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NAME: Date: Professor: Section: Score:INTERMEDIATE ACCOUNTING 1FINAL GRADING EXAMINATION1. What is the net effect of the under mentioned errors on the trial balance of a firm? I. Total of sales was taken as P58,726 instead of P58,762. II. A discount of P52 allowed to Mr. X was not posted in the disc...

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NAME: Professor:

Section:

Date: Score:

INTERMEDIATE ACCOUNTING 1 FINAL GRADING EXAMINATION 1. What is the net effect of the under mentioned errors on the trial balance of a firm? I. Total of sales was taken as P58,726 instead of P58,762. II. A discount of P52 allowed to Mr. X was not posted in the discount account. III. Sale of old furniture of P130 was credited to Machinery account. IV. A credit sale of P250 to Mr. Y was posted twice in his account.

a. b. c. d. e.

Credit total of trial balance will be more than that of debit total by P234 Debit total of trial balance will be more than that of credit total by P234 Credit total of trial balance will be more than that of debit total by P104 Debit total of trial balance will be more than that of credit total by P264 Debit total of trial balance will be more than that of credit total by P286

2. The credit total of a trial balance exceeds the debit total by P350. In investigating the cause of the difference, the following errors were determined: a credit to accounts receivable of P550 was not posted; a P5,000 debit to be made to the Purchases account was debited to Accounts payable instead; a P3,000 credit to be made to the Sales account was credited to the Accounts receivable account instead; the Interest payable account balance of P4,500 was included in the trial balance as P5,400. The correct balance of the trial balance is a. 7,540 b. 8,550 c. 9,250 d. 7,450 3. These are the means by which the information accumulated and processed in financial accounting is periodically communicated to the users. They are the end products of the accounting process. a. Financial statements b. Financial Reporting Standards c. Notes to financial statements d. All of these 4. It represents the steps or accounting procedures normally used by entities to record transactions and prepare financial statements. It implements the accounting process. a. Accounting cycle c. Accounting evolution b. Accounting process d. Accounting information system 5. Which of the following is a nominal (temporary) account? a. Unearned Revenue b. Salary Expense c. Inventory d. Retained Earnings

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6. The following were taken from the records of SML Co. as of December 31, 20x1: Checks drawn but not yet issued to payees ₱120,000 Customers’ checks dated January 15, 20x2 35,000 Customers’ checks dated Dec. 31, 20x1 40,000 SML’s check dated Jan. 15, 20x2 already 16,000 mailed to payee Cash on hand 130,000 Employees’ checks representing unclaimed 14,000 salaries, held by the treasurer Petty cash fund (fully replenished) 20,000 How much of the items listed above will be included in SML’s Dec. 31, 20x1 cash? a. 340,000 b. 260,000 c. 280,000 d. 320,000 7. The accountant for Baccah Inc. established a petty cash fund of ₱1,400. During September, the fund was depleted by the following disbursements: Shipping expense ................................... Travel expense .......................................... Postage expense ......................................... Miscellaneous supplies ..................................

₱740 240 230 170

In addition to receipts for the above items, the petty cash box contained ₱8 in coins and an IOU of ₱8 from the secretary handling the fund. The company uses a cash over and short expense account, as needed. The company decided to decrease the petty cash fund to ₱1,000. How much is the cash (shortage) or overage? a. (4) b. 4 c. (12) d. 12 8. Yesterday, you wrote a ₱2M check and gave it to a supplier as payment for the goods you have purchased. Today, you received your bank statement. You noticed that the ₱2M check is not reflected in the statement. What should you do? a. Call your friends and celebrate, telling them that you just saved ₱2M. b. Call the supplier and demand him or her to go to the bank and present the check for payment. c. Post the incident on your Facebook page and wait for likes. d. Treat the ₱2M check as outstanding check in your bank reconciliation for today.

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9. Entity A is preparing its March 31, 20x1 bank reconciliation. The following information was determined:  The cash balance per books is ₱280,000 while the cash balance per bank statement is ₱320,000.  Credit memo – ₱20,000  Debit memo – ₱15,000  Deposits in transit – ₱75,000  Outstanding checks – ₱25,000  The disbursements per books are overstated by ₱45,000.  The bank debits are understated by ₱40,000. How much is the adjusted balance of cash? a. 370,000 b. 330,000 c. 285,000 d. 380,000 10. At 30 September 2000, Z Ltd had a provision for doubtful debts of P37,000. During the year ended 30 September 2001 the company wrote off debts totaling P18,000, and at the end of the year it is decided that the provision for doubtful debts should be P20,000. What should be included in the income statement for bad and doubtful debts? a. P35,000 debit b. P1,000 debit c. P38,000 debit d. P1,000 credit 11. Light Co.’s accounts receivable balances at the beginning and end of the period were ₱80,000 and ₱100,000, respectively. Write-offs and recoveries during the period amounted to ₱10,000 and ₱8,000, respectively. Collections of sales on account during the period totaled ₱120,000, excluding the recoveries. How much is the total credit sales during the period? a. 130,000 b. 150,000 c. 170,000 d. 210,000 12. On January 1, 20x1, ABC Co. received a 3-year, noninterest bearing note of ₱133,100 in exchange for land with carrying amount of ₱100,000. The note is due on December 31, 20x3. The effective interest rate is 10%. How much is the carrying amount of the note on December 31, 20x2? a. 133,100 b. 121,000 c. 110,000 d. 100,000 13. Nicole Company transferred loan assets with carrying amount and fair value of P100,000 to Tristan Co. for cash amounting to P100,000. The terms of the transfer include a provision that

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any individual loan could be called back but the aggregate amount of loans that could be repurchased could not exceed P10,000. How much asset would be derecognized in the following transaction? a. 100,000 b. 90,000 c. 110,000 d. 10,000 14. On June 30, 2002, Simon Company discounted a customer's ₱180,000, 6 month, 10 percent note receivable dated April 30, 2002. A discount rate of 12 percent was charged by the bank. Simon's proceeds from this discounted note would be a. ₱169,200. b. ₱172,800. c. ₱181,440. d. ₱185,220. 15. The use of a Purchase Discounts account implies that the recorded cost of a purchased inventory item is its a. invoice price. b. invoice price plus any purchase discount lost. c. invoice price less the purchase discount taken. d. invoice price less the purchase discount allowable whether taken or not. Use the following information for the next two questions: During 2004, which was the first year of operations, Luther Company had merchandise purchases of ₱985,000 before cash discounts. All purchases were made on terms of 2/10, n/30. Three-fourths of the items purchased were paid for within 10 days of purchase. All of the goods available had been sold at year end. 16. Which of the following recording procedures would result in the highest cost of goods sold for 2004? 1. Recording purchases at gross amounts 2. Recording purchases at net amounts, with the amount of discounts not taken shown under "other expenses" in the income statement a. 1 b. 2 c. Either 1 or 2 will result in the same cost of goods sold. d. Cannot be determined from the information provided. 17. Which of the following recording procedures would result in the highest net income for 2004? 1. Recording purchases at gross amounts 2. Recording purchases at net amounts, with the amount of discounts not taken shown under "other expenses" in the income statement a. 1 b. 2 c. Either 1 or 2 will result in the same net income. d. Cannot be determined from the information provided.

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18. Which of the following is correct? a. Selling costs are product costs. b. Manufacturing overhead costs are product costs. c. Interest costs for routine inventories are product costs. d. All of these. 19. Entity A acquires inventories and incurs the following costs: Purchase price, gross of trade discount Trade discount Non-refundable purchase tax, not included in the purchase price above Freight-in (Transportation costs) Commission to broker Advertisement costs

100,000 20,000 5,000 15,000 2,000 10,000

How much is the cost of the inventories purchased? a. 102,000 b. 122,000 c. 97,000 d. 100,000 20. On October 1, 20x1, the warehouse of ABC Co. and all inventories contained therein were damaged by flood. Off-site back up of data base shows the following information: Inventory, Jan. 1 Accounts payable, Jan. 1 Accounts payable, Sept. 30 Payments to suppliers Freight-in Purchase returns and discounts Sales from Jan. to Sept. Sales returns Sales discounts Gross profit rate based on sales

14,500 6,000 3,000 50,000 5,000 2,500 75,000 5,000 2,000 20%

Additional information: Goods in transit as of October 1, 20x1 amounted to ₱2,000, cost of goods out on consignment is ₱1,200, and materials damaged by flood can be sold at a salvage value of ₱500. How much is the inventory loss due to the flood? a. 6,800 b. 7,200 c. 7,800 d. 8,200

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21. It is the amount at which the financial asset is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectability. a. fair value c. amortized cost b. discounted cost d. liquidation value

Use the following information for the next two questions: Karen Co. purchased the following equity securities on January 1, 20x1 for a total amount of P360,000. Cost Alaska Co. preference shares P200,000 Valdez Co. ordinary shares 160,000 Totals P360,000 The shares did not qualify for recognition as held for trading, thus they were classified as investment in equity securities measured at fair value through other comprehensive income. On December 31, 20x1, the portfolio of Karen Co. comprised the following. Fair value – 12/31/x1 Alaska Co. preference shares P240,000 Valdez Co. ordinary shares 60,000 Total P300,000 On December 31, 20x2, the portfolio of Karen Co. comprised the following: Fair value – 12/31/x2 Alaska Co. preference shares P220,000 Valdez Co. ordinary shares 180,000 Total P400,000 On February 2, 20x3, all of the Alaska Co. preference shares were sold for P160,000 net of transaction costs. 22. How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 20x1? a. 60,000 b. (60,000) c. 100,000 d. 0 23. How much is the unrealized gain (loss) accumulated in equity as of December 31, 20x2? a. 40,000 b. (40,000) c. 100,000 d. 0

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24. On January 1, 20x1, Mitch Co. acquired 12%, P4,000,000 bonds at 98. Commission 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. indeterminable Use the following information for the next three questions: On January 1, 20x1, ABC Co. acquired 10%, ₱1,000,000 bonds for ₱827,135. The bonds mature on December 31, 20x3 and pay annual interest every December 31. ABC Co. incurred transaction costs ₱80,000 on the acquisition. The effective interest rate adjusted for the effect of the transaction costs is 14%. The bonds are to be held under a “hold to collect and sell” business model. Information on fair values is as follows: December 31, 20x1…………………………….98 December 31, 20x2……………………………102 December 31, 20x3……………………………100 25. How much is the carrying amount of the investment on December 31, 20x1? a. 935,134 b. 1,002,000 c. 980,000 d. 965,443 26. How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 20x1? a. 45,866 b. (45,866) c. (37,899) d. 0 27. How much is the interest income recognized in 20x2? a. 126,999 c. 135,088 b. 130,779 d. 144,388 28. On January 1, 20x1, ABC Co. insures the life of its president for ₱1,000,000. ABC Co. is the beneficiary. Annual insurance premium of ₱20,000 is payable at the beginning of each year. Information on the cash surrender value from the insurance policy is shown below: Policy year Dec. 31, 20x1 Dec. 31, 20x2 Dec. 31, 20x3 Dec. 31, 20x4 Dec. 31, 20x5

Cash surrender value 21,000 28,000 40,000

How much is the insurance expense for the year 20x3? a. 1,000 b. 7,000 c. 13,000 d. 0

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Use the following information for the next three questions: On March 1, 20x1, ABC Co. sold inventory to a foreign company for FC 1,000,000 (FC means foreign currency) when the spot exchange rate is FC 40: ₱1. The payment is due on April 1, 20x1. ABC Co. is concerned about the possible fluctuation in exchange rates, so on this date, ABC Co. entered into a forward contract to sell FC 1,000,000 for ₱25,000 to a broker. According to the terms of the forward contract, if FC 1,000,000 is worth less than ₱25,000 on April 1, 20x1, ABC Co. shall receive from the broker the difference; if it is worth more than ₱25,000, ABC Co. shall pay the broker the difference. 29. If the exchange rate on April 1, 20x1 is FC35: ₱1, how much is the net cash settlement? a. 3,571 receipt b. 3,571 payment c. 4,231 receipt d. 4,231 payment 30. If the exchange rate on April 1, 20x1 is FC50: ₱1, how much is the net cash settlement? a. 5,000 payment b. 5,000 receipt c. 6,223 payment d. 6,223 receipt 31. If the exchange rate on March 31, 20x1 is FC45: ₱1, how much is the fair value of the interest rate swap? a. 3,000 asset b. 3,000 liability c. 2,778 asset d. 2,778 liability 32. ABC Co. does printing jobs for various customers. On January 1, 20x1, ABC Co. forecasted the purchase of 1,000 reams of paper in the next quarter. The expected purchase date is on April 15, 20x1. ABC Co. expects that the price of paper will fluctuate because of the upcoming elections. Thus, on January 1, 20x1, ABC Co. enters into a forward contract to purchase 1,000 reams of paper at a forward rate of ₱600 per ream. If the market price on April 15, 20x1 is more than ₱600, ABC Co. shall receive the difference from the broker. On the other hand, if the market price is less than ₱600, ABC Co. shall pay the difference to the broker. The forward contract will be settled net on April 15, 20x1. The discount rate is 10%. If the price of paper is ₱700 per ream on March 31, 20x1, how much is the derivative asset (liability) to be recognized in ABC Co.’s first quarter financial statements? a. 100,000 asset b. 100,000 liability c. 98,772 asset d. 98,772 liability

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33. On January 1, 20x1, Entity A acquires 25% interest in Entity B for ₱800,000. Entity B reports profit of ₱1,000,000 and declares dividends of ₱100,000 in 20x1. How much is the carrying amount of the investment in associate on December 31, 20x1? a. 800,000 b. 1,250,000 c. 1,000,000 d. 1,025,000 34. Which of the following is outside the scope of PAS 41? a. dairy cattle used in the production of milk b. chickens used in the production of meat c. rice plants and other crops that produce agricultural products only once d. mango trees and other plants that produce agricultural products repeatedly over a long period of time 35. Which of the following is considered a biological asset? a. Carcass c. Pig b. Ham d. Piggy bank 36. Which of the following is considered an agricultural produce? a. fruit cocktail c. picked or harvested fruit b. fruit tree d. dried fruit 37. According to PAS 41, biological assets are measured as follows: Initial measurement Subsequent measurement a. fair value less costs to sell fair value less costs to sell b. cost cost less accumulated depreciation c. cost cost less accumulated depreciation and impairment losses d. fair value less costs to sell cost

38. When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be a. amortized over the estimated time period between the tearing down of the building and the completion of the plant. b. expensed as incurred. c. added to the cost of the plant. d. added to the cost of the land.

39. Lakepoint Company recently accepted a donation of land with a fair value of ₱200,000 from an unrelated party. The entry that Lakepoint should use to record this land is: a. Plant.............................. 200,000 Gain from Receipt of Donated Plant

200,000

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b.

Land..............................

200,000

Gain from Receipt of Donated Land c.

Land..............................

200,000

200,000

Unrealized Gain from Receipt of Donated Land.................. d.

Land..............................

200,000

200,000

Retained Earnings................

200,000

40. Small tools and containers used repeatedly for more than a year are classified on the balance sheet as a. current assets. b. fixed assets (PPE). c. deferred charges. d. investments. 41. Which of the following is a capital expenditure? a. Payment of an account payable b. Retirement of bonds payable c. Payment of income taxes d. None of these 42. You are a business manager. During the period, you have authorized the acquisition of a machine that will be used in your company’s manufacturing activities in the next 5 years. In your selection of an appropriate accounting policy for the recognition and measurement of the machine, which of the following reporting standards is most relevant? a. PAS 1 b. PAS 2 c. PAS 16 d. PAS 32 43. You are the sole proprietor of Entity A. As a requisite to your business loan application, you were required by the bank to submit audited financial statements. During the audit of your financial statements, the auditor questioned the carrying amount of your land. The auditor believes that the carrying amount is overstated and needs to be written down to its recoverable amount. In your discussions with your auditor, the auditor would most likely refer to this standard in her report? a. PAS 36 b. PFRS 1 c. PAS 26 d. PAS 12

44. Entity A acquires equipment on January 1, 20x1. Information on costs is as follows:

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Purchase price, gross of ₱10,000 trade discount Non-refundable purchase taxes Delivery and handling costs Installation costs Present value of decommissioning and restoration costs

800,000 20,000 40,000 30,000 10,000

How much is the initial cost of the equipment? a. 900,000 c. 870,000 b. 820,000 d. 890,000 45. (Use the information in the immediately preceding problem.) Assume the equipment has a useful life of 10 years and a residual value of ₱90,000. Entity A uses the straight line method of depreciation. How much are the depreciation expense in 20x1 and the carrying amount of the equipment on December 31, 20x2, respectively? Depreciation expense Carrying amount – 12/31/x2 a. 80,000 810,000 b. 80,000 730,000 c. 80,000 640,000 d. 80,000 580,000 46. (Use the information in the immediately preceding two problems.) Assume the equipment has a useful life of 10 years and a residual value of ₱90,000. Entity A uses the straight line method of depreciation. On December 31, 20x2, Entity A revalues the equipment at a fair value of ₱820,000. There is no change in the residual value and the remaining useful life of the asset. How much are the revaluation surplus on December 31, 20x2 and revised depreciation expense in 20x3 and in subsequent periods, respectively? Revaluation surplus Revised annual depreciation a. 83,000 90,250 b. 89,000 91,050 c. 90,000 91,250 d. 92,000 92,150 47. Entity A sells a machine that is classified as PPE for ₱1,700,000. Entity A ...