Apino Jan Dave T.

Quiz

BSA 4-1

Cash
The books of Manilas Service, Inc. disclosed a cash balance of P687,570 on
December 31, 2014. The bank statement as of December 31 showed a balance of P
547,800. Additional information that might be useful in reconciling the two balances
follows:
a) Check number 748 for P 30,000 was originally recorded on the books as
P45,000
b) A customers note dates September 25 was discounted on October 12. The
note was dishonored on December 29(maturity date). The bank charges
Manilas account for P142,650, including a protest fee of P2,650.
c) The deposit of December 24 was recorded on the books as P28,950, but it
was actually a deposit of P27,000.
d) Outstanding checks totaled P98,850 as of December 31
e) There were bank service charges for December of P 2,100 not yet recorded
on the books.
f) Manilas account had been charged on December 26 for a customers NSF
check for P12,960.
g) Manila properly deposited P6,000 on December 3 that was not recorded by
the bank.
h) Receipts of December 31 for P134,250 were recorded by the bank on January
2.
i) A bank memo stated that a customers note for P45,000 and interest of
P1,650 had been collected on December 27, and the bank charged P360
collection fee
What is the adjusted cash in bank balance?
a. P583,200
b. P577,200
c. P580,200
d. P512,400
Net adjustment to cash as of December 31 ,2014
a. P104,370
b. 110,370
c. P98,370
d. P175,170
Balance per Bank
Deposit in Transit
Bank Error
Less Outstanding Checks
Adjusted Bank Balance, 12/31

547,800
134,250
6,000
98,850
589,200

Balance per Book

Book error
Customer Note
Less Dishonored note
Book error

687,570
15,000
46,290
142,650
1950

NSF check
Bank service charge
Adjusted book balance
Unadjusted balance per books, 12/31
Adjusted book balance,12/31
Net adjustment to cash

19,960
2,100
589,200
687,570
589,200
98,370

In connection with your audit of Caloocan Corporation for the year ended December
31, 2015, you gathered the following:
1. Current account at Metrobank
P2,000,000
2. Current account at BPI
(100,000)
3. Payroll account
500,000
4. Foreign bank account restricted (in equivalent pesos)
1,000,000
5. Postage stamps
1,000
6. Employees post dated check
4,000
7. IOU from controllers sister
10,000
8. Credit memo from a vendor for a purchase return
20,000
9. Travelers check
50,000
10. Not-sufficient-funds check
15,000
11. Money order
30,000
12. Petty cash fund (P4,000 in currency and expense receipts for P6,000)
10,000
13. Treasury bills, due 3/31/07 (purchased 12/31/06)
200,000
14. 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, 2015 balance
sheet.
a. P2,784,000
b. P3,084,000
c. P2,790,000
d. P2,704,000
Current account at Metrobank
Payroll account

P2,000,000
500,000

Travelers check
Money order
Petty cash fund (P4,000 in currency)
Treasury bills, due 3/31/07 (purchased 12/31/06)
Total

50,000
30,000
4,000
200,000
P2,784,000

Receivables
Your audit of Banayo Corp. for the year ended December 31, 2014 revealed that
Accounts Receivable account consists of the following:
Trade accounts receivable(current)
3,440,000
Past due trade accounts
640,000
Uncollectible accounts
128,000
Credit balances in customers accounts
(80,000)
Notes receivable dishonored
240,000
Consignment shipments- at cost
320,000
The consignee sold goods costing P96,000 for the consignee and remitted the
calance to Banayo. The cash was received in January 2015
Total
Determine the balance of
Trade Accounts Receivable
a. 4,080,000
b. 3,440,000
c. 4,464,000
d. 3,584,000
Allowance for doubtful accounts
a. 204,000
b. 216,000
c. 172,000
d. 179,200
Doubtful accounts expense
a. 264,000
b. 220,000
c. 252,000
d. 227,200

P4,688,000

Trade accounts receivable(current)

Past due trade accounts
Notes receivable dishonored
Consignment goods already sold (P160,000*90%)
Adjusted trade receivables

3,440,000
640,000
240,000
144,000
4,464,000

Adjusted trade receivables

Less due from consignee
Basis of allowance

4,464,000
144,000
4,320,000

Bad debt rate

Require allowance

216,000

5%

Required allowance for doubtful accounts

Write off
Allowance before adjustments
Doubtful accounts expense

216,000
128,000
(80,000)
264,000

Bantay companys unadjusted trial balance at December 31, 2014 included the
following accounts:
Accounts receivable
1,000,000
Allowance for doubtful accounts
40,000
Sales
(15,000,000)
Sales returns and allowance
700,000
Bantay estimates its bad debts expense to be 1 % of net sales. Determine its bad
debt expense for 2014
a. 225,000
b. 254,500
c. 214,500
d. 55,000
Sales
Sales returns
Net sales
Bad debt rate
Bad debt expense

15,000,000
700,000
14,300,000
1%
214,500

Inventories
You are engaged in the regular annual examination of the accounts and records of
ABCD Manufacturing Co. for the year ended December 31, 2014. To reduce the
workload at year end, the company, upon your recommendation, took its annual
physical inventory on November 30, 2012. You observed the taking of the inventory
and made tests of the inventory count and the inventory records.
The companys inventory account, which includes raw materials and work-inprocess is on perpetual basis. Inventories are valued at cost, first-in, first-out
method. There is no finished goods inventory.
The companys physical inventory revealed that the book inventory of P1,695,960
was understated by P84,000.

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:
a. Pricing tests showed that the physical inventory was overstated by P61,600.
b. An understatement of the physical inventory by P4,200 due to errors in footings
and extensions.
c. Direct labor included in the inventory amounted to P280,000. 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.
d. The physical inventory included obsolete materials with a total cost of P7,000.
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

P1,920,800

Direct labor

338,800

Purchases

691,600

b. The cost of sales of P1,920,800 included direct labor of P386,400.

Adjusted amount of physical inventory at November 30, 2014

a. P1,715,560

c.

P1,845,7
60

b. P1,631,560

d.

P1,722,5
60

Adjusted amount of inventory at December 31, 2014

a. P1,509,760
b. P1,516,760
b.
P1,502,760
c.
P1,425,760

Inventory, November 30, 2014

Understatement
Overstatement-Pricing Test
Understatement-errors in footings & extn
Obsolete materials
Adjusted Inventories, November 30, 2014
Purchases in December
Direct Labor Incurred
Overhead
Cost of Goods Sold
Inventories, December 31, 2014

1,695,960
84,000
(61,600)
4,200
(7,000)
1,715,560
691,600
338,800
677,600
(1,920,800)
1,509,760

In connection with your audit of the Alcala Manufacturing Company, you reviewed
its inventory as of December 31, 2014 and found the following items:
(a) A packing case containing a product costing P100,000 was standing in the
shipping room when the physical inventory was taken. It was not included in the
inventory because it was marked Hold for shipping instructions. The customers
order was dated December 18, but the case was shipped and the costumer billed on
January 10, 2015.
(b) Merchandise costing P600,000 was received on December 28, 2014, and the
invoice was recorded. The invoice was in the hands of the purchasing agent; it was
marked On consignment.
(c) Merchandise received on January 6, 2015, costing P700,000 was entered in
purchase register on January 7. The invoice showed shipment was made FOB
shipping point on December 31, 2014. Because it was not on hand during the
inventory count, it was not included.
(d) A special machine costing P200,000, fabricated to order for a particular
customer, was finished in the shipping room on December 30. The customer was
billed for P300,000 on that date and the machine was excluded from inventory
although it was shipped January 4, 2015.

(e) Merchandise costing P200,000 was received on January 6, 2015, and the related
purchase invoice was recorded January 5. The invoice showed the shipment was
made on December 29, 2014, FOB destination.
(f) Merchandise costing P150,000 was sold on an installment basis on December 15.
The customer took possession of the goods on that date. The merchandise was
included in inventory because Alcala still holds legal title. Historical experience
suggests that full payment on installment sale is received approximately 99% of the
time.
(g) Goods costing P500,000 were sold and delivered on December 20. The goods
were included in the inventory because the sale was accompanied by a purchase
agreement requiring Alcala to buy back the inventory in February 2015.
Based on the above and the result of your audit, how much of these items should be
included in the inventory balance at December 31, 2014?
a. P1,300,000
b. P 800,000
c. P1,650,000
d. P1,050,000
Unshipped goods
P 100,000
Purchased merchandise shipped FOB shipping point
700,000
Goods used as collateral for a loan
500,000
Total
P1,300,000

Investments
The following transactions of the Angat Company were completed during the year
2015:
Jan. 2 Purchased 20,000 shares of Bulacan Auto Co. for P40 per share plus
brokerage costs of P4,500. These shares were classified as trading securities.
Feb. 1 Purchased 20,000 shares of Malolos Company common stock at P125 per
share plus brokerage fees of P19,000. Angat classifies this stock as and availablefor-sale security.
Apr. 1 Purchased P2,000,000 of RP Treasury 7% bonds, paying 102.5 plus accrued
interest of P35,000. In addition, the company paid brokerage fees of P18,000. Angat
classified these bonds as a trading security.
Jul. 1 Received semiannual interest on the RP Treasury Bonds.
Aug. 1 Sold P500,000 of RP Treasury 7% bonds at 103 plus accrued interest.
Oct. 1 Sold 3,000 shares of Malolos at P132 per share. The market values of the
stocks and bonds on December 31, 2015, are as follows: Bulacan Auto Co. P45 per
share Malolos Company P130 per share RP Treasury 7% bonds 102

Based on the above and the result of your audit, determine the following:
1. Gain or loss on sale of P500,000 RP Treasury Bonds on August 1, 2015
a. P15,000 gain
b. P 2,500 gain
c. P2,000 loss
d. P7,500 loss
2. Gain or loss on sale of 3,000 Malolos shares on October 1, 2015
a. P18,150 loss
b. P18,150 gain
c. P 2,000 gain
d. P21,000 gain
Sales proceeds (P500,000 x 1.03)
Less cost of RP Treasury bonds sold (P500,000 x 1.025)
Gain on sale of
P500,000 RP Treasury Bonds
Sales proceeds (3,000 shares x P132)
Less cost of shares sold {[(20,000 x P125) + P19,000] x 3/20}
Gain on sale of 3,000 Malolos shares

P515,000
512,500
P 2,500
P396,000
377,850
P 18,150

On January 2, 2014, ABCD Company acquired 20% of the 400,000 shares of

outstanding common stock of XYZ Corporation for P30 per share. The purchase
price was equal to XYZs underlying book value. ABCD plans to hold this stock to
influence the activities of XYZ.
The following data are applicable for 2014 and 2015:
2014
2015
XYZ dividends (paid Oct. 31)
P 40,000
P
48,000
XYZ earnings
140,000
160,000
XYZ stock market price at year-end
32
31
On January 2, 2006, ABCD Company sold 20,000 shares of XYZ stock for P31 per
share. During 2006, XYZ reported net income of P120,000, and on October 31,
2006, XYZ paid dividends of P20,000. At December 31, 2006, after a significant
stock decline, which is expected to be temporary, XYZs stock was selling for P22

per share. After selling the 20,000 shares, ABCD does not expect to exercise
significant influence over XYZ, and the shares are classified as available for sale.
1. Carrying value of Investment in XYZ as of December 31, 2014
a. P12,020,000
b. P 2,500,000
c. P2,420,000
d. P2,388,000
2. Carrying value of Investment in XYZ as of December 31, 2015
a. P2,442,400
b. P2,612,000
c. P12,042,400
d. P 2,372,000
3. Gain or loss on sale of Investment in XYZ on January 2, 2006
a. P2,390,600 loss
b. P
9,400 gain
c. P33,000 loss
d. P27,000 gain
Acquisition cost (400,000 x 20% x P30)
P2,400,000
Dividends received (P40,000 x 20%)
Investment income (P140,000 x 20%)
Carrying value, 12/31/14

(8,000)
28,000
P2,420,000

Carrying value, 12/31/14

Dividends received (P48,000 x 20%)
Investment income (P160,000 x 20%)
Carrying value, 12/31/15

P2,420,000
(9,600)
32,000
P2,442,400

Sales proceeds (20,000 x P31)

Less carrying value of investment sold (P2,442,400 x 20/80)
610,600
Gain on sale of investment

P620,000
P

9,400

Franchise
On January 1, 2014, ABCD signed an agreement to operate as franchisee of Clear
Copy Service, Inc. for an initial franchise of P680,000. Of this amount, P200,000

was paid when the agreement was signed and the balance was payable in four
annual payments of P120,000 each, beginning January 1, 2015. The agreement
provides that the down payment is not refundable and no future services are
required of the franchisor. The implicit rate for loan of this type is 14%. The
agreement also provides the 5% of the revenue from the franchise must be paid to
the franchisor annually. ABCDs revenue from the franchise for 2014 was
P8,000,000. ABCD estimates the useful life of the franchise to be ten years.
Carrying amount of franchise as of December 31, 2014
a. P549,644
b. P494,680
c. P538,733
d. P612,000
Acquisition Cost
Cash
Installment 120,000*2.9137
Carrying Amount of Franchise (1/14)
Amortization 594,644/10
Carrying Amount (12/14)

200,000
349,644
549,644
54964
494,680

Patent
On July 1, 2015, ABCD purchased a patent from the inventor, who asked P1,100,000
for it. ABCD paid for the patent as follows: cash, P400,000; issuance of 10,000
shares of its own ordinary shares, par P10 (market value, P20 per share); and a note
payable due at the end of three years, face amount, P500,000, noninterest-bearing.
The current interest rate for this type of financing is 12 percent. ABCD estimates the
useful life of the patent to be ten years.
Carrying amount of patent as of December
31, 2015
P860,3
a. P1,045,000
c. 10
P908,1
b. P 955,900
d. 05
Cash
Shares 10,000 shares @ P20
Notes Payable P500,000*0.7117
Carrying Amount of Note (7/15)
Amortization (955,850/10)/2
Carrying Amount (12/15)

400,000
200,000
355,850
955,850
47,792.50
908,057.5

Bonds payable
ABCD issued P5,000,000, 12% bonds, on October 1, 2009 at 96. The bonds will
mature on October 1, 2019. Interest is paid semi-annually on October 1 and April 1.
ABCD uses the straight line method to amortize bond discount. Based on the
foregoing information, determine the adjusted balances of the following as of March
31, 2015:

Unamortized bond
discount
a. P110,000
b. P100,000

c P200,000
d. P
90,000

Bond interest payable

a. P

c
. P150,000
d
. P250,000

b. P300,000
Face amount
Acquisition cost
Bond Discount

5,000,000
4,800,000
200,000

Amortization [(200,000/10)*5.5]
Unamortized Discount
Face amount
Stated Rate
Interest Payable
Period
Interest Payable

110,000
90,000
5,000,000
12%
600,000

300,000

Warranty Payable
Cavaliers has a one-year product warranty on some selected items. The estimated
warranty liability on sales made during the 2014 2015 fiscal year and still
outstanding as of March 31, 2015, amounted to P252,000. The warranty costs on
sales made from April 1, 2015 to March 31, 2016, are estimated at P630,000. The
actual warranty costs incurred during 2015 2016 fiscal year are as follows:
Warranty claims honored on 2014 2015 sales

P 252,000

Warranty claims honored on 2015 2016 sales

Total

285,000
P 537,000

Estimated warranty payable

a. P252,000

b. P345,000

c. P630,000

Warranty payable, 3/31/15

Add warranty expense accrued during 2015-2016
Total
Less payments during 2015-2016
Warranty payable, 3/31/16

d. P882,000

252,000
630,000
882,000
537,000
345,000

Shareholders Equity
The shareholders equity section of the ABCD Corporations statement of financial
position as of December 31,2015 is presented below:
12% Preference share capital,
P100 par
Ordinary share capital, P20 par
Share premium preference
Share premium ordinary
Share premium treasury shares
Retained earnings
Total shareholders equity

P 270,000
1,598,400
36,800
235,200
3,200
1,585,840
P3,729,440

ABCD had 65,000 ordinary shares as December 31,2014.

The following shareholders equity transactions were recorded in 2015 and 2016:
2015
May 1
July 1
Jul. 31
Aug. 30
Dec. 31

- Sold 9,000 ordinary shares for P24, par

value P20.
- Sold 700 preference shares for P124, par
value P100.
- Issued an 8% share dividend on ordinary
shares. The market value of ordinary
share was P30 per share.
- Declared cash dividends of 12% on
preference shares and P3 per share on
ordinary shares.
- Profit for the year amounted to
P1,345,040.

2016
Feb. 1
May 1
May 31

- Sold 2,200 ordinary shares for P30.

- Sold 600 preference shares for P128.
- Issued a 2-for-1 split of ordinary shares.
The par value of the ordinary share was
reduced to P10 per share.
Sep. 1 Purchased 1,000 ordinary shares for P18
to be held as treasury shares.
Oct. 1 Declared and paid cash dividends of 12%
on preference shares and P4 per share on ordinary shares.
Nov. 1 -

Sold 1,000 shares of treasury shares for P22.

Dec. 31

Profit for the year amounted to P991,520.

Dividends paid to ordinary shareholders in 2016

a.
b.
c.
d.

P652,690
P692,560
P652,960
P656,960

Ordinary Shares
Dividend per Share
Dividends Paid to Ordinary Shares

163,240
4
652,960

The Retained Earnings account of Perseverance Company shows the following

debits and credits for the year 20xx:
RETAINED EARNINGS
Date
Jan. 1
(a)
(b)
(c)
(d)

Balance
Loss from fire
Write-off of goodwill
Stock dividends distributed
Loss on sale of equipment
Officers compensation related to
( e ) income of
prior periods accrual overlooked
( f ) Loss on retirement of preferred shares
at more than issue price
( g ) Paid in capital in excess of par
( h ) Stock issuance expenses
(related to letter g)
( i ) Stock subscription defaults
Gain on retirement of preferred stock
( j ) at
less than issue price
( k ) Gain on early retirement of bonds
( l ) Gain on life insurance policy settlement
( m ) Correction of a fundamental error

Effect of change in accounting principle

from FIFO to weighted average
(o)
Dividends payable

5,250
52,500
140,000
48,300

Balance
Debit
Credit
726,400
721,150
668,650
528,650
480,350

325,500

154,850

Debit

Credit

70,000
129,500

84,850
214,350

8,470

204,350
212,820

25,900
15,050
10,500
50,050

238,720
253,770
264,270
314,320

100,000

414,320
389,320

10,000

25,000

(p)
(q)
(r)
(s)

Loss on sale of treasury stock

Proceeds from sale of donated stock
Appraisal increase in land
Appropriated for property acquisition

20,000
40,000
250,000
100,000

Determine the correct amount of Retained Earnings account.

a. 190,000
b. 195,950
c. 205,950
d. 200,000

Jan. 1 Balance
C

Stock dividend

Officers compensation

Loss on retirement of preferred shares

726,400
(140,000)
(325,500)
(70,000)

Correction of prior-period error

Effect of change in accounting principle

100,000

Dividends payable

(25,000)

Loss on sale of treasury stock

50,050

Appropriated for property acquisition

Correct amount of RE before net income(loss)

(20,000)
(100,000)
195,950

369,320
409,320
659,320
559,320