PHINMA – UNIVERSITY OF ILOILO BAM 006: MIDTERM EXAM

1. Bethany Company provided the following 4. Sherwin Company adopted a new method for
information for 2021: estimating doubtful accounts at an amount
Accounts receivable – January 1 2,000,000 indicated by aging of accounts receivable.
Credit sales 10,000,000 Allowance for doubtful accounts – Jan 1 250,000
Collection from customers, excluding the Provision for doubtful accounts recorded
8,000,000
recovery of accounts written off during the year (2% of credit sales of 200,000
Accounts written off as worthless 100,000 Php10,000,000)
Sales return 500,000 Accounts written off 205,000
Recovery of accounts written off 50,000 Uncollectible accounts per aging Dec 31 220,000
Estimated future sales returns on December What is the year-end adjustment to the allowance for
150,000
31 doubtful accounts?
Estimated uncollectible accounts on a. 175,000 debit c. 25,000 debit
300,000
December 31 per aging b. 175,000 credit d. 25,000 credit
What is “amortized cost” of accounts receivable on
December 31 2021? 5. Kristel Company pledged Php4,000,000 of
a. 3,400,000 c. 2,950,000 accounts receivable as collateral for a
b. 3,100,000 d. 2,900,000 Php3,000,000 loan with a bank. The bank
assessed a 10% finance fee on the amount of the
2. Hernando Company reported accounts loan charged 8% annual interest on the note at
receivable Php8,000,000 on December 31 2021 maturity. What is the journal entry to record the
and allowance for doubtful accounts transaction?
Php1,000,000 on January 1 2021. During the a. Debit cash Php3,000,000 and credit note payable
year, accounts Php400,000 were written off and Php3,000,000
recoveries of accounts written off totaled b. Debit cash Php2,700,000; debit finance charge
Php100,000. Php300,000 and credit accounts receivable
Amount Uncollectible Php3,000,000
Under 30 days 5,000,000 10% c. Debit cash Php2,700,000; debit finance charge
31 – 180 days 1,500,000 20% Php300,000; debit due from bank Php1,000,000
180 – 360 days 1,000,000 50% and credit accounts receivable Php4,000,000
More than one year 500,000 100% d. Debit cash Php2,700,000; debit finance charge
What amount should be reported as doubtful accounts Php300,000 and credit note payable
expense for the current year? Php3,000,000.
a. 1,800,000 c. 1,000,000
b. 1,100,000 d. 1,400,000 Use the problem below to answer numbers 6 – 8:
On December 1 2016, Shermaine Company assigned on
3. During the current year, Hannah Company a non-notification basis accounts receivable of
reported beginning allowance for doubtful Php5,000,000 to a bank in consideration for a loan of
accounts Php200,000; Sales Php9,500,000; Sales 80% of the accounts less a 5% service fee on the accounts
Returns and Allowances Php1,000,000; Sales assigned. The entity signed a note for the bank loan. On
Discounts Php500,000; Accounts Written Off December 31 2016 the entity collected assigned
Php300,000 and Recovery of Accounts Written accounts of Php2,000,000 less discount of Php200,000.
Off Php50,000. It is estimated that 5% of net The entity remitted the collections to the bank in partial
sales may prove uncollectible. What is the payment for the loan. The bank applied first the
ending allowance for doubtful accounts? collection to the interest and the balance to the principal.
a. 350,000 c. 400,000 The agreed interest is 1% per month on the loan balance.
b. 375,000 d. 425,000 The entity accepted sales returns of Php100,000 o the
assigned accounts and wrote off assigned accounts
totaling Php300,000.
6. What is the balance of accounts receivable
assigned on December 31 2016?
a. 3,000,000 c. 2,400,000
b. 2,600,000 d. 2,900,000

7. What is the carrying amount of the note payable

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PHINMA – UNIVERSITY OF ILOILO BAM 006: MIDTERM EXAM
8. What is the equity of the assignor in assigned 15. What is the total amount collected from the
accounts on December 31 2016? customer on December 31 2016?
a. 2,600,000 c. 360,000 a. 6,450,000 c. 6,695,000
b. 2,240,000 d. 0 b. 6,500,000 d. 6,662,500
16. If the discounting is secured borrowing, what is
Use the problem below to answer numbers 9 – 10: included in the journal entry to record the
Karmina Company factored Php5,000,000 of accounts transaction?
receivable. Control was surrendered by the entity. The a. Debit loss on discounting Php87,000
finance company assessed a fee of 5% and retains a b. Debit interest expense Php87,000
holdback equal to 10% of the accounts receivable. In c. Credit liability for note discounted
addition, the finance company charged 12% interest Php6,063,000.
computed on a weighted average time to maturity of the d. Credit interest income Php63,000.
accounts receivable for 30 days?
9. What is the amount initially received from the Use the problem below to answer numbers 17 – 18:
factoring of accounts receivable? On January 1 2016, Janelle Company sold equipment
a. 4,250,000 c. 4,700,685 with a carrying amount of Php4,800,000 in exchange for
b. 4,200,000 d. 4,200,685 Php6,000,000 noninterest bearing note due January 1
10. What total amount should be recognized as loss 2019. There was no established exchange price for the
on factoring? equipment. The prevailing interest rate for this note was
a. 299,315 c. 250,000 10%. The present value of 1 at 10% for three periods is
b. 799,315 d. 0 0.75.
17. What amount should be reported as gain or loss
Use the problem below to answer numbers 11 – 12: on sale of equipment?
Frazelle Company accepted from a customer in a. 1,200,000 gain c. 300,000 gain
settlement of an account a Php4,000,000 90-day 12% b. 2,700,000 gain d. 300,000 loss
note dated August 31 2016. On September 30 2016 the 18. What amount should be reported as interest
entity discounted the note at 15% with recourse at the income for 2016?
bank. The note was paid in full by the maker on maturity a. 600,000 c. 450,000
the discounting with recourse is accounted for as a b. 500,000 d. 90,000
conditional sale with recognition of a contingent liability.
11. What amount was received from the note Use the problem below to answer numbers 19 – 22:
receivable discounting? On December 31 2016, Alfonso Company sold used
a. 4,017,000 c. 4,103,000 equipment with carrying amount of Php2,000,000 in
b. 4,120,000 d. 3,965,500 exchange for a noninterest bearing note of Php5,000,000
12. What is the loss on note receivable discounting? requiring ten annual payments of Php500,000. The first
a. 40,000 c. 17,000 payment was made on December 31 2018. The market
b. 23,000 d. 20,000 interest for similar note was 12%. The present value of
ordinary annuity of 1 is 5.65 for ten periods and 5.33 for
Use the problem below to answer numbers 13 – 16: nine periods.
On April 1 2016, Aljean Company discounted with 19. What is the carrying amount of the note
recourse a 9-month, 10% note dated January 1 2016 with receivable on December 31 2016?
face of Php6,000,000. The bank discount rate is 12%. The a. 5,000,000 c. 2,665,000
discounting transaction is accounted for as a conditional b. 2,825,000 d. 4,500,000
sale with recognition of contingent liability. 20. What is the gain on sale of equipment to be
On October 1 2016, the maker dishonored the note recognized in 2016?
receivable. The entity paid the bank the maturity value a. 3,000,000 c. 825,000
of the note plus protest fee of Php50,000. b. 2,175,000 d. 0
On December 31 2016, the entity collected the 21. What amount should be recognized as interest
dishonored note in full plus 12% annual interest on the income for 2017?
total amount due. a. 600,000 c. 319,8000
13. What amount was received from the note b. 339,000 d. 300,000
discounting on April 1 2016? 22. What is the carrying amount of the note
a. 6,063,000 c. 6,150,000 receivable on December 31 2017?
b. 6,450,000 d. 5,963,000 a. 2,664,000 c. 3,164,000
14. What amount should be recognized as loss on b. 4,500,000 d. 2,325,000
note discounting?
a. 450,000 c. 87,000
b. 387,000 d. 63,000
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PHINMA – UNIVERSITY OF ILOILO BAM 006: MIDTERM EXAM
Use the problem below to answer numbers 23 – 26: Use the problem below to answer numbers 28 – 30:
Christopher Bank loaned Php7,500,000 to a borrower on Pearl Company maintains a checking account at the City
January 1 2014. The terms of the loan were payment in Bank. The bank provides a bank statement along with
full on January 1 2019 plus annual interest payment at canceled checks on the last day of each month. The July
12%. The interest payment was made as scheduled on bank statement included the following information:
January 1 2015. However, due to financial setbacks, the Balance, July 1 3,200,000
borrower was unable to make the 2016 interest Deposits 8,600,000
payment. Checks processed 7,500,000
The bank considered the loan impaired and projected the Service charge 50,000
cash flows from the loan on December 31 2016. The bank NSF check 150,000
had accrued the interest on December 31 2015 but did Monthly loan payment deducted by
not continue to accrue interest for 2016 due to the 500,000
bank from account
impairment of the loan. Deposits outstanding totaled Php400,000 and all checks
The projected cash flows are: written by the entity were processed by the bank for
Amount projected check of Php500,000.
Date of cash flow
December 31 2016 A Php200,000 July deposit from a credit customer was
December 31 2017 500,000 recorded as Php20,000 debit to cash and credit to
December 31 2018 1,000,000 accounts receivable.
December 31 2019 2,000,000 A check correctly recorded by Pearl Company as
December 31 2020 4,000,000 Php30,000 disbursement was incorrectly processed by
The PV of 1 at 12% is 0.89 for one period, 0.80 for two the bank as Php300,000 disbursement.
periods, 0.71 for three periods and 0.64 for four periods. 28. What is the balance per bank on July 31?
23. What is the present value of the cash flows from a. 3,600,000 c. 4,300,000
the loan receivable on December 31 2016? b. 4,100,000 d. 3,800,000
a. 5,225,000 c. 5,376,000 29. What amount should be reported as adjusted
b. 7,500,000 d. 4,800,000 cash in bank on July 31?
24. What is the loan impairment loss to be a. 3,500,000 c. 3,230,000
recognized on December 31 2016? b. 3,770,000 d. 3,800,000
a. 2,275,000 c. 5,225,000 30. What is the cash in bank balance per ledger on
b. 3,175,000 d. 2,175,000 July 31?
25. What is the interest income to be reported by a. 4,320,000 c. 4,290,000
the bank in 2017? b. 4,470,000 d. 4,020,000
a. 627,000 c. 567,000
b. 900,000 d. 0 Use the problem below to answer numbers 31 – 34:
26. What is the carrying amount of the loan Lira Company prepared the following bank reconciliation
receivable on December 31 2017? on June 30:
a. 5,352,000 c. 5,225,000 Balance per bank 9,800,000
b. 4,725,000 d. 7,000,000 Deposits in transit 400,000
Outstanding check (1,400,000)
27. Manchester Company provided the following Balance per book 8,800,000
accounts abstracted from the unadjusted trial There were total deposits of Php6,500,000 and charges
balance at year-end: for disbursements of Php9,000,000 for July per bank
Debit Credit statement. All reconciliation items on June 30 cleared the
Accounts receivable 5,000,000 bank on July 31.
Allowance for doubtful accounts 40,000 Checks outstanding amounted to Php1,000,000 and
Net credit sales 20,000,000 deposits in transit totaled Php1,200,000 on July 31.
The entity estimated that 3% of the gross accounts
receivable will become uncollectible 31. What is the amount of cash receipts per book in
What amount should be recognized as doubtful accounts July?
expense for the current year? a. 6,500,000 c. 5,700,000
a. 110,000 c. 190,000 b. 7,300,000 d. 7,900,000
b. 150,000 d. 600,000 32. What is the amount of cash disbursements per
book in July?
a. 8,600,000 c. 9,400,000
b. 7,600,000 d. 8,400,000

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PHINMA – UNIVERSITY OF ILOILO BAM 006: MIDTERM EXAM
33. What amount should be reported as adjusted Use the problem below to answer numbers 38 – 40:
cash in bank on July 31? Germany Company started business at the beginning of
a. 7,300,000 c. 7,500,000 current year. The entity established an allowance for
b. 6,300,000 d. 6,500,000 doubtful accounts estimated at 5% of credit sales. During
34. What is the cash balance per ledger on July 31? the year, the entity wrote off Php50,000 of uncollectible
a. 8,800,000 c. 6,300,000 accounts.
b. 8,500,000 d. 7,500,000 Further analysis showed that merchandise purchased
amounted to Php9,000,000 and ending merchandise
Use the problem below to answer numbers 35 – 37: inventory was Php1,500,000. Goods were sold at 40%
Aries Company kept all cash in a checking account. An above cost.
examination of the accounting of the accounting records The total sales compromised 80% sales on account and
and bank statement for the month of June revealed the 20% cash sales. Total collections from customers,
following information: excluding cash sales, amounted to Php6,000,000.
• The cash balance per book on June 30 was 38. What amount should be reported as cost of
Php8,500,000. goods sold?
• A deposit of Php1,000,000 that was placed in the a. 7,500,000 c. 3,600,000
bank’s night depository on June 30 did not b. 5,400,000 d. 6,900,000
appear on the bank statement. 39. What amount should be reported as sales on
• The bank statement showed that on June 30 the account?
bank collected note for the entity and credited a. 10,500,000 c. 12,000,000
the proceeds of Php950,000 to the note for the b. 18,750,000 d. 8,400,000
entity’s account, net of collection charge 40. What is the net realizable value of accounts
Php50,000. receivable at year-end?
• Checks outstanding on June 30 amounted to a. 1,980,000 c. 1,930,000
Php300,000 including certified check of b. 2,350,000 d. 2,400,000
Php100,000.
• The entity discovered that a check written in
June for Php200,000 in payment of an account End of Midterm Exam
payable had been recorded in the entity’s
records as Php20,000.
• Included with the June bank statement was NSF
check for Php250,000 received from a customer
on June 26.
• The bank statement showed a Php200,00 service
charge for June.
35. What amount should be reported as cash in bank
on June 30?
a. Php9,000,000 c. Php9,360,000
b. Php8,300,000 d. Php9,180,000
36. What is the balance per bank statement on June
30?
a. 8,300,000 c. 8,660,000
b. 9,700,000 d. 8,200,000
37. What is the net adjustment to cash in bank on
June 30?
a. Net debit Php950,000
b. Net credit Php450,000
c. Net debit Php500,000
d. Net debit Php860,000