NAME: SECTION: DATE:

Quiz No. 5: SET BAAC (CCE, Receivables, Inventories, and Investments)

Score Pts No. Answer

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/ 10 PROBLEM 3
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/ 6 PROBLEM 4
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/ 10 PROBLEM 5
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/ 20 PROBLEM 6
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/ 7 PROBLEM 7
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PROBLEM 1
The bank portion of the bank reconciliation for Angelo Company at October 31, 2016 was as follows:
Angelo Company Bank Reconciliation
October 31, 2016

Cash Balance per Bank P 12,367.90

Add: Deposit in transit 1,530.20
P 13,898.10
Less: Outstanding checks

Check Number Check Amount

2451 P 1,260.40
2470 720.10
2471 844.50
2472 426.80
2474 1,050.00 4,301.80

Adjusted cash balance per bank P 9,596.30

The adjusted cash balance per bank agreed with the cash balance per books at October 31. The November bank statement

showed the following checks and deposits.

Bank Statement
Checks Deposits
Date Number Amount Date Amount
11-1 2470 720.10 11-1 1,530.20
11-2 2471 844.50 11-4 1,211.60
11-5 2474 1,050.00 11-8 990.10
11-4 2475 1,640.70 11-13 2,575.00
11-8 2476 2,830.00 11-18 1,472.70
11-10 2477 600.00 11-21 2,945.00
11-15 2479 1,750.00 11-25 2,567.30
11-18 2480 1,330.00 11-28 1,650.00
11-27 2481 695.40 11-30 1,186.00
11-30 2483 575.50 Total 16,127.90
11-29 2486 900.00
Total 12,936.20

The cash records per books for November showed the following:

Cash Receipts
Cash Payments Journal Number Journal
Date Amount Date Number Amount
Date Amount
11-1 2475 1,640.70 11-20 2483 575.50 11-3 1,211.60
11-2 2476 2,830.00 11-22 2484 829.50 11-7 990.10
11-2 2477 600.00 11-23 2485 974.80 11-12 2,575.00
11-4 2478 538.20 11-24 2486 900.00 11-17 1,472.70
11-8 2479 1,570.00 11-29 2487 398.00 11-20 2,954.00
11-10 2480 1,330.00 11-30 2488 800.00 11-24 2,567.30
11-15 2481 695.40 Total 14,294.10 11-27 1,650.00
11-18 2482 612.00 11-29 1,186.00
11-30 1,225.00
Total 15,831.70
The bank statement contained two bank memoranda:

1. A credit of P2,105.00 for the collection of a P2,000 note for Angelo Company plus interest of P120 and less a collection fee of
P15. Angelo company has not accrued any interest on the note.

2. A debit for the printing of additional company checks, P50.

At November 30, the cash balance per books was P11,123.90, and the cash balance per the bank statement was P17,604.60. The
bank did not make any errors, but Angelo Company made two errors.

Note: The correction of any errors pertaining to recording checks should be made to Accounts Payable. The correction of any
errors relating to recording cash receipts should be made to Accounts Receivable

QUESTIONS:
1. The unadjusted cash ledger balance of ANGELO COMPANY at November 30, 2016 is:
2. The unadjusted bank balance of ANGELO COMPANY at November 30, 2016 is:
3. The outstanding checks of ANGELO COMPANY at November 30, 2016 is:
4. The deposit in transit of ANGELO COMPANY at November 30, 2016 is:
5. The adjusted book balance of ANGELO COMPANY at November 30, 2016 is:
PROBLEM 2
The following items are found in the cash account of Ivie Company at December 31, 2016. The company’s controller asks your
opinion whether the items listed below should be considered as part of cash account and come up with adjusting entry to adjust the
cash account.

1. Customers’ check dated December 25, 2016, P25,000.

2. Company’s check (P30,000) dated December 26, 2016 which was drawn in payment for merchandise purchased on that date
but not delivered until January 3, 2017. This check was deducted in the cash balance.
3. A check worth P196,000 from customer who paid the account net of the 2% discount. The company records the transaction as
credit to Accounts Receivable for the proceeds.
4. Cash in closed bank (Urban Bank), P95,000.
5. Redemption fund, P100,000
6. Sinking fund, P100,000. This will be used on March 1, 2017 to redeem the bonds payable.
7. Metro Bank Checking Account No. 0004568, P210,000.
8. RCBC Checking Account No. 0002347, P115,000.
9. Overdraft in PNB Checking Account No. 00011256, P50,000.
10. Company’s check dated January 3, 2017 in payment of account, P50,000. This was recorded in the company’s
disbursement ledger at December 31, 2016.
11. Overdraft in RCBC Checking Account No. 0056791, P15,000.
12. Postage stamps, P2,000.
13. 90-day Treasury Bills (purchase on November 1, 2016), P100,000
14. Treasury Bills that matures on February 1, 2017, P50,000.
15. Change fund, P10,000.
16. Customers’ certified check, P20,000.
17. Company’s certified check, P50,000. (This was included in the cash disbursement for December).

QUESTION
1. IVIE COMPANY’S adjusted cash and cash equivalents balance at December 31, 2016

PROBLEM 3
In connection with your examination of the financial statements of Nagbukel, Inc. for the year ended December 31, 2016,
the December 31, 2016 balance in the Accounts Receivable control accounts is P788,000. The only entries in the
Doubtful Accounts Expense account were:
 A credit for P1,296 on December 2, 2016 because Company A remitted in full for the
accounts charged off on October 31, 2016; and
 A debit on December 31 for the amount of the credit to the Allowance for Doubtful Accounts.

The Allowance for Doubtful Accounts schedule is follows:

Debit Credit Balance
January 1, 2016 P14,632
October 31, 2016
Uncollectible accounts:
Company A – P1,296
Company B – P3,280 P6,032 8,600
Company C – P2,256
December 31, 2016 P39,400 P48,000

An aging schedule of the accounts receivable as of December 31, 2016 is presented below:

Amount to which the Allowance is

Net debit to be adjusted after adjustments and
Age balance corrections have been made
0 to 1 month P372,960 1 percent
1 to 3 months 307,280 2 percent
3 to 6 months 88,720 3 percent
Over 6 months 24,000 Definitely uncollectible, P4,000;
P8,000 is considered 50%
uncollectible; the remainder is
estimated to be 80% collectible.

There is a credit balance in one account receivable (0 to 1 month) of P8,000; it represents an advance on a sales contract. Also,
there is a credit balance in one of the 1 to 3 months account receivable of P2,000 for which merchandise will be accepted by the
customer.

The ledger accounts have not been closed as of December 31, 2016. The Accounts Receivable control account is not in agreement
with the subsidiary ledger. The difference cannot be located, and you decided to adjust the control account to the sum of the
subsidiaries after corrections are made.

QUESTIONS:
1. How much is the adjusted balance of Accounts Receivable as of December 31, 2016?
2. How much is the adjusted balance of the Allowance for Doubtful Accounts as of December 31, 2016?
3. How much is the net adjustment to the Allowance for Doubtful Accounts?
4. How much is the Doubtful Accounts expense for the year 2016?
5. How much is the net adjustment to the Doubtful Accounts expense account?
PROBLEM 4
You are the accountant of AYALA MERCHANTS CORPORATION for the year 2017. The company is a dealer of appliances and
has several branches in Metro Manila. Its main office is located in Makati City. You were given by the company controller the
unadjusted balances of the items to be included in the company’s statement of financial position and statement of income as of
and for the year ended December 31, 2017, findings as follows:

A cash count was conducted by your staff on January 7, 2018. The petty cash fund of P60,000 maintained by the company on
an imprest basis relected a balance of P22,750. Unreplenished expenses totaled P37,250 of which P9,510 pertains to January
2018.

You were furnished a copy of the company’s bank reconciliation statement with Chartered Bank as follows:

Balance per bank P277,994

Add: Deposit in transit 248,836
Bank debit memos 712,750
Returned check 63,000
Less: Outstanding checks (174,580)
Book error (72,000)
Balance per books P1,056,000

Your review of the reconciliation statement disclosed the following:

1. Postdated checks totaling P107,400 were included as part of the deposit in transit. These represent collections from
various customers whose accounts have been outstanding for less than three months. These checks were actually
deposited on January 8, 2018.

2. Included in the deposit in transit is a check from a customer for P63,000 which was returned by the bank on December 27,
2017 for insufficiency of funds. This account has been outstanding for over six months. The check was replaced by the
customer on January 15, 2018.

3. The bank debited the account of Ayala Merchants for P710,000 as payment of notes payable including interest of P10,000
due on December 26, 2017. This was not recorded as of year-end.

4. A check was cleared by the bank as P30,900 but was recorded by the bookkeeper as P102,900. This was in payment of
accounts payable.

5. Bank service charges totaling P2,750 were not recorded.

It is the company’s policy to provide allowance for doubtful accounts as follows:

Less than 3 months P2,500,960 1%

3 to 6 months 843,200 5%
Over 6 months 274,500 10%
Total P3,618,660

An analysis of the accounts receivable schedule showed that several long outstanding accounts for more than a year totaling
P152,460 should be written-off.

The company’s equity portfolio as of year-end showed the following:

Total Market Value

Shares Cost per Share
Bacnotan Cement 7,000 P108,500 P16.00
Fil-Estate 10,000 195,000 19.75
Ionics 2,400 49,200 24.00
La Tondena 2,000 67,000 26.00
Selecta 8,000 31,600 1.20
Union Bank 1,600 50,880 27.50
P502,180
The securities are listed in the stock exchange. The company follows the fair value accounting.

The note receivable amounting to P1,300,000 represents a loan granted to a subsidiary. This is covered by a promissory note
with interest at 15% per annum dated November 1, 2017. No interest has been accrued on the note as of December 31, 2017.

Questions: Determine the adjusted balances of the following:(Ignore tax implications)

1. Petty cash fund
2. Cash in bank
3. Trading securities
4. Accounts receivable
5. Allowance for doubtful accounts
6. Notes and interest receivable
PROBLEM 5

On January 1, 2017, Arcenith uses a periodic inventory system. The CPA did not observe the inventory count on December
31, 2016, as a result, a special examination was made of the inventory records.

The financial statements prepared by the company (uncorrected) showed the following: ending inventory, P72,000; accounts
receivable, P60,000; accounts payable, P30,000; sales, P400,000; net purchases, P160,000, and pretax income P51,000.
The following data were as follows:

1. Merchandise received on January 2, 2017, costing P800 was recorded on December 31, 2016. An invoice on hand
showed the shipment was made fob supplier’s warehouse on December 31, 2016. Because the merchandise was not on
hand at December 31, 2016, it was not included in the inventory.

2. Merchandise that cost P18,000 was excluded from the inventory, and the related sale for P23,000 was recorded. The
goods had been segregated in the warehouse for shipment; there was no contract for sale but a “tentative order by
phone”.

3. Merchandise that cost P10,000 was out on consignment for Valentin Distributing Company and was excluded from the
ending inventory. The merchandise was recorded as a sale P25,000 when shipped to Valentin on December 29, 2016.

4. A sealed packing case containing a product costing P900 was in Arcenith’s shipping room when the physical inventory
was taken. It was included in the inventory because it was marked “Hold for customer’s shipping instructions.”
Investigation revealed that the customer signed a purchase contract dated December 18, 2016, but that case was
shipped and the customer billed on January 10, 2017. A sale for P1,500 was recorded on December 31, 2016.

5. A special item, fabricated to order for a customer, was finished and in the shipping room on December 31, 2016. The
customer has inspected it and was satisfied. The customer was billed in full on that sale in the amount of P5,000. The
item was included in inventory at cost, P1,000 because it was shipped on January 4, 2017.

6. Merchandise costing P15,600 was received on December 28, 2016. The goods were excluded from inventory, and a
purchase was not recorded. The auditor located the related papers in the hands of the purchasing; they indicated, “On
consignment from Roselyn Company”.

7. Merchandise costing P2,000 was received on January 8, 2017, and the related purchase invoice recorded January 9.
The invoice showed the shipment was made on December 29, 2016, fob destination. The merchandise was excluded
from the inventory.

8. Merchandise that cost P6,000 was excluded from the ending inventory and not recorded as a sale for P7,500 on
December 31, 2016. The goods had been specifically segregated. According to the terms of the contract of sale,
ownership will not pass until actual delivery.

9. Merchandise that cost P15,000 was included in the ending inventory. The related purchase has not been recorded. The
goods had been shipped by the vendor fob destination, and the invoice was received on December 30, 2016. The goods
was received on January 5, 2017.

10. Merchandise in transit that cost P7,000 was excluded from inventory because it was not on hand. The shipment from the
vendor was fob shipping point. The purchase was recorded on December 29, 2016, when the invoice was received.

11. Merchandise in transit that cost P13,000 was excluded from inventory because it had not arrived. Although the invoice
had arrived, the related purchase was not recorded by December 31, 2016. The merchandise shipped fob shipping point
by the vendor.

12. Merchandise that cost P8,000 was included in the ending inventory because it was on hand. The merchandise had been
rejected because of incorrect specifications and was being held for return to the vendor. The merchandise was recorded
as a purchase on December 26, 2016.

Question:
1. The adjusted balance of inventory at year-end is:
2. The adjusted balance of accounts receivable at year-end is:
3. The adjusted balance of Net Purchases at year-end is:
PROBLEM 6

On April 15, 2017, a fire damaged the office and warehouse of KAREN MAE CORPORATION. The only accounting record
save was the general ledger, from which the trial balance below was prepared.
KAREN MAE CORPORATION TRIAL
BALANCE
March 31, 2017
Cash 200,000
Accounts receivable 400,000
Inventory, December 31, 2016 750,000
Land 350,000
Building and equipment 1,100,000
Accumulated depreciation 413,000
Other Assets 36,000
Accounts payable 237,000
Other expense accruals 102,000
Capital stock 1,000,000
Retained earnings 520,000
Sales 1,350,000
Purchases 520,000
Operating expenses 266,000
3,622,000 3,622,000

The following data and information have been gathered:

1. The fiscal year of the corporation ends on December 31.

2. An examination of the April bank statement and canceled checks revealed that checks written during the period April 1-
15 totaled P130,000: P57,000 paid to accounts payable as of March 31, P34,000 for April merchandise shipments, and
P39,000 paid for other expenses. Deposits during the same period amounted to P129,500, which consisted of receipts
on account from customers with the exception of a P9,500 refund from a vendor for merchandise returned in April.

3. Correspondence with suppliers revealed unrecorded obligations at April 15 of P106,000 for April merchandise shipments,
including P23,000 for shipments in transit on that date.

4. Customers acknowledge indebtedness of P360,000 at April 15, 2017. It was also estimated that customers owed another
P80,000 that will never be acknowledge or recovered. Of the acknowledged indebtedness, P6,000 will probably be
uncollectible.

5. The companies insuring the inventory agreed that the corporation’s fire loss claim should be based on the assumption
that the overall gross profit ratio for the past two years was in effect during the current year. The corporation’s audited
financial statements disclosed this information:
Year Ended December 31
2016 2015
Net Sales 5,300,000 3,900,000
Net purchases 2,800,000 2,350,000
Beginning inventory 500,000 660,000
Ending inventory 750,000 500,000

6. Inventory with a cost of P70,000 was salvaged and sold for P35,000. The balance of the inventory was a total loss.
Questions:
1. Cash balance at April 15, 2017 is:
2. Accounts Receivable balance at April 15, 2017 is:
3. Inventory at April 15, 2017 is:
4. Sales as of April 15, 2017 is:
5. Net purchases as of April 15, 2017 is:
6. Cost of Sales as of April 15, 2017 is:
7. Estimated inventory as of April 15, 2017 is:
8. Inventory loss at April 15, 2017 is:
9. The Average Gross Profit for two years (2015 and 2016) is:

PROBLEM 7
In connection Salcedo Corporation, you noted that the company’s Notes Receivable consists of the following:
a. A 4-month note dated November 30, 2016, from AA Company, P200,000; interest rate, 16%; discounted on November 30,
2016 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, 2016 and accepted on December 4, 2016.
c. A 90-day note dated November 1, 2016 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, 2016, from CC Company, P600,000; interest rate, 16%; dishonored at maturity; judgment obtained
on October 10, 2016. Collection within the next twelve months is doubtful.
e. A 90-day note dated January 4, 2016, from Apol Bobads, president of Salcedo, P160,000; no interest; note not renewed;
president confirmed.
f. A 120-day note dated September 14, 2016, from DD Company, P120,000; interest rate, 16%; note is held by bank as
collateral.
 Questions:
1. The adjusted balance of Notes Receivable as of December 31, 2016 is
2. How much of foregoing notes receivable will be reported in the current assets section of the balance sheet?
3. How much is the net interest income from the foregoing notes receivable for 2016?
4. The adjusted balance of Interest Receivable as of December 31, 2016 is

PROBLEM 8
Presented below is a list of items that may or may not reported as inventory in a company’s December 31 balance sheet.

1. Goods out on consignment at another company’s store P800,000

2. Goods sold on installment basis 100,000
3. Goods purchased f.o.b. shipping point that are in transit at
December 31 120,000
4. Goods purchased f.o.b. destination that are in transit at
December 31 200,000
5. Goods sold to another company, for which our company has signed
an agreement to repurchase at a set price that covers all costs
related to the inventory 300,000
6. Goods sold where large returns are predictable 280,000
7. Goods sold f.o.b. shipping point that are in transit December 31
120,000
8. Freight charges on goods purchased 80,000
9. Factory labor costs incurred on goods still unsold 50,000
10. Interest cost incurred for inventories that are routinely
manufactured 40,000
11. Costs incurred to advertise goods held for resale 20,000
12. Materials on hand not yet placed into production 350,000
13. Office supplies 10,000
14. Raw materials on which a the company has started production, but
which are not completely processed 280,000
15. Factory supplies 20,000
16. Goods held on consignment from another company 450,000
17. Costs identified with units completed but not yet sold 260,000
18. Goods sold f.o.b. destination that are in transit at
December 31 40,000
19. Temporary investment in stocks and bonds that will be
resold in the near future 500,000

Questions:
1. How much of these items would typically be reported as inventory in the financial stateents?