SAN BEDA COLLEGE-ALABANG

PROBLEMS-FINANCIAL ACCOUNTING Prof. Enrique L. Moreno

1. Alaska Company is making a four column bank reconciliation at June 30 from the following data. The amounts per
bank statements were: Balance, May 31-P650,000; June receipts-P1,300,000; June Disbursement-P1,100,000. The
amounts per books were: Balance, May 31-P763,500; June Receipts-P1,154,800; June Disbursements-P1,123,500;
Balance June 30-P794,800.

May 31 June 30
Deposit in transit `120,000 150,000
Outstanding checks 67,000 84,000
The bank overlooked a check for P7,500 when
recording a deposit on June 10
Note collected by bank, recorded after receiving
the bank statement 180,000
Service charge, recorded after receiving the
Bank statement 4,500 6,000
NSF checks, recorded after receiving the bank
Statement 56,000 48,000
Alaska recorded a check of P37,400 received from
From a customer in June as P34,700

1. The corrected cash balance on June 30 would be

2. The corrected June receipts would be
3. The corrected amount of June disbursement would be

2. On Dec. 31, 2013, the Reliable Finance Company had a P5,000,000 note receivable from Burgundy Company. The note
bears 10% interest. The books reported accrued interest of P500,000 on this date. Because of financial distress being
suffered by Burgundy Company, Reliable Finance agreed to the restructuring & modification of the terms of its loan to
Burgundy as follows:

Reduction of principal to P4,000,000

Reduction of interest to 8% payable annually beginning Dec. 31, 2014
Accrued interest on Dec. 31, 2013 is condoned
Principal payment was reset to Dec. 31, 2015
The prevailing market rate of interest for similar obligations on the date of restructuring decreased to 9%. How much
impairment loss should Reliable Finance Company record on Dec. 31, 2013 as a result of the restructuring?

3. Carnival Company found itself in financial difficulties & decided to use its accounts receivable as a means of obtaining
cash to continue operations. On July 1, 2013, Carnival factored P750,000 of accounts receivable for cash proceeds of
P695,000. No allowance for doubtful accounts was associated with these accounts. On Dec. 31, 2013, Carnival assigned
the remainder of its accounts receivable, P2,500,000 as of that date as collateral on a P1,250,000, 12% annual interest
rate loan from Westmont Company. Carnival received P1,250,000 less 2% finance charge.

Additional information is as follows:

Allowance for doubtful accounts, 12.31.13 before adjustments P 32,000
Estimated uncollectible accounts, 12.31.133% of accounts receivable
Accounts receivable (not including factored & assigned accounts) 12.31.13 P500,000

Of the assigned accounts, P300,000 had been collected by the end of the year.
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 SAN BEDA COLLEGE-ALABANG
PROBLEMS-FINANCIAL ACCOUNTING Prof. Enrique L. Moreno

1. How much were the proceeds from factoring & general assignment of the accounts receivable?
2. Assuming that these are the only transactions affecting receivables, how much is the doubtful account expense for the
year ended Dec. 31 2013?

4. Nike is a retail store specializing in sportwear, including team jerseys & caps for amateur sports teams. On March 1,
2014, Nike had inventory on hand with a cost of P40,000. During March 2014, it acquired P180,000 of additional
inventory at cost & sold P200,000 of goods (at selling price that included gross profit of 25%). On March 31 the store
burned down & all accounting records were destroyed. If only P12,000 of goods (at selling price) remained undamaged,
what is the cost of inventory destroyed that Nike should claim from its insurance company?

5. Balungao Company changed its accounting policy with respect to the inventories valuation. Up to 2013, inventories
were valued using weighted average cost method (WAC). In 2014, the method was changed to FIFO, as it was considered
to more accurately reflect the usage & flow of inventories in the economic cycle. The impact of inventory valuation was
determined to be

At December 31, 2012an increase of P100,000

At December 31, 2013an increase of P150,000
At December 31, 2014---an increase of P200,000
What is the increased in net profit for 2014 due to change in accounting policy?

6. A retailer imported goods at a cost of P260,000, including P40,000non-refundable import duties and P20,000 non-
refundable purchase taxes. The risks & rewards of ownership of the imported goods were transferred to the retailer
upon collection of the goods from the harbour warehouse. The retailer was required to pay for the goods upon
collection. The retailer incurred P10,000 to transport the goods to its retail outlets & a further P4,000 in delivering the
goods to its customer. Further selling cost of P6,000 were incurred in selling the goods. What amount should the
inventory be valued?

7. As a result of taking a physical inventory count on Dec. 31, 2014, the Samantha Company inventory was determined to
be P50,000. The auditors suspected an inventory shortage & used the gross profit method to estimate the ending
inventory. The accounting records for the company contained the following transaction:

Inventory-01.01.14 130,000
Purchases -2014 770,000
Sales-2014 1,100,000
Sales return-2014 100,000
Gross profit ratio 25% of sales
Using the gross profit method, what did the auditors estimate as the amount of the inventory shortage at Dec. 31, 2014?

8. On Dec. 1, 2016, Joy 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 Dec. 31, 2016, 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 & the balance to the principal. The agreed interest is 1% per month on the loan balance. The entity accepted
sale returns of P100,000 on the assigned accounts & wrote-off assigned accounts totalling P300,000.

1. What is the balance of accounts receivable assigned on Dec. 31, 2016?

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 SAN BEDA COLLEGE-ALABANG
PROBLEMS-FINANCIAL ACCOUNTING Prof. Enrique L. Moreno
2. What is the carrying amount of the note payable on Dec. 31, 2016?
3. What is the equity of the assignor in assigned accounts on Dec. 31, 2016?

9. Kaiser Company provided the following information for 2016:

Accounts receivable, Jan. 1 2,000,000
Credit sales 10,000,000
Collection from customers, excluding the recovery of accounts
Written off 8,000,000
Accounts written off as worthless 100,000
Sales returns 500,000
Recovery of accounts written off 50,000
Estimated future sales returns on Dec. 31 150,000
Estimated uncollectible accounts on Dec. 31 per aging 300,000
What is the amortized cost of accounts receivable on Dec. 31, 2016?

10. Ashley Company factored P5,000,000 of accounts receivable. Control was surrendered by the entity. The finance
company assessed a fee of 5% & retained holdback equal to 10% of the accounts receivable. In addition, the finance
company charged 12% interest computed on a weighted average time to maturity of the accounts receivable for 30 days.

1. What is the amount initially received from the factoring of accounts receivable?
2. What total amount should be recognized as loss on factoring?