Quiz # 11 ESPINA

BA 114.1 Financial Accounting & Reporting

Bank reconciliation, Proof of cash & Accounts Receivable
I. Problem-Solving.
1. The accountant for the Muni Co. assembled the following data:
June 30 July 31
Cash Account Balance P15,822 P39,745
Bank Statement Balance P107,082 P137,817
Deposits in transit P8,201 P12,880
Outstanding Checks P27,718 P30,112
Bank Service Charge P72 P60
Customer’s check deposited July 10, returned
by bank on July 16 marked NSF, and redeposited
immediately: no entry made on books for return
or redeposit P8,250
Collection by bank of company’s N/R P71,815 P80,900
The bank statements and the company’s cash records show these totals:
Disbursements in July per bank statement P218,373
Cash Receipts in July per Muni’s Books P236,452
Requirements: (2 points each)
(a) How much is the adjusted cash balance as of June 30?
(b) How much is the adjusted bank receipts for July?
(c) How much is the adjusted book disbursements for July?
(d) How much is the adjusted cash balance as of July 31?
(e) How much is the cash shortage as of July 31?
2. Optimus Inc. provided the following information for 2018:
Accounts Receivable- January 1 P2,785,000
Credit Sales P10,234,555
Collections from customers, excluding recovery of accounts written off P8,854,875
Accounts written off as worthless P110,050
Sales Returns P501,010
Recovery of accounts written off P56,016
Estimated future sales returns on December 31 P158,546
Estimated uncollectible accounts on December 31 per aging P365,984
What is the “amortized cost” of accounts receivable on December 31, 2018? (5 points)
3. An entity provided the following accounts abstracted from the unadjusted trial balance at year-end:
Debit Credit
Accounts Receivable P5,050,001
Allowance for Doubtful Accounts P54,310
Net Credit Sales P22,440,020
The entity estimated that 7.85% of the gross accounts receivable will become uncollectible.
What amount should be recognized as doubtful accounts expense for the current year? (3 points)
4. Sablay Co. adopted the aging method of estimating doubtful accounts on December 31, 2016. The following data are
available for the current year:
Allowance for doubtful accounts, Jan. 1 P2,565,335
Provision for doubtful accounts recorded during the year
based on credit sales P2,340,325
Recoveries of accounts written off P510,570
Accounts written off P2,055,340
Estimated Uncollectible accounts per aging, Dec. 31 P2,250,545
Estimated future sales return P1,550,000
Prepare the entry for the year-end adjustment of the Allowance for Doubtful Accounts. (8 points)
5. Guya Inc. sells to wholesalers on terms of 2/15, n/30. The entity has no cash sales but 53.85% of the customers take
advantage of the discount. The entity uses the gross method of recording sales and accounts receivable. An analysis on
December 31, 2016 revealed the following:
Age Amount Collectible
0-15 Days P105,070 98%
16-30 Days P63,574 92%
31-60 Days P5,047 80%
Over 60 Days P2,543 541
On December 31, 2016, what amount should be reported as allowance for discounts to be deducted from A/R to
get the net realizable value? Round off to 2 decimal places. (5 points)
6. From inception of operations, an entity provided for doubtful accounts under the allowance method and provisions were
made monthly at 2.5% of credit sales.
No year-end adjustments to the allowance account were made. The balance in the allowance for doubtful accounts was
P1,200,000 on January 1, 2018.
 During 2018, credit sales totaled P25,000,000, interim provisions for doubtful accounts were made at 2.5% of credit
sales, P275,000 of bad debts were written off, and recoveries of accounts previously written off amounted to P59,000. An
aging was made on December 31, 2018.
Classification Balance Uncollectible
November-December P7,500,000 10%
July-October P2,450,000 20%
January-June P1,565,000 30%
Prior to January 1, 2018 P600,000 50%
Based on the review of collectability of the account balances in the “Prior to January 1, 2018” aging category, additional
accounts totaling P120,000 are to be written off on December 31, 2018. Effective December 31, 2018, the entity adopted
aging method for estimating the allowance for doubtful accounts.
(a) What is the required allowance for doubtful accounts on December 31, 2018? (5 points)
(b) What amount should be reported as doubtful accounts expense for current year? (5 points)
(c) What is the net realizable value of accounts receivable on December 31, 2018? (5 points)
(d) Prepare the adjustment to the allowance for doubtful accounts on December 31, 2018? (10 points)

Bonus Questions: (1 point each unless otherwise stated)

a. I have a head and a tail but I have no body. Who/What/Where am I?
b. “Avere” is the Italian term for ________.
c. You see a boat filled with people. It has not sunk, but when you look again you don’t see a single person on the
boat. Why? (2 points)
d. If you have me, you want to share me. But if you share me, you’ll no longer have me. What am I? (2 points)
e. Dr. Stone, a well-renowned practitioner in the city, and Tommy, a truck driver for Coca-Cola were both in love
with an voluptuous woman named Sarah. Tommy had to go on a long trip that would last a week. Before he left,
he gave Sarah seven Fuji apples. Why? (3 points)