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ACTBAS2 nd AY 2011-2012, 2 Term Name: Mhykl Krysty G.

Nieves Section: K43

TEST I. MULTIPLE CHOICE (1PT each) 1. Journal entry to amortize discount on notes payable issued by the company would normally include: a. Debit to Discount on Notes Payable b. Debit to Cash c. Debit to Interest Expense d. Credit to Notes Payable 2. In discounting a customers note, the difference between the maturity value of the note and the cash received by the endorser is normally debited to: a. Interest Income b. Interest Expense c. Liability on Notes Discounted d. Notes Payable 3. Bank statements provide information about all of the following, except: a. Checks cleared during the period b. Errors made by the company c. NSF checks d. Bank charges for the period. 4. Which of the following reconciling items would require an adjusting entry in the books of the owner/company? a. Interest Income not yet taken up in the books b. Outstanding Checks c. Deposits in Transit d. Undeposited Collections 5. In a bank reconciliation that attempts to reconcile the bank balance to the correct cash balance, the following items would affect reconciliation in what way? Outstanding checks Deposits in transit a. Added Added b. Deducted Added c. Added Deducted d. Deducted Deducted 6. If the cash balance shown in a companys 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 in transit b. Proceeds of collectibles collected by the bank but not yet recorded by the company c. Debit memo from the bank not yet taken up in the books d. Bank service charges not yet recorded 7. A monthly report provided by the bank to the depositor which shows detailed information on the movement of the depositors bank account balance during a given period is a/an: a. Cash Flow Statement b. Income Statement c. Bank Statement d. Statement of Changes in Owners Equity 8. These are checks that have been written by the company and issued to payees but have not yet been reflected in the bank statement since these were not yet presented to the bank for payment. a. Outstanding Checks b. Staled Checks c. NSF Checks d. Deposits in Transit 9. In preparing a monthly bank reconciliation, which of the following would be added to the balance reported on the bank statement to arrive at the correct cash balance? a. Outstanding Checks b. Bank Service Charge c. Deposits in Transit d. A customers note collected by bank on behalf of the depositor 10. This is prepared to explain and reconcile any difference between a companys book balance of cash and the bank statement balance for the depositor company. a. Bank Statement b. Bank Reconciliation c. Cash Ledger Account d. Income Statement TEST II. TRUE OR FALSE (1PT each) 1. Discount on Notes Payable is presented in the Statement of Financial Position as a deduction to the Notes Payable account. 2. Outstanding Checks should be added to the bank balance to arrive at the corrected cash balance.

3. Bank service charges are normally added to the unadjusted book balance to arrive at the correct cash balance. 4. Credit memos issued by the bank represent charges to the companys account such as NSF checks, technically defective checks and bank charges. 5. Any increase in the depositors balance is credited by the bank in its books since the bank treats the depositors account as a liability. 6. NSF checks included in the bank statement that have not been recorded by the company apparently overstate the balance per books. 7. Bank reconciliation is likewise prepared to detect any errors in the recording of cash transactions in the books. 8. Checks already issued by the company but have not been presented in the bank for payment results in the overstatement of the bank balance. 9. Typical examples of credit memos from the bank would include notes collected by bank in favor of the depositor, interest earned on the companys checking account and bank service charges. 10. After preparing the bank reconciliation, the adjusted book balance is normally higher than the adjusted bank balance. TEST III. PROBLEM SOLVING (3PTS each) Present your solutions in good accounting format. 1. On May 16, 2011, Lily Co. discounted to ABD Bank its own note amounting to P1,200,000. The note matures on July 15, 2011 and carries with it an annual 10% interest rate. How much cash did Lily Co. received on May 16, 2011? Assuming the companys fiscal year ends on June 30, 2011, prepare the necessary adjusting journal entry for this transaction. 2. The following data pertains to Ming Co. on December 31, 2011: Unadjusted bank statement balance P5,000,000 Unadjusted check book balance 5,600,000 Outstanding Checks 400,000 Adjusted Cash Balance, 12/31/11 6,600,000 Credit Memo from the bank representing note collection on behalf of the company 1,000,000 How much is the Deposit in Transit for the month of December? 3. In preparing its November 30, 2011 bank reconciliation, Marinara Company has available the following information: Unadjusted balance per bank statement, 11/30/11 Deposit in Transit, 11/30/2011 Return of Customers NSF Check Bank Service Charge for August P300,500 58,500 46,000 11,000

utstanding Checks, 11/30/2011 32,500 Note collected by the bank in behalf of the company (inclusive of P780 interest) 45,780 How much is the unadjusted cash balance per companys ledger as November 20, 2011? How much is the correct cash balance of the company as of November 30, 2011? Provide the necessary journal entry to bring the unadjusted cash balance to its adjusted amount. 4. In reconciling the book and bank balances of the Cash account of Perrie Corp, you discover the following for the month of May 2011; Balance per Bank Statement, unadjusted Balance per Books, unadjusted Receipts for December which was not yet deposited Bank Service Charge for December Customers check returned by bank marked DAIF P400,000 387,000 100,000 1,000 22,000

Assuming no other errors were noted, what is the amount of the outstanding checks at December 31, 2011? What is the corrected cash balance at December 31, 2011? Provide the necessary journal entry to bring the unadjusted cash balance to its adjusted amount.

TEST IV. Answer Exercise 3-55 Financial Statements in your workbook.

ANSWER SHEET Activity on Amortization of discount, Bank Reconciliation and Preparation of Financial Statements

Name: Mhykl Krysty G. Nieves MULTIPLE CHOICE

Section: K43

1C 2B 3B 4C 5B
TRUE OR FALSE

6D 7C 8A 9C 10 B

1 2 3 4 5

TRUE FALSE FALSE FALSE TRUE

6 7 8 9 10

TRUE TRUE TRUE TRUE FALSE

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