Problem Quiz 1 | PrAE 304 SY 2223 | 2nd semester
Problem 1
You are asked to audit the cash of Letty Corporation. Letty Corporation carries its checking
account with Mindanao Bank. The following data are available:
a. Letty Company Cash account for December:
Balance, November 30
P 20,900
Deposits during December
93,400
Checks written during December
( 83,000)
Balance, December 31
P 32,300
b. Bank statement for December:
Balance, November 30
P 20,000
Deposits during December
92,300
Checks cleared during December
( 82,150)
Funds transferred from foreign operations revenue
(in peso amount not yet recorded by Letty Corp.) 25,000
NSF check, Customer Nelly
( 180)
Bank Service charge
( 70)
Balance, December 31
P 54,900
c. Additional data:
1. Balance in Petty Cash account, P200 (not included in Letty Cash account).
2. The deposits of P93,400 by Letty Company are overstated by P100; the bank
recorded the correct amount.
3. The checks cleared by the bank of P82,150 erroneously included a P300 check
drawn by Laity Corporation; the bank has not yet corrected this error.
4. November 30: deposits outstanding, P2,000; and checks outstanding, P1,500.
Questions
1. The deposit in transit of LETTY COMPANY at December 31 is:
a. P 3,100
b. P 3,000
c. P 2,900
d. P 2,000
2. The outstanding checks of LETTY COMPANY at December 31 is:
a. P 1,650
b. P 1,500
c. P 2,050
d. P 2,350
3. The adjusted cash balance of LETTY COMPANY at December 31 is:
a. P 56,050
b. P 55,950
c. P 55,650
d. P 55,550
4. The cash shortage of LETTY COMPANY at December 31 is:
a. P 0
b. P 400
c. P 500
d. P 600
Problem 2
The adjusted trial balance of Galimuyod Company as of December 31, 2005 shows the following:
Debit
Credit
Accounts receivable
P1,000,000
Allowance for bad debts
P40,000
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

It is expected that cash discount of P6,000 will be taken on accounts receivable outstanding


Sales returns in 2006 amounted to P400,000. All return
During 2006, accounts totaling to P44,000 were written off as uncollectible; bad debt

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,
2006 is 150% of the rate used on December 31, 2005.
Questions: Based on the above and the result of your audit, answer the following:
1. The accounts receivable as of December 31, 2006 is
a. P3,000,000
b. P 300,000
c. P 333,333
d. P2,444,000
2. The allowance for doubtful accounts as of December 31, 2006 is
a. P 20,000
b. P120,000
c. P180,000
d. P146,640
3. The net realizable value of accounts receivable as of December 31, 2006 is
a. P 307,340
b. P2,814,000
c. P2,874,000
d. P2,291,360
4. The doubtful account expense for the year 2006 is
a. P181,000
b. P121,000
c. P 21,000
d. P147,640
Bonus Questions:
1. Bantay Company’s unadjusted trial balance at December 31, 2006, included the following
accounts: Debit Credit Accounts receivable P1,000,000 Allowance for doubtful accounts 40,000
Sales P15,000,000 Sales returns and allowances 700,000
Bantay Company estimates its bad debt expense to be 1 1/2% of net sales. Determine its bad
debt expense for 2006.
a. P225,000
b. P254,500
c. P214,500
d. P 55,000
2. An analysis and aging of Burgos Corp. accounts receivable at December 31, 2006, disclosed the
following:
Amounts estimated to be uncollectible
P 1,800,000
Accounts receivable
17,500,000
Allowance for doubtful accounts (per books)
1,250,000
What is the net realizable value of Burgos’ receivables at December 31, 2006?
a. P15,700,000
b. P17,500,000
c. P16,250,000
d. P14,450,000