FAR - Level 1 Test

FINANCIAL ACCOUNTING AND REPORTING
LEVEL 1 TEST
INSTRUCTIONS:
a) You should finish the test within 30 minutes;

b) Fill up the answer sheet with your answers, then email it to
[email protected];
c) You will qualify to Level 2 test if you can get at least 8 correct answers.
PROBLEMS/QUESTIONS:
1. On December 31, 2020, the cash account of Tiara Company has a debit balance
of P3,500,000. An analysis of the cash account shows the following details:
Undeposited collections 60,000

Cash in bank - PCIB checking account 500,000
Cash in bank — PNB (overdraft) ( 50,000)
Undeposited NSF check received from customer,
dated December 1, 2020 . 15,000
Undeposited check from a customer, dated
January 15, 2021 25,000
Cash in bank PCIB (fund for payroll) . 150,000
Cash in bank - PCIB (saving deposit) 100,000
Cash in bank - PCIB (money market instrument,
90 days) 2,000,000
Cash in foreign bank (restricted) 100,000
IOUs from officers 30,000
Sinking fund cash 450,000
Listed stock held as temporary investment 120,000
3,500,000
Compute the cash and cash equivalents that should be shown in the statement of
financial position.
a. 2,670,000 c. 2,810,000
b. 2,760,000 d. 2,850,000
2. Information pertaining to Grace Company appears below.
Balance per bank statement July 31 620,000

Balance per ledger, July 31 375,000
Deposit of July 30 not recorded by bank 140,000
Debit memo - service charges 5,000
Credit memo - collection of note by bank for Grace 150,000
Outstanding checks ?
An analysis of the canceled checks returned with the bank statement reveals the
following:
* Check for purchase of supplies was drawn for P30,000 but was recorded as
P20,000.
* The management wrote a check for traveling expenses of P50,000 while out
of town. The check was not recorded.
What is the amount of outstanding checks on July 31?
a. 300,000 c. 250,000
b. 280,000 d. 460,000
1
3. The following information relates to accounts receivable of Jenny Company
for the year 2020.
Accounts receivable, 1/1 1,300,000

Credit sales 5,500,000
Sales return 150,000
Accounts written off 100,000
Collections from customers 5,000,000
Estimated future sales return at 12/31 50,000
Estimated uncollectible accounts at 12/31 250,000
What amount should Jenny report as net realizable value of accounts

receivable at December 31, 2020?
a. 1,550,000 c. 1,300,000
b. 1,250,000 d. 1,500,000
4. Beatrice received from a customer a one-year, P375,000 note bearing annual

interest of 8%. After holding the note for six months, Beatrice discounted the
note Super Bank at an effective interest rate of 10%. How much did Beatrice
receive from the bank?
a. P371,428.50 c. P392,857.50
b. P384,750.00 d. P405,000.00
5. Janine Company regularly buys sweaters from Mill Company and is allowed a
trade discount of 20% and 10% from a list price. Janine made a purchase on
March 20, 2020, and received an invoice with a list price of P900,000, a freight
charge of P50,000, and payment terms of net 30 days. Janine should record the
purchase at
a. 648,000 c. 698,000
b. 630,000 d. 680,000
6. The following information is provided by Era Company for the year 2020:
Inventory, January 1 500,000

Purchases 2,000,000
Freight in 100,000
Purchase return and allowance 120,000
Purchase discount 80,000
Sales 2,200,000
Sales return 100,000
Sales allowance 50,000
Sales discount 50,000
Gross profit rate on cost 25%
Using the gross profit method, the estimated cost of the inventory on December
31, 2020 is
a. 720,000 c. 800,000
b. 825,000 d. 900,000
7. Lin Corporation purchased the following securities during 2019:

Market Value
Classification Cost 12-31-19
Security A Trading 900,000 1,000,000
Security B Trading 1,000,000 1,600,000
On July 31, 2020, the entity sold all of the shares of Security B for a total of
P1,100,000. On December 31, 2020, the shares of security A had a market
value of P600,000. No other activity occurred during 2020 in relation to the
trading security portfolio. What is the gain or loss on the sale of Security B on
July 31, 2020?
2
a. 500,000 gain c. 100,000 gain
b. 500,000 loss d. 100,000 loss
8. Emma Company issued rights to subscribe to its stock, the ownership of 4

shares entitling the shareholders to subscribe for 1 share at P100. Jane
Company owns 50,000 shares of Emma Company with a total cost of
P5,000,000. The share is quoted right-on at 125. The stock rights are
accounted for separately and measured initially at fair value. What is the cost of
the new investment if all of the stock rights are exercised by Jane Company?
a. 1,500,000 c. 1,562,500
b. 1,250,000 d. 1,450,000
9. Ana Company acquired several fixtures for its new building, including display
cases, shelves and hanging racks. The invoice price of the fixtures was
P700,000. The company received a 2% cash discount by paying within the
discount period. Freight and insurance during shipment totaled P3,000. Costs of
assembling and installing fixtures were P5,000. While installing a display case, a
new employee carelessly broke a glass top. This top was replaced at a cost of
P2,000. What is the total cost of the fixtures?
a. 694,000 c. 708,000
b. 696,000 d. 710,000
10. On January 2, 2018, Myra Company acquired equipment to be used in its

manufacturing operations. The equipment has an estimated useful life of 10
years and an estimated salvage value of P50,000. The depreciation applicable to
this equipment was P240,000 for 2020 computed under the sum of years’ digits
method. What was the acquisition cost of the equipment?
a. 1,650,000 c. 2,400,000
b. 1,700,000 d. 2,450,000
End of Level 1 Test

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FINANCIAL ACCOUNTING AND REPORTING

a) You should finish the test within 30 minutes;

Undeposited collections 60,000

2. Information pertaining to Grace Company appears below.

Balance per bank statement July 31 620,000

What is the amount of outstanding checks on July 31?

Accounts receivable, 1/1 1,300,000

What amount should Jenny report as net realizable value of accounts

4. Beatrice received from a customer a one-year, P375,000 note bearing annual

Inventory, January 1 500,000

7. Lin Corporation purchased the following securities during 2019:

8. Emma Company issued rights to subscribe to its stock, the ownership of 4

10. On January 2, 2018, Myra Company acquired equipment to be used in its

End of Level 1 Test

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