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AP Second Monthly Assessment

PROBLEM NO. 1

In connection with your examination, the Mist Company presented to you the following information
regarding its Cash in Bank account for the month of December, 2023:
a. Balances per bank statements: November 30, ₱107,800, and December 31, ₱115,200.
b. Balances of cash in bank account in company’s books: November 30, ₱82,725, and
December 31, ₱113,400.
c. Total receipts per books were ₱1,110,950 of which ₱6,050 was paid in cash to a creditor
on December 24.
d. Total charges in the bank statement during December were ₱1,094,850.
e. Undeposited receipts were: November 30, ₱45,300 and December 31, ₱50,600.
f. Outstanding checks were: November 30, ₱13,375, and December 31, ₱9,650, of which a
check for ₱2,500 was certified by the bank on December 26.
g. NSF checks returned, recorded as reduction of cash receipts, were:
• Returned by bank on December, recorded also in December, ₱5,200.
• Returned by bank on December but recorded in January, ₱4,300.

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h. Collections by bank not recorded by Company were ₱60,750 in November and ₱58,200
in December.
i. Bank service charges not entered in company’s books were: November 30, ₱3,750 and

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December 31, ₱2,100.
j. A check for ₱4,750 of Best Company was charged to Mist Company in error.
k. A check drawn for ₱4,200 was erroneously entered in the books as ₱2,400.

QUESTIONS: ev
Based on the above and the result of the audit, answer the following:
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1. How much is the adjusted cash balance as of November 30, 2023?
a. ₱107,800 b. ₱139,725 c. ₱75,875 d. ₱137,225
2. How much is the adjusted book receipts for December, 2023?
a. ₱1,102,350 b. ₱1,113,600 c. ₱1,056,950 d. ₱1,108,400
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3. How much is the adjusted book disbursements for December, 2023?

a. ₱1,084,725 b. ₱1,078,675 c. ₱1,089,925 d. ₱1,084,725
4. How much is the adjusted cash balance as of December 31, 2023?
a. ₱158,650 b. ₱153,900 c. ₱165,200 d. ₱163,400
5. How much is the cash shortage of December 31, 2023?
a. ₱1,800 b. ₱9,500 c. ₱4,750 d. P0
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PROBLEM NO. 2
In reconciling the cash in bank account of INSIGHT CO with the bank statement balance for the
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month of July 2023, the following data are summarized:

Cash in bank:
Balance June 30 1,000,000
Book debits for July including June CM for note
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Collected, ₱300,000 4,000,000

Book credits for July including June NSF
of ₱100,000, and service charge of ₱4,000 3,600,000

Bank statement for July:

Balance June 30 1,650,000
Bank debits for July including service charge of ₱1,000
and June outstanding checks of ₱854,000 2,500,000
Bank credits for July including CM for bank loan
Of ₱500,000 and June deposit in transit
Of ₱400,000 3,500,000

Required:
6. Compute for the adjusted cash in bank balance June 30, 2023
a. 1,196,000 c. 2,050,000
b. 1,899,000 d. 2,504,000
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7. The adjusted book receipts on July 31, 2023

a. 4,200,000 c. 3,700,000
b. 3,500,000 d. 3,000,000
8. Compute for the adjusted cash in bank balance on July 31, 2023
a. 1,196,000 c. 2,050,000
b. 1,899,000 d. 2,504,000
9. Compute for the DIT as of July 31, 2023
a. 600,000 c. 1,400,000
b. 900,000 d. 1,100,000
10. Compute for the OC as of July 31, 2023
a. 1,855,000 c. 1,851,000
b. 1,955,000 d. 1,951,000

PROBLEM NO. 3
The financial statements submitted for your examination by Garth Company included
the following:

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December 31, 2022 December 31, 2023
Accounts Receivable P 800,000

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Allowance for doubtful accounts 16,000
Sales on account P 5,000,000
Cash collected from customers 4,500,000

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Among the cash collections was the full recovery of a ₱20,000 receivable from Charlie
Company, a customer whose account had been written off as worthless late in 2022.
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During 2023, it was necessary to write off uncollectible customers’ accounts totaling ₱35,000.

On December 1, 2023, a customer settled his account by issuing to Garth Company a 10%, six
month note for ₱250,000.
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At December 31, 2023, the accounts receivable included ₱150,000 past due accounts. After
careful study of all past due accounts, the management estimated that the probable loss
contained therein was 10%. In addition, 5% of current accounts receivable might prove
uncollectible.
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1. What should be the balance of Accounts Receivable as of December 31, 2023?

a. ₱1,015,000b. ₱1,035,000c. ₱1,265,000 d. ₱1,515,000

2. What is the amount of the current accounts receivable that might prove to be uncollectible?
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a. ₱43,000 b. ₱44,250 c. ₱55,750 d. ₱59,250

3. What is the balance of Allowance for Doubtful Accounts on December 31, 2023 before taking
up the doubtful accounts expense?
a. ₱1,000 credit b. ₱15,000 debit c. ₱1,000 debit d. ₱15,000 credit
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4. How much doubtful accounts expense should be presented on the income statement for the
year ended December 31, 2023?
a. ₱43,250 b. ₱44,250 c. ₱58,250 d. ₱68,250

5. What is the net realizable value of accounts receivable on December 31, 2023?
a. ₱1,431,750 b. ₱1,194,250 c. ₱975,750 d. ₱956,750

PROBLEM NO. 4
6. Frame Company has an 8% note receivable dated June 30, 2011, the original amount of
₱1,500,000. Payments of ₱500,000 in principal plus accrued interest are due annually on July
1, 2012, 2013 and 2014. In its June 30, 2013 statement of financial position, what amount
should Frame report as current asset for interest on the note receivable?

a. 120,000 b. 40,000 c. 80,000 d. 0

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PROBLEM NO. 5

7. Pangasinan Company is a dealer in equipment. On December 31, 2011, Pangasinan

Company sold equipment in exchange for a noninterest bearing note requiring five annual
payments of ₱500,000. The first payment was made on December 31, 2012. The market
interest for similar notes was 8%. The relevant present value factors are:

PV of 1 at 8% for 5 periods 0.68

PV of an ordinary annuity of 1 at 8% for 5 periods 3.99

1. In its December 31, 2011 statement of financial position, what should Pangasinan report as
note receivable?

a. 2,500,000 b. 1,995,000 c. 1,700,000 d. 1,495,000

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2. What is the interest income should be reported for 2012?

a. 505,000 b. 101,000 c. 159,600 d. 119,600

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PROBLEM NO. 6

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8. On January 1, 2011, Shackile Company sold equipment with a carrying amount of ₱4,800,000
in exchange for a ₱6,000,000 noninterest bearing note due January 1, 2014. There was no
established exchange price for the equipment. The prevailing rate of interest for a note of this
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type on January 1, 2011 was 10%. The present value of 1 at 10% for three periods is 0.75.

1. In Shackile’s 2011 income statement, what amount should be reported as interest income?
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a. 90,000 b. 450,000 c. 500,000 d. 600,000

2. In Shackile’s 2011 income statement, what amount should be reported as gain or loss on sale
of equipment?

a. 300,000 loss b. 300,000 gain c. 1,200,000 gain d. 2,700,000 gain

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PROBLEM NO. 7
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BIRD COMPANY is a manufacturer of small tools. The following information was obtained from
the company’s accounting records for the year ended December 31, 2023:
Inventory at December 31, 2023 (based on
Physical count in Bird’s warehouse at cost on 12/31/2023) ₱1,870,000
Accounts payable at Dec. 31, 2023 1,415,000
Net sales (sales less sales returns) 9,693,400
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Your audit reveals the following information:

1. The physical count included tools billed to a customer FOB shipping point on December 31,
2023. These tools cost ₱64,000 and were billed at ₱78,500. They were in the shipping area
waiting to be picked up by the customer.

2. Goods shipped FOB shipping point by a vendor was in transit on December 31, 2023. These
goods with invoice cost of ₱93,000 were shipped on December 29, 2023.

3. Work in process inventory costing ₱27,000 was sent to a job contractor for further
processing.
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4. Not included in the physical count were goods returned by customers on December 31, 2023.
These goods costing ₱49,000 were inspected and returned to inventory on January 7, 2024.
Credit memos for ₱67,800 were issued to the customers at that date.

5. In transit to a customer on December 31, 2023, were tools costing ₱17,000 shipped FOB
shipping point on December 26, 2023. A sales invoice for ₱29,400 was issued on January 3,
2024, when Bird Company was notified by the customer that the tools had been received.

6. At exactly 5:00 pm on December 31, 2023, goods costing ₱31,200 were received from a
vendor. These were recorded on a receiving report dated January 2, 2024. The related invoice
was recorded on December 31, 2023, but the good were not included in the physical count.

7. Included in the physical count were goods received from a vendor on December 27, 2023.
However, the related invoice for ₱36,000 was not recorded because the accounting
department’s copy of the receiving report was lost.

8. A monthly freight bill for ₱32,000 was received on January 3, 2024. It specifically related to

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merchandise bought in December 2023, one-half of which was still in the inventory at December
31, 2023. The freight was not included in either the inventory or in accounts payable at
December 31, 2023.

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1. Bird’s December 31, 2023, inventory should be increased by
A. ₱216,200
B. ₱233,200

A. ₱68,000
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C. ₱252,200
D. ₱123,200
2. Bird’s accounts payable balance at December 31, 2023, should be increased by
C. ₱125,000
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B. ₱145,000 D. ₱161,000
3. The amount of net sales to be reported on Bird’s income statement for the year ended
December 31, 2023, should be
A. ₱9,547,100 C. ₱9,591,000
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B. ₱9,576,500 D. ₱9,595,300
4. Bird’s statement of financial position at December 31, 2023, should report accounts
payable of
A. ₱1,576,000 C. ₱1,540,000
B. ₱1,483,000 D. ₱1,431,000
5. The amount of inventory to be reported on Bird’s December 31, 2023, statement of
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financial position should be

A. ₱2,103,200 C. ₱2,122,200
B. ₱2,086,200 D. ₱1,993,200
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PROBLEM NO. 8
Use the following information for the next three questions:
On January 1, 2023, Sheila Co. purchased the following marketable securities to be held for
trading. Transaction costs are negligible.
Cost
May Co. preference shares ₱200,000
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Pearl Co. ordinary shares 160,000

Shane Co. bonds 120,000
Totals ₱480,000

On December 31, 2023, Sheila’s investment portfolio has the following fair values
Fair value – 12/31/21
May Co. preference shares ₱160,000
Pearl Co. ordinary shares 60,000
Shane Co. bonds 140,000
Totals ₱360,000

On December 31, 2024, Sheila’s investment portfolio has the following fair values
Fair value – 12/31/22
May Co. preference shares ₱220,000
Pearl Co. ordinary shares 80,000
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Shane Co. bonds 120,000

Totals ₱420,000

On February 2, 2025, all of the May Co. preference shares were sold for ₱160,000, net of
transaction costs.

1. How much is the unrealized gain (loss) recognized on December 31, 2023?
a. 120,000 b. (120,000) c. (140,000) d. 140,000

2. How much is the unrealized gain (loss) recognized on December 31, 2024?
a. 60,000 b. (60,000) c. 120,000 d. (120,000)

3. How much is the realized gain (loss) on the sale on February 2, 2025?
a. 140,000 b. (140,000) c. 60,000 d. (60,000)

PROBLEM NO. 9

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On June 30,2023, POTATO COMPANY purchased 25% of the outstanding ordinary shares of
LITE Co. at a total cost of ₱2,100,000. The book value of LITE Co.’s net assets on acquisition
date was a ₱7,200,000. For the following reasons, Potato was willing to pay more than book

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value for LITE Co. stock:
• LITE Co. has depreciable assets with a current fair value of ₱180,000 more than their
book value. These assets have a remaining useful life of 10 years.

amount.
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• LITE Co. owns a tract of land with current fair value of ₱900,000 more than its carrying

• All other identifiable tangible and intangible assets of LITE Co. have current fair values
that are equal to their carrying amounts.
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LITE Co. reported net income of ₱1,620,000, earned evenly during the current year ended
December 31, 2023. Also in the current year, it declared and paid cash dividends of ₱315,000
to its ordinary shareholders. Market value of LITE Co.’s ordinary shares at December 31, 2023,
is ₱9 million. Potato Company’s financial year-end is December 31.
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1. What is the total amount of goodwill of LITE Co. based on the price paid by Potato
Company?
A. ₱300,000 C. ₱120,000
B. ₱1,080,000 D. ₱30,000
2. What amount of investment revenue should Potato report on its income statement for
the year ended December 31, 2023, under the cost method?
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A. ₱78,750 C. ₱228,750
B. ₱202,500 D. ₱71,250
3. What amount of investment revenue should Potato report on its income statement for
the year ended December 31, 2023, under the equity method?
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A. ₱202,500 C. ₱78,750
B. ₱200,250 D. ₱123,750
4. Under the equity method, the carrying value of the Potato Company’s investment in
ordinary shares of LITE Co. on December 31,2023, should be
A. ₱2,221,500 C. ₱2,070,000
B. ₱2,100,000 D. ₱2,250,000
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5. What amount should Potato company report on its December 31,2023, statement of
financial position as its investment in LITE Co. under cost method?
A. ₱2,250,000 C. ₱2,221,500
B. ₱2,070,000 D. ₱2,100,000

PROBLEM NO. 10

Steve Corporation’s current assets and liabilities section of the balance sheet as of December 31,
2022 appear as follows:

Current assets
Cash P1,200,000
Accounts receivable P2,670,000
Less allowance for doubtful accounts 210,000 2,460,000
Inventories 5,130,000
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Prepaid expenses 270,000

Total current assets P9,060,000

Current liabilities
Accounts payable P1,830,000
Notes payable 2,010,000
Total current liabilities P3,840,000

The following errors in the corporation’s accounting have been discovered;

a. January 2023 cash disbursements entered as of December 2022 included payment of

accounts payable in the amount of P1,170,000, on which a cash discount of 2% was taken.

b. The inventory included P810,000 of merchandise that have been received at December 31
but for which no purchase invoices have been received or entered. Of this amount P360,000
had been received on consignment; the remainder was purchased f.o.b. destination, terms
2/10, n/30.

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c. Sales for the first four days in January 2023 in the amount of P900,000 were entered in the
sales book as of December 31, 2022. Of these, P645,000 were sales on account and the

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remainder were cash sales.

d. Cash, not including cash sales, collected in January 2023 and entered as of December 31,

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2022, totaled P1,059,720. Of this amount, P699,720,was received on account after cash
discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.
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Based on the above and the result of your audit, determine the following;

1. Adjusted cash balances as of December 31, 2022

a. P1,031,880 c. P1,055,280
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b. P 641,880 d. P1,286,880

2. Adjusted accounts receivable balances as of December 31, 2022

a. P2,739,000 c. P2,724,720
b. P2,529,000 d. P3,129,000
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3. Adjusted accounts payable balances as of December 31, 2022

a. P3,000,000 c. P2,976,600
b. P2,190,000 d. P3,450,000
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4. Adjusted working capital as of December 31, 2022

a. P4,160,880 c. P3,950,880
b. P3,500,880 d. P3,524,280

5. Net misstatement in the reported net income for the year ended December 31, 2022 as a
result of the errors
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a. P1,269,120 c. P1,719,120
b. P1,700,880 d. P1,250,880

End