INTERMEDIATE ACCOUNTING 1 (Midterm)

Chapter 6 Receivables (Part 2)

1. An entity sells goods either on cash basis or on 6-month installment basis. On January 1, 20x1, goods with
cash price of ₱50,000 were sold at an installment price of ₱75,000. Which of the following statements is
correct?
a. Net receivable of ₱75,000 is recognized on the date of sale.
b. Net receivable of ₱50,000 is recognized upon full payment of the total price.
c. The ₱20,000 difference between the cash price and installment price is recognized as interest income on the
date of sale.
d. Net receivable of ₱50,000 is recognized on the date of sale.

Initial measurement
2. An entity sells goods for ₱150,000 to a customer who was granted a special credit period of 1 year. The
entity normally sells the goods for ₱120,000 with a credit period of one month or with a ₱10,000 discount for
outright payment in cash. How much is the initial measurement of the receivable?

a. 150,000 b. 120,000 c. 130,000 d. 110,000

Initial measurement
3. ABC Co. received the following note receivables on January 1, 20x1: 9-month, 10% note from Alpha
Company. 15,000 6-month, noninterest bearing note from Beta, Inc. (the effect of discounting is deemed
immaterial) 20,000 14%, 3-year note from Charlie Corp. 30,000 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

Simple interest
4. On August 1, 20x1, ABC Co. received a ₱1,200,000, 10%, 3-year note receivable in exchange for a vacant
lot carried in the books at ₱850,000. Principal, in three equal installments, plus interest are due annually
starting August 1, 20x2. Current market rates as of April 1, 20x1, December 31, 20x1, and December 31, 20x2
are 10%, 12% and 13%, respectively. How much interest receivable is recognized on December 31, 20x2?

a. 33,333 b. 40,000 c. 50,000 d. 60,000

Compounded interest
5. On January 1, 20x1, ABC Co. extended a ₱1,200,000 loan to one of its officers as part of ABC Co.’s car and
housing assistance program. The note received is due on January 1, 20x4 and bears 10% interest
compounded annually. How much interest receivable is recognized on December 31, 20x2 statement of
financial position?
a. 132,000 b. 120,000 c. 168,000 d. 252,000

Noninterest-bearing note – lump sum

Use the following information for the next two questions: On January 1, 20x1, ABC Co. sold a transportation
equipment with a historical cost of ₱1,000,000 and accumulated depreciation of ₱300,000 in exchange for
cash of ₱100,000 and a noninterest-bearing note receivable of ₱800,000 due on January 1, 20x4. The
prevailing rate of interest for this type of note is 12%.

6. How much is the interest income in 20x1?

a. 68,331 b. 76,532 c. 85,714 d. 96,000

7. How much is the carrying amount of the receivable on December 31, 20x2?
a. 800,000 b. 569,424 c. 637,755 d. 714,286

Noninterest-bearing note – installments

Use the following information for the next three questions: On January 1, 20x1, ABC Co. sold transportation
equipment with a historical cost of ₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange for
cash of ₱500,000 and a noninterest-bearing note receivable of ₱8,000,000 due in 4 equal annual installments
starting on December 31, 20x1 and every December 31 thereafter. The prevailing rate of interest for this type
of note is 12%.

8. How much is the interest income in 20x1?

a. 728,946 b. 678,334 c. 728,964 d. 704,236
9. How much is the current portion of the receivable on December 31, 20x1?
a. 1,271,036 b. 1,423,560 c. 3,380,102 d. 1,594,388

10. How much is the carrying amount of the receivable on December 31, 20x2?
a. 4,803,663 b. 3,380,102 c. 6,074,699 d. 6,000,000

Noninterest-bearing note – installment in advance

Use the following information for the next three questions: On January 1, 20x1, ABC Co. sold transportation
equipment with a historical cost of ₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for
cash of ₱100,000 and a noninterest-bearing note receivable of ₱4,000,000 due in 4 equal annual installments
starting on January 1, 20x1 and every January 1 thereafter. The prevailing rate of interest for this type of note
is 12%.

11. How much is the interest income in 20x1?

a. 408,230 b. 278,334 c. 328,964 d. 288,220

12. How much is the carrying amount of the receivable on December 31, 20x1?
a. 1,690,510 b. 892,857 c. 2,690,051 d. 1,594,388

13. How much is the carrying amount of the receivable on January 1, 20x3?
a. 892,857 b. 3,380,102 c. 6,074,699 d. 6,000,000

Noninterest-bearing note – semiannual cash flows Use the following information for the next two questions: On
January 1, 20x1, ABC Co. sold machinery with historical cost of ₱3,000,000 and accumulated depreciation of
₱900,000 in exchange for a 3-year, ₱2,100,000 noninterest-bearing note receivable due in equal semi-annual
payments every July 1 and December 31 starting on July 1, 20x1. The prevailing rate of interest for this type of
note is 10%.

14. How much is the interest income in 20x1?

a. 88,825 b. 177,649 c. 128,964 d. 164,591

15. How much is the carrying amount of the receivable on December 31, 20x1?
a. 1,241,083 b. 982,378 c. 1,690,051 d. 1,594,388

Noninterest-bearing note – non-uniform cash flows

16. On January 1, 20x1, ABC Co. sold machinery costing ₱3,000,000 with accumulated depreciation of
₱1,100,000 in exchange for a 3-year, ₱900,000 noninterest-bearing note receivable due as follows:

Date Amount of installment December 31, 20x1 400,000 December 31, 20x2 300,000 December 31, 20x3
200,000 Total 900,000.
The prevailing rate of interest for this type of note is 10%. How much is the carrying amount of the receivable
on December 31, 20x1?
a. 467,354 b. 438,016 c. 376,345 d. 428,346

Receivable with cash price equivalent Use the following information for the next two questions:
On January 1, 20x1, ABC Co. sold inventory costing ₱1,800,000 with a list price of ₱2,200,000 and a cash
price of ₱2,000,000 in exchange for a ₱2,400,000 noninterest-bearing note due on December 31, 20x3.

17. How much is the initial measurement of the receivable?

a. 1,800,000 b. 2,200,000 c. 2,000,000 d. 2,400,000

18. How much is the carrying amount of the receivable on December 31, 20x1?
a. 2,125,390 b. 2,135,341 c. 2,098,343 d. 2,000,000

Note with below-market interest (simple interest) - Principal due at maturity, interests due periodically
19. On January 1, 20x1, ABC Co. sold machinery with historical cost of ₱5,000,000 and accumulated
depreciation of ₱1,900,000 in exchange for a 3-year, 3%, ₱3,000,000 note receivable. Principal is due on
January 1, 20x4 but interest is due annually every December 31. The prevailing interest rate for this type of
note is 12%. How much is the carrying amount of the receivable on December 31, 20x1?
a. 2,159,324 b. 2,249,324 c. 2,543,685 d. 3,000,000

Note with below-market interest (simple interest) - Principal due at maturity, interests due in semi-annual
installments
20. On July 1, 20x1, ABC Co. sold machinery costing ₱12,000,000 with accumulated depreciation of
₱9,000,000 in exchange for a 3-year, 3%, ₱4,000,000 note receivable. Principal is due on July 1, 20x4 but
interests are due semiannually every July 1 and January 1. The prevailing interest rate for this type of note is
12%. How much is the interest income in 20x1?
a. 186,893 b. 381,399 c. 94,147 d. 120,000

Note with below market interest (simple interest) - Principal and interests collectible in installments
21. On January 1, 20x1, ABC Co. sold machinery costing ₱2,000,000 with accumulated depreciation of
₱950,000 in exchange for a 3-year, 3%, ₱900,000 note receivable. Principal is due in three equal annual
installments. Interests on the outstanding principal balance are also due annually and are to be collected
together with the periodic collections on the principal. The prevailing interest rate for this type of note is 12%.
How much is the carrying amount of the receivable on December 31, 20x1?
a. 530,261 b. 1,000,562 c. 673,531 d. 789,361

Note with below market interest (compound interest) - Principal and interests due at maturity
22. On January 1, 20x1, ABC Co. sold machinery costing ₱2,000,000 with accumulated depreciation of
₱950,000 in exchange for a 3-year, ₱1,200,000 note receivable. Principal and interest at 3% are due on
January 1, 20x4. The prevailing interest rate for this type of note is 12%. How much is the carrying amount of
the receivable on initial recognition date?
a. 1,311,272 b. 2,000,000 c. 933,337 d. 854,136

Total interest income over the life of a note

23. ABC Co. received a ₱1,000,000, 8%, 5-year note that requires five equal annual year-end payments. The
effective interest rate on the note is 9%. How much is total interest revenue to be earned on the note? a.
250,438 b. 278,074 c. 25,882 d. 225,882

Non-interest bearing note with deferred uniform payments

24. On January 1, 20x1, ABC Co. sold a used equipment in exchange for a ₱1,200,000 noninterest-bearing
note receivable due in three equal annual installments starting January 1, 20x4. The current market rate of
interest on January 1, 20x1 is 12%. How much is the carrying amount of the receivable on initial recognition
date?
a. 890,365 b. 728,860 c. 765,890 d. 821,060

Non-interest bearing note with deferred non-uniform payments

25. On January 1, 20x1, ABC Co. sold a used equipment in exchange for a ₱4,500,000 non-interest bearing
note due in three annual installments as follows: Jan. 1, 20x4 2,000,000 Jan. 1, 20x5 1,500,000 Jan. 1, 20x6
1,000,000 Total 4,500,000 The current market rate of interest on January 1, 20x1 is 12%. How much is the
carrying amount of the receivable on initial recognition date?
a. 1,980,685 b. 2,728,860 c. 2,944,264 d. 2,818,706

Pre-acquisition accrued interest 26. On March 1, 20x1, ABC Co. received a ₱1,000,000, 12%, one-year note
dated January 1, 20x1 from XYZ, Inc. in exchange for a ₱1,000,000 past due account. How much interest
income is recognized in 20x1?
a. 120,000 b. 100,000 c. 90,000 d. 0

Chapter 7 Receivables (Part 3)

Origination costs and fees

1. On January 1, 20x1, ABC Bank extended a 12%, ₱1,000,000 loan to XYZ, Inc. Principal is due on January
1, 20x5 but interests are due annually every January 1. ABC Bank incurred direct loan origination costs of
₱88,394 and indirect loan origination costs of ₱18,000. In addition, ABC Bank charged XYZ a 2.5-point
nonrefundable loan origination fee. How much is the interest income in 20x2?
a. 104,973 b. 105,364 c. 106,339 d. 136,661

“Day 1” difference Use the following information for the next two questions:
On January 1, 20x1, ABC Co. extended a ₱500,000, zero-interest loan to one of its directors. The loan
matures in lump sum on January 1, 20x5. The prevailing interest rate for this type of loan is 12%.

2. If the loan proceeds extended to the director is equal to the present value of the loan receivable, the net
effect of the loan to ABC’s 20x1 profit (loss) is
a. (182,240) b. (144,109) c. 38,131 d. 0

3. If the loan proceeds extended to the director is equal to the face amount of the loan receivable, the net effect
of the loan to ABC’s 20x1 profit (loss) is
a. (182,240) b. (144,109) c. 38,131 d. 0

Impairment of receivable Use the following information for the next two questions:
On January 1, 20x1, ABC Bank extended a ₱900,000 loan to XYZ, Inc. Principal is due on December 31, 20x5
but 12% interest is due annually starting December 31, 20x1.

On December 31, 20x3, XYZ, Inc. was delinquent and it was ascertained that the loan is impaired. ABC Bank
assessed that interests accruing on the loan will not be collected; however, the principal is expected to be
received in three equal annual installments starting on December 31, 20x4. Accrued interest receivable on
December 31, 20x3 amounted to ₱100,000. The current market rate on December 31, 20x3 is 14%.

4. How much is the balance of allowance for impairment loss on December 31, 20x3 immediately after
impairment testing?
a. 279,460 b. 303,510 c. 203,510 d. 179,460

5. How much is the interest income in 20x5?

a. 86,465 b. 60,481 c. 60,841 d. 0
Interest not accrued because of loss event Use the following information for the next two questions:
On January 1, 20x1, ABC Co. received a ₱1,000,000 note receivable from XYZ, Inc. Principal payments of
₱200,000 and interest at 12% are due annually at the end of each year for 5 years. The first payment starts on
December 31, 20x1.

XYZ, Inc. made the required payments during 20x1 and 20x2. However, during 20x3 XYZ, Inc. began to
experience financial difficulties, requiring ABC Co. to reassess the collectibility of the note. Because of the loss
event, ABC Co. did not accrue the interest on December 31, 20x3. The current rate of interest on December
31, 20x3 is 10%. ABC Co. made the following cash flow projections on December 31, 20x3:
Date of expected receipt Amount of cash flow January 1, 20x4 200,000 January 1, 20x5 150,000 January 1,
20x6 150,000

6. How much is the impairment loss recognized in 20x3?

a. 146,492 b. 195,082 c. 139,669 d. 181,518 7.

7. How much is the interest income in 20x4?

a. 54,421 b. 30,421 c. 16,071 d. 0

Reversal of impairment loss

8. On January 1, 20x1, ABC Bank extended a 3-year, 12%, ₱1,000,000 loan to XYZ, 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, XYZ was delinquent and it was ascertained that the loan was impaired. The loan was
restructured as follows: Only the principal amount of ₱1,000,000 shall be collected from the loan. This is due
on December 31, 20x3. ABC Co. waived the collection of interest.

On December 31, 20x2, XYZ’s credit rating has improved and the loan was again restructured as follows:
Aside from the principal amount of ₱1,000,000, which is due on December 31, 20x3, a 14% interest will also
be collected. The new terms shall be applied prospectively.

How much is the gain on impairment reversal on December 31, 20x2? (Do not round-off present value factors)
a. 109,091 b. 112,561 c. 134,341 d. 141,323

Evaluation of transfers Use the following information for the next four questions:
ABC Co. transferred loans receivables with carrying amount of ₱900,000 and fair value of ₱1,000,000 to XYZ,
Inc. for cash amounting to ₱1,000,000.
9. If ABC Co. transfers substantially all the risks and rewards of ownership of the loans receivable, how much
of the transferred receivables is derecognized?
a. 1,000,000 b. 900,000 c. 100,000 d. 0

10. If ABC Co. is obligated to repurchase the transferred loans at a future date for the fair market value of the
instrument at repurchase date plus 10% interest, how much of the transferred receivables is derecognized?
a. 1,000,000 b. 900,000 c. 100,000 d. 0

11. If ABC Co. is obligated under the terms of the transfer to repurchase any individual loan but the aggregate
amount of loans that could be repurchased could not exceed ₱100,000, how much of the transferred
receivables is retained in the books and not derecognized?
a. 1,000,000 b. 900,000 c. 100,000 d. 0

12. If ABC Co. retains only a right of first refusal to repurchase the transferred asset at fair value if XYZ, Inc.
subsequently sells it, how much of the transferred receivables is derecognized?
a. 1,000,000 b. 900,000 c. 100,000 d. 0

Transfer of financial asset Fact pattern

13. ABC Co. transfers loans receivable with a fair value of ₱500,000 and carrying amount of ₱420,000. ABC
Co. obtains an option to purchase similar loans and assumes a recourse obligation to repurchase similar loans.
ABC Co. also agrees to provide a floating rate of interest to the transferee company. The assets and liabilities
received as consideration for the transfer are listed below:

Assets received & liabilities assumed Fair values Cash proceeds 250,000 Interest rate swap 120,000 Call
option 60,000 Recourse obligation 120,000

How much is the gain (loss) on the derecognition of the financial asset?
a. 30,000 b. 7,500 c. (110,000) d. (135,000)

Servicing of a financial asset

14. Use the information in the immediately preceding problem except that ABC Co. agreed to service the loans
without explicitly stating the compensation. The fair value of the service is ₱25,000. How much is the gain
(loss) on the derecognition of the financial asset?
a. 30,000 b. 7,500 c. (110,000) d. (135,000)

Assignment
15. On March 1, 20x1, ABC Co. assigned its ₱1,000,000 accounts receivable to Piggy Bank in exchange for a
2-month, 12%, loan equal to 75% of the assigned receivables. ABC Co. received the loan proceeds after a 2%
deduction for service fee based on the assigned notes. During March, ₱500,000 were collected from the
receivables. Sales returns and discounts amounted to ₱150,000. How much net cash is received from the
assignment transaction on March 1, 20x1?
a. 735,000 b. 730,000 c. 1,230,000 d. 1,235,000

Factoring: Without recourse The next three questions are based on the following information: Fact pattern ABC
Co. factored ₱100,000 accounts receivable to XYZ Financing Corp. on a without recourse basis on January 1,
20x1. XYZ charged a 4% service fee and retained a 10% holdback to cover expected sales returns. In addition,
XYZ charged a 12% interest computed on a weighted average time to maturity of the receivables of 73 days
based on 365 days.

16. How much proceeds is received from the factoring on January 1, 20x1?
a. 100,320 b. 85,600 c. 83,600 d. 88,300

17. How much is the cost of factoring assuming all of the receivables have been collected?
a. 6,400 b. 2,400 c. 16,400 d. 12,400

Factoring: With recourse

18. Use the same information in the preceding illustration except that ABC Co. factored the receivables on a
with recourse basis. ABC Co. determines that the recourse obligation has a fair value of ₱3,000. How much is
the loss on sale of receivables recognized on January 1, 20x1 assuming the factoring was made on a casual
basis?
a. 3,000 b. 9,400 c. 19,400 d. 6,400

Discounting - Without recourse

19. On October 1, 20x1, ABC Co. discounted a ₱600,000, one-year, 12% note, received from a customer on
January 1, 20x1, with a bank at 14% on a without recourse basis. How much is the loss on discounting? a.
4,960 b. 5,250 c. 4,690 d. 5,520

Dishonored note
20. On July 1, 20x1, ABC Co. discounted an ₱800,000, 90-day, 12% note, received from a customer on June
1, 20x1, with a bank at 16% on with recourse basis. The discounting is treated as conditional sale. The bank
uses 365 days per year in computing for discounts. On August 30, 20x1 (maturity date), the maker of the note
defaulted and the bank charged ABC Co. the maturity value of the note plus a ₱3,000 protest fee. How much is
transferred to accounts receivable due to the dishonor and before impairment testing?
a. 826,671 b. 823,671 c. 827,000 d. 862,671
Discounting of “own” note
21. On July 1, 20x1, ABC Co. discounted its own note of ₱200,000 to a bank at 10% for one year. How much
was the net proceeds received by ABC from the transaction?
a. 180,000 b. 190,000 c. 200,000 d. 0

Chapter 8 Inventories

Goods in transit Use the following information for the next two questions:
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.

1. 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

2. How much is the net cash payment to the supplier if the terms of the shipment are FOB destination, freight
collect?
a. 3,050 b. 3,000 c. 2,950 d. 0

Total inventory
3. ABC 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 XYZ, 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

Consigned goods
4. ABC Co. consigned goods costing ₱14,000 to XYZ, Inc. Transportation costs of delivering the goods to XYZ
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 ₱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

Correct inventory and accounts payable Use the following information for the next two questions: On
December 31, 20x1, ABC Co. has a balance of ₱240,000 in its inventory account determined through physical
count and a balance of ₱90,000 in its accounts payable account. The balances were determined before any
necessary adjustment for the following:
a. Segregated goods in the shipping area marked “Bill and hold sale” were included in inventory because
shipment was not made until January 4, 20x2. The goods were sold to the customer on a “bill and hold” sale
for ₱20,000. The cost of the goods is ₱10,000. The goods were already packed and ready for shipment. Both
ABC and the buyer acknowledged the shipping term.
b. A package containing a product costing ₱80,000 was standing in the shipping area when the physical
inventory was conducted. This was included in the inventory although it was marked “Hold for shipping
instructions.” The sale order was dated December 17 but the package was shipped and the customer was
billed on January 4, 20x2.
c. Merchandise costing ₱10,000, shipped FOB destination from a vendor on December 30, 20x1, was received
and recorded on January 5, 20x2.
d. Goods shipped F.O.B. shipping point on December 27, 20x1, from a vendor to ABC Co. were received on
January 6, 20x2. The invoice cost of ₱30,000 was recorded on December 31, 20x1 and included in the count
as “goods intransit.”

5. How much is the adjusted balance of inventory?

a. 240,000 b. 230,000 c. 160,000 d. 200,000

6. How much is the adjusted balance of accounts payable?

a. 90,000 b. 80,000 c. 60,000 d. 100,000

Inventories under financing agreement, Installment sales

7. The records of ABC Co. show the following:
a. Goods sold on an installment basis to XYZ, Inc., title to the goods is retained by ABC Co. until full payment
is made. XYZ, Inc. took possession of the goods. 150,000
b. Goods sold to Alpha Co., for which ABC Co. has the option to repurchase the goods sold at a set price that
covers all costs related to the inventory. 280,000
c. Goods sold where large returns are unpredictable. 70,000
d. Goods received from Beta Co. for which an agreement was signed requiring ABC Co. to replace such goods
in the near future. 50,000
How much is included as part of inventory?
a. 50,000 b. 120,000 c. 270,000 d. 330,000

Bill and hold and Lay away

8. 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. 54,920 c. 34,920 d. 0

Errors in inventory
9. ABC Co. uses the periodic inventory system. In the current year, ABC’s ending inventory is understated by
₱20,000. Which of the following statements is correct?
a. ABC’s cost of goods sold is understated by ₱20,000. b. ABC’s gross income is understated by ₱20,000.
c. ABC’s net purchases are understated by ₱20,000. d. ABC’s profit is overstated by ₱20,000.

Cost of purchase
10. ABC Co., a VAT payer, imported goods from a foreign supplier. Costs incurred by ABC include the
following: purchase price, ₱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

Deferred payment
11. On January 1, 20x1 ABC Co. acquired goods for sale in the ordinary course of business for ₱250,000,
excluding ₱5,000 refundable purchase taxes. The supplier usually sells goods on 30 days’ interest-free credit.
However, as a special promotion, the purchase agreement for these goods provided for payment to be made in
full on December 31, 20x1. In acquiring the goods transport charges of ₱2,000 were incurred; these were due
on January 1, 20x1. An appropriate discount rate is 10 per cent per year.

How much is the initial cost of the inventories?

a. 229,273 b. 224,727 c. 250,000 d. 257,000

12. ABC Co. acquired a tract of land for ₱2,000,000. The land was developed and subdivided into residential
lots at an additional cost of ₱200,000. Although the subdivided lots are relatively equal in sizes, they were
offered at different sales prices due to differences in terrain and locations. Information on the subdivided lots is
shown below: Lot group No. of lots Price per lot A 4 480,000 B 10 240,000 C 15 192,000 During the year, 2
lots from the A group, 3 lots from the B group and 12 lots from the C group were sold.

How much gross income is recognized during the year?

a. 2,766,667 b. 2,783,333 c. 2,860,000 d. 2,877,333
Twenty percent of the inventory contained in the warehouse has been salvaged from the fire while half is
partially damaged and can be sold as scrap at thirty percent of its cost.

How much is the inventory loss due to the fire?

a. 18,000 b. 5,400 c. 9,000 d. 11,700 Cost of goods sold

24. 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
Reviewer in ECODE (THEORIES)
1. It is a term referring to individuals who are employable and actively seeking a job but are unable to find a
job.
2. It is the A general increase in prices and fall in the purchasing value of money. the rate of increase in prices
over a given period.It is also typically a broad measure, such as the overall increase in prices or the increase in
the cost of living in a country
3. It is the literal amount of money you get paid per hour or by salary.
4. It is an indicator of the change in the average retail prices of a fixed basket of goods and services commonly
purchased by households relative to a base year.
5. Usually measured by the_________, which is dividing the number of unemployed people by the total
number of people in the workforce
6. It is the amount of pay a person can expect to receive after factoring in the current inflation rate.
7. It serves as one of the indicators of a country’s economic status.
8. Also called money wage
9. What are the uses of CPI?
10. The purpose of nominal wage is simply to provide an individual with ____________ they will receive for
their work within a given time frame from an employer. In contrast, the purpose of real wage is to help
individuals determine how a dollar amount's value changes in response to changing inflation rates
11. It is type of unemployment that arises from institutional policies that affect the economy. These can include
governmental programs promoting social equity and offering generous safety net benefits, and labor market
phenomena, such as unionization and discriminatory hiring.
12. It is one of the causes of inflation that refers to situations where there are not enough products or services
being produced to keep up with demand, causing their prices to increase.
13. Also called adjusted wages
14. It is type of unemployment that is caused by workers voluntarily changing jobs or first entering the
workforce. Searching for a new job, recruiting new employees, and matching the right worker to the right job
are all a part of it.
15. It is calculated by dividing the number of underemployed individuals by the total number of workers in a
labor force.
16. Students are not employed and unemployed, so what do you call to the students who focus to their studies
and who are part timers.
17. It is one of the causes of inflation that occurs when workers demand higher wages to keep up with rising
living costs. This in turn causes businesses to raise their prices in order to offset their rising wage costs,
leading to a self-reinforcing loop of wage and price increases.
18. What are the 3 causes of inflation?
19. What country that are ranked 8 in the Top 10 Richest countries in the world and what are their GDP Per
Capita in dollar?
20. What percent does Philippines Gross Domestic Product have in 4th quarter of 2022
21. It types of underemployment in which an individual works fewer hours than is necessary for a full-time job
in their chosen field. Due to the reduced hours, they may work two or more part-time jobs in order to make
ends meet.
22. It is one of the causes of inflation that occurs when the cost of producing products and services rises,
forcing businesses to raise their prices.
23. What country that ranked first or Top 1 in the Top 10 richest country in the world and also their gdp per
capita in dollar and pesos.
24. PH GDP Percent in 1st Quarter of 2023
25. What is the GDP percent Q1 2023 of Vietnam
26. It is type of unemployment that exists when part of the labor force is either left without work or is working in
a redundant manner such that worker productivity is essentially zero. It is unemployment that does not affect
aggregate output.
27. What are the two types of underemployment
28. What do you call to the – 15 to 60 years old population,
29. What is PPP and Ir
30. It is an economic situation in which all available labor resources are being used in the most efficient way
possible. It also embodies the highest amount of skilled and unskilled labor that can be employed within an
economy at any given time .
31. PH GDP Percent in 1st Quarter of 2022
32. What are the percentage of Major economic sectors includes Services, Agriculture, and Industry in the PH
33. What country that are ranked 9 in the Top 10 Richest countries in the world and what are their GDP Per
Capita in dollar and pesos?
34. What is the GDP percent Q1 2023 of Vietnam
35. What is the rank of China in the Top 10 richest country in the world and also their GDP per capita in USD
and peso?
36. Type of Unemployment, The desire to encourage technological progress can cause__________. For
example, when workers find themselves obsolete due to the automation of factories or the use of artificial
intelligence.
37. The second type of underemployment is that refers to the employment situation in which an individual is
unable to find a job in their chosen field. Consequently, they work in a job that is not commensurate with their
skill set and, in most cases, pays much below their customary wage.
38. What is the GDP percent Q1 2023 of Indonesia
39. It is the fluctuating type of unemployment that rises and falls within the normal course of the business
cycle. This unemployment rises when an economy is in a recession and falls when an economy is growing.
Therefore, for an economy to be at full employment, it cannot be in a recession that’s causing cyclical
unemployment
40. 2 types of underemployment
41. Ranked 10 in the richest country in the world and gdp per capita in usd
42. 7 types of unemployment
43. Labor Force LF who are willing and able to work.
44. Labor Force Participant or LFP who are willing and able to work but cannot find work.
45. It is the type of unemployment that occurs when people are unemployed at particular times of the year
when demand for labour is lower than usual. Seasonal unemployment refers to a temporary window of time
where the number of available employment opportunities decreases.
46. Top 3 in richest county in the world and gdp per capita
47. LFP who work less than 40 hours per week.
48. Top 1-10 richest country in the world and their gdp per capita in USD and pesos
Lecture #4. INFLATION
INFLATION
A general increase in prices and fall in the purchasing value of money (Oxford Dictionary)
Inflation is the rate of increase in prices over a given period. Inflation is typically a broad measure, such as the
overall increase in prices or the increase in the cost of living in a country (https://www.imf.org. January 8,
2022).

What Causes Inflation?

There are three main causes of inflation: demand-pull inflation, cost-push inflation, and built-in inflation.
Demand-pull inflation refers to situations where there are not enough products or services being produced to
keep up with demand, causing their prices to increase.
Cost-push inflation, on the other hand, occurs when the cost of producing products and services rises, forcing
businesses to raise their prices.
Lastly, built-in inflation—sometimes referred to as a “wage-price spiral”—occurs when workers demand higher
wages to keep up with rising living costs. This in turn causes businesses to raise their prices in order to offset
their rising wage costs, leading to a self-reinforcing loop of wage and price increases
(https://www.investopedia.com. January 8, 2022)

What is the Consumer Price Index (CPI)?

The CPI is an indicator of the change in the average retail prices of a fixed basket of goods and
services commonly purchased by households relative to a base year. What are the uses of CPI? The
CPI is most widely used in the calculation of the inflation rate and purchasing power of the peso. It is
a major statistical series used for economic analysis and as a monitoring indicator of government
economic policy. The CPI is also used to adjust other economic series for price changes. For example,
CPI components are used as deflators for most personal consumption expenditures (PCE) in the
calculation of the gross national product (GNP). Another major importance of the CPI is its use as
basis to adjust wages in labor management contracts as well as pensions and retirement benefits.
Increases in wages through collective bargaining agreements use the CPI as one of their bases
(Philippines Statistics Authority, January 8, 2021).
Terminology
● Abnormal loss: A loss of units in excess of expected levels (normal loss) during production; normal
losses are part of the cost of the job, while abnormal losses are written off as a period cost

● Cost-plus contract: A contract in which the customer agrees to reimburse the producer for the direct
costs and some indirect costs of the job plus a specified profit margin over cost

● Defects: Production process errors that cause a loss of units through rejection at inspection for failure
to meet appropriate quality standards or designated product specifications that can be economically
reworked and later sold

● Employee time sheet: A source document that indicates the jobs on which an employee worked and the
direct labor time consumed

● Intranet: A restricted network for sharing information and delivering data from corporate databases to
local-area network (LAN) desktops

● Job: A single unit or group of units identifiable as being produced to distinct customer specifications

● Job order cost sheet: A source document that provides virtually all the financial information about a
particular job; the set of all job order cost sheets for uncompleted jobs composes the Work in Process
Inventory subsidiary ledger

● Job order costing system: A system of product costing used by companies that make relatively small
quantities of distinct batches of identifiable, tailor-made products that conform to specifications
designated by the purchaser; the focus of recordkeeping is on individual jobs

● Material requisition form: A source document that indicates the types and quantities of material to be
placed into production or used in performing a service; it causes materials and their costs to be
released from the Raw Material Inventory and sent to Work in Process Inventory

● Normal loss: A loss of units that falls within a tolerance level that is expected during production; normal
losses are part of the cost of the job, while abnormal losses are written off as a period cost

● Process costing systems: Systems used by companies that make large quantities of homogeneous
goods such as breakfast cereal, candy bars, detergent, gasoline, and bricks; given the mass
manufacturing process, one unit of output cannot be readily identified with specific input costs within a
given period

● Shrinkage: Losses of materials or partially completed products inherent in the manufacturing process
such as evaporation, leakage, or oxidation

● Spoilage: Production process errors that cause a loss of units through rejection at inspection for failure
to meet appropriate quality standards or designated product specifications that cannot be economically
reworked

● Standard cost system: A valuation method that develops unit norms or standards for direct material and
direct labor quantities and/or costs; overhead is applied to production using a predetermined rate that is
considered the standard

● Variance: The difference between the actual quantity, price, or rate and its related standard cost; labled
favorable if actual is less than standard and unfavorable if actual is greater than standard