No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

FINANCIAL ACCOUNTING AND REPORTING November 25, 2023

Reviewer: Brian Christian S. Villaluz, CPA, MBA

INTERIM REPORTING

1. Which statement is correct regarding interim reporting?

A. Interim reports are not required.
B. Interim reports are required on a quarterly basis.
C. The independent view is required for interim financial statements.
D. Interim reports require the presentation of a complete set of financial statements.

2. An interim financial report contains:

A. A complete set of financial statements
B. A condensed set of financial statements
C. Either a complete set or condensed set of financial statements
D. Neither a complete set nor condensed set of financial statements

3. Which basic financial statements are prepared as a minimum for interim financial
reporting?
I. Statement of financial position
II. Statement of comprehensive income
III. Statement of changes in equity
IV. Statement of cash flows

A. I only B. I and II C. I, II, and III D. I, II, III, and IV

4. Interim financial reports shall be published

A. On a quarterly basis B. Semi-annually
C. On a monthly basis D. Whenever the entity wishes

5. Interim financial statements are usually presented on a(n)

A. Monthly basis B. Quarterly basis
C. Semi-annual basis D. Annual basis

6. For external reporting purposes, it is appropriate to use estimated gross profit rate to
determine the cost of goods sold for
A. Interim reporting B. Year-end reporting
C. Interim reporting and year-end D. Neither interim reporting nor year-end
reporting reporting

7. Conceptually, interim financial statements can be described as emphasizing

A. Correctness over timeliness B. Timeliness over reliability
C. Relevance over comparability D. Comparability over neutrality

8. Which statement about interim reporting is true?

A. All entities that issue annual reports should also issue interim financial reports.
B. A complete set of financial statements must be presented for an interim period.
C. The integral view is the appropriate approach in preparing interim financial reports.
D. The same accounting principles used for the annual report should be employed for
interim report.

1|P a g e RSORIANO/BVILLALUZ/JBAUTISTA/JABIERA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

9. If an entity does not prepare interim financial reports

A. The year-end financial statements are deemed not to comply with accounting
standards.
B. The year-end financial statements’ compliance with accounting standards is not
affected.
C. The year-end financial statements shall not be acceptable under local jurisdiction.
D. Interim financial reports shall be included in the year-end financial statements.

10. Food Park Company experienced a P1,000,000 decline in the market value of inventory
at the end of the first quarter. The company had expected this decline to reverse in the
subsequent quarter, and in fact, the second quarter recovery exceeded the previous
decline by P200,000. What amount of gain or loss should be reported in the interim
financial statements for the first and second quarters?

1st quarter 2nd quarter

A. 1,000,000 loss 1,000,000 gain
B. 1,000,000 loss 1,200,000 gain
C. 250,000 loss 400,000 gain
D 250,000 loss 150,000 gain

11. On June 30, 2023, Warfare Company realized a P200,000 net gain from disposal of a
business segment. On the same date, the entity paid P250,000 for property taxes
assessed for the calendar year 2023. What total amount should be included in the
determination of the profit or loss for the six-month interim period ended June 30, 2023?

A. 450,000 B. 350,000 C. 325,000 D. 225,000

12. Sim-Sim Company has historically reported uncollectible accounts expense of 5% of sales
in each quarter. For the year 2023, the entity followed the same procedure in the three
quarters of the year. However, in the fourth quarter, the entity determined that uncollectible
accounts expense for the entire year should be P220,000. Sales in each quarter were as
follows:

1st quarter sales 1,000,000

2nd quarter sales 700,000
3rd quarter sales 1,200,000
4th quarter sales 2,000,000

What amount of uncollectible accounts expense should be recognized for the last quarter
of 2023?
A. 220,000 B. 100,000 C. 75,000 D. 55,000

Use the following information for the next two items:

Bubbles Company prepares quarterly interim financial reports. The entity sells household
appliances and normally 5% of customers claim on their warranty. The provision in the first quarter
was calculated at 5% of sales to date which amounted to P5,000,000. However, in the second
quarter, a design fault was found and warranty claims were expected to be 10% for the whole
year. Sales for the second quarter amounted to P7,500,000.

13. What amount of provision should be charged in the interim income statement for the first
quarter?
A. 250,000 B. 312,500 C. 500,000 D. 625,000

14. What amount of provision should be charged in the interim income statement for the
second quarter?
A. 1,000,000 B. 750,000 C. 500,000 D. 375,000

2|P a g e RSORIANO/BVILLALUZ/JBAUTISTA/JABIERA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

15. Hidalgo Company is preparing interim financial statements for the first quarter ended
March 31, 2023. Expenses in the first quarter totaled P8,000,000 of which 25% was
variable. The fixed expenses included advertising expense of P3,000,000 representing
airtime to be incurred evenly during 2023, and depreciation expense of P1,200,000 for
2023 for a machinery that was available for use on March 1, 2023. What amount should
be reported as total expenses in the first quarter ended March 31, 2023?
A. 8,000,000 B. 5,750,000 C. 4,670,000 D. 4,650,000

16. MC Cabrera Company provided the following information for the first quarter:

Loss from typhoon P400,000

Insurance for the calendar year 100,000
Loss on inventory writedown 50,000
Property taxes for the calendar year 250,000
Advertising of a new product 150,000
Depreciation expense for the calendar year 300,000
Year-end bonuses to employees 600,000
Ordinary repairs to machinery 75,000

What total amount of expenses should be reported in the first quarter?

A. 837,500 B. 875,000 C. 987,500 D. 1,175,000

Use the following information for the next two items:

Black Tykes Company, a calendar year entity, reported the following pre-tax income and effective
tax rate for the first three quarters of the year 2020:

Pre-tax Effective tax

income rate
1st quarter 300,000 30%
2nd quarter 350,000 30%
3rd quarter 400,000 32%

17. What is the income tax expense for the second quarter?
A. 195,000 B. 118,000 C. 112,000 D. 105,000

18. What is the income tax expense for the third quarter?
A. 336,000 B. 141,000 C. 128,000 D. 112,000

Baby Ama Company has a financial reporting year that begins July 1, 2023 and ends on June 30,
2024. The tax year ends every December 31. The entity reported the following quarterly income
for financial reporting:

1st quarter 2,000,000

2nd quarter 3,000,000
3rd quarter 5,000,000
4th quarter 8,000,000

The annual effective tax rate is 30% for 2023 and 32% for 2024.

19. What is the total income tax expense for the year ended June 30, 2024?
A. 5,760,000 B. 5,660,000 C. 5,400,000 D. 4,160,000

3|P a g e RSORIANO/BVILLALUZ/JBAUTISTA/JABIERA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Trickster Company prepared the following income statement for the year ended December 31,
2023:

Sales 3,000,000
Cost of goods sold (1,400,000)
Gross profit 1,600,000
Gain on sale of equipment 50,000
Operating expenses (250,000)
Casualty loss due to fire (150,000)
Pre-tax income 1,250,000
Income tax expense (375,000)
Net income 875,000

Additional information:
• Third quarter sales were 30% of total sales.
• For interim reporting purposes, a gross profit rate of 40% can be justified.
• Variable operating expenses are allocated in the same proportion as sales.
• Fixed operating expenses are allocated based on passage of time.
• Of the total operating expenses, P200,000 relate to variable expenses and the remainder
relate to fixed expenses.
• The equipment was sold on June 1, 2023.
• The fire casualty loss occurred on September 1, 2023.

20. What amount should be reported as pre-tax income for the third quarter ended September
30, 2023?
A. 137,500 B. 150,000 C. 187,500 D. 250,000

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4|P a g e RSORIANO/BVILLALUZ/JBAUTISTA/JABIERA