UNIVERSITY OF SOUTHERN MINDANAO

Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I
NAME: Date:
Professor: Year/Course/Section: Score:

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

1. If material, deposits in foreign bank which are subject to foreign exchange restriction
shall be classified
a. Separately as current asset, with appropriate disclosure.
b. Separately as noncurrent asset, with appropriate disclosure.
c. Be written off as an extraordinary loss.
d. As part of cash and cash equivalents.

2. The internal control feature that is specific to petty cash is

a. Separation of duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest system

3. On January 1, 20x1, MamaMia 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

4. The following statements relate to the fair value and equity methods of accounting for a
stock investment.
I. whenever an investment in equity securities does not qualify for equity method,
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. the fair value method of accounting for a stock investment recognizes the legal
fact that the investor and investee are one economic unit.
III. an investor may still be able to exercise significant influence over an investee
even if the investment is less than 20% of the voting stock of the investee.
IV. no adjustment to the investment account is made when changing from the equity
to the fair value method, or vice versa.

State whether the foregoing statements are true.

a. all of the statements are true
b. only one statement is true
c. only two statements are true
d. three statements are true

5. Which is not a required disclosure in relation to inventory?

a. The amount of any writedown of inventories recognized as expense
b. The amount of any reversal of writedown of inventories
c. The circumstances or events that led to the reversal of a writedown of inventories
d. The fair value less cost to sell of inventories pledged as security for liabilities.

6. Under the allowance method of recognizing bad debts on trade accounts receivable, the
effect of writing off an account to an entity's working capital is
a. increase
b. decrease
c. either a or b depending on the current level of the entity's working capital
d. no effect

7. Bank reconciliations are normally prepared on a monthly basis to identify adjustments

needed in the depositor's records and to identify bank errors. Adjustments should be
recorded for
a. bank errors, outstanding checks, and deposits in transit.
b. all items except bank errors, outstanding checks, and deposits in transit.
c. book errors, bank errors, deposits in transit, and outstanding checks.
d. outstanding checks and deposits in transit.

8. 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.

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 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 rate that exactly discounts estimated future cash payments or 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, risk-free interest rate that is derived from observable government bond
prices.

9. What is the major purpose of an imprest petty cash?

a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors
c. To determine the honesty of the petty cashier
d. To effectively control cash disbursements

10. On July 1, 2002, Jawhead Corp. received a one-year note with a face value of P900,000
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. 16.67 percent
b. 15.0 percent
c. 3.5 percent
d. 11.11 percent

11. A consignee paid the freight cost for goods shipped from a consignor. The freight 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 of goods sold
b. Accounts Receivable
c. Distribution cost
d. Freight out

12. Which of the following statements in relation to accounting for petty cash is false?
a. Each disbursement from petty cash should be supported by a petty cash voucher.
b. The creation of a petty cash fund requires a journal entry to reflect the transfer of
fund out the general cash account.

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I
c. With the establishment of an imprest petty cash fund, one person is given the
authority and responsibility for issuing checks to cover minor disbursements.
d. At any time, the sum of cash in the petty cash fund and the total cash vouchers
should equal the amount for which the imprest petty cash fund was established.

13. An entity has financial assets held under a business model with the objective of 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 in circumstance is a prior period 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 remaining financial assets within the “hold to collect” business model 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 shall change its business model because of the change in circumstance.
The remaining financial assets shall be reclassified after the entity changes the
business model.

14. At the end of the current year, an entity had cash accounts at three different banks. 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 segregated account should be reported as a noncurrent asset, the regular
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 segregated account should be reported as a noncurrent asset, and the regular
account should be reported as current asset net of the overdraft.
d. The segregated and regular accounts should be reported current asset should be
reported as current asset net of the overdraft.

15. Which of the following should not be reported as inventory?

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I
a. Land acquired for resale by a real estate firm
b. Shares and bonds held for resale by a brokerage firm
c. Machinery acquired by a manufacturing entity for use in the production process
d. Partially completed goods held by a manufacturing entity

16. Whether recognized or unrecognized in an entity’s financial statements, disclosure of the

fair value of the financial instruments is required when
a. It is practicable to estimate the fair value.
b. The entity maintains accurate cost records.
c. Aggregate fair value is material to the entity.
d. Individual fair value is material to the entity.

17. Changes in fair value are recognized in profit or loss for which type of financial assets?
a. Financial assets measured at amortized cost
b. FVOCI securities
c. Held to maturity debt securities
d. Financial assets designated at FVPL

18. An unrealized holding loss on a company's FVOCI securities should be reflected in the
current financial statements as
a. an extraordinary item shown as a direct reduction from retained earnings.
b. a current loss resulting from holding securities.
c. a note or parenthetical disclosure only.
d. other comprehensive income and deducted in the equity section of the balance
sheet.

19. Which of the following may provide evidence of significant influence even if the
percentage of ownership interest is less than 20%?
I. Representation on the board of directors or equivalent governing body of the
investee.
II. Participation in policy-making processes, including participation in decisions
about dividends or other distributions.
III. Material transactions between the investor and the investee
IV. Interchange of managerial personnel.
V. Provision of essential technical information.

a. I, II

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I
b. I, II, III
c. I, II, IV
d. any of these

20. Stock dividends on common stock should be recorded at their fair value by the investor
when the related investment is accounted for under which of the standards?
PFRS 9 PAS 28
a. Yes Yes
b. Yes No
c. No Yes
d. No No

21. Which of the following statements are in accordance with PAS 28?
I. When the associate has cumulative preference shares, the investor computes its
share in the profit or loss of the investee after deducting the preferred dividends,
only when such dividends are declared.
II. When the associate has non-cumulative preference shares, the investor computes
its share in the profit or loss of the investee after deducting the preferred
dividends, whether or not such dividends are declared.
a. true, true
b. true, false
c. false, true
d. false, false

22. The following data were taken from Trump’s check register for the month of 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 Item Checks Deposits Balance

2020
April 1 Beginning Balance 6,150
1 Deposit 26,167 32,317
1 Check No. 179 250 32,567
4 Check No. 180 10,673 21,898
27 Deposit 11,774 33,672
29 Check No. 181 13,217 20,490

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I

The following is from Trump’s bank statement for April:

Date Item Checks Deposits Balance

2020
April 1 Beginning Balance 3,950
3 Check no. 179 250 3,700
3 Deposit 4,350 8,050
5 Check No. 180 10,673 (2,623)
5 Automatic loan 8,150 5,527
5 Deposit 26,417 31,944
20 NSF Check 1,000 30,944
20 Service Charge 600 30,344
30 Interest 82 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. P26,833
b. P26,838
c. P30,426
d. P26,782

23. If the balance shown on entity’s bank statement is less than the correct cash balance and
neither the entity nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity
b. Outstanding checks
c. Deposits in transit
d. Bank charges not yet recorded by the entity

24. An entity transferred financial assets to another entity. The transfer meets the condition to
be accounted for as a sale. The transferor should do each of the following, except
a. Remove all assets sold from the statement of financial position.
b. Remove all assets received and liabilities incurred as a proceeds from the sale.
c. Measure the assets received and liabilities incurred at cost.
d. Recognize any gain or loss on the sale.

25. A proof of cash would be useful for

a. Discovering cash receipts that have not been recorded in the journal

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I
b. Discovering time lag in making deposits
c. Discovering cash receipts that have been recorded but have not been deposited
d. Discovering an inadequate separation of incompatible duties of employees

26. According to PAS 28, significant influence is the 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. participation in policy making process
b. material intercompany transactions
c. majority ownership of the investee concentrated among a small group of
shareholders who operate the investee without regard to the views of the investor
d. technological dependency

27. On July 1 of the current year, an entity received a one-year note receivable 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 receivable
II. Unearned discount on note receivable

a. I only
b. Both I and II
c. Neither I nor II
d. II only

28. Consider the following statements.

I. In applying the Equity Method of accounting for investments in associates,
dividends received from the investee are considered a return of capital and should
be credited to stockholders’ equity of the investor.
II. A subsidiary is an affiliate that is not controlled by an enterprise directly, or
indirectly, through one or more intermediaries.

State whether the foregoing statements are correct.

a. Only I is correct
b. Only II is correct
c. I and II are correct
d. Neither I nor II is correct

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I

29. Nontrade receivables are classified as current assets only if they are reasonably expected
to be realized in cash
a. Within one year or within the operating cycle, whichever is shorter.
b. Within one year or within the operating cycle, whichever is longer.
c. Within the normal operating cycle.
d. Within one year, the length of the operating cycle notwithstanding.

30. Where the operating cycle extends beyond one year because of normal credit terms as in
the case of the installment sales of household appliances
a. It is proper to classify the entire receivables as current assets with disclosure of
the amount not realizable within one year, if material.
b. The entire receivables are shown as noncurrent assets.
c. The portion due in one year is shown as current and the balance as noncurrent.
d. The receivables are not recognized.

31. In the case of long-term installments receivable (real estate installment sales) where a
major portion of the receivables will be collected beyond the normal operating cycle
a. The entire receivables are shown as current without disclosure of the amount not
currently due.
b. The entire receivables are shown as noncurrent.
c. Only the portion currently due is shown as current and the balance as noncurrent.
d. The entire receivables are shown as current with disclosure of the amount not
currently due.

Use the following information to answer the next four questions:

The following long-term receivables were reported in the December 31, 2006, balance
sheet XXX Corporation:

Note receivable from sale of plant P3,000,000

Note receivable from officer P300,000

The following transactions during 2007 and other information relate to company’s long-
term 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.

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 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, was 12%. (Round
the present value factor to three decimal places)
 A tract of land was sold by XXX to ZZZ, Inc. on July 1, 2007, for P2,000,000
under an installment sale contract. ZZZ signed a four-year 11% note for
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 receivables on the balance sheet at December
31, 2007 is
a. P3,096,242
b. P3,067,550
c. P3,221,550
d. P3,250,242

33. The current portion of notes receivable on December 31, 2007 should be
a. P1,451,250
b. P1,297,250
c. P2,097,250
d. P2,297,250

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 income for the year ended December 31, 2007 should be
a. P427,000

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I
b. P455,692
c. P375,692
d. P532,692

36. Naimas Company provided the following information on December 31, 20x4.
Petty cash fund 50,000
Current account – First Bank 4,000,000
Current account – Second Bank (overdraft) (250,000)
Money market placement – Third Bank 1,000,000
Time deposit – Fourth Bank 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 information for 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 checks on October 31, 20x4 that cleared in November 230,000

What is the amount of outstanding checks on November 30, 20x4?

a. 282,000

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 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:

Happy Breakup Corp.’s accounts receivable subsidiary ledger shows the following
information:

ACCOUNT BALANCE INVOICE

CUSTOMER
DECEMBER 31, 20x7 DATE AMOUNT

Wala Label, Inc. (WL) P35,180 12/06/x7 P14,000

11/29/x7 21,180
Wala Ka Jowa, Co. (WKJ) P20,920 09/27/x7 12,000
08/20/x7 8,920
Walang Forever Corp. (WF) P30,600 12/08/x7 20,000
10/25/x7 10,600
Sana All Co. (SA) P45,140 11/17/x7 23,140
10/09/x7 22,000
M.U. Inc. P31,600 12/12/x7 19,200
12/02/x7 12,400
Malaon Ka Corp. (MK) P17,400 09/12/x7 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 totaled
a. P32,600
b. P44,320
c. P44,600

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 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 be made on December 31, 20x7, to adjust the allowance for bad debts
account?
a. Bad debt expense 13,699
Allowance for bad 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:

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 01/02/08 4,200 01/02/08 01/05/08 FOB Destination

12/05/07 01/02/08 3,600 12/17/17 12/22/07 FOB Destination
12/06/07 01/03/08 7,900 01/05/08 01/07/08 FOB Shipping
12/18/07 12/20/07 8,000 12/29/07 01/02/08 FOB Shipping
12/22/07 01/05/08 4,600 01/04/08 01/06/08 FOB Destination
12/27/07 01/07/08 3,500 01/05/08 01/07/08 FOB Destination

Savage, Inc. uses the “passing of legal title” for inventory recognition.

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I
41. Goods purchased during December totaled
a. 11,600 units
b. 15,800 units
c. 19,500 units
d. 8,000 units

42. How many units were sold during December?

a. 138,630 units
b. 113,830 units
c. 98,630 units
d. 153,830 units

43. How many units should be included in Savage, Inc.’s inventory at December 31, 2007?
a. 18,700 units
b. 39,900 units
c. 43,500 units
d. 47,700 units

Use the following information to answer the next four questions:

A recent fire severely damaged LuhAsaKa Company’s administration 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 to determine monthly ending inventory values. You also find out that the
company applies the average cost method.

You are able to gather the following information by examining various documents:

Inventory, July 31 150,000 units

Total cost of goods available for sale in July P356,400
Cost of goods sold during July P297,400
Gross profit on sales for July P303,000
Cost of Inventory, July 1 P0.35 per unit

The following are LuhAsaKa’s July purchases of merchandise:

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I

Date Quantity Unit Cost

July 6 180,000 P0.40
12 150,000 0.41
16 120,000 0.42
17 150,000 0.45

LuhAsaKa’s management has asked you to provide the following information:

44. Number of units on hand, July 1

a. 450,000
b. 848,571
c. 169,714
d. 300,000

45. Units sold during July

a. 600,000
b. 300,000
c. 750,000
d. 450,000

46. Unit cost of inventory on July 31

a. P0.35
b. P0.396
c. P0.419
d. P0.279

47. Value of inventory on July 31

a. P59,400
b. P52,500
c. P62,850
d. P41,850

48. On January 1, 2014, Buknoy Company purchased serial bonds with face value 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

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 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. P3,149,400

49. Marlou Company acquired a financial asset at the market value of P3,200,000. Broker
fees of P200,000 were incurred in relation to the purchase. At what amount should the
financial asset initially be recognized respectively if it is classified as at fair value
through profit or loss, or as at fair value through other comprehensive income?
a. 3,400,000 and 3,200,000
b. 3,200,000 and 3,200,000
c. 3,200,000 and 3,400,000
d. 3,400,000 and 3,400,000

50. Consider the following statements:

I. If the financial asset is reclassified from FVPL to amortized cost, the fair value at
the reclassification date becomes the new carrying amount of the financial asset at
amortized cost.
II. PFRS 9, par. 5.6.3, provides that the difference between the new carrying amount
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. Only equity investments held for trading or measured at FVPL cannot 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. Only I is correct
b. Only II is correct
c. I and II are correct
d. II and III are correct

51. Consider the following statements:

I. If the financial asset is reclassified from amortized cost to FVOCI, the financial
asset is measured at fair value at the reclassification date and a new effective

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I
interest rate must be determined based on the new carrying amount or fair value at
reclassification date.
II. The difference between previous carrying amount and fair value of a financial
asset when reclassified from amortized cost to FVPL is recognized in profit or
loss.
III. The cumulative gain or loss previously recognized in other comprehensive
income is reclassified to profit or loss at reclassification date when the financial
asset is reclassified from FVOCI to FVPL.
IV. The original effective rate is not adjust for financial assets that are reclassified
from FVPL to FVOCI.

State whether the foregoing statements are incorrect.

a. I and II are incorrect
b. II and III are incorrect
c. I and IV are incorrect
d. All the statements are incorrect

Use the following information for the next four questions:

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. On December 31, 2021, the fair value and 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 income for 2020?

a. P280,000
b. P400,000
c. P248,080
d. P354,400

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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I

53. What is the interest income for 2021?

a. P425,280
b. P418,800
c. P349,000
d. 244,300

54. What amount unrealized loss 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 included in profit or loss for 2021?
a. P65,000
b. P0
c. P203,800
d. 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
June 1 2,000,000
@P100
30,000 shares
December 1 3,600,000
@P120
5,600,000

The transactions for 20x5 are:

January 10 Received cash dividend at P10 per share.

January 20 Received twenty percent stock dividend.
December 10 Sold 30,000 shares at P125 per share.

56. If the FIFO approach is used, what is the gain on sale?

a. P1,150,000
b. P950,000
c. P150,000
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 UNIVERSITY OF SOUTHERN MINDANAO
Kabacan, Cotabato
Philippines
INTERMEDIATE ACCOUNTING I
d. P550,000

57. If the average approach is used, what is the gain on sale?

a. P1,150,000
b. P950,000
c. P150,000
d. P550,000

58. On December 31, 20x4, Z4pnu Bank has a loan receivable of P4,000,000 from a
borrower that is carrying at a face value and is due on December 31, 20x9. Interest on the
loan is payable at 9% each December 31. The borrower paid the interest due 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 P1,240,000

Balance per ledger, July 31 750,000
Deposit of July 20 not recorded by bank 280,000
Debit memo – service charges 10,000
Credit memo – collection of note by bank for 300,000
TuloDosSingko
Outstanding Checks ?

An analysis of the cancelled checks returned with the bank statement reveals the
following:

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 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 adjusted book 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

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