PRESIDENT UNIVERSITY

MIDTERM EXAMINATION
Academic Year 2022-2023
Current Semester : 20222
Period : January 09, 2023 - May 28, 2023
Subject : INTERMEDIATE ACCOUNTING 1
Lecturer : Mila A. Reyes, BSBA, CPA, MBA
Study Program : ACCOUNTING

Instructions to Students :

1. This examinations consist of 2 parts. Part 1 is theory and part 2 is roblem solving.
2. Time allowed for this examination is 2.5 hours. Use the time allotted efficiently.
3. Sanctions will be given to those students who are not following the examination rules.
4. All answers must be in INK. Use the exam paper given as your answer sheet. The number
to the corresponding question must be written correctly.
5. Students are to use Proper English and are required to write neatly and clearly. Do not use
TIP-X or correction fluid. Do not use abbreviations.
6. If you have questions you can ask me directly. Concentrate so you can finish on time.
7. This is an OFFLINE exam. Use of hand phone/computer is NOT ALLOWED. Use calculator
if need to compute. YOUR HONESTY AND INTEGRITY IS NEEDED IN DOING THIS EXAM
8. Anybody caught cheating/copying from his/her seatmate will automatically FAIL the subject.
9. Observe SILENCE during the examination period.
10. READ THE INSTRUCTIONS CAREFULLY BEFORE ANSWERING EACH PROBLEM.

PART 1.
A. (25 minutes)
The following table summarizes the rules of debit and credit. For each of the items below,
indicate whether the proper answer is a debit or credit
Example:
Account Classification Increase Decrease

Cash Current Assets Debit Credit

1. Accounts Payable 16 Machinery-idle (not in op

2. Accounts Receivable 17. Marketable securities
3. Accrued salaries payable 18. Merchandise inventory
4. Bank overdraft 19. Notes Payable
5. Bond payable 20. Patents
 6. Building 21. Prepaid Insurance
7. Cash in close bank 22. Raw materials
8. Creditors account with debit balance 23. Repairs Expense
9. Customers' account with credit balance 24. Rey Harris, Capital
10. Equipment 25. Rey Harris, Drawing
11. Franchise 26. Salaries Expense
12. Interest Income 27. Sales
13. Interest receivable 28. Supplies
14. Land 29. Supplies Expense
15. Land held for sale 30. Tax payable

B. (25 minutes)
On your answer sheet write after each number the LETTER which best described the following:

S 1. Estimates in financial statements 11. Point of production realization concept

H 2. Funds theory 12. Full disclosure
L 3. Consistency 13. Going concern
Q 4. A detailed principle 14. Fair value accounting
R 5. industry peculiarities 15. Matching principle
B 6. Entity 16. Materiality
K 7. Verifiability 17. Quantifiability
E 8. Stable monetary unit 18. Proprietary theory
A 9. Accounting theory 19. Writings of accountants
N 10. Conservative approach 20. Accounting period

a. A conglomeration of assumptions, concepts, principles, and procedures which serve as the

foundation of accounting practice.
b. permits the consolidation of financial statements of affiliates for economic reasons.
c. Long-lived assets are presented not at what they will realize if sold but at cost or other basic
value reduced by an allowance for depreciation.
d. The assets, liabilities, capital, income, and expenses should have a common denominator
in the form of a monetry unit.
e. The accounting function is to account for money and not for changes in the purchasing power.
f. NIFO approach of inventory valuation.
g. Following this concept, the balance sheet is the more important statement.
h. Applicable secifically to fiduciary or government accounting.
i. Squarely appplies to precious metals like gold, and silver.
j. Depreciation accounting is an appplication of this principle.
k. The exixtence of an effectively functioning system of internal control ensures adherence of this
concept.
l. If fixed assets are shown at appraised value, the depreciation should be based on appraised
value and not on cost.
m. Synonymous with comppleteness of financial statement.
n. Goodwill should be reported only when paid for.
o. Payments out of petty cash may ne charged only as miscellaneous expenses.
p. A source of accounting principles.
q. Installment method of accounting.
r. Business entities adopt practices best suited for their purposes and which will present their
statements as fairly as possible.
s. Should be minimized as much as ppossible so as not to fall into the "bottomless flaw of
indefiniteness".
t. None of the foregoing.
PART 2.
PROBLEM SOLVING :
SHOW ALL YOUR COMPUTATIONS IN GOOD FORM

Problem 1 (15 minutes)

Everlast company reported the following information as of the end of the current year:

● Investment securities of $1,000,000. These securities are share investments in entities

that are traded in the SEC. As a result, the shares are very actively traded in the market.

● Investment securities of $2,000,000. These securities are government treasury bills.

The treasury bills have a 10-year term and purchased on December 31, at which time
they had two months to go until they mature.

● Cash of $3,400,000 in the form of coin, currency, savings account, and checking account.

● Investment securities at $1,500,000. These securities are commercial papers (short-

term IOU's from other entities). The term of the commercial papers is nine months
and they were purchased on December 31, at which time they had four months to go
until they mature.

Required:
How much should be reported as cash and cash equivalents at the end of the current year?

Solution:
Investment in securities 2,000,000
Cash 3,400,000
5,400,000

Problem 2 (25 minutes)

On December 31, 2019, Everbest Company's "cash account" balance per ledger of $3,600,000
includes the following:

Demand deposit $ 1,500,000

Time deposit-30 days 500,000
NSF check of customer 20,000
Money market placement (due date June 30, 2020) 1,000,000
Savings deposit in closed bank 50,000
IOU from an employee 30,000
Pension fund 400,000
Petty cash fund 10,000
Customer check dated January 31, 2020 60,000
Customer check outstanding for 18 months 30,000
$ 3,600,000

Additional information:
a. Check of $100,000 in payment of accounts payable was dated and recorded on December
 31, 2019 but mailed to creditors on January 15, 2020.

b. Check of $50,000 dated January 31, 2020 in payment of accounts payable was recorded
and mailed December 31, 2019.
 c. The company uses the calendar year. The cash receipts journal was held open until
January 15, 2020 during which time, $200,000 was collected and recorded on December
31, 2019.

Required:
1. Adjusting entries to correct the cash account on December 31, 2019.

a Cash 100,000
Accounts payable 100,000
To record back the undelivered check.

b. Cash 50,000
Accounts payable 50,000
To record back post-dated ceck.

c Accounts receivable 200,000

Cash 200,000
To record back collection of accounts receivable
in January recorded in December.

d Accounts receivable 110,000

Money market placement 1,000,000
Cash in closed bank 50,000
Advances to employee 30,000
Pension fund 400,000
Cash 1,590,000
To reclassify accounts which are included in
Cash account.

2. Compute the cash and cash equivalents to be shown on the December 31, 2019
statement of financial position.
Solution
Demand deposit 1,500,000
Undelivered check 100,000
Postdated check 50,000
Collection (200,000)
Time deposit 500,000
Petty cash fund 10,000
1,960,000

Problem 3 (25 minutes)

From the books and records of Miramax Company as of December 31, 2019, you gathered
the following:

Balance per book $ 1,000,000

Bank charges 3,000
Outstanding checks 235,000
Deposit in transit 300,000
Customer note collected by bank 375,000
Interest on customer note 15,000
Customer check returned NSF 62,000
Depositor's note charged to account 250,000

Required:
1. Compute for the correct cash balance per book as of December 31, 2019
Solution:
Balance per book 1,000,000
Bank charges (3,000)
Customer note collected by bank 375,000
Interest on customer note 15,000
Customer check returned NSF (62,000)
Depositor's note charged to account (250,000)
1,075,000
2. Prepare journal entries to correct the cash balance.

1 Bank charges 3,000

Cash 3,000
To record bank charges not yet recorded in the book.

2 Cash 390,000
Notes Payable 375,000
Interest income 15,000
The record notes collected by bank not yet recorded in the book.

3 Accounts receivable 62,000

Cash 62,000
To record NSF check

4 Notes receivable 250,000

Cash 250,000
To record notes charged to account.

Problem 4 (15 minutes)

The following information was taken from Kay Company's accounting records for the year ended
December 31, 2022:

Increase in raw materials inventory $ 150,000

Decrease in finished goods inventory 350,000
Raw materials purchased 4,300,000
Direct labor payroll 2,000,000
Factory overhead 3,000,000
Freight-out 450,000

There was no goods in process inventory beginning or end of the year.

Required:
How much is the cost of goods sold in 2014 to be reported by Kay Company?

Solution:
Raw materials purchased $ 4,300,000
LessIncrease in raw materials inventory 150,000
Raw materials used 4,150,000
Direct labor payroll 2,000,000
Factory overhead 3,000,000
Cost of goods manufactured 9,150,000
Add:Decrease in finished goods inventory 350,000
COS $ 9,500,000
Problem 5 (15 minutes)

The December 31, 2022 statement of financial position of East Company contained the following
current assets:

Cash $ 3,200,000
Accounts receivable 2,000,000
Inventory 2,800,000
Deferred charges 200,000
$ 8,200,000

An examination revealed that accounts receivable consisted of the following items:

Customer's accounts $ 1,420,000

Employees' account-current 240,000
Advances to subsidiary 260,000
Allowance for uncollectible accounts (120,000)
Claim against shipper for goods lost in transit 200,000
$ 2,000,000

Required:
Compute for the total current assets that should be reported on December 31, 2022.

Solution :
Cash $ 3,200,000
Accounts receivable 1,420,000
Allowance for uncollectible accounts (120,000)
Employees' account-current 240,000
Claim against shipper for goods lost in transit 200,000
Inventory 2,800,000
7,740,000
Y

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S EXAM
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Normal Balance

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ndise inventory
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 Insurance
aterials
Expense
rris, Capital
rris, Drawing
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Problem 1
Account Classification Increase

1. Accounts Payable Current liabilities credit

2. Accounts Receivable Current assets debit
3. Accrued salaries payable Current liabilities credit
4. Bank overdraft Current liabilities credit
5. Bond payable Long-term liabilities credit
6. Building Property, plant and equipment debit
7. Cash in close bank Other assets debit
8. Creditors account with debit balance Current assets debit
 9. Customers' account with credit balance Current liabilities credit
10. Equipment Property, plant and equipment debit
11. Franchise Intangible assets debit
12. Interest Income Revenue credit
13. Interest receivable Current assets debit
14. Land Property, plant and equipment debit
15. Land held for sale Other assets debit
16 Machinery-idle (not in operation) Other assets debit
17. Marketable securities Current assets debit
18. Merchandise inventory Current assets debit
19. Notes Payable Current liabilities credit
20. Patents Intangible assets debit
21. Prepaid Insurance Current assets debit
23. Repairs Expense Expenses debit
I 24. Rey Harris, Capital Owner's equity credit
M 25. Rey Harris, Drawing Owner's equity debit
C 26. Salaries Expense Expenses debit
F 27. Sales Revenue credit
J 28. Supplies Current assets debit
O 29. Supplies Expense Expenses debit
D 30. Tax payable Current liabilities credit
G
P
T
 Decrease Normal Balances

debit credit
credit debit
debit credit
debit credit
debit credit
credit debit
credit debit
credit debit
debit credit
credit debit
credit debit
debit credit
credit debit
credit debit
credit debit
credit debit
credit debit
credit debit
debit credit
credit debit
credit debit
credit debit
debit credit
credit debit
credit debit
debit credit
credit debit
credit debit
debit credit