NAME: Di<!hqv~ I Roch..

u~ Cif)lA"l
Section: (./)K31 ( )K32 ( )K33 ( )K34 ( )K35

MODFIN2 May 31,2012

QUIZ1: Cash SET B

GENERALINSTRUCTIONS:
1. Turn off cellular phones before taking this quiz.
2. Write your name on the questionnaire and all worksheets used.
,3. Read and follow instructions for Tests I and 11. Appropriate deductions will be given to
students not following instructions.
4. You may use any part of the questionnaire for scratch work, however, the questionnaire
should be submitted intact and placed inside the worksheet.
5. Only the proctor is allowed to entertain any clarification on the questionnaire.
6. Avoid erasures. Corrections on items with erasures will not be considered.
7. Any student caught cheating will automatically get a score of Q in this quiz plus an offense.

1 MULTIPLECHOICETHEORY(20 points - 1 point each): On the Date column, rows 1 to 20, of the
left side of your worksheet, write the CAPITALLETTERof the best answer.

1. Cash equivalents DO NOT include

A. Money market accounts with checking privileges /
B. A 30-day commercial paper /
C. A gO-day treasury bill to mature one month from today /
Short-term investments
-. . .-.. --.

2. ~ich of the following is NOTan internal control procedure for cash?

(A)'Payments should be made with cash
B. There should be limited access to cash ,/
C. The amount of cash on hand should be kept to a minimum /
D. Cash receipts should be deposited daily>

3. Which reconciling item would NOT require an adjusting entry in the company's books?
A. Bank service charge /'
B. A dishonored customer check /'
Possession of customer note receivable by the bank in behalf of the company
D. Collection of customer account by the bank in behalf of the company/

4. Cash equivalents are short-term, highly liquid investments which are acceptable for deposit
in checking or savings accounts such as cashier's checks. ....
A. True
False

5. Which of the following DO NOTform part of Cash?

A. Dividend fund
B. Postal money order /
h Postdated checks issued by the company /
\Q)Stale checks received from a company customer- I~\IOt\\o\.

6. The cash in a cash register might not equal the cash receipts entered f'v'A~ ~\d-- Il'\-i\\ ~\~'iI(le..~

A. If the company accepts credit card payments j. l'

B. When there are different persons assigned to handle cash and recording of transactions
In which case a Cash Over and Short account will have to be used
D. Because of the entity principle ""

7. A Proof of Cash
A. Is required to be prepared monthly together with the bank reconciliation statement l7.')
B. Is an expanded version ofthe bank reconciliation statement /
b Is useful to identify the different transactions between the company and the bank /
\(j All of the above are correct.
MODFIN2 Quiz 1 SET B Page 2

8. ~he petty cash fund is not replenished at the end of the accounting reporting period, then
A. The Income Statement and Statement of Financial Position will not be correct
.. Liabilities will be overstated {... /
C. The Cash account will be understated )(
D. It indicates that the petty cash fund should be decreased

9. Which of the following statements is TRUEconcerning the Cash Over and Short account?
a
A. It has a normal debit balance and is Statement of Financial Position account
B. It has a normal credit balance and is an Income Statement account.
C. It has a normal debit balance and is an Income Statement account.
D. None of the above is true.

10. Which of the following is NOTconsidered a highly liquid asset?

A. Cash in the company checking account
B. Cash in the company savings account
C. Customer's check dated today and waiting to be deposited in the company's checking
account
D. None of the above

11. Which of the following DOESNOT involve the Petty Cash account?
A. The initial entry to create the fund
B. A decision after one year of operating the fund to permanently increase the fund balance
C. The entry to eliminate the fund entirely
D. The entry to replenish the fund at the end of the accounting period

12.At the end of the day, the cashier: (1) counts the money in the cash drawer, (2) compares
the cash count with the recorded sales for the day, and (3) makes notations of differences
on a special report that is forwarded, along with the cash, to the Accounting Department.
This procedure is
A. Acceptable practice, adhering to internal control principles
B. Designed to provide adequate internal control over cash I
C. Unacceptable practice, not following internal control principles
D. Follows the broad principle of internal control of insuring assets

13. This is an example of fraud which misappropriates a collection from one customer and
conceals this by applying a subsequent collection made from another customer.
A. Kiting
B. Window dressing
C. Lapping
D. Imprest system

14.At the end of the current accounting period, the petty cash fund has P300 of cash in it and
P700 of Petty Cash Receipts. The grand total of the fund is P1,OOO. The company's
materiality threshold is P250. If the petty cash fund is not replenished at the end of the
accounting period, the accounting principle that has most likely been violated is the
A. Going-concern principle
B. Cost principle
C. Matching principle
D. Monetary unit principle

15. Which of the following items is not considered a timing difference?

A. Deposits-in-transit
B. A bank error in our favor of P200
C. Service charges
D. ATM,fees for using an out-of-networkAllvl machine

16.A bank statement lets a depositor know the financial position of the bank as of a certain
date.
A. True
B. False
 MODFIN2 Quiz 1 SET B Page3

17.A bank reconciliation statement should be prepared when an employee is suspected of

fraud.
A. True
B. False

18. The bookkeeper recorded a bank deposit at P960, but the bank recorded the deposit at its
correct amount of P690. What entry is required to the Cash account to correct this error?
A. A credit to Cash for P270
B. A credit to Cash for P330
C. A debit to Cash for P270
D. No journal entry is required to correct the Cash account.

19. Which of the following statements is TRUE if a company's cash balance does NOTequal the
balance on its bank statement?
A. The company's Cash in Bank ledger usually does not equal the balance on its bank
statement.
B. The bank has made a mistake.
C. The company's accountant has made a mistake.
D. Both the accountant and the bank have made mistakes.

, 20. For which of the following errors should the appropriate amount be added to the balance per
bank on a bank reconciliation statement?
A. Deposit of P5,OOOrecorded by bank as P500
l' B. Company check for P43,000 recorded by company accountant as P34,000
C. A returned P20,000 check recorded by bank as P2,OOO
D. Company check for P35,000 recorded by company accountant as P53,000

11 PROBLEMSOLVING(30 points - 2 points each): Solve for the requirement and show solutions in
good accounting format in your worksheet, starting with row 22 of the left side of your
worksheet. Use the right side of the worksheet and another clean worksheet if space is not
enough. Then, write the final answer on the Particulars/Account Title column, rows 1 to 15, of
the left side of your worksheet. ONLYTHE FINALANSWERSHOULD BE DOUBLE-RULED.

The company started its operations on July 1, 2011 but follows the calendar year. You are given the
following information as of December 31,2011:
Cash balance in Bank A - (P8,165)
Cash balance in Bank-B .. 'P29,150
Cash balance in Bank C (which is under receivership) - P59,120
Cash on hand - P76,640
Petty cash fund initially established amount - P5,OOO
Amount of increase in petty cash fund after establishment - Pl0,000
1. How much is the total Cash in Bank as of December 31, 2011?
2. How much is the total amount of cash to be presented in the Statement of Financial
Position as of December 31, 2011?
----------------------------------------------

You are given the following petty cash transactions for the month of May 2012:
May 01 Wrote a P15,000check, cashed it, and gave the proceeds to Ms. X, the petty cashier
05 Purchased A4 bond paper for P330.00 that was immediately used
14 Paid P96.00 postage to express mail a contract to a customer
19 Reimbursed Mr. Z, the manager, P700 for a business lunch with a customer
25 Paid P165.00 shipping charges on merchandise purchased for resale
31 The fund had a P13,255 remaining balance in the petty cash box
31 The fund was decreased to Pl0,000
3. After recording all the above transactions, how much is the amount of petty cash fund to be
presented in the Notes to the Statement of Financial Position as of May 31, 2012? "floQXI t~)
4. How much is the amount of cash shortage/overage, if any? Indicate whether shortage or
overage.
MODFIN2 Quiz 1 SET B Page 4

The following information is available to reconcile the company's book balance of cash with its
bank statement cash balance as of January 31,2012:
After all posting is complete on January 31, the company's Cash account has a
P267,100 debit balance, but its bank statement shows a different balance.
Checks outstanding total P83,600.
In comparing the canceled checks returned by the bank with the entries in the
accounting records, it is found that Check No. 2222 for July phone bill was correctly A
written and drawn for P7,200 but was erroneously entered in the accounting records as
P2,700.
The bank charged the company P500 for lease of a safe-deposit box. The company does
not have a safe-deposit box.
A debit memorandum for P2,500 lists a P2,OOO NSF check plus a P500 NSF charge. The
check had been received from Bank One. The company has not yet recorded this check A
as NSF.
Enclosed with the statement is a P400 debit memorandum for bank services. It has not A
yet been recorded because no previous notification had been received.
.The January 31 daily cash receipts of P60,000 were placed in the bank's night
depository on that date but do not appear on the January 31 bank statement.
5. How much is the adjusted cash balance as of January 31, 2012?
6. How much is the unadjusted cash balance per bank statement as of January 31, 2012?
--------------------------

You are given the following information on a company with several accounts in one bank:
Cash in Bank (Refer to Note 1) - P575,000
Cash on hand (Refer to Note 2) - P228,300
Money market fund with checking privileges - P60,000
10Us from customers - P25,000
Travel advances - P16,000

NOTE 1: Cash in bank is net of Pll,OOO bank overdraft but includes P20,000 compensating
balance which is legally restricted as to withdrawal.
NOTE 2: Cash on hand includes petty cash fund of P15,OOO, change fund of P4,000, cash advance
received from customer of P3,700, and cash advance to company officers of P12,000.

7. How much is total Cash on Hand?

8. How much is the total amount of cash to be presented in the Statement of Financial
Position?

You are given the following information:

Cash in Bank balance per ledger, May 1,2012 - P32,176 \~- ~~ ~ Oe.,
Total checks cleared by the bank in May - P44,300
Total deposits recorded by the bank in May - P50,015
Total deposits made by the company in May - P35,761
Total checks issued by the company in May - P29,920
Deposit-in-transit, April 30, 2012 - P24,000
Outstanding checks, May 31,2012 - P12,734
Unrecorded bank service charge for May - Pi, 300
Customer check marked NSF which was already recorded in May - P8,000
Overstatement of cash receipts from customers recorded in May - P5,100
The company policy is to deposit all cash receipts and to pay all expenditures through
issuance of checks.
9. How much is deposit-in-transit as of May 31, 2012?
10. How much is outstanding checks as of April 30, 2012?
11. How much is corrected cash balance as of May 31, 2012? ,QUIl(~)
MODFIN2 Quiz i SET B Page 5

You are given the following information regarding the company's petty cash fund of P20,000:
Goinsand currency - P2,041
Check payable to Ms. V, the petty cashier, representing her salary - P15,000
Vouchers for the following:
Postage stamps - P350 (of which P70 worth of postage stamps remain in the
petty cash box)
Transportation expenses - P1,300
Repairs and maintenance expense - P280
Freight-out - P460
12. How much is the amount of the replenishment under the imprest fund system?

An incomplete Proof of Cash is presented below'

March 31 April April April 30
Receipts Disbursements
Balance per bank, unadjusted P254,365 5~lqOO - P601,650 P240,615
Deposit-in-transit - March 31 36,900 \3ft qoO-~
." ...
Deposit-in ..transit - April 30 3S~OO - 35,800
Outstanding check - March 31 (45,300) (ttt;coo-j
Outstanding check - April 30 't'J. ::t 00 - (42,200)
Bank error (the bank incorrectly
credited the company's account UCt I~OO-) l\(q/~CO-)
for P16,800 in April)
ADJUSTED BALANCE PER BANK ~l\-'O q<"D ~l()OG~ -Sq~~so - Q\lctIS
'~~A-

Balance per books, unadjusted P224,465 ~toe- tl1~W ~aQG3$ "

Bank credit memo - March 31 26,000 ( ccooc - ')
Bank credit memo - April 30 QI'+OO 21,400
Bank debit memo - March 31 (4,500) l '\600')
Bank debit memo - April 30 -5l:JO)... (5,720)
Book error (the company issued a
check in April in the correct
amount of P2,500 as payment ...
~/ l~O)
for utilities expense but recorded
the item in the Cash Payments ~
Journal as P250)
ADJUSTED BALANCE PER BOOKS Q~q&b -5l000l> - 'S=\~\9ro - Q\'1LfIC
13. How much is the adjusted balance in the April Receipts column?
14. How much is the adjusted balance in the April Disbursements column?
15. How much is the adjusted balance in the April 30 column?

.- END OF QUIZ.-------------

iQ.-tR:; ~
NAME: \)i~o."~, POcVW,\\(L Cl14e
Section: (J )K31 ( )K32 ( )K33 ( )K34 ( )K35

MODFIN2 June 14, 2012

QUIZ 2: Receivable

GENERALINSTRUCTIONS:
1. Turn off cellular phones before taking this quiz.
2. Write your name on the questionnaire and all worksheets used.
3. Read and follow instructions for Tests I and 11. Appropriate deductions will be given to students
not following instructions.
4. You may use any part of the questionnaire for scratch work, however, the questionnaire should
be submitted intact and placed inside the worksheet.
5. Only the proctor is allowed to entertain any clarification on the questionnaire.
6. Avoid erasures. Corrections on items with erasures will not be considered.
7. Any student caught cheating will automatically get a score of 0 in this quiz plus an offense.

A. IDENTIFICATION (10 points - 1 point each). On Particulars/Account Title column, rows 1 to 10,
of the left side of your worksbeet, write the accounting term(s) best described by the statements
below.

1. Receivables associated with the normal operating activities of a business, e.g., credit sales of
goods or services to customers.
2. A method of establishing an allowance for bad debts accounts which involves analyzing individual
accounts to determine those not yet due and those past due.
3. The borrowing of money with specific receivables pledged as security on the loan.
4. A method of recognizing the actual losses from uncollectible accounts as expense during the
period in which the receivables are determined to be uncollectible.
5. A reduction in the list price of an item to the "net" sales price actually charged the customer.
6. A method of recognizing the estimated losses from uncollectible accounts as expenses during the
period in which the sales occur.
7. A reduction in the selling price allowed if payment is received within the specified period.
8. Any receivable arising from transactions that is not directly associated with the normal operating
activities of a business.
9. The amount of cash expected to be received from the conversion of assets in the normal course
of business.
10. The buyer of accounts receivable.

B. TRUE OR FALSE (12 points - 1 point each). On Particulars/Account Title column, rows 11 to 22, of
the left side of your worksbeet., write True if the statement is correct, otherwise write False.

1. Initially, loans and receivable balances are measured at maturity value plus transaction costs
that are directly attributable to the acquisition.
2. Receivables denominated in foreign currency should be translated to local currency using the
exchange rate when the statement of financial position is issued.
3. In balance sheet presentation of receivable accounts, trade notes receivable may be combined
with trade accounts receivable.
4. Notes or accounts receivable from officers or affiliated companies should be presented on a
balance sheet as offset to capital.
5. The use of the direct write-off method is acceptable under generally accepted accounting
principles.
6. The category "trade receivables" includes claims against insurance companies for casualties
sustained.
7. Assignment continually involves a continuing agreement whereby a financing institution assumes
the credit function as well as the collection function.
S. On the books of the transferor, when accounts receivable are sold, Accounts Receivable Factored

Page1of 4
 should be debited.
9. Equity in the assigned accounts is a predetermined amount withheld by a factor as a protection
against customer returns, allowances and other special adjustments.
10. When notes receivable is dishonored, it is recorded as an increase to Accounts Receivable at face
value plus interest and other charges.
11. An entity factored its accounts receivable without recourse with a bank. The entity received cash
as a result of this transaction which is best described as sale of the entity's accounts receivable
to the bank with the risk of uncollectible accounts retained by the entity.
12. If accounts receivable are pledged against borrowings, the amount of accounts receivable
pledged shall be included in total receivables without disclosure.

C. PROBLEMSOLVING (30 points - 2 points each): Solve for the requirement and show solutions in
good accounting format in your worksheet, starting with row 24 of the left side of your
worksheet. Use the right side of the worksheet and another clean worksheet if space is not
enough. Then, write the final answer on the first money column/ rows 1 to 16, of the left side of
your warksheet. ONLYTHE FINAL ANSWERSHOULD BE DOUBLE-RULED.

The following information from JESSICA Company's first year of operations is to be used in testing
the accuracy of Accounts Receivable. The June 30, 2012, balance is P75,300. Collections from
customers, P162,000. Merchandise purchased, P220,500. Ending merchandise inventory, P52,800.
Goods sell at 60% above cost. All sales are on account.

1. Compute the correct balance of Accounts Receivable as of June 30, 2012.

A review of the accounting records of SANCHEZCorp. indicated that all receivables are recorded in a
single titled "Receivables." An analysis of the account reveals the following:
Accounts receivable from customers P 2,400,000
Notes receivable from customers, including a gO-day
P5,000 note from an officer for goods sold to him 880,000
Travel advances to company president 120,000
Accounts receivable from sale of old equipment 80,000
Accounts receivable factored 750,600
Ordinary share subscription receivable, currently due 390,000
Deposit to PLDT 30,500
Accounts receivable assigned, non-trade 500,000

2. Compute the total amount of non-trade receivables.

The De......
_......._. --, -_ ..........
--J----- ....._.._. -_._.._- _.......... --"or-" _ .. _ .. - _ .. - - ollowing:
Debit Credit
Accounts Receivable P125,000
Allowance for Doubtful Accounts P5,000

Additional information:
Cash sales of the company amount to P50,000 and represent 10% of gross sales.
90% of the credit sales customers do not take advantage of 2/20, n/30 terms. 4-5d)O~.*-=-
Customers who did not take advantage of the discount paid P371,250.
The allowance for bad debts is adjusted so that it represents a certain percentage of the
outstanding accounts receivable at the year-end. The required percentage at December 31,
2012 is 150% of the rate used on December 31, 2011.

3. Compute the net realizable value of accounts receivable on December 31, 2012.

On January 1, 2012 PACQUIAOCompany's Allowance for Bad Debts had a credit balance of P50,000.
During 2012 PACQUIAO,(1) charged P94,000 to bad debts expense, (2) wrote off P36,000 of
uncollectible accounts receivable, and (3) unexpectedly recovered P22,000 of bad debts written off
in the prior year.

Page 2 of 4
 4. How much should be the Allowance for Bad D~bts balance at De~~mb~r 31, 2012?

BRADLEYCorporation sells merchandise at an invoice price of P600,OOOwith accompanying terms of

2/10, n/30 on December 8, 2012. By December 18, 2012 BRADLEYhad collected from customers for
merchandise originally billed at P460,OOO.By December 31, 2012 additional collections had been
received on sales originally billed for P80,OOO,and sales returns and allowances of P5,OOOhad been
granted by BRADLEY.By January 15, 2013 all the remaining balances due had been collected.

S. Calculate the accounts receivable balance that would be reported under the net price method
on BRADLEY'SDecember 31, 2012 statement of financial position.

DANIEL Company finances some of its current operations by assigning account receivable to a bank
in consideration for a loan. On September 10, it assigned accounts of P1,OOO,OOO under the
notification basis. The bank advanced 80% less a S% service charge of the total accounts assigned.
The company signed a promissory note bearing interest of 1% per month on the unpaid loan
balance (ftsh. It;oOOO NR. 60""1
. fC., soooo ~ ~
. ~tz... ~oOO 0 N?-~,~, 6\6"
On October 10, DANIEL received a statement that the bank had collected PS1S,OOOof the assigned
accounts. On November 10, DANIEL received a second statement from the bank, together with a
check for the amount due. The statement indicated that the bank had collected P440,OOOof the
assigned accounts. ~~
N?- Q'\~
6. On November 10, how much was the interest paid on the loan? I.~ '2 ~:3
7. How much cash was remitted by bank to Daniel Company? ~-~s. '\-l\-O

On August 1, EMILY Inc. factored P1,SOO,OOO of accounts receivable with recourse with BPI Family
Bank on notification basis. EMILY maintains an allowance for bad debts of 2% of the receivable
balance. BPIFB charged a factoring fee of 5% of the amount of receivables facto red and withheld
10% of the receivables factored to cover sales return and allowances. On September 15, the
company received notice from BPIFB that factored accounts were fully collected less sales return and
allowances of P40,OOO.On September 30, EMILY received from the factor final settlement of their
obligation co.s~
~b/Jo.. GO
Lo~ScM~
8. Determine the gain or loss on factoring. ~.~~ .. \~O()

TIMOTHY, Inc. assigned accounts receivable in the amount of P800,OOOto the Fast Finance Ll<-
Company, as security for a loan of P600,OOO. The finance company charged a 4% commission on CE..
the face amount of the loan, and the note bears interest at 8% per year. During the first month, l'\\-'
TIMOTHY, Inc collected P380,OOOon assigned accounts. This amount was remitted to the finance
company along with one month's interest on the note.

9. Determine the equity on the assigned accounts after first month's remittance.

On January 1, 2012, MIGUEL Corporation needed cash to meet current operating needs. MIGUEL
decided to factor some of its receivables. MIGUEL factored P490,OOOof receivables to Philippine
National Bank for P416,SOO.MIGUEL maintains an allowance for doubtful accounts of 4 percent of
the receivable balance. The bank withheld 7 percent of the purchase price as protection against sales
returns and allowances. Sales returns and against the factored receivables totaled P1,480.

10. Determine for final cash settlement of Philippine National Bank to MIGUEL Corporation.

()Ish
f>..PA V\.(D
Lo~
Page 3 of 4 R()~ 2'\~
f>..R \O
On May 1, MARGARET, Inc. factored P600,OOO of accounts receivable with Ready Finance on a with
recourse basis. Under the arrangement, MARGARETwas to handle disputes concerning service, and
Ready Finance was to make the collections & handle the sales discounts. Ready Finance assessed a
finance charge of 6% of the total accounts receivable factored and retained an amount equal to 2%
of the total receivables to cover sales discounts.

11. Assume that the recourse provision was PI0,OOO. Determine the gain or loss on sale of
receivables.

------------------------------------------------------------------------------------------------------------

CATHERINECompany accepted a P120,OOO,lS0-day, 12% interest bearing note dated July 15,
2012, from a customer. On November 15, 2012, CATHERINEdiscounted the note at ODD Bank at a
14% discount rate. The customer paid the note at maturity. Co&V\ \21.'1.. ~"

12. How much was the net interest revenue? G 01>.1?\J l\?l.q,. P\\<.

-pV!d ~
On January 1, 2012, NATHAN Corp. sold pressing machine costing P627,OOOwith accumulated yV oS- 'Pt'; "t.
depreciation of P264,OOOon the date of sale. NATHAN received as consideration for the sale, a
Pl,320,OOO 12%-note, due January 1, 2016. There was no established exchange price for the ~'f'I~M,
machine and the note had no ready market. The prevailing rate of interest for a note of this type at
January 1, 2012 was 10%. 0a.!:\V\
'~"1"
13. In NATHAN's January 2012 interim income statement, how much should be included for
interest income?

On December 31, 2011, MARCOInc. sold land to KKK Company and received a non-interest bearing
note requiring annual payment of P300,OOOfor ten years. The first payment is due on December 31,
2011, and the prevailing rate of interest for this type of note at date of issuance is 12%.

14. In its December 31, 2013 statement of financial position, how much should be the carrying
value of the note?

On January 1, 2011, AGNES Company rendered services to MMM Corporation at an agreed price of
P206,650, accepting PS1,000 down and agreeing to accept the balance in four equal installments of
P40,500 receivable each December 31. An assumed interest rate of 11% is imputed.
~ %\CXX>
15. Calculate interest revenue on December 31, 2012? NI"' .~\'2.e;{fro
s....\~1) Q. GCt5(j,O

On December 31, 2011, OLIVER Company finished consultation services and accepted in exchange a
promissory note with a face value of P600,OOO,a due date of December 31, 2015, and a stated rate
of 7%, with interest receivable at the end of each year. The fair value of the services is not readily t.\'
determinable and the note is not readily marketable. Under the circumstances, the note is
considered to have an appropriate imputed rate of interest of 10%.

16. At December 31, 2012, how much should be the balance of Discount on Notes Receivable
account?

End of quiz

Page 4 of 4
.- -,

NAME: Dic..bo.ves I Rochel\Q C})u.q

Section: ( v)K31 ( )K32 ( )K33 ( )K34 ( )K35

MODFIN2 June 27, 2012

QUIZ 3: Property, Plant, and Equipment I SET B

GENERAL INSTRUCTIONS:
1. Turn off cellular phones before taking this quiz.
2. Write your name on the questionnaire and all worksheets used.
3. Read and follow instructions for Tests I and 11. Appropriate deductions will be given to
students not following instructions.
4. For scratch work, you may only use the questionnaire. However, the questionnaire should be
submitted intact and placed inside the worksheet.
5. Only the proctor is allowed to entertain any clarification on the questionnaire.
6. Avoid erasures. Corrections on items with erasures will not be considered.
7. Any student caught cheating will automatically get a score of Q in this quiz plus an offense.

I. TRUE OR FALSE (20 points - 1 point each): On the Particulars/Account Title column, rows 1 to
20, of the left side of your worksheet, write the word TRUE if the statement is correct. Write the
word FALSE if the statement is incorrect.

1. An exchange with commercial substance is an exchange of assets with a difference in future

cash flows.
2. An improvement made to a machine should be capitalized even if it increased the machine's
fair value and its production capacity by 25% without extending its useful life.
3. The initial cost of the land will include property taxes for the current period.
4. The cost of installing temporary electric service on building construction site so construction
crews have access to electricity to operate their tools is part of the cost of the building.
05. The primary purpose of depreciation is to assign a largely arbitrary amount of the asset's
depreciable cost to depreciation expense just so the matching principle may be satisfied.
6. The units-of-production method takes into consideration the asset's salvage value when
computing for annual depreciation of the said asset.
7. When a company purchases a parcel of land and a building located on the land, the
company will depreciate the entire cost over the useful life of the building.
8. The company accountant made an accounting error by recording twice the amount of
depreciation expense for the year. This will understate both net income and total assets.
9. An asset having an estimated useful life of 10 years will have a straight-line rate of
depreciation equal to 20%.
10.An asset's useful life is the same as its physical life.
11.lf a company continues to use equipment past the useful life assumed in determining the
depreciation, there will be no Depreciation Expense in those additional years.
12.0ver the life of a depreciable asset, the accelerated depreciation method will result in more
Depreciation Expense in total than when the straight-line depreciation method is used.
o 13. The residual value cannot increase to an amount equal to or greater than the asset's
carrying amount.
e 14. The composite method is used for grouping as a single unit the assets that have different
physical characteristics and vary widely in useful life.
15.lf a company revises the estimated useful life of one of its depreciable assets, the company
will need to reissue its earlier financial statements as the earlier depreciation was incorrect.
16.Assets classified as property, plant, and equipment can be either acquired for use in
operations, or acquired for resale.
17. Costs incurred subsequent to the acquisition of an asset are capitalized if it is probable that
the company will obtain future economic benefits.
18. Under component depreciation, each component of an item of property, plant and
equipment whose cost is significant relative to the total cost of the asset must be
depreciated separately.
 MODFIN2 Quiz 3 SET B Page 2
19.1nadequacy is the replacement of one asset with another more efficient and economical
asset.
20. Under the straight-line method of depreciation, depreciation is a function of time rather than
a function of usage.

11 PROBLEM SOLVING (30 points - 2 points each): Solve for the requirement and show solutions
in good accounting format in your worksheet, starting with row 22 of the left side of your
worksheet. Use the right side of the worksheet and another clean worksheet if space is not
enough. Then, write the final answer on the first money column, rows 1 to 18, of the left side of
your worksheet. ONLY THE FINAL ANSWER SHOULD BE DOUBLE-RULED.

The following relate to machinery purchased by COMPANY A:

Purchase price - P160,000 on terms 2/10, n/30
Installation costs - P5,OOO
Testing costs - P8,100
Repair of part broken during shipment - P3,000
The company failed to pay the account in full within the discount period and makes use of the gross
method in recording purchases,
1. What is the cost of the machinery?
-------------------------------------------,-------------
The following relate to machinery purchased by COMPANY B:
Purchase price - P160,000 on terms 2/10, n/30
Installation costs - P5,000
Testing costs - P8,100
Returns and allowances granted - P3,OOO
Salvage value - P20,OOO
The company paid the account in full within the discount period and makes use of the net method
in recording purchases.
2. What is the net depreciable cost of the machinery?

On March 1, 2012, COMPANY C exchanged a machine with a carrying value of P400,000,

accumulated depreciation of P75,000 and a fair value of P450,OOO for a similar machine. In
addition to the machine, P70,000 cash was given by the company. ~20
6> 3. Assume the exchange has commercial substance. How much is the gain or loss on ~cl, inS
exchange of machinery? Indicate whether gain or loss. eqsh 10
4. Assume the exchange lacks commercial substance. For calendar year 2012, how much is
the depreciation expense if estimated useful life is 100,000 hours, an average of 1,500
hours are used per month, and the working hours method is used? f\t> ~ ilf-~ +lseoo ;:~~o

This year, the city gave a parcel of land to COMPANY D as part of an agreement requiring the
company to construct its office building on the donated land. The land cost the city P800,000 when
purchased ten years ago and had an appraised value of P2,OOO,OOOon the date it was given to the
company. The office building has an estimated cost of P16,000,000 and useful life of 20 years.
5. How much grant revenue will be recognized next year?

The following is related to COMPANY E's purchased land on which a building has been situated:
Property taxes in arrears that had to be paid to get clear title to the land - P250,000
Real estate commissions paid as part of the purchase transaction - Pl00,000
Cost of erecting a fence on the property's perimeter - P20,000
Purchase price - P9,000,000
Proceeds from sale of scrap materials from old building - P35,OOO
6. How much is the cost of the land?

On January 1, 2012, COMPANY H purchased an equipment for P590,000 cash. The equipment is
expected to be dismantled at a cost of P74,000 at the end of its 8-year useful life. The appropriate
discount rate is 12%. The company uses the straight-line method of depreciation.
~ 7. How much is the accretion expense recognized for the year ended December 31, 2013?
-
 MODFIN2 Quiz 3 SET B Page 3

On April 1, 2012, COMPANY F buys a parcel of land on which two buildings are erected. The first
building is a 100,000-square-foot warehouse with estimated salvage value of P120,000 and 20-
year useful life. The second building is a 25,000-square-foot garage with estimated salvage value of
lI\~ P40,000 and 10-year useful life. The respective fair market values for the land, the warehouse, and
the garage are Pl,500,000, Pl,OOO,OOO, and P500,000. The company paid P2,700,000 for all
three assets. The company uses the sum-of-years' digits method.
8. How much is the cost of the warehouse?
9. How much is accumulated depreciation of the garage as of December 31, 2013?

On January 1, 2012, COMPANY G purchased an equipment (with estimated useful life of six years
and salvage value of P20,000) at an invoice price of P320,000 issuing a four-year non-interest
;]\';i\~ bearing note with equal annual instailments starting December 31, 2012. Prevailing interest rate
for this type of loan is 12%. Three years after, the equipment was sold for P115,000 cash. The
company follows a calendar year and uses the straight-line method of depreciation.
10. How much is the gain or loss on sale? Indicate whether gain or loss.

On January 1, 2012, COMPANY J acquired an equipment for P40,OOO. Its useful life was expected
to be 10 years and the salvage value is expected to be PO. After four years of use, the company
realized the asset would be useful for only three more years. The company uses the straight-line
method of depreciation.
11. How much is the depreciation expense for the year ended 2017?

On June 1, 2012, COMPANY K acquired machinery (with fair value of P500,OOO, estimated useful
life of 10 years and salvage value of P25,000) issuing 3,800 ordinary shares with P120 par value
per share and P165 market value per share at time of purchase. The shares are actively traded.
12. How much is credited to Share Premium-Ordinary?
13. How much is the machinery's accumulated depreciation balance as of December 31, 2013,
assuming double-declining balance method is used?
---------------------------
On January 1, 2012, COMPANY L constructed an administrative building with estimated useful life
of 30 years and no residual value at a total cost of P12,OOO,OOO.On January 1, 2026, the company
replaced the glass windows with an estimated original cost of P480,OOO with bullet-proof windows
costing P600,000. This replacement increased the building's residual value to P50,000.
14. How much is the loss on replacement of glass windows?
15. How much is the depreciation expense on the building for the calendar year ended 2027,
assuming straight-line method is used?

COMPANY M purchased the following assets on January 1,2012:

Second-hand Machinery - Cost: P400,OOO; Salvage value: none; Useful life: 5 years 80
Furniture - Cost: P220,000; Salvage value: P40,000; Useful life: 10 years I~
Delivery Equipment - Cost: P770,000; Salvage value: 10% of cost; Useful life: 12 years -sI.7f;
16. What is the composite rate? /'{} 16G.lb"
17. What is the composite life?
------------------------
On January 1, 2012, COMPANY N acquired six transportation equipment at a total cost of
P2,820,000. The equipment has an average life of four years and has no residual value. Group
depreciation method is used in writing off the cost of the equipment. The retirement was as follows:
December 31,2012: 1 equipment retired 410 ~ At> 'IOS'
December 31,2013: 2 equipment retired ~% ~ 59f.S=-
December 31,2014: 2 equipment retired '140 ~3G:U7
December 31, 2015: 1 equipment retired ttlC> frT~- ,Ill. ~
~ 18. How much is the gain or loss on retirement recognized on December 31, 2015? Indicate
whether gain or loss.
------------------------END OF QUIZ----------------------
 -;

DE lA SAllE UNIVERSITY MODFIN2

Quiz 4 - Revaluation, Impairment & Depletion July 5,2012

NAME Didr\G\\J~s ) RocbQ.\\Q eJAlAq

GENERAL INSTRUCTIONS:
1. Turn off cellular phones before taking this quiz.
2. Write your name on the questionnaire and all worksheets used.
3. Read and follow instructions for Tests I and 11. Appropriate deductions will be given to
students not following instructions.
4. For scratch work, you may only use the questionnaire. However, the questionnaire should be
submitted intact and placed inside the worksheet.
5. Only the proctor is allowed to entertain any clarification on the questionnaire.
6. Avoid erasures. Corrections on items with erasures will not be considered.
7. Any student caught cheating will automatically get a score of Q in this quiz plus an offense.

Part I. THEORY - TRUE or FALSE (22 points - 1 point each): On the Particulars/Account Title
column, rows 1 to 22, of the left side of your worksheet, write the word TRUE if the statement is
correct. Write the word FALSE if the statement is incorrect.

1. Revaluation is normally based on fair value which is usually the market value of an item of property,
plant and equipment or depreciated replacement cost.

2. The fair value of items of property, plant and equipment is usually their market value. When there is
no evidence of market value because of the specialized nature of the plant and equipment and
1.:1
because these items are rarely sold, they are revalued at present value of cash inflows from the use
of the asset

3. The frequency of revaluation depends upon the movements in the fair value of the items of property,
plant and equipment.

4. The accounting treatment of the accumulated depreciation on the date of revaluation could either
be restated proportionately with the change in the gross carrying amount of the asset so that the
carrying amount after revaluation equals the revalued amount or eliminated against the gross
carrying amount of the asset and the net amount restated to the revalued amount of the asset.

5. When the revaluation surplus is realized because of the use of the asset by the entity or disposal of
the asset, it may transferred directly to profit or loss.

6. The items within a class of property, plant and equipment are revalued selectively.

7. Depletion is a fall in the market value of an asset so that its recoverable amount is now less than its
carrying amount in the statement of financial position.

8. Significant decrease or decline in the market value of the asset is an example of internal sources of
information indicating possible impairment.

9. Fair value less cost to sell is the present value of estimated future cash flows expected to arise from
the continuing use of an asset and from its disposal at the end of its useful life.

10. An active market is a market where willing buyers and sellers can normally be found at any time.

11. The estimate of future cash flows in calculating value in use includes projection of cash outflows
that are necessarily incurred to generate the cash inflows from continuing use of the asset
(including cash outflows to prepare the asset for use) and can be directly attributed, or allocated on
a reasonable and consistent basis, to the asset.

12. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of
the asset shall be reduced to its recoverable amount.

13. If the assets are to be disposed of, the recoverable amount is the carrying value.

Page 1 of4
DE LA SALLE UNIVERSITY MODFIN2
Quiz 4 - Revaluation, Impairment & Depletion July 5,2012

14. If an asset's carrying amount is increased as a result of a revaluation, the increase shall be credited
directly to equity under the heading of Recovery of Impairment Loss.

15. The most common method of recording depletion for accounting purposes is the decreasing charge
method.

16. Tangible equipment cost associated with machinery used to extract the natural resource is part of
the development cost of natural resources, thus subject to depletion.

17. The measurement model applies to exploration and evaluation asset subsequent to initial
recognition could either be cost model or revaluation model. ID

18. The term "exploration and evaluation" of mineral resources includes the commercial review of
possible areas for mineral extraction before bidding for legal rights to explore a specific area.

19. Information needed to compute a depletion charge per unit includes the amount of resources sold
during the period.

20. The exploration and evaluation activities that have not led to the discovery of commercially viable
quantity of mineral resource and the entity has decided to discontinue such activities would trigger a
need to test an evaluation and exploration asset for impairment.

21. Under the successful efforts approach, the cost of drilling a dry oil reserve is capitalized.

22. Mineral resources are consumed physically over the period of use.

PART 11.PROBLEM SOLVING: (30 points - 2 points each problem); Solve for the requirement and
show solutions in good accounting format in your worksheet, starting with row 24 of the.left side of
your worksheet. Use the right side of the worksheet and another clean worksheet if space is not
enough. Then, write the final answer on the first money column, rows 1 to 17, of the left side of your
worksheet. ONLY THE FINAL ANSWER SHOULD BE DOUBLE-RULED.

NOTE: Round DEPLETION RATE up to 2 decimal places.

Round FINAL ANSWER to nearest peso.

The following data relates to PINKY Corporation: ~<60 '%go 300

1<0'2 Q~~

Equipment
Cost
P600,OOO
Replacement Cost
P900,OOO Lfl~ ~
--- 19~
Residual value 60,000 20,000 ~
Life in years 10 I(
Ace of the equipment 3 11
1. Determine the asset revaluation surplus
2. Determine the subsequent depreciation after revaluation if the remaining life is 8 years.

In 2012, an entity buys a parcel of land at P1 ,200,000 and adopts the revaluation model for subsequent
measurement. At year-end of 2012,'1Fi'efair value of the land rises to P1 ,800,000. At year-end of 2013,
its fair value falls to P960,OOO. lA.\'\d..
.\lbo<mO -q{po
\<$
3. Determine the revaluation decrease in 2013. R~ Ctoo()
'I\, ~~

A machinery was acquired on January 1,2009 for P250,OOOand is expected to have a 5-year life.
Straight-line depreciation will be used. On January 1, 2010, the asset is appraised as having a sound
value of P225,OOO.On January 1, 2012, the asset is appraised at a sound value of P37,500. 01
RQ..\Iotl. ~C>

i}
~~ to
Page 2 of 4 -
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L3
;

DE LA SALLE UNIVERSITY MODFIN2

Quiz 4 - Revaluation, Impairment & Depletion July 5,2012

The company uses revaluation model in measuring the machinery.

4. How much was the observed depreciation on January 1, 2010?

5. How much was the piecemeal realization of Revaluation Surplus in 2011?

On January 1, 2010, OWEN Company acquired a factory equipment at a cost of P500,000. The

equipment is being depreciated using the straight-line method over its projected useful life of 1 years.
On December 31,2011, a determination was made that the asset's recoverable amount was only
P288,000. Assume that this was properly computed and that recognition of the impairment is
warranted. On December 31, 2012, the asset's recoverable amount was determined to be P333,000
and management believes that the impairment loss previously recognized should be reversed. You
have been asked to assist the company's accountant in the application of PAS 36, the standard on
impairment of assets. ~<Cf.o1. <{oo ?1:;CJ>.cwf~
~ qv; ~\. 1il-- .
6. How much impairment loss should be recognized on December 31, 2011? ~ ~
7. How much impairment recovery should be reported in the 2012 income statement of OWEN
Company?

RICO Co. reported an impairment loss of P3,000,000 in its income statement for the year ended

December 31 , 2010. This loss was related to property assets acquired on January 1, 2009 with cost of
P15,000,000, useful life of 1 years and no residual value. On the December 31, 2010 balance sheet,
RICO reported these property assets at P9,000,000 which was the fair value on that date. On
December 31,2011, RICO determined that the fair value of its impaired property assets had increased
to P11 ,250,000. The straight-line depreciation is recorded for the impaired assets. ~.". l<r(& 1J~'/'I;""

8. Determine recovery of impairment loss. 'Rf.\

11<250
'> '\()C)() 1'6 -;.\
\2-!;
9. Determine depreciation of property asset for 2012

GI Company purchased equipment 8 years ago for P1,000,000. The equipment has been depreciated
using the straight-line method with a 20-year useful life and 10% residual value. Gl's operations have
experienced significant losses for the past 2 years and, as a result, the company has decided that the
equipment should be evaluated for possible impairment. The management of GI Company estimates
that the equipment has a remaining useful life of 7 years. Total net cash flows from the equipment will
be P690,500. The fair value less cost to sell of the equipment iSCij
P, 00. The company's discount
rate is 10%. '- ~l\'O~ 9\<t "34..fL Df'.. '\00 I\P ~
pt ~o
10. What should be the asset's carrying amount at the end of the 9th year?

PNOY Resources Company acquired a tract of land containing an extractable natural resource. PNOY
is required by its purchase contract to restore the land to a condition suitable for recreational use after it
has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be
2,000,000 tons, and that the land will have a value of P600,000 after restoration. Relevant cost
information follows:
Land P9,000,000 '\ <>\ct \ q-zOO ::. ~~
,..-------
Estimated restoration costs 800,000 qf!i}/J'

11. If Bambi maintains no inventories of extracted material, what should be the charge to depletion
expense per ton of extracted material?

In January, 2011, EARL Corporation purchased a mineral mine for P6,000,000 with removable ore
estimated by geological surveys at 2,000,000 tons. The property has an estimated value of P540,000 D-tf \~;I1a...
after the ore has been extracted. The company incurred P1 ,000,000 of development costs preparing
E.y>eVl.9e.
the mine for production. During 2011, 500,000 tons were removed and 400,000 tons were sold.

Page 3 of4
C~~ e
IQ>'\-~\ (P'(vO
DE LA SALLE UNIVERSITY MODFIN2
Quiz 4 - Revaluation, Impairment & Depletion July 5,2012

12. What is the amount of depletion that EARL should expense for 2011?

----------------------------------------------------------------------------------------------------------------------------------------.

In January 2011, KEANU Mining Corporation purchased a mineral mine for P4,500,000 with removable
ore estimated by geological surveys at 2,500,000 tons. The property has an estimated value of
P400,000 after the ore has been extracted. KEANU incurred P1, 150,000 of development costs
preparing the property for the extraction of ore. During 2011, 380,000 tons were removed and 340,000
tons were sold. 6'$ 0 .
-
13. For the year ended December 31, 2011, KEANU should include what amount of depletion in
its cost of goods sold?

On January 2, 2011, ZEKI Resources, Inc. purchased land with valuable natural ore deposits for P10
million. The estimated residual value of the land was P2 million. At the time of purchase, a geological
survey estimated 2 million tons of removable ore were under the ground. Early in 2011, roads were
constructed on the land to aid in the extraction and transportation of the mined ore at a cost of
P500,000. In 2011,50,000 tons were mined. In 2012, ZEKI fired his mining engineer and hired a new
e~p~rt. A new survey made at the end. of 2012 estimated 3 million tones of ore were available for si- .
mining. In 2012,150,000 tons were mined. 'l600 o~ -'2.\'2.5 ~~ cl-l1(\o(.;\\~\I\ (j\ll. \,\.&

14. Assuming that all the ore mined was sold, how much was the depletion expense for 2012?

In 2011, GOLD Spur Mining Inc. purchased land for P9,600,000 that had a natural resource supply
estimated at 4,000,000 tons. When the natural resources are removed, the land will have an estimated
value of P640,000. The present value of the expected cash outflows for the required restoration cost for
the property is estimated to be P800,000.

Development and road construction costs on the land were P560,000, and a building was constructed
at a cost of P88,000 with an estimated P8,000 salvage value when all the natural resources have been
extracted.

During 2012, additional development costs of P272,000 were incurred, but additional resources were
not discovered. Production for 2011 and 2012 was 700,000 tons and 900,000 tons, respectively.
'20\\-= IOWO
(Include depreciation on the building as a depletion charge.) ~
15. Compute the depletion charge for 2011. '26,'-- ~~G'L /~&- -700 )
16. Compute the depletion charge for 2012.

On July 4,2012, MONTANA Mining purchased the mineral rights to a granite deposit for P8,000,000. It
is estimated that the recoverable granite will be 4,000,000 tons. It is estimated that the value of the land
after the removal of granite deposits was P500,000. During 2012, 1,000,000 tons of granite were
extracted and 600,000 tons were sold. The company incurred mining cost of P120,000; distribution cost
of P82,000; and administrative expenses of P88,500. If;~
17. On December 31,2012 financial statements, what amount should MONTANA recognize as
granite inventory?

END OF QUIZ

"For the Lord gives wisdom; from His mouth come know/edge and
understanding;"
Proverbs 2:6

Page 4 of4