Name:___________________________​ ​ ​ ​ Date:____________​

Section:______________

Long Quiz No. 1

Intermediate Accounting 1

1.​ Which of the following statements is incorrect regarding accounting concepts?

a.​ Under the Accrual Basis of accounting, revenues are recognized when earned and
expenses are recognized when incurred, not when cash is received and disbursed.
b.​ Under the Going concern concept, the business entity is assumed to carry on its
operations for an indefinite period of time.
c.​ Under the Business entity/ Separate entity/ Entity/ Accounting entity Concept, the
business is treated separately from its owners.
d.​ Under the Time Period/ Periodicity/ Accounting Period concept, the life of the business
is divided into series of reporting periods.
e.​ Under the Cost-benefit concept, the cost of processing and communicating
information should exceed the benefits derived from it.

2.​ Which of the following statements is incorrect regarding accounting concepts?

a.​ Under the Materiality concept, items deemed material and affect decision making
should be separately disclosed.
b.​ Underlying assumptions are those that are mentioned in the Conceptual Framework;
Implicit assumptions are those that are not mentioned in the Conceptual Framework;
Pervasive concepts are those that affect virtually all financial statement elements and all
aspects of accounting.
c.​ Under the Cost/ Historical cost concept, the value of an asset is to be determined on the
basis of acquisition cost.
d.​ The Concept of Articulation states that all the components of a complete set of financial
statement are interrelated.
e.​ Under the Matching concept, revenues are matched with expenses in order to
properly determine the profit for a period.

3.​ Accrual accounting techniques are used to:

a.​ assign revenues and expenses to the appropriate accounting period.
b.​ record the anticipated effects of actions that may occur at a future date.
c.​ report the results of actions whose monetary effects are difficult to estimate.
d.​ allocate nonoperating revenues and expenses to the appropriate business unit.

4.​ The going concern assumption is also called

a. Periodicity​ b. Entity​ c. Business continuity​ d. Entity

5.​ The valuation of an assurance to receive cash in the future at present value on a business
entity’s financial statements is well-founded because of the accounting concept of:
a. Entity​ ​ b. Going concern​ c. Materiality​ ​ d. Neutrality
6.​ Which of the following correctly relate to the Monetary/ Stable monetary/ Monetary Unit
concept?
I.​ Assets, liabilities, equity, revenues and expenses should be stated in terms of a unit of
measure which is the peso in the Philippines
II.​ The purchasing power of the peso is stable or constant and that its instability is
insignificant and therefore ignored.
a. I​ b. II​ c. I and II​ d. None
7.​ An accounting (financial reporting) period may be
a. One month b. One quarter​ c. One year​ d. a, b or c
8.​ Under what principle when revenue is generally recognized and when the earning process is
virtually complete and an exchange has taken place
a.​ consistency b. maturing c. realization d. conservatism
9.​ Which of the following statements is not an objective of financial reporting?
a.​ Provide information that is useful in investment and credit decisions.
b.​ Provide​ information​ about​ enterprise​ resources,​ claims​ to​ those
resources, and changes to them.
c.​ Provide information on the liquidation value of an enterprise.
d.​ Provide information that is useful in assessing cash flow prospects.

10.​One objective of financial reporting is to provide

a.​ information about the investors in the business entity.
b.​ information about the liquidation values of the resources held by the enterprise.
c.​ information that is useful in assessing cash flow prospects.
d.​ information that will attract new investors.
11.​Which of the following is not considered cash for financial reporting purposes?
a.​ Petty cash funds and change funds
b.​ Money orders, certified checks, and personal checks
c.​ Coin, currency, and available funds
d.​ Postdated checks and I.O.U.'s
12.​Which of the following may properly be included as part of cash to be reported in the
December 31, 200A statement of financial position?
a.​ Treasury bills maturing on March 31, 200B, acquired on December 1, 200A.
b.​ Customer’s check dated January 1, 200B and sent to bank for deposit on
December 31, 200A.
c.​ Shares of stocks to be sold on the first week of January 200B.
d.​ Preference shares with mandatory redemption and acquired three months prior to
redemption date.

13.​Bank overdrafts, if material, should be

a.​ reported as a deduction from the current asset section.
b.​ reported as a deduction from cash.
c.​ netted against cash and a net cash amount reported.
d.​ reported as a current liability.

14.​Deposits held as compensating balances

a.​ usually do not earn interest.
b.​ if legally restricted and held against short-term credit may be included as cash.
c.​ if legally restricted and held against long-term credit may be included among current
assets.
d.​ none of these.
15.​Alaking received cash to be held in trust for Ambit under an escrow
agreement. Such cash should be presented in Alaking’s financial statements as
a.​ part of cash
b.​ a liability
c.​ an asset and a liability
d.​ an off-balance sheet item but disclosed in the notes

16.​Adjusting and correcting entries in the books of the company are necessary for
a.​ Book reconciling items​ c. Errors committed by the bank
b.​ Bank reconciling items​ d. a and c
17.​Bank reconciliations are normally prepared
a.​ on “as needed” basis
b.​ on a monthly basis
c.​ every time financial statements are prepared
d.​ only at year-end

18.​Unless otherwise stated, reconciling items are presumed to have been taken up in the books
or taken up by the bank
a.​ during the month the bank statement is prepared
b.​ in the immediately following month
c.​ in the immediately preceding month
d.​ in the immediately following or preceding reporting period, on a case-to- case basis

19.​In preparing the bank reconciliation using the adjusted balance method, the first item listed
in the bank reconciliation report for reconciling the balance of cash in bank per bank
statement to the adjusted balance is the
a.​ Balance of cash in bank per books as of the end of the month
b.​ balance of cash in bank per books as of the beginning of the month
c.​ balance of cash in bank per bank statement as of the end of the month
d.​ balance of cash in bank per bank statement as of the beginning of the month

20.​Which of the following is deducted from the cash balance per bank when computing for the
cash balance reported in the books?
a.​ Deposit in transit​ c. Credit memo
b.​ Error​ d. Debit memo

21.​Receivables arising from sales to customers are best described as

a.​ accounts receivables​ c. trade receivables
b.​ note receivables​ d. non-trade receivables

22.​If a receivable account has a credit balance

a.​ the credit balance is offset with other receivable accounts with debit balances
b.​ an adjusting entry is needed to eliminate the credit balance
c.​ the credit balance is classified as a liability
d.​ b and c

23.​Which of the following is not a characteristic of receivables?

a.​ They have fixed or determinable payments.
b.​ The holder can recover substantially all of its investment (unless there has been credit
deterioration).
c.​ They are not quoted in an active market.
d.​ The holder has a demonstrated positive intention and ability to hold them to
maturity.
24.​Loans and receivables are initially recognized at
a.​ fair value
b.​ face value
c.​ amortized cost
d.​ fair value plus transaction costs that are directly attributable to the acquisition
25.​Loans and receivables are measured, subsequent to initial recognition, at
a.​historical cost​ c. amortized cost
b.​fair value​ d. effective value
 26.​When the percentage of credit sales method is used in determining doubtful accounts, the
amount computed represents the
a.​ required balance
b.​ bad debt expense
c.​ bad debt expense after adjustments for write-offs, recoveries and changes in the balance
of the allowance for doubtful accounts
d.​ required balance after adjustments for write-offs, recoveries and changes in the balance of
the allowance for doubtful accounts

27.​When the allowance method of recognizing bad debt expense is used, the entry to record the
specific write-off of an uncollectible account would decrease
a.​ net accounts receivable​ c. profit
b.​ allowance for doubtful accounts d. working capital
28.​On July 1, 2010, a company obtained a two-year 8% note receivable for services rendered.
At that time the market rate of interest was 10%. The face amount of the note and the entire
amount of the interest are due on June 30, 2012. Interest receivable at December 31, 2010,
was
a.​ 5% of the face value of the note.
b.​ 4% of the face value of the note.
c.​ 5% of the July 1,2010, present value of the amount due June 30, 2012.
d.​ 4% of the July 1,2010, present value of the amount due June 30, 2012.

29.​Which of the following best describes the concept of time value of money?
a.​ interest is earned or incurred on debt instruments due to passage of time
b.​ interest is earned only on interest-bearing receivables
c.​ the amount debited to interest receivable is always equal to the interest income
recognized during the period
d.​ if no interest receivable is recognized, no interest income is also recognized
30.​Which of the following is incorrect in relation to accounting for note receivables?
a.​ a long-term note that is interest-bearing may nonetheless be discounted if it bears an
unreasonable interest rate.
b.​ the unearned interest income on a noninterest-bearing note receivable represents the
total interest income to be recognized over the life of the note.
c.​ the present value factor using a period (‘n’) of zero is 1
d.​ when accounting for noninterest-bearing note, the legal form of the instrument
takes precedence over its substance

31.​The books of Kapiz Co. show the following balances at December 31, 20x1:
Cash on hand ₱400,000
Cash in Bank – current account 1,200,000
Cash in Bank – peso savings deposit 5,000,000
Cash in Bank – dollar deposit (unrestricted) $ 100,000
Cash in Bank – dollar deposit (restricted) 250,000
Cash in 3-month money-market account ₱500,000
3-month unrestricted time deposit $ 20,000
Treasury bill, purchased 11/1/20x1, maturing 2/14/20x2 ₱1,600,000
Treasury bond, purchased 3/1/20x1, maturing 2/28/20x2 1,000,000
Treasury note, purchased 12/1/20x1, maturing 2/28/20x2 400,000
Unused Credit Line 4,000,000
Redeemable preference shares, purchased 12/1/20x1, due on
740,000
3/1/20x2
Treasury shares, purchased 12/1/20x1, to be reissued on 1/5/20x2 200,000
Sinking fund 400,000
Additional information:
●​ Cash on hand includes a ₱40,000 check payable to Kapiz Co. dated December
29, 20x1.
●​ During December 20x0, check amounting to ₱30,000 was drawn against the Cash in bank -
current account in payment of accounts payable. The check remains outstanding as of
December 31, 20x1.
●​ The Cash in Bank – peso savings deposit includes ₱800,000 security bond on a pending
labor litigation, in favor of a previous employee. The establishment of the bond is mandated
by a court of law.
●​ The Cash in Bank – peso savings deposit also includes a compensating balance
amounting to ₱500,000 which is not legally restricted.
●​ The Cash in Bank – dollar deposit (unrestricted) account includes interest of
$4,000, net of tax, directly credited to Kapiz Co.’s account. The exchange rate at year-end is $1 is
to ₱45.

How much is the cash and cash equivalents to be reported in the 20x1 financial statements?
a. 14,720,000​ b. 19,520,000​ c. 12,430,000​ d. 12,870,000

32.​The cash balance of Ronnie Co. comprises the following:

Cash on hand 300,000
Cash in bank – savings – Alpha Bank 600,000
Cash in bank – current – Alpha Bank (160,000)
Cash in bank – current – Beta Bank (140,000)
Cash in bank – deposit in escrow – Beta Bank 240,000
Cash in bank – savings – Charlie Bank 90,000
Additional information:
●​ Cash on hand excludes undeposited collections of ₱60,000.
●​ The cash in bank – savings maintained at Alpha Bank includes a ₱100,000
compensating balance which is restricted.

How much is the amount of cash to be reported in the financial statements?

a. 700,000​ b. 640,000​ c. 730,000​ d. 790,000

33.​The following were the transactions involving an entity’s petty cash fund
during the period.
July. 1, Established ₱30,000 petty cash fund.
20x1
July 1 Disbursements are made for the following:
through 21, -​Groceries for use of employees in the pantry​ ₱4,200
20x1 -​Transportation of Mang Benny, the messenger boy​ 1,500
-​Snacks during meetings and conferences​ 3,000
-​Gasoline for company vehicles​ 9,000
-​Pedicure of Ms. Ana (secretary of the
boss) – authorized​ ​ 9,000
Total​ ₱ 26,700
July 22, Total coins and currencies in the petty cash box is ₱1,500.
20x1 Replenishment is made.

Assuming that the petty cash fund is not replenished and financial statements are prepared on July
31, 20x1, the month-end adjustment to the petty cash fund most likely does not include a:
a.​ debit to receivable from custodian for ₱1,800
b.​ credit to petty cash fund for ₱28,500
c.​ total debit to various expense accounts for ₱26,700
 d.​ credit to cash in bank for ₱28,500

34.​Jane Co. is preparing its September 30, 20x1 bank reconciliation. Relevant information is
shown below:
Balance per books 1,480
Balance per bank statement 2,800
Collection on note by bank (including ₱250 interest) 2,500
NSF check returned by bank 500
Bank service charges for December 70
Deposits in transit 2,200
Outstanding checks (including certified checks of ₱100) 1,000

●​ A ₱600 loan amortization of Jane Co. was erroneously debited by the bank to Tarzan Co.’s
account.
●​ A ₱650 collection of accounts receivable was erroneously recorded in the
books as ₱560. The actual amount deposited to the bank is ₱650.

The compound entry to reconcile the accounts includes a

a.​ net debit to cash for ₱2,020
b.​ net credit to cash for ₱700
c.​ credit to notes receivable for ₱2,500
d.​ net debit to accounts receivable for ₱590

35.​Ching Co. has the following information:

Balance per books 380

Credit memos 670
Debit memos 400
Deposits in transit 560
Outstanding checks 280

How much is the cash balance per bank statement?

a. 650​ b. 560​ c. 930​ d. 370

The next three items are based on the following

information:
Taken from the records of Girly Co. are the following:

Balance per books, October 31 4,440

Total Credits per books, November 8,320
Balance per books, November 30 2,400
Balance per bank statement, October 31 5,520
Balance per bank statement, November 30 4,560
Total Debits per bank statement, November 2,800
Loan proceeds directly credited to Girly’s account in
1,200
October
Collection of receivable directly credited to Girly’s
600
account in November – not yet recorded in the books
NSF checks returned in October 900
NSF checks returned in November - not yet recorded
300
in the books
Check received from a customer amounting to ₱1,800
180
was recorded in the books in October as
 Overstatement in book debit in October 800
Overstatement in book credit in November 300
Understatement in bank debit in October 290
Overstatement in bank credit in October 370
Deposit amounting to ₱1,050 was recorded by 150
Deposits in transit – October 31 4,500
Outstanding checks – October 31 3,800

36.​How much is the deposits in transit at November 30?

a. 5,820​ b. 6,190​ c. 5,340​ d. 6,920

37.​How much is the outstanding checks at November 30?

a. 7,620​ b. 8,680​ c. 9,120​ d. 8,280

38.​How much is the adjusted balance of cash at November 30?

a. 3,000​ b. 3,300​ c. 2,400​ d. 3,580

Use the following information for the next three questions:

Kriselda Co. has the following information for the months of June and July.
June 30 July 31
Book balance ? 9,300
Book debits 30,700
Book credits 27,000
Bank balance 10,200 16,800
Bank debits 21,300
Bank credits ?
Notes collected by bank 2,250 3,000
Bank service charge 20 100
NSF checks 880 1,400
Understatement of recorded cash
collections 1,900 1,200
Deposit in transit 6,000 11,250
Outstanding checks 9,750 17,850
Loan amortization of Kristeta
Corp. erroneously debited to
Kriselda Co.’s account 2,400 1,800

39.​How much is the adjusted cash receipts in July?

a. 24,150​ b. 27,900​ c. 30,750​ d. 24,350

40.​How much is the adjusted cash disbursements in July?

a. 27,600​ b. 27,900​ c. 21,000​ d. 21,600

On May 1, 20x1, Bikini Bottom Co. acquired a 16%, nine-month note receivable from a
customer in settlement of an existing account receivable of P120,000. Interest and principal are
due at maturity.

41.​The proper adjusting entry at December 31,20x1, with regard to this note receivable
includes a:
a.​ credit to Interest Revenue of ₱12,800
b.​ debit to Notes Receivable of ₱19,200
c.​ debit to Cash of ₱12,800
d.​ debit to Interest Receivable of ₱14,400
42.​Bikini's entry to record the collection of this note at maturity includes a (assume no
reversing entries were made):
a.​ credit to Interest Receivable of ₱12,800
b.​ credit to Interest Revenue of ₱14,400
c.​ credit to Interest Receivable of ₱1,600
d.​ credit to Notes Receivable of ₱134,400

43.​Bikini's entry to record the collection of this note at maturity includes a (assume reversing
entries were made):
a.​ credit to Interest Receivable of ₱12,800
b.​ credit to Interest Revenue of ₱14,400
c.​ credit to Interest Receivable of ₱1,600
a.​ credit to Notes Receivable of ₱134,400​

44.​Chum Bucket Co. received a 60-day, 15% note for ₱3,000 on June 16. Which of
the following statements is true?
a.​ Chum Bucket will receive ₱3,000 plus interest of ₱450 at maturity
b.​ Chum Bucket should record a total receivable due of ₱3,075 on June 16
c.​ The principal of the note plus interest is due on August 15
d.​ The maturity value of this note is ₱3,000

45.​On January 1, 20x1, ABC Bank extended a 12%, ₱1,000,000 loan to XYZ, Inc. Principal is
due on January 1, 20x5 but interests are due annually every January 1. ABC Bank incurred
direct loan origination costs of ₱88,394 and indirect loan origination costs of ₱18,000. In
addition, ABC Bank charged XYZ a 2.5-point nonrefundable loan origination fee. How
much is the interest income in 20x2?
a. 104,973​ b. 105,364 c. 106,339 d. 136,661
Use the following information for the next two questions:

On January 1, 20x1, ABC Co. sold inventory costing ₱1,800,000 with a list price of
₱2,200,000 and a cash price of ₱2,000,000 in exchange for a ₱2,400,000
noninterest-bearing note due on December 31, 20x3.
46.​How much is the initial measurement of the receivable?
a. 1,800,000 b. 2,200,000 c. 2,000,000 d. 2,400,000
47.​How much is the carrying amount of the receivable on December 31, 20x1?
a. 2,125,390 b. 2,135,341 c. 2,098,343 d. 2,000,000
Use the following information for the next three questions:

On January 1, 20x1, ABC Co. sold transportation equipment with a historical cost of
₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱100,000 and
a noninterest-bearing note receivable of ₱4,000,000 due in 4 equal annual installments starting
on January 1, 20x1 and every January 1 thereafter. The prevailing rate of interest for this type of
note is 12%.

48.​How much is the interest income in 20x1?

a. 408,230​ b. 278,334​ c. 328,964​ d. 288,220

49.​How much is the carrying amount of the receivable on December 31, 20x1?
a. 1,690,510​ b. 892,857​ c. 2,690,051​ d. 1,594,388
50.​How much is the carrying amount of the receivable on January 1, 20x3?
a. 892,857​ b. 3,380,102 c. 6,074,699​ d. 6,000,000