Title | Qualifying Exam- Reviewer Cases ( All major subject from First Year to Third Year |
---|---|
Author | Clarissa Teodoro |
Course | Accountancy |
Institution | STI College |
Pages | 71 |
File Size | 1.8 MB |
File Type | |
Total Downloads | 207 |
Total Views | 352 |
INTERMEDIATE ACCOUNTING 1CASH AND CASH EQUIVALENTQuestion 1 The following unadjusted cash balances are available for JK Company for the month ended November 30, 201A.Cash balance per bank statement, November 30, 201A P 62, 305. Cash balance per company records, November 30, 201A 62,189. The bank sta...
INTERMEDIATE ACCOUNTING 1 CASH AND CASH EQUIVALENT
•
Balance per books
The following unadjusted cash balances are available for JK Company for the month ended November 30, 201A.
Add: Notes collected by the bank P 6,000.00
Cash balance per bank statement, November 30, 201A P 62, 305.75
Interest on notes collected
Cash balance per company records, November 30, 201A 62,189.70
Deduct:
Charges by bank included a returned customer’s check for P690.70 because of insufficient funds (NSF) and service charge of P75 for November. Credits by the bank included a customer’s note for P6,000 plus interest of P60 that was collected on November 29, 201A. A review of the company records disclosed the following information:
• • •
Correct! This is the cash adjusted balance per books.
Question 1
The bank statement disclosed the following information: •
Feedback:
A deposit for P5,714.35 made on November 29, 201A did not appear on the bank statement. Customers’ checks totaling P1,637 were still on hand at November 30, 201A awaiting deposit. The following company checks were still outstanding as of November 30, 201A: Check #145243 P480.95 Check #145247 735.90 Check #145250 1,316.25 Check #145257 for P456 in payment of a creditor account and included with the canceled checks in the bank statement has been erroneously recorded in the company records as P96. Using bank reconciliation, what is the adjusted cash balance per books? Response: P67,124
P62,189.70
60.00
6,060.00
Total
P68,249.70
Bank service charge Customer’s returned
NSF
P check
75.00
690.70
Check #145257 for P456 was 360.00 erroneously recorded as P96 Adjusted cash balance Score: 1 out of 1 Yes
1,125.70 P 67,124.00
Question 2 It refers to the minimum account balance that a borrower agrees to maintain with a lender. Response: Compensating balance Feedback: Correct! Compensating balance is the minimum account balance that the company agrees to maintain as support or collateral for a loan of a depositor. It can be classified as unrestricted, restricted – short-term, and restricted – long-term. Score: 1 out of 1 Yes Question 3 Which of the following is CORRECT about cash? Response: Measured at face value
Feedback: Correct! Cash is measured at face value in the statement of financial position. Cash (demand deposits) denominated in foreign currency is measured at the current exchange rate.
Feedback: Correct! Under the segregation of duties, no person should be in complete control of a transaction. Duties that should be segregated are collections, authorization, and recording.
Question 4 The following can be classified as cash equivalents, EXCEPT:
Question 9 The following unadjusted cash balances are available for JK Company for the month ended November 30, 201A.
Response: Checks Feedback: Correct! Checks are considered as cash. Question 5 Which of the following is NOT considered as cash? Response: IOU (I owe you) Feedback: Correct! This is reported as receivable. Question 6 It is a practice of accounting that focuses on recording of historical events and preparation of reports to make economic decisions.
Cash 201A
balance
per
bank statement, P 62, 305.75
November
30,
Cash 201A
balance
per
company records, 62,189.70
November
30,
The bank statement disclosed the following information: • •
Charges by bank included a returned customer’s check for P690.70 because of insufficient funds (NSF) and service charge of P75 for November. Credits by the bank included a customer’s note for P6,000 plus interest of P60 that was collected on November 29, 201A. A review of the company records disclosed the following information:
Response: Financial accounting Feedback: Correct! Financial accounting is a practice of accounting that focuses on recording of historical events and preparation of reports to make economic decisions. It may be performed using either the accrual method, cash method, or a combination of the two (2).
•
Question 7 It is a practice of accounting which involves preparation of returns and other requirements to be submitted to different taxing authorities.
•
•
A deposit for P5,714.35 made on November 29, 201A did not appear on the bank statement. Customers’ checks totaling P1,637 were still on hand at November 30, 201A awaiting deposit. The following company checks were still outstanding as of November 30, 201A: Check #145243 P480.95
Response: Tax accounting
Check #145247 735.90
Feedback: Correct! Tax accounting involves preparation of returns and other requirements to be submitted to different taxing authorities.
Check #145250 1,316.25
Question 8 Under this internal control over cash, no person should be in complete power over a specific transaction. Response: Segregation of duties
Check #145257 for P456 in payment of a creditor account and included with the canceled checks in the bank statement has been erroneously recorded in the company records as P96. Using bank reconciliation, what is the unadjusted cash balance per bank? Response: P62,305.75
Feedback: Correct! Per the given, this is the ‘unadjusted’ cash balance.
Correct! The accounts receivable balance is P1,825,000.
Question 10 Which is INCORRECT about the measurement of cash and cash equivalents?
Accounts receivable January 1
Response: Cash equivalent should be measured at maturity value, meaning face value plus interest.
–
P1,300,000
Add: Credit sales
5,400,000
Total
6,700,000
Feedback: Correct! Cash equivalent is measured the same as cash, which is at face value, not maturity value.
Less: Collection from customers (P4,750,000 + 4,875,000 125,000)
RECEIVABLES AND INVENTORIES
Accounts receivable December 31
Question 1 Roxy Company provided the following information relating to accounts receivable for 2X14: Accounts receivable on January 1
P1,300,000
Credit sales
5,400,000
Collections from customer, excluding 4,750,000 recovery Accounts written off
125,000
Collection of accounts written off in prior year (customer credit was not 25,000 reestablished) Estimated uncollectible receivables per aging of receivables at December 165,000 31 On December 31, 2X14, what is the balance of accounts receivable before Allowance for Doubtful Accounts? Response: P1,825,000 Feedback:
–
P1,825,000
Question 2 In January of the current year, Metro Company, which maintains a perpetual inventory system, recorded the following information of its inventory:
Units
Unit cost
Total cost
Units on hand
Balance 10,000 100 1/1
1,000,000 10,000
Purchased 6,000 -1/7
1,800,000 16,000
Sold 1/20
-
300
9,000
Purchased 4,000 – 1/25
7,000 500
2,000,000 11,000
Using the FIFO method, what should the company report as inventory on January 31? Response: P3,900,000 Feedback:
Correct!
Feedback: Units
Unit cost
January 1
1,000 P100
January 7
6,000
300
January 25
4,000
500
Correct! Total cost Units P100,000
Unit cost
Total cost
January 1
10,000 P100 P1,000,000
1,800,000
January 7
6,000
300
1,800,000
2,000,000
Balance 16,000 175 (2,800,000/16,000)
2,800,000
January 20 - Sale
(9,000) 175
(1,575,000)
Balance
7,000
175
1,225,000
Question 3
January 25
4,000
500
2,000,000
In January of the current year, Metro Company, which maintains a perpetual inventory system, recorded the following information of its inventory:
Balance
11,000 293
January 11,000 20 - Sale
Units
P3,900,000
Units Total cost on cost hand Unit
1,000,000 10,000
Purchased 6,000 -1/7
1,800,000 16,000
Sold 1/20
-
9,000
Purchased 4,000 – 1/25
7,000 500
Question 4 On June 1, P800 of goods are sold with credit terms of 1/10, n/30. How much should the seller expect to receive if the buyer pays on June 8? Response: P792
Balance 10,000 100 1/1 300
P3,225,000
2,000,000 11,000
Question 5 Scotch Company took a physical inventory at the end of the year and determined that P1,900,000 of goods were on hand. The entity also determined that P240,000 of goods purchased were in transit shipped FOB destination. The goods were actually received three (3) days after the inventory count. Scotch sold P100,000 worth of inventory FOB destination. Such inventory is in transit at year-end. What amount should be reported as inventory at year-end?
Using the moving average method, what should the company report as inventory on January 31?
Response: P2,000,000
Response: P3,225,000
Correct!
Feedback:
Feedback: Correct: The accounts written off during the year will result in a debit balance in Allowance for Doubtful Accounts of P12,000 (P30,000 − P18,000) at the end of the year. As indicated, 3% of accounts receivable are uncollectible, or P22,500 (P750,000 × 3%). Given a debit balance of P12,000 in Allowance for Doubtful Accounts at the end of the year, the adjusting entry at the end of the year is a debit to Bad Debt Expense of P34,500 (P22,500 + P12,000) and a credit to Allowance for Doubtful Accounts of P34,500
Goods purchased in P1,900,000 transit Goods out consignment
on
Total inventory
100,000 P2,000,000
Score: 1 out of 1 Yes
Question 6 A company estimates that P20,000 of its P500,000 of accounts receivable will be uncollectible. Its Allowance for Doubtful Accounts has a credit balance of P18,000. The adjusting entry will include a __________ to Bad Debts Expense.
Question 9 Leila Company conducted a physical count on December 31, 2X14, which revealed the total cost of P3,600,000. However, the following items were excluded from the count:
Response: Debit of P2,000 Feedback: Correct: The amount needed in Allowance is P20,000 minus the present amount of P18,000 = P2,000 additional credit needed in Allowance. Therefore, the entry will require a debit of P2,000 to Bad Debts Expense.
• •
Score: 1 out of 1 Yes Question 7 On June 1, P800 of goods are sold with credit terms of 1/10, n/30. On June 3, the customer returned P100 of the goods. How much should the seller expect to receive if the buyer pays on June 8?
• •
Goods sold to a customer which are being held for the customer to call for at the customer’s convenience with a cost of P200,000. A packing case containing a product costing P80,000 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked “hold for shipping instructions”. Goods in process costing P300,000 held by an outside processor for further processing. Goods worth P50,000 shipped by a vendor FOB seller on December 28, 2X14, and received by Leila Company on January 10, 2X15.
Response: P693
What is the inventory on December 31, 2X14?
Feedback: Correct! The seller should expect to receive P693 if the buyer pays on June 8. P800 – P100 - (P700 x 1%) = P693
Response: P4,030,000
Score: 1 out of 1 Yes Question 8 On December 31, 2020, Roso Company had accounts receivable of P750,000. On January 1, 2020, Allowance for Doubtful Accounts had a credit balance of P18,000. In 2020, P30,000 of uncollectible accounts receivable were written off. Past experience indicates that 3% of accounts receivable became uncollectible. What should be the Bad Debt Expense for 2020? Response: P34,500
Feedback: Correct! Inventory per physical P3,600,000 count Inventory marked “hold for shipping 80,000 instructions” Goods
in
process 300,000
inventory Goods shipped FOB seller or FOB 50,000 shipping point Correct Inventory Score: 1 out of 1 Yes
P4,030,000
Question 10 Brandy Company took a physical inventory at the end of the year and determined that P2,600,000 of goods were on hand. The entity also determined that P200,000 of goods purchased in transit shipped FOB shipping point were actually received two (2) days after the physical count and that the entity had P300,000 of goods out in consignment. What amount should be reported as inventory at year-end? Response: P3,100,000 Feedback:
Feedback: Correct! For the double-declining method, the depreciation rate would be 25% or (1/8 × 2). For 2020, annual depreciation expense is P15,000 (P60,000 book value × 25%); for 2021, annual depreciation expense is P11,250 [(P60,000 − P15,000) × 25%] Question 2 Able Towing Company purchased a tow truck for P60,000 on January 1, 2018. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of P12,000. On December 31, 2020, before adjusting entries had been made, the company decided to change the remaining estimated life to four (4) years (including 2020) and the salvage value to P2,000. What is the depreciation expense for 2020? Response: P12,100 Feedback: Correct! First, calculate accumulated depreciation from January 1, 2018, through December 31, 2019, which is P9,600 {[(P60,000 − P12,000)/10 years] × 2 years}. Next, calculate the revised depreciable cost, which is P48,400 P60,000 − P9,600 − P2,000). Thus, the depreciation expense for 2020 is P12,100 (P48,400/4)
Correct! Goods on hand
P2,600,000
Goods purchased in 200,000 transit Goods out consignment
on
Total inventory
300,000 3,100,000
PROPERTY,PLANT AND EQUIPMENT Question 1 Jefferson Company purchased a piece of equipment on January 1, 2020. The equipment costs P60,000 and has an estimated life of eight (8) years and a salvage value of P8,000. Using the double-declining balance method, what is the depreciation expense for the asset in 2021? Response: P11,250
Question 3 On January 1, 2X14, Jules Enterprises borrowed P6,000,000 at an annual interest rate of 10% to finance the building of an electricity generating plant. Construction commenced on January 1, 2X14, with a cost of P6,000,000. Not all cash borrowed was used immediately, so interest income of P80,000 was generated by temporarily investing some of the borrowed funds prior to use. The project was completed on November 30, 2X14. What is the carrying amount of the plant on November 30, 2X14? Response: P6,470,000 Feedback: Correct! Total Cost of Plant = Construction Cost P6,000,000 + Interest (6,000,000 x 10% x 11/12) P550,000 - Interest Income P80,000 = P6,470,000 Question 4 Ann Torbert purchased a truck for P11,000 on January 1, 2019. The truck will have an estimated salvage value of P1,000 in five (5) years. Using the unitsof-activity method, the balance in accumulated depreciation on December 31, 2020, can be computed with the following formula:
Response: (P10,000 ÷ Total estimated activity) × Units of activity for 2019 and 2020 Feedback: Correct! The units-of-activity method takes salvage value into consideration; therefore, the depreciable cost is P10,000. This amount is divided by the total estimated activity. The resulting number is multiplied by the units of activity used in 2019 and 2020 to compute the accumulated depreciation at the end of 2020, the second year of the asset’s use. Question 5 Micah Bartlett Company purchased equipment on January 1, 2019, at a total invoice cost of P400,000. The equipment has an estimated salvage value of P10,000 and an estimated useful life of five (5) years. Using the straight-line method, the amount of accumulated depreciation on December 31, 2020, is: Response: P156,000 Feedback: Correct! Accumulated depreciation will be the sum of two (2) years of depreciation expense. Annual depreciation for this asset is (P400,000 − P10,000)/5 = P78,000. Thus, the sum of two (2) years’ depreciation is P156,000 (P78,000 + P78,000). Question 6 Anxy Company acquired two (2) items of machinery as follows: •
•
On December 31, 2X14, Anxy Company purchased a machine in exchange for a noninterest-bearing note requiring 10 payments of P500,000. The first payment was made on December 31, 2X15, and the others are due annually on December 31. The prevailing rate of interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity of 1 at 12% is 5.33 for nine (9) periods and 5.65 for 10 periods. On December 31, 2X14, Anxy Company acquired used machinery by issuing the seller a two-year, noninterest-bearing note for P3,000,000. In recent borrowing, the entity has paid a 12% interest for this type of note. The present value of 1 at 12% for two (2) years is .80, and the present value of an ordinary annuity of 1 at 12% for two (2) years is 1.69. What is the total cost of machinery? Response: P5,225,000
Feedback: Correct! Present value of first note P2,825,000 payable (500,000 x 5.65) Present value of second note payable (3,000,000 x 2,400,000 .80) January 25
P5,225,000
Question 7 J Co. acquired a tract of land containing an extractable natural resource. The entity is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resources. A geological survey indicated that the recoverable reserves will be 2,500,000 tons and that the extraction will be completed in five (5) years. Relevant cost information shows the following: Land - P9,000,000; Exploration and development cost - P1,000,000; Expected cash flow for restoration cost P1,500,000; Credit-adjusted risk-free interest rate - 10%; and PV of 1 at 10% for five (5) periods - 0.62. What is the depletion charge per ton? Response: P4.37 Feedback: Correct! Depletable Amount = Land Cost P9,000,000 + Exploration and Development Cost P1,000,000 + Present Value of Expected Restoration Cost (P1,500,000 x 0.62) P930,000 = P10,930,000/2,500,000 = P4.37 Question 8 Maggie Company expects to extract 20,000,000 tons of coal worth P12,000,000 from a mine. If no salvage value is expected and 2,000,000 tons are mined in the first year, the entry to record depletion will include a: Response: Debit to Inventory of P1,200,000 Feedback: Correct! The amount of depletion is determined by computing the depletion per unit (P12,000,000/20,000,000 tons = P0.60 per ton) and then multiplying that amount times the number of units extracted during the year (2,000,000 tons × P0.60 = P1,200,000). This amount is debited to Inventory and credited to Accumulated Depletion.
Question 9 On August 1, 2X14, Banco Company purchased a new machine on a deferred payment basis. A down payment of P100,000 was made, with four (4) mont...