CPA REVIEW SCHOOL OF THE PHILIPPINES

MANILA

PRACTICAL ACCOUNTING PROBLEMS II

GUERRERO/ GERMANO/ DE JESUS

GOVERNMENT ACCOUNTING

I
The approved appropriation of Department U for 2008 was P18,000,000. Eighty five
percent of this appropriation was allotted by the Department of Budget and
Management (DBM) accompanied with the Notice of Cash allocation (80%) of the
allotment. During the year, the amount of obligations incurred was equivalent to ninety
percent of the NCA but only seventy percent of these obligations were paid by checks.
Determine which of the following is incorrect.
a. Department U records the receipt of NCA by debiting to Cash-NT-MDS an
amount equivalent to P12,240,000
b. The receipt of the allotment is recorded by means of a memorandum entry
c. At the end of the year, to adjust the unused NCA, Subsidy Income from National
Government would be debited by P4,528,800
d. At the end of the year, to adjust the unused NCA, Cash-NT-MDS would be
credited by P7,711,200

II
Bank charges per bank statement, P7,500; Interest expense upon receipt of Bill,
P9,000. Based on the given information, which of the following is not correct?
a. Entry to record the bank charges in the regular agency books would include a
credit to Cash-NT-MDS
b. Receipt of bill for interest is entered in the RAOFE
c. Payment of interest expenses would include a credit to Cash-NT-MDS
d. Agency enters the obligation for bank charges in the RAOFE

III
Which of the following would be included in an entry to record the remittance of income
taxes to the Bureau of Treasury (BTR) collected by the Bureau of Internal Revenue
(BIR)? The BIR has to authority to use the collections.
a. Debit to Cash – Collecting officer
b. Debit to Cash – NT – MDS
c. Credit to Cash – Collection officer
d. Credit to Cash – NT – MDS

IV
Agency V collected cash of P50,000 for services rendered. The collection was
deposited to the Bank of the Philippine Islands (BPI). What is the entry to record the
deposit?
a. Debit, Cash in Bank –LCCA and Credit, Cash - Distributing officer to P50,000
b. Debit, Cash – NT – MDS and Credit, Cash – Collecting officer for P50,000
c. Debit, Cash in Bank – LCCA and Credit , Cash – Collecting officer for P50,000
d. Debit, Cash – NT – MDS and Credit, Cash – Distributing officer for P50,000

V
During 2008, Agency W transferred cash of P100,000 to Agency X for a land
beautification project. Subsequently, Agency W received a report from Agency X about
the project. Which of the following is incorrect?
a. The obligation of P100,000 is entered in the RAOCO
b. Source Agency debits Due from NGA upon transfer of cash

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 c. Receiving Agency credits Cash –NT –MDS upon receipt of cash
d. Source Agency debits Land Development upon receipt of the completion
report from the implementing agency

VI
On September 10, 2008 Bureau of Customs collected taxes from articles in the amount
of P875,000. The BC has no authority to use these collections in their operations and
therefore deposited it to the Bureau of Treasury. What is the journal entry to record the
collections in the National Government Books?
a. Cash-National Treasury – MDS 875,000
Subsidy Income from NG 875,000

b. Cash-Collecting Officer 875,000

Excise taxes-Articles 875,000

c. Cash-Disbursing Officer 875,000

Contributions Revenue 875,000

d. Cash-in Bank-LCCA 875,000

Excise taxes-Articles 875,000

VII
Agency SS issued a purchase order for the acquisition of office equipment costing
P75,000. The equipment was received with the charge invoice and was paid by check
after withholding tax of 10%. Agency SS remitted the tax withheld to BIR thru
government depositary bank. What is the entry of Agency SS to record the payment?
a. Accounts Payable 75,000
Due to BIR 7,500
Cash-National Treasury-MDS 67,500

b. Office Equipment 75.000

Cash-National Treasury-MDS 75,000

c. Office Equipment 75,000

Due to BIR 7,500
Cash-National Treasury-MDS 67,500

d. Accounts Payable 75.000

Cash-National Treasury-MDS 75,000

VIII
Collection of P645,000 representing motor vehicles registration fees was recorded by
Land Transportation Office as P654,000. What is the correcting entry under the NGAS?
a. Cash – Disbursing Officer 9,000
Registration Fees 9,000

b. Cash – Collecting Officer 9,000

Registration Fees 9,000

c. Registration Fees 9,000

Cash NT - MDS 9,000

d. Registration Fees 9,000

Cash – Collecting Officer 9,000

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 IX
The following data were taken for the accounting records of Agency Q on December 31,
2008 (in million)
Notice of cash allocation received P600
Office supplies expenses 16
Electricity 80
Refund of excess cash advance 20
Unused NCA 120
Rent expense 32
Salaries and wages – regular pay 220
Travelling expenses 4
ADCOM 8
PERA 10

Which of the following is true to close the net income over expenses?
a. Debit retained Operating Surplus, P60
b. Debit Subsidy Income from National Government, P60
c. Credit Income and Expenses Summary, P60
d. Credit Retained Operating Surplus, P60

X
On June 30, 2008, Agency R collected P35,000 from tenants for the rent of office space
in its building and deposited the collections to PNB (AGDB). On July 10, the agency
used P17,000 of this collection for the repair of the office space. Which of the following
is true to record the payment of the repair of the office space?
a. Debit Repairs and Maintenance, P35,000
b. Credit Cash – Disbursing Officer, P35,000
c. Debit Cash – Collecting Officer, P17,000
d. Credit Cash in Bank – LCCA, P17,000

XI
On May 1, 2008 Agency G signed a contract for the construction of a building. The
contract price is P75 million. The agency made a down payment of 30% of the contract
price. On September 1, 2008, Agency G received the first billing of 50% of the contract
price. The agency paid the first billing less P150,000 withholding tax.

Which of the following is true to record the receipt of the first billing?
a. Debit Construction Billings, P37.5 million
b. Debit Construction in Progress, P75 million
c. Credit Advances to contractor, P22.5 million
d. Credit Accounts Payable, P22.5 million

Which of the following is false to record the payment of the first billing?
a. Debit Accounts Payable, P15 million
b. Credit Cash – NT – MDS, P14.85 million
c. Debit Accounts Payable, P37.5 million
d. Credit Due to BIR, P150,000

XII
Agency J prepares the payroll fund for the month of August, 2008:
Salaries and wages P300,000
ADCOM 90,000
PERA 60,000
Gross Payroll P450,000

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 Less: Withholding tax P12,000
GSIS contribution 9,000
Pag-ibig contribution 6,000
Philhealth contribution 3,000
30,000
Net Payroll P420,000

The net payroll is advances to a Disbursing Officer.

Which of the following is true to record the advances to the disbursing officer?
a. Debit Cash Disbursing Officer, P450,000
b. Credit Cash-NT-MDS, P420,000
c. C. Debit Cash in Bank – LCCA, P420,000
d. Credit Cash – NT –MDS, P450,000

NON-PROFIT ORGANIZATION

I
Y hospital, a Not for Profit hospital affiliated with a religious group, reported the following
information for the year ended December 31, 2008:
Gross patient service revenue P2,400,000
Bad debts expense 50,000
Contractual adjustments with third party payors 200,000
Charity care 150,000
Allowance for discounts to hospital employees 90,000
Net patient service revenues for Y hospital for the year ended December 31, 2008 is
a. P2,250,000 b. P2,110,000 c. P1,960,000 d. P1,910,000

II
During 2008, Z Hospital purchased medicines for hospital use totaling P1,000,000.
Included in the P1,000,000 was an invoice of P100,000 that was canceled in 2008 by
the vendor because the vendor wished to donate this medicine to Z. The donation
should be recorded as
a. An increase of P100,000 to Patient Service Revenue
b. An increase of P100,000 to Other Non-Operating Revenue
c. An increase of P100,000 to Other Operating Revenue
d. A decrease of P100,000 to Other Non-Operating Revenue

III
AA Hospital had the following cash receipts for the year ended December 31, 2008:
Collections of Receivables P500,000
Contribution for an establishment of term endowment 100,000
Tuition from nursing school 200,000
Interest received from investment in permanent endowments 35,000
Dividends received from investment in term endowments 40,000
Payment of supporting expenses 150,000
Payment of program expenses 215,000

The interest received from the permanent endowment is restricted by the donor for the
acquisition of equipment.

How much is the net cash provided by operating activities?

a. P335,000 b. P375,000 c. P410,000 d. P435,000

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 IV
ABC College, a private not-for-profit college received P80,000 from Ms. XXX on May
25, 2008. Ms. XXX stipulated that her contribution be used to support faculty
development seminars during the fiscal year beginning on July 1, 2008. On July 15,
2008, administrators of ABC awarded seminar and training grants totaling P65,000 to
several faculty members in accordance with the wishes of Ms. XXX. For the year ended
June 30, 2008. ABC should report the P80,000 contribution as
A. Temporarily restricted revenues on the statement of activities
B. Unrestricted revenue on the statement of activities
C. Temporarily restricted deferred revenue on the statement of activities
D. An increase in fund balance on the statement of financial position

V
XYZ University , a private not-for-profit university, had the following cash inflows during
the year ended June 30, 2008:
I. P800,000 from students for tuition
II. P450,000 from a donor who stipulated that the money be invested indefinitely.
III. P280,000 from a donor who stipulated that the money be spent in accordance
with the wishes of XYZ’s governing board.
On XYZ University’s statement of cash flows for the year ended June 30, 2008, what
amount of these cash flows should be reported as financing activities?
A. P280,000 B. P730,000 C. P1,080,000 D. P450,000

VI
Wild Life Park, a private not-for-profit zoological society, received contributions
restricted for research totaling P175,000 in 2007. None of the contributions were spent
on research in 2007. In 2008, P122,500 of the contributions were used to support the
research activities of the society. The net effect on the statement of activities for the
year ended December 31, 2008, for Wild Life Park would be a
A. P52,500 increase in temporarily restricted net assets.
B. P122,500 decrease in temporarily restricted net assets.
C. P122,500 increase in temporarily restricted net assets.
D. P122,500 decrease in unrestricted net assets.

VII
Fund established at a public college by donors who have stipulated that the principal is
nonexpendable, but that the income generated may be expended by current operating
funds, would be accounted for in the
A. Annuity Fund C. Temporarily restricted fund
B. Pure-endowment fund D. Current-fund restricted

VIII
Which of the following is most likely to be classified as other operating revenue?
A. Unrestricted gift C. State research grant
B. Dividend income D. Parking Fee

IX
The statement of financial position for the XYZ Library, a private nonprofit organization,
should report separate amounts for the library’s net assets according to which of the
following classifications?
A. Unrestricted and permanently restricted
B. Temporarily restricted and permanently restricted
C. Unrestricted and temporarily restricted
D. Unrestricted, temporarily restricted, and permanently restricted

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 X
On the statement of activities for a private not-for-profit performing arts center,
expenses should be deducted from
I. Unrestricted revenue
II. Temporarily restricted revenues
III. Permanently restricted revenues
A. I, II and III B. Both I and II C. I only D. II only

XI
DEF Museum, a private nonprofit organization, has both regular and term endowments.
On the museum’s statement of financial position, how should the net assets of each
type of endowment be reported?
Term Endowments Regular Endowment
A. Temporarily restricted Permanently restricted
B. Permanently restricted Permanently restricted
C. Unrestricted Temporarily restricted
D. Temporarily restricted Temporarily restricted

XII
TUV Hospital, a private not-for-profit hospital, earned P500,000 of gift shop revenues
and spent P100,000 on research during the year ended December 31, 2008. The
P100,000 spent on research was part of a P150,000 contribution received during
December of 2007 from a doctor who stipulated that the donation be used for medical
research. Assume none of the gift shop revenues were spent in 2008. For the year
ended December 31, 2008, what was the increase in unrestricted net assets from the
events occurring during 2008?
A. P600,000 B. P400,000 C. P500,000 D. P550,000

XIII
HIJ College, a private not-for-profit college, received the following contributions during
2008:
I. P1,250,000 from alumni for construction of a new wing on the science building to
be constructed in 2009.
II. P250,000 from a donor who stipulated that the contribution be invested
indefinitely and that the earnings be used for scholarships. As of December 31,
2008, earnings from the investment amounted to P12,500.
For the year ended December 31, 2008, what amount of these contributions should
be reported as temporarily restricted revenues on the statement of activities?
A. P12,500 B. P1,262,500 C. P1,250,000 D. P1,512,500

XIV
Mr. Y works full-time for a nonprofit organization for 5 months now, he fills the position
of finance director, a position that normally pays P75,000 per year. Mr. Y accepts no
salaries for his work. How should these donated services be recorded?
A. Debit to Salary expense, P31,250
B. Debit to Rent expense, P31,250
C. Credit to Contributions Revenue, P75,000
D. No required entry

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