PRESIDENT UNIVERSITY

MIDTERM EXAMINATION
Academic Year 2021-2022
Semester 20212

Subject : INTERMEDIATE ACCOUNTING 1 (M-C

Lecturer : Mila Austria Reyes
Study Program : ACCOUNTING
Date : 27 April 2022 Room: B101 Time:

Instructions to Students :

1. This examinations consist of 2 Parts with 8 problems.

2. Time allowed for this examination is 2.5 hours (150 minutes). Use the time allotted efficient
3. Sanctions will be given to those students who are not following the examination rules.
4. All answers must be in INK. Use paper line 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 T
or correction fluid. Do not use abbreviations.
6. This is an ON-LINE examination. All answer sheets must be submitted to CLASS CAPTAIN.
captain will upload to the link set and sent to me after the examination time ends.
7. If you have questions you can ask me directly. Concentrate so you can finish on time.
8. Do not forget to write your name clearly on top of your paper.
9. WARNING: BE SURE NOT TO COPY NOR ASK YOUR CLASSMATES FOR THE ANSWE
ANYBODY CAUGHT HAVING THE SAME ANSWERS WILL AUTOMATICALLY FAIL THE S
10. READ THE INSTRUCTIONS CAREFULLY BEFORE ANSWERING EACH PROBLEM.

KEY: Read first all the requirements. Start with the problem you think is the easiest but do not forge
a space for the problems you have not solve. Your solution must be presented chronologically

PART 1
(2 hours)
Problem 1

The controller of the Lyre Company is trying to determine the amount of cash and cash equivalents
on its December 31, 2021 statement of financial position. The following information is provided:
 ● Balances in the company's accounts at the Millennial Bank International
▪ Checking account
▪ Savings account

● Undeposited customers checks

● Currency and coins on hand

● Savings account at the National Bank (This account is being used to accumulate
cash for future plant expansion in 2023

● Checking account at National Bank

● Treasury bills; 30-day maturity bills

● Treasury bills, 180 day bills

Required:
What total amount of "cash and cash equivalents" should be reported in the current asset section o
statement of financial position?

Problem 2

Presented below is a summary of the accounts of Riverbank Company on December 31, 2021:

Accounts payable
Accounts receivable, after allowance of $2,000 for uncollectible accounts
Accruals payable
Accumulated depreciation-building and equipment
Building and equipment
Cash
Finished goods
First mortgage bonds, 10% due January 1, 2026, net of discount of $3,000
Goods in process
Land
Ordinary share capital
Prepaid expenses
Raw materials
Retained earnings

Required:
Prepare a statement of financial position on December 31, 2021.

Problem 3

Norfolk Company revealed a balance of $8,200,000 in the accounts receivable control at year-end.

An analysis of the accounts receivable showed the following:

 Accounts known to be worthless
Advance payments to creditors on purchase orders
Advances to affiliated entities
Customers' accounts reporting credit balances arising from sales returns
Interest receivable on bonds
Trade accounts receivable-unassigned
Subscription receivable due in 30 days
Trade accounts receivable-assigned (Finance Company's equity in assigned
accounts is $500,000)
Trade installments receivable due 1-18 months, including unearned finance
charged of $50,000
Trade accounts receivable from officers, due currently
Trade accounts on which post dated checks are held and no entries were made
on receipt of checks
TOTAL

Required:
What amount should be reported as trade accounts receivable at year-end?

Problem 4

Hemingway Company provided the following information on December 31, 2021:

Cash in bank, net of bank overdraft of $500,000

Petty cash, unreplenished petty cash expenses, $10,000
Notes receivable
Accounts receivable, net of customers' accounts with credit balances,$1,500,000
Inventory
Bond sinking fund (related to bonds payable)
Total current assets

Accounts payable, net of suppliers' accounts with debit balances of $1,000,000

Notes payable
Bonds payable, due June 30, 2022
Accrued expenses
Total current liabilities

Required:
1. What amount should be reported as total current assets on December 31, 2021?
2. What amount should be reported as total current liabilities on December 31, 2021?

Problem 5

While checking the cash balance of London Company for March of the current year, you have rece
statement, however, the closing balance of the account was unreadable.

Attempts to contact the bank after hours did not secure the desired information.
 February 28 book balance
Note collected by the bank
Interest earned on note
NSF check of customer
Bank service charged on NSF check
Other bank service charges
Outstanding checks
Deposit of February 28 placed in night depository
Check issued by Lyndon Company charged to London Company's account

Required
What is the cash balance per bank statement?

Problem 6

Lennox Company sells a variety of imported goods. By selling on credit, Lennox Company cannot e
collect 100% of its accounts receivable. At December 31, 2020, Lenox Company reported the follo
statement of financial position:

Accounts receivable
Less: Allowance for bad debts
Accounts receivable, net

During the year ended December 31, 2021, Lennox Company earned sales revenue of $537,702,5
collected cash of $528,070,500 from customers. Assume bad debts expense for the year was 1%
revenue and that Lennox Company wrote off uncollectible accounts receivable totaling $5,439,500

Required:
1. What is the accounts receivable balance at December 31, 2021?
2. What is the December 31, 2021 balance of Allowance for Bad Debts?

PART 2

Problem 7
Multiple Choice (15 minutes)

On your answer sheet write the LETTER you think is the correct answer after each number.

1. The allowance for cash discount , which would appear as a deduction from accounts receivab
on a statement of financial position and would be based on an estimate of cash discounts to
be taken on accounts receivable is an effect of the application of the

a. consistency principle. c. materiality principle.

b. matching principle. d. revenue principle.

2. The "going concern" concept is the basis for the rule that:
 a. The cost of installing a machine should be added to the invoice cost of the machine in
the accounts.
b. The cost of intangible assets should be written off systematically over their useful lives.
c. The income statement should not include material gains and losses unrelated to normal
operations.
d. Treasury shares should not be recorded in the statement of financial position as an
asset.

3. Financial accounting information is likely to be used for all of the following types of decisions
except

a. Deciding whether to add a new product line.

b. Deciding whether dividends should be increased.
c. Deciding whether an entity should be allowed to purchase goods on a credit basis.
d. Appraising the ability of an entity to pay its debts when they mature.

4. For accounting purposes the term "current assets" is used to designate cash and other
assets or resources commonly identified as:

a. Those which can be liquidated in the normal course of business during the following
fiscal year.
b. Those which will realized in cash or sold or consumed during the normal operating
cycle of the business.
c. Those which are reasonably expected to be realized in cash, sold or consumed
during the normal operating cycle of the business.
d. Those which can be used for the payment of current liabilities or consumed during
the normal operating cycle of the business.

5. Which of the following types of losses is excluded from the determination of net income?

a. Material losses resulting from obsolete merchandise.

b. Material losses resulting from unusual sales of assets not acquired for resale.
c. Material losses resulting from adjustment specifically related to operations of prior
years.
d. Material losses resulting from the write-off of intangibles.

6. Deposit of collections intact and disbursements via checks are characteristics of the
system called

a. Kitting c. Window dressing

b. Lapping d. Imprest

7. The petty cash account is debited under imprest system

a. When the fund is established and when the size of the fund is increased.
b. When the fund is established and every time it is replenished.
c. When the fund is established, replenished and increased in size.
d. Only when the fund is established.
 8. Generally, revenues should be recognized at a point when:

a. Management decides it is appropriate to do so.

b. The product is available for sale to the ultimate consumer.
c. An exchange has taken place and the earning process is virtually complete.
d. An order for a definite amount of merchandise has bee received for shipment
FOB destination.

9. A qualitative objective which requires that financial information results should be duplicated
by independent measurer using the same measurement methods:

a. Comparability c. Consistency
b. Verifiability d. Neutrality

10. For purposes of adjusting financial statements for changes in the general level of prices,
monetary items consist of

a. Accounts receivable and accounts payable only.

b. Cash, other assets expected to be converted into cash, and current liabilities.
c. Assets and liabilities which are classified as current on the statement of financial
position.
d. Assets and liabilities whose amounts are fixed by contract or otherwise in terms of
amount regardless of price-level changes.

Problem 8 (15 minutes)

TRUE OF FALSE

Indicate whether each of the following statements is true or false.

F 1. T Financial information should be expressed in terms of everyone can understand.

T 2. T An accounting entity may or may not be a legal entity.
F 3. T The statement of financial position must be prepared on a consistent basis with prior
years' statements.
T 4. F Accounting is primarily concerned with exchange price, not values.
T. 5. T The completeness objective may require reporting of an event that happened after the
balance sheet date.
F 6. F The cash amount shown in a corporation's statement of financial position must be the balanc
reported to the corporation in the bank statement of account.
F 7. T An error made by the bank in crediting an amount to a depositor's account requires a
correcting journal entry in the depositor's own records.
F 8. T The bank reconciliation statement has as its basic purpose the disclosing of errors made
by the bank in accounting for the depositor's funds.
T 9. T Some accounting measurements are verified in the sense that another accountant using the'
same methods would arrived at the same result.
F 10.T With the establishment of an imprest petty cash fund, one person is given the authority and
responsibility for issuing checks to cover minor cash disbursement.
Y

ING 1 (M-C2)

14:00 - 16:30

otted efficiently.

r to the

Do not use TIP-X

SS CAPTAIN. The

THE ANSWERS.
Y FAIL THE SUBJECT.
OBLEM.

t do not forget to leave

hronologically.

h equivalents to be reported
provided:
 $ 540.000
884.000

208.000

23.200

350.000

800.000

600.000

800.000

sset section of the 2021

$ 45.000
50.000
8.000
30.000
70.000
16.000
20.000
47.000
6.500
20.000
50.000
2.500
34.000
39.000
 $ 100.000
400.000
1.000.000
-600.000
400.000
2.000.000
2.200.000

1.500.000

850.000
150.000

200.000
$ 8.200.000

$ 5.000.000
50.000
4.000.000
6.000.000
3.000.000
3.000.000
$ 21.050.000

$ 7.000.000
4.000.000
3.000.000
2.000.000
$ 16.000.000

you have received the bank

 $ 1.460.000
100.000
10.000
130.000
2.000
3.000
200.000
85.000
20.000

pany cannot expect to

orted the following on its

$ 2.197.500
133.500
$ 2.064.000

of $537,702,500 and
year was 1% of sales
g $5,439,500.

umber.

ounts receivable
discounts to
Solution: P-1
Balance in Millennial Bank- checking
Balance in Millennial Bank- savings
Undeposited customers checks
Currency and coins on hand
Checking account at National Bank
Treasury bills; 30-day maturity bills
Amount of Cash and Cash Equivalent

Solution P-2
Riverbank Com
Statement of Financ
December 31,
(In USDollar)
Assets

Current assets
Cash
Accounts receivable
Allowance for uncollectible accounts
Inventories
Raw materials
Goods in process
Finished goods
Prepaid expenses

Property, plant and equipment:

Land
Building and equipment
Accumulated depreciation-building and equipment
Total assets

Liabilities and shareholders' equity

Liabilities:
Current liabilities
Accounts payable
Accruals payable

Longterm liability
First mortgage bonds, 10% due January 1, 2026,
Discount
 Total liabilities
Shareholders' equity:
Ordinary share capital
Retained earnings
Total liabilities and shareholders' equity

Solution: P-3
Trade accounts receivable-unassigned
Accounts receivable-assigned
Trade installments receivalbe (850,000-50,000)
Trade receivable-officer
Trade receivable with post-dated check

Solution: P-4
1. Cash in bank, net of bank overdraft of $500,000
Petty cash, unreplenished petty cash expenses, $10,000
Notes receivable
Accounts receivable, net of customers' accounts with credit b
Inventory
Debit balance, accounts payable
Bond sinking fund
Total current assets

2 Bank overdraft
Customers' credit balances
Accounts payable, net of suppliers' accounts with debit balanc
Notes payable
Bonds payable, due June 30, 2022
Accrued expenses
Total current liabilities

Solution: P-5
Book balance, Feb. 28
Note collected by bank
Interest
NSF check
Bank charges
adjusted book balance
Outstanding checks
Bank error
Deposit in transit
Bank balance

Solution: P-6
1. A/R Jan 1, 2020
Sales
Collection
Written off
A/R Dec 31, 2021

2. Allowance for bad debts, Jan 1,

Bad Debts expense (537,702,500 x 1%)
Written off
Allowance for bad debts, Dec 31
$ 540.000
 884.000
208.000
23.200
800.000
600.000
$ 3.055.200

rbank Company
t of Financial Position
ember 31, 2021
USDollar)

16.000
52.000
-2.000 50.000

34.000
6.500
20.000 60.500
2.500 129.000

20.000
70.000
-30.000 40.000 60.000
189.000

45.000
8.000 53.000

50.000
-3.000 47.000
 100.000

50.000
39.000 89.000
189.000

$ 2.000.000
1.500.000
800.000
150.000
200.000
$ 4.650.000

$ 5.500.000
40.000
4.000.000
7.500.000
ith credit balances,$1,500,000 3.000.000
1.000.000
3.000.000
$ 24.040.000

$ 500.000
1.500.000
debit balances of $1,000,000 $ 8.000.000
4.000.000
3.000.000
2.000.000
$ 19.000.000

$ 1.460.000
100.000
10.000
 -130.000
-5.000
$ 1.435.000
200.000
-20.000
-85.000
$ 1.530.000

2.197.500
537.702.500
-528.070.500
-5.439.500
6.390.000

133.500
5.377.025
-5.439.500
71.025