ACTIVITY 2

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

2) The Maddy Company is preparing interim financial statements for the six months to 30 June 2021 in
accordance with the minimum requirements of PAS34. Its accounting year ends on 31 December each
year. Which of the following comparative statement is not appropriate?
A. Statement of financial position at 30 June 2020
B. Statement of profit or loss and other comprehensive income for the half year to 30 June 2020
C. Statement of changes in equity for the half year to 30 June 2020
D. Statement of cash flows for the half year to 30 June 2020

3) 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.

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

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

5) Cosmic Cleave Company has historically reported bad debts expense of 5% of sales in each quarter.
For the current year, the company allowed the same procedure in the three quarters of the year.

However, in the fourth quarter, the company, in consultation with its auditor, determined that bad debt
expense for the year should be P4,500,000. Sales in each quarter of the year were as follows: first
quarter, P20,000,000; second quarter, P15,000,000; third quarter, P25,000,000; fourth quarter,
P40,000,000.

How much bad debt expense should be recognized for the fourth quarter?
A. 1,500,000
B. 2,000,000
C. 3,000,000
D. 4,000,000
6) Prinsipe ng Saiyan Company, a calendar-year corporation, has the following income before income
tax provision and estimated effective annual income tax rates for the first three quarters of the current
year:

Quarter Income before income Estimated effective annual tax rate at end of
tax quarter
First 60,000 40%
Second 70,000 40%
Third 40,000 45%

Prinsipe ng Saiyan’s income tax provision in its interim income statement for the third quarter should
be
A. 76,500
B. 25,500
C. 24,500
D. 18,000

7) Sharac Company prepares quarterly interim financial reports. The company sells it products through
sales agents who are paid a fixed monthly salary and a commission of 5% that is paid at year-end. Sales
for the first quarter were P20,000,000. However, in the second quarter, the employee’s union negotiated
that agent’s commissions be increased to 10% and be applied as of the beginning of the current year.
Sales in the second quarter were P25,000,000. What would be the sales commission expense of Sharac
Company charged in the second quarter’s interim financial statements?
A 1,000,000 B. 2,000,000 C 2,500,000 D. 3,500,000
. .

8) Djinn Company had the following transactions during the quarter ended March 31, 2014:

Loss from hurricane 1,000,000

Payment of the fire insurance premium for the year 600,000
2014
Loss on temporary inventory decline 300,000

What total amount of expenses should be included in the income statement for the quarter ended
March 31, 2014?
A 1,000,000 B. 1,150,000 C 1,450,000 D. 1,900,000
. .

9) On June 30, 2014, Wicked Wish Corporation incurred a P200,000 net loss form disposal of business
segment. Also on June 30, 2014, Wicked Wish paid P80,000 for property taxes assessed for the
calendar year 2014. What amount of the foregoing items should be included in the determination of
Wicked Wish’s net income or loss for the 6-month interim period ended June 30, 2014?
A 280,000 B. 240,000 C 180,000 D. 140,000
. .
10) Ascension Company has estimated that total depreciation expense for the year ending December 31,
2014 will amount to P2,000,000, and the 2014 year-end bonuses to employees will total P4,000,000.
Ascension paid P500,000 property taxes assessed for the year 2014. On June 30, 2014, 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, 2014, 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
.