NATIONAL TEACHERS COLLEGE Preliminary Examination

School of Business Intermediate Accounting 1

Academic Year 2024 - 2025
(Barba | Nuqui)
629 J. Nepomuceno St., Quiapo, Manila

GENERAL INSTRUCTIONS:
Read the following questions carefully and choose the best answer for every item.
Shade or blacken the circle that corresponds to your answer in the answer sheet provided for this assessment.
Erasures are not allowed.
Cheating and any form of communication with your classmates are not tolerated and tantamount to failing the test if proven.

Name:(LN, FN MI.)___________________________________________ Date: _____________________________________________

Student Number:____________________________________________ Professor:_________________________________________

1. Which statement is incorrect regarding cash equivalents?

a. Cash equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
b. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than
for investment or other purposes.
c. An investment normally qualifies as a cash equivalent only when it has a short maturity of, say,
three months or less from the end of the reporting period.
d. None, all the statements are correct.

2. Cash comprises cash on hand and demand deposits. Which of the following items can be
considered as ‘cash’?
I. Credit card receipts representing sales
II. Cryptocurrencies
III. US dollar bills
IV. Certificates of deposit

a. I, II, III and IV c. III only

b. III and IV only d. None of these

3. Which of the following may qualify as cash equivalents?

a. Investment in ordinary shares
b. Investment in share options
c. Investment in preference shares acquired within a short period of their maturity and with a
specified redemption date
d. None of these

4. Compensating balance
a. Is a minimum or average balance on deposit with a bank.
b. Constitutes support for existing borrowing arrangements.
c. Provides a source of funds to the lender as partial compensation for the credit extended.
d. All of these.
5. Which statement is correct regarding presentation of compensating balances?
a. “Legally restricted” deposits held as compensating balances should be segregated and reported
separately.
b. Deposits held as compensating balances that are not “legally restricted” are not shown
separately. However, footnote disclosure is necessary.
c. Both a and b.
d. Neither a nor b.

6. Which of the following is not a basic characteristic of a system of cash control?

a. Use of a voucher system.
b. Segregated responsibility for handling and recording cash.
c. Internal audits at irregular intervals.
d. Weekly deposit of all cash received.

7. The cash receipt’s function should be separated from the related record keeping in an organization
to
a. Physically safeguard the cash receipts.
b. Establish accountability when the cash is first received.
c. Prevent paying cash disbursements from cash receipts.
d. Minimize undetected misappropriations of cash receipts.

8. A petty cash system is designed to

a. Cash checks for employees
b. Handle cash sales
c. Account for all cash receipts and disbursements
d. Pay small miscellaneous expenses

9. Which of the following is true regarding the imprest petty cash system?
a. Entries are made to the Petty Cash account only to increase or decrease the size of the fund.
b. The Petty Cash account is debited when the fund is replenished.
c. The imprest petty cash system in effect adheres to the rule of disbursement by check.
d. All of these are not true.

10. A cash over or short account

a. Is not generally accepted
b. Is debited when the petty cash fund proves out over
c. Is debited when the petty cash fund proves out short
d. Is a contra account to cash

11. If the cash balance in a company’s bank statement is more than the correct cash balance and neither
the company nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the company
b. Outstanding checks
c. Bank charges not yet recorded by the company
d. Deposits in transit
12. If the cash balance shown in a company’s accounting records is more than the correct cash balance
and neither the company nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the company
b. Deposits in transit
c. Outstanding checks
d. Bank charges not yet recorded by the company

13. If the cash balance shown in a company’s 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 credited by the bank but not yet recorded by the company
b. Deposits in transit
c. Outstanding checks
d. Bank charges not yet recorded by the company

14. If the cash balance in a company’s bank statement is less than the correct cash balance and neither
the company nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the company
b. Outstanding checks
c. Bank charges not yet recorded by the company
d. Deposits in transit

15. The journal entries for a bank reconciliation

a. Are taken from the "balance per bank" section only.
b. May include a debit to Service Charge Expense for bank service charges.
c. May include a credit to Accounts Receivable for an NSF check.
d. May include a debit to Accounts Payable for an NSF check.

16. All reconciling items at March 31 cleared the bank in April. Outstanding checks at April 30 totaled
P5,000. There were no deposits in transit at April 30. What is the cash balance per books at April
30?
a. P25,200 b. P27,900 c. P30,200 d. P35,500
17. The amount Santa Clara should report as cash on the balance sheet as of Dec. 31 should be
a. P120,260 b. P130,640 c. P139,740 d. P132,240

As of June 30, the bank statement of Beyonce Co. Trading had an ending balance of P373,612. The
following data were assembled in the course of reconciling the bank balance:
• The bank erroneously credited Beyonce Co. for P2,150 on June 22.
• During the month, the bank charged back NSF checks amounting to P2,340 of which P800 had
been redeposited by the 25th of June.
• Collection for June 30 totaling P10,330 was deposited the following month.
• Checks outstanding as of June 30 were P30,205.
• Notes collected by the bank for Ang Po Trading were P8,150 and the corresponding bank charges
were P50.
18. The adjusted bank balance on June 30 is
a. P351,587 c. P353,927
b. P358,147 d. P359,687

19. The unadjusted book balance on June 30 is

a. P351,587 c. P353,927
b. P358,147 d. P345,027

20. Additionally, deposits in transit and outstanding checks are P 7,800 and P 1,600 respectively.
The correct balance for cash at Oct. 31 should be:
a. P13,980 b. P11,180 c. P12,780 d. P10,960
21. When preparing a bank reconciliation, bank credits are
a. Added to the bank statement balance
b. Deducted from the bank statement balance
c. Added to the balance per book
d. Deducted from the balance per book

22. The information below is from the books of the Seminole Corporation on June 30:

Balance per bank statement P11,164

Receipts recorded but not yet deposited in the bank 1,340
Bank charges not recorded 16
Note collected by bank and not recorded on books 1,120
Outstanding checks 1,100
NSF checks - not recorded on books nor redeposited 160
Assuming no errors were made, compute the cash balance per books on June 30 before any
reconciliation adjustments.

a. P11,404 c. P10,460
b. P12,348 d. P10,220

23. The cash in bank account of S-mart, Inc. for April showed an ending balance of P129,298. Deposits
in transit on April 30 was P18,200. Outstanding checks as of April 30, were P59,435, including a
P5,000 check which the bank had certified on April 27. During the month of April, the bank
charged back NSF checks in the amount of P3,435 of which P1,835 had been redeposited by April
20. On April 23, the bank charged S-mart’s account for a P2,200 items which should have been
charged against K-mart, Inc., the error was not detected by the bank. During April, the proceeds
from notes collected by the bank for S-Mart, Inc. was P7,548 and bank charges for this service was
P18. How much is the unadjusted balance per bank on April 30?
a. P95,263 c. P173,663
b. P88,333 d. P169,263

The following data pertaining to the cash transactions and bank account of Mandirigma Company
for the month of May are available to you:

Cash balance, per records, May 31: P17,194

Cash balance, per bank statement, 5/31: P31,948
Bank service charge for May: P109
Debit memo for the cost of printed checks delivered by the bank: P125
Outstanding checks, May 31: P6,728
Deposit of May 30 not recorded by bank until June 1: P4,880
Proceeds of a bank loan of May 30, net of interest of P300, P5,700.
Proceeds from a customer's promissory note, including interest of P100, P8,100.
Check No. 2772 issued to a supplier entered in the accounting records at P2,100 but deducted in
the bank statement at an erroneous amount of P1,200
 Stolen check lacking an authorized signature, deducted from Mandirigma's account by the bank
in error: P800
Customer's check returned by the bank marked NSF; no entry has been made in the accounting
records to record the returned check: P760

24. What is the adjusted cash balance in bank at May 31?

a. P29,200 c. P30,000
b. P30,300 d. P30,900

25. What is the adjusted cash balance in book at May 31?

a. P29,200 c. P30,000
b. P30,300 d. P30,900

The following items were included as cash in the books of Gotch Co.:
Checking account at Security Bank (P1,200)
Checking account at BPI 5,335
Checking account at Citytrust used for payment of salaries 5,500
Postage stamps 107
Employee’s post-dated check 2,300
I.O.U. from an employee 200
A check marked “DAIF” 1,250
Petty cash fund (P324 in expense receipts) 500
Certificate of time deposit with BPI 5,000
A gold ring surrendered as security by a customer who
lost his wallet (at market value) 1,500

26. The correct amount that should be reported as cash is

a. P11,835 c. P16,511
b. P11,011 d. P11,511

27. Diversity Corp.'s checkbook balance on Dec. 31, 2023, was P800,000. In addition, Diversity held
the following items in its safe on Dec. 31:
Check payable to Diversity Corp., dated Jan. 2, 2024, not included in Dec.
31 checkbook balance ----------------------------------------------------------------------- P200,000
Check payable to Diversity Corp., deposited Dec. 20, and included in Dec.
31 checkbook balance, but returned by bank on Dec. 30, stamped
"DAIF." The check was redeposited Jan. 2, 2024, and cleared Jan. 7 ------------- 40,000
Check drawn on Diversity Corp.'s account, payable to a vendor, dated and
recorded Dec. 31, but not mailed until Jan. 15, 2024 ---------------------------------- 100,000
The proper amount to be shown as cash on Diversity's statement of financial position at Dec. 31, 2023,
is
a. P760,000
b. P860,000
c. P800,000
d. P975,000
28. On Dec. 31, 2023, the cash account of Jen Corp. has a debit balance of P3,500,000. An analysis of
the cash account shows the following details:
Undeposited collections P 60,000
Cash in bank-PCIB checking account 500,000
Cash in bank-PNB (overdraft) (50,000)
Undeposited NSF check received from a customer, dated Dec. 1, 2023 15,000
Undeposited check from a customer, dated January 15, 2024 25,000
Cash in bank-PCIB (fund for payroll) 150,000
Cash in bank-PCIB (savings deposit) 100,000
Cash in bank-PCIB (money market instrument, 90 days) 2,000,000
Cash in foreign bank (restricted) 100,000
IOUs from officers 30,000
Sinking fund cash 450,000
Listed stock held as temporary investment 120,000
P3,500,000
Cash and cash equivalents on Jen’s Dec. 31, 2023 statement of financial position should be
a. P2,760,000
b. P2,885,000
c. P2,810,000
d. P2,935,000

29. The Ingersoll Co.’s ledger showed a balance in its cash account of P341,125 which was determined
to consist of the
following:

Petty cash fund P 1,800

Cash per bank statement with a check for P3,000 still outstanding 168,375
Notes receivable in the possession of a collecting agency 12,500
Undeposited receipts, including customer postdated check for P5,250 89,000
IOUs signed by employees 2,475
Paid vouchers not yet recorded 3,225
Total P 277,375

At what amount should “Cash on hand and in bank” be reported on Ingersoll’s balance sheet?
a. P267,375 c. P331,125
b. P250,925 d. P314,675

30. An entry to adjust a debit memo reconciling item in the books includes
a. Dr. Cash c. No Entry
b. Cr. Cash d. Cr. Payables

31. An entry to adjust an outstanding check reconciling item in the books includes
a. Dr. Cash c. No Entry
b. Cr. Cash d. Cr. Payables
32. An entry to adjust a deposit in transit reconciling item in the books includes
a. Dr. Cash c. No Entry
b. Cr. Cash d. Cr. Payables

33. An entry to adjust a credit memo reconciling item in the books includes
a. Dr. Cash c. No Entry
b. Cr. Cash d. Cr. Payables

34. As of December 31, 2023, Juice Co. invested its excess cash funds to the following securities:
- Commercial paper of P 4,000,000 with six-month term and maturity date of February 15,
2024. This was acquired on December 15, 2023.
- Money market placements of P 3,000,000 with nine-month term and maturity date of January
31, 2024. These were acquired on September 01, 2023.
- Treasury bills of P 1,200,000 with six-month term and maturity date of May 01, 2024. These
were acquired on December 01, 2023.
- Treasury bonds of P 2,000,000 with ten-year term and maturity date of March 30, 2024. These
were acquired on December 31, 2023.
Based on the above information, cash equivalents shall have a balance of
a. P 4,200,000 c. P 0
b. P 6,000,000 d. P 10,200,000

35. The following are considered bank reconciling items, except

a. Deposit in transit
b. NSF checks
c. Outstanding checks
d. Bank errors

36. Trade receivables are classified as current assets if these are reasonably expected to be collected
a. Within one year
b. Within the normal operating cycle
c. Within one year or within the normal operating cycle, whichever is shorter
d. Within one year or within the normal operating cycle, whichever is longer

37. Nontrade receivables are classified as current assets only if these are reasonably expected to be
realized in cash
a. Within one year, the length of the operating cycle notwithstanding
b. Within the normal operating cycle
c. Within one year or within the normal operating cycle, whichever is shorter
d. Within one year or within the normal operating cycle, whichever is longer

38. If the ideal measure of short-term receivables in the statement of financial position is the
discounted amount of the cash to be received in the future, failure to follow this practice usually does
not make the statement of financial position misleading because
 a. Most short-term receivables are noninterest-bearing.
b. The allowance for doubtful accounts includes a discount element.
c. The amount of the discount is immaterial.
d. Most receivables can be sold to a bank or a factor.

39. Credit balances in accounts receivable are classified as

a. Current liabilities
b. Parts of accounts payable
c. Long term liabilities
d. Deduction from accounts receivable

40. Where the operating cycle extends beyond one year because of normal credit terms as in the case
of installment sales of household appliances
a. It is proper to classify the entire receivables as current assets with disclosure of the amount
not realizable within one year, if material.
b. The entire receivables are shown as noncurrent assets.
c. The portion due in one year is shown as current and the balance as noncurrent.
d. The receivables are not recognized.

41. In the case of long-term installment receivables as in real estate installment sales where a major
portion is collected beyond the normal operating cycle.
a. The entire receivables are shown as current without disclosure of the amount not currently
due.
b. The entire receivables are shown as noncurrent.
c. Only the portion currently due is shown as current and the balance as noncurrent.
d. The entire receivables are shown as current with disclosure of the amount not currently
due.

42. Which method of recording bad debts loss is consistent with accrual?
a. Allowance method
b. Direct write-off method
c. Percent of sales method
d. Percent of accounts receivable method

43. A method of estimating bad debts that focuses on the income statement rather than the statement
of financial position is the allowance method based on
a. Direct writeoff
b. Aging the trade accounts receivable
c. Credit sales
d. The balance in the trade accounts receivable

44. A method of estimating uncollectible accounts that emphasizes asset valuation rather than income
measurement is the allowance method based on
 a. Aging of accounts receivable
b. Direct writeoff
c. Gross sales
d. Credit sales less returns and allowances

45. The advantage of relating the bad debt experience to accounts receivable is that this approach
a. Gives a reasonably accurate measurement of receivables in the statement of financial
position.
b. Relates bad debts expense to the period of sale.
c. Is the only generally accepted method for measuring accounts receivable
d. Makes estimates of uncollectible accounts unnecessary.

46. Which of the following is not permitted in accounting for uncollectible accounts receivable?
a. Percentage of accounts receivable
b. Percentage of sales
c. Direct writeoff method
d. Aging of accounts receivable

47. When the direct writeoff method of recognizing bad debt expense is used, the entry to write off a
specific customer account would
a. Increase net income
b. Have no effect on net income
c. Increase accounts receivable and increase net income
d. Decrease accounts receivable and decrease net income

48. Accounting for the interest in a noninterest bearing note receivable is an example of what aspect
of accounting theory?
a. Matching
b. Verifiability
c. Substance over form
d. Form over substance

49. Why would an entity sell accounts receivable to another entity?

a. To improve the quality of credit granting process
b. To limit its legal liability
c. To accelerate access to amount collected
d. To comply with customer agreements

50. Which of the following are the methods to generate cash from accounts receivable?
a. Assignment
b. Factoring
c. Assignment and factoring
d. Assignment, factoring and discounting
Problem No. 1

Your review disclosed that on December 31, 2024, the accounts receivable control account of Ezekiel
Company had a balance of Php 2,865,000. An analysis of the accounts receivable account showed the
following:

(in Php)
37,500 Accounts known to be worthless
150,000 Advance payments to creditors on purchase orders
375,000 Advances to affiliated companies
(225,000) Customer’s accounts reporting credit balances arising from sales return
150,000 Interest receivable on bonds
750,000 Other trade accounts receivable – unassigned
825,000 Subscription receivable due in 30 days
375,000 Trade accounts receivable – assigned (Ezekiel Company’s equity in assigned accounts
is Php 150,000)
330,000 Trade installment receivable due 1-18 months, including unearned finance charges of
Php 30,000
22,500 Trade Receivables from officers due currently
75,000 Trade accounts on which post-dated checks are held (no entries were made on receipts
of checks)
__________
2,865,000

Questions:
Based on the above information, determine the correct balance of the following:

51. The trade accounts receivable as of December 31, 2024 is

a. 1,147,500
b. 1,522,500
c. 1,485,000
d. 1,447,000
52. The net current trade and other receivables as of December 31, 2024 is
a. 2,647,500
b. 2,610,000
c. 2,272,500
d. 1,822,500
53. How much of the foregoing will be presented under noncurrent assets as of December 31, 2024?
a. 1,200,000
b. 375,000
c. 525,000
d. 0
Problem No. 2

The adjusted trial balance of Kenneth Company as of December 31, 2023 shows the following:
Debit Credit
Accounts Receivable Php 1,000,000
Allowance for bad debts Php 40,000

Additional information:
• Cash sales of the company represent 10% of gross sales
• 90% of the credit sales customers do not take advantage of the 2/10, n/30 terms.
• It is expected that cash discount of Php 6,000 will be taken on accounts receivable
outstanding at December 31, 2024.
• Sales returns in 2024 amounted to Php 400,000. All returns were from charge sales.
• During 2024, accounts totaling to Php 44,000 were written off as uncollectible, bad debt
recoveries during the year amounted to Php 3,000.
• The Allowance for Bad Debts is adjusted so that it represents certain percentage of the
outstanding accounts receivable at year-end. The required percentage at December 31, 2024
is 150% of the rate used on December 31, 202.

Questions:

Based on the above information, answer the following:

54. The accounts receivable as of December 31, 2024 is
a. 3,000,000
b. 300,000
c. 333,333
d. 2,444,000
55. The allowance for doubtful accounts as of December 31, 2024 is
a. 20,000
b. 120,000
c. 180,000
d. 146,640
56. The net realizable value of accounts receivable as of December 31, 2024 is
a. 307,340
b. 2,814,000
c. 2,874,000
d. 2,291,360
57. The doubtful account expense for the year 2024 is
a. 181,000
b. 121,000
c. 21,000
d. 147,640
From the inception of operations, Sandy Company carried no allowance for doubtful accounts.
Uncollectible accounts were expensed as written off and recoveries were credited to income as
collected.

During 2024, management recognized that the accounting policy with respect to doubtful accounts
was not correct and determined that an allowance for doubtful accounts was necessary.

A policy was established to maintain an allowance for doubtful accounts based on historical bad debt
loss percentage applied to year-end accounts receivable.

The historical bad debt loss percentage is to be recomputed each year based on all available past years
up to a maximum of five years.

Year Credit Sales Write Offs Recoveries

2020 2,500,000 11,000 0
2021 2,750,000 34,000 2,700
2022 3,150,000 52,000 2,500
2023 3,600,000 57,000 4,800
2024 4,000,000 85,000 5,000

The entity reported accounts receivable of Php 1,000,000 on December 31, 2023 and Php 2,100,000 on
December 31, 2024.

58. How much is the Bad Debts Expense Rate for 2023?
a. 1.2%
b. 1.4%
c. 1.6%
d. 1.8%
59. How much is the Bad Debt Expense Rate for 2024?
a. 1.7%
b. 1.6%
c. 1.5%
d. 1.4%
60. How much is the ending balance of Allowance for Doubtful Accounts in 2023?
a. 20,000
b. 12,000
c. 24,000
d. 16,000
61. How much is the ending balance of Allowance for Doubtful Accounts in 2024?
a. 29,400
b. 30,600
c. 34,000
d. 32,400
62. How much is the Bad Debts Expense for 2023?
a. 80,200
b. 75,200
c. 64,200
d. 54,200
63. How much is the Bad Debts Expense for 2024?
a. 92,000
b. 69,600
c. 20,000
d. 34,000
64. How much is the net realizable value of Accounts Receivable in 2023?
a. 980,000
b. 988,000
c. 976,000
d. 984,000
65. How much is the net realizable value of Accounts Receivable in 2024?
a. 2,070,600.00
b. 2,069,400.00
c. 2,066,000.00
d. 2,067,600.00

Adelpha Corp. sells various merchandise both for cash and on credit. Accounts receivable transaction
during 2018 follows:

Accounts written off as worthless, P6,400; Cash received from cash customers, P206,200; Cash received
from credit customers where P231,000 was received from credit customer who took the advantage of
the 4% discount within the discount period, P330,000; Credit memoranda issued to credit customers
for sales returns and allowances, P26,400; Cash refunds given to cash customers for sales returns and
allowances, P17,100; Recoveries on accounts written off as uncollectible in prior periods which are not
yet included in the above collections, P6,800; Sales for cash and credit, P791,000.

The December 31, 2017, statement of financial position balances for account receivable and allowance
for bad debts are P85,800 and P7,900, respectively. An aging of the receivables indicates that P15,500
of the account receivable balance is deemed uncollectible.

66. Adelpha Corp.’s balance of accounts receivable that would be shown in the December 31, 2018
statement of financial position and the bad debts expense to be reported in profit or loss for the year
ended December 31, 2018, respectively, shall be______________
a. P298,175 and P7,200
b. P304,575 and P7,900
c. P298,175 and P15,500
d. P304,575 and P8,300

Norway Co. uses the net price method of accounting for cash discount. In one of its transactions on
December 5, 2018, Norway sold merchandise with a list price of P1,000,000 to a client who was given
a trade discount of 20%, 10% and 5%. Credit terms given by Norway were 4/10, n/30. The goods were
shipped FOB destination, freight collect. Total freight charge paid by the client was P25,000. On
December 10, 2018, the client returned damaged goods originally billed at P100,000.

67. The net realizable value of Norway’s accounts receivable on December 31, 2018 is _______
a. P535,640
b. P624,000
c. P559,000
d. P650,000

Bulbasaur Company provided the following information relating to current operations – Accounts
receivable, January 1, P4,000,000; Accounts receivable collected, P8,400,000; Cash sales, P2,000,000;
Inventory, January 1, P4,800,000; Inventory, December 31, P4,400,000; Purchases, P8,000,000; Gross
margin on sales, P4,200,000.

Charmander Company’s allowance for doubtful accounts was P1,000,000 at the end of 2021 and
P900,000 at the end of 2020. For the year ended December 31, 2021, the entity reported bad debts
expense of P160,000 in the income statement.

68. What amount should Bulbasaur be reported as accounts receivable on December 31?
a. P8,200,000
b. P6,200,000
c. P2,000,000
d. P4,200,000
69. What amount was debited to the appropriate account to write off uncollectible accounts in 2021
for Charmander?
a. P60,000
b. P100,000
c. P160,000
d. P260,000
Roy Company provided the following data relating to accounts receivable for the current year (in
Php):

Accounts receivable, January 1 650,000

Sales, 90% on credit 3,000,000
Purchase discount 50,000
Sales returns 75,000
Accounts written off 40,000
Collections from customers 2,150,000
Estimated future sales returns at 12/31 50,000
Estimated uncollectible accounts at 12/31 based on sales 110,000

70. What amount should be reported as net realizable value of accounts receivable on December 31?
a. 925,000.00
b.1,085,000.00
c. 1,385,000.00
d. 1,285,000.00