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You were able to gather the following from the December 31, 2006 trial balance of Mandaluyong
Corporation in connection with your audit of the company:
The petty cash fund consisted of the following items as of December 31, 2006.
Currency and coins P 2,000
Employees’ vales 1,600
Currency in an envelope marked “collections for charity” with names attached 1,200
Unreplenished petty cash vouchers 1,300
Check drawn by Mandaluyong Corporation, payable to the petty cashier 4,000
P10,100
Included among the checks drawn by Mandaluyong Corporation against the BPI current account and recorded
in December 2006 are the following:
a. Check written and dated December 29, 2006 and delivered to payee on January 2, 2007, P80,000.
b. Check written on December 27, 2006, dated January 2, 2007, delivered to payee on December 29,
2006, P40,000.
The credit balance in the Security Bank current account No. 2 represents checks drawn in excess of the deposit
balance. These checks were still outstanding at December 31, 2006.
The savings account deposit in PNB has been set aside by the board of directors for acquisition of
new equipment. This account is expected to be disbursed in the next 3 months from the balance
sheet date.
Questions:
Based on the above and the result of your audit, determine the adjusted balances of following:
1. Cash on hand
a. P410,000
b. P530,000
c. P470,000
d. P440,000
Question No. 1
Unadjusted cash on hand P500,000
NSF check (40,000)
Post dated check received (20,000)
Adjusted cash on hand P440,000
Question No. 2
Petty cash fund per total P10,100
Employees' vales (IOU) (1,600)
Currency in envelope marked "collections for charity" (1,200)
Unreplenished petty cash vouchers (1,300)
Petty cash fund, as adjusted P 6,000
Question No. 3
Unadjusted BPI current account P1,000,000
Unreleased check 80,000
Post dated check delivered 40,000
Adjusted BPI current account P1,120,000
Question No. 4
Cash on hand (see no. 1) P 440,000
Petty cash fund (see no. 2) 6,000
BPI current account (see no. 3) 1,120,000
Security Bank current account (net of overdraft of P80,000) 1,000,000
PNB time deposit 500,000
Cash and cash equivalents, as adjusted P3,066,000
BANK RECONCILIATION
Shown below is the bank reconciliation for Marikina Company for November 2006:
The bank statement for December 2006 contains the following data:
All outstanding checks on November 30, 2006, including the bank credit, were cleared in the bank
in December 2006.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December 31,
2006.
Questions:
Based on the above and the result of your audit, answer the following:
1. How much is the cash balance per bank on December 31, 2006?
a. P154,000
b. P150,000
c. P164,000
d. P172,400
a. P124,000
b. P 96,000
c. P110,000
d. P148,000
a. P96,000
b. P79,600
c. P89,600
d. P98,000
4. How much is the cash balance per books on December 31, 2006?
a. P150,000
b. P170,400
c. P180,400
d. P162,000
a. P141,600
b. P162,000
c. P172,000
d. P196,000
Question No. 1
Balance per bank, Nov. 30, 2006 P150,000
Add: Total deposits per bank statement 110,000
Total 260,000
Less: Total charges per bank statement 96,000
Balance per bank, Dec. 31, 2006 P164,000
Question No. 2
Total deposits per bank statement P110,000
Less deposits in transit, Nov. 30 24,000
Dec. receipts cleared through the bank 86,000
Add deposits in transit, Dec. 31 38,000
December receipts per books P124,000
Question No. 3
Total charges per bank statement P96,000
Less: Outstanding checks, Nov. 30 P28,000
Correction of erroneous bank credit 10,000
December NSF check 8,000
December bank service charge 400 46,400
Dec. disb. cleared through the bank 49,600
Add outstanding checks, Dec. 31 30,000
December disbursements per books P79,600
Question No. 4
Balance per books, Nov. 30, 2006 P136,000
Add December receipts per books 124,000
Total 260,000
Less December disbursements per books 79,600
Balance per books, Dec. 31, 2006 P180,400
Question No. 5
Balance per bank statement, 12/31/06 P164,000
Deposits in transit 38,000
Outstanding checks ( 30,000)
Adjusted bank balance, 12/31/06 P172,000
ACCOUNT RECEIVABLE
The adjusted trial balance of Galimuyod Company as of December 31, 2005 shows the following:
Debit Credit
Accounts receivable P1,000,000
Allowance for bad debts P40,000
Additional information:
Questions:
Based on the above and the result of your audit, answer the following:
a. P3,000,000
b. P 300,000
c. P 333,333
d. P2,444,000
a. P 20,000
b. P120,000
c. P180,000
d. P146,640
a. P 307,340
b. P2,814,000
c. P2,874,000
d. P2,291,360
a. P181,000
b. P121,000
c. P 21,000
d. P147,640
Question No. 1
Question No. 2
Accounts receivable, 12/31/06 P3,000,000
Multiply by bad debt rate[(P40,000/P1,000,000) x 1.5] 0.06
Allowance for doubtful accounts, 12/31/06 P 180,000
Question No. 3
Question No. 4
NOTES RECEIVABLE
In connection with your audit of the Salcedo Corporation, you noted that the company’s Notes Receivable
consists of the following:
a. A 4-month note dated November 30, 2006, from AA Company, P200,000; interest rate, 16%;
discounted on November 30, 2006 at 16%.
b. A draft drawn payable 30 days after for P900,000 by the BB Company on the Charlie Company in favor
of the Delta Company, endorsed to Salcedo Corp. on December 2, 2006 and accepted on December 4,
2006.
c. A 90-day note dated November 1, 2006 from E. Dy, P500,000; interest at 16%; the note is for
subscription to 5,000 shares of the preferred stock of Salcedo Corp. at P100 per share.
d. A 60-day note dated May 3, 2006, from CC Company, P600,000; interest rate, 16%; dishonored at
maturity; judgment obtained on October 10, 2006. Collection within the next twelve months is
doubtful.
e. A 90-day note dated January 4, 2006, from Apol Bobads, president of Salcedo, P160,000; no interest;
note not renewed; president confirmed.
f. A 120-day note dated September 14, 2006, from DD Company, P120,000; interest rate, 16%; note is
held by bank as collateral.
QUESTIONS:
Based on the above and the result of your audit, you are to provide the answers to the following:
2. How much of foregoing notes receivable will be reported in the current assets section of the balance sheet?
a. P1,220,000
b. P2,480,000
c. P1,680,000
d. P1,520,000
3. How much is the net interest income from the foregoing notes receivable for 2006?
a. P19,093
b. P70,613
c. P166,613
d. P 35,093
a. P19,093
b. P 5,760
c. P70,613
d. P0
Question No. 1
AA Company P 200,000
BB Company 900,000
DD Company 120,000
Adjusted balance of Notes Receivable P1,220,000
Notes:
1) AA Company will still be included in the balance of “Notes Receivable” since “Notes Receivable-
Discounted” account will be credited upon discounting. If the question is Notes Receivable that will be
reported in the balance sheet, the Notes Receivable – Discounted will be excluded from the total Notes
Receivable with disclosure of contingent liability.
2) E. Dy note was excluded since that will be reclassified to Subscriptions Receivable.
3) CC Company note was excluded because the note was dishonored. It will be reclassified to Accounts
Receivable, including the accrued interest.
4) Apol Bobads note was excluded due to the fact that it will be reclassified to Advances to Officers.
5) The fact that DD Company note is held by bank as collateral should be disclosed but the note will still
be included in the Notes Receivable.
Question No. 2
LOAN RECEIVABLE
On January 1, 2004, Sinait Company loaned P3,000,000 to Ilocos Company. The terms of the loan were
payment in full on January 1, 2009, plus annual interest payments at 11%. The interest payment was made as
scheduled on January 1, 2005; however, due to financial setbacks, Ilocos was unable to make its 2006 interest
payment. Sinait considers the loan impaired and projects the following cash flows from the loan as of
December 31, 2006 and 2007. Assume that Sinait accrued the interest at December 31, 2005, but did not
continue to accrue interest due to the impairment of the loan.
Amount projected as of
Date of Flow Dec. 31, 2006 Dec. 31, 2007
December 31, 2007 P 200,000 P 200,000
December 31, 2008 400,000 600,000
December 31, 2009 800,000 1,200,000
December 31, 2010 1,200,000 1,000,000
December 31, 2011 400,000
QUESTIONS:
Your client requested you to determine the following: (Round-off present value factors to four decimal places)
a. P 882,380
b. P1,549,500
c. P1,212,380
d. P1,542,380
2. Interest income for 2007 assuming the P200,000 was collected on December 31, 2007 as scheduled
a. P195,855
b. P232,938
c. P200,000
d. P 66,000
a. P554,340
b. P752,640
c. P649,442
d. P776,900
4. Interest income for 2008 assuming the P600,000 was collected on December 31, 2008 as scheduled
a. P225,210
b. P247,023
c. P236,561
d. P222,541
a. P1,672,570
b. P2,150,558
c. P1,645,641
d. P1,892,683
Question No. 1
Principal P3,000,000
Add accrued interest in 2005 (P3,000,000 x 11%) 330,000
Carrying amount, 12/31/06 3,330,000
Less PV of projected cash flows (see below) 2,117,620
Loan impairment (bad debt expense) P1,212,380
Question No. 2
Question No. 3
Principal, 12/31/07 (P3,000,000 - P200,000) P2,800,000
Less PV of projected cash flows (see below) 2,245,660
Allowance for loan impairment, 12/31/07 P 554,340
Question No. 4
Question No. 5
RECEIVABLE FINANCING
Tagudin Co. required additional cash for its operation and used accounts receivable to raise such needed cash,
as follows:
QUESTIONS:
1. In its December 31, 2006 balance sheet, Tagudin should report note payable as a current liability at
a. P1,745,000
b. P2,250,000
c. P1,545,000
d. P1,700,000
2. Tagudin Company’s equity in the assigned accounts receivable as of December 31, 2006 is
a. P255,000
b. P300,000
c. P455,000
d. P0
5. The proceeds from the note receivable discounted on June 30, 2006 is
a. P564,000
b. P617,400
c. P604,800
d. P576,000
Question No. 1
Question No. 2
Cash P1,340,000
Allowance for doubtful accounts (P1,550,000P1,470,000) 80,000
Loss on factoring (Finance Charge) 130,000
Accounts receivable P1,550,000
Question No. 4
Accounts receivable pledged against borrowings, should be Included in total receivables with disclosure.
Question No. 5
INVENTORIES
During your audit of the records of the Manaoag Corporation for the year ended December 31, 2006, the
following facts were disclosed:
Units
Explanation 1/1/06 12/31/06
Raw materials 35,000 ?
Work in process (80% completed) - 25,000
Finished goods 15,000 40,000
Sales, 200,000 units
c) Raw materials are issued at the beginning of the manufacturing process. During the year, no returns,
spoilage, or wastage occurred. Each unit of finished goods contains one unit of raw materials.
QUESTIONS:
Based on the above and the result of your audit, answer the following:
a. P992,000
b. P888,000
c. P 936,000
d. P1,040,000
a. P1,496,000
b. P1,514,000
c. P1,746,000
d. P1,776,000
a. P2,793,600
b. P3,334,000
c. P3,553,130
d. P2,812,000
4. The cost of goods sold for the year ended December 31, 2006 is
a. P16,897,000
b. P14,161,400
c. P14,077,000
d. P13,911,400
Question No. 1
Units
Raw materials, 1/1/06 35,000
Add Purchases 265,000
Raw materials available for use 300,000
Less raw materials, 12/31/06 (squeeze) 50,000
Goods placed in process 250,000
Less work in process, 12/31/06 25,000
Goods manufactured 225,000
Finished goods, 1/1/06 15,000
Total goods available for sale 240,000
Less finished goods, 12/31/06 40,000
Goods sold 200,000
Raw materials, 12/31/06 (50,000 units x P20.80) P1,040,000
Question No. 2
Started, finished and sold [(200,000 units - 15,000 units) x 100%] 185,000
Started, finished and on hand (40,000 units x 100%) 40,000
Started, and in process (25,000 units x 80%) 20,000
Total 245,000
Question No. 3
INVESTMENT
The following transactions of the Angat Company were completed during the year 2006:
Jan. 2 Purchased 20,000 shares of Bulacan Auto Co. for P40 per share plus brokerage costs of P4,500.
These shares were classified as trading securities.
Feb. 1 Purchased 20,000 shares of Malolos Company common stock at P125 per share plus brokerage
fees of P19,000. Angat classifies this stock as and available-for-sale security.
Apr. 1 Purchased P2,000,000 of RP Treasury 7% bonds, paying 102.5 plus accrued interest of P35,000.
In addition, the company paid brokerage fees of P18,000. Angat classified these bonds as a
trading security.
The market values of the stocks and bonds on December 31, 2006, are as follows:
Based on the above and the result of your audit, determine the following:
4. What amount of unrealized gain should be shown as component of equity as of December 31, 2006?
a. P68,850
b. P85,000
c. P66,000
d. P0
Question No. 1
Question No. 2
Question No. 3
Question No. 4