Advanced Financial Accounting and Reporting

14 – NGAS

STRAIGHT PROBLEMS

Problem 1 • Salaries and other allowances are paid by the

Agency AAA is a national government agency unit. disbursing officer,
Selected transactions completed during the agency’s as follows: Salaries P1,562,000
2020 operations follow: PERA 213,000 P1,775,000
Less salary deductions
1. Approval of the annual budget of the agency for 2020 (see schedule) 355,000#
by DBM (thru a legislative enactment by Congress), Net amount paid (disbursing officer’s
as follows: cash advance) P1,420,000
Personal services (PS) P2,000,000
# Withheld taxes P131,350
Maintenance and other operating
GSIS premiums 188,150
expenses (MO) 1,500,000
Pag-ibig premiums 14,200
Capital outlay (CO) 1,200,000
Phil Health premiums 21,300 P 355,000
Financial expenses (FE) 40,000
Cancelled due to BIR (TRA) P 131,350
Total P 4,740,000
Remitted other salary deductions to
pertinent payees 223,650
2. Approval of Agency’s budget matrix by DBM and
related ALLOTMENT received out of the above 8. Incurred an OBLIGATION for the Agency’s share on
APPROPRIATIONS: the following mandated contributions:
Personal services P 1,800,000 Life and Retirement P266,250
Maintenance and other operating Pag-ibig 14,200
expenses 1,350,000 Philhealth 21,300 P 301,750
Capital Outlay 1,100,000
9. Incurred an OBLIGATION and paid bank
Financial expenses 35,000
service charges of P 33,500
Total P4,285,000
Required:
3. Receipt of NOTICE of CASH ALLOCATION for the (1) Account for the above-mentioned information I n the
above-mentioned ALLOTMENT for a total of books of the Agency.
P4,100,000 (2) Prepare adjusting entries at year-end for the
following information
4. Incurred OBLIGATION and paid the following a. Three-fourths of the prepaid rent must be
expensed.
maintenance and operating expenses
b. Various operating expenses are accrued at year-
a. Various operating expenses P 1,100,000 end, P35,000
b. Prepaid rent P 120,000 c. Fifteen percent (15%) of the recorded various
c. Travelling and other expenses of operating expenses are prepayments
the Treasurer, Pol Buba, for a P 40,000 d. The office equipment will be depreciated over an
scheduled seminar in Kutawi. P1,260,000 estimated life of 10 years, Depreciation expense
• Refund of excess cash for 8 months will be charged during the current
advance for travelling year.
expenses by Pol B 3,000
• Liquidation of the actual
travel and related expenses Problem 2.
by Pol B. 37,000 The following is the pre-closing trial balance of XYZ, a
• Deposit of collection for national government agency for the fiscal year ended,
excess cash advance to June 30, 2020.
Bureau of Treasury 3,000 Debit Credit
Cash-NT-MDS P 25,750
5. Incurred OBLIGATION for the acquisition Cash in Bank – LCCA 50,000
of office equipment P 800,000 Prepaid rent 30,000
• Receipt of office equipment per invoice Prepaid expenses 165,000
and delivery receipt 800,000 PI Municipal park 376,000
• Payment of office equipment, less 12% Office equipment 400,000
withholding tax 704,000 Accumulated
• Issuance of TRA for the depreciation P 24,000
withholding tax 96,000 Accrued Expenses 35,000
Government Equity 386,000
6. Collection of other income which the Agency is Subsidy Income from NG 3,807,000
authorized to use in their operations: Other service income 15,000
• Other service income P 15,000 Sales revenue 35,000
• Sales revenue 35,000 Traveling 37,000
• Deposited the above collections in the Salaries 1,562,000
bank P 50,000 PERA 213,000
Life and retirement 266,250
7. Incurred an OBLIGATION for personal Pag-ibig 14,200
services P 1,775,000 Philhealth 21,300
• The disbursing officer is granted a cash Depreciation 48,000
advance of 1,420,000 Rent 90,000

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 Various operating 2. Prepare a post-closing trial balance for year ended
expenses 970,000 2020.
Bank service charges 33,500 3. Prepare a Statement of Revenues and Expenses and
Totals P4,302,000 P4,302,000 a Statement of Financial Position for 2020
Required:
1. Prepare closing entries at year-end.
MULTIPLE CHOICE

1. Which of the following is most likely recognition of Government 651 350,000

stale check? Cash National
a. Cash Collecting officer 102 100,000 Treasury – MDS 108 350,000
Electricity Expenses 767 100,000 b. Income and
b. Cash National Treasury expense Summary 512 645,000
– MDS 108 100,000 Salaries and
Electricity Expense 767 100,000 Wages-Regular 701 645,000
c. Cash Disbursing Officer 103 100,000 c. Government Equity 501 2,000,000
Telephone Expense Public
– landline 772 100,000 Infrastructures 2,000,000
d. Cash in Bank –Current d. Allowance for bad
Account 111 100,000 debts 100,000
Miscellaneous Income and
Income 100,000 Exp. Summary 512 100,000

2. What is the appropriate entry to record receipt of NCA Items 5-7 relates to the following:
from the DBM? Agency A is a National Government with an NCA from
a. Cash in Bank the DBM for MOOE amounting to P5,500,000. Of the
Current Account 111 5,000,000 total amount, P4,675,000 was obligated and 80% was
Subsidy Income paid. The remaining 20% was recognized as accounts
from National payable.
Government 651 5,000,000 5. How much is the un-obligated balance that should be
b. Cash National shown in the Registry of Allotment and Obligation-
Treasury – MDS 108 5,000,000 MOOE?
Government
Equity 501 5,000,000 a. P825,000 c. P1,760,000
c. Cash National b. P935,000 d. P110,000
Treasury - MDS 108 5,000,000
Subsidy 6. How much is the utilization rate of obligation?
Income from a. 80% c. 85%
National b. 20% d. 38%
Government 651 5,000,000
7. What entry should be prepared to record the unutilized
d. Subsidy Income
subsidy income from national government?
from National
a. Subsidy Income from
Government 651 5,000,000
National Government 651 935,000
Government
Cash National
Equity 501 5,000,000
Treasury – MDS 108 935,000
b. Subsidy Income from
National Government 651 825,000
3. What is the appropriate entry to record the issuance of
Cash National
check for payment of payroll with net amount of
Treasury – MDS 108 825,000
P600,000 received by the disbursing officer?
c. Subsidy Income from
a. Salaries and Wages-
National Government 651 110,000
Regular 701 680,000
Cash National
Due to BIR 412 45,000
Treasury – MDS 108 110,000
Due to GSIS 413 30,000
d. Subsidy Income from
Due to Philhealth 415 5,000
National Government 651 825,000
Due to Officers and
Government Equity 501 825,000
employees 403 600,000
b. Salaries and Wages- 8. What is the appropriate entry to record remittance of
Regular 701 680,000 withholding taxes deducted from salaries of
Due to BIR 412 45,000 government employees through TRA’s?
Due to GSIS 413 30,000
Due to Philhealth 415 5,000 a. Due to BIR 412 120,000
Cash-National Cash National
Treasury-MDS 108 600,000 Treasury – MDS 108 120,000
c. Cash Disbursing Officer 103 600,000 b. Due to BIR 412 120,000
Cash National Subsidy Income
Treasury-MDS 108 600,000 from National
d. Cash Disbursing Officer 103 600,000 Government 120,000
Due to officers and c. Due to BIR 412 120,000
employees 403 600,000 Due to officers and
Employees 403 120,000
4. Which of the following is not a closing entry? d. Due to BIR 108 120,000
a. Subsidy Income Cash In Bank –
from National Current Account 111 120,000

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 Items 9-10 relate to the following: b. Subsidy to National
X, a national government agency, established a petty Government 100,000
cash fund of P20,000. During the month, P12,000 of Cash National Treasury –
the petty cash liquidated but was not replenished. The MDS 100,000
total amount liquidated pertains to the following: c. Subsidy to Operating units 100,000
Gas and oil P8,000 Cash National Treasury –
Office supplies 4,000 MDS 100,000
d. Subsidy to Operating unit 100,000
Of the P4,000 office supplies, P1,500 is on hand at the Subsidy from National
end of the month. Government 100,000
9. How much should be reported as petty cash at the end
of the month assuming that a financial report is to be
prepared? 13. Mario is an employee of a national government
a. P20,000 c. P12,000 agency. Mario was granted and received a cash
b. P 8,000 d. P 1,500 advance of P30,000 for official travel. Mario liquidated
the cash advance as follows:
10. What is the appropriate entry to record the liquidation Travel expenses P10,000
of the petty cash fund? Training expenses 10,000
a. Gas and oil 8,000 Representation expenses 8,000
Office supplies expense 4,000 Total P28,000
Petty cash fund 12,000
b. Gas and oil 8,000 The amount advanced had an un-liquidated balance of
Office supplies expense 4,000 P2,000. What is the appropriate entry to record the
Cash in bank 12,000 liquidation of the cash advance?
c. Gas and oil 8,000 a. Travel expenses 10,000
Office supplies inventory 1,500 Training expenses 10,000
Office supplies expense 2,500 Representation expenses 8,000
Cash in bank 12,000 Cash Disbursing Officer 28,000
d. Gas and oil 8,000 b. Travel expenses 10,000
Office supplies inventory 1,500 Training expenses 10,000
Office supplies expense 2,500 Representation expenses 8,000
Petty cash fund 12,000 Due from officers and
Employees 2,000
11. M is the cashier of DILT a national government. During Cash Disbursing Officer 30,000
the month, she received total collections from c. Travel expenses 10,000
earnings amounting to P250,000 of which P150,000 Training expenses 10,000
was income that should be deposited to the National Representation expenses 8,000
Government and the P100,000 was income received Due from officers and
from its own agency operation. The P 150,000 was Employees 2,000
deposited to the National Treasury and the remaining Cash National Treasury 30,000
balance was deposited to the agency’s bank account. d. Travel expenses 10,000
What should be the entry to record the deposit of the Training expenses 10,000
collections received by the collecting officer? Representation expenses 8,000
a. Cash National Treasury 108 150,000 Cash Collecting Officer 2,000
Cash in Bank Current Due from officers and
Account 111 100,000 Employees 30,000
Cash Collecting
Officer 102 250,000
14. What is the appropriate entry to record cash overage?
b. Due to National
a. A cash overage is returned to the cashier and not
Treasury 108 150,000
recorded.
Cash in Bank Current
b. A cash overage is debited to Cash and credited to
Account 111 100,000
Miscellaneous Income.
Cash Collecting
c. A cash overage is not recorded and should be
Officer 102 250,000
distributed to all employees equally.
c. Due to National
Treasury 108 150,000 d. A cash overage is debited to Accounts
Cash In Bank Current receivable and credited to Cash.
Account 111 100,000 GHI, a national government agency unit incurs an
Income 250,000 obligation for the purchase of garbage truck for P450,000
d. Cash National Treasury 108 150,000 on March 15, 2016. The dump truck is to be delivered on
Cash In Bank Current March 31, 2016 and the motor firm has agreed for a 30-
Account 111 100,000 day, interest free-delayed payment, i.e. payable on April
Income 250,000 30, 2016 Assume a 12% tax on the purchase covered by
12. W, a national government agency received cash TRA:
allotment from its head agency totaling P1,000,000. 15. On March 15, 2016, the entry to be recorded by GHI
Of the total amount received, W distributed P100,000 will be:
to one of its operating units as subsidy. What entry a. Equipment 450,000
should be prepared to record the distribution of the Accounts payable 450,000
subsidy to W, operating units?
a. Subsidy from National b. Equipment 450,000
Government 100,000 Accounts payable 396,000
Cash National Treasury – Subsidy income from NG 54,000
MDS 100,000

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 c. Equipment 450,000 Due to BIR 54,000
Accounts payable 396,000 Cash – NT – MDS 450,000
Due to BIR 54,000 c. Accounts payable 450,000
Cash – NT – MDS 396,000
d. Memorandum entry in RAOCO Due to BIR 54,000
d. Accounts payable 396,000
Due to BIR 54,000
Cash – NT – MDS 396,000
16. On March 31, 2016, the entry to be recorded by GHI Subsidy income from NG 54,000
will be:
a. Equipment 450,000 18. The entry by GHI to record to subsequent disposal of
Accounts payable 450,000 the withheld tax will be:
a. Due to BIR 54,000
b. Equipment 450,000 Cash – NT – MDS 54,000
Accounts payable 396,000 b. Due to BIR 54,000
Subsidy income from NG 54,000 Withholding tax payable 54,000
c. Equipment 450,000 c. Due to BIR 54,000
Accounts payable 396,000 Subsidy income from NG 54,000
Due to BIR 54,000 d. Memorandum entry in RAOFE

d. Memorandum entry in RAOCO

17. On April 30, 2016, the entry to be recorded by GHI

will be:
a. Accounts payable 450,000
Cash – NT –MDS 450,000
b. Accounts payable 396,000
- now do the drill-

SUGGESTED SOLUTIONS TO STRAIGHT PROBLEMS

Problem 1.
1. APPROVAL OF ANNUAL BUDGET (APPROPRIATION) Due from Officers 3,000
and employees
*DBM enters in RAPAL, P4,740,000. * Liquidation of cash
*COA prepares spreadsheets on appropriations. advance
• Agency prepares a journal entry
2. APPROVAL OF AGENCY’S BUDGET MATRIX (ALLOTMENT) Traveling expenses 37,000
Due from Officers
*DBM enters in RAPAL and in RANCA, P4,285,000. and employees 37,000
*Agency enters in RALOBS, as follows • Deposit of collection
• Agency prepares a journal entry
a. RAOCO for capital outlay P1,100,000 Subsidy income from NG 3,000
b. RAOMO for M & O expenses 1,350,000 Cash –Collecting Officer 3,000
c. RAOPS for personal services 1,800,000
d. RAOFE for financial expenses 35,000 5. INCURRED OBLIGATION FOR ACQUISITION OF
Total P4,285,000 EQUIPMENT

3. RECEIPT OF NOTICE OF CASH ALLOCATION (NCA) • Agency enters in RAOCO

• DBM enters in RANCA, P4,100,000 • Journal entry for receipt of eqpt

• BTR enters in RENREP, P4,100,000 Office Equipment 800,000
• Agency prepares a journal entry: Accounts payable 800,000
Cash – National
Treasury – Modified • Journal entry for payment
Disbursement System P4,100,000 Accounts payable 800,000
Subsidy Income Cash – NT –MDS 704,000
from the National 4,100,000 Due to BIR 96,000
Government
• Journal entry for issuance of TRA
4. INCURRED OBLIGATION FOR VARIOUS MOOEs
Due to BIR 96,000
• Agency enters in RAOMO Subsidy Income from the 96,000
*Agency prepares the following compound entry: NG
Prepaid rent 120,000
Due from officers and 40,000 6. COLLECTION OF OTHER INCOME WHICH THE AGENCY IS
Employees AUTHORIZED TO USE
Various other Operating
Expenses 1,100,000 • Journal entry for the collection
Cash – NT – MDS 1,260,000 Cash – Collecting Officer 50,000
Other service income 15,000
• Refund of excess cash advance Sales revenue 35,000
• Agency enters in RAOMO (negative entry)
• Agency prepares a journal entry: • Journal entry for the deposit
Cash – Collecting 3,000
officer Cash in Bank – LCCA 50,000

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 Cash – Collecting officer 50,000
Service income 15,000
Sales revenue 35,000
7. INCURRED OBLIGATION FOR PERSONAL SERVICES Income & Expense 50,000

• Agency enters in RAOPS Income & Expense 3,255,250

• Journal entry for the cash advance Travelling 37,000
Salaries 1,562,000
Cash – Disbursing Officer 1,420,000 PERA 213,000
Cash – NT – MDS 1,420,000 Life & retirement 266,250
Pag-ibig 14,200
• Journal entry for the payment Philhealth 21,300
Depreciation 48,000
Salaries & wages 1,562,000 Rent 90,000
PERA 213,000 Various operating
Due to BIR 131,350 Expenses 970,000
GSIS premiums payable 188,150 Bank service charges 33,500
Pag-ibig premiums 14,200
payable Income & expense 576,000
Philhealth premiums 21,300 Retained operating
payable surplus 576,000
Cash – disbursting officer 1,420,000
Retained operating
• Journal entry for remittance to BIR of WT surplus 576,000
Due to BIR 131,350 Government Equity 576,000
SI from the NG 131,350
Government Equity 376,000
• Journal entry for remittance to various payees PI-municipal park 376,000

GSIS premiums payable 188,150

Pag-ibig premiums 14,200 2. POST-CLOSING TRIAL BALANCE AT FISCAL-YEAR-END
payable Debits Credits
Phil-health premiums 21,300 Cash-in-Bank – LCCA P 50,000
payable Prepaid expenses 165,000
Cash – NT – MDS 223,650 Prepaid rent 30,000
Office equipment 400,000
8. INCURRED OBLIGATION FOR SHARE IN CONTRIBUTIONS Accumulated depreciation – P 24,000
OE
• Agency enters in RAOPS Accrued expense 35,000
• Journal entry for the payments Government equity ________ 586,000
Life & Retirement 266,250 Totals P645,000 P645,000
contributions
Pag-ibig contributions 14,200 3. STATEMENT OF REVENUES AND EXPENSES
Phil-health contributions 21,300 Revenues:
Cash – NT – MDS 301,750 Subsidy income from the
National Govt. 3,781,250
Other service income 15,000
9. INCURRED OBLIGATION FOR BANK SERVICE CHARGES Sales revenues 35,000
Total P3,831,250
• Agency enters in RAOFE
• Journal entry for payment Less Expenses:
Bank service charges P33,500
Bank service charges 33,500 Traveling 37,000
Cash – NT – MDS 33,500 Rent 90,000
Depreciation 48,000
REQUIREMENT 2 – ADJUSTING ENTRIES Life & Retirement
contributions 266,250
a. Rent expense 90,000 Pag-ibig contributions 14,200
Prepaid rent 90,000 Phil-health contributions 21,300
b. Various operating 35,000 Salaries 1,562,000
expenses PERA 213,000
Accrued expenses 35,000 Other operating 970,000 3,255,250
c. Prepaid expense 165,000 Net Savings P 576,000
Other operating
supplies 165,000 4. STATEMENT OF FINANCIAL POSITION
d. Depreciation expenses 48,000 Cash-in-bank – LCCA P50,000
Accumulated Prepaid rent 30,000
depreciation 48,000 Prepaid expense 165,000
Office equipment P400,000
Less accumulated
PROBLEM 2 depreciation 24,000 376,000
1. Closing entries at year-end Total P621,000

SI from NG 25,750 Accrued expense P35,000

Cash-NT-MDS 25,750 Government equity 586,000
Total P621,000
SI from NG 3,781,250
Income & Expense 3,781,250

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Problem 3. Cash – NT – MDS 120
1. Agency enters in RAOCO 6. Agency prepares a journal entry
2. Agency prepares a journal entry CIP – Building 1,000
Advances to contractor P 300 Accounts payable 850
Cash – NT – MDS P 300 Advances to contractor 150

3. Agency prepares a journal entry 7. Agency prepares a journal entry

CIP – Building 1,000 Accounts payable 850
Accounts payable 850 Due to BIR 120
Advances to contractors 150 Cash – NT – MDS 730

4. Agency prepares a journal entry 8. Agency prepares a journal entry

Accounts payable 850 Due to BIR 120
Due to BIR 120 Cash – NT – MDS 120
Cash – NT – MDS 730
9. Agency prepares a journal entry
5. Agency prepares a journal entry Buildings 2,000
Due to BIR 120 CIP – Building 2,000

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