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ACCTBA Accounting Designated De La Salle University

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De La Salle University

ACCTBA Accounting Designated De La Salle University

Problem I (Current assets)
An entity provided the following trial balance on June 30, 2015:
Cash overdraft ( 200,000) Property, plant and equipment, net 1,900,000
Accounts receivable, net 700,000 Accounts payable and accrued expenses 640,000
Inventory 1,200,000 Share capital 3,000,000
Prepaid expenses 200,000 Share premium 500,000
Land held for resale 2,000,000 Retained earnings 1,660,000
Checks amounting to P600,000 were written to vendors and recorded on June 30 resulting in cash
overdraft of P200,000. The checks were mailed on July 9. Land held for resale was sold for cash on
July 15. The financial statements were issued on July 31. On June 30, 2015, what total amount
should be reported as current assets?
a. 4,500,000
b. 4,100,000
c. 4,300,000
d. 2,500,000
Problem 2 (Total assets)
An entity was incorporated on January 1, 2015 with proceeds from the issuance of P7,500,000 in
shares and borrowed funds of P1,100,000. During the first year of operations, revenue from sales
and consulting amounted to P820,000, and operating costs and expenses totaled P640,000. On
December 15, the entity declared a P30,000 cash dividend, payable to shareholders on January 15,
2016. No additional activities affected owners’ equity in 2015. The liabilities increased to
P1,200,000 by December 31, 2015. What amount should be reported as total assets on December
31, 2015?
a. 8,850,000
b. 8,820,000
c. 7,870,000
d. 8,750,000
Problem 3 (Current liabilities)
An entity had the following liabilities on December 31, 2015:
Accounts payable 55,000
Unsecured notes, 8% due 7/1/2016 400,000
Accrued expenses 35,000
Contingent liability 450,000
Deferred tax liability 25,000
Senior bonds, 7%, due 3/31/2016 1,000,000
The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit filed against the
entity. The legal counsel expects the suit to be settled in 2016 and has estimated that the entity will
be liable for damages in the range of P450,000 to P750,000. The deferred tax liability is expected to
reverse in 2016. What amount should be reported on December 31, 2015 for current liabilities?
a. 515,000
b. 940,000
c. 1,490,000
d. 1,515,000
Page 2
Problem 4 (Net income)
An entity reported net income of P7,410,000 for the current year. The auditor raised questions about
the following amounts that had been included in net income:
Unrealized loss on equity investments at fair value through other comprehensive
income ( 540,000 )
Gain on early retirement of bonds payable 2,200,000
Adjustment of profit of prior year for error in depreciation, net of tax effect ( 750,000 )
Loss from fire ( 1,400,000 )
Gain from change in fair value attributable to the credit risk of financial liability
designated at fair value through profit or loss 500,000
What amount should be reported as adjusted net income?
a. 6,500,000
b. 7,200,000
c. 8,200,000
d. 8,700,000
Problem 5 (Retained earnings)
An entity provided the following information on December 31, 2015:
Total reported income since incorporation 1,700,000
Total cash dividends paid ( 800,000)
Unrealized holding loss on trading investment ( 120,000)
Total share dividends distributed ( 200,000)
Prior period adjustment recorded January 1, 2015 – credit 75,000
What amount should be reported as retained earnings on December 31, 2015?
a. 655,000
b. 700,000
c. 580,000
d. 775,000
Problem 6 (Cash computation)
An entity reported the checkbook balance on December 31, 2015 at P8,000,000. In addition, the
entity held the following items in the safe on that date:
Check payable to the entity, dated January 2, 2016 in payment of a sale,
not included in December 31 check book balance 1,000,000
Check payable to the entity, deposited December 15 and included in
December 31 checkbook balance, but returned by bank on
December 30 stamped “NSF”. The check was redeposited on
January 2, 2016 and cleared on January 5, 2016 3,000,000
Check drawn on the entity’s account, dated and recorded on
December 31, 2015 but not mailed until January 15, 2016 2,500,000
Coins and currencies on hand 800,000
Three-month money market instruments 1,500,000
What is the correct amount of “cash” on December 31, 2015?
a. 7,500,000
b. 9,300,000
c. 8,300,000
d. 9,800,000
Page 3
Problem 7 (Impairment of accounts receivable)
An entity reported the following accounts receivable on December 31, 2015:
Customer A 1,000,000
Customer B 1,500,000
Customer C 2,000,000
Customer D 2,500,000
All other accounts receivable not individually significant 3,500,000
The entity determined that Customer A receivable is totally impaired and Customer B receivable is
impaired by P700,000. The other receivables from Customers C and D are not considered impaired.
The entity determined that a composite rate of 10% is appropriate to measure impairment on the
remaining accounts receivable. What is the total impairment loss of accounts receivable for 2015?
a. 2,500,000
b. 2,050,000
c. 1,050,000
d. 2,750,000
Problem 8 (Current net receivables)
An entity reported current receivables on December 31, 2015 which consisted of the following:
Trade accounts receivable 930,000
Allowance for uncollectible accounts 20,000
Claim against shipper for goods lost in transit in November 2015 30,000
Selling price of unsold goods sent by the entity on consignment at 130% of
cost and not included in the ending inventory 260,000
Security deposit on lease of warehouse used for storing inventories 300,000
What is the correct total of current net receivables on December 31, 2015?
a. 1,500,000
b. 1,200,000
c. 1,240,000
d. 940,000
Problem 9 (Measurement of notes receivables)
On December 31, 2015, an entity received two P2,000,000 notes receivable from customers. On
both notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and
payable at maturity. The first note, made under customary trade terms, is due in nine months and the
second note is due in five years. The market interest rate for similar notes on December 31, 2015
was 8%. The PV of 1 at 8% due in nine months is .944, and the PV of 1 at 8% due in 5 years is .68.
On December 31, 2015, what total carrying amount should be reported for the two notes receivable?
a. 3,248,000
b. 3,494,400
c. 3,360,000
d. 3,564,000


ACCTBA Accounting Designated De La Salle University

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