INTERMIDIATE QUEZON CITY UNIVERSITY ACCOUNTING 3

PROBLEMS San Bartolome Main Campus  San Francisco Satellite Campus  Batasan Satellite Campus
673 Quirino Highway, San Bartolome, Novaliches, Quezon City

LIABILITIES 1. Britch Company provided the following information on

December 31, 2021:
16% term note, due on 2024 100,000
12% term note, due on 2022 60,000
Mortgage note payable- 8% 1,500,000
Debentures 2,000,000
Bank account overdrafts 1,000,000
Customer deposits 150,000
Sales tax payable 750,000
Deferred tax payable 2,700,000
Income tax payable 2,500,000
What is the current liabilities on December 31, 2021?
A) 7,160,000
B) 4,460,000
C) 6,460,000
D) 9,160,000
PREMIUM LIABILITY 2. Rio Company offers their customers a pouch of chocolate if they send 5 vouchers from the
product and P20. The estimated redeemable vouchers is only 50%. On this year, they sold 850,000 and the customers
redeemed 275,000 vouchers receiving 55,000 pouches. Each pouch cost 30. What is the liability for outstanding
premiums?
A) 850,000
B) 150,000
C) 300,000
D) 425,000
BONDS PAYABLE 3. Belly Company reported 7% bonds payable of 3,700,000 less unamortized discount of 150,000 on
June 1, 2021. These bonds were issued to yield 12%. Semiannual interest was paid on June 1 and December 1 of each
year. The entity used effective interest method. What is the amortization from June 2021 to December 2021?
A) 83,500
B) 167,000
C) 259,000
D) 426,000
BONDS PAYABLE 4. On January 1, 2021, Maxi Co. issued 3-year bonds with face amount of 7,800,000 at 93. The entity
used effective interest method. The interest is payable annually. The entity also paid bonds issue cost of 360,000. What is
the price of the bonds?
A)6,919,200
B)7,588,800
C)7,465,200
D)7,254,000
RETAINED EARNINGS 5. Draost Company has a balance of 987,000 in its retained earnings on Dec 2020. The net profit
in the current year is 3,850,000 and the entity has sales of 2,100,000. The dividends paid is 205,700. What is the retained
earnings on the current year?
A)4,631,300
B)6,731,300
C)2,881,300
D)2,531,300
TREASURY SHARES 6. Rocko Company canceled 6,800 shares of P50 par value held in treasury at P125 per share.
The entity had:
Share capital, 28,000 shares issued at P75
Treasury shares- 850,000
Share premium- 700,000
Retained Earnings- 1,300,000
What should be the amount of retained earnings after the cancellation of treasury shares?
A)125,000
B)340,000
C)915,000
D)385,000
ACCOUNTING FOR INCOME TAX 7. Jillian Company reported a deferred tax asset of 500,000 and a deferred tax liability
of 1,250,000 on January 2021. On December 2021, the entity reported its deferred tax asset and deferred tax liability with
the amount of 150,000 and 1,500,000, respectively. On the same year, the entity reported a pretax financial income of
5,000,000. What is the net deferred tax expense for the year 2021?
A)350,000
B)600,000
C)250,000
 D)2,900,000 QUEZON CITY UNIVERSITY
EFFECTIVE INTEREST San Bartolome Main Campus  San Francisco Satellite Campus  Batasan Satellite Campus METHOD 8. On January
673 Quirino Highway, San Bartolome, Novaliches, Quezon City
1, 2021, Swiper Co. Presented bonds with
face a amount of 8,000,000. Nominal rate and effective rate is 10% and 12%,
respectively. Every January 1 of each year, interest is being paid.
PV of 1 at 10% for 5-periods .54
PV of 1 at 12% for 5-periods .73
PV of ordinary annuity of 1 at 10% 2.39
PV of ordinary annuity of 1 at 12% 2.42
What is the premium amortization of the bonds on 2023?
A)133,120
B)149,094
C)166,986
D)187,024
LIABILITIES 9. On year 2021, Magnum Company accord to pay the head supervisor a bonus of 20% of the company’s
earnings after deducting the bonus but before the deduction of income tax. The income before bonus and before tax is
3,600,000 and the income tax rate is 25%. What is the bonus for the year 2021?
A)150,000
B)180,000
C)720,000
D)600,000
SHARE OPTIONS 10. On January 1, 2021, Oreo Company granted share options to their staffs. The total alloted
expense is 10,000,000 endowing on December 2023. The company decided to grant on December 2022. The expense
charged was 4,700,000 on 2021. The total cost that would have been charged to 2022 is 3,500,000. What is the
compensation expense recognized for 2022?
A)5,300,000
B)1,800,000
C)11,200,000
D)8,800,000
ACCOUNTING FOR INCOME TAX 11. Fidget Company disclosed the following at carrying amount at year end, 2021:
Cash 2,500,000
Inventory 2,000,000
Trade payable 1,500,000
Land 12,000,000
Plant and equipment 6,000,000
The entity the charges between the inventory and trades payable 500,000 and 800,000, respectively and this will not be
allowed for any tax purposes. The tax purposes for land is 4,000,000 and for plant and equipment is 3,000,000. Fidget
Company’s net income for year 2021 is 15,000,000. Tax rate is 30%. What should be the deferred tax liability?
A)1,500,000
B)2,100,000
C)3,300,000
D)5,400,000
DEFINED BENEFIT PLAN 12. At the year 2021, Pearl Company had a pension fund of FV 5,000,000 and a projected
benefit obligation of 4,000,000. Discount rate is 5%. Additionally, the entity provided that the current service cost is worth
1,700,000 and the benefits paid to retirees is 450,000. The rate of expected return of fund is 10%. What is the pension
expense for the year 2021?
A)1,250,000
B)2,150,000
C)1,075,000
D)1,650,000
SALE AND LEASE BACK 13. At the year 2021, Turf Company sold a machinery to Tard Company and leased it for 2
years. The sale price of the machinery is 770,000 and the carrying amount was 320,000. The estimated economic life is 6
years. What should be the reported amount as gain from sale on machinery for 2021?
A)300,000
B)450,000
C)150,000
D)225,000
WARRANTY LIABILITY 14. Angela Company sells fridge with a 2-year warranty in case of some manufacturer’s
deficiencies. At the year 20x1, the entity sold 5,500 fridges and paid 300,000 for warranty costs. The warranty cost per
machine is 600. What amount should be the warranty liability at the year-end?
A)3,300,000
B)6,300,000
C)3,000,000
D)6,000,000
DEBT RESTRUCTURE 15. At the year 2021, Knoxx Company is likely failed to pay a 20% 5- year note amounting to
4,500,000 payable to Katsumoto Bank dated January 1, 2020. The two parties agreed to settle the note and interest
payable of 350,000 for a QUEZON CITY UNIVERSITY cash payable of
4,000,000 on January 1, San Bartolome Main Campus  San Francisco Satellite Campus  Batasan Satellite Campus 2022. What is the gain
673 Quirino Highway, San Bartolome, Novaliches, Quezon City
from extinguishment of debt in the year 2021?
A)850,000
B)4,850,000
C)8,850,000
D)250,000
NOTE PAYABLE 16. Scofield Company borrowed a 10% 3-year interest bearing note of 10,000,000 on January 1, 2021.
On June 30,2021, the fair value of the note is calculated as 550,000. How much is the interest expense for the current
year?
A)472,500
B)500,000
C)527,500
D)-50,000
SHAREHOLDERS’ EQUITY 17. Jabami Company provided the following information on shareholders equity:
Ordinary share capital- P20 par value 3,500,000
Preference share capital, P50 par value 6,750,000
Share premium-preference shares 850,000
Subscription receivable- ordinary shares 920,000
Retained earnings 1,025,000
What is the total amount for legal capital?
A)12,020,000
B)8,480,000
C)10,250,000
D)9,505,000
LIABILITIES 18. Bren Company provided the following on the year 2021:
Cash/bank overdraft 2,800,000
Notes payable-bank loans 1,300,000
Stock dividend payable 2,100,000
Withholding tax payable 1,500,000
Share dividend payable 1,900,000
Accrued liabilities 3,200,000
Premium liability 1,400,000
What is the total amount of the current liabilities at year-end?
A)12,300,000
B)10,200,000
C)12,100,000
D)14,200,000
RETAINED EARNINGS 19. At the year 2021, Tzy Company issue share capital of 50,000 shares with P40 par. The entity
sold 20,000 shares at 50 per share and reacquired 2,000 treasury shares at 55 per share. On June, 2021, they issued
10% share dividend. Additionally, they approved a share split of 5 for 1, reissued all the treasury shares at P25, and
reported the net income for the year with 5,000,000. What is the shares outstanding at the year 2021?
A)109,000
B)90,000
C)99,000
D)100,000
RETAINED EARINGS 20. According to information in question 19, what is the share capital at year-end?
A)900,000
B)990,000
C)1,000,000
D)1,090,000