Preliminary Examination (Accounting Review – Intermediate Accounting 1)

• LEE Corporation's checkbook balance on December 31, 2021, was P1,120,000. In addition, LEE
held the following items in its safe on December 31:
a. Check drawn on LEE Corporation's account, payable to a vendor, dated and recorded
December 31, but not mailed until January 15, 2022, 140,000
b. Check payable to LEE Corporation, dated January 2, 2022, not included in December 31
checkbook balance 280,000.
c. Check payable to LEE Corporation, deposited December 20, and included in December 31
checkbook balance, but returned by bank on December 30, stamped "DAIF." The check
was redeposited January 2, 2022, and cleared January 7, 56,000

1. The proper amount to be shown as cash on December 31, 2021, is?

• Consider the following information:

Balance per bank statement 1,805,000

Deposit in transit 325,000
Insufficient fund check 60,000
Outstanding checks 275,000
Bank service charge 10,000

2. What is the adjusted cash in bank?

• On September 1, DY COMPANY assigns specific receivables totaling P750,000 to Davao Bank as

collateral on a P625,000, 12% note. DY COMPANY will continue to collect the assigned accounts
receivable. Davao Bank also assesses a 2% service charge on the total accounts receivable
assigned. DY COMPANY is to make monthly payments to Davao Bank with cash collected on
assigned accounts receivable. Collections of assigned accounts during September totaled
P260,000 less cash discounts of P3,500.

3. What were the proceeds from the assignment of DY COMPANYs’ accounts

receivable on September 1?
4. What amount is owed to Davao Bank by DY COMPANY for September collections
plus accrued interest on the note to September 30?

• On January 1, TUQUIB COMPANY sells its equipment with a carrying value of P160,000. The
company receives a non-interest-bearing note due in 3 years with a face amount of P200,000.
There is no established market value for the equipment. The prevailing interest rate for a note of
this type is 12%.
The following are the present value factors of 1 at 12%:
Present value of 1 for 3 periods 0.71178
Present value of an ordinary annuity of 1 for 3 periods 2.40183

5. What is the gain or loss on the sale of equipment?

6. What is the discount on notes receivable?
 Preliminary Examination (Accounting Review – Intermediate Accounting 1)

• Riga Company provided the following information relating to inventory for the month of
December:

Units Unit Selling Price

1 Beginning 10,000 520,000
7 Purchase 30,000 1,500,000
12 Sale 20,000 90
17 Purchase 60,000 2,700,000
22 Purchase 20,000 860,000
28 Sale 70,000 90

7. Assuming the entity used the periodic system, what is the Cost of Goods Sold
under the FIFO method?

• Winter Company provided the following inventory data at year-end:

Cost NRV
Skis 2,200,000 2,500,000
Boots 1,700,000 1,500,000
Ski equipment 700,000 800,000
Ski apparel 400,000 500,000

8. What amount should be reported as inventory at year-end?

• Carmela Company acquired a financial instrument for P4, 000,000 on March 31. The financial
instrument is classified as financial asset at fair value through other comprehensive income. The
direct acquisition cost incurred amounted to P700, 000. On December 31, the fair value of the
instrument was P5, 500,000 and transaction costs that would be incurred on the sale of the
investment are estimated at P600, 000.

9. What gain or loss would be recognized in other comprehensive income for the year
ended December 31?

• On January1, 2020, Agusan Company purchased bonds with face value of P5, 000,000 to be held
as “available for sale”. The entity paid P4, 600,000 plus transaction costs of P142, 000. The bonds
mature on December 31, 2022, and pay 6% interest annually on December 31 each year with 8%
effective yield. The bonds are quoted at 105 on December 31, 2020 and 110 on December 31,
2021.

10. What amount of cumulative unrealized gain on these bonds should be reported in
the 2021 statement of changes in equity?
 Preliminary Examination (Accounting Review – Intermediate Accounting 1)

• On January 1 of the current year, DELILAH Company acquired 10,000 shares of Fair value through
other comprehensive income securities of SAMUEL Company at P200,000 plus brokerage expense
of P10,000. On March 1, of the current year, SAMUEL Company ordinary share was split on a 5-
for-2 basis. On October 1, SAMUEL Company made a special assessment of P1.60 per share on all
ordinary shareholders. DELILAH Company accordingly paid the assessment. The fair value
amounted to P15 per share.

11. What is the total number of shares at the end of the year?

• On January 1, 2022, Mimi Company acquired 40% outstanding shares of Viy Company for P4 500
000.The fair value and carrying amount of the identifiable assets are equal. The investor sold
equipment costing P200 000 to associate for P500 000 with a remaining useful life of 3 years
Company reported P6 000 000 net income and P1 000 000 cash dividends paid.

12. What is the investor’s share in the profit of associate for 2022?