Intermediate Accounting III

Post-Test 07

Name: ___________________________________________ Date: ___________

(Surname) (First Name) (M.I.)
Score: /
Section: ___________________________________________

Instructions: Read each question carefully. Choose the BEST answer for each of the following items/Compute for
the correct answers. Write your answers on the answer sheet provided. Show your solutions.

1) For interim reporting, a gain on disposal of land occurring in the third quarter is
A. Recognized and allocated over the quarters C. Recognized immediately in the third quarter
B. Recognized and allocated over four quarters D. Deferred until the annual reporting

2) If an entity prepares interim financial statements, which statements are required?

A. Statement of financial position, income statement and statement of comprehensive income.
B. Statement of financial position, income statement, statement of cash flows and statement of changes
in equity.
C. Income statement, statement of comprehensive income and statement of cash flows
D. Statement of financial position, statement of comprehensive income, statement of cash flows and
statement of changes in equity.

3) The following statements are based on PAS 34 – “Interim Financial Reporting":

Statement 1: Interim financial report means a financial report containing either a complete set of financial
statements or a set of condensed financial statements for an interim period
Statement 2: If an entity publishes a complete set of financial statements in its interim financial report, the
form and content of those statements shall conform to the requirements of PAS 1 for a
complete set of financial statements.
Statement 3: An entity shall apply different accounting policies in its interim financial statements and in its
annual financial statements.

A. Only statement 1 is true C. Only statement 3 is false

B. Only statement 2 is true D. All of the statements are true

4) Which one among the following statements is not a characteristic of the integral view of presenting interim
financial statements?
A. It is the more acceptable view.
B. Each interim period is recognized as a separate accounting period, regardless of the length of time
involved.
C. Each interim period is a part of the annual period.
D. The revenues and expenses for the annual period are allocated among interim periods on

5) Which of the following is not true regarding standards for interim reporting?
A. Declines in inventory value should be deferred to future interim periods.
B. Use of the gross margin method for computing cost of goods sold must be disclosed.
C. Costs and expenses not directly associated with interim revenue must be allocated to interim periods
on a reasonable basis.
D. Gains and losses that arise in an interim period should be recognized in the interim period in which they
arise if they would not normally be deferred at year-end.

6) Crippling Corporation had the following transactions during the quarter ended March 31, 2016:

Loss from typhoon damage 210,000

Payment of fire insurance premium for calendar year 300,000
2016

What amount should be included in Crippling’s income statement for the quarter ended March 31, 2016?

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 Typhoon loss Insurance expense Typhoon loss Insurance expense
A. 210,000 300,000 C. 52,500 75,000
B. 210,000 75,000 D. 0 300,000

Use the following information for the next two (2) questions:
On February 1, 2019, Fowl Company purchased machinery for P2,400,000 with a 10-year useful life and no
residual value. On March 20, 2019, Fowl incurred repairs and maintenance cost to the equipment for P150,000.

Fowl used the percentage of sales method is estimating doubtful accounts. Doubtful accounts are estimated to
be 6% of sales in each quarter. In 2019, Fowl followed this procedure for the first three quarters. However, in
the fourth quarter, Fowl determined that doubtful accounts expense for the year showed be P550,000 based
on aging of accounts receivable. Following the calendar year, sales per quarter are: first quarter – P1,500,000,
second quarter – P1,000,000, third quarter – P2,000,000, fourth quarter – P1,600,000.

7) What total amount of expenses should be recognized in the first quarter?

A. 190,000 B. 240,000 C. 280,000 D. 300,000

8) What total amount of expenses should be recognized in the fourth quarter?

A. 340,000 B. 280,000 C. 156,000 D. 197,500

9) Beerus Company prepared quarterly interim financial statements and used the percentage of credit sales
method in computing doubtful accounts. The credit sales for the first, second, third and fourth quarters
totaled P2,000,000, P1,500,000, P3,500,000 and P4,000,000 respectively. The doubtful account
percentages for the first, second, third and fourth quarters effective for the entire year are 2%, 2%, 4%, and
5% respectively. What amount of doubtful accounts expense should be recognized in the fourth quarter
income statement?
A. 550,000 B. 270,000 C. 200,000 D. 137,500

10) Ascension Company has estimated that total depreciation expense for the year ending December 31, 2019
will amount to P2,000,000, and the 2019 year-end bonuses to employees will total P4,000,000. Ascension
paid P500,000 property taxes assessed for the year 2019. On June 30, 2019, Ascension incurred a
permanent inventory loss from market decline of P800,000 and extraordinary loss of P200,000. In the
interim income statement for the six months ended June 30, 2019, what total amount expense relating to
these items should be reported?
A. 4,250,000 B. 3,850,000 C. 3,750,000 D. 3,450,000

- End J -

Answers:
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