Interim Exam Questionnaire - Solution Manual

INTERIM ASSESSMENT
BAFACR33/INTERMEDIATE ACCOUNTING 3
Instructions: Choose the correct answer.
Part I. Multiple Choice Theory
1. The objective of PAS 1 Presentation of Financial Statements is?

a. To provide the basic principles in the presentation of general-purpose financial statements to improve comparability.
b. To provide the basic principles in the presentation of general and special purpose financial statements to improve comparability.
c. To provide the basic principles in the presentation of general-purpose financial statements to improve consistency.
d. All of these.
2. The heading of a financial statement most likely will not include

a. The name of the reporting entity.
b. The title of the financial statement.
c. The date of the financial statement.
d. The name(s) of the business owner(s).
3. According to PAS 1, an asset shall be classified as current when it satisfies any of the following criteria except
a. It is expected to be realized in or is intended for sale or consumption in, the entity’s normal operating cycle.
b. It is held primarily for the purpose of being traded.
c. It is expected to be realized within twelve months after the balance sheet date.
d. It is cash or cash equivalents that are restricted.
4. A liability shall be classified as current when it satisfies any of the following criteria, except
a. It is expected to be settled in the entity’s normal operating cycle.
b. It is held primarily for the purpose of being traded.
c. It is due to be settled within twelve months after the balance sheet date.
d. The entity has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.
5. Material omissions or misstatements of items are material if they could, individually or collectively; influence the economic decisions
of users taken based on the financial statements. Materiality depends on
a. The peso amount and degree of financial consequence of the omission or misstatement judged in the surrounding circumstances.
b. The size and peso amount of the omission or misstatement judged in the surrounding circumstances.
c. The peso amount and nature of the omission but not the misstatement judged in the surrounding circumstances.
d. The size and nature of the omission or misstatement judged in the surrounding circumstances.
6. In the extremely rare circumstances in which management concludes that compliance with a requirement in a Standard or an
Interpretation would be so misleading that it would conflict with the objective of financial statements set out in the Framework, the
entity shall depart from that requirement in the manner set under PAS 1. When an entity departs from a requirement of a Standard or
an Interpretation, it shall disclose: (choose the incorrect statement)
a. that management has concluded that the financial statements present fairly the entity’s financial position, financial performance,
and cash flows.
b. that it has complied with applicable Standards and Interpretations, except that it has departed from a particular requirement to
achieve a fair presentation.
c. that it has complied with applicable standards other than those issued by FRSC or IASB and the description of those accounting
standards to which the entity has complied.
d. the title of the Standard or Interpretation from which the entity has departed, the nature of the departure, including the treatment
that the Standard or Interpretation would require, the reason why that treatment would be so misleading in the circumstances that
it would conflict with the objective of financial statements set out in the Framework and the treatment adopted; and
e. for each period presented, the financial impact of the departure on each item in the financial statements that would have been
reported in complying with the requirement.
7. Identify the incorrect statement.

a. When an entity has departed from a requirement of a Standard or an Interpretation in a prior period, and that departure affects the
amounts recognized in the financial statements for the current period, it shall disclose the (a) title of the Standard or
Interpretation from which the entity has departed and the (b) impact of such departure.
b. In the extremely rare circumstances in which management concludes that compliance with a requirement in a Standard or an
Interpretation would be so misleading that it would conflict with the objective of financial statements set out in the Framework,
but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible,
reduce the perceived misleading aspects of compliance by disclosing:(a) the title of the Standard or Interpretation in question and
(b) for each period presented, the adjustments to each item in the financial statements that management has concluded would be
necessary to achieve a fair presentation.
c. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to
cease trading or has no realistic alternative but to do so.
d. PAS 1 requires an entity preparing financial statements, to make an assessment of the entity’s ability to continue as a going
concern. In assessing whether the going concern assumption is appropriate, management takes into account all available
information about the future, which is at least, but is not limited to, five years from the balance sheet date.
8. Identify the incorrect statement.

a. The final stage in the process of aggregation and classification is the presentation of condensed and classified data, which form
line items on the face of the financial statements.
b. PAS 1 sometimes uses the term ‘disclosure’ in a broad sense, encompassing items presented on the face of the balance sheet,
statement of profit or loss and other comprehensive income, statement of changes in equity and cash flow statement, as well as in
the notes.
c. Applying the concept of materiality means that a specific disclosure requirement in a Standard or an Interpretation need not be
satisfied if the information is not material.
d. An entity shall prepare its financial statements, including cash flow information, using the accrual basis of accounting.
e. PAS 1 requires an entity presenting its current year financial statements to also present its financial statements for the previous
year.
9. You are a CPA. Your client asked you for advice regarding the items that are presented as other comprehensive income. You will tell
your client to refer to which of the following standards?
Prepared by: Rhen Marct T. Beja Approved by: Arnel A. Villamin
FACULTY PROGRAM CHAIR – (SABM)
INTERIM ASSESSMENT
a. PAS 1
b. PFRS 1
c. PFRS 15
d. PAS 8
10. As used in accounting parlance, PFRS stands for

a. Philippine Accounting Standards.
b. Philippine Financial Accounting Standards.
c. Philippine Financial Reporting Standards.
d. Palabok, Fried Chicken, Rice, and Sprite.
e. All of the above
11. Who is responsible for an entity’s financial statements?

a. Management
b. External Auditor
c. Bookkeeper
d. Accountant
12. What does PAS 1 say about the presentation of the extraordinary items in the statement of profit or loss and other comprehensive
income or in the notes?
a. PAS 1 allows the presentation of extraordinary items in the statement of profit or loss and other comprehensive income.
b. PAS 1 prohibits the presentation of extraordinary items in the statement of profit or loss and other comprehensive income or in
the notes.
c. PAS 1 prohibits the presentation of extraordinary items only in the statement of profit or loss and other comprehensive income.
d. PAS 1 allows the presentation of extraordinary items only in the statement of profit or loss and other comprehensive income.
13. In a classified statement of financial position, PAS 1 Presentation of Financial Statements requires deferred tax assets and deferred tax
liabilities to be presented as
a. Current items
b. Non-current items
c. Either a or b
d. None of these items
14. Which of the following is considered revenue?

a. gain on the sale of equipment
b. service fees
c. other income
d. other comprehensive income
15. In a two-statement presentation, information on profit or loss and other comprehensive income is shown
a. in two separate statements, a statement of profit or loss and a statement showing other comprehensive income.
b. in two separate statements, a statement of profit or loss and an income statement.
c. in two separate statements, a single-step statement, and a multi-step statement.
d. in a single statement called “statement of comprehensive income.”
Part II. Multiple Choice Problems
16. The Ledger of MONKEY D. LUFFY Co. as of December 31, 2021, includes the following:

INTERIM ASSESSMENT
Assets
Cash 10,000
Trade accounts receivable (net of ₱10,000 credit balance in

accounts) 40,000
Held for trading securities 80,000
Financial assets designated at FVPL 30,000
Investment in equity securities at FVOCI 70,000
Investment in bonds measured at amortized cost (due in 3 years) 60,000
Prepaid assets 10,000
Deferred tax asset (expected to reverse in 2022) 12,000
Investment in Associate 36,000
Investment property 46,000
Sinking fund 38,000
Property, plant, and equipment 100,000
Goodwill 28,000
Totals 560,000
How much is the total current assets?

a. 220,000
b. 180,000
c. 175,000
d. 164,000
Solution:
Current assets
Cash 10,000
Trade accounts receivable (40,000 + 10,000) 50,000
Total current assets 180,000
17. The Ledger of ZORO Co. as of December 31, 2021, includes the following:
Liabilities
Bank Overdraft 10,000
Trade accounts payable (net of ₱10,000 debit balance in

accounts) 40,000
Notes payable (due in 20 semi-annual payments of ₱4,000) 80,000
Interest payable 30,000
Bonds payable (due on March 31, 2022) 70,000
Discount on bonds payable (30,000)
Dividends payable 10,000
Share dividends payable 12,000
Deferred tax liability (expected to reverse in 2022) 36,000

INTERIM ASSESSMENT
Income tax payable 44,000
Contingent liability 100,000
Reserve for contingencies 28,000
Totals 430,000
How much is the total current liabilities?

a. 192,000
b. 186,000
c. 212,000
d. 187,000
Solution:
Current liabilities
Bank overdraft 10,000

Trade accounts payable (P40,000 + P10,000) 50,000
Notes payable (P4,000 semi-annual instalment x 2) 8,000
Bonds payable (due on March 31, 20x2) 70,000
Discount on bonds payable (30,000)
Dividends payable 10,000
Total current liabilities 192,000
18. The Ledger of BARATIE Co. in 2021 includes the following:
Share capital 200,000
Share premium 40,000
Retained earnings, appropriated 36,000
Retained earnings, unappropriated 84,000
Revaluation surplus 60,000
Remeasurements of the net defined benefit liability (asset) - gain 30,000
Cumulative net unrealized gain on fair value changes of investment
in FVOCI 46,000
The effective portion of losses on hedging instruments in a cash
flow hedge 20,000
10,00
Cumulative translation loss on foreign operation 0

INTERIM ASSESSMENT
Treasury shares, at cost 26,000
How much is the Shareholder’s Equity?
a. 460,000
b. 440,000
c. 420,000
d. 390,000
19. USOPP Co. was incorporated on January 1, 2021. The following were the transactions during the year:
- Total consideration from share issuances amounted to ₱2,000,000.
- A land and building were acquired through a lump sum payment of ₱400,000. A mortgage amounting
to ₱100,000 was assumed on the land and building.
- Total payments of ₱80,000 were made during the year on the mortgage assumed on the land and
building, The payments are inclusive of interest amounting to ₱10,000.
- Additional capital of ₱200,000 was obtained through bank loans. None of the bank loans were paid
during the year. Half of the bank loans required a secondary mortgage on the land and building.
- There is no accrued interest as of year-end.
- Dividends declared during the year but remained unpaid amounted to ₱60,000.
- No other transactions during the year affected liabilities.
- Retained earnings as of December 31, 2021, is ,₱120,000.
How much is the profit for the year?
a. 120,000
b. 160,000
c. 180,000
d. 220,000
Retained earnings
- Jan. 1, 2021
Dividends 60,000 180,000 Profit for the year (squeeze)
Dec. 31, 20x1 120,000
20. The
Cash 200,000 ledger
of
Accounts receivable 400,000
Inventory 1,000,000
Accounts payable 300,000
Note payable 100,000
BUGGY Co. in 2021 includes the following:
During the audit of BUGGY’s 2021 financial statements, the following were noted by the auditor:
-Cash sales in 2022 amounting to ₱20,000 were inadvertently included as sales in 2021. BUGGY recognized a gross profit of ₱6,000
on the sales.
-A collection of ₱40,000 accounts receivable in 20x2 was recorded as a collection in 2021. A cash discount of ₱2,000 was given to the
customer.
-During January 2022, a short-term bank loan of ₱50,000 obtained in 2021 was paid together with ₱5,000 interest accruing in January
2022. The payment transaction in 2022 was inadvertently included as a 2021 transaction.
How much is the adjusted working capital as of December 31, 2021?
a. 1,651,000
b. 1,014,000
c. 1,450,000
d. 1,201,000

INTERIM ASSESSMENT
Solution:
The adjusted balance of cash is computed as follows:
Cash (unadjusted) 200,000
Cash sales in 20x2 recorded as 20x1 sale (20,000)
Collection of account in 20x2 recorded as 20x1 collection
(40,000 account less 2,000 cash discount) (38,000)
Loan payment in 20x2 recorded as 20x1 transaction 50,000
Interest payment in 20x2 recorded as 20x1 transaction 5,000
Adjusted cash balance, Dec. 31, 20x1 197,000
The adjusted balance of accounts receivable is computed as follows:
Accounts receivable (unadjusted) 400,000
Collection of account in 20x2 recorded as 20x1 collection 40,000
Adjusted accounts receivable balance, Dec. 31, 20x1 440,000
The adjusted balance of inventory is computed as follows:
Inventory (unadjusted) 1,000,000
Cost of cash sale in 20x2 recorded as 20x1 sale
(20,000 sale - 6,000 gross profit) 14,000
Adjusted inventory balance, Dec. 31, 20x1 1,014,000
Adjusted current assets, Dec. 31, 20x1: (197K + 440K + 1,014K) = 1,651,000
The adjusted current liabilities are computed as follows:
Accounts payable 300,000
Note payable 100,000
Loan payable 50,000
Adjusted current liabilities, Dec. 31, 20x1 450,000
Working capital, Dec. 31, 20x1 = Current assets – Current liabilities
Working capital, Dec. 31, 20x1 = (1,651,000 – 450,000) = 1,201,000
21. Entity A has the following information:
Inventory, beg. 80,000
Inventory, end. 128,000
Purchases 320,000
Freight-in 16,000

INTERIM ASSESSMENT
Purchase returns 8,000
Purchase discounts 11,200
How much is Entity A’s cost of sales?
a. 286,800
b. 292,800
c. 288,600
d. 268,800
Solution:
Net purchases:
Purchases 320,000
Freight-in 16,000
Purchase returns (8,000)
Purchase discounts (11,200) 316,800
Total goods available for sale 396,800
Less: Inventory, end. (128,000)
Cost of goods sold 268,800
22. GOLD ROGER Co. had the following information for 2021:
Accounts receivable turnover 10:1
Total assets turnover 2:1
Average receivables during the year ₱400,000
Total assets, January 1, 2021 800,000
How much is the total assets as of December 31, 2021?

a. 4,000,000
b. 3,800,000
c. 3,200,000
d. 2,800,000
Solution:
Sales are computed as follows:
Net credit sales

Accounts receivable turnover =
Average accounts receivable
Net credit sales

10 =
400,000
Net credit sales = 4,000,000
Net credit sales

Total assets turnover =
Average total assets
Where:
Total assets, beg. + Total assets, end

Average total assets =
2

INTERIM ASSESSMENT
Net credit sales
Total assets turnover =
2 = 4,000,000
Average total assets = 4,000,000
Average total assets = 2,000,000
Total assets, Jan. 1 + Total assets, Dec. 31

Average total assets =
2
800,000 + Total assets, Dec. 31

2,000,000 =
2
Total assets, Dec. 31 = (2,000,000 x 2) - 800,000
Total assets, Dec. 31 = 3,200,000
23. Below are the account balances prepared by the bookkeeper for MORGAN Company as of December 31, 2021:
Assets Liabilities
Cash 30,000 Accounts payable 40,000
Accounts receivable, net 88,000 Notes payable 200,000
Inventory 80,000
Prepaid income tax 16,000
Investment in subsidiary 20,000
Land held for sale 56,000
Property, plant and equipment 100,000
Totals 400,000 240,000
Additional information:
- Cash consists of the following:
Petty cash fund (unreplenished petty cash expenses, ₱3,000) 4,000
Cash in bank (20,000)
Payroll fund 28,000
Tax fund 14,000
Cash is to be contributed to a sinking fund set up for retirement
of bonds maturing on December 31, 2023, 4,000
Total Cash 30,000
- Checks amounting to ₱61,000 were written to suppliers and recorded on December 30, 2021, resulting in a bank overdraft of
₱20,000. The checks were mailed on January 5, 2022.
- Accounts receivable consist of the following:

INTERIM ASSESSMENT
Allowance for uncollectability ( 10,000)
Credit balance in customers’ accounts ( 6,000)
The selling price of unsold goods sent on consignment to QUELL, Inc.
at 120% of the cost and excluded from MORGAN’s inventory 24,000
Accounts receivable, net 88,000
- The inventory includes the cost of goods amounting to ₱20,000 that are expected to be sold beyond 12 months but within
the ordinary course of business. Also, the inventory includes the cost of consigned goods received on consignment from Alpha-
Numerix Co. amounting to ₱10,000.
- Prepaid income tax represents the excess of payments for quarterly corporate income taxes during 2021 over the actual
annual corporate income tax as of December 31, 2021.
- Prepaid assets include a ₱4,000 security deposit on an operating lease which is expected to expire on March 31, 2023. The
security deposit will be received on lease expiration.
- The land qualified for classification as “asset held for sale” under PFRS 5 Non-current Assets Held for Sale and
Discontinued Operations as of December 31, 2021.
- Accounts payable is net of ₱12,000 debit balance in suppliers’ accounts. Accounts payable include the cost of goods held
on consignment from Alpha-Numerix Co. which were included in inventory.
- The notes payable is dated July 1, 2021, and are due on July 1, 2024. The notes payable bear an annual interest rate of 10%.
Interest is payable annually.
How much is the adjusted working capital?

a. 334,000
b. 289,000
c. 264,000
d. 215,000
Solution:
 The adjusted cash is computed as follows:

Cash – unadjusted 30,000
Unreplenished petty cash expenses ( 3,000)
Unreleased checks recorded as disbursement
resulting to overdraft 61,000
Contribution to sinking fund ( 4,000)
Adjusted cash balance 84,000
 The adjusted accounts receivable is computed as follows:

Allowance for uncollectibility (10,000)
Adjusted accounts receivable, net 70,000
 The adjusted inventory is computed as follows:

Inventory* 80,000
Cost of unsold goods sent out on consignment
excluded from inventory (24,000 ÷ 120%) 20,000
Cost of goods held on consignment (10,000)
Adjusted inventory 90,000
*The cost of inventory expected to be sold beyond 12 months but within the normal operating cycle is properly included as part of
cost of inventories presented as current assets.
 The adjusted prepaid assets are computed as follows:

Security deposit (to be presented as noncurrent) (4,000)

INTERIM ASSESSMENT
Adjusted prepaid assets 6,000
 The adjusted accounts payable is computed as follows:

Accounts payable (40,000 + 12,000 debit balance) 52,000
Unreleased checks recorded as disbursement
resulting to overdraft 61,000
Cost of goods held on consignment ( 10,000)
Adjusted accounts payable, net 103,000
 Accrued interest on the notes payable is computed as follows:

(P200,000 x 10% x 6/12) 10,000
The current assets and current liabilities are computed as follows:

Current assets Current liabilities
Cash 84,000 Accounts payable 103,000
Accounts receivable, net 70,000 Advances from customers 6,000
Advances to suppliers 12,000 Interest payable 10,000
Inventory 90,000
Prepaid income tax 16,000
Land held for sale 56,000
Total current assets 334,000 Total current liabilities 119,000
The adjusted working capital is computed as follows:
Working capital = Current assets – Current liabilities
Working capital = P 334,000 – P 119,000
Working capital = P 215,000

24. The ledger of MIHAWK Co. as of December 31, 2021, includes the following:
10% Note payable 80,000
14% Mortgage note payable 60,000
Interest payable -
- MIHAWK Co.’s financial statements were authorized for issue on April 15, 2022.
- The 10% note payable is due on July 1, 2022, and pays semi-annual interest every July 1 and December 31. On January 28, 2022,
MIHAWK Co. entered into a refinancing agreement with a bank to refinance the entire note by issuing a long-term obligation.
- The 12% note payable is due on March 31, 2022, and pays annual interest every March 31. On January 31, 2022, MIHAWK Co.
extended the maturity of the note to March 31, 2023, under the existing loan agreement. The extension of the maturity date is at the
option of MIHAWK.
- The 14% mortgage note is due on December 31, 2029. Per agreement with the creditor, MIHAWK is to pay quarterly interests on the
note, failure to do so will render the note payable on demand. MIHAWK failed to pay the 3rd and 4th quarterly interests on the note
during 2021.

a. 119,000
b. 155,000
c. 172,000
d. 189,000

INTERIM ASSESSMENT
Solution:
Interest payable on the 12% note (120,000 x 12% x 9/12) 10,800
14% Mortgage note payable 60,000
Interest payable on the 14% note (60,000 x 14% x 6/12) 4,200
Current liabilities 155,000
25. Anne Jeng Inc.’s accounts show the following balances:
Cost of goods sold ₱320,000
Insurance expense 75,000
Advertising expense 25,000
Freight-out 30,000
Loss on sale of equipment 7,000
Rent expense (one-half pertains sales department) 80,000
Salaries expense (1/4 pertains to non-sales personnel) 150,000
Sales commission expense 10,000
Bad debts expense 5,000
Interest expense 5,000
How much is the total distribution costs (selling expenses)?

a. 198,000
b. 210,500
c. 217,500
d. 221,500
Solution:
Freight-out 30,000
Rent expense (80K x 1/2) 40,000
Salaries expense (150K x 3/4) 112,500
Sales commission expense 10,000
Distribution costs 217,500
26. CHOPPER Co.’s December 31, 2021, balance sheet reported the following current assets:
Cash 70,000
Accounts Receivable 120,000
Inventories 60,000
Total 250,000
An analysis of the accounts disclosed that accounts receivable consisted of the following:
Trade accounts 96,000

Allowance for uncollectible accounts (2,000)
Selling price of CHOPPER’s unsold goods out on consignment,
At 130% of the cost, is not included in CHOPPER’s ending inventory 25,000
119,000
As of December 31, 2021, how much is the total current assets of CHOPPER Co.?

INTERIM ASSESSMENT
a. 224,000
b. 230,000
c. 244,000
d. 244,230.77
Solution:
Cash 70,000
Accounts receivable (120,000 - 25,000) 95,000
Inventories [60,000 + (25,000 / 130%)] 79,230.77
Total current assets 244,230.77
27. SANJI Co.’s trial balance included the following account balances on December 31, 2023:
Accounts payable
Bonds payable, due 2024
Discount on bonds payable, due 2024
Dividends payable 1/31/24
Notes Payable, due 2025.
What amount should be included in the current liability section of SANJI’s December 31, 2023, balance sheet?
a. 45,000
b. 43,000
c. 65,000
d. 78,000
28. When preparing a draft of its 2023 statement of financial position, NAMI, Inc. reported net assets totaling P875,000. Included in the
asset section of the statement of financial position were the following:
Treasury share of NAMI Inc. at cost 22,000
Idle machinery 11,200
Cash surrender value of life insurance on corporate executives 13,700
Allowance for the decline in market value of non-current equity investments 8,400
At what amount should Nami Inc.’s net assets be reported in the December 31, 2023, statement of financial position?
a. 851,000
b. 853,000
c. 842,600
d. 834,500
Solution:
Unadjusted net assets 875,000
Treasury share of Mont erroneously included in assets (22,000)
Adjusted net assets 853,000
29. During 2023, the other revenues and gains section of SHANKS Company’s Statement of Earnings and Comprehensive Income
contains P5,000 in interest revenue, P15,000 equity in CHOPPER Co. earnings, and P60,000 total gain on sale of foreign operations.
The total gain on the sale of foreign operations includes a P35,000 reclassification adjustment for cumulative translation gain.
Assuming the reclassification adjustment relating to the sale of the foreign operation increased the current portion of income tax
expense by P10,000. Determine the net tax amount of SHANKS reclassification adjustment to Other Comprehensive Income.
a. 5,000
b. 2,500
c. 25,000
d. 15,000
35,000 gross of tax – 10,000 tax effect = 25,000 net of tax reclassification adjustment
30. In GRANDLINE Co.’s 2025 annual report, GRANDLINE described its social awareness expenditures during the year as follows:
“The Company contributed P250,000 in cash to youth and educational programs. The Company also gave P140,000 to health and
human service organizations, of which P85,000 was contributed by employees through payroll deductions. In addition, consistent with
the Company’s commitment to the environment, the Company spent P100,000 to redesign product packaging.”
INTERIM ASSESSMENT
What amount of the above should be included in GRANDLINE’s income statement as charitable contributions expense?
a. 310,000
b. 305,000
c. 410,000
d. 490,000
Solution:
Contribution to youth and educational programs 250,000
Contribution to health and human-service organizations 140,000
Contribution shouldered by employees (85,000)
Charitable contributions expense 305,000
31. A company buys ten shares of securities of P2,000 each on December 31, 2021. The securities are classified to be subsequently
measured at FVOCI. The fair value of the securities increases to P2,500 on December 31, 2022, and to P22,750 on December 31,
2023. On December 31, 2023, the company sold the securities. Assume no dividends are paid and that the company has a tax rate of
30%. What is the amount of the reclassification adjustment for other comprehensive income on December 31, 2023?
a. 0
b. (7,500)
c. 5,250
d. (5,250)
Reclassification adjustment of cumulative unrealized gains (losses) on FVOCI securities is

prohibited. The cumulative unrealized gains (losses) on FVOCI securities are transferred
directly in equity when the FVOCI securities are derecognized.
32. What amount of comprehensive income should ARLONG Corporation report on its statement of comprehensive income given the
following net of tax figures that represent changes during a period?
Actuarial gain or loss on defined benefit plan (6,000)

Unrealized gain on FVOCI securities 30,000
Reclassification adjustment for cumulative gain on
Translation of foreign operation included in profit or loss (4,000)
Stock warrants outstanding 13,000
Profit for the year 154,000
a. 173,000
b. 174,000
c. 179,000
d. 181,000
Solution:
Actuarial gain or loss on defined benefit plan (6,000)
Unrealized gain on FVOCI securities 30,000
Reclassification adjustment for cumulative gain on
translation of foreign operation included in profit or loss (4,000)
Profit for the year 154,000
Total comprehensive income 174,000
33. KOBY Co.’s advertising expense account had a balance of P146,000 on December 31, 2023, before any necessary year-end
adjustment relating to the following:
Included in the P146,000 is the P16,000 cost of printing catalogs for a sales promotional campaign in January 2024
Radio advertisements broadcast during December 2023 were billed to KOBY on January 2, 2024. KOBY paid the P9,000 invoice on
January 11, 2024.

INTERIM ASSESSMENT
What amount should KOBY report as advertising expense in its income statement for the year ended December 31, 2023?
a. 122,000
b. 139,000
c. 140,000
d. 155,000
Solution:
Unadjusted bal. of advertising expense 146,000
Prepaid advertising (16,000)
Accrued advertising 9,000
Adjusted advertising expense 139,000
34. MERRY Co.’s trial balance of Income Statement accounts for the year ended December 31, 2021, including the following:
Debit Credit
Sales 575,000
Cost of Sales 240,000
Administrative Expenses 70,000
Loss on Sale of Equipment 10,000
Sales commissions 50,000
Interest Revenue 25,000
Freight Out 15,000
Loss on early retirement of long-term debt 20,000
Uncollectible accounts expense 15,000
TOTALS 420,000 600,000
Other information:
Finished goods inventory:
January 1, 2021, P400,000
December 31, 2021 360,000
MERRY’s Income tax rate is 30%.

In MERRY’s 2021 multi-step income statement, what amount should MERRY report as the cost of goods manufactured?
a. 200,000
b. 215,000
c. 280,000
d. 295,000
Solution:
Finished goods
Jan. 1 400,000
COGM (squeeze) 200,000 240,000 Cost of sales
360,000 Dec. 31
35. BlackRock Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial
balance on December 31, 2021, included the following expense and loss accounts:
Accounting and Legal Fees 120,000

Advertising 150,000
INTERIM ASSESSMENT
Freight out 80,000
Interest 70,000
Loss on sale of long-term investment 30,000
Officers’ salaries 225,000
Rent for Office Space 220,000
Sales salaries and commissions 140,000
One-half of the rented premises is occupied by the sales department.
How much is the total selling expenses of BlackRock for 2021?

a. 480,000
b. 400,000
c. 370,000
d. 360,000
Solution:
Advertising 150,000
Freight-out 80,000
Rent for office space (220,000 x 1/2) 110,000
Sales salaries and commissions 140,000
Total selling expenses 480,000
36. The following costs were incurred by GRIFF Co., a manufacturer, during 2021:
Accounting and Legal Fees 25,000

Freight In 175,000
Freight Out 160,000
Officers’ Salaries 150,000
Insurance 95,000
Sales representative salaries 215,000
What amount of these costs should be reported as general and administrative expenses for 2021?
a. 260,000
b. 270,000
c. 635,000
d. 810,000
Solution:
Accounting and legal fees 25,000
Officers’ salaries 150,000
Insurance 95,000
Total general and administrative expenses 270,000
37. The following trial balance of Marine Corp on December 31, 2023, has been adjusted except for income tax expense.
Debit Credit
Cash 600,000
Accounts Receivable, net 3,500,000
Cost in excess of billings on long-term contracts 1,600,000
Billings in excess of costs on long-term contracts 700,000
Prepaid taxes 450,000
Property, Plant and Equipment, net 1,480,000
Note payable- noncurrent 1,620,000
Ordinary share capital 750,000
Share premium 2,000,000
Retained Earnings- unappropriated 900,000
Retained Earnings- restricted for notes payable 160,000
Earnings from long-term contracts 6,680,000
Costs and expenses 5,180,000
TOTALS 12,810,000 12,810,000
Other financial data for the year ended December 31, 2023, are:

INTERIM ASSESSMENT
-Marine uses the percentage of completion method to account for long-term construction contracts for financial statements and income
tax purposes. All receivables on these contracts are collectible within twelve months.
-During 2023, estimated tax payments of P450,000 were charged to prepaid taxes. Marine has not recorded income tax expenses.
There were no temporary or permanent differences, and Marine’s tax rate is 30%.
In Marine’s December 31, 2023, balance sheet, what amount should be reported as Retained Earnings?
a. 1,950,000
b. 2,110,000
c. 2,400,000
d. 2,560,000
Solution:
Earnings from long-term contracts 6,680,000
Costs and expenses (5,180,000)
Profit before tax 1,500,000
Income tax expense (1,500,000 x 30%) (450,000)
Profit after tax 1,050,000
Retained earnings - unappropriated (Jan. 1) 900,000
Retained earnings - restricted for note payable (Jan. 1) 160,000
Total retained earnings (Dec. 31) 2,110,000
38. The ledger of HELMEPPO Co. in 2021 includes the following:
January 1, 2021 December 31, 2021

Current assets 600,000 ?
Noncurrent assets 2,000,000 ?
Current liabilities 450,000 500,000
Noncurrent liabilities ? 1,500,000
HELMEPPO’s working capital as of December 31, 2021, is twice as much as the working capital as of January 1, 2021.
Total Equity as of January 1, 2021, is 850,000. Profit for the year is P1,200,000 while dividends declared amounted to P500,000.
There were no other changes in equity during the year.
What are the noncurrent assets as of December 31, 2021?
a. 2,750,000
b. 2,000,000
c. 3,500,000
d. 2,880,000
Refer to Page 30.
39. The ledger of STRAWHAT Co. as of December 31, 2021, includes the following:
Assets
Cash 5,000
Trade accounts receivable (net of P10,000 credit balance in accounts) 20,000
Investment in equity securities at FVOCI 35,000
Investment in bonds measured at amortized cost (due in 3 years) 30,000
Deferred tax asset (expected to reverse in 2022) 6,000
Investment in associate 18,000
Investment Property 23,000
Sinking Fund 19,000
Property, Plant, and Equipment 50,000
Goodwill 14,000
TOTALS 280,000

INTERIM ASSESSMENT
How much is the total current assets?
a. 85,000
b. 95,000
c. 92,000
d. 90,000
Cash 5,000
Trade Receivable (20K+10K) 30,000
95,000
40. The ledger of MAKINO Co. as of December 31, 2021, includes the following:
Liabilities
Bank Overdraft 5,000
Trade accounts payable (net of P10,000 debit balance in accounts) 20,000
Notes payable (due in 20 semi-annual payments of P2,000) 40,000
Bonds payable 35,000
Dividends payable (15,000)
Discount on bonds payable 5,000
Share dividends payable 6,000
Deferred tax liability (expected to reverse in 2022) 18,000
Contingent liability 50,000
Reserve for contingencies 14,000
TOTALS 215,000
a. 85,000
b. 92,000
c. 96,000
d. 101,000
41. The records of Kuro Co. showed the following information:
Increase in accounts receivable 50,000

Collections on accounts 400,000
Cash Sales 60,000
Increase in inventory 20,000
Freight In 7,000
Freight out 6,500
Decrease in accounts payable 30,000
Disbursements for purchases 240,000
How much is the gross profit for the year?
a. 313,000
b. 312,000
c. 303,000
d. 311,000
Refer to Page 64
42. BRIDGEWATER Co. reported a profit after tax of P105,000. BRIDGEWATER’s income tax rate is 30%. Operating expenses for the
year were 15% of sales and 25% of cost of sales. Other expenses were 10% of sales.
How much is the sales for the year?

a. 1,000,000
b. 995,000
c. 889,000
d. 1,100,000
Sales 100%
Cost of sales (15%/25%) (60%)

INTERIM ASSESSMENT
Gross Profit 40%
OPEX (15% of 100%) or (25% of 60%) (15%)
Other expenses (10% of 100%) (10%)
Profit Before tax 15%
Profit after tax 105,000
Divided by (100%-30%) 70%
Profit before tax 150,000
Divided by 15% 15%
Sales 1,000,000
43. The records of SHAM Co. showed the following information:
Decrease in accounts payable 30,000

Disbursements of purchases 220,000
Increase in raw materials 50,000
Direct labor is 50% of raw materials used in production
Manufacturing overhead is 20% of prime costs
Increase in work-in-process inventory 20,000
Decrease in finished goods inventory 25,000
How much is the Cost of Goods Sold?
a. 227,000
b. 257,000
c. 287,000
d. 237,000
Accounts Payable
30,000 AP, beg.
Purchases
Disbursements for purchases 200,000 190,000 (Squeeze)
Raw Materials Inventory
RM Invty. Beg -
Raw Materials used in

Purchases 190,000 140,000 Production(Squeeze)
- 50,000 RM invty. End
WIP Inventory
WIP Beg -
RM used in Production 140,000
Direct labor 70,000
Production overhead* 190,000 232,000 Cost of goods Manufactured

INTERIM ASSESSMENT
- 20,000 WIP, end.
*Prime cost= DM + DL
Prime cost = 140,000 +70,000
Production overhead= 20% x 210,000 = 42000
Direct Labor = 50% * Prime Cost
Finished Goods Inventory
FG Beg 25,000
Cost of Goods Manufactured 232,000
257,000 Cost of goods Sold
Total Goods available for

sale 257,000 257,000 WIP, end.
44. The records of NOJIKO Co., showed the following information:
Accounts Receivable, net January 1, 2021 20,000

Accounts Receivable, net December 31, 2021 80,000
Accounts Receivable turnover 4:1
Inventory, January 1, 2021 60,000
Inventory, December 31, 2021 30,000
Inventory turnover 3:1
How much is the Gross Profit for the year?

a. 65,000
b. 75,000
c. 85,000
d. 55,000
Refer to Page 66
45. GENZO Co. has the following information on December 31, 2021:
The cost of sales is P130,000
Operating expenses are 13% of sales and 20% of cost of sales
Interest expense is 5% of sales
The income tax rate is 30%. There were no temporary differences during the year.
How much is the profit for the year?

a. 23,800
b. 25,000
c. 28,800
d. 32,800
Refer to page 72
Part III. Multiple Choice Straight Problem
Use the following information for the next five questions:
The nominal accounts of Rommel SP Corp. on December 31, 2021, have the following balances:
Accounts Dr. Cr.
Sales ₱739,000
Interest income 45,000
Gains 15,000
₱65,00
Inventory, beg.
0

INTERIM ASSESSMENT
180,00
Purchases
0
Freight-in 10,000
Purchase returns 5,000
Freight-out 30,000
Sales commission 45,000
240,00
Salaries expense
0
Rent expense 30,000
Depreciation expense 50,000
Utilities expense 25,000
Supplies expense 15,000
Transportation and travel expenses 15,000
Taxes and licenses 60,000
Interest expense 5,000
Miscellaneous expense 3,000
Loss on the sale of equipment 5,000
a. Ending inventory is ₱90,000.
b. One-fourth of the salaries, rent, and depreciation expenses pertain to the non-sales department. The sales department does not share
in the other expenses.
46. How much is the “change in inventory” in 2021?
a. ₱90,000 increase c. ₱25,000 decrease
b. ₱65,000 decrease d. ₱25,000 increase
Purchases 180,000
Freight-in 10,000
Purchase returns (5,000)
Purchase discounts (9,000)
Net purchases 176,000
Inventory, end. 90,000
Change in inventory – increase (25,000)
47. How much is the cost of goods sold?
a. ₱151,000 c. ₱169,000
b. ₱95,000 d. ₱127,000
Beg Inventory

INTERIM ASSESSMENT
Net purchases 176,000
Less: Net increase in inventory (25,000)
Cost of sales 151,000
48. How much is the total selling expense?
a. ₱420,000 c. ₱180,000
b. ₱260,000 d. ₱340,000
Freight-out 30,000
Sales commission 45,000
Rent expense (30K x 3/4) 22,500
Depreciation expense (50K x 3/4) 37,500
Selling expenses/Distribution costs 340,000
49. How much is the total general and administrative expense?
a. 280,000 c. 330,000
b. 320,000 d. 208,000
Rent expense (30,000 x 1/4) 7,500
Depreciation expense (50K x 1/4) 12,500
Utilities expense 25,000
Supplies expense 15,000
Transportation and travel expense 15,000
Taxes and licenses 60,000
Miscellaneous expense 3,000
Administrative expenses 208,000
The next three items are based on the following information:
Lake Corporation’s accounting records showed the following investments on January 1, 2023:
Ordinary shares:
Kar Corp. (1,000 shares) 10,000
Aub Corp. (5,000 shares) 100,000
Real estate:
Parking lot (leased to Day Co.) 300,000

INTERIM ASSESSMENT
Other:
Trademark (at cost, less accumulated

amortization) 25,000
435,00
Total investments
0
Lake owns 1% of Kar and 30% of Aub. The Day lease, which commenced on January 1, 2021, is for ten years, at an annual rental of
₱48,000. In addition, on January 1, 2021, Day paid a nonrefundable deposit of ₱50,000 and a security deposit of ₱8,000 to be refunded
upon lease expiration. The trademark was licensed to Barr Co. for royalties of 10% of sales of the trademarked items. Royalties are
payable semiannually on March 1 (for sales in July through December of the prior year), and on September 1 (for sales in January
through June of the same year).
During the year ended December 31, 2023, Lake received cash dividends of ₱1,000 from Kar, and ₱15,000 from Aub, whose 2023 net
incomes were ₱75,000 and ₱150,000, respectively. Lake also received ₱48,000 rent from Day in 2023 and the following royalties from
Barr:
March 1 September 1
2022 3,000 5,000
2023 4,000 7,000
Barr estimated that sales of the trademarked items would total ₱20,000 for the last half of 2023.
50. In Lake’s 2023 income statement, how much should be reported for dividend revenue?
a. 16,000
b. 2,400
c. 1,000
d. 150
1,000 – the dividend from the 1% investment. The dividend from the 30% investment is not dividend
income but rather a deduction to the carrying amount of the investment in associate (significant influence
is presumed to exist).
51. In Lake’s 2023 income statement, how much should be reported for royalty revenue?
a. 14,000
b. 13,000
c. 11,000
d. 9,000
Solution:
Royalty revenue for Jan. to June, 20x3
(received on Sept. 20x3) 7,000
Royalty revenue for July to Dec., 20x3 (20,000 x 10%) 2,000
Total royalty revenue 9,000
“A wise man will hear and increase learning, and a man of understanding will attain wise counsel.” (Proverbs 1:5)
“Love is patient, love is kind. It does not envy, it does not boast, it is not proud. It does not dishonor others, it is not self-seeking, it is not easily angered, it keeps no
record of wrongs. Love does not delight in evil but rejoices with the truth. It always protects, always trusts, always hopes, always perseveres.” – (1 Corinthians 13:4-7)
- END


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INTERIM ASSESSMENT

Part I. Multiple Choice Theory

1. The objective of PAS 1 Presentation of Financial Statements is?

2. The heading of a financial statement most likely will not include

7. Identify the incorrect statement.

8. Identify the incorrect statement.

10. As used in accounting parlance, PFRS stands for

11. Who is responsible for an entity’s financial statements?

14. Which of the following is considered revenue?

Instructions: Choose the correct answer.

Part II. Multiple Choice Problems

Prepared by: Rhen Marct T. Beja Approved by: Arnel A. Villamin

Trade accounts receivable (net of ₱10,000 credit balance in

Held for trading securities 80,000

Financial assets designated at FVPL 30,000

Investment in equity securities at FVOCI 70,000

Investment in bonds measured at amortized cost (due in 3 years) 60,000

Prepaid assets 10,000

Deferred tax asset (expected to reverse in 2022) 12,000

Investment in Associate 36,000

Investment property 46,000

Sinking fund 38,000

Property, plant, and equipment 100,000

How much is the total current assets?

Trade accounts receivable (40,000 + 10,000) 50,000

Held for trading securities 80,000

Financial assets designated at FVPL 30,000

Prepaid assets 10,000

Total current assets 180,000

Bank Overdraft 10,000

Trade accounts payable (net of ₱10,000 debit balance in

Notes payable (due in 20 semi-annual payments of ₱4,000) 80,000

Interest payable 30,000

Bonds payable (due on March 31, 2022) 70,000

Discount on bonds payable (30,000)

Dividends payable 10,000

Share dividends payable 12,000

Deferred tax liability (expected to reverse in 2022) 36,000

Prepared by: Rhen Marct T. Beja Approved by: Arnel A. Villamin

Contingent liability 100,000

Reserve for contingencies 28,000

How much is the total current liabilities?

Bank overdraft 10,000

18. The Ledger of BARATIE Co. in 2021 includes the following:

Share capital 200,000

Share premium 40,000

Retained earnings, appropriated 36,000

Retained earnings, unappropriated 84,000

Revaluation surplus 60,000

Remeasurements of the net defined benefit liability (asset) - gain 30,000

Cumulative net unrealized gain on fair value changes of investment

The effective portion of losses on hedging instruments in a cash

flow hedge 20,000

Prepared by: Rhen Marct T. Beja Approved by: Arnel A. Villamin

How much is the Shareholder’s Equity?

Dividends 60,000 180,000 Profit for the year (squeeze)

Dec. 31, 20x1 120,000

Accounts payable 300,000

Note payable 100,000

BUGGY Co. in 2021 includes the following: