Cordillera Career Development College

Buyagan, Poblacion, La Trinidad, Benguet

Tel. No.: (074) 422-2221/Email: [email protected]
COLLEGE OF ACCOUNTANCY

Multiple Choice Type (MCQ)

Instructions: Write down the letter of your choice in a piece of paper. Have it scanned
or photographed then send it to my messenger: Faus Ladu-an or email it at
[email protected]

Problem 1
In your audit of KINGS COMPANY for the past calendar year, you find the following accounts:
ACCOUNTS RECEIVABLES
Jan. 1, 2020 P 800,000 Jan. – Dec. 2020 collections P 5,900,000
Jan. – Dec. Sales 6,300,000 Jan. – Dec. write-off 100,000

ALLOWANCE FOR BAD DEBTS

Jan. – Dec. Write-off of Jan. 1, 2020 P 95,000
last year’s receivables P 85,000 Dec. 31 provisions 315,000

Write-off of this year’s

Receivables 15,000

In your examination, you find that the balance of Accounts Receivable represents sales of the
current audit year only; that credit balances in the subsidiary ledger for accounts receivable
totaled P80,000; and that the current year’s provision for bad debts expense was 5% of sales
(as compared with 4½% last year, 4% of the year before, and 3½% the next previous year).
Sequential to aging the accounts receivable, you and the company’s treasurer agree on an
additional write-off of P50,000, and P300,000 as the probable loss to be sustained on
collection of the accounts receivable balance.

Questions

1. The adjusted Accounts Receivable balance is:

a. P 830,000 b. P 1,100,000 c. P 1,130,000 d. P 1,180,000

2. The adjusted Allowance for Bad Debts is:

a. P 260,000 b. P 300,000 c. P 315,000 d. P 355,000

3. The adjusted Bad Debts account is:

a. P 260,000 b. P 300,000 c. P 315,000 d. P 355,000

4. The provision per record at December 31 is:

a. P 260,000 b. P 300,000 c. P 315,000 d. P 355,000

Page 1 of 12
Problem 2
The following selected transactions occurred during the year ended December 31, 2020 of DJ
COMPANY:

Gross sales (cash and credit) P 900,736.80

Collections from credit customers, net of 2% cash discount 294,000.00
Cash sales 180,000.00
Uncollectible accounts written off 19,200.00
Credit memos issued to credit customers for sales ret./allow. 10,080.00
Cash refunds given to cash customers for sales ret./allow. 15,168.00
Recoveries on accounts receivable written-off in prior years
(not included in cash received stated above) 6,505.20

At year-end, the company provides for estimated bad debts losses by crediting the Allowance
for Bad Debts account for 2% of its net credit sales for the year. The allowance for bad debts
at the beginning of the year is P19,327.20.

Questions
1. How much is the DJ COMPANY’s gross sales?
a. P 900,736.80 b. P 720,736.80 c. P 704,656.80 d. P 689,488.80

2. DOMINGO COMPANY’s credit sales at December 31, 2020 is:

a. P 900,736.80 b. P 720,736.80 c. P 704,656.80 d. P 689,488.80

3. How much is the DJ COMPANY’s net credit sales?

a. P 900,736.80 b. P 720,736.80 c. P 704,656.80 d. P 689,488.80

4. The Bad Debts Expense of DJ COMPANY at December 31, 2020 is:

a. P 20,725.54 b. P 14,093.14 c. P 8,030.74 d. P7,829.14

5. The Accounts Receivable of DJ COMPANY at December31, 2020 is:

a. P 408.042.00 b. P 407,536.80 c. P 401,536.80 d. P 391,456.80

6. The Allowance for Bad Debts of DJ COMPANY at December 31, 2020 is:
a. P 20,725.54 b. P 14,093.14 c. P 8,030.74 d. P7,829.14

Problem 3
Presented below are unaudited balances of selected accounts of MARITES COMPANY as of
December 31, 2020:
Unaudited Balances, 12/31/20
Selected Accounts Debit Credit
Cash P 500,000
Accounts receivable 1,300,000
Allowance for doubtful accounts 8,000
Net sales P 6,750,000

Page 2 of 12
Additional information are as follows:

a. Goods amounting to P50,000 were invoiced for the accounts of GS & Co., recorded on
January 2, 2021 with terms of net, 60 days, FOB shipping point. The goods were shipped
to Variety Store on December 30, 2020.

b. The bank returned on December 29, 2020, a customer’s check for P5,000 marked “DAIF”,
but no entry was made.

c. MARITES COMPANY estimates that allowance for uncollectible accounts should be one and
one-half percent (1½%) of the accounts receivable balance as of year-end. No provision
has yet been made for 2020.

Questions

1. What is the adjusted balance of Accounts Receivable on December 31, 2020?

a. P 1,355,000 b. P 1,350,000 c. P 1,305,000 d. P 1,300,000

2. What is the adjusted balance of Allowance for doubtful accounts on December 31, 2020?
a. P 36,325 b. P 28,325 c. P 20,325 d. P 8,000

3. What is the adjusted amount of 202 B0ad Debts Expense?

a. P 12,325 b. P 20,325 c. P 28,325 d. P 36,325

Problem 4
You are examining the financial statements of NEA CORPORATION for the year ended
December 31, 2020. During the audit of the accounts receivable and other related accounts,
certain information was obtained.

The December 31, 2020 debit balance in the Accounts Receivable control account is P197,000.

The only entries in the Bad Debts Expense account were: a credit for P324 on December 31,
2020, because MOPRECO Company remitted in full for the accounts charged off October 31,
2020, and a debit on December 31 for the amount of the credit to the Allowance for Bad
Debts.

The Allowance for Bad Debts schedule is presented below:

Debit Credit Balance

January 1, 2020 P 3,658
October 21, 2020, Uncollectible;
MOPRECO Co., - P324; J. Co.,
- P 820; GI Co., - P564 P 1,508 2,150
December 31, 2020, 5% of P197,000 P 9,850 12,000

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An aging schedule of the accounts receivable as of December 31, 2020 and the decision are
shown in the table below:

Age Net Debit Balance Amount to which the Allowance

is to be adjusted after adjust.
____________ _________________ and corrections have been made

0 – 1 month P 93,240 1 percent

1 – 3 months 76,820 2 percent
3 – 6 months 22,180 3 percent
over 6 months 6,000 Definitely uncollectible, P1,000;
P2,000 is considered 50%
uncollectible; the remainder is
estimated to be 80% collectible.

There is a credit balance in one account receivable (0-1 month) of P2,000; it represents an
advance on a sales contract. Also, there is a credit balance in one of the 1-3 months accounts
receivable of P500 for which merchandise will be accepted by the customer.

The ledger accounts have not been closed as of December 31, 2020. The Accounts Receivable
control account is not in agreement with the subsidiary ledger. The difference cannot be
located, and the auditor decides to adjust the control to the sum of the subsidiaries after
corrections are made.

Questions

1. The adjusted balance of accounts receivable of NEA CORPORATION at December 31, 2020
is:
a. P 199,740 b. P 199,540 c. P 198,300 d. P 198,100

2. The adjusted write-off of accounts receivable balance of NEA CORPORATION at December

31, 2020 is:
a. P 2,708.00 b. P 2,508.00 c. P 2,384.00 d. P 1,708.00

3. The adjusted allowance of bad debts account of NEA CORPORATION at December 31, 2020
is:
a. P 4,980.60 b. P 4,964.20 c. P 4,780.60 d. P 4,764.20

4. The bad debts expense per book of NEA CORPORATION at December 31, 2020 is:
a. P 9,850.00 c. P 4,764.20
b. P 6,359.80 d. Cannot be determined

5. The adjusted bad debts expense of NEA CORPORATION at December 31, 2020 is:
a. P 3,814.20 b. P 3,614.20 c. P 3,490.20 d. P 2,814.20

6. The entry to adjust the account of MOPRECO Company is:

a. Bad debts 324 c. Allow. for BD 324
Allow. for BD 324 Bad debts 324
b. b. Bad debts 324 d. Accounts receivable 324
Accounts receivable 324 Bad debts 324

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7. The entry to reconcile the accounts receivable control ledger to subsidiary ledger is:
a. Accounts receivable 1,440 c. Accounts receivable 1,440
Allow. for Bad Debts 1,440 Misc. income 1,440
b. b. Allow. for Bad Debts 1,440 d. No adjustment
Accounts receivable 1,440

8. The net realizable value of accounts receivable of NEA CORPORATION at December 31,
2020 is:
a. P 194,975.80 b. P 194,775.80 c. P 193,335.80 d.P193,319.40

Problem 5
You have been assigned to audit the financial statement KYLIE INCORPORATED. The company
is a distributor of a variety of electronic appliances and parts. The company uses the calendar
year for reporting purposes. Information regarding balances of KYLIE INCORPORATED’S
Accounts Receivable and the related Allowance for Doubtful Accounts as of December 31,
2020 and the related audit finding, is given below.

The schedule of accounts receivable furnished you by the accountant reflects some errors.
The total figure in the schedule does not tally with the balance per subsidiary ledger of
P919,000. Based on your review of sales invoices, purchase orders and other related
documents, you noted the following information:

1. Sales on account of various electronics totaling P36,480 were returned by the customer
on December 28, 2020, but no entry was made in the books. The goods were included in
the year-end physical count.

2. Based on the findings per confirmation reply from a customer, he indicated that he has
already paid his account of P23,980 in October, 2020. Your verification disclosed that said
collection was credited to net sales account.

3. Collection of P12,950 on November 5, 2020 from Aljur Corporation was credited to the
account of AJ Corporation.

The allowance for doubtful accounts is set at 3% of the outstanding accounts receivable at
the end of the period. As of December 31, 2020, the Allowance for Doubtful Accounts has a
balance of P32,400 before adjustment.

Questions

1. What is the adjusted balance of Accounts Receivable as of December 31, 2020?

a. P 919,000 b. P 895,020 c. P 882,520 d. P 858,540

2. What is the adjusted balance of Allowance for Doubtful Accounts as of December 31, 2020?
a. P 27,570.00 b. P 26,850.60 c. P 26,475.60 d. P 25,756.20

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Problem 6
You audit of SPAM COMPANY for the year 2020 disclosed the following:

1. The December 31 inventory was determined by a physical count on December 28 and

based on such count, the inventory was recorded by:
Inventory 1,400,000
Cost of sales 1,400,000
2. The 2020 ledger shows a sales balance of P20,000,000.
3. The company sells a mark-up of 20% based on sales.
4. The company recognizes sales upon passage of title to the customers.
5. All customers are within a four-day delivery area.

The sales register for December, 2020 and January, 2021, showed the following details:

December Register

Invoice No. FOB Terms Date Shipped Amount

300 Destination 12/30 P 50,000
301 Shipping point 12/30 62,500
302 Destination 12/23 47,500
303 Destination 12/24 82,500
304 Shipping point 01/02 56,000
305 Shipping point 12/29 90,000

January Register

Invoice No. FOB Terms Date Shipped Amount

306 Destination 12/29 67,500
307 Shipping point 12/29 74,500
308 Destination 01/02 140,000
309 Shipping point 01/04 73,000
310 Shipping point 12/27 67,500

Questions

1. The Sales for December is over/(under) by:

a. P 36,000 under c. P 106,000 under
b. P 36,000 over d. P 106,000 over

2. The Inventory for December is over/(under) by:

a. P 235,600 under c. P 181,600 under
b. P 235,600 over d. P 181,600 over

3. The adjusted inventory at December 31, 2020 is:

a. P 1,645,412 b. P 1,635,600 c. P 1,218,400 d. P 1,164,400

4. The adjusted sales at December 31, 2020 is:

a. P 20,106,000 b. P 20,036,000 c. P 19,964,000 d. P 19,894,000

Page 6 of 12
5. How much sales for the month of December 2020 were erroneously recorded in January
2021?
a. P 282,000 b. P 272,500 c. P 198,000 d. P 142,000

6. How much sales for the month of January 2021 were erroneously recorded in December
2020?
a. P 228,500 b. P 188,500 c. P 180,500 d. P 106,000

Problem 7
You are engaged to perform an audit of the accounts of the SENYORA CORPORATION for the
year ended December 31, 2020, and have observed the taking of the physical inventory of
the company on December 27, 2020. Only merchandise shipped by the Durian Corporation
to customers up to and including December 27, 2020, have been removed or excluded from
inventory. The inventory as determined by physical inventory count has been recorded on
the books by the company’s controller. No perpetual inventory records are maintained. All
sales are made on an FOB shipping point basis.

The following lists of sales invoices are entered in the sales books for the months of December
2020 and January 2021, respectively.

Sales Invoices

Date Amount Date Shipped

December 2020 (a) 12/23/20 P 25,000 12/31/20

(b) 12/27/20 18,000 12/27/20
(c) 12/30/20 30,000 01/05/21
(d) 12/22/20 12,000 01/08/21
(e) 12/28/20 16,000 12/29/20
(f) 12/03/20 8,000 12/05/20
(g) 12/31/20 20,000 01/07/21
(h) 12/31/20 14,000 12/31/20

January 2021 (i) 12/31/20 7,500 12/29/20

(j) 12/27/20 11,000 01/04/21
(k) 01/08/21 9,000 01/09/21
(l) 01/10/21 5,000 12/31/20
Questions

1. How much sales for month of December 2020 were erroneously recorded in January 2021?
a. P 7,500 b. P 12,500 c. P 18,500 d. P 20,000

2. How much sales for the month of January 2021 were erroneously recorded in December
2020?
a. Zero b. P 12,500 c. P 20,000 d. P 62,000

3. How much is the correct amount of sales for the month ended December 31, 2020?
a. P 143,000 b. P 155,500 c. P 93,500 d. P 81,000

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Problem 8
SY BINANCE CORPORATION purchases the accounts receivable of other companies on a
without recourse, notification basis. At the time the receivables are factored, 15% of the
amount factored is charged to the client as commission and recognized as revenue in SY’S
books. Also, 10% of the receivables factored is withheld by SY as protection against sales
returns or other adjustments. This amount credited by SY to the client Retainer account. At
the end of each month, payments are made by SY to its clients so that the balance in the
Client Retainer account is equal to 10% of unpaid factored receivables. Based on SY’s bad
debt loss experience, an allowance for bad debts of 5% of all factored receivables is to be
established, SY makes adjusting entries at the end of each month.

On January 3, 2020, XI Company factored its accounts receivable totaling P1,000,000. By

January 31, P800,000 on these receivables had been collected by SY.

Questions

1. The commission earned of SY Binance Corporation from Jannette Company’s accounts

receivable factored is:
a. P 150,000 b. P 120,000 c. P 135,000 d. P 90,000

2. The proceeds received by XI Company on the accounts factored is:

a. P 810,000 b. P 780,000 c. P 765,000 d. P 750,000

3. How much is the Client Retainer account of SY Finance Corporation at January 31, 2020
is:
a. P 0 b. P 20,000 c. P 60,000 d. P 80,000

4. How much is the bad debts expense of SY Binance Corporation at January 31, 2020 is:
a. P 50,000 b. P 40,000 c. P 20,000 d. P 0

Problem 9
During your audit of the XYZ COMPANY for the calendar year 2020, you find the following
accounts:
NOTES RECEIVABLE

Sept. 1 Samson, 12%, due in 3 mos. 36,000 36,000

Nov. 1 Hazel, 15%, due in 6 mos. 90,000 126,000
Nov. 1 Salazar, no interest, due in one
year 75,000 201,000
Nov. 30 Rosa, Co. 12%, due in 13 mos. 15,000 216,000
Dec. 1 Rona, 15%, due in 15 mos. 36,000 252,000
Dec. 2 Anito, President, 18%, due in 3
mos. 18,000 270,000

Page 8 of 12
 NOTES RECEIVABLE DISCOUNTED
Sept. 1 Samson note, discounted at 36,000 36,000
15%
Nov. 1 Salazar note, discounted at 75,000 111,000
15%

INTEREST EXPENSE
Sept. 1 Samson note 310.50 310.50
Nov. 1 Salazar note 11,250.00 11,560.50

All notes are trade notes receivable unless otherwise specified. The Samson note was paid
December31, 2020. Interest income is credited only upon receipt of cash.

Questions

1. The accrued interest income at December 31, 2020 is:

a. P 2,748 b. P 3,018 c. P 3,120 d. P 4,200

2. The interest expense at December 31, 2020 is:

a. P 1,875.00 b. P 2,185.50 c. P 4,060.50 d. P 11,560.50

3. The Notes Receivable at December 31, 2020 is:

a. P 141,000 b. P 159,000 c. P 216,000 d. P 252,000

4. The Notes Receivable – discounted at December 31, 2020 is:

a. P 63,750 b. P 73,125 c. P 75,000 d. P 111,000

5. How much is the proceeds in the discounting of notes receivable for the year?
a. P 99,439.50 b. P 100,060.50 c. P 111,000.00 d. P 111,310.50

Problem 10
On January 2, 2020, a tract of land that originally cost P800,000 was sold by MARIE
CORPORATION. The company received a P1,200,000 note as payment. It bears interest rate
of 4% and is payable in 3 annual installments of P400,000 plus interest on the outstanding
balance. The prevailing rate of interest for a note of this type is 10%. The present value
table shows the following present value factors of 1 at 10%:

Present value factor of 1 for 3 periods 0.75132

Present value factor of 1 for 2 periods 0.82645
Present value factor of 1 for 1 period 0.90909
Present value of an ordinary annuity of 1 for 3 periods 2.48685

Questions

1. The gain on sale of land on January 2, 2020 is:

a. P 194,740 b. P 276,847 c. P 290,740 d. P 400,000

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2. The interest income on the note receivable for the year ended December 31, 2020 using
effective interest method is:
a. P 120,000 b. P 109,074 c. P 107,685 d. P 99,474

3. How much cash will MARIE CORPORATION received from notes receivable?
a. P 1,076,847 b. P 1,200,000 c. P 1,296,000 d. P 1,476,847

Problem 11
You are engaged in your fifth annual examination of the financial statements of ABC
CORPORATION. Your examination is for the year ended December 31, 2020. The client
prepared the following schedule of Trade Notes Receivable and Interest Receivable for you at
December 31, 2020. You have agreed the opening balances to your prior year’s audit
workpapers.

ABC CORPORATION
TRADE NOTES RECEIVABLE AND RELATED INTEREST RECEIVABLE
Trade-Notes Receivable
Maker Date Terms Int. Bal. 2020 2020 Bal.
Rate 12/31/19 debits credit 12/31/20
Rubin 04/01/19 1-year 12% P 60,000 P 60,000
Co.
Cardoza 05/01/20 90 days - P 30,000 29,375 P 625
after date
Pancho 07/01/20 60 days 12% 6,000 6,000
after date
Betque 08/03/20 Demand 12% 15,000 15,000
Gabuteo 10/02/20 60 days 12% 50,000 50,000 -
after date
Noval 11/01/20 90 days 8% 42,000 35,000 7,000
after date
Gan 11/01/20 90 days 12% 32,000 after 32,000
date

INTEREST RECEIVABLE
Due from Balance 2020 debit 2020 credit Balance
12/31/20
Rubin Co. P 5,400 P 1,800 P 7,200
Pancho 120 P 120
Betque 400 400
Gabuteo 1,000 660 340
Noval 560 560
Gan ___________ 640 ___________ 640
Totals P 5,400 P 4,520 P 7,860 P 2,060

Your examination reveals this information:

1. Interest is computed on a 360-day basis. In computing interest, it is the corporation’s

practice to exclude the first day of the note’s term and to include the due date.

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2. The Cardoza’s 90-day non-interest bearing note was discounted on May 15 at 10%, and
the proceeds were credited to the Trade Notes Receivable account. The note was paid at
maturity.

3. Pancho became bankrupt on August 31, and the corporation will recover 75 cents on the
peso. All of ABC Corporation’s notes receivable provide for interest at a rate of 12% on
the maturity value of a dishonored note.

4. Betque, president of ABC Corporation, confirmed that she owed ABC Corporation P15,000
and that she expected to pay the note within six months. You are satisfied that the note
is collectible.

5. Gabuteo’s 60-day note was discounted on November 1 at 8%, and the proceeds were
credited to the Trade Notes Receivable and Interest Receivable accounts. On December
2, ABC Corporation received notice from the bank that Gabuteo’s note was not paid at
maturity and that it had been charged against ABC’s checking account by the bank. Upon
receiving the notice from the bank, the bookkeeper recorded the note and the accrued
interest in the Trade Notes Receivable and Interest Receivable account. Gabuteo paid
ABC Corporation the full amount due in January 2021.

6. Noval, 90-day note was pledged as collateral for P35,000, 60-day 10% loan from the PNB
Bank on December 1.

7. On November 1, the corporation received four, P8,000, 90-day notes from Gan. On
December 1, the corporation received payment from Gan for one of the P8,000 notes with
accrued interest. Prepayment of the notes is allowed without penalty. The bookkeeper
credited the Gan’s Accounts Receivable account for the cash received.

Questions

1. At December 31, 2020, the note receivable from Cardoza has a balance of:
a. P 30,000 b. P 29,375 c. P 625 d. P 0

2. The interest income from Cardoza’s note at December 31, 2020 is:
a. P 750 b. P 625 c. P 500 d. P 0

3. At December 31, 2020, the note receivable from Pancho has a balance of:
a. P 6,370.92 b. P 6,366.00 c. P 6,120 d. P 0

4. The interest income from Pancho’s note at December 31, 2020 is:
a. P 370.92 b. P 250.92 c. P 246 d. P 0

5. At December 31, 2020, the note receivable from Betque has a balance of:
a. P 15,350 b. P 15,000 c. P 14,650 d. P 0

6. At December 31, 2020 the note receivable from Gabuteo has a balance of:
a. P 150,000 b. P 100,000 c. P 50,000 d. P 0

7. At December 31, 2020 the note receivable from Noval has a balance of:
a. P 42,000 b. P 35,000 c. P 7,000 d. P 0

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8. At December 31, 2020 the note receivable from Gan has a balance of:
a. P 32,480 b. P 32,000 c. P 24,000 d. P 23,950

9. The total Note Receivable – Trade at December 31, 2020 is:

a. P 89,000 b. P 81,000 c. P 72,366 d. P 66,000

10. The total Interest Receivable at December 31, 2020 is:

a. P 2,300 b. P 2,060 c. P 1,950 d. P 1,790

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