1. Evaluate whether the following statements are true or false in relation to cash and cash equivalents:

I. Demand Deposits forms part as cash just like savings and time deposit.

II. Stale checks made by the company revert back as accounts receivable.

III. In preparing a proof of cash, a prior month erroneous credit to the account of the depositor by the bank will extend as deduction from total disbursements.

	A.	B.	C.	D.
Statement I	False	True	False	True
Statement II	False	False	True	True
Statement III	True	True	False	True

2. Which of the following statements is incorrect?

A. Cash which is restricted and not available for use within one year of the reporting period should be included in noncurrent assets.

B. Cash in a demand deposit account, being held specifically for the retirement of long-term debts not maturing currently, should be excluded from current assets and shown as a noncurrent investment.

C. Investments which can be liquidated at once and with little risk of loss of principal may be classified as cash equivalent and included in the caption "Cash and Cash equivalents"

D. Compensating balances are cash amounts that are not immediately accessible by the owner.

E. Cash and cash equivalents is always presented first in statement of financial position when presenting current and non-current classifications.

3. Which of the following is not a cash item?

I. Demand deposit

II. Customer post-dated checks

III. Time deposit

A. I and II D. I, II and III

B. II and III E. Answer not given

C. I and III

4. Determine which of the following statements is incorrect.

A. Cash includes bank drafts and manager’s check.

B. All cash and cash equivalents are considered to be current assets.

C. An investment in redeemable preference shares are not part of cash.

D. All of the statements are true.

5. NECROLYTE INC. provided the following data for the month of January of the current year:

Balance per book, January 31	3,130,000
Balance per bank statement, January 31	3,500,000
Collections on January 31 but undeposited	550,000
NSF check received from a customer returned by the bank on February 5 with the January bank statement	50,000
Checks outstanding on January 31	650,000
Bank debit memo for safety deposit box rental not recorded by depositor	5,000
A creditor check for P30,000 was incorrectly recorded in the depositor's book as	300,000
A customer check for P200,000 was recorded by the depositor as	20,000
The depositor neglected to make an entry in its books for a check drawn in payment of an account payable	125,000

What is the adjusted cash in bank on January 31?

A. 2,950,000 C. 3,400,000

B. 3,130,000 D. 3,500,000

6. LUNA MOONFANG CORP. had the following account balances on December 31, 2024:

Petty cash fund	50,000
Cash in bank - current account	4,000,000
Cash in bank - sinking fund	2,000,000
Cash on hand	500,000
Cash in bank - restricted account for plant addition, expected to be disbursed in 2025	1,500,000
Treasury bills	1,000,000

The petty cash fund included unreplenished December 2024 petty cash expense vouchers of P10,000 and employee IOU of P5,000. The cash on hand included a P100,000 check payable to LUNA dated January 15, 2025. In exchange for a guaranteed line of credit, the entity has agreed to maintain a minimum balance of P200,000 in its unrestricted current bank account. The sinking fund is set aside to settle a bond payable that is due on June 30, 2025. What total amount should be reported as "cash and cash equivalents" on December 31, 2024?

A. 4,435,000 C. 5,535,000

B. 5,435,000 D. 7,435,000

7. In relation to the cash and cash equivalents line item of the balance sheet of KARDEL CORP. as of the year ended December 31, 2024, the following information was presented:

VAT fund	P30,000
Bond sinking fund	150,000
BPI checking account	(5,000)
BPI savings account	500,000
BDO checking account	(20,000)
BDO time deposit	100,000
Security bank savings account	(10,000)
Coins and currencies	30,000
IOUs from employees	25,000
Treasury bond acquired December 30, 2024 maturing February 15, 2025	50,000
Money order	15,000
Bonds payable maturing June 30, 2025	150,000

What amount is to be reported as cash for the year ended December 31, 2024?

A. P770,000 C. P720,000

B. P800,000 D. P700,000

8. On December 31, 2026, NEVERMORE CORP. has the following composition of its cash and cash equivalents:

Demand deposit, P 1,500,000; Certificate of dcposit-30 days, P 500,000; NSF check of customer, P 20,000; Money market placement (due date: June 30, 2027), P 1,000,000; Savings deposit in closed bank, P 50,000; IOU from an employee, P 30,000; Petty cash fund, P 10,000; Customer's check dated January 31, 2027, P 60,000; Customer's check outstanding for 1.8 months, P 30,000.

Additional information:

? Check of P 100,000 in payment of accounts payable was recorded on December 31, 2026 but mailed to creditors on January 15, 2027.

? Check of P 50,000 dated January 31, 2027 in payment of accounts payable was not recorded and mailed December 31, 2026.

? The company uses the calendar year. The cash receipts journal was held open until January 15, 2027, during which time, P 200,000 was collected and recorded on December 31, 2026.

How much "cash and cash equivalents" should be shown on the December 31, 2026 balance sheet?

A. 1,910,000 C. 2,160,000

B. 1,960,000 D. 2,360,000

9. On December 31, 2024, GATOTKACA BANK recorded an investment of P5,000,000 in a loan granted to a client. The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at maturity on December 31, 2027. Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full payment.

The bank projected that the entire principal will be paid at maturity and 4% interest or P200,000 will be paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2024.

The present value of 1 at 10% for three periods is 0.75, and the present value of an ordinary annuity of 1 at 10% for three periods is 2.49.

What is the loan impairment loss for 2024?

A. 250,000 C. 748,000

B. 600,000 D. 752,000

10. Cobb Company purchased 10,000 shares representing 2% ownership of Roe Company on February 15, 2024. Cobb Company received a stock dividend of 2,000 shares on March 31, 2024, when the carrying amount per share was P350 and the market value per share was P400. Roe Company paid a cash dividend of P15 per share on September 15, 2024. In the income statement for the year ended October 31, 2024, what amount should be reported as dividend income?

A. 150,000 C. 880,000

B. 180,000 D. 980,000

11. Use the following information for the next item(s):

On January 1, 2029, an entity purchased 25% of the outstanding ordinary shares of another entity for P3,000,000. Oh such date, the carrying amounts of the net assets of the investee amounted to P8,000,000. The carrying amounts of net assets equaled fair value except for land and building. The fair value of land exceeded carrying amount by P 2,000,000 and the fair value of building exceeded carrying amount by P 3,000,000. The investee reported net income of P 1,500,000 and paid dividends of P 300,000 in 2029. The building has a remaining life of 5 years.

On January 1, 2030, the entity sold 60% of its interest to another entity for P 2,500,000. On such date, the fair value of the remaining interest was P 1,800,000. The remaining interest was reclassified at FVPL. The investee paid dividend of P 200,000 during 2030 and on December 31, 2030, the investee reported net income of P 1,000,000. The fair value of the remaining interest on December 31, 2030 is P 1,600,000.

What is the investment income for 2029?

A. 475,000 C. 225,000

B. 375,000 D. 425,000

12. What is the carrying amount of the investment on December 31, 2029?

A. 3,400,000 C. 3,550,000

B. 3,475,000 D. 3,150,000

13. What is the gain or disposal of the investment in 2030?

A. 440,000 C. 900,000

B. 460,000 D. 260,000

14. What net amount is included in profit or loss for 2030?

A. 720,000 C. 920,000

B. 900,000 D. 460,000

15. If the initial measurement of a loan receivable is higher than its face value:

I. The direct origination cost is higher than origination fee.

II. The nominal interest rate is lower than the effective interest rate.

Which of the above statements is correct?

A. I only C. Both I and II

B. II only D. Neither I nor II

Answer rating: 100% (QA)

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