Quiz Midterm - Answer Key
Quiz Midterm - Answer Key
Quiz Midterm - Answer Key
It is expected that the sale will occur on April 30, 2019. On December 31, 2018, the
carrying value of net assets was P4,000,000 and the net recoverable amount was P3,600,000.
During 2018, the company paid employuees severance and relocation costs of P200,000 as
a direct result of the discontinuing operation. The revenue and expenses of the disconinuing segment
during 2018 were:
Revenues Expenses
January 1 - June 1 3,000,000.00 4,000,000.00
June 1 - December 31 1,400,000.00 1,800,000.00
1. How much will be reported as loss from ordinary activities of the discontinued segment during 2018?
a. 1,000,000 c. 1,600,000
b. 1,300,000 d. 2,000,000
On December 31, 2018, Potter Company's warehouse has a carrying value of P3,500,000 with a
remaining useful life of 10 years, but its fair market value was P3,300,000. As of December 31, 2018,
Potter Company intends to sell the warehouse to a buyer after it vacates the warehouse. The time
necessary to vacate the warehouse is usual and customary for sales of such assets.
2. In its December 31, 2018 statement of financial position, Potter Company should include the
warehouse as
a. PPE valued at P3,300,000
b. PPE at P3,500,000
c. Non-current asset held for sale and valued at P3,300,000
d. Non-current asset held for disposal and valued at P3,500,000
On September 30, 2018, when the carrying amount of the net assets of segment C was P7,000,000,
X Company signed a binding contract to sell segment C for P12,000,000. The sale is expected to be
completed by January 31, 2019. In addition to January 31, 2019, the sale contract obliges X Company
to terminate certain employees of segment C incurring termination cost P2,000,000 to be paid on
June 30, 2019. The company continued to operate segment C throughout 2018. Revenue of segment C
throughout 2018 was P8,000,000, operating cost was P4,000,000.
3. How much income should be reported as income from ordinary activities of the discontinued segment
for 2018, before tax?
a. None c. 7,000,000
b. 2,000,000 d. 8,000,000
Melvin Company plans to dispose of a group of net assets that form part a disposal group. The net assets
at December 31, 2018 are:
Carrying Value at December 31, 2918
Goodwill 6,000,000.00
PPE 18,000,000.00
Inventory 10,000,000.00
Financial assets (profit of P2,000,000 recornized in equity) 7,000,000.00
Financial liabilities (4,000,000.00)
Total 37,000,000.00
Before the date of classification, the PPE had a fair value of P16,000,000; the inventory has a net realizable
value of P9,000,000. The fair value less cost to sell of the disposal group is P25,000,000.
5. Immediately after classification as held for sale, what amount should be presented as the carrying value of
the disposal group?
a. 25,000,000 c. 34,000,000
b. 29,000,000 d. 37,000,000
During 2018, Gambler Company discovered that the ending inventories on its financial statements were incorrect
by the following amounts:
Gambler uses the periodic system to ascertain year-end quantities that are converted to peso amounts using FIFO
cost method.
6. Prior to any adjustments for these errors and ignoring income taxes, how much would be the accumulated profits
and losses of Gambler at January 1, 2018?
a. Correct c. 150,000 overstated
b. 30,000 overstated d. 270,000 overstated
Market Corporation failed to recognize accruals and prepayments since the inception of its business 3 years ago.
The accruals and prepayments at the end of 2018 are given below:
7. What is the net effect of the above errors in the 2018 net income?
a. 30,000 overstated c. 120,000 understated
b. 30,000 understated d. 120,000 overstated
Cola Company reported an Accumulated Profits balance of P400,000 at December 31, 2018. In August 2019, Cola Compan
determined that insurance premiums of P75,000 for the 3 year period beginning January 1, 2018, had been paid and fully e
in 2018. Assume Cola has a 32% income tax rate.
8. What amount should Cola report as adjusted beginning Accumulated Profits in 2019?
a. 366,000 c. 434,000
b. 425,000 d. 450,000
Silk Company's December 31 year-end financial statements had the following errors
12/31/2018 12/31/2019
Ending Inventory 13,500 understated 19,800 overstated
Depreciation Expense 3,600 understated
Unearned Rental 5,000 understated
Prepaid Insurance 8,000 understated
There were no other errors during the years 2018 or 2019 and no corrections have been made for any of the errors. (Ignor
9. What is the net effect of the errors on the Silk's 2019 net income?
a. Understated by 13,000 c. Overstated by 20,300
b. Overstated by 14,800 d. Overstated by 25,300
10. What is the net effect of the errors on the Silk's December 31, 2019 working capital?
a. Understated by 4,900 c. Overstated by 11,800
b. Understated by 8,000 d. Understated by 20,300
Mango Company bought a machine on January 1, 2016 for P240,000 at which time it had an estimated useful life of 8 year
no residual value. Straight line method of depreciation is used for all Mango's depreciable assets. On January 1, 2018, the m
estimated uselful life was determined to be only 6 years from the acquisition date.
11. In Mango's 2018 statement comprehensive income, what amount of depreciation should the company recognized as a r
of the change in estimate?
a. none c. 40,000
b. 30,000 d. 45,000
Mustang Company changed from straight line depreciation to double declining balance method at the beginning of 2018. T
asset originally cost P1,500,000 in 2013 using straight line depreciation. Periodic depreciation using straight line is P60,000
12. What amount of depreciation Mustang Company should recognize for the year 2018?
a. 75,000 c. 120,000
b. 96,000 d. 150,000
During 2018, Tricky Company decided to change from FIFO method of inventory valuation to the valuation to the weighted
Inventory balances under each method were as follows:
13. In its year-end 2018 statement of retained earnings, what amount should Tricky report as the effect of this accounting ch
a. none c. 80,000
b. 78,000 d. 120,000
During the second quarter of 2018, Rhine Company sold a piece of equipment at a P12,000 gain.
14. What portion of the gain should Rhine Company report in its income statement for the 2nd quarter of 2018?
a. none c. 6,000
b. 4,000 d. 12,000
An inventory loss from a permanent market decline of P360,000 occurred to May 2018. Lakers Company appropriately rec
May 2018 after its March 31, 2018 quarterly report was issued.
15. What amount of inventory loss should be reported in the quarterly income statement for the 3 months ended June 30, 2
a. none c. 180,000
b. 90,000 d. 360,000
p. 407
uing segment
t during 2018?
p. 412
er 31, 2018,
p. 408
s X Company
e of segment C
tinued segment
he carrying value of
d-Average Method
t as the effect of this accounting change?