CASH

1. The following statements relate to cash. Which statement is true?

a. The term "cash equivalent" refers to demand credit instruments such as
money order and bank drafts.
b. The purpose of establishing a petty cash fund is to keep enough cash on
hand to cover all normal operating expenses for a period of time.
c. Classification of a restricted cash balance as current or noncurrent should
parallel the classification of the related obligation for which the cash was
restricted.
d. Compensating balances required by a bank should always be excluded from
"cash and cash equivalent".

2. Cash equivalents are

a. Short-term and highly liquid investments that are readily convertible into cash.
b. Short-term and highly liquid investments that are readily convertible into cash
with remaining maturity of three months.
c. Short-term and highly liquid investments that are readily convertible into cash
and so near their maturity that they represent insignificant risk of changes in
value because of changes in interest rates.
d. Short term and highly liquid marketable equity securities.

3. Which of the following statements is false?

Not all items included in cash constitute legal tender.
b. Cash may be offset against a liability if the deposit of funds in restricted
account clearly constitutes the legal discharge of the liability.
c. Legally restricted bank deposit held as compensating balances should be
segregated from the cash account and reported under a separate caption.
d. One-year BSP treasury bills with remaining maturity of three months on
balance sheet date may be shown as part of "cash and cash equivalents"
provided this is disclosed.
4. All cash receipts are deposited intact and all cash disbursements are made
by means of check. This internal control is known as
a. Administrative control
b. Imprest system
c. Accounting control
D. Auditing control

5. Entries to record the replenishment of petty cash fund result in a debit to

various expense accounts and a credit to cash in bank. This accounting
procedure typically exemplifies the
a. Imprest petty cash system
b. Fluctuating petty cash system
C. Internal control
d. Administrative control

6. 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 employees
d. To effectively control cash disbursements

7. A cash over or short account

a. Is not generally accepted
b. Is debited when the petty cash fund proves out over
C. Is debited when the petty cash fund proves out short
d. Is a contra account to cash
8. The payments of accounts payable made subsequent to the close of the
accounting period are recorded as if they were made at the end of the current
period.
a. Window dressing
b. Kiting
c. Lapping
d. Imprest system
9. Bank reconciliation
a. Is the process of transferring money in or out of a bank account.
b. Requires that every transaction which will result in a cash payment be verified,
approved and recorded before a bank check is prepared.
c. Is an analysis that reflects the bank transactions made by a depositor.
d. Explains the difference between the bank balance and the balance shown in
the depositor's records.

10.If the cash balance shown in a company's accounting records is less than the
correct cash balance and neither the company nor the bank has made any
errors, there must be
a. Deposits credited by the bank but not yet recorded by the company
b. Deposits in transit
c. Outstanding checks
d. Bank charges not yet recorded by the company

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

12.The journal entries for a bank reconciliation

a. Are taken from the balance per bank only
b. May include a debit to office expense for bank service charges
c. May include a credit to accounts receivable for an NSF check
d. May include a debit to accounts payable for an NSF check
13. When preparing a bank reconciliation, bank credits are
a. Added to the bank statement balance
b. Deducted from the bank statement balance
c. Added to the balance per book
d. Deducted from the balance per book

14. Bank overdrafts, if material, should

a. Be reported as a deduction from the current asset section.
b. Be reported as a deduction from cash.
c. Be netted against cash and a net cash amount reported.
d. Be reported as a current liability.

15. Which of the following is not a basic characteristic of a system of cash

control?
a. Use of a voucher system
b. Combined responsibility for handling and recording cash
C. Daily deposit of all cash received
d. Internal audits at irregular intervals

16. Bank statements provide information about all of the following except
a. Checks cleared during the period.
b. NSF checks.
c. Bank charges for the period.
d. Errors made by the company.

1. Bank overdrafts that cannot be offset should be

a. reported as a deduction from the current asset section.
b. reported as a deduction from cash.
c. netted against cash and a net cash amount reported.
d. reported as a current liability.
2. Coins, currencies, checks, money orders, money on deposit, and cash funds
that are available for unrestricted use in current operations are disclosed in the
notes to the financial statements as
a. Cash.
b. Cash equivalents.
c. Investments.
d. Accounts receivable.

3. These are short-term, highly liquid investments that are so near their maturity
that they represent insignificant risk of changes in value due to changes in
interest rates.
a. Cash and Cash equivalents
b. Treasury bills
c. Treasury notes
d. Cash equivalents

4. Cash in foreign currency is valued at

a. tace value.
b. current exchange rate.
C. current exchange rate reduced by an allowance for expected decline in
peso.
d. estimated realizable value.

5. The amount reported as "Cash" on a company's statement of financial

position normally should exclude
a. postdated checks that are payable to the company.
b. cash in a payroll account.
c. undelivered checks written and signed by the company.
d. petty cash.
6. Under the imprest system of handling petty cash funds, the petty cash fund
account is credited when
a. disbursement is made out of the fund.
b. the fund is replenished.
c. the fund is not replenished and the fund is adjusted for the disbursements
during the period.
d. the imprest balance of the fund is increased.

7. The policies and procedures used to safeguard assets, ensure accurate

business information, and ensure compliance with laws and regulations are
called
a. voucher system.
b. bank reconciliation.
c. internal controls.
d. proof of cash.

8. Which of the following is not considered an internal control over cash?

a. rotating duties among employees with cashier responsibilities
b. separating the responsibilities for cash custody and cash recording
c. management's operating style
d. voucher system

9. It is a fund that is used to pay relatively small amounts.

a. pretty cash fund
b. small fund
C. cute little cash fund
d. petty cash fund
10. If the Cash Short and Over account has a credit balance at the end of the
period and the investigation for the discrepancy was without merit, the balance
would be reported in the financial statements as
a. receivable from an emplovee.
b. loss.
c. other liabilities.
d. other income or gain.

11. Trask Corporation's checkbook balance on December 31, 2001 was P8,000.
In addition, Trask held the following items in its safe on December 31:

● Check payable to Trask Corporation, dated January 2, 2002,

not included in December 31 checkbook balance
P2,000
● Check payable to Trask Corporation, deposited on December 20
and included in the Dec 31 checkbook balance but returned by the
bank on Dec 30, stamped "NSF." The check was redeposited on
Jan. 2, 2002 and cleared on Jan. 7
400
● Post-dated checks not reflected in the checkbook balance
150
● Check drawn on Trask Corporation's account, payable to a vendor,
dated and recorded December 31, but not mailed until January 15, 2002,
deducted from checkbook balance
1,000

The proper amount to be shown as cash on Trask's balance sheet at December

31, 2001, is

a. 7,000
b. 8,000
c. 8,600
d. 9,750
12. On December 31, 20x1, West Company had the following cash balances:

● Cash in banks
P1,800,000
● Petty cash funds (all funds were reimbursed on 12/31/x1)
50,000

Cash in banks includes P600,000 of compensating balances against short-term

borrowing arrangements at December 31, 20x1. The compensating balances
are not legally restricted as to withdrawal by West. In the current assets section
of West's December 31, 20x1, balance sheet (statement of financial position),
what total amount should be reported as cash?
a. 1,200,000
b. 1,250,000
c. 1,800,000
d. 1,850,000

13. At December 31, 20x3, Beth Co. had the following balances in the accounts
it maintains at XYZ. Bank:

Checking account #101 175,000

Checking account #201 (10.000)
Money market account 25,000
90-day certificate of deposit, due 2/28/×4 50.000
180-day certificate of deposit, due 3/15/×4 80,000

Beth Co. classifies debt securities acquired three months or less before maturity
date as cash equivalents. In its December 31, 20x3 statement of financial
position, what amount should Beth Co. report as cash and cash equivalents?
A. 330,000
B. 250,000
C. 240,000
D. 225,000
14. Sneeze Co. established a petty cash fund of P1,400. The following were the
fund disbursements during the period:
Freight-out P740
Transportation expense 240
Office supplies expense 230
Miscellaneous expense 170

In addition to the receipts (source documents) for the above items, the petty
cash box contained P8 in coins and an IOU of P8 from the secretary handling
the fund. The IOU is to be treated as salary advance. The company uses a cash
over and short account, as needed. The company decided to decrease the
petty cash fund to P1,000 after replenishing the fund. How much is the cash
(shortage) or overage during the period?

a. (4)
b. 4
c. (12)
d. 12

15. Noise Co. or Trans Co. had the following balances on December 31, 20x1:
Cash in checking account P35.000
Cash in money market account 75,000
Treasury bill, purchased 11/1/20×1, maturing 1/31/20×2 350,000
Treasury bill, purchased 12/1/20×1, maturing 3/31/20×2 400,000

What amount should Noise Co. report as cash and cash equivalents in its
December 31, 20×1 statement of financial position?

a. P110,000
b. P385,000
c. P460,000
d. P860,000
1. As contemplated in accounting, cash includes
a. Money only
b. Money and any negotiable instrument
c. Any negotiable instrument
d. Money and any negotiable instrument that is payable in money and
acceptable by the bank for deposit and immediate credit

2. To be reported as "cash and cash equivalent, the cash and cash equivalent
must be
a. Unrestricted in use for current operations
b. Available for the purchase of property, plant and equipment
c. Set aside for the liquidation of long-term debt
d. Deposited in the bank

3. Cash equivalents are

a. Short-term and highly liquid investments that are readily convertible into cash
b. Short-term and highly liquid investments that are readily convertible into cash
with remaining maturity of three months
c. Short-term and highly liquid investments that are readily convertible into cash
and acquired three months before maturity
d. Short-term and highly liquid marketable equity securities

4. All of the following can be classified as cash and cash equivalents, except?
a. Redeemable preference shares acquired and due in 60 days
b. Commercial papers held and due for repayment in 90 days
c. Equity investments
d. A bank overdraft
5. Which is false concerning measurement of cash and cash equivalents?
a. Cash is measured at face value
b. Cash in foreign currency is measured at the current exchange rate
c. If a bank or financial institution holding the funds of the company is in
bankruptcy or financial difficulty, cash should be written down to estimated
realizable value
d. Cash equivalents should be measured at maturity value, meaning face value
plus interest.

6. If material, deposits in foreign bank which are subject to foreign exchange

restriction should be classified
a. Separately as current asset, with appropriate disclosure
b. Separately as a non-current asset with appropriate disclosure
c. Be written off as an extraordinarv loss
d. As part of cash and cash equivalents

7. Bank overdraft
a. Is a debit balance in a cash in bank account
b. Is offset against demand deposit account in another bank
c. Which cannot be offset is classified as a current liability
d. Which cannot be offset is classified as non-current liability

8. A compensating balance
a. Must be included in cash and cash equivalent
b. Which is legally restricted and related to a long-term loan is classified as a
current asset
c. Which is legally restricted and related to a short-term loan is classified
separately as a current asset
d. Which is not legally restricted as to withdrawal is classified separately as
current asset
9. Unreleased checks (checks drawn before the end of reporting period but held
for later delivery to creditors)
a. Shall be treated as outstanding checks
b. Shall be restored to the cash balance
c. Shall be treated as outstanding checks if the date is shortly after the end of
reporting period.
d. Shall be treated as outstanding checks if they are ultimately encashed.

10. Which of the following shall not be considered "cash" for financial reporting
purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks and personal checks
c. Coin, currency and available funds
d. Postdated checks and IOUs

11. Which of the following is usually considered cash?

a. Certificates of deposit
b. Checking accounts
c. Money market saving certificate
d. Postdated check

12. Petty cash fund is

a. Separately classified as current asset
b. Money kept on hand for making minor disbursements of coin and currency
rather than by writing checks
c. Set aside for the payment of payroll
d. Restricted cash

13. The petty cash account under the imprest fund system is debited
a. Only when the fund is created
b. When the fund is created and every time it is replenished
c. When the fund is created and when the size of the fund is increased
d. When the fund is created and when the size of the fund is decreased
14. The internal control feature that is specific to petty cash is
a. Separation of duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest system

15. 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 disbursements

16. Consider the following: Cash in Bank - checking account of $13,500, Cash on
hand of $500, Post-dated checks received totaling $3,500, and Certificates of
deposit totaling $124,000. How much should be reported as cash in the balance
sheet?
a. $ 13,500.
b. $ 14,000.
c. $ 17.500.
d. $131,500

17. On January 1, 2010, Lynn Company borrows $2,000,000 from National Bank
at 11% annual interest. In addition, Lynn is required to keep a compensatory
balance of $200,000 on deposit at National Bank which will earn interest at 5%.
The effective interest that Lynn pays on its $2,000,000 loan is
a. 10.0%
b. 11.0%.
c. 11.5%.
d. 11.6%
18. Kennison Company has cash in bank of $10,000, restricted cash in a
separate account of $3,000, and a bank overdraft in an account at another
bank of $1,000. Kennison should report cash of
a. $9,000.
b. $10,000.
c. $12,000.
d. $13,000.

19. Kaniper Company has the following items at year-end:

Cash in bank $20,000
Petty cash 300
Short-term paper with maturity of 2 months 5,500
Postdated checks 1,400

Kaniper should report cash and cash equivalents of

a. $20,000.
b. $20,300.
c. $25,800.
d. $27,200.

20. Lawrence Company has cash in bank of $15,000, restricted cash in a

separate account of $4,000, and a bank overdraft in an account at another
bank of $2,000. Lawrence should report cash of
a. $13,000.
b. $15,000.
c. $18,000.
d. $19,000.
21. In connection with your audit of Caloocan Corporation for the year ended
December 31, 2006, you gathered the following:
Current account at Metrobank P2,000,000
Current account at BPI (100,000)
Payroll account 500,000
Foreign bank account - restricted (in equivalent pesos) 1,000,000
Postage stamps 1,000
Employee's post dated check 4.000
IOU from controller's sister 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler's check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund (P4,000 in currency and
expense receipts for P6,000) 10,000
Treasury bills, due 3/31/07 (purchased 12/31/06) 200,000
Treasury bills, due 1/31/07 (purchased 1/1/06) 300,000

Based on the above information and the result of your audit, compute for the
cash and cash equivalent that would be reported on the December 31, 2006
balance sheet.
a. P2,784,000
c. P2,790,000
b. P3,084,000
d. P2,704,000
22. In the course of your audit of the Las Piñas Corporation, its controller is
attempting to determine the amount of cash to be reported on its December 31,
2006 balance sheet. The following information is provided:
1. Commercial savings account of P1,200,000 and a commercial checking
account balance of P1,800,000 are held at PS Bank.
2. Travel advances of P360,000 for executive travel for the first quarter of the next
year (employee to reimburse through salary deduction).
3. A separate cash fund in the amount of P3,000,000 is restricted for the
retirement of a long term debt.
4. Petty cash fund of P10,000.
5. An I.O.U. from a company officer in the amount of P40,000.
6. A bank overdraft of P250,000 has occurred at one of the banks the company
uses to deposit its cash receipts. At the present time, the company has no
deposits at this bank.
7. The company has two certificates of deposit, each totaling P1,000,000. These
certificates of deposit have maturity of 120 days.
8. Las Piñas has received a check dated January 2, 2007 in the amount of
P150,000.
9. Las Piñas has agreed to maintain a cash balance of P200,00o at all times at
PS Bank to ensure future credit availability.
10. Currency and coin on hand amounted to P15,000.

Based on the above and the result of your audit, how much will be reported as
cash and cash equivalent at December 31, 2006?
a. P3,025,000
b. P2,825,000
c. P2,575,000
d. P5,025,000
23. The cash account of the Makati Corporation as of December 31, 2006
consists of the following:
On deposit in current account with Real Bank Cash
collection not yet deposited to the bank 900,000
A customer's check returned by the bank for
insufficient fund 350,000
A check drawn by the Vice-President of the Corporation
dated January 15, 2007 70,000
A check drawn by a supplier dated December 28, 2006
for goods returned by the Corporation 60,000
A check dated May 31,2006 drawn by the Corporation
against the Piggy Bank in payment of customs duties.
Since the importation did not materialize,
the check was returned by the customs broker.
This check was an outstanding check in the
reconciliation of the Piggy Bank account 410,000
Petty Cash fund of which P5,000 is in currency; P3,600 in
form of employees' I.O.U.s; and P1,400 is supported
by approved petty cash vouchers for expenses all
dated prior to closing of the books on December 31, 2006 10,000
Total 1,950,000
Less: Overdraft with Piggy Bank secured by a Chattel
mortgage on the inventories 300,000
Balance per ledger 1,650,000
300,000
P1,650,000

At what amount will the account "Cash" appear on the December 31, 2006
balance sheet?
a. P1,315,000
b. P1,425,000
c. P1,495.000
d. P1.725,000
You noted the following composition of Malabon Company’s “cash account” as of
December 31, 2006 in connection with your audit:
Demand deposit account P2,000,000
Time deposit – 30 days 1,000,000
NSF check of customer 40,000
Money market placement (due June 30, 2007) 1,500,000
Savings deposit in a closed bank 100,000
IOU from employee 20,000
Pension fund 3,000,000
Petty cash fund 10,000
Customer’s check dated January 1, 2007 50,000
Customer’s check outstanding for 18 months 40,000
Total P7,760,000

Additional information follows:

a) Check of P200,000 in payment of accounts payable was recorded on
December 31, 2006 but mailed to suppliers on January 5, 2007.
b) Check of P100,000 dated January 15, 2007 in payment of accounts payable was
recorded and mailed on December 31, 2006.
c) The company uses the calendar year. The cash receipts journal was held open
until January 15, 2007, during which time P400,000 was collected and recorded
on December 31, 2006.

The cash and cash equivalents to be shown on the December 31, 2006 balance sheet is
a. P3,310,000
c. P2,910,000
b. P1,910,000
d. P4,410,000
Tranvia Company revealed the folowing information on December 31, 2020:
Cash in checking account 350,000
Cash in money market account 750,000
Treasury bill, purchased November 1, 2020 3,500,000
maturing January 31, 2021
Time depositpurchasedDecember ,1 2020 4,000,000
maturing March 31, 2021

What amount should be reported as cash and cash equivalents on December

31, 2020?
a. 1,100,000
b. 3,850,000
C.4,600,000
d. 8,600,000

Affable Company provided the following information at year-end comprising the

cash account:
Cash in bank - demand deposit 5,000,000
Cash on hand 400,000
Postage stamps unused 5,000
Certificate of time deposit 1,500,000
Money order 50,000
Manager check 100,000
Traveler check 1,000,000
Postdated customer check 500,000

What total amount should be reported as cash at year-end?

a. 8,050,000
b. 7,050,000
C. 6,550,000
d. 6,450,000
Thor Company provided the following data on December 31, 2020:
Checkbook balance 4,000,000
Bank statement balance 5,000,000
Check drawn on Thor's account, payable to supplier
dated and recorded on December 31, 2020 but
not mailed untilJanuary 31, 2021 500,000
Cash in sinking fund 2,000,000

On December 31, 2020, what amount should be reported as cash under current
assets?
a. 4,500,000
b. 5,500,000
c. 3,500,000
d. 6,500,000

Joana Company had the following account balances on December 31, 2020:
Petty cash fund
Cash on hand
Cash in bank - current account
Cash in bank - payroll account
Time deposit
Cash in bank - restricted account for plant addition,
expected to be disbursed in early 2021
Cash in sinking fund set aside for bond payable
due June 30, 2021

The petty cash fund included unreplenished December2020 petty cash expense
vouchers of P5,000 and employee IOU of P5,000. The cash on hand included a
P100,000 check payable to the entity dated January 31, 2021.

What total amount should be reported as cash and cash equivalents on

December 31, 2020?
а. 6,940,000 b. 8,940,000 C. 7,940,000 d. 7,440,000
1. Which of the following should not be considered cash?
a. Petty cash fund
b. Money order
c. Coin and currency
d. IOU

2. Which of the following is usually considered cash?

a. Certificate of deposit
b. Checking account
c. Money market certificate
d. Postdated check

3. Which of the following should not be included in cash?

a. Travel cash advance
b. Certified check
c. Personal check
d. Manager check

4. All of the following may be included in cash, except

a. Currency
b. Money market instrument
c. Checking account balance
d. Saving account balance

5. Which statement is true about reporting bank overdraft under IFRS?

a. Overdraft typically cannot be offset against positive balance in other cash
account but reported as current liability.
b. Generally, cash overdraft is not allowed.
c. Overdraft can be offset against other bank account when payable on
demand and often fluctuates from positive to overdrawn as an integral part of
cash management.
d. All of these statements are true about bank overdraft.
6. Technically, cash may not include
a. Foreign currency
b. Money order
c. Restricted cash
d. Undeposited customer check

7. Restricted deposits in foreign bank are classified as

a. Current asset with appropriate disclosure.
b. Noncurrent asset with appropriate disclosure
c. Be written off as loss.
d. As part of cash and cash equivalents.

8. What is a compensating balance?

a. Saving account balance
b. Demand deposit account balance
c. Temporary investment as collateral for loan
d. Minimum deposit required to be maintained in connection with a borrowing
arrangement

9. Compensating balance represents

a. Fund in a bank account that cannot be spent
b. Balance in a payroll checking account
c. Account that is subject to bank service charge
d. Account on which a bank pays interest

10. A compensating balance

a. Must be included in cash and cash equivalent.
b. Which is legally restricted and related to a long-term loan is classified as
current asset.
c. Which is legally restricted and related to a short-term loan is classified
separately as current asset.
d. Which is not legally restricted as to withdrawal is classified separately as
current asset.
11. The internal control feature specific to petty cash is
a. Separation of duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest system

12. 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 disbursements

13. The imprest petty cash fund account is debited

a. Only when the fund is created.
b. When the fund is created and every time it is replenished.
c. When the fund is created and when the size of the fund is increased.
d. When the fund is created and when the size of the fund is decreased.

14. A cash over and short account

a. Is not generally accepted.
b. Is debited when the petty cash fund proves out over.
c. Is debited when the petty cash fund proves out short.
d. Is a contra account to cash.

15. Petty cash fund is

a. Separately classified as current asset
b. Money kept on hand for making minor disbursements of coin and currency
rather than by writing checks
c. Set aside for the payment of payroll
d. Restricted cash
NOTES RECEIVABLES

1.Present value is
a.the value now of a future amount.
b.the amount that must be invested now to produce a known future value.
c.always smaller than the future value.
d.all of these.

2.Which of the following factors would show the largest value for an interest rate
of 12% for six periods?
a.Present value of 1
b.Present value of an ordinary annuity of 1
c.Present value of an annuity due of 1
d.Answer cannot be determined

3.A higher interest rate results to

a.increased amount of present value.
b.decreased amount of present value.
c.same amount of present value.
d.Answer cannot be determined due to insufficient data

4.A shorter period results to

a.increased amount of present value.
b.decreased amount of present value.
c.same amount of present value.
d.shorter accountant.

5.The present value of 1 for a period of zero equals

a.1. c. Error!
b.0. d. Answer depends on the interest rate
6.An entity sells goods either on cash basis or on 6-month installment basis. On
January 1, 20x1, goods with cash price of ₱50,000 were sold at an installment
price of ₱75,000. Which of the following statements is correct?
a.Net receivable of ₱75,000 is recognized on the date of sale.
b.Net receivable of ₱50,000 is recognized upon full payment of the total price.
c.The ₱20,000 difference between the cash price and installment price is
recognized as interest income on the date of sale.
d.Net receivable of ₱50,000 is recognized on the date of sale.

7.An entity sells goods for ₱150,000 to a customer who was granted a special
credit period of 1 year. The entity normally sells the goods for ₱120,000 with a
credit period of one month or with a ₱10,000 discount for outright payment in
cash. How much is the initial measurement of the receivable if the entity does
not use the practical expedient allowed under PFRS 15?
a.150,000
b.130,000
c.120,000
D.110,000

Use the following information for the next two questions:

On January 1, 20x1, ABC Co. sold a transportation equipment with a historical
cost of ₱1,000,000 and accumulated depreciation of ₱300,000 in exchange for
cash of ₱100,000 and a noninterest-bearing note receivable of ₱800,000 due on
January 1, 20x4. The prevailing rate of interest for this type of note is 12%.

8.How much is the interest income in 20x1?

a.68,331
b.76,532
c.85,714
D.96,000
9.How much is the carrying amount of the receivable on December 31, 20x2?
a.800,000
b.569,424
c.637,755
D.714,286

Use the following information for the next three questions:

On January 1, 20x1, Mojo Co. sold transportation equipment with a historical
cost of ₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange
for cash of ₱500,000 and a noninterest-bearing note receivable of ₱8,000,000
due in 4 equal annual installments starting on December 31, 20x1 and every
December 31 thereafter. The prevailing rate of interest for this type of note is
12%.

10.How much is the interest income in 20x1?

a.728,946
b.678,334
c.728,964
d.704,236

11.How much is the current portion of the receivable on December 31, 20x1?
a.1,271,036
b.1,423,560
c.3,380,102
D.1,594,388

12.How much is the carrying amount of the receivable on December 31, 20x2?
a.4,803,663
b.3,380,103
c.6,074,699
D.6,000,000
Use the following information for the next three questions:
On January 1, 20x1, ABC Co. sold transportation equipment with a historical cost
of ₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for
cash of ₱100,000 and a noninterest-bearing note receivable of ₱4,000,000 due in
4 equal annual installments starting on January 1, 20x1 and every January 1
thereafter. The prevailing rate of interest for this type of note is 12%.

13.How much is the interest income in 20x1?

a.408,230
b.278,334
c.328,964
D.288,220

14.How much is the carrying amount of the receivable on December 31, 20x1?
a.1,690,510
b.892,857
c.2,690,051
D.1,594,388

15.How much is the carrying amount of the receivable on January 1, 20x3?

a.892,857
b.3,380,102
c.6,074,699
D.6,000,000
Use the following information for the next two questions:
On January 1, 20x1, ABC Co. sold machinery with historical cost of ₱3,000,000
and accumulated depreciation of ₱900,000 in exchange for a 3-year,
₱2,100,000 noninterest-bearing note receivable due in equal semi-annual
payments every July 1 and December 31 starting on July 1, 20x1. The prevailing
rate of interest for this type of note is 10%.

16.How much is the interest income in 20x1?

a.88,825
b.177,649
c.128,964
D.164,591

17.How much is the carrying amount of the receivable on December 31, 20x1?
a.1,241,083
b.982,378
c.1,690,051
D.1,594,388

18.On January 1, 20x1, ABC Co. sold machinery costing ₱3,000,000 with
accumulated depreciation of ₱1,100,000 in exchange for a 3-year, ₱900,000
noninterest-bearing note receivable due as follows:
Date Amount of installment
December 31, 20x1 400,000
December 31, 20x2 300,000
December 31, 20x3 200,000
Total 900,000
The prevailing rate of interest for this type of note is 10%. How much is the
carrying amount of the receivable on December 31, 20x1?
a.467,354
b.438,016
c.376,345
d.428,346
Use the following information for the next two questions:
On January 1, 20x1, ABC Co. sold inventory costing ₱1,800,000 with a list price of
₱2,200,000 and a cash price of ₱2,000,000 in exchange for a ₱2,400,000
noninterest-bearing note due on December 31, 20x3.

19.How much is the initial measurement of the receivable?

a.1,800,000
b.2,200,000
c.2,000,000
D.2,400,000

20.How much is the carrying amount of the receivable on December 31, 20x1?
a.2,125,390
b.2,135,341
c.2,098,343
d. 2,000,000

1. The basic issues in accounting for notes receivable include each of the
following except
a. analyzing notes receivable.
b. disposing of notes receivable.
c. recognizing notes receivable.
d. valuing notes receivable.

2. A 6o-dav note receivable dated June 13 has a maturity date of

a. August 13.
b. August 12.
c. August 11.
d. August 10.

3. The maturity value of a $90,000, 10%, 60-day note receivable dated July 3 is
a. $90,000.
b. $99,000.
c. $105,000.
d. $91,500.

4. A 90-day note dated June 14 has a maturity date of

a. September 14.
b. September 12.
c. September 13.
d. September 15.

5. A promissory note
a. is not a formal credit instrument.
b. may be used to settle an accounts receivable.
c. has the party to whom the money is due as the maker.
d. cannot be factored to another party.

6. Which of the following is not true regarding a promissory note?

a. Promissory notes may not be transferred to another party by endorsement.
b. Promissory notes may be sold to another party.
c. Promissory notes give a stronger legal claim to the holder than accounts
receivable.
d. Promissory notes may be bearer notes and not specifically identify the payee
by name.

7. The maturity value of a $4,000, 9%, 6o-day note receivable dated February
10th is
a. $4,060.
b. $4,030.
c. $4,000.
d. $4,360.

8. The interest on a $5,000, 10%, 1-year note receivable is

a. $5,000.
b. $500.
c. $5,050.
d. $5,500.

9. The maturity value of a $30,000, 8%, 3-month note receivable is

a. $30,600.
b. $30,240.
c. $32,400.
d. $30,200.

10. Risen Company receives a $5,000, 3-month, 8% promissory note from Dodd
Company in settlement of an open accounts receivable. What entry will Risen
Company make upon receiving the note?

a. Notes Receivable 5,100

Accounts Receivable-Dodd Company 5,100
b. Notes Receivable 5,100
Accounts Receivable-Dodd Company 5,000
Interest Revenue 100
c. Notes Receivable 5,000
Interest Receivable 100
Accounts Receivable-Dodd Company 5,000
Interest Revenue 100
d. Notes Receivable 5,000
Accounts Receivable-Dodd Company 5,000

11. A company that receives an interest-bearing note receivable will

a. debit Notes Receivable for the maturity value of the note.
b. credit Notes Receivable for the maturity value of the note.
c. debit Notes Receivable for the face value of the note.
d. credit Notes Receivable for the face value of the note.
12. Short-term notes receivable is reported at
a. cash (net) realizable value.
b. face value.
c. gross realizable value.
d. maturity value.

13. When a note receivable is dishonored,

a. interest revenue is never recorded.
b. bad debts expense is recorded.
c. the maturity value of the note is written off.
d. Accounts Receivable is debited if eventual collection is expected.

14. The average collection period is computed by dividing

a. net credit sales by average gross accounts receivable.
b. net credit sales by ending gross accounts receivable.
c. the accounts receivable turnover ratio by 365 days.
d. 365 days by the accounts receivable turnover ratio.

15. Herbert Company lends Newton Company $30,000 on April 1, accepting a

four-month, 9% interest note. Herbert Company prepares financial statements on
April 30. What adjusting entry should be made before the financial statements
can be prepared?
a. Note Receivable 30,000
Cash 30,000
b. Interest Receivable 225
Interest Revenue 225
c. Cash 225
Interest Revenue 225
d. Interest Receivable 900
Interest Revenue 900
16. When a note is accepted to settle an open account, Notes Receivable is
debited for the note's
a. net realizable value.
b. maturity value.
c. face value.
d. face value plus interest.

17. A note receivable is a negotiable instrument which

a. eliminates the need for a bad debts allowance.
b. can be transferred to another party by endorsement.
c. takes the place of checks in a business firm.
d. can only be collected by a bank.

18. The interest on a $2,000, 6%, 90-day note receivable is

a. $120.
b. $60
c. $30.
d. $90.

19. Notes receivable are recognized in the accounts at

a. cash (net) realizable value.
b. face value.
c. gross realizable value.
d. maturity value.

20. The retailer considers VISA and MasterCard sales as

a. cash sales.
b. promissory sales.
c. credit sales.
d. contingent sales
1.A VAT-registered entity purchases inventory. The invoice price of the inventory
includes payment for VAT. The entity should
a.include the VAT paid as part of the cost of the inventory.
b.exclude the VAT paid and record it under the VAT payable account.
c.exclude the VAT paid and record it under the Input VAT account.
d.ignore the VAT payment and disclose it only in the notes to the financial
statements.

Use the following information for the next two questions:

During 2004, Elway Corporation transferred inventory to Howell Corporation and
agreed to repurchase the merchandise early in 2005. Howell then used the
inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to
Elway. In 2005 when Elway repurchased the inventory, Howell used the proceeds
to repay its bank loan.

2. This transaction is known as a(n)

a.consignment.
b.installment sale.
c.assignment for the benefit of creditors.
d.product financing arrangement.

3.On whose books should the cost of the inventory appear at the December 31,
2004 balance sheet date?
a.Elway Corporation
b.Howell Corporation
c.Norwalk Bank
d.Howell Corporation, with Elway making appropriate note disclosure of the
transaction
4.Eller Co. received merchandise on consignment. As of January 31, Eller
included the goods in physical inventory but did not record the transaction. The
effect of this on its financial statements for January 31 would be
a.net income or profit, current assets, and retained earnings were overstated.
b.net income or profit was correct and current assets were understated.
c.net income or profit and current assets were overstated and current liabilities
were understated.
d.net income or profit, current assets, and retained earnings were understated.

5.Dawn Co. purchased goods with invoice price of ₱3,000 on account on

December 27, 20x1. The related shipping costs amounted to ₱50. The seller
shipped the goods on December 31, 20x1. Dawn Co. received the goods on
January 2, 20x2 and settled the account on January 5, 20x2. How much is the
net cash payment to the supplier if the terms of the shipment are FOB
destination, freight collect?
a. 3,050 b. 3,000 c. 2,950 d. 0

Use the following information for the next two questions:

On December 31, 20x1, ABC Co. has a balance of ₱240,000 in its inventory
account, determined through physical count, and a balance of ₱90,000 in its
accounts payable account. The balances were determined before any
necessary adjustment for the following:
a. Segregated goods in the shipping area marked “Bill and hold sale” were
included in inventory because shipment was not made until January 4,
20x2. The goods were sold to the customer, on a “bill and hold” sale, for
₱20,000 on December 30, 20x1. The customer accepted the billing on that
day. The cost of the goods is ₱10,000. The goods were already packed
and ready for shipment. Both ABC and the buyer acknowledged the
shipping term.
b. A package containing a product costing ₱80,000 was standing in the
shipping area when the physical inventory was conducted. This was
included in the inventory although it was marked “Hold for shipping
 instructions.” The sale order was dated December 17, 20x1 but the
package was shipped and the customer was billed on January 4, 20x2.
c. Merchandise costing ₱10,000, shipped FOB destination from a vendor on
December 30, 20x1, was received and recorded on January 5, 20x2.
d. Goods shipped F.O.B. shipping point on December 27, 20x1, from a
vendor to ABC Co. were received on January 6, 20x2. The invoice cost of
₱30,000 was recorded on December 31, 20x1 and included in the count
as “goods in-transit.”

6.How much is the adjusted balance of inventory?

a. 240,000
b. 230,000
c. 160,000
d. 200,000

7.How much is the adjusted balance of accounts payable?

a. 90,000
b. 80,000
c. 60,000
d. 100,000
8.The records of ABC Co. show the following:

a. Goods sold on an installment basis to XYZ, Inc.,

title to the goods was retained by ABC Co. until
full payment is made. XYZ, Inc. took possession of the goods. 150,000
b. Goods sold to Alpha Co., for which ABC Co.
has the option to repurchase the goods sold
at a set price that covers all costs related to the inventory. 280,000
c. Goods sold under a “sale on trial” arrangement 70,000
d. Goods received from Beta Co. for which an
agreement was signed requiring ABC Co. to
replace such goods in the near future. 50,000

How much is included as part of inventory?

a. 50,000
b. 120,000
c. 270,000
d. 330,000

9.ABC Co. uses the periodic inventory system. In the current year, ABC’s ending
inventory is understated by ₱20,000. Which of the following statements is
correct?

a.ABC’s cost of goods sold is understated by ₱20,000.

b.ABC’s gross income is understated by ₱20,000.
c.ABC’s net purchases are understated by ₱20,000.
d.ABC’s profit is overstated by ₱20,000.
10.On January 1, 20x1 Plaka Co. acquired goods for sale in the ordinary course
of business for ₱250,000, excluding ₱5,000 refundable purchase taxes. The
supplier usually sells goods on 30 days’ interest-free credit. However, as a
special promotion, the purchase agreement for these goods provided for
payment to be made in full on December 31, 20x1. Transport charges of ₱2,000
were paid on January 1, 20x1. An appropriate discount rate is 10 per cent per
year. How much is the initial cost of the inventories?

a. 229,273
b. 224,727
c. 250,000
d . 257,000

11.Ciano Co. acquired a tract of land for ₱2,000,000. The land was developed
and subdivided into residential lots at an additional cost of ₱200,000. Although
the subdivided lots are relatively equal in sizes, they were offered at different
sales prices due to differences in terrain. Information on the subdivided lots is
shown below:

Lot group No. of lots Price per lot

A 4 480,000
B 10 240,000
C 15 192,000

During the year, 2 lots from the A group, 3 lots from the B group and 12 lots from
the C group were sold. How much gross income is recognized during the year?

a. 2,766,666
b. 2,783,333
c. 2,860,000
d. 2,877,333
Use the following information for the next four questions:
Kryslanz Co. is a wholesaler of guitar picks. The activity for product “Pick X”
during August is shown below:

Date Transaction Units Unit cost Total cost

1-Aug Inventory 2,000 ₱ 28.80 ₱ 57,600
7 Purchase 3,000 29.76 89,280
12 Sales 4,200
13 Purchase 4,800 30.40 145,920
14 Sales return 600
22 Sales 3,800
29 Purchase 1,900 30.88 58,672
30 Purchase return 300 30.88 (9,264)

Total goods available for sale ₱ 342,208

12. How much are the ending inventory and cost of goods sold under the FIFO -
periodic cost flow

Ending inventory Cost of goods sold

a. 219.840 122.368
b. 112.341 229,867
c. 122.368 219,840
d. 122.386 219,804
13. How much are the ending inventory and cost of goods sold under the FIFO -
perpetual cost flow forula?

Ending inventory Cost of goods sold

a. 219.840 122,368
b. 112341 229,867
c. 122.368 219.840
d. 122,386 219,804

14. How much are the ending inventory and cost of goods sold under the
weighted average - periodic
COST flow formula?

Ending inventory Cost of goods sold

a. 229.840 112,160
b. 126,468 215,740
c. 120.080 222,128
d. 120.072 222,153

15. How much are the ending inventory and cost of goods sold under the
weighted average - perpetual cost flow formula?

Ending inventory Cost of goods sold

a. 121.794 220.414
b. 122.468 219,740
c. 122.017 220,191
d. 123,384 218,824
16. Vacation Co. buys and sells products A & B. The following unit costs are
available for the inventory as of December 31, 20x1: (All costs are borne by
Vacation Co.)
A B
Number of units 2,000 3.000
Purchase cost per unit P125 P190
Delivery cost from supplier 10 30
Estimated selling price 150 250
Selling costs 22 28
General and administrative 15 18

How much total inventory shall be reported in Vacation Co. 's 20×1 financial
statements?
a. 916,000
b. 930,000
c. 966,000
d. 696.000

17. On January 1, 20x1, Shock Co. signed a three year, noncancelable

purchase contract that allows Shock Co. to purchase up to 12,000 units of a
microchip annually from Aha! Co. at P15 per unit. The guaranteed minimum
annual purchase is 3000 units. At year-end, it was found out that the goods are
obsolete. shock co. had 4.000 units of this inventory at Uecember 31, ZUx1, and
believes these parts can be sold as scrap for 5 per unit. How much is the loss on
purchase commitment to be recognized on December 31, 20x1?

a. 70.000
b. 100.000
c. 60,000
d. O
18. The raw materials inventory of Mug Co. on December 31, 20x1 have a cost of
P20,000 and an estimated net realizable value of 18,000. Information on the
finished goods is as follows.
Cost………………………………………………………....... P250,000
NRV……………………………………………………........... P280.000

How much is the total inventory on December 31, 20x1?

a. 268,000
b. 270,000
с. 298,000
d. 300.000

Use the following information for the next two questions:

Almost Co. has the following comparative information regarding its inventories.
2022 2021
Inventory, December 31 at cost 30,000 24,000
Inventory. December 31 at NRV 33,000 22,000
Cost of goods sold before adjustments 180,000 200,000

Almost Co. recognizes write-downs of inventories in cost of goods sold.

19. How much is the cost of goods sold in 20x1?

a. 200,000
b. 202.000
c. 198.000
d. 220,000

20. How much is the cost of goods sold in 20x2?

a. 178,000
b. 177.000
c. 182,000
d. 183.000