ACC3 INTERMEDIATE ACCOUNTING 1A

1. Which of the following is considered as cash?

a. 30-day certificate of deposit
b. Customer’s postdated check
c. Money Market account
d. 6 months market savings certificates

2. Which of the following may qualify to be reported as cash equivalents at December 31,
2020?
i. Redeemable preference shares, purchased 3 months before the redemption date
ii. 6 months treasury note, purchased on November 2, 2020 and maturing January 31, 2021
iii. 3-months certificate of deposit maturing on February 14, 2021
iv. Ordinary shares of other entities held for trading purposes and expected to be sold three
months from the date of acquisition
v. Check of a customer received in December and dated January 10, 2021. The check cleared
by the bank in January

a. I, II, III, IV and V

b. I, II, III and IV
c. I, II, III and V
d. I, II and III

3. The following items are included in an entity’s account “cash and cash equivalents” in the
statement of financial position. Which of the following items will require an adjusting entry to
state cash and cash equivalents at its correct balance?
a. Checks drawn before the reporting date but held for later delivery to creditors
b. 60-day time deposits
c. US dollars deposited in a foreign currency depositary account
d. Cash reserved for the acquisition of fixed assets

4. In a bank reconciliation that attempts to reconcile the bank balance to the correct cash
balance, the following items would affect reconciliation in what way?

OUTSTANDING CHECKS DEPOSIT IN TRANSIT

a. ADDED ADDED
b. DEDUCTED ADDED
c. ADDED DEDUCTED
d. DEDUCTED DEDUCTED

5. A proof of cash is a

a. Proof of company’s liquid position

b. Reconciliation of the cash receipts and payments during the previous period, together with
the beginning and ending balances of cash
c. Proof of the existence of a cash deposit in a bank
d. Reconciliation of the cash receipts and payments during the current period, together
with the beginning and ending balances of cash

6. Trade receivables are classified as current assets if these are reasonably expected to be
collected
a. Within one year
b. Within one year or within the operating cycle whichever is shorter
c. Within one year or within the operating cycle whichever is longer
d. It should always be current assets

7. Non trade receivables are classified as current assets only if these are reasonably expected
to be realized in cash

a. Within one year or within the operating cycle whichever is shorter

b. Within one year or within the operating cycle whichever is longer
c. Within the normal operating cycle
d. Within one year, notwithstanding the length of the operating cycle

8. Credit balance in accounts receivable is classified as

a. Current liabilities
b. Part of accounts payable
c. Long term liabilities
d. Deduction from account receivable

9. Receivable from subsidiaries is classified as

a. Current assets
b. Noncurrent assets
c. Either as current or noncurrent depending on the expectation of realizing them within
one year or over one year
d. Partly current and partly noncurrent

10. Which method of recording bad debts is consistent with accrual accounting?
a. Allowance method
b. Direct write-off method
c. Percent of sales method
d. Percent of accounts receivable method

11. For banks and financial institutions, receivables arise primarily from
a. Loans
b. Deposits
c. Withdrawals
d. Credit sales

12. STATEMENT 1: Trade receivables are classified as current assets if they are to be collected
within one year or within the normal operating cycle, whichever is shorter
STATEMENT 2: Non-trade receivables are classified as current assets if they are to be
collected within one year or within the normal operating cycle, whichever is longer.

a. Both statements are true

b. Both statements are false
c. Only statement 1 is true
d. Only statement 1 is false

13. An entity uses the allowance method for recognizing uncollectible accounts, the entry to
record the write-off of a specific uncollectible account
a. Affects neither net income nor working capital
b. Affects neither net income now accounts receivable
c. Decrease both net income and accounts receivable
d. Decrease both net income and working capital

14. Which method of recording bad debt loss is consistent with accrual accounting?
a. Allowance method
b. Direct write off method
c. Percent of sales method
d. Percent of accounts receivable method

15. Which of the following would be added to the balance per bank statement to arrive at the
correct cash balance?
a. Outstanding checks
b. Bank Service charge
c. Deposit in transit
d. A customer’s note collected by the bank on behalf of the depositor

16. If the balance shown in the bank statement is less than the correct cash balance and neither
the entity nor the bank made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity
b. Outstanding checks
c. Deposits in transit
d. Bank charges not yet recorded by the entity

17. Which of the following should not be considered “cash”

a. Change fund
b. Certified check
c. Personal check
d. Postdated check

18. What is the major purpose of an imprest petty cash fund?

a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors
c. To determine the honesty of the petty cashier
d. To effectively control cash disbursement

19. When allocating costs to inventory produced for the period, fixed overhead should be based
upon
a. The actual amounts of goods produced during the period
b. The normal capacity of production facilities
c. The highest production levels in the last three periods
d. The lowest production level in the last three periods

20. Reporting inventory at the lower of cost or net realizable value is a departure from the
accounting principle of
a. Historical cost
b. Consistency
c. Conservatism
d. Full disclosure

21. The original cost of an inventory item is below both replacement cost and net realizable
value. The net realizable value less normal profit margin is below the original cost. Under
the lower of cost or market method, the inventory item should be value at
a. Replacement cost
b. Net realizable value
c. Net realizable value less normal profit margin
d. Original cost

22. What is the presentation of accounts receivable from officers, employees or affiliated
entities?
a. As offset to equity
b. By means of footnote only
c. As trade notes and accounts receivable
d. As assets but separately from other receivables

23. When the allowance method is used, the entry which is appropriate when a particular
account is written off as uncollectible should include a
a. Credit to sales revenue
b. Credit to bad debt expense
c. Debit to accounts receivable
d. Debit to allowance for doubtful accounts

24. FAITH company uses the allowance method in recognizing uncollectible accounts. Ignoring
deferred taxes, the entry to record the write-off of a specific uncollectible account.
a. Affects neither net income nor working capital
b. Decreases both net income and working capital
c. Affects neither net income nor accounts receivable
d. Decreases both net income and accounts receivable

25. When accounts receivable is factored without recourse, what amount does the transferor
credit?
a. Accounts receivable
b. Accounts receivable assigned
c. Liability
d. Sales

26. When accounts receivable is pledge, in addition to the disclosures required, total receivable
will
a. Increase
b. Decrease
c. Remain the same
d. Increase or decrease depending on the circumstances
27. A company decided to change its inventory valuation method from FIFO to LIFO in a period
of rising prices. What was the result of the change on ending inventory and net income in
the year of the change?

Ending inventory Net income

a. Increase Increase
b. Increase Decrease
c. Decrease Decrease
d. Decrease Increase

28. Generally, which inventory costing method approximates most closely the current cost for
each of the following?

Cost of goods sold Ending inventory

a. LIFO FIFO
b. LIFO LIFO
c. FIFO FIFO
d. FIFO LIFO

29. All of the following are characteristics of financial assets classified as loan and receivables,
except
a. They are not quoted in an active market
b. They have fixed or determinable payments
c. The holder has demonstrated positive intention and ability to hold them to maturity
d. The holder can recover substantially all of its investment

30. Short-term non-interest-bearing notes receivable are usually recorded at their

a. Discounted value
b. Maturity value
c. Net realizable value
d. Present value

31. A non-interest-bearing note receivable

a. Causes no interest revenue to be recorded
b. Includes a specified principal amount plus specified interest
c. Includes a specified principal amount but an unspecified interest amount
d. Includes an unspecified principal amount and an unspecified interest amount.

32. An entity that purchases inventory from suppliers for resale to customers should record
which inventory?
a. Finished goods inventory
b. Merchandise inventory
c. Work in process inventory
d. All of the choices are correct

33. When inventory is misstated, its presentation lacks

a. Comparability
b. Faithful representation
c. Relevance
d. All of the choices are correct

34. The failure to record a purchase of merchandise on account even though the goods are
properly included in the physical inventory results in
a. An overstatement of asset and net income
b. An understatement of asset and net income
c. An understatement of liability and an overstatement of equity
d. An understatement of cost of goods sold and liability and an overstatement of assets

35. Which is not common disclosure for inventories?

a. Inventory composition
b. Inventory cost method
c. Inventory financing arrangement
d. Inventory location

36. Which item should be included in accounts receivable?

a. Note receivable
b. Interest receivable
c. Allowance for doubtful accounts advances to related parties
d. Advances to related parties
37 – 38. Mill company’s allowance for doubtful accounts was P1,000,000 at the end of
2018 and P900,000 at the end of 2017.

For the year ended December 31, 2018, the entity reported doubtful accounts expense of
P160,000 in the income statement.

What amount was debited to the appropriate account to write off uncollectible accounts in
2018?
a. 60,000
b. 100,000
c. 160,000
d. 260,000

39 – 40. Delta company sold goods to wholesalers on terms 2/15, net 30. The entity had no
cash sales but 50% of the customers took advantage of the discount.

The entity used the gross method of recording sales and accounts receivable

An analysis of the trade accounts receivable at year-end revealed the following:

Age Amount Collectible

0-15 days 2,000,000 100%
16-30 days 1,400,000 95%
31-60 days 400,000 90%
Over 60 days 200,000 50%

What is the net realizable value of accounts receivable at year end?

a. 4,000,000
b. 3,750,000
c. 3,770,000
d. 3,790,000

41 – 42. Opal company reported the following items that were included in inventory at year-end:
Merchandise out on consignment, at sales price,
including 40% markup on selling price 40,000

Goods purchased in transit shipped FOB buyer 36,000

Goods held on consignment by OPAL company 27,000

By what amount should the inventory be reduced?

a. 76,000
b. 40,000
c. 43,000
d. 103,000

43 – 44. Boyet company factored P3,000,000 of accounts receivable without recourse. The
factor required an assessment fee of 10% of the accounts factored and a holdback of 15%
of the accounts factored for possible sales return and allowances. The accounts factored
had related allowance for doubtful accounts of 200,000. What amount of loss on factoring
should be recognized?
a. 100,000
b. 250,000
c. 400,000
d. 600,000

45 – 46. On December 1, 2019, Kyle Corporation established a petty cash fund of P4,000. On
December 31, 2019, the petty cash fund was examined and found to have receipts and
documents for miscellaneous expenses amounting to P3,640. In addition, there was cash
amounting to P440. What entry would be required to record replenishment of the petty cash
fund on 12/31/2019?

a. Petty cash 3640

 Cash short or over 80
Cash in bank 3560

b. Miscellaneous expense 3640

Cash short or over 80
Petty cash 3560

c. Miscellaneous expense 3640

Cash short or over 80
Cash in bank 3560

d. Miscellaneous expense 3560

Cash short or over 80
Cash in bank 3640

Use the following information for numbers 47 to 52

KAYA Company is making a four-column bank reconciliation at June 30 from the following
data.
Balance per bank statement, 11/30/19 P 180,400
Add: Deposit in transit 41,500
Erroneous bank charge 15,000 56,500
Subtotal P 236,900
Less: Outstanding checks 78,200_
Balance per books, 11/30/19 P 158,700

Data for the month of December 2019 follows:

Per bank: December deposits/credits 261,000
December charges/ debits 224,200
Balance, December 31, 2019 217,200
All items that were outstanding as of November 30 cleared through the bank in December,
including the bank charge. In addition, P25,000 checks were outstanding as of December
31, 2019

47 – 48. What is the amount of cash disbursements per books in December 2019?
a. 146,000
b. 171,000
c. 249,200
d. 249,400

49 - 50. What is the amount of cash receipts per books in December 2019?
a. 204,500
b. 219,500
c. 246,000
d. 317,500

51 – 52. What is the cash balance per books at December 31, 2019?
a. 257,200
b. 242,200
c. 207,200
d. 192,200

53 – 54. On December 31, 2017, CORONA Company reported cash of P3,350,000 with the
following details:
Undeposited collections - 60,000
Cash in Bank- BDO checking account - 500,000
Cash in Bank-PNB (overdraft) - (50,000)
Undeposited NSF check received from customer, dated December 1, 2017 - 15,000
 Undeposited check from a customer, dated 1/15/2018 - 25,000
Cash in Bank-BDO fund for payroll - 150,000
Cash in Bank- BDO savings deposit - 100,000
Cash in bank- BDO money market instrument, 90 days - 2,000,000
Cash in foreign bank restricted - 100,000
Cash in bank- BDO VAT account - 450,000
TOTAL 3,350,00

On 12/31/2017, what total amount should be reported as cash and cash equivalents?

a. 2,910,000
b. 2,810,000
c. 2,760,000
d. 3,260,000

Use the following information for number 55 to 47.

Germany company started business at the beginning of current year. The entity established
an allowance for doubtful accounts estimated at 5% of credit sales. During the year, the
entity wrote off P50,000 of uncollectible accounts.
Further analysis showed that merchandise purchased amounted to P9,000,000 and ending
merchandise inventory was P1,500,000. Goods were sold at 40% above cost.
The total sales comprised 80% sales on account and 20% cash sales. Total collections from
customers, excluding cash sales, amounted to P6,000,000
55 – 56. What is the cost of goods sold?
a. 7,500,000
b. 5,400,000
c. 3,600,000
d. 6,900,000

57 – 58. What is the amount of sales on account?

a. 10,500,000
b. 18,750,000
c. 3,600,000
d. 6,900,000

59 – 60. What is the net realizable value of accounts receivable at year-end?

a. 1,980,000
b. 2,350,000
c. 1,930,000
d. 2,400,000

61.62. ABC Company provided the following information with respect to the cash and cash
equivalents on December 31, 2020
Checking account at UP Bank (200,000)
Checking account at UB Bank 3.500.000
Treasury bonds 1,000,000
Payroll account 500,000
VAT account 400,000
Foreign bank account- unrestricted (in Pesos) 2,000,000
Postage stamps 50,000

Employee’s postdated check 300,000

IOU from president 750,000
Credit memo from a vendor for a purchase return 80,000
Travelers check 300,000
NSF check 150,000
Petty cash fund (30,000 represents expense voucher) 50,000
Money order 180,000

What amount should be reported as unrestricted cash on December 31, 2020?

a. 5,900,000
 b. 4,600,000
c. 4,900,000
d. 6,900,000

63 - 64. HOPE company reported that the cash account per ledger had a balance on December
31, 2020 of P4,415,000 which consisted of the following:

Petty cash fund 24,000

Undeposited receipts, including a postdated
customer check for P70,000 1,220,000
Cash in BDO, per bank statement, with a check
for P40,000 still outstanding 2,245,000
Bond sinking fund 850,000
Vouchers paid out of collections not yet recorded 43,000
IOUs signed by employees, taken from collections 33,000

What amount should be reported as cash on December 31, 2020?

a. 3.379,000
b. 3,419,000
c. 3,489,000
d. 3,449,000

65.66. Faith company provided the following information relating to current operations:

Accounts receivable, January 1 4,000,000

Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, January 1 4,800,000
Inventory, December 31 4,000,000
Purchases 8,000,000
Gross margin on sales 4,200,000

What is the balance of accounts receivable on December 31?

a. 8,200,000
b. 6,200,000
c. 2,000,000
d. 4,200,000

67.68. The cash account shows a balance of P450,000 before reconciliation. The bank statement
does not include a deposit of P23,000 made on the last day of the month. The bank
statement shows a collection by the bank of P9,400 and a customer’s check for P3,200 was
returned because it was NSF. A customer’s check for P4,500 was recorded on the books at
P5,400 and a check written for P790 was recorded as P970.

The correct balance in the cash account was

a. 455,120
b. 455,480
c. 457,280
d. 478,480

CPA Company kept all cash in a checking account. An examination of the accounting
records and bank statement for the month of June revealed the following information
a. The cash balance per book on June 30 was P8,500,000
b. A deposit of P1,000,000 that was placed in the bank’s night depository on June 30 did not
appear on the bank statement
c. The bank statement showed that on June 30 the bank collected note for the entity and
credited the proceeds of P950,000 to the entity’s account, net of collection charge P50,000
d. Checks outstanding on June 30 amounted to P300,000 including certified check of
P100,000
e. The entity discovered that a check written in June for P200,000 in payment of an account
payable had been recorded in the entity’s records as P20,000
f. Included with the June Bank statement was NSF check for P250,000 received from a
customer on June 26
g. The bank statement showed a P20,000 service charge for June
69 -70. What amount should be reported as cash in bank on June 30?

e. 8,300,000
f. 9,360,000
g. 9,180,000
h. 9,000,000