QUEZON CITY UNIVERSITY - BATASAN CAMPUS

INTERMEDIATE ACCOUNTING II
LONG QUIZ #1

Name: ______________________________________________________ Score: _________________

Section: _____________________________________________________ Date : _________________

Answer the following questions and place your FINAL ANSWERS in the ANSWER SHEET only.
STRICTLY NO ERASURES. Use black/blue ballpen in writing (Friction pens are not allowed)

PROBLEMS. (3pts each) THEORIES (2 pt each)

ROUND OF TO NEAREST 2 DECIMAL PLACES USE CAPITAL LETTERS ONLY

1 1
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PROBLEM I.
NCOV INC. is a manufacturer and retailer of household furniture. The following were
information were available as of December 31, 2020. Financial Statements are authorized for
issuance on March 6, 2021.

a. A P150,000 short term obligation due on March 1, 2021. Its maturity could be extended
to March 1, 2022, provided that NCOV agrees to provide additional collateral. On
February 12, 2021, an agreement is reached to extend the loan’s maturity to March 1,
2022.
b. A short-term obligation of P3,600,000 in the form of notes payable due on February 5,
2021. The company issued 75,000 ordinary shares for P36 per share on January 15, 2015.
The proceeds from the issuance plus P900,000 cash were used to settle debt on February
5, 2021.
c. A long-term obligation of P2,500,000 on December 1, 2020. On November 10, 2020,
NCOV breaches a covenant on its debt obligation and the loan becomes payable on
demand. An agreement is reached to provide waiver of the breach on December 21, 2020.
d. A debt obligation of P1,000,00 maturing on December 31, 2022. The debt is callable on
demand by NACOV at any time.

1. What amount of current liabilities should be reported on Dec. 31, 2020?4750,000

2. What amount of non-current liabilities should be reported on Dec. 31, 2020? 2500,000

PROBLEM II.
You were able to obtain the following from the accountant for JLO Corp. related to the
company’s liabilities as of December 31, 2020.

Accounts Payable P 650,000

Notes Payable – trade 190,000
Notes Payable – bank 800,000
Wages and Salaries Payable 15,000
Interest Payable ?
Mortgage notes payable (10%) 600,000
Mortgage notes payable (12%) 1,500,000
Bonds Payable 2,000,000

The following additional information pertain to these liabilities.

a. All trade notes payable is due within six months from the end of the reporting period.
b. Bank notes payable two separate notes payable to Allied Bank.
a. A P300,000, 8% note issued March 1, 2018, payable on demand. Interest is
payable every six months.
b. A 1-year, P500,000, 11 ½% note issued January 2, 2020. On December 30, 2020,
JLO Corp. negotiated a written agreement with Allied Bank to replace the note
with a 2-year , P500,000, 10% note to be issued January 2, 2021. The interest was
paid on December 31, 2020.
c. The 10% mortgage note was issued October 1, 2017, with a term of 10 years. Terms of
the note give the holder the right to demand immediate payment if the company fails to
make a monthly interest payment within 10 days of the date the payment is due. As of
December 31, 2020, JLO is three months behind paying the required interest payment.
d. The 12% mortgage note was issued May 1, 2014, with a term of 20 years. The current
principal amount due is P1,500,000. Principal and interest payable annually on April 30.
A payment of P220,000 is interest payable annually on April 30. A payment of P220,000
is due on April 20, 2021. The payment includes interest of P180,000.
e. The bonds payable is 10-year, 8% bonds, issued on June 30, 2011. Interest is payable
semi annually every June 30 and December 31.

3. What is the Interest Payable as of December 31, 2020? 143,000

4. What is the portion of the Note Payable – Bank to be presented under current liabilities
as of December 31, 2020? 300,000
5. What is the Total Current Liabilities as of December 31, 2020? 3,938,000
6. What is the Total Noncurrent Liabilities as of December 31, 2020? 1,950,000
PROBLEM III.
WUHAN Corp. has signed several long-term notes with the following institutions. The
maturities of these notes are given below. The total unpaid interest for all of these notes amounts
to P500,000 as of March 31, 2020.

Due Date Amount

April 31, 2020 P 720,000
July 31, 2020 1,080,000
September 1, 2020 540,000
February 1, 2021 540,000
April 1, 2021 to March 31, 2022 1,000,000
January 31, 2023 2,240,000
Total P6,120,000

7. How much is the Total Current Liabilities?3380,000

8. How much is the Total Non-Current Liabilities?3240,000

PROBLEM IV.
To increase sales, CANDY Corp. inaugurated a promotional campaign on June 30, 2020.
CANDY placed a coupon redeemable for a premium in each package sold. Each premium costs
P100 and is offered to customers in lieu of every five coupon and cash of P30. The distribution
cost per premium is P20. It is estimated that only sixty percent of coupons be distributed. For the
six months ended, the following were available:

Packages of product sold 160,000

Coupons redeemed 64,000
Premiums purchased P1,600,000

9. How much is the Estimated Liability for Coupons as of year end 2020? 576,000
10. How much should be recognized as Expense related to the coupons redeemed? 1728,000
11. What is the ending balance of Premiums account as of year ended Dec 2020? 320,000

PROBLEM V.
ELLE Company offered a cash rebate of P20 each P150 package of batteries sold during the
current year. Historically, 10% of the customers main in the rebate form. During the year,
600,000 packages of battery are sold and 25,000 rebates are mailed to customers.

12. What amount of rebate expense should be reported for the current year?1200,000
13. What amount of Rebate Liability will be presented as of year-end?700,000

PROBLEM VI.
ABLE Company provides an incentive compensation plan under which the president receives a
bonus equal to 10% for the income after tax and deduction of the bonus. Tax rate is 30% and the
net income before provision and tax was P4,650,000.

14. What amount of bonus will be given to the president as of year-end?304,205.61

15. How much is the provision for tax during the year? 1303,738.32
16. How much is the Net Income After Bonus and Income Tax? 3042,056.07

PROBLEM VII.
LYRA Company is preparing financial statements for the year ended Dec. 31, 2019. Accounts
payable amounted to P3,060,000 before any adjustment were seen related on the following
transactions:
a. On December 31, 2019, LYRA has P50,000 debit balance in accounts payable to
RICHE Co. supplier, resulting from an advance payment for goods.
b. Checks in the amount of P100,000 were written to vendors and recorded in Dec.
20, 2019. The checks were mailed on Jan. 5, 2020.
c. Checks in the amount of P110,000 were written to vendors were mailed on Dec.
20, 2019. Amount was still unrecorded as of year-end.
 d. Purchased merchandise from a supplier amounting to P200,000 still in transit
FOB Destination.

17. How much is the Accounts Payable to be reported as of Dec. 31, 2019? 5000,000

PROBLEM VIII.

Problem 4-1 Multiple Choice (PAS 37)

1. Which is the correct definition of provision?

a. A possible obligation arising from past events.

b. A liability of uncertain timing or amount
c. A liability which cannot be easily measured
d. An obligation to transfer funds to an entity.

2. A provision shall be recognized when:

I. An entity has a present obligation as a result of past

event.

II. It is probable that an outflow of resources embodying

economic benefits will
be required to settle the obligation.

a. I and II only.
b. I and III only
c. II and III only
d. I, II and III

3. A constructive obligation is an obligation.

I. That is derived from an entity’s action that the entity

will accept certain
responsibilities because of past practice, published
policy or current
statement.

II. The entity has created a valid expectation in other

parties that it will
discharge those responsibilities.

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

4. It is an event that creates a legal or constructive

obligation because that entity has
no other realistic alternative but to settle the obligation.

a. Obligating event
b. Past event
c. Subsequent event
d. Current event

5. An outflow of resources embodying economic benefits

 a. The probability that the event will occur is greater than
the probability at the
event will not occur.
b. The probability that the event will not occur is greater
than the probability that
the event will occur.
c. The probability that the event will not occur is the same
as the probability that
the event will not occur.
d. The probability that the event will occur is 90% likely.

6. What amount is recognized as provision?

a. Best estimate of the expenditure

b. Minimum of the range
c. Maximum of the range
d. Midpoint of the range

7. Where there is continuous range of possible outcomes , and

each point in that range
as likely as any other, the range to be used is the:

a. Minimum
b. Maximum
c. Midpoint
d. Summation of Maximum and Minimum.

8. When the provision involves a large population of items, the

estimate of the
amount.

a. Reflects the weighting of all possible outcomes by their

associated
probabilities.
b. Is determined as the individual most likely outcome.
c. May be the individual most likely outcome.
d. May be the individual most likely outcome.

9. When the provision arises from a single obligation, the

estimate of the amount

a. Reflects him weighting of all possible outcomes by their

associated
probabilities.
b. Is determined as the individual most likely outcome.

c. Is the individual most likely outcome adjusted for the

effect of other possible
outcomes?
d. Midpoint of the possible outcomes.

10. Which of the following statements is incorrect where some or

all of the
expenditure required to settle a provision is expected to be
reimbursed by another
party?

a. The reimbursement shall be recognized only when it is

virtually certain that the
reimbursement will be received if the entity settles the
obligation.
b. The amount of the reimbursement shall not exceed the
amount of provision.
c. The reimbursement shall be “netted” against the estimated
liability for the
provision.
d. In the income statement, the expense relating to the
provision may be presented
net of the reimbursement.

ANSWERS:

1. B 6. A
2. D 7. C
3. C 8. A
4. A 9. C
5. A 10. C