Intermediate Accounting I: Midterm Exam

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I NAME: Professor:

Year/Course/Section:

Date: Score:

MIDTERM EXAM MULTIPLE CHOICE.  Read each statement carefully, and from the given choices below, choose the correct answer. Just answer directly.

1. If materia material, l, deposits deposits in foreign foreign bank which are subjec subjectt to foreign foreign exchange exchange restrict restriction ion shall be classified a. Separately Separately as current current asset, asset, with appropriate appropriate disclosure. disclosure.  b. Separately as noncurrent asset, with appropriate disclosure. c. Be writt written en off off as an an extrao extraordi rdinar nary y loss. loss. d. As part part of cash cash and cash cash equival equivalent ents. s. 2. The internal internal control control feature feature that that is specific specific to petty cash is is a. Sepa Separa rati tion on of of dut dutie iess  b. Assignment of responsibility responsibility c. Prop Proper er auth author oriz izat atio ion n d. Impr Impres estt sys syste tem m 3. On January January 1, 20x1, MamaMi MamaMiaa Co. acquired acquired 12%, P4,000,00 P4,000,000 0 bonds at 98. 98. Commissio Commission n  paid to brokers amounted to P204,000. Principal is due on December 31, 20x4 but interest payments are made annually starting December 31, 20x1. The adjusted effective interest rate on the investment is closest to a. 12%  b. 11% c. 10.2650% d. Inde Indete term rmin inab able le 4. The following following statemen statements ts relate relate to the fair fair value and equity equity methods methods of accountin accounting g for a stock investment. I. whene wheneve verr an inve invest stme ment nt in equity equity secur securit itie iess does not qual qualif ify y fo forr equity equity metho method, d, the investor is required to use PFRS 9 in accounting for dividend income received from the investee.

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UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

II. II. III. III. IV.

the the fair fair value value metho method d of accoun accounti ting ng for a stock stock inves investm tmen entt recogni recognize zess the legal legal fact that the investor and investee are one economic unit. an inves investo torr may still still be able able to exerc exercis isee signif signific ican antt influe influenc ncee ov over er an invest investee ee even if the investment is less than 20% of the voting stock of the investee. no adjus adjustme tment nt to to the invest investmen mentt account account is made made when when chang changing ing from from the the equit equity y to the fair value method, or vice versa.

State whether the foregoing statements are true. a. all all of the the stat statem emen ents ts are are tru truee  b. only one statement is true c. only only two two stat statem emen ents ts are are tru truee d. thre threee stat statem ement entss are are true true 5. Which is not not a require required d disclosure disclosure in relati relation on to invento inventory? ry? a.  b. c. d.

The amount amount of any writedow writedown n of invento inventories ries recognized recognized as expense expense The amount of any reversal of writedown of inventories The circumsta circumstances nces or events events that that led to the revers reversal al of a writedown writedown of inventories inventories The fair value value less cost to to sell of inventori inventories es pledged as securit security y for liabiliti liabilities. es.

6. Under Under the allowa allowance nce method method of recogni recognizin zing g bad debts debts on trade trade accounts accounts receivabl receivable, e, the effect of writing off an account to an entity's working capital is a. increase  b. decrease c. either either a or b depending depending on on the current current level level of the entity's entity's working working capital capital d. no effect 7. Bank Bank reconc reconcili iliati ations ons are normal normally ly prepar prepared ed on a monthl monthly y basis basis to identi identify fy adjustmen adjustments ts needed in the depositor's records and to identify bank errors. Adjustments should be recorded for  a. bank errors errors,, outstandi outstanding ng checks, checks, and and deposits deposits in transi transit. t.  b. all items except bank errors, outstanding checks, and deposits in transit. c. book errors, errors, bank bank errors, errors, deposit depositss in transit transit,, and outstandi outstanding ng checks. checks. d. outsta outstandi nding ng checks checks and and deposit depositss in trans transit it.. 8. What What is the the ef effe fect ctiv ivee inte intere rest st rate of a bond bond or other other de debt bt instru instrume ment nt measur measured ed at amortized cost? a. The state stated d coupon coupon rate rate of the the debt debt instr instrume ument. nt. Page 2 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

 b. The interest rate currently charged by the entity or by others for similar debt instruments (i.e., similar remaining maturity, cash flow pattern, currency, credit risk, collateral, and interest basis). c. The interest interest rate rate that exactly exactly discounts discounts estimat estimated ed future future cash payments payments or receipts receipts through the expected life of the debt instrument or, when appropriate, a shorter   period to the net carrying amount of the instrument. d. The basic, basic, risk-free risk-free interes interestt rate that that is derived derived from observabl observablee government government bond  prices. 9. What is the the major major purpose purpose of of an imprest imprest petty petty cash? a. To effect effective ively ly plan plan cash cash inflow inflowss and outfl outflows ows  b. To ease the payment of cash to vendors c. To deter determin minee the hone honesty sty of the the petty petty cashi cashier  er  d. To effect effective ively ly control control cash cash disbur disbursem sement entss 10. On July 1, 2002, Jawhead Jawhead Corp. received received a one-year note with a face value of P900, P900,000 000 and a stated interest rate of 15 percent in exchange for a machine with a fair value of  P1,000,000. Compute the effective interest rate for Jawhead Corp. a. 16 16..67 pe percent  b. 15.0 percent c. 3.5 pe percent d. 11.1 11.11 1 per percent cent 11. A consignee paid the freight freight cost for goods shipped from a consignor consignor.. The frei freight ght cost is to be deducted from the consignee’s payment to the consignor when the consigned goods are sold. Until the consignee sells the goods, the freight cost should be included in the consignee’s a. Cost Cost of go good odss sold sold  b. Accounts Receivable c. Dist Distri ribu buti tion on co cost st d. Fr Freeight out 12. Which of the following statements statements in relati relation on to accounting for petty cash is false? a. Each disbursem disbursement ent from from petty petty cash should should be supported supported by a petty petty cash cash voucher. voucher.  b. The creation of a petty cash fund requires a journal entry to reflect the transfer of  fund out the general cash account.

Page 3 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

c. With With the es esta tabl blis ishm hmen entt of an im impr pres estt pe pett tty y ca cash sh fund, fund, on onee pe pers rson on is given given th thee authority and responsibility for issuing checks to cover minor disbursements. d. At any time, time, the sum of cash cash in the petty petty cash fund fund and the total total cash vouche vouchers rs should equal the amount for which the imprest petty cash fund was established. 13. An entity has financial financial assets held under a business business model with the objective objective of holding holding financial assets in order to collect contractual cash flows. Prior to maturity date, the entity sells a significant portion of the financial assets. Which of the following statements is correct? a. The change change in circu circumst mstanc ancee is a prior prior period period error. error.  b. Under the “hold to collect” business model, the entity needs to hold financial assets until their maturity dates. A significant sale of financial assets before their  maturity date evidences an inability to hold and collect cash flows. Therefore, the remaining financial assets shall be reclassified to either FVPL or FVOCI. c. The remaini remaining ng financia financiall assets assets within within the “hold to collect collect”” busine business ss model need need not be reclassified. However, the change in circumstance may be relevant in assessing the business model for new financial assets that have been acquired or  originated. d. The entity entity shall change change its its business business model model because because of the change change in circumst circumstance. ance. The remaining financial assets shall be reclassified after the entity changes the  business model. 14. At the end of the current current year, an entity had cash accounts at three dif different ferent bank banks. s. One account is segregated solely for payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The third account, used for regular corporate operations, has a positive balance. How should these accounts be reported? a. The The se segr grega egate ted d ac acco count unt should should be re repo port rted ed as a noncu noncurr rrent ent asset asset,, th thee re regu gula lar  r  account should be reported as current asset, and the overdraft should be reported as current liability.  b. The segregated and regular accounts should be reported as current assets, and the overdraft as a current liability. c. The segregat segregated ed account account should should be reported reported as a noncurren noncurrentt asset, asset, and the regular  regular  account should be reported as current asset net of the overdraft. d. The segrega segregated ted and regular regular accounts accounts should should be report reported ed current current asset asset should should be reported as current asset net of the overdraft. ove rdraft. 15. Which of the following should not be reported as inventory? Page 4 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

a. Land Land acquire acquired d for resa resale le by a real real estat estatee firm firm  b. Shares and bonds held for resale by a brokerage firm c. Machinery Machinery acquired acquired by a manufacturi manufacturing ng entity entity for use use in the production production process process d. Partially Partially completed completed goods goods held held by a manufact manufacturing uring entity entity 16. Whether recognized or unrecognized in an entity’s entity’s financial statements, disclosure of the fair value of the financial instruments is required when a. It is prac practi ticabl cablee to estima estimate te the fair fair valu value. e.  b. The entity maintains accurate cost records. c. Aggregat Aggregatee fair valu valuee is materi material al to the enti entity. ty. d. Individual Individual fair fair value is materi material al to the entit entity. y. 17. Changes in fair value are recognized in in profit or loss for which type of financial financial assets? a. Financi Financial al asset assetss measur measured ed at amort amortize ized d cost  b. FVOCI securities c. Held Held to to m matu aturi rity ty debt debt securi securitie tiess d. Financi Financial al asset assetss desig designat nated ed at FVPL FVPL 18. An unrealized unrealized holding loss on a company's FVOCI securitie securitiess should be reflected reflected in the current financial statements as a. an extraordin extraordinary ary item item shown as a direct direct reducti reduction on from retained retained earnings. earnings.  b. a current loss resulting from holding securiti securities. es. c. a note note or pare parenth ntheti etical cal disc disclos losure ure only only.. d. other other comprehen comprehensiv sivee income income and deducted deducted in the equity equity section section of the balanc balancee sheet. 19. Whic Which h of the the foll follow owin ing g may may prov provid idee ev evid iden ence ce of si sign gnif ific icant ant in infl fluen uence ce even even if th thee  percentage of ownership interest is less than 20%? I. Repr Repres esen enta tati tion on on the board board of dire direct ctor orss or equiva equivale lent nt gover governi ning ng body body of the investee. II. II. Parti Partici cipat patio ion n in polic policy-m y-mak akin ing g proc proces esse ses, s, in incl clud udin ing g parti partici cipa pati tion on in de deci cisi sion onss about dividends or other distributions. III. III. Materi Material al tran transac sactio tions ns betw between een the invest investor or and the invest investee ee IV.. IV Inte Interc rcha hang ngee of m man anag ager eria iall pers person onne nel. l. V. Pr Provi ovisi sion on of es esse sent ntia iall tec techn hnic ical al info inform rmat atio ion. n. a. I, II Page 5 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

 b. I, II, III c. I, II, IV d. an any y of of these 20. Stock dividends dividends on common stock should be recorded at their fair value by the investor  investor  when the related investment is accounted for under which of the standards?  PFRS 9 PAS 28 a. Ye Y es Yes  b. Yes No c. No Yes d. No No 21. Which of the following statements statements are in accordance with PAS 28? I. When When the assoc associa iate te has cumul cumulati ative ve prefe prefere rence nce shar shares es,, the invest investor or compu compute tess its

II.

a.  b. c. d.

share in the profit or loss of the investee after deducting the preferred dividends, only when such dividends are declared. When When the asso associa ciate te has has non-cu non-cumul mulati ative ve prefe preferen rence ce share shares, s, the the invest investor or compu computes tes its its sh shar aree in the the prof profit it or loss loss of the the in inve vest stee ee af afte terr deduc deducti ting ng th thee pr pref efer erre red d dividends, whether or not such dividends are declared. true, true true, false false, true fal false se,, fal alsse

22. The followin following g data data were were taken taken from from Trump’ Trump’ss check check regist register er for the month month of April. April. Trump’s bank reconciliation for March showed one outstanding check, check no. 178 for  P2,150 (written on March 20), and one deposit in transit for P4,350 (made on March 31). Date 2020 April 1 1 1 4 27 29

Item

Beginning Balance Deposit Check No. 179 Check No. 180 Ch Deposit Ch C heck No. 181

Checks

Deposits

26,167 250 10,673 11,774 13,217

Page 6 of 20

Balance

6,150 32,317 32,567 21,898 33,672 20,490

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

The following is from Trump’s bank statement for April: Date 2020 April 1 3 3 5 5 5 20 20 30

Item

Beginning Balance Check no. 179 Deposit Check No. 180 Automatic loan Au Deposit NSF Check Se Service Charge Interest

Checks

Deposits

Balance

250 4,350 10,673 8,150 26,417 1,000 600 82

3,950 3,700 8,050 (2,623) 5,527 31,944 30,944 30,344 30,426

Assume that any errors or discrepancies you find are Trump’s, not the bank’s. What is the adjusted cash balance as of April 30? a.  b. c. d.

P26,833 P26,838 P30,426 P26,782

23. If the balance shown on entity’s bank statement statement is less than the correct cash balan balance ce and neither the entity nor the bank has made any errors, there must be a. Deposits Deposits credite credited d by the bank but not yet yet recorded recorded by by the entit entity y  b. Outstanding checks c. Depo Deposi sits ts in tran transi sitt d. Bank char charges ges not not yet yet recor recorded ded by by the entity entity 24. An entity transferred financial financial assets to another entity. The tr transfer ansfer meets the condition to  be accounted for as a sale. The transferor should do each of the following, except a. Remove all assets assets sold from the stateme statement nt of financi financial al positio position. n.  b. Remove all assets received and liabilities incurred as a proceeds from the sale. c. Measure Measure the assets assets received received and and liabili liabilities ties incurr incurred ed at cost. cost. d. Recogni Recognize ze any any gain gain or loss loss on the sale. sale. 25. A proof of cash cash would would be useful useful for  a. Discovering Discovering cash receipt receiptss that have not not been recorded recorded in the the journal journal Page 7 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

 b. Discovering time lag in making deposits c. Discovering Discovering cash cash receipt receiptss that have have been recorde recorded d but have not been deposited deposited d. Discovering Discovering an an inadequate inadequate separat separation ion of incompa incompatible tible duties duties of employees employees 26. According to PAS 28, significant significant influence is the investor’s investor’s participation in the financial and operating policy decisions of the investee but not control of these decisions. Which of the following may an investor be unable to exercise significant influence? a. partic participa ipatio tion n in poli policy cy makin making g proces processs  b. material intercompany transactions c. majo majori rity ty owne owners rshi hip p of the the inve invest stee ee co conc ncen entr trat ated ed amon among g a smal smalll gr grou oup p of  shareholders who operate the investee without regard to the views of the investor  d. tech technol nolog ogic ical al depe depend ndenc ency y 27. On July 1 of the curren currentt year, year, an entity entity received received a one-yea one-yearr note note receiv receivabl ablee bearing bearing interest at the market rate. The face amount of the note receivable and the entire amount of the interest are due in one year. When the note receivable was recorded on July 1, which of the following was debited? I. Interest re receivable II. II. Unea Unearn rned ed dis disco coun untt o on n not notee rrec ecei eiva vabl blee a.  b. c. d.

I only Both I and II Nei Neither her I nor nor II II only

28. Consider Consider the following statement statements. s. I. In ap appl plyi ying ng the the Equi Equity ty Meth Method od of ac acco coun unti ting ng fo forr in inve vest stme ment ntss in as asso soci ciat ates es,, dividends received from the investee are considered a return of capital and should  be credited to stockholders’ equity of the investor. II. II. A subsid subsidia iary ry is an affil affilia iate te that that is not cont contro roll lled ed by an enterp enterpri rise se direc directl tly, y, or  indirectly, through one or more intermediaries. State whether the foregoing statements are correct. a. Onl Only I is cor corrrect ect  b. Only II is correct c. I and and II ar aree cor corre rect ct d. Neith Neither er I nor nor II II is corre correct ct Page 8 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

29. Nontrade receivables are classified classified as current assets only if they are reasonably expected to be realized in cash a.  b. c. d.

Within Within one year or within within the operating operating cycle, cycle, whichever whichever is shorter. shorter. Within one year or within the operating cycle, whichever is longer. Within Within the normal normal operat operating ing cycle. cycle. Within Within one year, year, the length length of the the operating operating cycle cycle notwiths notwithstandi tanding. ng.

30. Where the operating operating cycle extend extendss beyond one year because of normal credi creditt terms as in the case of the installment sales of household appliances app liances a. It is proper to classif classify y the entire entire receiva receivable bless as current current assets assets with with disclosu disclosure re of  the amount not realizable within one year, if material.  b. The entire receivables are shown as noncurrent assets. c. The portion portion due in in one year year is shown shown as curren currentt and the balance balance as noncurrent noncurrent.. d. The rece receiva ivable bless are are not recogni recognized. zed. 31. In the case of long-term installment installmentss receivable receivable (real estate installment installment sales) sales) where a major portion of the receivables will be collected beyond the normal operating cycle a. The entire entire receivabl receivables es are shown shown as curren currentt without without disclosu disclosure re of the the amount amount not currently due.  b. The entire receivables are shown as noncurrent. c. Only the the portion portion currently currently due due is shown shown as current current and the the balance balance as noncurrent noncurrent.. d. The entire entire receiva receivable bless are shown shown as current current with disclos disclosure ure of the amount amount not currently due. Use the following information to answer the next four questions: q uestions: The following long-term receivables were reported in the December 31, 2006, balance sheet XXX Corporation:  Note receivable from sale of plant  Note receivable from officer

P3,000,000 P300,000

The following transactions during 2007 and other information relate to company’s longterm receivables. 

The note receivable from sale of plant bears interest at 12% per annum. The note is payable in three annual installments of P1,000,000 plus interest on the unpaid  balance every April 1. The initial principal and interest payment was made on April 1, 2007. Page 9 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I 





The note receivable from officer is dated December 31, 2006, earns interest at 10% per annum, and is due on December 31, 2009. The 2007 interest was received on December 31, 2007. XXX sold a piece of equipment to YYY, Inc. on April 1, 2007, in exchange for a P400,00 non-interest-bearing note due on April 1, 2009. The note had no ready market, and there was no established exchange price for the equipment. The  prevailing interest rate for a note of this type at April 1, 2007, 2 007, was 12%. (Round  the present value factor to three decimal places) A tract of land land was sold by XXX to ZZZ, Inc. on July 1, 2007 2007,, for P2,000,00 P2,000,000 0 under und er an inst instal allm lmen entt sa sale le co cont ntra ract ct.. ZZZ ZZZ si sign gned ed a fo four ur-y -year ear 11 11% % no note te fo for  r  P1,400,000 on July 1, 2007, in addition to the down payment of P600,000. The equal annual payments of principal and interest on the note will be P451,250  payable on July 1, 2008, 2009, 2010, and 2011. The land had an established cash  price of P2,000,000 and its cost to XXX was P1,500,000. The collection of the installments on this note is reasonably assured.

32. The amount to be reported as noncurrent noncurrent receivables receivables on the balance sheet at December  December  31, 2007 is a. P3,096,242  b. P3,067,550 c. P3,221,550 d. P3, P3,250,2 0,242 33. The current portion of notes receivabl receivablee on December 31, 2007 should should be a. P1,451,250  b. P1,297,250 c. P2,097,250 d. P2, P2,297,2 7,250 34. The accrued interest receivable on December 31, 2007 should be a. P257,000  b. P180,000 c. P285,692 d. P334,000 35. The total interest interest income for the year ended December 31, 2007 should be a. P427,000 Page 10 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

 b. P455,692 c. P375,692 d. P532,692 36. Naimas Company provided the the following information information on December 31, 20x4. Petty cash fund Current account – First Bank Current account – Second Bank (overdraft) Money market placement – Third Bank Time deposit – Fourth Bank 





50,000 4,000,000 (250,000) 1,000,000 2,000,000

The petty cash fund included unreplenished December 20x4 petty cash expense vouchers for P15,000 and an employee check for P5,000 dated January 31,20x5. A check for P100,000 was drawn against First Bank current account dated and recorded December 29, 20x4 but delivered to payee on January 15, 20x5. The Fourth Bank time deposit is set aside for land acquisition in early January 20x5.

  What total amount should be reported as “cash and cash equivalents” on December 31, 20x4? a. 5,130,000  b. 5,150,000 c. 4,130,000 d. 4,880,000 37. Hakuna Matata Company provided the following following information ffor or October and November  20x4: Checks and charges recorded by Bank in November, including a 550,000  November service charge of P4,000 and NSF check of P20,000 Service charge made bu bank in October and recorded by depositor in 2,000  November  Total credits to cash in all journals during November 620,000 Customer NSF check returned in October and redeposited in 40,000  Novemebr (no entry was made by depositor in either October or  November) Outstanding ch checks on on Oc October 31 31, 20 20x4 th that cclleared in in No November 230,000 What is the amount of outstanding checks on November 30, 20x4? a. 282,000 Page 11 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

 b. 300,000 c. 322,000 d. 302,000 Use the following information to answer the next three questions: q uestions: Happy Breaku Happy Breakup p Corp.’ Corp.’ss account accountss receiv receivabl ablee subsid subsidiar iary y ledger ledger shows shows the follow following ing information: CUSTOMER 

 

ACCOUNT BALANCE DECEMBER 31, 20x7

Wala Label, Inc. (WL)

P35,180

Wala Ka Jowa, Co. (WKJ)

P20,920

Walang Forever Corp. (WF)

P30,600

Sana All Co. (SA)

P45,140

M.U. Inc.

P31,600

Malaon Ka Corp. (MK)

P17,400

INVOICE DATE

AMOUNT

12/06/x7 11/29/x7 09/27/x7

P14,000 21,180 12,000

08/20/x7 12/08/x7 10/25/x7 11/17/x7 10/09/x7 12/12/x7 12/02/x7 09/12/x7

8,920 20,000 10,600 23,140 22,000 19,200 12,400 17,400

The estimated bad debts rates below are based on Happy Breakup’s receivable collection experience. Age of Accounts

Rate

0 – 30 days 1% 31 – 60 days 1.5% 61 – 90 days 3% 91 – 120 days 10% Over 120 days 50% The allowance for bad debts account a debit balance of P4,000 on December 31, 20x7,  before adjustment. 38. The company’s accounts receivable under “61-90 days” category ttotaled otaled a. P32,600  b. P44,320 c. P44,600 Page 12 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

d. P42,000 39. The allowance for bad debts to be reported on the balance sheet at December 31, 20x7, is a. P13,199  b. P6,199 c. P9,699 d. P9,043 40. What entry should should be made on December 31, 20x7, to adjust the allow allowance ance for bad debts account? a. Bad debt expense 13,699 Allowance ffo or bad de debts 13,699  b. Bad debt expense 5,199 Allowance for bad debts 5,199 c. Allowance for bad debts 5,199 Bad debts expense 5,199 d. Bad debt expense 9,699 Allowance for bad debts 9,699 Use the following information to answer the next three questions: q uestions: The management of Savage, Inc. has engaged you to assist in the preparation of year-end (December 31) financial statements. You are told that on November 30, the correct inventory level was 145,730 units. During the month of December, sales totaled 138,630 units including 40,000 units shipped on consignment to AA Corp. A letter received from AA indicates that as of December 31, it has sold 15,200 units and was still trying to sell the remainder. A review of the December purchase orders to various suppliers shows the following: Purchase Invoice Quantity Date Date   Terms Order Date Date in Units Shipped Received 12/31/07 12/05/07 12/06/07 12/18/07 12/22/07 12/27/07

01/02/08 01/02/08 01/03/08 12/20/07 01/05/08 01/07/08

4,200 3,600 7,900 8,000 4,600 3,500

01/02/08 12/17/17 01/05/08 12/29/07 01/04/08 01/05/08

01/05/08 12/22/07 01/07/08 01/02/08 01/06/08 01/07/08

Savage, Inc. uses the “passing “pa ssing of legal title” for inventory recognition. Page 13 of 20

FOB Destination FOB Destination FOB Shipping FOB Shipping FOB Destination FOB Destination

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

41. Goods purchased purchased during December December totale totaled d a. 11 11,,600 un units  b. 15,800 units c. 19 19,,500 un units d. 8,0 8,000 un uniits 42. How many units were were sold during December? December? a. 13 138 8,630 un units  b. 113,830 units c. 98 98,,630 un units d. 153, 153,83 830 0 unit unitss 43. How many units should be included included in Savage, Inc.’s inventory at December 31, 2007? a. 18 18,,700 un units  b. 39,900 units c. 43 43,,500 un units d. 47 47,,700 un units Use the following information to answer the next four questions: q uestions: A recent fire severely damaged LuhAsaKa LuhAsaKa Company’s administratio administration n building building and destroyed many of its financial records. You have been contracted by LuhAsaKa’s management to reconstruct as much as financial information as possible for the month of  July. You learn that the company makes a physical inventory count at the end of each month mon th to determ determine ine monthl monthly y ending ending invent inventory ory values values.. You also also fi find nd out that that the company applies the average cost method. You are able to gather ga ther the following information by examining various documents: Inventory, July 31 Tota To tall cost cost of good goodss av avai aillable able for for sal alee in Ju Jully Cost of goods sold during July Gross profit on sales for July Cost of Inventory, July 1

150,000 units P356 P356,4 ,400 00 P297,400 P303,000 P0.35 per unit

The following are LuhAsaKa’s July purchases of merchandise: Page 14 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

Date July 6

Quantity 180,000

Unit Cost P0.40

12 16 17

150,000 120,000 150,000

0.41 0.42 0.45

LuhAsaKa’s management has asked you to provide the following information: 44. Number of units on on hand, July July 1 a. 450,000  b. 848,571 c. 169,714 d. 300,000 45. Units sold sold during during July a. 600,000  b. 300,000 c. 750,000 d. 450,000 46. Unit cost of of inventory inventory on July 31 a. P0.35  b. P0.396 c. P0.419 d. P0.279 47. Value of invento inventory ry on July July 31 a. P59,400  b. P52,500 c. P62,850 d. P41,850

48. On Janu Januar ary y 1, 2014, 2014, Bukn Buknoy oy Comp Company any purch purchas ased ed se seri rial al bonds bonds wi with th fa face ce va valu luee of  P3,000,000 and stated 12% interest payable annually every December 31. The bonds are to be held as financial asset at amortized cost with a 10% yield rate. The bonds mature at Page 15 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

an annual installment of P1,000,000 every December 31. What is the present value of the serial bonds on January 1, 2014? (Round off the PV factor to two decimal places only) a. P3,106,800  b. P3,060,000 c. P3,045,000 d. P3, P3,149,4 9,400 49. Marlou Marlou Company acquired a financial asset at the market value of P3,200,000. P3,200,000. Broker  fees of P200,000 were incurred in relation to the purchase. At what amount should the financ fin ancial ial asset asset initi initiall ally y be recogni recognized zed respect respective ively ly if it is classi classifie fied d as at fair fair value value through profit or loss, or as at fair value through other comprehensive income? a. 3,400 3,400,00 ,000 0 and 3,200 3,200,00 ,000 0  b. 3,200,000 and 3,200,000 c. 3,200 3,200,00 ,000 0 and 3,400 3,400,00 ,000 0 d. 3,400 3,400,00 ,000 0 and and 3,400 3,400,00 ,000 0 50. Consider Consider the following statement statements: s: I. If the the financ financial ial asse assett is recl reclass assifi ified ed from from FVPL FVPL to amor amortiz tized ed cost, cost, the the fair fair value value at the reclassification date becomes the new carrying amount of the financial asset at amortized cost. II. PFRS 9, par. par. 5.6.3, 5.6.3, provi provides des that that the the diffe differen rence ce betwee between n the new new carry carrying ing amou amount nt of the financial asset at amortized cost and the face amount of the financial asset shall be amortized through profit or loss over the remaining life of the financial asset using straight line method. III. III. Onl Only equi equitty inve invest stme ment ntss hel held for for tr trad adiing or mea easu sure red d at FVPL VPL ca cann nnot ot be reclassified by reason of the consequential requirement of PFRS 9, but all debt investments can be reclassified. State whether the foregoing statements are correct. a. Onl Only I is cor corrrect ect  b. Only II is correct c. I and and II ar aree cor corre rect ct d. II and III III are are co corr rrec ectt 51. Consider Consider the following statement statements: s: I. If the the financi financial al asset asset is recl reclass assif ified ied from from amorti amortized zed cost cost to FVOC FVOCI, I, the the financ financial ial asset is measured at fair value at the reclassification date and a new effective Page 16 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

II. II.

III. III.

IV IV..

interest rate must be determined based on the new carrying amount or fair value at reclassification date. The The differ differen ence ce betwe between en previ previous ous carr carryi ying ng amoun amountt and fair fair value value of a financ financia iall asset when reclassified from amortized cost to FVPL is recognized in profit or  loss. The The cu cumu mula lati tive ve ga gain in or loss loss prev previo ious usly ly re reco cogn gniz ized ed in ot othe herr co comp mpre rehe hens nsiv ivee income is reclassif reclassified ied to profit profit or loss at reclassificati reclassification on date when the financial asset is reclassified from FVOCI to FVPL. The The orig origin inal al effec effecti tive ve rate rate is not adjus adjustt fo forr financi financial al asset assetss that are recla reclass ssif ifie ied d from FVPL to FVOCI.

State whether the foregoing statements are incorrect. a. I aand nd II II are are inco incorr rrec ectt  b. II and III are incorrect c. I aand nd IV IV are are inco incorr rrec ectt d. All the st state atemen ments ts are are incor incorrec rectt Use the following information for the next four questions: que stions: On January 1, 2020, Ivanananggal Company purchased 7% bonds with face amount of  P4,000,000. The bonds mature on January 1, 2025 and were purchased for P3,544,000 to yield 10%. The entity classified the bonds as held for trading and interest is payable annually every December 31. On December 31, 2020, the fair value and effective rate is 3,490,000 and 12%, respectively respectively.. On December 31, 2021, the fair value and effective effective rate is 3,425,000 and 14%, respectively. On December 31, 2020, the entity changed the business model to collect contractual cash flows and also to sell the bonds in an open market. On January 1, 2021, the fair value of  the bonds did not change. 52. What is the interest interest income income for 2020? a. P280,000  b. P400,000 c. P248,080 d. P354,400 Page 17 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

53. What is the interest interest income income for 2021? a. P425,280  b. P418,800 c. P349,000 d. 244,300 54. What amount unrealized loss is is included in profit or loss for 2020? a. P510,000  b. P456,000 c. P54,000 d. 0 55. What amount unrealized loss is is included in profit or loss for 2021? a.  b. c. d.

P65,000 P0 P203,800 P138,800

Use the following information for the next two questions: During 20x4, Lavan Ganern Company bought the shares of Beshywap Company as follows: 20,000 shares 2,000,000 @P100

June 1 December 1

30,000 shares 3,600,000 @P120 5,600,000

The transactions for 20x5 are: Janu nuaary 10 10 Janu nuaary 20 20 Dece De cemb mber er 10

Receive ved d ca cash di dividend at at P10 pe perr share. Receive ved d tw twenty pe percent st stock di dividend nd.. Sold Sold 30,0 30,000 00 shar shares es at P125 P125 pe perr sha share re..

56. If the FIFO approach is used, what is the gain on sale? a. P1,150,000  b. P950,000 c. P150,000 Page 18 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I

d. P550,000 57. If the average approach is used, what what is the gain on sale? a.  b. c. d.

P1,150,000 P950,000 P150,000 P550,000

58. On Dece Decemb mber er 31, 20x4, 20x4, Z4pnu Z4pnu Bank ha hass a lo loan an re rece ceiv ivab able le of P4 P4,00 ,000, 0,000 000 from a  borrower that is carrying at a face value and is due on Dec December ember 31, 20x9. Interest on the loan loan is pa paya yabl blee at 9% ea each ch Dece Decemb mber er 31 31.. The The bo borr rrow ower er paid paid th thee in inte tere rest st du duee on December 31, 20x4 but informed the bank that it would probably miss the next two years’ interest payments. After that, the borrower is expected to resume the annual interest payment but it would make the principal payment one year late, with interest paid for that additional year at the time of principal payment. (Round off the PV factor to three decimal places only) What is the loan impairment for 20x4? a. P634,640  b. P720,000 c. P721,960 d. P913,120 Use the following information for the next two questions: TuloDosSingko Company provided the following information: Balance per bank statement July 31 Balance per ledger, July 31 Deposit of July 20 not recorded by bank Debit memo – service charges Credit memo – collection of note by bank for TuloDosSingko Outstanding Checks

P1,240,000 750,000 280,000 10,000 300,000 ?

An analysi analysiss of the cancel cancelled led checks checks return returned ed with with the bank statement statement reveals reveals the following: Page 19 of 20

 

UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato Philippines INTERMEDIATE ACCOUNTING I 



Check for purchase of supplies was drawn for P60,000 but was recorded as P90,000. The manager wrote a check for travelling expenses of P100,000 while out of  town. The check was not recorded.

59. What was the amount of outstanding checks on July 31? a. P970,000  b. P270,000 c. P550,000 d. P610,000 60. What is the the adjusted adjusted book balance? balance? a. P270,000  b. P550,000 c. P610,000 d. P970,000

“Trust in the LORD with all your heart and lean not on your own understanding; in all your ways submit to Him, and He will make your paths straight.”  -  Proverbs 3:5-6  3:5-6 

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