PROBLEM NO.

1 Computation of adjusted inventory

Ovation Company asks you to review its December 31, 2015 inventory values and prepare the necessary adjustments to the
books. The following information is given to you.

a. Ovation uses the periodic method of recording inventory. A physical count reveals P2,348,900 inventory on hand
at December 31, 2015.

b. Not included in the physical count of inventory is P134,200 of merchandise purchased on December 15 from
Standing. This merchandise was shipped F.O.B shipping point on December 29 and arrived in January. The invoice
arrived and was recorded on December 31.

c. Included in inventory is merchandise sold to Oval on December 30, F.O.B destination. This merchandise was
shipped after it was counted. The invoice was prepared and recorded as a sale on account for P128,000 on December
31. The merchandise cost P73,500 and Oval received it on January 3.

d. Included in inventory was merchandise received from Owl on December 31 with an invoice price of P156,300. The
merchandise was shipped FOB. destination. The invoice, which has not yet arrived, has not been recorded.

e. Not included in inventory is P85,400 of merchandise purchased from Oxygen Industries. The merchandise was
received on December 31 after the inventory had been counted. The invoice was received and recorded on December
30.

f. Included in inventory was P104,380 of inventory held by Ovation on consignment from Ovoid Industries.

g. Included in inventory is merchandise sold to Kemp FOB. shipping point. This merchandise was shipped after it was
counted. The invoice was prepared and recorded as a sale for P189,000 on December 31. The cost of this
merchandise was P105,200 and Kemp received the merchandise on January 5.

h. Excluded from inventory was carton labeled, Please accept for credit. This carton contains merchandise costing
P15,000 which had been sold to a customer for P25,000. No entry had been made to the books to reflect the return,
but none of the returned merchandise seemed damaged.

REQUIRED:

Determine the adjusted balance of Inventory.

SOLUTION:

Unadjusted inventory 2,348,900

Add (deduct) adjustments:

b) Goods in-transit purchased FOB shipping - not included 134,200

c) Goods in-transit sold FOB destination - included -
d) Goods purchased and received already - included -

e) Goods purchased and received already - not included 85,400

f) Goods held on consignment - included (104,380)

g) Goods in-transit sold FOB shipping point - included (105,200)

e) Goods returned by customers, received already - not
included 15,000
 Adjusted inventory 2,373,920

PROBLEM NO. 2 Computation of adjusted inventory and related accounts

Bulls Company, a manufacturer of small tools, provided the following information from its accounting records for the year
ended December 31, 2015:

Inventory at December 31, 2015

(based on physical count on Dec. 31, 2015) P 980,000
Accounts Payable at December 31, 2015 586,000
Net Sales (sales less sales returns) 10,048,000

Additional information follows:

a. Goods held on consignment from Chicago to Bulls amounting to P9,000 were included in the physical count of
goods in Bulls warehouse on December 31, 2015, and in accounts payable at December 31, 2015.

b. Retailers were holding P50,000, at cost, of goods on consignment from Bulls, at their stores on December 31, 2015.

c. Included in the physical count were goods billed to a customer FOB shipping point on December 31, 2015. These
goods had a cost of P31,000 and were billed at P40,000. The shipment was on Bulls loading dock waiting to be
picked up by the common carrier.

d. P15,000 worth of parts which were purchased from Deng Co. and paid for in December 2015 were sold in the last
week of 2015 and appropriately recorded as sales of P21,000. The parts were included in the physical count on
December 31, 2015 because the parts were on the loading dock waiting to be picked up by the customer.

e. Goods were in transit from a vendor to Bulls on December 31, 2015. The invoice cost was P71,000 and the goods
were shipped FOB shipping point on December 29, 2015.

f. Work in process inventory costing P30,000 was sent to an outside processor for plating on December 30, 2015.

g. Goods returned by customers and held pending inspection in the returned goods area on December 31, 2015 were
not included in the physical count. On January 8, 2016, the tools costing P32,000 were inspected and returned to
inventory. Credit memos totaling P47,000 were issued to the customers on the same date.

h. Goods shipped to a customer FOB destination on December 26, 2015 were in transit at December 31, 2015, and
had a cost of P21,000. Upon notification of receipt by the customer on January 2, 2016, Bulls issued a sales invoice
for P42,000.

i. Goods, with an invoice cost of P27,000, received from a vendor at 5:00 p.m. on December 31, 2015, were recorded
on a receiving report dated January 2, 2016. The goods were not included in the physical count, but the invoice was
included in accounts payable at December 31, 2015.

j. Goods received from a vendor on December 26, 2015 were included in the physical count. However, the related
P56,000 vendor invoice was not included in accounts payable at December 31, 2015, because the accounts payable
copy of the receiving report was lost.

k. On January 3, 2016, a monthly freight bill in the amount of P6,000 was received. The bill specifically related to
merchandise purchased in December 2015, one-half of which was still in the inventory at December 31, 2015. The
freight charges were not included in either the inventory or accounts payable at December 31, 2015.

REQUIRED:
 1. Determine the following as of and for the year ended December 31, 2015:
a. Inventory
b. Net Sales
c. Accounts Payable

2. Adjusting entries as of December 31, 2015

SOLUTION:

Requirement No. 1
Accts.
Inventory Payable Sales, net

Unadjusted balances 980,000 586,000 10,048,000

Add (deduct) adjustments:

a - Goods held on consignment (9,000) (9,000) -

b - Goods out on consignment 50,000 - -

c - Unshipped goods, erroneously
billed - - (40,000)

d - Goods with constructive delivery (15,000) - -

e - Goods purchased FOB shipping
point 71,000 71,000 -

f - WIP sent to outside processor 30,000 - -

g - Goods returned by customers 32,000 - (47,000)

h - Goods sold FOB destination 21,000 - -

i - Goods excluded from physical
count 27,000 - -
j - Unrecorded purchases - 56,000 -

k - Unrecorded freight-in 3,000 6,000

Adjusted balances 1,190,000 710,000 9,961,000

Requirement No. 2

a) Accounts payable 9,000

Inventory 9,000

b) Inventory 50,000
P/L summary (Cost of sales) 50,000

c) Sales 40,000
Acccounts receivable 40,000

d) P/L summary (Cost of sales) 15,000

 Inventory 15,000

e) Inventory 71,000
Accounts payable 71,000

f) Inventory 30,000
P/L summary (Cost of sales) 30,000

g) Inventory 32,000
P/L summary (Cost of sales) 32,000

Sales returns 47,000

Acccounts receivable 47,000

h) Inventory 21,000
P/L summary (Cost of sales) 21,000

i) Inventory 27,000
P/L summary (Cost of sales) 27,000

j) P/L summary (Cost of sales) 56,000

Accounts payable 56,000

k) Inventory 3,000

P/L summary (Cost of sales) 3,000

Accounts payable 6,000
PROBLEM NO. 11 Roll forward analysis

You are engaged in the regular annual examination of the accounts and records of Valenzuela manufacturing for the year
ended December 31, 2015. To reduce the workload at year end, the company upon your recommendation, took its annual
physical inventory in November 30, 2015. You observed the taking of the inventory and made tests of the inventory count
and inventory records.

The companys inventory account, which includes raw materials and work in process, is on perpetual basis. Inventories are
valued at cost, FIFO method. There is no finished goods inventory. The companys physical inventory revealed that the
book inventory of 1,695,960 was understated by 84,000. To avoid delay in completing its monthly financial statements, the
company decided not to adjust the book inventory until year end except for obsolete inventory items.

Your examination disclosed the following information regarding the November 30 inventory

1. Pricing tests showed that the physical inventory was overstated by 61, 600.

2. An understatement of the physical inventory by 4,200 due to errors in footings and extensions.

3. Direct labor included in the inventory amounted to 280,000. Overhead was included at the rate of 200% of direct labor.
You have ascertained that the amount of direct labor was correct and that the overhead rate was proper.

4. The physical inventory included obsolete materials with a total cost of 7,000. During December the obsolete materials
were written off by a charge to cost of sales.
Your audit also disclosed the following information about the December 31 inventory:

a. Total debits to the following accounts during December were:

Cost of sales 1,920,800

Direct labor 338, 800
Purchases 691, 600

b. The cost of sales of 1,920,800 included direct labor of 386,000

REQUIRED

Compute for the following:

1. Adjusted amount of physical inventory at November 30, 2015

2. Adjusted amount of inventory at December 31, 2015

3. Breakdown of inventory at December 31, 2015

a. Cost of materials on hand, and materials included in work in process

b. Direct labor included in work in process

c. Factory overhead included in work in process

SOLUTION:
Requirement No. 1

Inventory per books, 11/30 1,695,960

Add understatement of booked inventory 84,000

Physical inventory,11/30, per client 1,779,960

Add (deduct) adjustments

Overstatement due to pricing errors (61,600)

Understatement due to footing and extension errors 4,200

Obsolete materials (7,000)

Inventory per physical count, as adjusted 1,715,560

Requirement No. 2

Adjusted balance of inventory, 11/30 1,715,560

Purchases 691,600

Direct labor 338,800

Factory overhead (200% of direct labor) 677,600

 Total 3,423,560
Less cost of sales:

Per books 1,920,800

Obsolete materials written off through
COS (7,000) 1,913,800

Inventory, 12/31 1,509,760

Requirement No. 3

Inventory, 11/30 (see no. 1) 1,715,560

Direct labor (280,000)

Factory overhead (200% of direct labor) (560,000)

Raw materials, 11/30 875,560

Purchases 691,600

Total 1,567,160
Less: Materials included in cost of sales

Adjusted cost of sales (see no. 2) 1,913,800

Direct labor (386,400)

Factory overhead (772,800) 754,600

Cost of materials on hand and materials included in WIP 812,560

Labor cost in the WIP:

Labor included in 11/30 inventory 280,000

Labor incurred in December 338,800

Total 618,800

Labor included in COS (386,400) 232,400

Applied factory overhead (200% of direct labor) 464,800

Total, as shown in no.2 1,509,760

PROBLEM NO. 1 Audit of recognition and measurement of intangible assets

The accountant of the newly organized Zerg Corporation provided to you the details the companys Intangible Assets
account as follows:

Date Intangible Assets Description Amount

01/02 Organization costs P 233,000
01/15 Goodwill 15,000
04/01 Patent 490,000
05/01 License and trademark 300,000
07/01 R & D laboratory 1,310,000
 12/31 Product development costs 1,750,000
4, 098, 000
Transactions during 2015 included the following:

Jan 2 Paid legal fees of P 150,000 and stock certificate costs of P83,000 to complete organization of the
corporation of the corporation.

15 Hired a clown to stand in front of the corporate office for 2 weeks and hand out pamphlets and candy to create
goodwill for the new enterprise. Clown cost, P10,000; pamphlets and candy, P5,000.

Apr. 1 Patented a newly developed process with costs as follows:

Legal fees to obtain patent P429,000

Patent application and 61,000

licensing fees
Total 490,000

It is estimated that in 5 years other companies will have developed improved processes, making the Zerg
Corporation process obsolete.

May 1 Acquired both a license to use a special type of container and a distinctive trademark to be printed on the
container in exchange for 6, 000, no-par, ordinary shares of Zerg selling for P50 per share. The license is
worth twice as much as the trademark, both of which may be used for 5 years.

Jul.1 Constructed a shed for P1,310,000 to house prototypes of experimental models to be developed in future
research projects.

Dec. 31 Paid salaries for an engineer and chemist involved in research and development totaling P1,720,000 in 2015.

It is the companys policy to take full year amortization in the year of acquisition.

REQUIRED:

1. Prepare the necessary adjusting journal entries as of December 31, 2015.

2. Compute the carrying amount of the Intangible assets as of December 31, 2015.

3. Compute the total amount resulting from the foregoing transactions that should be expensed when incurred.

SOLUTION:
Requirement No. 1

1/2 Organization expenses 233,000

Intangible assets 233,000

1/15 Advertising expense 15,000

Intangible assets 15,000

4/1 Patents 490,000

Intangible assets 490,000

 5/1 Licences (P300,000 x 2/3) 200,000

Trademark 100,000

Intangible assets 300,000

7/1 Building 1,310,000

Intangible assets 1,310,000

Research and development

12/31 expense 1,750,000

Intangible assets 1,750,000

Amortization expense 158,000

Patent (P490,000/5) 98,000

Licences (P200,000/5) 40,000

Trademark (P100,000/5) 20,000

Requirement No. 2
Cost

Patent 490,000

Licences 200,000

Trademark 100,000 790,000

Less amortization

Patent (P490,000/5) 98,000

Licences (P200,000/5) 40,000

Trademark (P100,000/5) 20,000 158,000

Carrying amount, 12/31/12 632,000

Requirement No. 3

Organization expenses (Jan. 2 transaction) 233,000

Advertising expense (Jan. 15 transaction) 15,000

R and D expense (Dec. 31 transaction) 1,750,000

Total 1,998,000
PROBLEM NO. 3 Amortization and impairmentof intangible assets
The Terran Company acquired several small companies at the end of 2014 and, based on the acquisitions, reported the
following intangibles in its December 31, 2014 statement of financial position:

Patent P200,000
Copyright 400,000
Tradename 350,000
Computer software 100,000
Goodwill 900,000

The companys accountant determines the patent has an expected life of 10 years and no expected residual value, and that
it will generate approximately equal benefits each year. The company expects to use the copyright and tradename for the
foreseeable future. The accountant knows that the computer software is used in the companys 120 sales offices. The
company has replaced the software in 60 offices in 2015, and expects to replace the software in 40 more offices in 2016 and
the remainder in 2017.

In December 31, 2015, there are no indications of impairment of patent and computer software. The following information
relate to the other intangible assets:

a.) Because of the rampant piracy, the copyright is expected to generate cash flows of just P8,000 per year.

b.) The tradename is expected to generate cash flows of P15,000 per year.

c.) The goodwill is associated with Terrans SCV Manufacturing reporting unit. The cash flows expected to be
generated by the SCV Manufacturing reporting unit is P200,000 per year for the next 24 years. The reporting unit
has a carrying amount of P2,100,000.

REQUIRED:

Based on the above and the result of your audit, determine the following: (Assume that the appropriate discount rate for al
litems is 5%)

1. Total amortization of intangible assets in 2015

2. Total loss on impairment in 2015

3. Carrying amount of goodwill on December 31, 2015

4. Carrying amount of other intangible assets on December 31, 2015

SOLUTION:
Requirement No. 1

Patent (P200,000/10) 20,000

Computer software [P100,000 x (60/120)] 50,000

Total amortization 70,000

*The useful lives of copyright and tradename are indefinite, so no amortization expense is recognized.
** Goodwill is not amortized.

Requirement No. 2
Impairment loss
 Copyright:

Carrying amount 400,000

Recoverable amount (P8,000/0.05) 160,000 240,000

Tradename:

Carrying amount 350,000

Recoverable amount (P15,000/0.05) 300,000 50,000

Goodwill:

Carrying amount of Anne Manufacturing unit 3,000,000

Recoverable amount (P200,000 x 14.0939) 2,818,780 181,220

Total impairment loss 471,220

Requirement No. 3

Original amount of Goodwill 900,000

Less impairment loss 181,220

Carrying amount of Goodwill, 12/31/12 718,780

Question No. 4 - A

Patent (P200,000 - P20,000) 180,000

Copyright (recoverable amount) 160,000

Tradename (recoverable amount) 300,000

Computer software (P100,000 - P50,000) 50,000

Carrying amount of other intangible assets, 12/31/12 690,000

PROBLEM NO.10 Audit of intangibles and other assets

GDI., Inc, had the following noncurrent asset account balances at December 31, 2014
Patent P1,920,000
Accumulated amortization (240,0000)
Deferred tax asset 360,000

Transactions during 2015 and other information relating to the noncurrent assets of GDL, Inc were as follows:

a. The patent was purchased from Grey Company for P1,920,000 on January 1, 2013, at which date the remaining life
was sixteen years. On January 1, 2015, GDL determined that the useful life of the patent was only eight years from
the date of acquisition.

b. On January 3, 2015, in connection with the purchase of a trademark from Cody Corporation, the partie entered into
a noncompetiton agreement and a consulting contract. GDL paid Cody P8,000,000, of which three-quarters was for
trademark and one-quarter was for Codys agreement not to compete for a five-year period in the line of business
covered by the trademark. GDI considers the life of the trademark to be indefinite. Under the consulting contract,
 GDL agreed to pay Cody P500,000 annually on January 3 for five years. The first payment was made on January
3,2015

c. Deferred tax asset is provided in recognition of temporary differences between accounting and tax reporting of rent
income and warranty liability. For the year ended December 31, 2015, (1) rent collected in advance decreased by
P200,000, and (2)product warranty liability increased by P150,000. GDLs income tax rate for 2015 was 35%

REQUIRED:

Based on the above and the result of your audit, determine the following:

1. The total amortization of the intangible assets for the year 2015

2. The carrying amount of the intangible assets as of December 31,2015

3. The carrying amount of deferred tax asset as of December 31, 2015

SOLUTION:

Requirement No. 1

Patent amortization (P1,680,000/6) 280,000

Trademark -

Noncompetition agreement (P2,000,000/5) 400,000

Total amortization 680,000

Requirement No. 2

Patent (P1,680,000 - P280,000) 1,400,000

Trademark (P8,000,000 x 3/4) 6,000,000

Noncompetition agreement (P2,000,000 - P400,000) 1,600,000

Carrying amount of intangible assets, 12/31/12 9,000,000

Requirement No. 3

Deferred tax asset, 12/31/11 360,000

Decrease in deferred tax asset:

Decrease in unearned rent (P200,000 x 35%) (70,000)

Increase in warranty liability (P150,000 x
35%) 52,500 (17,500)

Deferred tax asset, 12/31/12 342,500

PROBLEM NO. 1 Composition of trade and other receivables

On December 21, 2015 the accounts receivable control account of Ipil-ipil Co. had a balance of P181,100. An analysis of
the accounts receivable account showed the following:

Accounts known to be worthless P 2,500

Advance payments to creditors on purchase orders 10,000
 Advances to affiliated companies 25,000
Customers accounts reporting credit balance arising from sales
return (15,000)
Interest receivable on bonds 10,000
Other trade accounts receivable unassigned 50,000
Subscriptions receivable for ordinary share capital due in 30 days 55,000
Trade accounts receivable assigned 15,000
Trade installment receivable due 1 18 months,
(including unearned finance charges, P2,000) 22,000
Trade receivables from officers, due currently 1,500
Trade accounts on which post-dated checks are held
(no entries were made on receipts of checks) 5,000

Total P181,000

REQUIRED:

Determine the trade and other receivables to be reported on the entitys December 31, 2015 statement of financial position.

SOLUTION:
Items included:

Trade accounts receivable (see computation below) 91,500

Advance payments to creditors on purchase orders 10,000

Interest receivable on bonds 10,000

Subscriptions receivable due in 30 days 55,000

Trade and other receivables 166,500

Composition of trade accounts receivable:

Other trade accounts receivable unassigned 50,000

Trade accounts receivable - assigned 15,000

Trade installment receivable due 1 18 months,

net of unearned finance charges of P2,000 20,000

Trade receivables from officers due currently 1,500

Trade accounts on which post-dated checks are held

(no entries were made on receipts of checks) 5,000

Trade accounts receivable 91,500

Items not included:

Accounts known to be worthless 2,500 Write off
Advances to affiliated companies 25,000 Noncurrent investment
Customers' account with credit balance (15,000) Trade and other payables
PROBLEM NO. 8 Audit of notes receivable and related accounts

On January 1, 2015, Pedro Company sold land that originally cost P400, 000 to Buyer Company. As payment, Buyer gave
Pedro Company a P600, 000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments of
P200, 000 (plus interest on the outstanding balance). The first payment is due on December 31, 2015. The market price of
the land is not reliably determinable =. The prevailing rate of interest for notes of this type is 14% on January 1, 2015 and
15% on December 31, 2015.

Pedro made the following journal entries in relation to the sale of land and the relate note receivable.

January 1, 2015
Notes Receivable P600,000
Land P400,000
Gain on sale of Land 200,000

December 31, 2015

Cash P224,000
Notes receivable P200,000
Interest income 24,000

Pedro reported the notes receivable in its statement of financial position at December 31, 2015 as part of trade and other
receivables.

REQUIRED:

1. Determine the following as of and for the year ended December 31, 2015:
a. Correct gain on sale of land
b. Correct interest income
c. Overstatement of profit
d. Correct carrying amount of note receivable
e. Overstatement of working capital
2. Adjusting entries as of December 31, 2015

SOLUTION:

Requirement No. 1.a

PV of consideration receivable (see computation below) 503,105
Carrying amount of land (400,000)
Correct gain on sale of land 103,105

Present value of cash flows to determine initial CA:

Date Principal Interest (4%) Total PVF (14%) PV, 1/1/12 PV, 12/31/12
12/31/12 200,000 24,000 224,000 0.8772 196,493
12/31/13 200,000 16,000 216,000 0.7695 166,212 189,475
12/31/14 200,000 8,000 208,000 0.6750 140,400 160,056
600,000 503,105 349,531

Requirement No. 1.b

Amortization schedule using effective interest method:
Date EI (14%) NI (4%) Disc. Amort. Repayment AC
1/1/12 503,105
12/31/12 70,435 24,000 46,435 200,000 349,540
 12/31/13 48,936 16,000 32,936 200,000 182,476
12/31/14 25,524 8,000 17,524 200,000 -
23
Interest income - 2012 (P503,105 x .14) 70,435

Requirement No. 1.c

Gain on sale of land - overstated (P200,000 - P103,105) 96,895
Interest income for 2012 - understated (P70,435 - P24,000) (46,435)
Net overstatement of 2012 profit 50,460

Requirement No. 1.d

Carrying amount, 12/31/12 (see schedule) 349,540

Requirement No. 1.e

Amount reported as notes receivable 400,000
Correct current portion of NR (P349,540 - P182,476) 167,064
Overstatement of CA/working capital 232,936

Requirement No. 2
Adjusting journal entries:
To corect the entrymade to record the sale of land on 1/1/12:
Gain on sale of land 96,895
Discount on notes receivable (FV-PV) 96,895

To record amortization of discount on 12/31/12:

Discount on notes receivable 46,435
Interest income 46,435
PROBLEM NO. 11 Loan impairment

Bahrain Bank granted a loan to a borrower in the amount of P10,000,000 on January 1,2014. The interest rate on the loan
is 10% payable annually starting December 31, 2014. The loan matures in five years on December 31, 2018. Bahrain Bank
incurs P130,900 of direct loan origination cost and P50,000 of indirect loan origination cost. In addition, Bahrain Banks
charges the borrower a 5-point nonrefundable loan origination fee.

The borrower paid the interred due on December 31, 2014. However during 2015 the borrower began to experience financial
difficulties, requiring the bank to reassess the collectability of the loan. As of December 31, 2015, the bank expects that
only P8,000,000 of the principal will be recovered. The P8,000,000 principal amount is expected to be collected in two
equal installments on December 31,2017 and December 31,2019. The prevailing interest rates for similar type of note as of
December 31, 2014 and 2015 are 15% and 16%, respectively.

REQUIRED:

Determine the following:

1. Interest income to be recognized in 2014
2. Carrying amount of the loan as of December 31, 2014
3. Loan impairment loss to be recognized in 2015

SOLUTION:
Requirement No.s 1 & 2
Principal 10,000,000
Direct origination cost 130,900
Origination fee received from borrower (P10M x .05) (500,000)
 Carrying amount, 1/1/12 9,630,900

Amortization schedule
Date EI (11%) NI (10%) Disc. Amort. C.A.
1/1/11 9,630,900
12/31/11 1,059,399 1,000,000 59,399 9,690,299
12/31/12 1,065,933 1,000,000 65,933 9,756,232
12/31/13 1,073,186 1,000,000 73,186 9,829,418
12/31/14 1,081,236 1,000,000 81,236 9,910,654
12/31/15 1,089,346 1,000,000 89,346 10,000,000
826
Requirement No. 3
Carrying amount, 12/31/12 (see schedule) 9,756,232
Less PV of expected cash flows:
12/31/14 (P4M x 0.8116) 3,246,400
12/31/16 (P4M x 0.6587) 2,634,800 5,881,200
Loan impairment (bad debt expense) 3,875,032
PROBLEM NO.12- Proof of cash

Celtics Company had the following bank reconciliation on June 30, 2015:

Balance per bank statement, June 30, 2015 P3,000,000

Add: Deposit in transit 400,000
Total 3,400,000
Less: Outstanding checks 900,000
Balance per book, June 30 P2,500,000

The bank statement for the month of July 2015 showed the following:

Deposits (including P200,000 note collected for Celtics) P9,000,000

Disbursements (including P140,000 NSF check and P10,000 service charge) 7,000,000
All reconciling items on June 30,2015 cleared through the bank in july. The
outstanding checks totaled P600,000 and the deposits in transit amounted to
P1,000,000 on July 31, 2015.

REQUIRED:

Determine the following:

1. Cash receipts per books in July

2. Cash disbursement per books in July
3. Cash balance per books at July 31
4. Adjusted cash balance at July 31

SOLUTION:

Requirement No. 1

Total deposits per bank statement in June 9,000,000

Note collected by bank in July (200,000)

Deposits in transit, June 30 (400,000)

 Deposits in transit, July 31 1,000,000

Cash receipts per books in July 9,400,000

Requirement No. 2

Total disbursements per bank statement in June 7,000,000

July NSF check (140,000)

July service charge (10,000)

Outstanding checks, June 30 (900,000)

Outstanding checks, July 31 600,000

Cash disbursements per books in July 6,550,000

Requirement No. 3

Balance per books, June 30, 2007 2,500,000

July receipts per books (see no. 21) 9,400,000

July disbursements per books (see no. 22) (6,550,000)

Balance per books, July 31, 2007 5,350,000

Requirement No. 4

Balance per bank statement, July 31 (P3M+P9M-P7M) 5,000,000

Deposits in transit, July 31 1,000,000

Outstanding checks, July 31 (600,000)

Adjusted bank balance, July 31 5,400,000

Balance per books, July 31 5,350,000

Note collected by bank in July 200,000

NSF check (140,000)

Bank service charges (10,000)

Adjusted book balance, July 31 5,400,000

PROBLEM NO.14 Three-dated bank reconciliation

The client, Noel Corporation, obtained bank statements for November 30 and December 31, 2015 and reconciled the
balanced. You obtained directly the statements of January 12,2016 and obtained the necessary confirmation. You have
found that there are no errors in addition or subtraction in the clients books.

11/30/15 12/31/15
Balance, bank statement P344,420 P275,020
 Balance, company records 271,260 226,010
Deposits in transits 35,000 ?
Outstanding checks 88,240 ?

12/1-31/15 1/1-12/16
Receipts, cash records P963,230 P292,500
Credits, bank statement 941,010 321,490
Disbursements, cash records 1,008,480 177,570
Charges, bank statement 1,010,410 230,180

The following information also was obtained:

a) Check no. 804 for P340 cleared by the bank in December as P1,340. This was found in proving the bank statement.
The bank made the correction on January 8, 2016.
b) A note of P20,000, sent to the bank for collection on November 15,2015, was collected and credited to the account
on November 28, 2015, net of a collection fee of P80. The note was recorded in the cash receipts on December 21,
2015, at which date the collection fee was entered as a disbursement.
c) The client records returned checks in red in the cash receipts journal. The checks listed in the table were returned
by the bank.

Amount Returned Recorded Redeposited

Co. A P3,270 12/6/15 No entries 12/8/15
Co. B P6,730 12/27/15 1/3/16 1/15/16

d) Two payroll checks for employees vactions totalling P5,500 were drawn on January 3, 2016, and cleared the bank
on January 8,2016. Those checks were not entered in the clients records because semi-monthly payroll summaries
are entered only on the 15th and the last day of each month.

REQUIRED:

1. Compute for the following:

a. Deposits in transit as of December 31, 2015
b. Outstanding checks as of December 31,2015
c. Deposits in transits as of January 12, 2016
d. Outstanding checks as of January 12,2016
2. Prepare a 4-column bank reconciliation for the month of December 2015 and for the period January 1 to 12, 2016
using the adjusted balance method.

SOLUTION:

Requirement 1.a

Deposits in transit, Nov. 30 35,000

Add collections in
December:
December book
receipts 963,230

Customers' note collected by bank in Nov. (20,000) 943,230

Total 978,230
Less deposits credited by the bank in December:
December bank
receipts 941,010
 NSF check redeposited (Customer A) (3,270) 937,740

Deposits in transit, Dec. 31 40,490

Requirement 1.b
Outstanding checks, Nov.
30 88,240
Add checks issued in December:

December book disbursements 1,008,480

Collection fee for note collected in Nov. (80) 1,008,400

Total 1,096,640
Less checks paid by the bank in December:

December bank disbursements 1,010,410

Bank error in check payment (P1,340 - P340) (1,000)

NSF check - Customer
A (3,270)
NSF check - Customer
B (6,730) 999,410

Outstanding checks, Dec. 31 97,230

Requirement 1.c

Deposits in transit, Dec. 31 (see Requirement 1.a) 40,490

Add collections, Jan. 1-12:

Jan. 1-12 book receipts 292,500

NSF check - Customer
B 6,730 299,230

Total 339,720
Less deposits credited by the bank, Jan. 1-12:

Jan. 1-12 bank receipts 321,490

Correction of error in check payment in Dec. (1,000) 320,490

Deposits in transit, Jan. 12 19,230

Requirement 1.d

Outstanding checks, Dec. 31 (see Requirement 1.b) 97,230

Add checks issued, Jan. 1-12:

Jan. 1-12 book disbursements 177,570

Unrecorded payroll checks 5,500 183,070

Total 280,300
Less checks paid by the bank, Jan. 1-12: 230,180

Outstanding checks, Jan. 12 50,120

December January 1-12

Nov. 30 Receipts Disb Dec. 31 Receipts Disb Jan. 12

Unadjusted bank balances 344,420 941,010 1,010,410 275,020 321,490 230,180 366,330
Deposits in transit:

eginning of period 35,000 (35,000) (40,490)

End of period 40,490 40,490 19,230 19,230

Outstanding checks:

Beginning of period (88,240) (88,240) (97,230)

End of period 97,230 (97,230) 50,120 (50,120)

Bank error in check
payment (1,000) 1,000 (1,000)

NSF check redeposited (Customer A) (3,270) (3,270)

Adjusted bank balances 291,180 943,230 1,015,130 219,280 299,230 183,070 335,440

Unadjusted book balances 271,260 963,230 1,008,480 226,010 292,500 177,570 340,940
Note collected by bank in
Nov. 19,920 (20,000) (80)

NSF check not redeposited (Customer B) 6,730 (6,730) 6,730

Unrecorded payroll in Jan. 5,500 (5,500)

Adjusted book balances 291,180 943,230 1,015,130 219,280 299,230 183,070 335,440