ACT1104-INTERMEDIATE ACCOUNTING, Part 1

Final Period Quiz No. 6

1. On December 1, 2022, Boyd Co. purchased a P400,000 tract of land for a factory site. Boyd razed an old
building on the property and sold the materials it salvaged from the demolition. Boyd incurred additional costs
and realized salvage proceeds during December 2022 as follows: Demolition of old building P50,000; Legal fees
for purchase contract and recording ownership 10,000;Title guarantee insurance 12,000; Proceeds from sale of
salvaged materials 8,000. In its December 31, 2022 balance sheet, Boyd should report a balance in the land
account of
a. P464,000
b. P460,000
c. P442,000
d. P422,000

2. Turtle Co. purchased equipment on January 2, 2022, for P50,000. The equipment had an estimated five-year
service life. Turtle’s policy for five-year assets is to use the 200% double-declining depreciation method for the
first two years of the asset’s life, and then switch to the straight-line depreciation method. In its December 31,
2024 balance sheet, what amount should Turtle report as accumulated depreciation for equipment?
a. P30,000
b. P38,000
c. P39,200
d. P42,000

3. Nanki Corporation purchased equipment on 1/1/19 for P650,000. In 2019 and 2020, Nanki depreciated the
asset on a straight-line basis with an estimated useful life of 8 years and a P10,000 residual value. In 2021, due
to changes in technology, Nanki revised the useful life to a total of six years with no residual value. What
depreciation would Nanki record for the year 2021 on this equipment?
a. P108,333
b. P106,667
c. P122,500
d. None of the above is correct.
Depreciation for 2yrs (2021 & 20220 using straight line method
Yearly depreciation: (650,000-10,000)/8yrs=80,000/yr
2019: 80,000 + 2020: 80,000 = Php160,000
NBV, end of 2020: 650,000-160,000= 490,000
Remaining life
Revised total life 6 yrs
(-) expired life (2019&2020) 2 yrs
-------
Remaining life, beg 2020, end 2021 4 yrs
====
Yearly depreciation starting 2021
= 490,000/4 yrs
= 122,500/yr

4. On January 1, 2021, ABC Co sold equipment with a historical cost of P12,000,000 and accumulated
depreciation of P7,000,000 in exchange for cash of P100,000 and a noninterest-bearing note receivable of
P4,000,000 due in 4 equal installments starting on January 1, 2021 and every January 1 thereafter. The
prevailing rate of interest for this type of note is 12%.How much is the interest income in 2021?
a. 408,230 b. 278,334 c. 328,964 d. 288,220

5. Refer to No. 4, How much is the carrying amount of receivable on December 31, 2021?
a. 1,690,510 b. 892,857 c. 2,690,051 d. 1,594,388

6. Refer to No. 4, How much is the carrying amount of the receivable on January 1, 2023?
 a. 892,857 b. 3,380,102 c. 6,074,699 d. 6,000,000

7. FC258 Co. build an item of plant manufacturing division. The costs incurred for the construction of the plant
are as follows:

Contractors’ cost, P20,000; Direct materials and labor used in the construction, P8,000,0000; Engineering and
technical overheads, P2,000,000; interest cost incurred to finance construction, P1,000,000 and general
administrative cost allocated, P1,500,000.

Of the direct materials and labor used, P1,500,000 is attributed to inefficiencies caused by a labor strike.

During a construction of the asset, FC258 Co. entered into an incidental operation wherein the company uses the
vacant plant site as parking lot. Total revenue from the parking lot was P125,000 and related cost incurred was
P10,000.

At what amount should the manufacturing plant be initially recorded?

a. 29,500,000
b. 31,100,000
c. 32,600,000
d. 34,100,000

8. On December 31, 2026, CCU257 traded equipment with the original cost of P400,000 and accumulated
depreciation of P160,000 for another equipment. In addition, CCU257 received P20,000 cash in connection with
this exchange. The exchange transaction lacks the necessary commercial substance. What amount of gain
should the company recognize assuming the fair value of the asset received is P240,000?
a. None
b. 20,000
c. 40,000
d. 60,000

Cutter Enterprises purchased equipment for P72,000 on January 1, 2021. The equipment is expected to have a
five-year life and a residual value of P6,000.

9. Using the double-declining balance method, depreciation for 2022 would be:
a. P28,800.
b. P18,240.
c. P17,280.
d. None of the above is correct

10. Using the sum-of-the-years'-digits method, depreciation for 2022 and book value at December 31, 2022
would be:
a. P19,200 and P30,800.
b. P17,600 and P26,400.
c. P19,200 and P28,800.
d. P17,600 and P32,400.

11. Grab Manufacturing Co. purchased a ten-ton draw press at a cost of P180,000 with terms of 5/15, n/45.
Payment was made within the discount period. Shipping costs were P4,600, which included P200 for insurance
in transit. Installation costs totaled P12,000, which included P4,000 for taking out a section of a wall and
rebuilding it because the press was too large for the doorway. The capitalized cost of the ten-ton draw press is:
 a. P171,000.
b. P183,600.
c. P187,600.
d. P185,760.

12. On December 1, 2024, Boyd Co. purchased a P400,000 tract of land for a factory site. Boyd razed an old
building on the property and sold the materials it salvaged from the demolition. Boyd incurred additional costs
and realized salvage proceeds during December 2024 as follows: Demolition of old building P50,000; Legal fees
for purchase contract and recording ownership 10,000;Title guarantee insurance 12,000; Proceeds from sale of
salvaged materials 8,000. In its December 31, 2024 balance sheet, Boyd should report a balance in the land
account of
a. P464,000
b. P460,000
c. P442,000
d. P422,000

13. Turtle Co. purchased equipment on January 2, 2022, for P50,000. The equipment had an estimated five-year
service life. Turtle’s policy for five-year assets is to use the 200% double-declining depreciation method for the
first two years of the asset’s life, and then switch to the straight-line depreciation method. In its December 31,
2024 balance sheet, what amount should Turtle report as accumulated depreciation for equipment?
a. P30,000
b. P38,000
c. P39,200
d. P42,000

14. Nanki Corporation purchased equipment on 1/1/19 for P650,000. In 2019 and 2020, Nanki depreciated the
asset on a straight-line basis with an estimated useful life of 8 years and a P10,000 residual value. In 2021, due
to changes in technology, Nanki revised the useful life to a total of six years with no residual value. What
depreciation would Nanki record for the year 20x1 on this equipment?
a. P108,333
b. P106,667
c. P122,500
d. None of the above is correct.

15. On July 1, EC purchased as a long-term investment P500,000 face amount, 8% bonds of Rand Corp for
P461,500 to yield 10% per year. The bonds pay interest semiannually on January 1 and July 1. In its December
31, balance sheet, EC should report interest receivable of
a. 18,460 b. 20,000 c. 23,075 d. 25,000

16. On July 1, 2015, YC purchased as investment measured at amortized cost P1,000,000 of Park, Inc.’s 8%
bonds for P946,000, including accrued interest of P40,000. The bonds were purchased to yield 10% interest. The
bonds mature on January 1, 2022, and pay interest annually on January 1. In its December 31, 2015, balance
sheet, what amount should YC report as investment in bonds?
a. 911,300 b. 916,600 c. 953,300 d. 960,600
17. JC Corp purchased bonds at a discount of P10,000. Subsequently, JC sold these bonds at a premium of
P14,000. During the period that JC held this investment, amortization of the discount amounted to P2,000. What
amount should JC report as gain on the sale of bonds?
a. 12,000 b. 22,000 c. 24,000 d. 26,000

18. On July 2, 2013, Wynn, Inc. purchased as a short-term investment a P1,000,000 face value Kean Co. 8%
bond for P910,000 plus accrued interest to yield 10%. The bonds mature on January 1, 2010, pay interest
annually on January 1, and are classified as held for trading securities. On December 31, 2013, the bonds had a
fair value of P945,000. On February 13, 2014, Wynn sold the bonds for P920,000. In its December 31, 2013
balance sheet, what amount should Wynn report for short-term investments in held for trading debt securities?
a. 910,000 b. 920,000 c. 945,000 d. 950,000

19. MC purchased the following portfolio of held for trading securities during 2012 and reported the following
balances at December 31, 20x2. No sales occurred during 2012. All declines are considered to be temporary.

SECURITY COST FAIR VALUE AT 12/31/20X2

X 80,000 82,000
Y 140,000 132,000
Z 32,000 28,000

The carrying value of the portfolio at December 31, 20x2, on MC’s balance sheet would be
a. 222,000 b. 240,000 c. 242,000 d. 252,000

20. MCo purchased the following portfolio of fair value through other comprehensive income securities during
2022 and reported the following balances at December 31, 2022. No sales occurred during 2022. All declines are
considered to be temporary.

SECURITY COST FAIR VALUE AT 12/31/2022

X 80,000 82,000
Y 140,000 132,000
Z 32,000 28,000

MCo should report what amount related to the securities transactions in its 2022 profit or loss?
a. 0
b. 2,000 unrealized loss
c. 10,000 unrealized loss
d. 12,000 unrealized loss

21. Walsh Inc, began business on January 1, 2022, and at December 31, 2022, Walsh had the following
investment portfolios of equity securities:
FVPL FVOCI
AGGREGATE COST 150,000 225,000
AGGREGATE FAIR VALUE 120,000 185,000

None of the declines are judged to be temporary. Unrealized losses at December 31, 2022, should be recorded
with corresponding charges against
PROFIT OR LOSS EQUITY
A 70,000 0
B 40,000 30,000
C 30,000 40,000
D 0 70,000
22. The following data pertains to Tynne Co.’s investments in marketable equity securities

COST FV 12/31/23 FV 12/31/22

FVPL 150,000 155,000 100,000
FVOCI 150,000 130,000 120,000

What amount should Tyne report as unrealized holding gain in its 2023 income statement?
a. 50,000 b. 55,000 c. 60,000 d. 65,000

23. Refer to No. 22, What amount should Tyne report as unrealized loss on marketable equity securities at
December 31, 20x3 in accumulated other comprehensive income in stockholders’ equity?
a. 0 b. 10,000 c. 15,000 d. 20,000

24. Austere Co. owns 20% of Severe, Inc.’s ordinary shares. Severe also has an outstanding cumulative 6%
preference shares of P8,000,000. None of those preference shares is held by Austere. Cumulative preference
share dividends are in arrears for 3 years. Severe reported year-end profit of P4,000,000 and declared no
dividends.

How much is Austere Co. share in the profit or loss of associate?

a. 704,000
b. 800,000
c. 512,000
d. 770,000

25. Refer to No. 24. What if Severe Co. declared dividends that pay all of the dividends that pay all of the
dividends in arrears on preference shares, how much is the share in profit or loss of associate?
a. 704,000
b. 800,000
c. 512,000
d. 770,000

26. Refer to No. 24, What if the preference shares are non-cumulative, how much is the share in profit or loss of
associate?
a. 704,000
b. 800,000
c. 512,000
d. 770,000

27. Refer to No. 24, What if the shares are redeemable preference shares and Severe declared P150,000 cash
dividends on the redeemable preference shares during the year, how much is the share in profit or loss of
associate?
a. 704,000
b. 800,000
c. 512,000
d. 770,00

28. On January 1, 2021, ABC Co sold equipment with a historical cost of P12,000,000 and accumulated
depreciation of P7,000,000 in exchange for cash of P100,000 and a noninterest-bearing note receivable of
P4,000,000 due in 4 equal installments starting on January 1, 2021 and every January 1 thereafter. The
prevailing rate of interest for this type of note is 12%.How much is the interest income in 2021?
a. 408,230 b. 278,334 c. 328,964 d. 288,220

29. Refer to No. 28, How much is the carrying amount of receivable on December 31, 2021?
a. 1,690,510 b. 892,857 c. 2,690,051 d. 1,594,388

30. Refer to No. 28, How much is the carrying amount of the receivable on January 1, 2023?
a. 892,857 b. 3,380,102 c. 6,074,699 d. 6,000,000

Listless Co. owns 20% of Weak Inc. and uses the equity method. In 2021, Weak sells inventory to Listless for
P400,000 with a 60% gross profit on the transaction. The inventory remains unsold during 2021 and was sold by
Listless to external parties only in 2022. Listless income tax rate is 30%. Weak reports profit of P4,000,000 and
P4,800,000 on December 31, 2021 and 2022, respectively.

31. How much is the share in the profit of associate in 2021?

a. 766,400
b. 752,000
c. 785,600
d. 800,000
Reported Profit-2021 Php4,000,000
Less: gross profit on intercompany transaction , net of 30% tax
400,000 x 60% x 70% 168,000
--------------------
3,832,000
X % of ownership 20%
-------------------
Share in profit of associate 766,400
============
32. How much is the share in the profit of associate in 2022?
a. 960,000
b. 974,400
c. 933,600
d. 1,008,000
Reported profit in 2022 Php4,500,000
+ Sold intercompany transactions 168,000
-------------------
Php4,668,000
X % of ownership 20%
-------------------
Share in profit of associate Php 933,600
===========
33. On January 1, 2021, Nana Company paid P100,000 for 8,000 shares of Papa Company common stock.
These securities were classified as trading securities. The ownership in Papa Company is 10%. Papa reported
net income of P52,000 for the year ended December 31, 2021. The fair value of the Papa stock on that date was
P45 per share. What amount will be reported in the balance sheet of Nana Company for the investment in Papa
at December 31, 2021?
a. P284,400.
b. P300,000.
c. P315,600.
 d. P360,000.

Cutter Enterprises purchased equipment for P72,000 on January 1, 2021. The equipment is expected to have a
five-year life and a residual value of P6,000.

34. Using the double-declining balance method, depreciation for 2022 would be:
a. P28,800.
b. P18,240.
c. P17,280.
d. None of the above is correct

35. Using the sum-of-the-years'-digits method, depreciation for 2022 and book value at December 31, 2022
would be:
a. P19,200 and P30,800.
b. P17,600 and P26,400.
c. P19,200 and P28,800.
d. P17,600 and P32,400.

Use the following information for the next three items

On 31 December 2022, IC showed the following current assets

Cash Php 3,200,000

Accounts receivable 2,500,000
Inventory 2,000,000
Prepaid expenses 100,000
Total Current Assets 7,800,000

Cash on hand, including postdated check of P50,000 and employees IOUs Php 500,000
P50,000
Cash in bank per bank statement (Outstanding Checks on 31 December 2,700,000
2017, P200,000)
Total Cash 3,200,000

Customers’ debit balances, net of customer deposit of P50,000 Php 1,900,000

Allowance for doubtful accounts (150,000)
Sales price of goods invoiced to customers at 150% of cost on 29 750,000
December 2017 but delivered on 5 January 2018 and excluded from
reported inventory
Total accounts receivable 2,500,000

36. What is the adjusted cash balance?

a. 2,900,000 b. 2,950,000 c. 2,500,000 d. 3,200,000
Cash on hand (500,000-50,000-50,000) 400,000
Adjusted bank balance (2,700,000-200,000) 2,500,000
--------------
2,900,000
========

37. What is the adjusted balance of receivables?

a. 1,950,000 b. 1,850,000 c. 2,000,000 d. 1,800,000
Customer’s debit balances (1,900,000+50,000) 1,950,000
Customer’s post dated check 50,000
--------------
 2,000,000
========

38. What is the adjusted inventory?

a. 1,500,000 c. 2,500,000 c. 2,000,000 d. 2,750,000
Unadjusted inventory balance 2,000,000
Sales delivered in Jan 5, excluded in inventory
750,000/150% 500,000
-------------
2,500,000
========
+

Use the following information for the next four items:

Chris Company presented the following bank reconciliation for the month of November:
Balance per bank statement, November 30 Php 3,600,000
Add: Deposit in Transit 800,000
Less: Outstanding Checks Php 1,200,000
Bank credit recorded in error 200,000 1,400,000
Balance per book, November 30 3,000,000

Data per bank statement for the month of December are as follows:
December deposits, including note collected of P1,000,000 for Chris Php 5,500,000
December disbursements, including NSF customer check P350,000 and
service charge P50,000 4,400,000

 All items that were outstanding on November 30 were cleared through the bank in December, including
the bank credit
 Checks amounting to P500,000 were outstanding and deposits of P700,000 were in transit on 31on
December 31
39. What is the adjusted cash in bank on December 31
a. 4,700,000 b. 4,500,000 c. 4,900,000 d. 3,200,000

40. What is the cash balance per ledger in 31 December?

a. 4,100,000 b. 4,700,000 c. 4,900,000 d. 4,300,000

41. What is the amount of cash receipts per book in December?

a. 5,400,000 b. 5,500,000 c. 4,400,000 d. 6,400,000

42. What is the amount of cash disbursement per book in December?

a. 3,700,000 b. 3,100,000 c. 3,300,000 d. 3,500,000

Use the following information for the next three items:

Germo Company started business at the beginning of the current year. The entity established an allowance for
doubtful accounts estimated at 5% of credit sales. During the year, the entity wrote off P50,000 of uncollectible
accounts.
Further analysis showed that the merchandise purchased amounted to P9,000,000 and ending merchandise
inventory was P1,500,000. Goods were sold at 40% above cost. The total sales comprised 80% sales on
account and 20% cash sales. Total collections from customers, excluding cash sales, amounted to P6,000,000.

43. What is the cost of goods sold?

a. 7,500,000 b. 3,600,000 c. 5,400,000 d. 6,900,000

44. What is the amount of sales on account?

a. 10,500,000 b. 12,000,000 c. 18,750,000 d. 8,400,000

45. What is the net realizable value of accounts receivable at year-end?

a. 1,980,000 b. 1,930,000 c. 2,350,000 d. 2,400,000

Use the following information for the next four items

On 31 December 2022, BC assigned specific accounts receivable amounting to P4,000,000 as collateral on
P3,000,000, 12% note from certain bank. The company will continue to collect the assigned receivable. In
addition to the interest of the note, the bank also charged a 5% finance fee deducted in advance on the
P3,000,000 value of the note.

The December collections of assigned accounts receivable amounted to P2,000,000 less cash discount of
P100,000. On 31 December 2022, the entity remitted the collections to the bank in payment for the interest
accrued on 31 December 2022 and the note payable.

The entity accepted the sales returns of P150,000 on the assigned accounts and wrote off assigned accounts of
P200,000.

46. What amount of cash was received from the assignment of accounts receivable on 31 December 2022?
a. 4,000,000 b. 3,800,000 c. 3,000,000 d. 2,850,000

47. What is the carrying amount on note payable on 31 December 2022?

a. 1,000,000 b. 1,130,000 c. 1,100,000 d. 1,460,000

48. What is the balance of accounts receivable-assigned on 31 December 2022?

a. 2,100,000 b. 1,650,000 c. 2,000,000 d. 1,850,000

49. What amount should be disclosed as the equity of BC in assigned accounts on 31 December 2022?
a. 550,000 b. 520,000 c. 870,000 d. 970,000

Use the following information for the next two items

DC sold accounts receivable without recourse with face amount of P6,000,000. The factor charged 15%
commission on all accounts receivable factored and withheld 10% of the accounts factored as protection against
customer returns and other adjustments.

The entity had previously established an allowance for doubtful accounts of P200,000 for these accounts. By
year-end, the entity had collected the factor’s holdback there being no customer returns and other adjustments.

50. What amount of cash was initially received from factoring?

a. 4,500,000 b. 5,100,000 c. 5,400,000 d. 6,000,000

51. What is the loss on factoring?

a. 700,000 b. 200,000 c. 900,000 d. 0

Use the following information for the next two items

RC accepted from a customer a P4,000,000, 90-day, 12% interest-bearing note dated 31 August 2023. On 30
September 2023, the entity discounted the note with recourse at Abank at 15%.
However, the proceeds were note received until 1 October 2023. The discounting with recourse is accounted for
as conditional sale with recognition of a contingent liability.

52. What is the amount received form the discounting of note receivable?
a. 4,017,000 b. 4,103,000 c. 4,120,000 d. 3,965,000

53. What is the loss on note receivable financing?

a. 40,000 b. 17,000 c. 23,000 d. 20,000

Use the following information for the next two items

HC sells a new product. During a move to a new location, the inventory records for the product were misplaced.
The entity has been able to gather some information for the purchases and sales records. The July purchases
are as follows:

Date Quantity Unit Cost Total Cost

5 10,000 Php 65 Php 650,000
10 12,000 70 840,000
15 15,000 60 900,000
25 14,000 55 770,000

On July 31, 17,000 units were on hand. The sales for July amount to P6,000,000 or 60,000 units at P100 per
unit. Gross profit on sales for July was P2,400,000. The entity has always used a periodic FIFO inventory
system.

54. What is the cost of the inventory on July 31?

a. 3,600,000 b. 770,000 c. 1,670,000 d. 950,000

55. What is the cost of inventory on July 1?

a. 1,390,000 b. 950,000 c. 2,400,000 d. 760,000