Republic of the Philippines

CAGAYAN STATE UNIVERSITY

College of Business, Entrepreneurship and Accountancy
Andrews Campus, Caritan Tuguegarao City, Cagayan

INTERMEDIATE ACCOUNTING III

2nd Semester, S.Y. 2020 - 2021
Final Examination

Name: ____________________________ Course / Year/Section____________ Score_______

I. MULTIPLE CHOICES
DIRECTIONS: Choose the letter that corresponds to the best answer; write it on the answer sheet provided. ERASURE
or ANY KIND OF ALTERATION is considered WRONG!
NOTE: One item can have a multiple answer.

1. Stine Corp.'s trial balance reflected

the following account balances at
December 31, 2019:
2. Accounts receivable (net)
R$24,000
3. Trading securities 6,000
4. Accumulated depreciation—
equipment 15,000
5. Cash 21,000
6. Inventory 30,000
7. Equipment 25,000
8. Patent 4,000
9. Prepaid expenses 2,000
10. Land held for future business site
18,000
11. In Stine's December 31, 2019
statement of financial position, the
current assets total is
12. a. R$101,000.
13. b. R$92,000.
14. c. R$87,000.
15. d. R$83,000.
1. Stine Corp.'s trial balance reflected the following account balances at December 31, 2019:

Accounts receivable (net) P24, 000

Trading securities 6,000
Accumulated depreciation—equipment 15,000
Cash 21,000
Inventory 30,000
Equipment 25,000
Patent 4,000
Prepaid expenses 2,000
Land held for future business site 18,000

In Stine's December 31, 2019 statement of financial position, the current assets total is
A. P101, 000.
B. P92, 000.
C. P87, 000.
D. P83, 000.

2. Olmsted Company has the following items: share capital–ordinary, P920,000; treasury shares, P85,000;
deferred taxes, P100,000 and retained earnings, P363,000. What amount should Olmsted Company report
as total equity?
A. P1, 098,000.
B. P1, 198,000.
C. P1, 298,000.
D. P1,398,000

3. Fulton Company owns the following investments: Trading securities (fair value) P70,000 Non-trading securities
(fair value) 35,000 Held-for-collection securities (amortized cost) 47,000 Fulton will report investments in its
current assets section of
A. P0.
B. Exactly P70, 000.
C. P70, 000 or an amount greater than P70,000, depending on the circumstances.
D. Exactly P105, 000.

4. Which item below is not a current liability?

A. Unearned revenue
B. Share dividends distributable
C. The currently maturing portion of long-term debt
D. Trade accounts payable

5. Each of the following are an intangible asset except

A. Copyrights.
B. Goodwill.
C. Plant expansion fund.
 D. Trademarks.

6. Which of the following is a current asset?

A. Cash surrender value of a life insurance policy of which the company is the bene-ficiary.
B. Investment in equity securities for the purpose of controlling the issuing company.
C. Cash designated for the purchase of tangible fixed assets.
D. Trade installment receivables normally collectible in 18 months.

7. The statement of financial position can help assess all of the following except
A. Solvency.
B. Financial flexibility.
C. Profitability.
D. Liquidity.

8. Which of the following is a limitation of the statement of financial position?

A. Many items that are of financial value are omitted.
B. Judgments and estimates are used.
C. Current fair value is not reported.
D. All of these choices are correct.

9. The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash
is referred to as
A. Solvency.
B. Financial flexibility.
C. Liquidity.
D. Exchangeability.

10. The current assets section of the statement of financial position should include
A. Machinery.
B. Patents.
C. Goodwill.
D. Inventory.

11. Which of the following should be reported for share capital?

A. The shares authorized
B. The shares issued
C. The shares outstanding
D. All of these choices are correct.

12. Which of the following is not an acceptable major asset classification?

A. Current assets
B. Investments
C. Property, plant, and equipment
D. Deferred charges

13. Houghton Company has the following items: share capital–ordinary, P820,000; treasury shares, P85,000;
deferred taxes, P100,000 and retained earnings, P313,000. What amount should Houghton Company report
as total equity?
A. 948,000.
B. 1,048,000.
C. 1,148,000.
D. 1,218,000.

14. Presented below are data for Antwerp Corp.

2018 2019 2020

Assets, January 1 2,800 3,360 ?
Liabilities, January 1 1,580 ? 2,016
Equity, Jan. 1 ? ? 2,100
Dividends 560 420 476
Increase in share capital–ordinary 504 448 500
Equity, Dec. 31 ? ? 1,596
Net Income 560 448 ?
 Equity at January 1, 2018 is
A. 504.
B. 560.
C. 1,220.
D. 1,724.

15. The financial statement which summarizes operating, investing, and financing activities of an entity for a period
of time is the
A. Retained earnings statement.
B. Income statement.
C. Statement of cash flows.
D. Statement of financial position.

16. Keisler Corporation reports:

Cash provided by operating activities P200,000
Cash used by investing activities 110,000
Cash provided by financing activities 140,000
Beginning cash balance 90,000

What is Keisler’s ending cash balance?

A. 250,000.
B. TL320,000.
C. 470,000.
D. 540,000.

17. A complete set of financial statements includes each of the following except a.
A. Statement of comprehensive income.
B. A statement of changes in equity.
C. Notes.
D. All of these answers are included.

18. Which of the following statements is incorrect regarding notes to the financial statements?
A. IFRS requires specific note disclosures including disaggregation of inventories into classifications such as
merchandise, production supplies, work in process, and finished goods.
B. IFRS requires a maturity analysis for receivables.
C. IFRS requires that all notes be clear, simple to understand, and non-technical in nature.
D. All of the choices are correct regarding notes to the financial statements.

19. Which of the following is a contra account?

A. Premium on bonds payable
B. Unearned service revenue
C. Patents
D. Accumulated depreciation

20. General-purpose financial statements are the product of

A. Financial accounting.
B. Managerial accounting.
C. Both financial and managerial accounting.
D. Neither financial nor managerial accounting.

21. All the following are differences between financial and managerial accounting in how accounting information is
used except to
A. Plan and control company’s operations.
B. Decide whether to invest in the company.
C. Evaluate borrowing capacity to determine the extent of a loan to grant.
D. All of the above.

22. When making decisions, investors are interested in assessing

A. The company’s ability to generate net cash inflows.
B. Management’s ability to protect and enhance the capital provider’s investments.
C. Both a and b.
D. The company’s ability to generate net income.

23. Which of the following is a general limitation of general purpose financial statements?
 A. General purpose financial statements may not be the most informative for a specific enterprise.
B. General purpose financial statements are comparable.
C. General purpose financial statements are assumed to present fairly the companys financial operations.
D. None of the above.

24. Which of the following characteristics may result in the classification of a liability as current?
A. Short-term obligations expected to be refinanced with long-term debt
B. Debts to be liquidated from funds that have been accumulated and are reported as noncurrent assets
C. Violation of provisions of a debt agreement
D. Obligations for advance collections that involve long-term deferment of the delivery of goods or services

25. Which of the following would NOT be classified as a current liability on a classified balance sheet?
A. Unearned revenue
B. Mandatory redeemable preferred stock
C. The currently maturing portion of long-term debt
D. Accrued salaries payable to management

26. Pending litigation would generally be considered a(n)

A. Nonmonetary liability.
B. Contingent liability.
C. Estimated liability.
D. Current liability.

27. Which of the following statements regarding assets is NOT true?

A. An asset represents a probable future economic benefit.
B. Assets are obtained or controlled as a result of past or probable future transactions or events.
C. Assets reported on the balance sheet include both monetary and nonmonetary resources.
D. Assets include costs that have not yet been matched with revenues.

28. Which of the following would NOT be reported for capital stock in the contributed capital section of a classified
balance sheet?
A. Dividends per share
B. Shares authorized
C. Shares issued
D. Shares outstanding

29. Which of the following would NOT be reported in the stockholders’ equity section of the balance sheet?
A. Retained earnings appropriated for future plant expansion
B. Dividends declared on preferred stock
C. Paid-in capital in excess of par value
D. Deficit in retained earnings

30. Which of the following statements best describes a subsequent event?

A. A subsequent event affects only subsequent reporting periods.
B. A subsequent event is, in some cases, reflected in the statements of the preceding period.
C. A subsequent event may occur any time after financial statements are issued.
D. A subsequent event is not covered by the independent auditor’s report.

31. The operating cycle

A. Measures the time elapsed between cash disbursement for inventory and cash collection of the sales price.
B. Refers to the seasonal variations experienced by business enterprises.
C. Should be used to classify assets and liabilities as current if it is less than one year.
D. Cannot exceed one year.

32. Wolfe Co. was incorporated on July 1, 2014, with P200, 000 from the issuance of stock and borrowed funds of
P30,000. During the first year of operations, net income was P10,000. On December 15, Wolfe paid an P800 cash
dividend. No additional activities affected owners’ equity in 2014. At December 31, 2014, Wolfe’s liabilities had
increased to P37,600. In Wolfe’s December 31, 2014, balance sheet, total assets should be reported at
A. 239,200.
B. 240,000.
C. 246,800.
D. 276,800.

33. Major Co.’s adjusted trial balance at December 31, 2020, includes the following account balances:
 Common Stock, P3 par …………………………………………………………………… 360,000
Additional Paid-In Capital ………………………………………………………………. 480,000
Treasury Stock, at cost ………………………………………………………………….. 30,000
Net Unrealized Loss on Available-for-Sale Securities …………………………… 12,000
Retained Earnings: Appropriated for Uninsured Earthquake Losses …………. 90,000
Retained Earnings: Unappropriated …………………………………………………… 120,000

34. What amount should Major report as total stockholders’ equity in its December 31, 2020, balance sheet?

A. 1,008,000
B. 1,032,000
C. 1,068,000
D. 1,092,000

35. The following changes in American Corporation’s account balances occurred during 2014:

Increase
Assets ……………………………………………………………………………………… 267,000
Liabilities ………………………………………………………………………………….. 81,000
Capital Stock …………………………………………………………………………….. 198,000

American paid dividends of 39,000 during the year. There were no changes in Retained Earnings for 2020 except
dividends and net income. What was American’s net income for 2020?

A. 12,000
B. 27,000
C. 39,000
D. 51,000

36. Songbird Corporation’s trial balance included the following account balances at December 31, 2020:

Accounts Payable …………………………………. P45,000

Bonds Payable, due 2015 …………………………… 75,000
Discount on Bonds Payable, due 2015 ………………… 9,000
Dividends Payable January 31, 2015 …………………. 24,000
Notes Payable, due January 31, 2018 ………………… 60,000

What amount should be included in the current liability section of Songbird’s December 31, 2020, balance
sheet?

A. 135,000
B. 153,000
C. 195,000
D. 234,000

37. B Co has total debt of 252,000 and stockholders’ equity of 420,000. B is seeking capital to fund an expansion. B is
planning to issue an additional 180,000 in common stock, and is negotiating with a bank to borrow additional
funds. The bank requires a maximum debt ratio of .75. What is the maximum additional amount B will be able to
borrow after the common stock is issued?

A. 639,000
B. 852,000
C. 1,236,000
D. 1,548,000

38. The accounts and balances shown below were gathered from D Corporation’s trial balance on December 31,
2020. All adjusting entries have been made.

Wages Payable ……………………………………. 25,600

 Cash ……………………………………………. 17,700
Mortgage Payable …………………………………. 151,600
Dividends Payable ………………………………… 14,000
Prepaid Rent …………………………………….. 13,600
Inventory ……………………………………….. 81,800
Sinking Fund Assets ………………………………. 52,400
Short-Term Investments ……………………………. 15,200
Premium on Bonds Payable ………………………….. 4,600
Stock Investment in Subsidiary …………………….. 102,400
Taxes Payable ……………………………………. 22,800
Accounts Payable …………………………………. 24,800
Accounts Receivable ………………………………. 36,600

The amount that should be reported as current assets on D Corporation’s balance sheet is

A. 151,300.
B. 164,900.
C. 217,300.
D. 267,300.

39. The accounts and balances shown below were gathered from M Corporation’s trial balance on December 31,
2020. All adjusting entries have been made.

Wages Payable ……………………………………. 25,600

Cash ……………………………………………. 17,700
Mortgage Payable …………………………………. 151,600
Dividends Payable ………………………………… 14,000
Prepaid Rent …………………………………….. 13,600
Inventory ……………………………………….. 81,800
Sinking Fund Assets ………………………………. 52,400
Short-Term Investments ……………………………. 15,200
Premium on Bonds Payable ………………………….. 4,600
Stock Investment in Subsidiary …………………….. 102,400
Taxes Payable ……………………………………. 22,800
Accounts Payable …………………………………. 24,800
Accounts Receivable ………………………………. 36,600

See information for Pastel Corporation above. The amount that should be reported as current liabilities on M
Corporation’s balance sheet is

A. 73,200.
B. 91,800.
C. 87,200.
D. 238,800.

40. See information for M Corporation above. M Corporation’s working capital is

A. 77,700.
B. 73,100.
C. 62,500.
D. 125,700.
E.
“POSITIVITY”

Prepared by: Reviewed by:

HEUD MARRION B. URBINA, CPA, MBA CORNELIO ADDUN, CPA, CIA

Approved by: Noted by:

CORNELIO ADDUN, CPA, CIA MA. JOSEFA TAGUINOD, MBM