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NAME: Dayrit, Krisha Mae H. Date:

Professor: [Link] Section: BSA12 Score:

INTERMEDIATE ACCOUNTING 1
MID TERM EXAMINATION

1. It is a systematic compilation of a group of accounts.

a. Chart of T-accounts c. Ledger
b. Trial balance d. Journal

2. A trial balance may prove that debits and credits are equal, but
a. an amount could be entered in the wrong account.
b. a transaction could have been entered twice.
c. a transaction could have been omitted.
d. all of these.

3. Unearned income can best be described as an amount that is

a. collected and currently matched with expenses.
b. collected but not currently matched with expenses.
c. not collected but currently matched with expenses.
d. not collected and not currently matched with expenses.

4. 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 mailed to payee 16,000
Cash on hand 130,000
Employees’ checks representing unclaimed salaries, held by the 14,000
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

5. Devin Co.'s cash balance in its balance sheet is ₱1,300,000, of which ₱300,000 is
identified as a compensating balance. In addition, Devin has classified cash of
₱250,000 that has been restricted for future expansion plans as "other assets". Which
of the following should Devin disclose in notes to its financial statements?
Compensating balance Restricted cash
a. Yes Yes
b. Yes No
c. No Yes
d. No No

6. It is a report that is prepared for the purpose of bringing the balances of cash per
records and per bank statement into agreement.
a. Bank statement
b. Check Disbursement Voucher
c. Bank reconciliation
d. Bank deposit slip
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7. Entity A is preparing its November 30, 20x1 bank reconciliation statement. The
following information was determined:
 Cash balance per accounting books, Nov. 30, 20x1, ₱600,000
 Cash balance per bank statement, Nov. 30, 20x1, ₱860,000
 Credit memo, ₱380,000
 Debit memo, ₱60,000
 Deposits in transit, ₱100,000
 Outstanding checks, ₱40,000

How much is the adjusted balance of cash?

a. 840,000
b. 880,000
c. 920,000
d. 1,040,000

8. Under the allowance method of recognizing bad debts on trade accounts receivable,
the effect of writing off an account to an entity's current ratio is
a. increase
b. decrease
c. increase if the entity's current ratio is higher than 1 prior to the write-off; decrease
if the entity's current ratio is lower than 1 prior to the write-off
d. no effect

9. Howl Co. has the following information:

Days outstanding Receivable balances % uncollectible
0 – 60 180,000 1%
61 – 120 135,000 2%
Over 120 150,000 6%
Total accounts receivables 465,000

During the year, Howl Co. wrote off ₱10,500 receivables and recovered ₱6,000 that had
been written-off in prior years. The allowance for doubtful accounts has a beginning
balance of ₱3,000. How much is the doubtful accounts expense for the year?
a. 20,000
b. 25,000
c. 15,000
d. 30,000

10. In its December 31 balance sheet, Devin Co. reported trade accounts receivable of
₱250,000 and related allowance for uncollectible accounts of ₱20,000. What is the
total amount of risk of accounting loss related to Devin's trade accounts receivable,
and what amount of that risk is off balance-sheet risk? (Item 1) Risk of accounting loss;
(Item 2) Off-balance-sheet risk
a. 0; 0
b. 230,000; 20,000
c. 230,000; 0
d. 250,000; 20,000

11. What is the effective interest rate of a bond or other debt instrument measured at
amortized cost?
a. The stated coupon rate of the debt instrument.
b. The current market rate published by a regulatory body.
c. The interest rate that exactly discounts the estimated future cash payments or
receipts over the expected life of the debt instrument or, when appropriate, a
shorter period, to the net carrying amount of the instrument.
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d. The basic, risk-free interest rate that is derived from observable government bond
prices.

12. ABC Co. received the following notes receivable on January 1, 20x1:
15,00
9-month, 10% note from Alpha Company.
0
6-month, noninterest bearing note from Beta, Inc. (the effect of discounting is 20,00
deemed immaterial) 0
30,00
14%, 3-year note from Charlie Corp.
0
Market rate of interest on January 1, 20x1 10%

At what total net amount will the notes be initially recognized?

a. 65,000
b. 53,673
c. 62,357
d. 50,000

13. On March 1, 20x1, Nickelodeon Co. received a 12% note dated January 1, 20x1.
Principal and interest on the note are due on July 1, 20x1. On initial recognition,
which of the following accounts increased?
a. Prepaid interest
b. Unearned interest income
c. Interest revenue
d. Interest receivable

14. What are the effects of direct loan origination costs and origination fees on the
carrying amount of a loan receivable?
Direct origination costs Origination fees
a. increase increase
b. decrease decrease
c. increase decrease
d. no effect no effect

15. The application of the expected credit loss (ECL) model of PFRS 9 requires the
measurement of expected credit losses in a manner that reflects reasonable and
supportable information that is available without undue cost or effort at the reporting
date. Such reasonable and supportable information does not include
a. past events.
b. current conditions.
c. forecasts of future economic conditions.
d. All of these are included

16. When testing loans and note receivables for impairment, the rate that should be used
is
a. the current market rate as of impairment testing date.
b. the weighted average rate on the remaining term of the instrument.
c. the original effective rate of the instrument.
d. the weighted average rate over the total life of the instrument.

17. The due date of a 90-day note receivable dated July 12 is

a. September 12.
b. October 9.
c. October 10.
d. October 11.
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18. On January 1, 20x1, Hollycow Bank extended a 3-year, ₱1,000,000, 12% loan to
Manna, Inc. at a price that yields an effective interest rate of 10%. Principal is due at
maturity but interest is due annually every December 31.

On December 31, 20x1, it was ascertained that the loan was credit-impaired. The loan
was restructured as follows:
 Only the principal amount of ₱1,000,000 will be collected on the loan. This is due
on December 31, 20x3.
 The ₱120,000 interest receivable accrued in 20x1 and future interests are waived.

How much is the impairment loss on December 31, 20x1?

a. 105,289
b. 129,091
c. 212,561
d. 328,265

19. Tremolo Co. transferred loans receivables with carrying amount and fair value of
₱200,000 to XYZ, Inc. for cash amounting to ₱200,000. Under the terms of the
transfer, Tremolo Co. is obligated to repurchase some of the loans transferred not
exceeding ₱20,000. The entry to record the transfer includes all of the following
except
a. a debit to cash for ₱200,000.
b. a credit to loans receivable of ₱200,000.
c. a credit to liability on repurchase agreement of ₱20,000.
d. a credit to loans receivable of ₱180,000.

20. According to PAS 2, inventories are measured at

a. cost.
b. fair value.
c. net realizable value.
d. lower of a and c.

21. ABC Co. purchased goods with invoice price of ₱3,000 on account on December 27,
20x1. The related shipping costs amounted to ₱50. The seller shipped the goods on
December 31, 20x1. ABC Co. received the goods on January 2, 20x2 and settled the
account on January 5, 20x2. How much is the capitalizable cost of the inventory
purchased if the terms of the shipment are FOB shipping point, freight prepaid?
a. 3,050 b. 3,000 c. 2,950 d. 0

22. Haze Co. provided you the following information for the purpose of determining the
amount of its inventory as of December 31, 20x1:
Goods located at the warehouse (physical count) 3,400,000
Goods located at the sales department (at cost) 15,800,000
Goods in-transit purchased FOB Destination 2,400,000
Goods in-transit purchased FOB Shipping Point 1,600,000
Freight incurred under “freight prepaid” for the
goods purchased under FOB Shipping Point 80,000
Goods held on consignment from Smoke, Inc. 1,800,000

How much is the total inventory on December 31, 20x1?

a. 25,080,000
b. 25,080,000
c. 20,880,000
d. 20,800,000
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23. ABC Co. consigned goods costing ₱14,000 to XYZ, Inc. Transportation costs of
delivering the goods to XYZ, Inc. totaled ₱3,000. Repair costs for goods damaged
during transportation totaled ₱1,500. To induce XYZ, Inc. in accepting the consigned
goods, ABC Co. gave XYZ, Inc. ₱2,000 representing an advance commission. How
much is the cost of the consigned goods?
a. 20,500 b. 18,500 c. 17,000 d. 14,000

24. ABC Co., a VAT payer, imported goods from a foreign supplier. Costs incurred by ABC
include the following: purchase price, excluding VAT, ₱250; import duties, ₱20; value
added tax, ₱15; transportation and handling costs, ₱5; and commission to broker, ₱2.
How much is the cost of purchase of the imported goods?
a. 292 b. 277 c. 257 d. 255

25. The following are among the transactions of ABC Co. during the year:
 Purchased goods costing ₱20,000 from XYZ, Inc. Billing was received although delivery
was delayed per request of ABC Co. The goods purchased were segregated and ready
for delivery on demand.
 Purchased goods costing ₱35,000 from Alpha Corp. on a lay away sale agreement. The
goods were not yet delivered until after ABC makes the final payment on the purchase
price. ABC Co. made total payments of ₱34,920 during the year.

How much of the goods purchased above will be included in ABC’s year-end inventory?
a. 55,000 b. 54,290 c. 34,920 d. 0

26. Based on the following information, how much is the cost of goods sold?
Decrease in inventory 12,000
Increase in accounts payable 16,000
Payments to suppliers 80,000

a. 108,000 b. 96,000 c. 76,000 d. 84,000

Use the following information for the next two questions:

Miller Inc. is a wholesaler of office supplies. The activity for Model III calculators during
August is shown below:
Date Transaction Units Cost
Aug. 1 Inventory 2,000 ₱36.0
0
7 Purchase 3,000
37.2
0
12 Sales 3,600
21 Purchase 4,800
38.0
0
22 Sales 3,800
29 Purchase 1,600
38.6
0

27. If Miller Inc. uses a FIFO periodic inventory system, the ending inventory of Model III
calculators at August 31 is reported as
a. 150,080 b. 150,160 c. 152,288 d. 152,960

28. If Miller Inc. uses a FIFO cost perpetual inventory system, the ending inventory of
Model III calculators at August 31 is reported as
a. 150,080 b. 150,160 c. 152,232 d. 152,960
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Use the following information for the next two questions:

Stephens Inc. is a wholesaler of photography equipment. The activity for the VTC
cameras during July is shown below:
Date Transaction Units Cost
July 1 Inventory 2,000 ₱36.00
7 Purchase 3,000 37.00
12 Sales 3,600
21 Purchase 5,000 37.88
22 Sales 3,800
29 Purchase 1,600 38.11

29. If Stephens Inc. uses the average cost method to account for inventory, the ending
inventory of VTC cameras at July 31 is reported as
a. 153,400 b. 156,912 c. 158,736 d. 159,464

30. If Stephens Inc. uses a moving average perpetual inventory system, the ending
inventory of the VTC cameras at July 31 is reported as
a. 153,400 b. 156,912 c. 158,736 d. 159,464

31. On June 19, 2002, a fire destroyed the entire uninsured merchandise inventory of
Allen Merchandising Company. The following data are available:

Inventory, January ₱
1 .................................. 80,000
Purchases, January 1 through June 560,00
19 .................. 0
Sales, January 1 through June 776,00
19 ...................... 0
Markup percentage on 25%
cost .............................

What is the approximate inventory loss as a result of the fire?

a. ₱19,200
b. ₱27,200
c. ₱34,000
d. ₱58,000

32. The following information is available for Torino Corp. for its most recent year:

Net ₱3,600,0
sales ............................................. 00
Freight- 90,000
in ............................................
Purchase 50,000
discounts ....................................
Ending 240,000
inventory ......................................

The gross margin is 40 percent of net sales. What is the cost of goods available for sale?
a. ₱1,680,000
b. ₱1,920,000
c. ₱2,400,000
d. ₱2,440,000
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33. The Ashby Sporting Goods Store uses the retail inventory method. Information
relating to the computation of the inventory at December 31, 2002, is as follows:
Cost Retail
Inventory at January 1, 2002 .............. ₱ 32,000 ₱ 80,000
Sales ..................................... 580,000
Purchases ................................. 270,000 600,000
Freight-in ................................ 7,600
Net markups ............................... 40,000
Net markdowns ............................. 20,000

What is the ending inventory at cost at December 31, 2002, using the retail inventory
method and the FIFO cost estimation?
a. ₱43,000 c. ₱51,600
b. ₱45,000 d. ₱53,724

34. According to PFRS 9 Financial Instruments, a financial instrument is recognized

a. when the entity purchases investments in equity securities
b. when the entity becomes a party to the contractual provisions of the instrument
c. when the entity has a codified business model with an objective of holding assets
in order to collect contractual cash flows.
d. all of these

35. Financial assets are initially classified and subsequently measured on the basis of
a. the entity’s business model for managing the financial assets.
b. the contractual cash flow characteristics of the financial asset.
c. a and b
d. a or b

36. Entity Y has operated a “hold to collect” business model for many years. Its portfolio
of assets has for many years consisted of investment grade bonds issued by utility
companies. Entity Y’s investment policies attach importance to both the yield and the
stability afforded by such investments, and result in sales only in response to
significant deteriorations in the credit risk of individual assets within the portfolio.
Recently, however, there has been a wave of takeovers in the utility sector fuelled by
overseas interest in the sector. As a result, Entity Y has sold a number of the bonds
within its portfolio in response to unsolicited offers that have been made to it.
Continuing interest in this sector means that such sales are likely to continue in the
future. Can Entity Y continue to classify the unsold bonds under a held to collect
business model?
a. Yes, Entity Y may continue to classify the remaining bonds under the “hold to
collect” model.
b. No, Entity Y shall reclassify the remaining bonds to the “hold to sell” model.
c. No, Entity Y shall reclassify the remaining bonds to the “hold to collect and sell”
model.
d. No, Entity Y must either designate the remaining bonds as FVPL or elect to classify
them as FVOCI. The amortized cost measurement is not appropriate for the
remaining bonds.

37. Dawn Co. had the following portfolio of securities at the end of its first year of
operations:
Year-End
Security Classification Cost Fair Value
A Held for Trading ₱18,000 ₱23,000
B Held for Trading ₱25,000 ₱27,000

The year-end adjusting entry would most likely include a

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a. ₱11,000 net debit to gain.

b. ₱7,000 net credit to a fair value adjustment account.
c. ₱7,000 net debit to held for trading securities.
d. ₱5,000 net credit to loss.

38. There are multiple active markets for a financial asset with different observable
market prices:
Transaction
Market Quoted Price
Costs
A 76 5
B 74 2

There is no principal market for the financial asset. What is the fair value of the asset?
a. 71 b. 72 c. 74 d. 76

39. On January 1, 2002, Young Co. paid ₱500,000 for 20,000 shares of Montana Co.'s
ordinary shares and classified these shares as held for trading securities. Young does
not have the ability to exercise significant influence over Montana. Montana declared
and paid a dividend of ₱.50 a share to its stockholders during 2002. Montana reported
net income of ₱260,000 for the year ended December 31, 2002. The fair value of
Montana Co.'s stock on December 31, 2002 is ₱27 per share. What is the net asset
amount (which includes both investments and any related market adjustments)
attributable to the investment in Montana that will be included on Young's balance
sheet at December 31, 2002?
a. 530,000 b. 540,000 c. 569,000 d. 579,000

40. Martin Co. purchased the following portfolio of held for trading securities during 2002
and reported the following balances at December 31, 2002. No sales occurred during
2002. All declines are considered to be temporary.
Security Cost Fair Value at 12/31/02
X ₱ 80,000 ₱ 82,000
Y 140,000 132,000
Z 32,000 28,000

The carrying value of the portfolio at December 31, 2002, on Martin Co.'s balance sheet
would be
a. 222,000 b. 240,000 c. 242,000 d. 252,000

41. Martin Co. purchased the following portfolio of fair value through other
comprehensive income securities during 2002 and reported the following balances at
December 31, 20x2. No sales occurred during 20x2. All declines are considered to be
temporary.
Security Cost Fair Value at 12/31/02
X ₱ 80,000 ₱ 82,000
Y 140,000 132,000
Z 32,000 28,000

Martin Co. should report what amount related to the securities transactions in its 20x2
profit or loss?
a. 0 c. 10,000 unrealized loss
b. 2,000 unrealized loss d. 12,000 unrealized loss

42. It is a bond that gives the holder the right to exchange the par amount of the bond for
ordinary shares of the issuer at some fixed ratio during a particular period.
a. convertible bond c. extendible bond
b. exchangeable bond d. optimus prime bond
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Use the following information for the next two questions:

On January 1, 20x1, Gina Co. acquired 10%, ₱4,000,000 bonds for ₱3,807,853. The
principal is due on January 1, 20x4 but interest is due annually. The yield rate on the
bonds is 12%.

43. How much is the interest income recognized in 20x1?

a. 456,942 b. 463,776 c. 471,429 d. 400,000

44. How much is the carrying amount of the investment on December 31, 20x1?
a. 3,807,853 b. 3,864,795 c. 3,928,571 d. 4,000,000

Use the following information for the next two questions:

On January 1, 20x1, ABC Co. acquired 14%, ₱1,000,000 bonds for ₱1,099,474. The
principal is due on December 31, 20x3 but interest is due annually starting December 31,
20x1. The effective interest rate on the bonds is 10%. The bonds are classified as
investment measured at amortized cost.

45. How much is the carrying amount of the investment on December 31, 20x2?
a. 1,000,000 b. 1,036,364 c. 1,069,421 d. 1,044,312

46. Assume that half of the investment was sold on January 1, 20x2 for ₱480,000.
Transaction costs incurred on the sale amounted to ₱15,000. How much is the gain
(loss) on the sale?
a. (54,711) b. (39,711) c. 16,341 d. (69,711)

47. On May 1, 20x1, Solna Co. acquired ₱100,000 face amount, 10% bonds dated January
1, 20x1 at 102. The purchase price excludes interest. How much is the initial carrying
amount of the investment?
a. 102,000 b. 99,500 c. 98,667 d. 105,333

48. According to PFRS 9, which of the following represents a cessation of a financial

asset’s impairment accounting?
a. Reclassification of the financial asset from Amortized cost to FVPL
b. Reclassification of the financial asset from FVPL to Amortized cost
c. Reclassification of the financial asset from Amortized cost to FVOCI
d. Reclassification of the financial asset from FVOCI to Amortized cost

Use the following information for the next two questions:

On December 29, 20x2 (trade date), Jared Co. enters into a contract to sell a financial
asset for its current fair value of ₱4,040 to Hera Co. The asset was acquired one year
earlier for ₱4,000 and its carrying amount on December 29, 20x2 is ₱4,000. On December
31, 20x2 (financial year-end), the fair value of the asset is ₱4,024. On January 4, 20x3
(settlement date), the fair value is ₱4,052.

49. If the financial asset sold was classified as held for trading security and the sale is
accounted for under the trade date accounting, the entry on December 29, 20x2 in
Jared’s books will include
a. a ₱4,000 credit to the “Held for trading securities” account.
b. a ₱40 debit to unrealized gain.
c. a ₱4,000 debit to a receivable account.
d. No entry will be made on this date.

50. If the financial asset sold was classified as held for trading security and the sale is
accounted for under the settlement date accounting, the entry on December 29, 20x2
in Jared’s books will include
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a. a credit to “Held for trading securities” for ₱4,000.

b. a credit to “Unrealized gain” for ₱40.
c. a ₱4,000 debit to a receivable account.
d. No entry will be made on this date

51. On August 31, 2002, Stiggins Company purchased the following equity securities and
irrevocably elected to measure them at fair value through other comprehensive
income:
Fair Value
Security Cost December 31, 2002
D ₱ 96,000 ₱ 84,000
E 152,000 158,000
F 162,000 146,000

On December 31, 2002, Stiggins reclassified its investment in security F from fair value
through other comprehensive income to held for trading securities. What total amount of
loss on reclassification should be included in Stiggins' income statement for the year
ended December 31, 2002?
a. 0 b. 16,000 c. 22,000 d. 28,000

52. On January 1, 20x1, Skid Row Co. acquired ₱2,000,000 face amount, 10% bonds for
₱1,903,927. The bonds were measured at amortized cost. The principal is due on
January 1, 20x4 but interest payments are due annually every December 31. The
effective interest rate is 12%. On December 31, 20x2, the investee entered into a
corporate rehabilitation program resulting in the extension of the maturity of the
bonds to January 1, 20x6. Skid Row sees this as a loss event. Skid Row estimates that
only the face amount of the bonds will be collected, in lump-sum, on January 1, 20x6.
There is no interest receivable as of December 31, 20x2. The current market rate on
December 31, 20x2 is 14%. How much is the impairment loss recognized on
December 31, 20x2?
a. 223,734
b. 483,914
c. 540,726
d. 0

53. Which of the following is not considered an “other long-term investment?”

a. Sinking fund
b. Preference share redemption fund
c. Contingency fund
d. Tax fund

54. On January 1, 20x1, Halilikaw Co. makes a one-time contribution of ₱1,000,000 to a

sinking fund that earns compounded interest of 12% per annum. Relevant future value
factors are as follows:
FV of ₱1 @ 12%, n=10………………………………………….. 3.10585
FV of an ordinary annuity of ₱1 @ 12%, n=10……………....17.54874
FV of an annuity due of ₱1 @ 12%, n=10............................... 19.65458

How much sinking fund balance could Halilikaw Co. expect to accumulate in 10-years’
time?
a. 1,287,892
b. 3,105,850
c. 17,548,740
d. 19,654,580

55 .An entity’s assets include the following. Which is not a debt security?
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a. Convertible bonds
b. Commercial paper
c. Loans receivable
d. All of these are debt securities.

56. Walsh, Inc. began business on January 1, 2002, and at December 31, 2002, Walsh had
the following investment portfolios of equity securities:
FVPL FVOCI
Aggregate cost ₱150,000 ₱225,000
Aggregate fair value 120,000 185,000

None of the declines is judged to be other than temporary. Unrealized losses at December
31, 2002, should be recorded with corresponding charges against
Profit or loss Equity Profit or loss Equity
a. 70,000 0 c. 30,000 40,000
b. 40,000 30,000 d. 0 70,000

57. Billy Goat Co. calculates the interest income on an investment in debt securities using
the effective interest method but reports the investment at fair value. Billy’s investment
must have been classified as
a. amortized cost asset. c. FVOCI asset.
b. FVPL asset. d. fair value asset.

58. On December 29, 20x1, an entity commits itself to purchase a financial asset for
₱10,000, which is its fair value on commitment date (trade date). Transaction costs are
immaterial. On December 31, 20x1 and on January 4, 20x2 (settlement date), the fair
values of the asset are ₱12,000 and ₱15,000, respectively. If the entity uses the trade date
accounting and that the investment is classified as held for trading, how much is the
carrying amount of the investment in the December 31, 20x1 statement of financial
position?
a. 10,000 b. 12,000 c. 2,000 d. 0

59. An increase in the cash surrender value is accounted for as

a. income recognized in profit or loss.
b. income recognized in other comprehensive income.
c. reduction to insurance expense.
d. none of these.

60. It is the risk of a possible future change in one or more of a specified interest rate,
financial instrument price, commodity price, foreign exchange rate, index of prices or
rates, credit rating or credit index or other variable, provided in the case of a non-
financial variable that the variable is not specific to a party to the contract.
a. Insurance risk c. Financial risk
b. Operating risk d. Credit risk

“We want each of you to show this same diligence to the very end, so that
what you hope for may be fully realized.” (Hebrews 6:11)

- END -
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1. C
2. D
3. B
4. A
5. A
6. C
7. C
8. D
9. C
10. C -
11. C
12. A
13. D
14. C
15. D
16. C
17. C -
18. D
19. B
20. D
21. A
22. C
23. C
24. B
25. A
26. A
27. D
28. D
29. B
30. C
31. A
32. C
33. D
34. B
35. C
36. A
37. C
38. C -
39. B
40. C
41. A
42. A
43. A
44. B
45. B
46. D
47. A
48. A
49. A
50. B
51. A
52. C
53. D
54. B
55. C
56. D -
57. C -
58. B
59. C
 P a g e | 13

60. C