IA1 Prelim

Verifiable and comparable

AJ audited the financial statements of ABC Corporation. He found out that the book balance of cash corresponds to the actual cash balance. In no more than three (3) sentences, discuss what enhancing characteristic of financial information is being described in the scenario.

A. Classifying

After recording all the business transactions, Kenneth posted all the transactions in their corresponding ledgers. Which communicating process did he perform? A. Classifying B. Summarizing C. Recording D. Investigating

23,000

An entity accepted a P4,000,000, 90-day, 12% note dated August 31, 2X18 from a customer in settlement of an account.On September 30, 2X18, the entity discounted the note at 15% with recourse at the bank. The note was paid in full by the maker on maturity. The discounting is accounted for as a conditional sale with recognition of contingent liability. Based on the given information, what is the loss on notes receivable discounting?

9,500,000

An entity had the following account balances on December 31, 2X18: Cash on hand, including a customer check P100,000 dated January 31, 2X19 - P500,000; Cash in bank - current account - P4,000,000; Cash in bank - payroll account - P1,000,000; Cash in bank - restricted account for plant addition expected to be disbursed in 2X19 - P500,000; Cash in sinking fund set aside for bond payable due December 31, 2X19 - P1,500,000; Three-month time deposit - P2,000,000; Traveler's check - P200,000; Manager's check - P300,000; and Money order - P100,000. Based on the given information, what is total amount to be reported as cash under current assets?

D. Increase in allowance for doubtful accounts and decrease in doubtful account expense

An entity uses the allowance method to recognize doubtful account expense. What is the effect of a collection of an account previously written off? A. No effect on both allowance for doubtful accounts and doubtful accounts expense B. No effect on allowance for doubtful accounts and decrease in doubtful accounts expense C. Increase in allowance for doubtful accounts and no effect on doubtful account expense D. Increase in allowance for doubtful accounts and decrease in doubtful account expense

D. Both statements are incorrect.

Analyze the following statements: Statement I. Identifying is the process of determining the monetary amounts at which the elements of financial statements are to be recognized. Statement II. Classifying refers to the preparation of financial statements A. Statement I is correct; Statement II is incorrect. B. Statement I is incorrect; Statement II is correct. C. Both statements are correct. D. Both statements are incorrect.

D. Both statements are incorrect.

Analyze the following statements: Statement I. Measurement activity refers to the recognition and non-recognition of accountable events Statement II. Measurement activity refers to the process of preparing and distributing accounting reports to potential users of accounting information. A. Statement I is correct; Statement II is incorrect. B. Statement I is incorrect; Statement II is correct. C. Both statements are correct. D. Both statements are incorrect.

A. Statement I is correct; Statement II is incorrect.

Analyze the following statements: Statement I. The overall objective of accounting is to provide quantitative financial information about a business that is useful to the users of the financial statements in making economic decisions. Statement II. Economic activities are outside the scope of Accounting. A. Statement I is correct; Statement II is incorrect. B. Statement I is incorrect; Statement II is correct. C. Both statements are correct. D. Both statements are incorrect.

B. Dr Accounts Receivable P1,000; Cr Sales P970; Cr Sales Discounts P30

Austin Company records sales on account using the gross method and offers terms of 3/15, n/45. How would the company record the entry of a credit sale of P1,000? A. Dr Accounts Receivable P970; Cr Sales P970 B. Dr Accounts Receivable P1,000; Cr Sales P970; Cr Sales Discounts P30 C. Dr Accounts Receivable P1,000; Cr Sales P1,000 D. Dr Petty Cash P1,000; Cr Sales P1,000

B. P4,500,000

DC Company provided the following data on December 31, 2X14: checkbook balance - P4,000,000; bank statement balance - P5,000,000; Check drawn on DC Company's account, payable to supplier, dated and recorded on December 31, 2X14, but not mailed until January 15, 2X15 - P500,000; and cash in sinking fund - P2,000,000. On December 31, 2X14, what should be reported as "cash" under current assets? A. P3,500,000 B. P4,500,000 C. P5,500,000 D. P6,500,000

C. Voucher system

It is an extensive network of approvals by authorized individuals acting independently to ensure that all disbursements by check are proper. A. Electronic funds transfer system B. Computerized system C. Voucher system D. Verifiable system

D. Cash

It is measured at face value in the statement of financial position. A. Accounts receivable B. Inventory C. Property, plant, and equipment D. Cash

B. Measuring

It is the process of determining the monetary amounts of the transaction to be carried or recognized in the financial statements. A. Estimating B. Measuring C. Accounting D. Communicating

B. Trade discounts

It is used by companies to avoid frequent changes in catalogs, alter prices for different quantities purchased, or hide the true invoice price from the competitors. A. Cash discounts B. Trade discounts C. Sales returns and allowances D. Time value of money

6,700,000

Mama Co. had the following bank reconciliation on June 30, 2X14: Balance per bank statement, June 30 - P3,000,000;Deposit in transit - P400,000; Outstanding checks - P900,000; and Balance per book, June 30 - P2,500,000. The bank statement for the month of July showed the following: Deposits (including P200,000 note collected for Mama Co.) - P9,000,000; and Disbursements (including P140,000 NSF check and P10,000 service charge) - P7,000,000. All reconciling items on June 30 cleared through the bank in July. The outstanding checks totaled P600,000, and the deposit in transit amounted to P1,000,000 on July 31. Based on the given information, what is the amount of cash disbursements per book in July?

9,600,000

Mama Co. had the following bank reconciliation on June 30, 2X14: Balance per bank statement, June 30 - P3,000,000;Deposit in transit - P400,000; Outstanding checks - P900,000; and Balance per book, June 30 - P2,500,000. The bank statement for the month of July showed the following: Deposits (including P200,000 notes collected for Mama Co.) - P9,000,000; and Disbursements (including P140,000 NSF check and P10,000 service charge) - P7,000,000. All reconciling items on June 30 cleared through the bank in July.The outstanding checks totaled P600,000, and the deposit in transit amounted to P1,000,000 on July 31. Based on the given information, what is the amount of cash receipts per book in July?

D. Recording

Mia accounted for all of ABC Company's sales transactions in the its journal for November. Which communicating process did she perform? A. Investigating B. Classifying C. Summarizing D. Recording

C. P2,375,000

Shayne Co. had the following account balances on December 31, 2X14: cash in bank - P2,250,000; cash on hand - P125,000; cash restricted for addition to plant (expected to be disbursed in 2X15) P1,600,000. Cash in bank included P600,000 of compensating balance against short-term borrowing arrangement. The compensating balance is not legally restricted as to withdrawal. On December 31, 2X14, what is the total cash to be reported under current assets? A. P1,775,000 B. P2,250,000 C. P2,375,000 D. P3,975,000

D. Dr Cash P249,800; Dr Cash Short and Over P200; Cr Sales P250,000

Suppose the point-of-sale (POS) system of a large department store indicates a sales revenue of P250,000, but the cash received is P249,800. Which of the following entries must the store make to record the day's sales? A. Dr Cash P240,800; Cr Sales P249,800 B. Dr Cash P250,000; Cr Sales P250,000 C. Dr Cash P249,800; Cr Cash Short and Over P200; Cr Sales P250.000 D. Dr Cash P249,800; Dr Cash Short and Over P200; Cr Sales P250,000

A. Dr Cash P249,800; Dr Cash Short and Over P2,200; Cr Sales P252,000

Suppose the point-of-sale (POS) system of a large department store indicates a sales revenue of P252,000, but the cash received is P249,800. Which of the following entries must the store make to record the day's sales? A. Dr Cash P249,800; Dr Cash Short and Over P2,200; Cr Sales P252,000 B. Dr Cash P249,800; Dr Accounts Receivable P2,200; Cr Sales P252,000 C. Dr Cash P249,800; Cr Sales P249,800 D. Dr Cash P252,000; Cr Sales P252,000

A. Trade receivables

These receivables are the result of the normal operating undertakings of a firm. A. Trade receivables B. Non-trade receivables C. Bonds receivables D. Tax refund

C. Imprest System

What internal control feature is specific to petty cash? A. Separation of duties B. Assignment of responsibility C. Imprest System D. Proper authorization

B. Minimum deposit required to be maintained in connection with a borrowing arrangement

What is a compensating balance? A. Saving account balance B. Minimum deposit required to be maintained in connection with a borrowing arrangement C. Demand deposit account balance D. Temporary investment serving as collateral for an outstanding loan

B. General purpose financial statements

What is the main product of the accounting process? A. Special purpose financial statements B. General purpose financial statements C. Unaudited financial statement D. Economical financial statements

C. Net realizable value

What value are the accounts receivable normally reported? A. Historical cost B. Fair market value C. Net realizable value D. Present value

B. The reimbursement of the petty cash fund should be credited to the cash account.

When an imprest petty cash fund is used, which of the following statements is TRUE? A. The balance of the petty cash fund should be reported in the statement of financial position as a long-term investment. B. The reimbursement of the petty cash fund should be credited to the cash account. C. The petty cashier's summary of petty cash payments serves as a journal entry that is posted to the appropriate general ledger account. D. Entries that include a credit to cash account should be recorded at the time the payments from the petty cash fund are made.

D. Identifying

Which activity in the accounting process means recognition or non-recognition of accountable events? A. Classifying B. Journalizing C. Summarizing D. Identifying

A. Independent internal verification

Which internal control is being applied if the work assignment for one (1) employee is designed to check on the work of another employee? A. Independent internal verification B. Documentation procedures C. Double duties D. Separation of duties

D. Serialization of sales invoice

Which is the best way to discourage a sales clerk from using sales invoice to make a cash sale to a customer and then pocketing the cash and destroying the company's copy of the sales invoice? A. Verification of sales invoice B. Separation of duties for making the sale and recording the sale in the journal C. Authorization of sales invoice D. Serialization of sales invoice

A. Allowance method

Which method of recording bad debt is consistent with accrual accounting? A. Allowance method B. Direct write-off method C. Percent of sales method D. Percent of accounts receivable

C. Money market instrument

Which of the following is NOT a part of cash? A. Currency B. Checking account balance C. Money market instrument D. Saving account balance'

A. No estimate of uncollectible accounts is made, but accounts are written off when it is determined that accounts cannot be collected.

Which of the following is NOT acceptable in estimating uncollectible accounts receivable? A. No estimate of uncollectible accounts is made, but accounts are written off when it is determined that accounts cannot be collected. B. The estimate of uncollectible accounts is based on the percentage of sales for the period. C. The estimate of uncollectible account is based on the percentage of the accounts receivable at the end of the period. D. The estimate of uncollectible accounts is based on an aging schedule.

A. A three-year treasury note maturing on January 31 of the next year purchased by the entity on October 1 of the current year

Which of the following is NOT considered as a cash equivalent? A. A three-year treasury note maturing on January 31 of the next year purchased by the entity on October 1 of the current year B. A three-year treasury note maturing on January 31 of the next year purchased by the entity on December 1 of the current year. C. A 90-day treasury bull D. A 60-day money market placement

A. Notes receivable collected by the bank in favor of the depositor and credited to the account of the depositor

Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation that ends with an adjusted cash balance? A. Notes receivable collected by the bank in favor of the depositor and credited to the account of the depositor B. No sufficient fund (NSF) customer check C. Service charge D. Erroneous bank debit

C. Aptly called the language of business

Which of the following statements best describes accounting? A. An organized way in which a state or nation allocates its resources and apportions goods and services in the national community B. Measures revenues and expenses to compute net income. C. Aptly called the language of business D. Records revenue after you receive cash