Father Saturnino Urios University

Accounting 520
Accountancy Program
MQ 001
Butuan City
Anbert Angelo C.Cayna, CPA
1. The following information is available for the Beta Company:
Credit sales during 2010
P200,000
Allowance for doubtful accounts at 12/31/2009
2,400
Accounts receivable deemed worthless and written off during 2010
3,200
During 2010, Beta estimated that its bad debts expense should be 1% of all credit sales. As a result of a
review and aging of accounts receivable in early January 2011, it has been determined that an allowance for
doubtful accounts of P2,200 is needed at December 31, 2010. What amount should Beta record as bad
debts expense for the year ended December 31, 2010?
a. P2,000
b. P3,000
c. P3,200
d. P4,200
Dysas PAS 1 #32 b
2. Kriz Company is a leading educational institution with student population of more than 50,000. Kriz
continuously maintains good quality education and a roster of qualified instructors. As a result, Kriz
continuously produces top graduates in several fields. As of December 31, 2010, Kriz has an outstanding
receivable balance of P23,250,000 broken down into: 0-60 days outstanding, P9,000,000; 61-120 days
outstanding, P6,750,000; and over 120 days outstanding, P7,500,000. Estimated percent uncollectible of
these accounts is 2%, 4% and 10%, respectively. Kriz wrote off P525,000 of its receivables and recovered
P300,000 from accounts previously written off in prior year. As of December 31, 2009, Kriz has an allowance
for uncollectible accounts of P650,000. Base on the aging analysis, Kriz should report an allowance for
doubtful accounts as of December 31, 2009 at :
a. P1,200,000
b. P1,500,000
c. P775,000
d. P675,000
Dysas Pas 1 #35 a
3. From inception of operations, Celina Company provided for uncollectible accounts expense under the
allowance method and provisions were made monthly at 4% of credit sales. No year-end adjustments to the
allowance account were made. The usual credit terms are net 30 days.
The balance in the allowance for doubtful accounts was P1,000,000 on January 1, 2012. During 2012, credit
sales totalled P20,000,000, interim provisions for doubtful accounts were made at 4% of credit sales,
P200,000 of bad debts were written off, and recoveries of accounts previously written off amounted to
P50,000. An aging of accounts receivable was made for the first time on December 31, 2012 as follows:
Uncollectibl
Classification
Balance
e
6,000,00
November- December
0
10%
2,000,00
July
- October
0
20%
1,500,00
January -June
0
30%
Prior to January 1, 2012
500,000
50%
Based on the review of collectibility of the account balances in the prior to January 1, 2012 aging category,
additional accounts totalling P100,000 are to be written off on December 31, 2012. Effective with the year
ended December 31, 2012, the entity adopted a new accounting method for estimating the allowance for
doubtful accounts at the amount indicated by the year-end aging of accounts receivable.
What is the year-end adjustment to the allowance for doubtful accounts on December 31, 2012?
a. 900,000 debit
b. 900,000 credit
c. 100,000 debit
d. 100,000 credit
5434 #6 d
4. B Corporation began operations in 2010. For the year ended December 31, 2010, B made available the
following information:
Total merchandise purchases for the year
P350,000
Merchandise inventory at December 31, 2010
70,000
Collections from customers
200,000
All merchandise was marked to sell at 40% above cost. Assuming that all sales are on a credit basis and all
receivables are collectible, what should be the balance in accounts receivable at December 31, 2010?
a. P50,000
b. P192,000
c. P250,000
d. P290,000
Dysas pas 1 #28 b
5. Cherry Bank granted a loan to a borrower on January 1, 2012. The interest on the loan is 10% payable
annually starting December 31, 2012. The loan matures in three years on December 31, 2014. Data related
to the loan are:
Principal amount
5,000,000
Origination fee charged against the borrower
340,000
Direct origination cost incurred
100,000
Indirect origination cost incurred
50,000
After considering the origination fee charged against the borrower and the direct origination cost incurred, the
effective rate on the loan is 12%. What is the carrying amount of the loan receivable on December 31, 2012?
a. 5,000,000
b. 4,760,000
c. 4,831,200
d. 4,910,944
5435 #1 c
Melissa Bank loaned P10,000,000 to a borrower on January 1, 2010. The terms of the loan require principal
payment of P2,000,000 each year plus interest at 10%. The first principal and interest payment is due on
January 1, 2011.
The borrower made the required payments during 2011 and 2012. However, during 2012, the borrower began
to experience financial difficulties requiring the bank to reassess the collectibility of the loan.

6.
7.
8.
9.

10.

11.

12.

13.

14.

On December 31, 2012, the bank has determined that the remaining principal payments will be collected but
the collection of the interest is unlikely. The bank has accrued the interest for 2012. The principal payments
are expected to be as follows:
January 1, 2013
1,000,000
January 1, 2014
2,000,000
January 1, 2015
3,000,000
The present value of 1 at 10% is 0.91 for one period, 0.83 for two periods, and 0.75 for three periods.
What is the loan impairment loss to be recognized on December 31, 2012?
a. 1,180,000
b. 2,000,000
c. 1,290,000
d. 690,000
What is the interest income to be reported by the bank in 2013?
a. 531,000
b. 431,000
c. 600,000
d. 500,000
What is the carrying amount of the loan receivable on December 31, 2013?
a. 5,000,000
b. 4,741,000
c. 4,310,000
d. 3,122,000
5435 #3 1, 2 and 3 c,b and b
North sells P6,000 accounts receivable to a factor and receives 94% of the value of the factored accounts
less 10% commission based on the gross amount of the factored accounts receivable. After the journal entry
to record this factoring transaction is made, the companys assets will be:
a. Increased by P5,040
c. reduced by P600
b. Reduced by P960
d. increased by P5,400
Dysas pas 1 #37 b
On December 1, 2012, Charmagne Company assigned on a nonnotification basis accounts receivable of
P5,000,000 to a bank in consideration for a loan of 80% of the accounts less a 5% service fee on the
accounts assigned. The entity signed a note for the bank loan. On December 31, 2012, the entity collected
assigned accounts of P2,000,000 less discount of P200,000. The entity remitted the collections to the bank in
partial payment for the loan. The bank applied first the collection to the interest and the balance to the
principal. The agreed interest is 1% per month on the loan balance.
What is the carrying amount of note payable on December 31, 2012?
a. 2, 240,000
b. 2,250,000
c. 3,250,000
d. 2,040,000
5436 #1 a
Crystal Company factored P5,000,000 of accounts receivable to a finance company on July 1, 2012. Control
was surrendered by the entity. The finance company assessed a fee of 5% and retains a holdback equal to
10% of the accounts receivable. In addition, the finance company charged 12% interest computed on a
weighted average time to the maturity of the receivables for 30 days. What is the amount of cash initially
received by the entity on July 1, 2012 as a result of factoring arrangement?
a. 4,250,000
b. 4,200,000
c. 4,700,685
d. 4,200,685
5436 #2 b
On January 1, 2012, Darlene Company sold land with carrying amount of P1,500,000 in exchange for a 9month, 10% note with a face value of P2,000,000. The 10% rate properly reflects the time value of money for
this type of note. On April 1, 2012, the entity discounted the note with recourse. The bank discount rate is
12%. The discounting transaction is accounted for as conditional sale with recognition of a contingent liability.
On October 1, 2012, the maker dishonored the note receivable. The entity paid the bank the maturity value of
the note plus protest fee of P10,000. On December 31, 2012, the entity collected the dishonored note in full
plus 12% annual interest on the total amount due.
What is the amount collected by the entity from the customer on December 31, 2012?
a. 2,150,000
b. 2,224,800
c. 2,160,000
d. 2,214,500
5436 #4 b
Jet Company purchased different goods with following details of the costs incurred during the current year:
Merchandise in transit purchased FOB shipping point
P100,000
Abnormal freight charge for express shipping
20,000
Import duties
10,000
Brokerage commission paid to agents for imports
10,000
Sales commissions paid to sales agents
30,000
Merchandise sent to customer for approval
50,000
After-sale warranty costs
10,000
Merchandise shipped on consignment to Gel
110,000
Freight paid by Jet on consigned goods
20,000
What is the amount of inventory to be reported in Jets statement of financial position?
a. P300,000
b. P320,000
c. P330,000
d. P360,000
Pas 2 #26 a
Inventory on hand at December 31, 2011 for the King Company is valued at a cost of P947,800. The following
items were not included in this inventory amount:
a. Purchased goods in transit, shipped FOB destination. Invoice price P32,000, which includes freight
charges of P1,600.
b. Goods held on consignment by King at a sales price of P28,000, including sales commission of 20% of
the sales price.
c. Goods sold to Ken Company, under terms FOB destination, invoiced for P24,400 which includes P1,000
freight charges to deliver the goods. The goods are in transit.
d. Purchased goods in transit , terms FOB shipping point. Invoice price P48,000. Freight cost P3,000.
e. Goods out on consignment to Kid Company, sales price, P36,400. Shipping cost of P2,000.
Mark-up on cost for all sales is 30%.
What is the cost of the inventory to be reported in Kings financial statements?
a. P1,022,400
b. P1,041,800
c. P1,046,800
d. P1, 078,800
Pas 2 #27 c

15. Mix Company has the following information pertaining to its merchandise inventory as of December 31, 2011:
Inventory on hand( including merchandise received on consignment of P20,000)
P200,000
Inventory purchased with a buyback agreement
100,000
Merchandise in transit, FOB shipping point, including P5,000 freight cost
155,000
Merchandise in transit, Free Alongside, including delivery cost alongside the vessel
of P6,000 but excluding the cost of shipment of P3,000
250,000
Merchandise in transit, CIF (including insurance costs and freight of P8,000)
175,000
What amount should Mix Company report as value of its inventory in its 2011 balance sheet?
a. P749,000
b. P757,000
c. P763,000
d. P857,000
Pas 2 #28 b
16. On November 15, 2012, Romina Company entered into a commitment to purchase 100,000 barrels of
aviation fuel for P55 per barrel on March 31, 2013. The entity entered into this purchase commitment to
protect itself against the volatility in the aviation fuel market. By December 31, 2012, the purchase price of
aviation fuel had fallen to P50 per barrel. However, by March 31, 2013, when the entity took delivery of the
100,000 barrels the price of aviation fuel had risen to P58 per barrel. What amount should be recognized as
gain on purchase commitment for 2013?
a. P500,000
b. P300,000
c. P800,000
d. 0
5438 #3 a
17. On June 1, 2012, Jeanah Company sold merchandise with a list price of P5,000,000 to a customer. The entity
allowed trade discounts of 20% and 10%. Credit terms were 5/10, n/30 and the sale was made FOB shipping
point. The entity prepaid P100,000 of delivery cost for the customer as an accommodation. On June 11, 2012,
what is the full remittance from the customer?
a. 3,600,000
b. 3,420,000
c. 3,700,000
d. 3,520,000
5438 #2 d
18. Gan Company sells one product which it purchases from various suppliers. Its trial balance at December 31,
2011 included the following items:
Sales(33,000 units)
P528,000
Sales discounts
7,500
Purchases
368,900
Purchase discounts
18,000
Freight in
4,800
Freight out
11,000
Gans inventory purchases during 2011 were as follows:
Units
Unit cost
Beginning inventory, January 1
8,000
P8.20
Purchases,1st quarter
12,000
8.25
Purchases, 2nd quarter
15,000
7.90
Purchases,3rd quarter
13,000
7.50
Purchases,4th quarter
7,000
7.70
Gans accounting policy is to report inventory at lower of cost or net realizable value, applied to total inventory.
Cost is determined under the weighted average method. It determined at December 31, 2011 the replacement
cost of its inventory at P8.20 per unit and the net realizable value was P8.00 per unit. Its normal profit margin
is P1.05 per unit. It uses the direct method of reporting losses from the market decline of inventory?
What is the cost of sales for the year 2011?
a. P241,100
b. P245,500
c. P252,780
d. P264,200
Pas 2 #29 c
The Computer Express Company sells only one product, a wonder calculator designed specifically for
accounting students. After experiencing record sales of P500,000, the accountant is ready to prepare the
annual financial statements. At the start of the year, there were 21,000 calculators on hand at a cost of P15
per unit. During the year, the company purchased three shipments of wonder calculators consisting of 9,000,
5,000 and 12,000 units costing P144,000, P85,000 and P126,000 respectively. Throughout the entire year,
Computer Express sold the wonder calculators for P20 each.
19. The cost of ending inventory using the weighted average cost method would be:
a. P313,720
b. P363,000
c. P404,250
d. P412,500
20. The cost of goods sold using FIFO would be:
a. P331,000
b. P379,000
c. P381,000
d. P429,000
Pas 2 30 and 31 a and b
21. Lift Companys pricing structure has been established to yield a gross profit of 30%. The following data pertain
to the year ended December 31, 2011:
Sales
P2,200,000
Inventory, January 1, 2011
800,000
Purchases
1,200,000
Freight cost on purchases
50,000
Freight cost on merchandise sold
30,000
Inventory inside the company's warehouse,
per actual count on 12/31/2011
160,000
Credit memo issued to customers for goods
returned and received
50,000
Credit memo issued to customer for merchandise
to be returned, 1//2/2012
40,000

Sales discount
100,000
Lift is satisfied that all sales and purchases have been fully and properly recorded. How much should Lift
reasonably estimate as a shortage in inventory at December 31, 2011?
a. P573,000
b. P413,000
c. P385,000
d. P373,000
Pas 2 #37 c
22. On the eve of June 15, 2011, a fire destroyed the entire merchandise inventory of Can Corporation. The
merchandise were not insured. The following data were gathered:
Inventory, January 1
P250,000
Purchases, January 1 to June 15
1,500,000
Sales, January 1 to June 15
2,000,000
Markup percentage on cost
25%
What is the approximate inventory loss as a result of the fire?
a. P150,000
b. P250,000
c. P312,500
d. P1,500,000
Pas2 #35 a
23. Dean Company uses the retail inventory method to estimate its inventory for the interim statement purposes.
Data relating to the computation of the inventory at July 31, 2011 are as follows:
Cost
Retail
Inventory, February 1, 2011
P180,000
P250,000
Purchases
1,020,000
1,575,000
Net markups
175,000
Sales
1,705,000
Net markdowns
125,000
Estimated normal shoplifting losses
20,000
Under the approximate lower of the average cost retail method, Deans estimated inventory at July 31, 2011
is:
a. P102,000
b. P150,000
c. P90,000
d. P96,000
Pas 2 #36 c
24. Great Company provided the following data for the current year:
Inventory-January 1:
Cost
P3,000,000
Net realizable value
2,800,000
Net purchases
8,000,000
Inventory-December 31:
Cost
4,000,000
Net realizable value
3,700,000
What should be the reported costs of goods sold?
a. P7,000,000
b. P7,100,000
c. P7,300,000
d. P7,200,000
Pas 2 #33 b