Intermediate Acctg 3 Finals With Answers PDF

METRO MANILA COLLEGE
COLLEGE OF BUSINESS AND ACCOUNTANCY
Name: Date:
Section: Score:
INTERMEDIATE ACCOUNTING 3: PRE-FINAL AND FINAL EXAMINATION
Single Entry
We were given the following information which were obtained from the single-entry records of Poging
Bagsik:
January 1 June 30
Interest receivable P 12,000 P 9,600
Accounts receivable 540,000 1,056,000
Notes receivable 180,000 144,000
Merchandise inventory 456,000 120,000
Store and office equipment (net) 390,000 360,000
Prepaid operating expenses 30,000 26,400
Interest payable 3,600 6,000
Accounts payable 420,000 300,000
Notes payable 120,000 144,000
Accrued operating expenses 32,400 60,000
An analysis of the cashbook shows the following:
Balance, January 1 P 180,000

Receipts:
Interest income P 24,000
Accounts receivable 432,000
Notes receivable 180,000
Investment by Bagsik 72,000 708,000
Disbursement:
Interest expense P 18,000
Accounts payable 624,000
Notes payable 96,000
Operating expenses 204,000 942,000
Balance, June 30 – bank overdraft (P 54,000 )
Questions:
Based on the above and the result of your audit, determine the following for the six months ended
June 30, 2019:
1. Sales
a. P 948,000 c. P 1,092,000
b. P 132,000 d. P 1,164,000
2. Purchases
a. P 624,000 c. P 816,000
b. P 576,000 d. P 504,000
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3. Operating expenses, excluding depreciation

a. P 172,800 c. P 228,000
b. P 231000 d. P 235,200
4. Net loss
a. P 4,800 c. P 152,400
b. P 132,000 d. P 1,221,600
Single Entry
Recto Legarda, a retired engineer, formed Ralph Loren Trading on July 1, 2019, investing his retirement
pay of P 400,000 in the business. To cut on operating expenses, he did not hire an accountant; as a
consequence, his accounting records were incomplete. On January 1, 2020, his cash balance was
P 410,000 and on December 31, 2020, it was P 430,000. He wanted to have an idea of the result of his
operations for the year ended December 31, 2020. The following information and other data were gathered
for the year 2020.
January 1 December 31
Accounts receivable – trade P 130,000 P 170,000
Money marker placement 20,000 15,000
Accrued interest on money market
placement 800 600
Merchandise inventory 175,300 280,400
Prepaid rent expense 6,000 4,500
Delivery equipment (at cost) 120,000 120,000
Store fixtures (at cost) 50,000 50,000
Rent deposit 12,000 6,000
Other assets 1,000 1,000
Accounts payable – Trade 390,000 480,000
Notes payable (delivery equipment) 100,000 60,000
Accrued interest on notes payable 12,000 8,000
Accrued operating expenses (excluding rent) 8,000 10,000
Legarda was able to arrange with the owner of the building that his rental deposit be reduced by 50% and
the amount applied against rentals in 2020.
From the 2020 cash memoranda of Recto Legarda, you were able to extract the following:
Cash received from:

Sales P 380,000
Interest on money market placement 4,000
Collections of accounts receivable 1,328,000
Matured money market placement,
Not rolled over 5,000
Total P 1,717,000
Cash payments for:
Merchandise purchases P 210,000
Interest on notes payable 25,000
Trade payables 940,000
Notes payable (delivery equipment) 40,000
Operating expenses 470,000
Recto Legarda, drawing 12,000
Total P 1,697,000
Page 2 of 6
You have established that the fixed assets have not been depreciated since they were acquired on
July 1, 2019. Estimated life of these assets is ten years.
Questions:
Based on the above and the result of your audit, determine the following for the year 2020: (Ignore income
taxes)
5. Total sales
a. P 1,368,000 c. P 1,668,000
b. P 1,748,000 d. P 988,000
6. Cost of sales
a. P 1,134,900 c. P 850,000
b. P 1,060,000 d. P 924,900
7. Total operating expenses

a. P 479,000 c. P 492,500
b. P 489,000 d. P 496,500
8. Net profit
a. P 99,400 c. P 106,900
b. P 116,600 d. P 384,300
9. Recto Legarda, Capital, December 31, 2020

a. P 406,000 c. P 494,000
b. P 499,000 d. P 519,500
Correction of errors
Misamis Company’s December 31, year end financial statement contained the following errors:
12/31/2018 12/31/2019
Ending inventory P 100,000 P 90,000
Understated Overstated
Depreciation expense 20,000
Understated
An insurance premium of P 75,000 was prepaid in 2018 covering the years 2018, 2019, and 2020. The
same was charged to expense in full in 2018. In addition, on December 31, 2019, a fully depreciated
machinery was sold for P 160,000 cash, but the sale was not recorded until 2020. There were no other
errors during 2018, 2019 and 2020 and no corrections have been made for any of the errors. Ignore
income tax considerations.
Questions:
Based on the above and the result of your audit, answer the following:
10. What is the net effect of the errors on the 2018 profit?
a. Understated by P 130,000
b. Understated by P 155,000
c. Overstated by P 70,000
d. No effect
Page 3 of 6
11. What is the net effect of the errors on the 2019 profit?
a. Overstated by P 55,000
b. Overstated by P 30,000
d. Understated by P 45,000
12. What is the net effect of the errors on the company’s working capital at December 31, 2019?
d. No effect
13. What is the net effect of the errors in the balance of the company’s retained earnings at
December 31, 2019?
d. No effect
14. What is the net effect of the errors on the company’s working capital at December 31, 2020?
a. Overstated by P 65,000
c. Understated by P 160,000
d. No effect
Cash to accrual
The income statement of Cagayan Corporation for 2020 included the following items:
Interest income P 2,101,000

Salaries expense 1,650,000
Insurance expense 277,200
The following balances have been excerpted from Cagayan Corporation’s statement of financial position:
12/31/2019 12/31/2020
Accrued interest receivable P 165,000 P 200,200
Accrued salaries payable 92,400 195,800
Prepaid insurance 33,000 24,200
Questions:
Based on the above and the result or your audit, determine the following:
15. The cash received for interest during 2020 was

a. P 1,900,000 c. P 2,065,800
b. P 2,101,000 d. P 2,136,200
16. The cash paid for salaries during 2020 was

a. P 1,753,400 c. P 1,546,600
b. P 1,557,600 d. P 1,845,800
Page 4 of 6
17. The cash paid for insurance premium during 2020 was
a. P 253,000 c. P 244,200
b. P 286,000 d. P 286,400
Cash to accrual
Gingoog Company paid or collected during 2020 the following items:
Insurance premium paid P 462,000

Interest collected 927,000
Salaries paid 4,056,000
The following balances have been excerpted from Gingoog’s statements of financial position:
12/31/2019 12/31/2020
Prepaid insurance P 45,000 P 36,000
Interest receivable 87,000 111,000
Salaries payable 318,000 369,000
Questions:
Based on the above and the result of your audit, determine the following:
18. The insurance expense on the income statement for 2020 was
a. P 381,000 c. P 453,000
b. P 543,000 d. P 471,000
19. The interest income on the income statement for 2020 was
a. P 729,000 c. P 903,000
b. P 951,000 d. P 1,125,000
20. The salary expense on the income statement for 2020 was
a. P 3,369,000 c. P 4,005,000
b. P 4,107,000 d. P 4,743,000
21. The transaction approach to determine income is a concept in which

a. Income is measured as the amount that an equity could consume during a period and be as well
off at the end of that period as it was at the beginning.
b. Market values adjusted for the effects of inflation or deflation are used to calculate income.
c. The financial statement effects of business events are classified as revenues, gains, expenses,
and losses, which are used to measure and define income.
d. Income equals the change in the market value of the firm’s outstanding common stock for the
period.
22. When a business segment is discounted during the year, the gain or loss on disposal
a. Is reported as an extraordinary item.
b. Should include operating losses of the current period up to the measurement date.
c. Excludes operating losses during phase-out period.
d. Should be shown net of applicable income taxes.
23. Costs that can be reasonably associated with specific revenues but not with specific products should
be
a. Charged to expense in the period incurred.
b. Allocated to specific products based on the best estimate of the production processing time.
Page 5 of 6
c. Expensed in the period in which the related revenue is recognized.

d. Capitalized and then amortized over a period not to exceed 60 months.
24. A changed from the straight-line method of depreciation to an accelerated method should be
accounted for as a(n)
a. Change in the accounting principle
b. Change in the accounting estimate
c. Prior period adjustment
d. Accounting error
25. The correct order to present current assets is

a. Cash, inventories, prepaid items, accounts receivable.
b. Cash, inventories, accounts receivable, prepaid items.
c. Cash, accounts receivable, prepaid items, inventories.
d. Cash, accounts receivable, inventories, prepaid items.
26. 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. Obligation for advance collections that involve long-term deferment of the delivery of goods or
services.
27. Offsetting of assets and liabilities is

a. Allowed in all cases c. Allowed unless not permitted by PFRS
b. Not allowed in all cases d. Not allowed unless permitted by PFRS
28. Units of currency held and assets and liabilities to be received or paid in a fixed or determinable
number of units of currency are
a. Financial assets and liabilities c. Non-monetary items
b. Monetary items d. Functional currency
29. When an investor uses the equity method to account for investment in common stock, the investment
account will not be affected when the investor recognizes
a. A proportionate interest in the net income of the investee.
b. Periodic amortization of the goodwill related to the purchase.
c. A stock dividend received from the investee.
d. Depreciation related to the excess of market value over the book value of the investee’s
depreciable assets at the date of purchase by the investor.
30. If at the end of the period a company erroneously excluded some goods from its ending inventory and
also erroneously did not record the purchase of these goods on its accounting records, these errors
would cause
a. Cost of goods sold available for sale, cost of goods sold, and net income to be understated.
b. No effect on the net income, working capital and retained earnings.
c. The ending inventory, cost of goods available for sale, and retained earnings to be understated.
d. The ending inventory, cost of goods sold, and retained earnings to be understated.
Page 6 of 6
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METRO MANILA COLLEGE

COLLEGE OF BUSINESS AND ACCOUNTANCY

INTERMEDIATE ACCOUNTING 3: PRE-FINAL AND FINAL EXAMINATION

An analysis of the cashbook shows the following:

Balance, January 1 P 180,000

3. Operating expenses, excluding depreciation

Cash received from:

7. Total operating expenses

9. Recto Legarda, Capital, December 31, 2020

Interest income P 2,101,000

15. The cash received for interest during 2020 was

16. The cash paid for salaries during 2020 was

Gingoog Company paid or collected during 2020 the following items:

Insurance premium paid P 462,000

21. The transaction approach to determine income is a concept in which

c. Expensed in the period in which the related revenue is recognized.

25. The correct order to present current assets is

27. Offsetting of assets and liabilities is

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