse basis
Trade receivables rendered worthless and must be written off
Installments receivable, normally due one to two years
Customers accounts reporting credit balances arising from sales
returns
Advance payments for purchase of merchandise
Customers accounts reporting credit balances arising from advance
payments

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1,550,000
750,000
300,000
200,000
300,000
50,000
600,000
60,000
300,000
40,000
800,000

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Claims from insurance company
Subscription receivable due in 60 days
Accrued interest receivable
Deposit on contract bids
Advances to stockholders (collectible in 2019)

30,000
600,000
20,000
500,000
2,000,000

Question(s):
9. How much is the total trade receivables?
10.How much is the amount to be presented as trade and other receivables
under current assets?
11.How much gain or loss from receivable financing should be recognized in
the profit or loss statement?
Problem 5: (San Marino, Inc.)
San Marino, Inc. had the following transactions for the fiscal year ended August 31, 2015:
(a) San Marino, Inc. had an outstanding accounts receivable balance amounting to P
4,000,000 on June 30, 2015. These was pledged to HCIB Bank in consideration of a
12% loan. The loan amount is 80% of the outstanding accounts receivable. HCIB
charged San Marino 5% of the outstanding accounts receivable as service charge. By
the end of July, San Marino collected P 1,200,000 cash from credit customers, net of P
120,000 cash discounts. Also, by the end of July, San Marino accepted merchandise
from customers as returns. This was originally invoiced at P 80,000. By the end of
August, San Marino collected another P 900,000 after P 50,000 cash discounts and
wrote-off P 200,000 of the accounts receivable as worthless.
It was agreed-upon with the HCIB that remittances from collections will be made to
the bank on a monthly-basis and that the collections from customer will cover both
interest and the principal amount of the loan.
(b) On May 1, 2015, San Marino discounted to HCIB a 12-month, 10% note dated January
1, 2015 and with a face value of P 2,000,000. HCIBs discount rate was at 8%. The
discounting was done on a without-recourse basis.
Question(s):
12.What is the balance of the accounts receivable account as of August 31,
2015?
13.What is the balance of the loan payable account as of August 31, 2015?
14.What is the balance of the note receivable as of August 31, 2015?
15.What amount of gain or loss is to be reported in the 2015 profit or loss from
derecognition of receivables, if any?
Problem 6: (Botswana Co.)
Botswana Co. had the following transactions in 2015:
(a) At the beginning of November, Botswana Co. assigned P 2,000,000 out of its P
10,000,000 outstanding accounts receivable to NYB Bank in consideration of a P
1,500,000, 12% loan. NYB charged Botswana 5% of the loan principal as service
charge. By the end of November, Botswana collected P 600,000 cash from the
assigned accounts net of P 50,000 cash discount. Also, by the end of November,
Botswana accepted merchandise from customers as returns. This was originally
invoiced at P 60,000. By the end of December, Botswana collected another P 700,000
from the assigned accounts after P 40,000 cash discount and wrote-off P 80,000 of
the assigned accounts as worthless.
The agreement with NYB calls for monthly remittance of customer collections for the
month. The collections will cover both interest and loan principal.
(b) Also at the beginning of November, Botswana Co. factored P 500,000 of its accounts
receivable to NYB. As of the date of factoring, it was ascertained that P 20,000 of the
accounts receivable is doubtful of collection. NYB advanced P 350,000 cash to
Botswana and withheld P 50,000 as factors holdback to cover future sales discount
and sales returns and allowances. The Co. incurred P 10,000 of legal fees and other
professional fees related to the factoring.

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Villaluz

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Question(s):
16.What is the balance of the accounts receivable-assigned account as of
December 31, 2015?
17.How much is the equity in assigned accounts to be disclosed on December
31, 2015?
18.What amount of gain or loss to be reported in the 2015 profit or loss from
derecognition of receivables, if any?
Problem 7: (Algeria Co.)
The Statement of financial position of Algeria Co. reported the following long-term
receivables as of December 31, 2015:
Notes receivable from sale of a business segment
Note receivable from vice president

4,500,00
0
1,200,00
0

In connection with your examination, you were able to gather the following transactions
during 2016 and other information pertaining to the companys long-term receivables: (Use
three decimal place for PV factors)
(1) The note receivable from sale of a business segment bears annual interest rate of
12%. The note is payable in annual installments of P 1,500,000 plus appropriate
interest every April 1. The initial principal and interest payment was made on April 1,
2016.
(2) The note receivable from vice president is dated December 31, 2015, earns interest
at 10%, and is due on December 31, 2018. The 2016 interest was collected at yearend.
(3) The company sold a piece of equipment to Bhutan Corp. on April 1, 2016 in exchange
for a P 600,000 non-interest bearing note due on April 1, 2018. The note had no
ready market and there was no established price for the said equipment. The
prevailing interest rate for a note of this type at April 1, 2016 was 12% and 15% at
December 31, 2016.
(4) A tract of land was sold by the company to Bobby Bolivia Inc. on July 1, 2016 for P
3,000,000 under an installment sales contract. Bobby signed a four-year 11% note for
P 2,100,000 on July 1, 2016, in addition to the P 900,000 down-payment. The equal
annual payments of principal and interest on the note will be P 676,875 payable on
July 1 of every year starting July 1, 2017. The land had an established cash price of P
3,000,000 and its cost to the company was P 2,250,000. The collection of the
installments on this note is reasonably assured.
Question(s):
19.How much is the total current portion of the long-term notes receivable as
of December 31, 2016?
20.How much is the total non-current notes receivables as of December 31,
2016?
21.What is the amount of accrued interest receivable as of December 31,
2016?
22.What is the total amount of interest income to be reported for the year
2016?
Problem 8: (Kosovo Co.)
On December 31, 2015, Kosovo Co. lent P 4,000,000 to Latvia Inc. due after three years.
Kosovo received an 8% promissory note. Interests are collectible annually every December
31. The prevailing market rate of a note of this type is 6.25%.
Kosovo was able to collect interest as it became due at the end of 2016. During 2017, Latvia
is experiencing business deterioration due to political instability and faltering global
economy, Kosovo was not able to collect amounts due at the end of 2017. After assessing
the collectability of the note at December 31, 2017, Kosovo determined that it was probable
that Latvia would pay back only P 3,400,000 collectible as follows:
December 31, 2019

Page 10 of 20

Villaluz

1,400,00

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
December 31, 2020
December 31, 2021
December 31, 2022

0
1,000,00
0
600,000
400,000

As of December 31, 2017, the prevailing interest rate for all debt instruments is 9.75%. (Use
four decimal places for PV factors)
Question(s):
23.What is the carrying value of the notes receivable as of December 31,
2016?
24.What is the impairment loss to be recognized in the 2017 income
statement?
25.What amount related to the note shall be presented as non-current assets
on December 31, 2018?
26.What is the interest income to be recognized in the 2019 income
statement?
27.What amount related to the note shall be presented as current assets on
December 31, 2020?
28.What is the carrying value of the notes receivable as of December 31,
2020?
Problem 9: (Mauritania Corp.)
You are to assess the collectability of the receivables carried in the books of Mauritania Corp.
the books showed the following balances as of December 31, 2015:
Notes receivable
Accounts
receivable

6,000,000
4,000,000

## In the course of your examination, you discovered the following:

(1) The composition of the notes receivable, as shown above, is as follows:
Notes receivable from Nauru Co.
Notes receivable from Poland Co.
Notes receivable from Rwanda Co.

2,000,000
3,000,000
1,000,000

(2) No interest has yet been recorded by Mauritania during 2015 on any of the notes.
(3) Nauru Co. is undergoing bankruptcy proceedings and has negotiated for a
restructuring of its notes receivable. The note was for a four-year period and interest
of 10% is collectible annually. All interest accrued before 2015 has been collected.
The note matured on December 31, 2015. Collection of interest was last made on
December 31, 2014. The restructuring agreement with Nauru calls for annual
payment of P 550,000 starting December 31, 2016. No further interest will be
collected during the extended period.
(4) The notes receivable from Rwanda bears interest at 10%. The note was received from
sale of goods in the normal course of business. The note is dated October 1, 2015
and matures on March 31, 2017.
(5) The notes receivable from Poland is a three-year non-interest bearing note. The note
was received in exchange for a tract of land sold by Mauritania on May 1, 2015. The
land was carried in the books at the date of sale at P 2,600,000. The prevailing rate
of interest for a note of this type is 10%.
Question(s):
29.What amount is to be presented as current assets in the statement of
financial position at December 31, 2015?
30.What amount is to be presented as non-current assets in the statement of
financial position at December 31, 2015?
31.What is the amount of impairment loss on receivables to be reported in the
2015 income statement?
32.How much is the total interest revenue for the year 2015?

Page 11 of 20

Villaluz

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Problem 10: (Saint Kitts and Nevis Co.)
Saint Kitts and Nevis Co. started operations on January 1, 2015. The following data are
available as of June 30, 2015:
Purchase of merchandise
Inventory, June 30, 2015
Goods were sold at 150% above cost; 75% of sales were on account
Recorded uncollectible accounts expense
Total collections from customers
Adjusted allowance for uncollectible accounts, June 30, 2015

1,900,000
350,000
32,000
3,504,750

15,000
Question(s):
33.What is the account balance of Accounts receivable at December 31, 2015?
-END OF RECEIVABLESINVENTORIES
Problem 1: (Belize Co.)
The following information were found during your examination of the inventory and related
accounts of the Belize Co.:
(a) An excerpt from Belizes trial balance revealed the following account balances:
Accounts
receivable
Inventory, per
count
Accounts payable
Net sales

Net purchases
Net income

680,000
1,200,0
00
790,000
6,050,0
00
3,300,0
00
610,000

(b) Belize conducted an inventory count on December 31, 2015. Belize normally sells at
30% gross margin based on sales price.
(c) Goods were in transit FOB destination from a supplier in the amount of P 120,000.
Further testing revealed that the suppliers invoice pertaining to the delivery was
received and recorded on December 29, 2015.
(d) Goods costing P 70,000 had been received on December 31, and recorded as a
purchase. However, upon your inspection the goods were found to be defective and
would be immediately returned.
(e) Materials costing P 224,000, sold and billed on December 30 under a bill-and-hold
agreement, had been segregated in the warehouse awaiting pick-up by the customer.
Being on hand, the materials had been included in the count.
(f) Goods costing P 70,000 was out on consignment with Cambodia Co. since the
monthly statement from Cambodia listed those materials as on hand, the items had
been excluded from the ending inventory and invoiced on December 31 at a normal
gross profit provision.
(g) The sale of materials invoiced at P 150,000 had been shipped FOB point of shipment
at December 31. However, this inventory was found to be included in the ending
inventory. The sale was properly recorded in 2015.
(h) Goods costing P 98,000 had been segregated but not shipped at December 31. A
review of the customers purchase order related to the goods set forth terms as FOB
shipping point. The sale had not been recorded while the goods were excluded from
the count.
(i) Belize has an invoice from a supplier, terms FOB shipping point but the goods had not
arrived as yet. While these materials costing P 170,000 had been included in the
(j) Merchandise costing P 200,000 had been recorded as a purchase but not included as
inventory. Terms of the sale are FOB point of shipment according to the suppliers
invoice which had arrived at December 31.
Determine the correct balances of the following:

Page 12 of 20

Villaluz

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
1.
2.
3.
4.
5.

Inventory.
Accounts payable.
Net sales.
Net purchases.
Net income.

## Problem 2: (Comoros Corp.)

In your examination of the December 31, 2015 financial statements of Comoros Corp., you
found the following inventory-related transactions:

Goods costing P 100,000 are on consignment with a customer. These goods were
invoiced at normal profit margin which was at 40% based on cost and was recorded
as 2015 sales. Being offsite on the count date which was on December 30, 2015,
these goods were not included in the physical count.
Goods costing P 33,000 were delivered to Comoros Corp. on January 3, 2016. The
invoice of these goods were received and recorded on January 8, 2016. The invoice
showed that the shipment was made on December 30, 2015, FOB seller.
Goods costing P 40,000 were shipped FOB seller on December 31, 2015, and were
received by the customer on January 1, 2016. Although the sale was recorded in
2015, these goods were included in the 2015 inventory.
Goods costing P 16,000 were shipped to a customer on December 30, 2015, FOB
buyer. These goods were received by the customer on January 7, 2016 and were not
included in the physical count. The sale was recorded in 2016.
Goods costing P 22,000 shipped by a vendor under FOB buyer term, were received on
January 2, 2016. The related invoice however, were received on December 31, 2015,
thus was recorded as purchase in 2015.
Goods costing P 50,000 were received from a vendor under consignment term. These
goods were included in the physical count. No purchase related to the inventory had
been recorded yet.
Comoros recorded as 2015 sale a P 112,000 invoice for goods delivered to a
customer on December 31, 2015, FOB buyer. The goods were received by the
customer on January 6, 2016. Having been delivered after the inventory count date,
the goods were included in the physical count.

Question(s):
6. What is the net adjustment to inventories as of December 31, 2015?
7. Assuming sales are on account, what is the net adjustment to accounts
receivable as of December 31, 2015?
8. Assuming all purchases are on account, what is the net adjustment to
accounts payable?
9. What is the effect of the errors to the 2015 net income?

## Problem 3: (Bissau Co.)

You are engaged in an examination of financial statements of Bissau Co. for the year ended
October 31, 2015, and have observed the physical count of inventories on October 30, 2015.
All merchandise received up to and including October 30, 2015 has been included in the
physical count which totaled P 354,500. As a result of the count, the following cost of goods
sold schedule has been prepared by Bissaus accountant:
Inventory, November 1, 2014
Net purchases
Total cost of goods available for
sale
Inventory, October 30, 2015 per
count
Cost of goods sold

235,000
2,543,9
00
2,778,9
00
(?)
?

The following list of invoices is for purchases of merchandise and are entered in the
purchase journal for the months of October and November 2015:

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Villaluz

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Recorded as purchases in October 2015
Receiving
report #:
6901
6902
6903

Amoun
t:

Freight
terms:

Invoice
date:

14,400
8,800
18,500

Destination
Destination
Shipping
point
Destination
Destination

October 18
October 20
October 23

6904
6905

7,800
5,000

6906

20,500

6907

18,400

6908
6909

24,200
69,200

Shipping
point
Shipping
point
Destination
Destination

Date
merchandise
October 20
October 23
October 30

October 21
November
5
October 26

November 3
October 28

October 26

October 30

October 22
October 28

October 30
October 30

Date
merchandise
October 31
October 30
October 30

October 30

## Recorded as purchases in November 2015

Receiving
report #:
6912
6913
6914

Amoun
t:

Freight
terms:

Invoice
date:

4,000
9,700
12,840

Destination
Destination
Shipping
point
Shipping
point
Shipping
point
Shipping
point
Destination

October 30
October 30
October 26

6915

14,440

6916

25,640

6917

28,400

6918

14,200

November
1
October 24

November 3

October 24

November 4

October 28

November 4

November 4

Question(s):
10.What is the adjusted balance of the Inventory account as of October 31,
2015?
11.What is the correct cost of goods sold for the period ended October 31,
2015?
Problem 4: (Holy See Co.)
As part of your examination of receivables of Holy See Co., you performed a cut-off test of
sales. Results of your test revealed the following:
Recorded as Sales in December 2015

Sales
price
:
18,00
0
12,50
0
8,680
14,20
0
9,000
10,00
0
7,800
14,00
0

Cost:

Freight Terms:

Date of
shipment:

the customers:

16,50
0
10,20
0
7,240
12,50
0
7,500
7,750

Shipping point

12/25/2015

12/30/2015

Destination

12/25/2015

12/30/2015

Destination
Shipped to
consignee
Shipping point
Destination

12/27/2015
12/29/2015

01/03/2016
01/03/2016

12/30/2015
12/31/2015

01/03/2016
01/02/2016

6,100
12,00
0

Shipping point
Shipped to
consignee

12/31/2015
12/31/2015

01/03/2016
01/02/2016

Page 14 of 20

Villaluz

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants

Sales
price
:
21,00
0
10,50
0
4,500
6,500

Cost:

Freight Terms:

Date of
shipment:

the customers:

18,20
0
8,800

Shipping point

12/31/2015

01/02/2016

Destination

12/31/2015

01/02/2016

3,200
5,000

Destination
Shipping point

01/01/2016
01/03/2016

01/04/2016
01/07/2016

A count of all inventories within the premises was made in the morning of December 31,
2015 prior to any shipment made during that day. The total cost of the count was recorded
as inventories as of December 31, 2015. The goods shipped to consignees are still unsold at
December31.
The unadjusted ledger balances showed the following:
Accounts
receivable
Inventories
Sales

276,500
425,000
1,320,0
00
842,000

## Determine the adjusted balances of the following:

12.Accounts receivable.
13.Inventories.
14.Sales.
15.Cost of goods sold.
16.Gross profit.
Problem 5: (Lesotho Co.)
The Lesotho Co. is an importer and wholesaler. Its merchandise is purchased from several
suppliers and is warehoused by Lesotho until sold to customers. In conducting an
examination for the year ended June 30, 2015, the Companys CPA observed the physical
inventory count at an interim date, May 31, 2015, instead of at fiscal year-end.
The CPA obtained the following information from the records and ledgers:
Inventory, July 1, 2014
Inventory, May 31, 2015
Sales for 11 months ended May 31, 2015

## Sales for year-ended June 30, 2015

Purchases for 11 months ended May 31, 2015 (before
Purchases for year-ended June 30, 2015 (before

87,500
95,000
840,00
0
960,00
0
675,00
0
800,00
0

## The CPAs examination disclosed the following data:

Shipments received in May and included in the physical inventory count but
recorded as June purchases
Shipments received in unsalable condition and excluded from physical
been recorded:
Total at May 31, 2015
Total at June 30, 2015 (including the May unrecorded returns)
Deposits made with vendor and charged to purchases in April 2015. The goods
were shipped in July 2015
Deposits made with a vendor and charged to purchases in May 2015. Goods

Page 15 of 20

Villaluz

7,500

1,000
1,500

2,000

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
were shipped, FOB buyer, on May 29, 2015 and was included in May 31, 2015
physical inventory count as goods in transit

5,500

## Through the carelessness of the warehouseman, a June shipment was

damaged. This shipment was later sold in June at its cost of

10,00
0

Required:
17.Compute the gross profit ratio for the eleven months ended May 31, 2015.
18.Compute the cost of goods sold during June 2015.
19.Compute the estimated June 30, 2015 inventory.
Problem 6: (Malawi Co.)
Malawi Co.s policy is to measure their inventory accounts at the lower of cost and net
realizable value (NRV). Data regarding Malawis inventories are as follows:
The general ledgers showed the following balances:
Costs:

Raw materials
Work-inprogress
Finished goods

2,875,00
0
748,000
1,430,00
0

Raw materials
Finished goods

(40,000)
(10,000)

## The following information was furnished to you by Malawi Co.:

RAW MATERIALS INVENTORY
Item # 18672
Cost
Current purchase
price

RM #0823

250,000
250,000

500,000
480,000

RM #0800

RM #0913

400,000
450,000

300,000
275,000

Item # 18673
Cost
Current purchase
price

RM #0997

Item # 18674
Cost
Current purchase
price

RM #0762
P

RM
#0916
400,000
375,000
RM
#0888
200,000
180,000
RM
#0797
450,000
420,000

375,000
395,000

WORK-IN-PROGRESS INVENTORY

Cost
Selling price
Estimated cost to
complete
Replacement cost
Normal profit margin as
percentage of selling
price

Item
#18672
240,000
360,000
48,000

Item
#18673
188,000
289,000
97,650

Item
#18674
320,000
735,000
74,000

208,000

169,000

375,000

30.0

25.0

20.0

Item
#18672

Item
#18673

Page 16 of 20

Villaluz

Item #18674

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Cost
Selling price
Estimated cost to sell as
percentage of selling
price

550,000
675,000

540,000
620,000

20.0

15.0

430,000
820,000
15.0

Question(s):
20.What is the correct amount to be reported as Raw materials inventory as of
year-end?
21.What is the correct amount to be reported as Work-in-Progress inventory as
of year-end?
22.What is the correct amount to be reported as Finished goods inventory as
of year-end?
23.What is the total loss on inventory write-down to be reported for the
period?
Problem 7: (Antigua and Barbuda Corp.)
Antigua and Barbuda Corp. wholesales wooden tables. The company is a calendar year
entity. At December 1, 2015, inventory on hand consisted of 350 wooden tables at P 820
each and 43 wooden tables at P 850 each. During the month ended December 31, 2015, the
following inventory transactions took place. All purchase and sales transactions are on
credit.
Decemb
er

## Sold 300 wooden tables for P 1,200 each.

Five wooden tables were returned by a customer. They had originally cost P
820 each and were sold for a sales price same as the above.
Purchased 55 wooden tables at P 910 each.

1
1
1
5
1
6
1
8
2
0
2
4
3
0

## Purchased 76 wooden tables at P 960 each.

Sold 86 bicycles at P 1,360 each.
Returned a damaged wooden table to the supplier. This wooden table had
been purchased on December 11.
Sold 60 wooden tables for P 1,250 each.
Purchased 72 wooden tables at P 980 each.
Two wooden tables, sold on December 20, were returned by a customer. The
wooden tables were badly damaged so it was decided to write them off. They
had originally cost P 910 each.

Assuming Antigua and Barbuda uses perpetual inventory system, determine the
following:
24.Cost of 12/31/15 inventory using the First In, First Out (FIFO) method.
25.Gross profit for the month of December using the First In, First Out (FIFO)
method.***
26.Cost of 12/31/15 inventory using the moving average method.
27.Gross profit for the month of December using the moving average method.
***
Assuming Antigua and Barbuda uses periodic inventory system, determine the
following:
28.Cost of 12/31/15 inventory using the weighted average method.
29.Cost of goods sold for the month of December using the weighted average
method.
The records of Chad Co. revealed the following information on August 31, 2015
Inventory, September 1
Purchases

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Villaluz

COST:
1,020,00
0
13,072,5
00

RETAIL:
1,920,000
22,155,00
0

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
Transportation In
Sales

300,000

Purchase return
Purchase allowance
Sales returns & allowances
Sales discounts
Purchase discounts
Normal spoilages &
breakages
Discounts granted to
employees
Departmental transfer debit
Departmental transfer credit
Net mark-up
Net mark-down
Mark-up cancellations
Mark-down cancellations
Abnormal spoilages &
breakages

450,000
270,000

19,800,00
0
750,000
450,000
500,000

15,960

600,000
300,000

300,000
600,000

120,000

425,000
1,200,000
450,000
1,425,000
40,000
40,000
200,000

## The company reported inventories per a physical count conducted on August 31 at P

to the nearest whole number)
Requirement(s):
30.Estimated cost of inventory shortage under the average cost method.
31.Estimated cost of inventory shortage under the FIFO retail method.
32.Estimated cost of inventory shortage under the conventional retail method.
Problem 9: (Fiji Co.)
The Fiji Co. uses the lower of cost and net realizable value (NRV) inventory. Data regarding
the items in work-in-process (WIP) inventory are presented below:

Historical cost

Marker
s
24,000

Selling price

36,000

Replacement cost

3,000
20,800

## Normal profit margin as a percentage

of selling price
Cost to sell as a percentage of selling
price

15.0
5.0

Pens
P

18,88
0
21,80
0
2,620
16,80
0
20.0
10.0

Pencil
s
30,000
38,000
6,200
16,800
25.0
10.0

Question(s):
33.What is the loss on inventory write-down under the direct write-off method?
34.What is the loss on inventory write-down under the allowance method,
assuming that the unadjusted balance of the allowance for inventory writedown is at P 2,000?
35.What is the gain on recovery of previous write-down under the allowance
method, assuming, that the unadjusted balance of the allowance for
inventory write-down is at P 5,000?
36.What is the correct carrying value of inventories as of December 31?
The following data was presented to you by Grenada Co. on December 31, 2015:
Item #:
012
013
014
015

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Quantity:
360 units
24 units
28 units
43 units

Cost:
3.60 each
4.70 each
16.50 each
5.15 each

3.64 each
4.80 each
16.50 each
5.20 each

Amount:
1,310.40
112.80
1,353.00
176.80

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
016
017
018

400 units
70 dozens
95 grosses

9.10 each
2.00/dozen
144.00/gross

8.10 each
2.00/dozen
132.00/gross

3,640.00
140.00
13,780.00

Question(s):
37.How much should the inventory be presented in the 2015 statement of
financial position?
-END OF INVENTORIES~END OF HANDOUT~
Every expert was once a beginner

## CASH & CASH

EQUIVALENTS
1. P 538,200
2. P 1,536,000
3. P 1,317,600
4. P 2,171,760
5. P 2,253,840
6. P 50,600
7. P 8,362,000
8. P 4,000,000
9. P 194,550
10. P 255,700
11. P 55,000
12. P 92,000
13. P 145,600
14. P 400 shortage
15. P 5,300
16. P 80,000
17. P 340,000
18. P 3,134,500
19. P 50,500
20. P 10,800 shortage
21. P 25,500
22. P 3,195,000
23. P 1,500,000
24. 0

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RECEIVABLES

INVENTORIES

1. P 124,500
2. P 107,537
3. P 366,000
4. P 22,320
5. P 330,720
6. P 25,320
7. P 275,100
8. P 1,960,700
9. P 3,100,000
10. P 4,050,000
11. P (86,000)
12. P 1,450,000
13. P 1,152,320
14. 0
15. P 16,000 gain
16. P 470,000
17. P 245,850
18. P 90,000 loss
19. P 1,945,875
20. P 4,875,363
21. P 385,500
22. P 683,538
23. P 4,127,863
24. P 1,545,814

1. P 1,169,000
2. P 770,000
3. P 5,950,000
4. P 3,280,000
5. P 499,000
6. P 59,000
7. P (252,000)
8. P 11,000
9. P (204,000)
10. P 412,540
11. P 2,439,140
12. P 250,620
13. P 420,440
14. P 1,294,120
15. P 846,560
16. P 447,560
17. 20%
18. P 98,000
19. P 114,000
20. P 2,785,000
21. P 708,000
22. P 1,497,000
23. P 103,000
24. P 148,980

## University of Santo Tomas

Alfredo M. Velayo College of Accountancy
Junior Philippine Institute of Accountants
25. P
26. P
27. P
28. P
29. P

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Villaluz

447,000
18,500
613,500
900,000
6,655,500

25. P
26. P
27. P
28. P
29. P
30. P
31. P
32. P
33. P

1,806,139
188,596
542,561
919,023
1,400,655
3,771,950
456,555
375,260
353,250

25. P
26. P
27. P
28. P
29. P
30. P
31. P
32. P
33. P
34. P
35. P
36. P
37. P

176,230
143,486
170,736
133,607
382,603
297,500
308,750
252,500
3,880
1,880
1,120
69,000
18,012