Pdf-prelims-ia3-key-answerspdf compress PDF

Preview

Summary

NAME: NAME: Date:Date: Professor: Professor: Section: Section: Score:Score:INTERMEDIATE ACCOUNTING 3INTERMEDIATE ACCOUNTING 3FIRST GRADING EXAMINATIONFIRST GRADING EXAMINATION According to PAS 1, an asset shall be classified asAccording to PAS 1, an asset shall be classified as current when it satis...

Description



NAME:

Date:

Professor:

Section:

Score:

INTERMEDIATE ACCOUNTING 3 FIRST GRADING EXAMINATION 1. According Accordingto toPAS PAS1,1,an anasset assetshall shallbe beclassified classifiedas ascurrent currentwhen whenititsatisfies satisfiesany anyof ofthe th criteria, except a. it is expected to be realized in, or is intended intended for for sale sale or or consumption consumption in, in, the the enti ent operating cycle b. itit is is held heldprimarily primarily for for the the purpose purposeof ofbeing beingtraded traded c. itit is isexpected expected to tobe berealized realizedwithin within twelve twelvemonths monthsafter afterthe thebalance balancesheet sheetdate date d. it is cash or a cash equivalent that is restricted 2. A liability shall be classified as current current when when itit satisfies satisfies any any of of the the following criteri criteria, a, e a. it is expected to be settled in the entity’s normal operating cycle cycle b. itit is is held heldprimarily primarily for for the the purpose purposeof ofbeing beingtraded traded c. it is due to be settled within twelve mont months hs after the the balance balance sheet date d. the the entity entity has has an an unconditional unconditional right right to to defer defer settlement settlement of of the the liability liability for for at at lel months months after after the the balance balance sheet sheet date. date. 3. IfIf an an entity entity expects, expects, and and has has the the discretion, discretion, to to refinance refinance or or roll roll over over an an obligation obligation twelve twelve months months after after the the balance balance sheet sheet date date under under an an existing existing loan loan facility, facility, itit clcl obligation obligation as as non-current, non-current, a. even even ifif itit would would otherwise otherwise be be due due within a shorter period. period. b. even even ifif the the original original term term was was for for aa period period longer longer than than twelve twelve months months c. even even ifif an an agreement agreement to to refinance, refinance, or or to to reschedule reschedule payments, payments, on on aa long-te long-te completed completedafter afterthe thereporting reportingperiod periodand andbefore beforethe thefinancial financialstatements statementsare areaut au issue d. choices b and c 4. When Whenan anentity entitybreaches breachesan anundertaking undertakingunder underaalong-term long-termloan loanagreement agreementon onor orbef be of ofthe thereporting reportingperiod periodwith withthe theeffect effectthat thatthe theliability liabilitybecomes becomespayable payableon ondemand, demand, incorrect statement) a. The The liability liability isisclassified classified as ascurrent, current,even even ififthe the lender lender has hasagreed, agreed, after after the the balance balanc and andbefore beforethe theauthorization authorizationof ofthe thefinancial financialstatements statementsfor forissue, issue,not not to demand aa consequence consequence of of the the breach. breach. b The The liability liability is is classified classified as as cu cu ee tt because because at at the the bala bala ce ce sheet sheet date date the the ee tit tit



least least twelve twelve months months after after the the balance balance sheet sheet date, date, within within which which the the entity entity can can breach and during th that at period the lender ccannot annot deman demand d immediate repayment. 5. Material Material Omissions Omissions or or misstatements misstatements of of items items are are material material ifif they they could, could, indiv indiv collectively; collectively; influence influence the the economic economic decisions decisions of of users users taken taken on on the the basis basis of of th th statements. Materiality depends on a. the the peso peso amount amount and and degree degree of of financial financial consequence consequence of of the the omission omission or or m m judged in the surround surrounding ing circu circumstances mstances b. the the size size and and peso peso amount amount of of the the omission omission or or misstatement misstatement judged judged in in the the su s circumstances c. the the peso peso amount amount and and nature nature of of the the omission omission but but not not the the misstatement misstatement jud jud surrounding circumstances d. the the size size and and nature nature of of the the omission omission or or misstatement misstatement judged judged in in the the su s circumstances 6. Identify Identify the incorrect statement. statement. a. When When an an entity entity has has departed departed from from a requirement of a Standard Standard or or an an Interpretati Interpretat period, and that that departure departure affects affects the amounts amounts recognized recognized in in the the financial financial statem statem current currentperiod, period,ititshall shalldisclose disclosethe the(a) (a)title titleof ofthe theStandard Standardor orInterpretation Interpretationfrom from entity entity has has departed departed and and the the (b) (b) impact impact of such departure. departure. b. In the extremely extremelyrare rarecircumstances circumstancesin inwhich whichmanagement managementconcludes concludesthat thatcompli compl requirement requirementin inaaStandard Standardor oran anInterpretation Interpretationwould wouldbe beso somisleading misleadingthat thatititwo wo with with the the objective objective of of financial financial statements statements set set out out in in the the Framework, Framework, but the relevan framework prohibits departure from the requirement,, the entity shall, to the maxim possible, reduce the perceived perceived misleading misleading aspects aspects of of compliance compliance by by disclosing:(a) disclosing:(a the theStandard Standardor orInterpretation Interpretationin inquestion questionand and(b) (b)for for each each period period presented, presented, the the to each item in the financial  statements statements that that management management has has concluded concluded would would bb to achieve afair presentation presentation.. c. Financial Financial statements statements shall shall be be prepared prepared on on aa going going concern concern basis basis unless unless managem manage intends intendsto toliquidate liquidatethe theentity entityor orto tocease ceasetrading, trading,or orhas hasno norealistic realisticalternative alternativebut bu d. PAS PAS 11 requires requires an an entity entity preparing preparing financial financial statements, statements, to to make make an an assessm assessm entity’s entity’s ability ability to to continue continue as as aa going going concern. concern. In In assessing assessing whether whether the the ggoi oi assumption assumptionisisappropriate, appropriate,management management takes takesinto into account account all all available available informa inform the the future, future, which which is is at at least, least, but but is is not not limited limited to, to, five five years years from the balance sheet shee 7. Identify Identify the incorrect statement. statement. a. The The final final stage stage in in the the process process of of aggregation aggregation and and classification classification isis the the prese pres condensed condensedand andclassified classifieddata, data,which which form formline lineitems itemson on the the face of the financial s b. PAS PAS 11sometimes sometimesuses usesthe the term term ‘disclosure’ ‘disclosure’ in in aabroad broad sense, sense, encompassing encompassing items item on the face of of the the balance balance sheet sheet statement statement of of profit profit or or loss loss and and other other comprehen



 8. The The ledger ledger of of SCHOLIAST SCHOLIAST COMMENTATOR COMMENTATOR Co. Co. as as of of December December 31, 31, 20x1 20x1 in in following: Assets Cash 10,000 Trade Trade accounts accounts receivable receivable (net (net of of ₱10,000 credit balance in accounts accounts)) 40,000 Held for trading securities 80,000 Financial assets designated at FVPL 30,000 Investment in equity securities at FVOC FVOCII 70,000 Investment in bonds measured at amortized cost (due in 3 years) 60,000 Prepaid assets 10,000 Deferred tax asset (expected to reverse in 20x2) 12,000 Investment in Associate 36,000 Investment property 46,000 Sinking fund 38,000 Property, plant, and equipment 100,000 Goodwill 28,000 Totals 560,000 How much is the total current assets? a. 220,000 b. 180,000 c. 340,000 d. 164,000 Solution:

Current assets Cash Trade accounts receivable (40,000 + 10,000) Held for trading securities Financial assets designated at FVPL Prepaid assets

Tota Totall current a ass s et etss

9. The Theledger ledgerof ofPERNICIOUS PERNICIOUSDEADLY DEADLYCo. Co.as asof ofDecember December31, 31,20x1 20x1includes includesthe thefollow follow Liabilities Bank overdraft 10,000 Trade Trade accounts accounts payable payable (net (net of of ₱10,000 debit balance in accounts) 40,000 Notes payable (due in 20 semi-annual payments of ₱4 000) 80 000



Contingent liability Reserve for contingen contingencies cies Totals

100,000 28,000 430,000

How much is the total current liabilities? a. 192,000 b. 186,000 c. 212,000 d. 178,000 Solution:

C urrent lliabilit iabilities ies Bank overdraft Trade accounts payable (P20,000 + P5,000) Notes payable (P2,000 semi-annual instalment x 2) Interest payable Bonds payable (due on March 31, 20x2) Discount on bonds payable Dividends payable Income tax payable

Total cur current rent lliabilities iabilities

10. The Theledger ledgerof ofCALLOW CALLOWIMMATURE IMMATURECo. Co.in in20x1 20x1includes includesthe thefollowing: following: Share capital Share premium Retained earnings, appropriated Retained earnings, unappropria unappropriated ted Revaluation surplus Remeasurements of the net defined benefit liability (asset) - gain Cumulative net unrealized gainon on fair fair value value changes changes of of investment investment in FVOCI Effective Effective portion portion of of losseson on hedging hedging instruments instruments in in aa cash cash flow hedge Cumulative translation losson foreign operation Treasury shares, at cost How much is the total shareholders’ equity? equity? a. 460,000 b. 440,000



Remeasurements of the net defined benefit liability (asset) - gain Cumulative net unrealizedg ain on fair value changes of investment in FVOCI Effective portion of losses on hedging instruments in a cash flow hedge Cumulative translation loss  on foreign operation Treasury shares, at cost

Tota Totall s hareh harehold olders ers ' equity Use the following information for for the next two questions: 11. GUILE GUILE DECEITFULNESS DECEITFULNESS Co. Co. was was incorporated incorporated on on January January 1,1, 20x1. 20x1. The The followin followin transaction transactionss during the year: - Total Total consideration consideration from from share share issuances issuances amounted amounted to to ₱2,000,000. - A land and b building uildingwere wereacquired acquiredthrough through aalump lumpsum sumpayment paymentof of ₱400,000. A mor amounting to ₱100,000 was assumed on the land and building. - Total payments of ₱80,000 80,000were weremade madeduring duringthe theyear yearon onthe themortgage mortgageassumed assumedon onth t building, The paymen payments ts are inclus inclusive ive of interes interestt amount amounting ing to ₱10,000. - Additional capital of ₱200,000 200,000was wasobtained obtainedthrough throughbank bankloans. loans.None Noneof ofthe thebank bankloa lo paid paid during during the the year. year. Half Half of of the bank loans required a secondary mortg mortgage age on the la building. - There There is is no no accrued accrued interest interest as as of of year-end. year-end. - Dividends Dividendsdeclared declaredduring duringthe theyear yearbut butremained remainedunpaid unpaidamounted amountedto to ₱60,000. - No No other other transactions transactions during during the the year year affected liabilities. - Retained Retained earnings earnings as as of of December 31, 31, 20x1 20x1 is ₱120,000.

12. How How much much is is the the profit profit for for the the year? year? a. 120,000 b. 160,000 c. 180,000 d. 220,000

Retained earnings Dividends Dec. 31, 20x1

60,000

-

180,000

Jan. 1, 20x1

Pr ofit for the yea yearr (s quee queeze) ze)

120,000

13. How much is the total assets as of December 31, 20x1? a. 2,410,000 b 2 520 000



Bank loans Dividends payable Liabilities, Dec. 31, 20x1

200,000 60,000 0

Share issuances Retained earnings –Dec. 31, 20x1 Equity, Dec. 31, 20x1

Tota Totall a ass s et etss , Dec. 31, 20x1 (liabilities + equity)

2,000,000 120,000 0

0

14. The Theledger ledgerof ofDEROGATORY DEROGATORYDEGRADING DEGRADINGCo. Co.in in20x1 20x1includes includesthe thefollowing: following: Cash 200,000 Accounts receivable 400,000 Inventory 1,000,000 Accounts payable 300,000 Note payable 100,000 During During the the audit audit of of DEROGATORY’s DEROGATORY’s 20x1 20x1 financial financial statements, statements, the the following following were were no n auditor: - Cash sales in 20x2 amounting to ₱20,000 were inadvertently included included as as sales sales in in 20x1. 20x1. - -

DEROGATORY DEROGATORY recognized recognized gross gross profit profit of of ₱6,000 on the sales. A collection of a ₱40,000 40,000 accounts accounts receivable receivable in in 20x2 20x2 was was recorded recorded as ascollection collection in in 20x 20x discount of ₱2,000 was given to the customer. During DuringJanuary January20x2, 20x2,aashort-term short-termbank bankloan loanof of ₱50,000 50,000 obtained obtained in in 20x1 20x1 was was paid paid tog tog ₱5,000 5,000interest interestaccruing accruingin inJanuary January20x2. 20x2.The Thepayment paymenttransaction transactionin in20x2 20x2was was inadve included as 20x1 transacti transaction. on.

How How much much is isthe theadjusted adjustedworking workingcapital capitalas as of of December December 31, 31,20x1? 20x1? a. 1,651,000 b. 1,014,000 c. 1,450,000 d. 1,201,000 Solution: The adjusted balance of cash is computed as follows: Cash (unadjusted) Cash sales in 20x2 recorded as 20x1 sale Collection of account in 20x2 recorded as 20x1 collection (40,000 account less 2,000 cash discount)

Loan payment in 20x2 recorded as 20x1 transaction Interest payment in 20x2 recorded as 20x1 transaction Adj

t d

hb l

D

31 20 1



(20,000 sale - 6,000 gross profit)  Adjusted inventory balance, Dec. 31, 20x1

A Adju djuss ted cu curr rr ent a ass s ets ets,, Dec Dec.. 31, 20x 20x1: 1: (197K + 440K + 1,014K)= 1,651,000 The adjusted current liabilities are computed as follows: Accounts payable Note payable Loan payable

A Adjus djus ted cu curr rr ent lliabi iabiliti lities es , Dec Dec.. 31, 20x 20x11 Working capital, Dec. 31, 20x1 = Current assets –Current liabilities Work ing cap capita ital,l, Dec. 31, 20x1 = (1,651,000 –450,000) = 1,201,000

15. Entity Entity A A has has the the following following information: information: Inventory, beg. Inventory, end. Purchases Freight-in Purchase returns Purchase discounts How much is Entity A’s A’scost cost of sales? a. 286,800 b. 292,800 c. 288,600 d. 268,800

Inventory, beg. Net purchases: Purchases Freight-in Purchase returns Purchase discounts

80,000 320,000 16,000 (8,000) (11,200)

316,800

Total goods available for sale Less: Inventory, end.

396,800 (128,000)

Cost of goods sold

268,800



d. in a single single statement statement called called ‚statement ‚statement of of comprehensive comprehensive income.‛ income.‛ 17. Under Under this this presentation presentation method, method, expenses expenses are are presented presented in in the the statement statement of of com com income incomewithout withoutdistinctions distinctionsas asto totheir theirfunctions functionswithin withinthe theentity. entity. a. nature nature of of expense expense method method b. function function of of expense expense method method c. single-statemen single-statementt presentation d. two-statemen two-statementt presentation 18. Under Underthis thispresentation, presentation,expenses expensesare areclassified classifiedas aseither eitheroperating operatingor ornon-operating non-operatin minimum, cost of sales is presented separately. a. nature nature of of expense expense method method b. function function of of expense expense method method c. single-statemen single-statementt presentation d. two-statemen two-statementt presentation Use the following information for the next five questions: The Thenominal nominalaccounts accountsof ofRommel RommelSP SPCorp. Corp.on onDecember December31, 31,20x1 20x1have havethe thefollowing followingbala bal Accounts

Sales Interest income Gains Inventory, beg. Purchases Freight-in Purchase returns Purchase discounts Freight-out Sales commissio commission n Advertising expense

Salaries expense Rent expense Depreciatio Depreciation n expense Utilities expense Supplies expense Transportat Transportation ion and travel expense Insurance expense Taxes and licenses

Dr.

Cr.

₱739,000

45,000 15,000 ₱ 65,000

180,000 10,000 5,000 9,000 30,000 45,000 25,000 240,000 30,000 50,000 25,000 15,000 15,000 10,000 60,000



 19. How How much much is is the the net net purchases? purchases? a. ₱185,000 c. ₱194,000 b. ₱176,000 d. ₱192,000 Purchases Freight-in

180,000 10,000

Purchase returns Purchase discounts Net purchases

(5,000 (9,000

176,000

20. How much is the ‚change in inventory‛ in 20x1? 20x1? a. ₱90,000 increase c. ₱25,000 decrease b. ₱65,000 decrease d. ₱25,000 increase Inventory, beg. Inventory, end. end.

65,000 90,000

Change in inventory –increase

(25,000)

21. How How much much is is the the cost cost of of goods goods sold? sold? a. ₱151,000 c. ₱169,000 b. ₱95,000 d. ₱127,000 Net purchases Less: Net increase in inventory

Cost of sales 22. How much is the total selling expense? a. ₱420,000 c. ₱180,000 b. ₱260,000 d. ₱340,000 Freight-out

30,000

Sales commissio commission n Advertising expense

45,000 25,000

Salaries expense (240K x 3/4) Rent expense (30K x 3/4) Depreciatio Depreciation n expense (50K x 3/4)

180,000 22,500 37,500



Rent expense (30,000 x 1/4) Depreciatio Depreciation n expense (50K x 1/4)

7,500 12,500

Utilities expense

25,000

Supplies expense

15,000

Transportat Transportation ion and travel expense

15,000

Insurance expense

10,000

Taxes and licenses Miscellaneous expense

60,000 3,000

Administrative Administrative expenses expenses

208,000

Use the following information for for the next two questions: DECORTICATE DECORTICATE PEEL, PEEL, Inc. Inc. isis committed committed to to aa plan plan to to sell sell aa manufacturing manufacturing facility facility and and hh actions actions to to locate locate aa buyer. buyer. As As of of this this date, date, the the building building has has aa carrying carrying amount amount of of ₱6,00 value of ₱5,000,000 and estimated costs to sell of ₱200,000. 200,000. At At the plan plan commitment date dat backlog of uncomplet...