1stF 2nd Yr Intermediate Accounting 1 Verified
1stF 2nd Yr Intermediate Accounting 1 Verified
1stF 2nd Yr Intermediate Accounting 1 Verified
a) I only
b) I and II
c) I, II, and III
d) I, II, III, and IV
7. Annual crops and similar plants that die once their produce has been
harvested are considered __________ and therefore classified as ____________?
a) consumable plants; biological asset
b) biological asset; consumable plants
c) bearer plants; PPE
d) PPE; bearer plants
a) I, II and III
b) I and II only
c) I and III only
d) I only
13. Any entity purchased an equipment that it does not have to pay until after
3 years. The total payment on maturity will include both principal and
interest. The cost of the equipment would be the total payment multiplied
by what time value of money concept?
a) Present value of annuity of 1
b) Present value of 1
c) Future amount of annuity of 1
d) Future amount of 1
14. Which of the following are essential characteristics of property, plant and
equipment?
I. Estimated useful life is not beyond 12 months
II. Intended for sale in the ordinary course of business
III. Physical existence
IV. Held for use in the production or supply of goods and services, for
rental to others, or for administrative purposes.
a) I, II, III, and IV
b) I,II, and III
c) I,II, and IV
d) III and IV
18. Which among the statements is not correct regarding Retail Inventory
Method?
a) Retail inventory method requires that a record be kept of the total cost and
retail of goods purchased.
b) Under Retail inventory method, purchase discounts usually are
considered as an addition of the cost of purchases.
c) Under Retail inventory method, freight costs are treated as a part of the
purchase cost;
d) Under Retail inventory method, purchase returns and allowances are
ordinarily considered both a reduction of the price at both cost and retail
19. Costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner
intended by management exclude:
a) Professional fees
b) Costs of site preparation
c) administration and other general overhead costs
d) installation and assembly costs
20. Under the revaluation model, how often shall revaluations be made?
a) Annually
b) Every three or five years
c) It depends upon the entity’s accounting policy
d) It depends upon the changes in fair values of the items of property, plant
and equipment being revalued.
22. When property is acquired by issuing equity shares, which of the following
is the best basis for establishing the historical cost of the acquired asset?
a) Historical cost of the asset to the seller
b) Historical cost of a similar asset
c) Fair value of the asset received
d) Fair value of shares issued
24. The customer's copy of the account provided by the bank to the depositor
to record deposits and withdrawals is called
a) Sales Book
b) Cash Book
c) Pass Book
d) Purchases Book
25. The statement that explains the causes of the difference between the cash
book and bank statement is called
a) Bank Statement
b) Financial Statement
c) Income Statement
d) Bank Reconciliation Statement
26. Spare parts and servicing equipment are usually accounted for as:
a) Inventory
b) A separate class of fixed assets
c) Expenses written off to the profit or loss on buying
d) Equipment
29. If payment for a fixed asset is deferred beyond normal credit terms, any
additional payment above the cash cost of the asset will be accounted for
as:
a) Repairs and maintenance
b) Cost of fixed asset
c) Borrowing cost
d) Expenses
30. In the case of an exchange of assets, if the acquired asset cannot be valued:
a) The cost of the asset given up is used
b) The residual value is used
c) The asset cannot be capitalized
d) The asset can be capitalized
a) P33,100,000
b) P29,100,000
c) P33,900,000
d) P29,900,000
33. The following information pertains to Baby Pink Company at December 31,
2022:
Inventory, January 1 P 2,800,000
Purchases during the year 13,200,000
Inventory, December 31:
Cost 2,400,000
Net realizable value 2,000,000
Prior to 2022, the application of the lower of cost and net realizable value
never produced a write down in the company’s inventory to an amount
below cost. What is the cost of goods sold assuming the company applies
the lower of cost and net realizable value using the allowance method?
a) P14,000,000
b) P15,600,000
c) P13,600,000
d) P16,000,000
a) P810,000
b) P690,000
c) P1,250,000
d) P1,310,000
35. Lavender Company provided the following information for the current year:
a) P888,500
b) P850,000
c) P808,500
d) P1,208,500
36. The following items relate to the acquisition of a new machine by HoneyBee
Company in 2022:
a) P5,120,000
b) P4,820,000
c) P4,870,000
d) P4,990,000
37. The Silver Company determined that, due to obsolescence, equipment with
an original cost of P900,000 and accumulated depreciation at December 31,
2022, of P420,000 had suffered permanent impairment, and as a result
should have a carrying value of only P300,000. In addition, the remaining
useful life of the equipment was reduced from eight years to three year.
a) P0
b) P140,000
c) P1,040,000
d) P120,000
38. Use the same information given in No.37. In its December 31, 2022
statement of financial position, what amount should Silver Company report
as accumulated depreciation?
a) P900,000
b) P880,000
c) P760,000
d) P780,000
39. Hans Company provided the following data for the current year:
Inventory – January 1 Cost P2,500,000
Net realizable value 2,800,000
Net Purchases 6,900,000
Inventory – December 31 Cost 2,000,000
Net realizable value 2,700,000
a) P7,700,000
b) P10,100,000
c) P7,400,000
d) P7,600,000
40. Anna Company for the year ended December 31, 2020 revealed the
following:
• During 2020, Anna received P40,000 as cash advance from a customer for
merchandise to be manufactured and shipped during 2021. The P40,000
was credited to sales revenue.
• Inventory at January 1, 2020 was understated by P71,000.
• Inventory at December 31, 2020 was understated by P96,000.
• Profit (before adjustments) reported on the 2020 profit or loss was
P900,000.
What is the correct profit for the year ended Dec. 31, 2020?
a) P845,000
b) P1,027,000
c) P965,000
d) P885,000
a) P6,690,000
b) P6,700,000
c) P7,030,000
d) P6,640,000
If there is no market value available for the trees and plants, how much is
to be reported as biological assets in Inasal Corp.’s balance sheet?
a) P500,000
b) P6,500,000
c) P800,000
d) P885,000
44. Hot Chicken Co. provided the following assets in a forest plantation and
farm:
a) P14,700,000
b) P12,500,000
c) P12,600,000
d) P14,800,000
a) P2,150,000
b) P2,400,000
c) P1,870,000
d) P2,370,000
47. Love Company regularly buys accounting books and is allowed a trade
discount of 20% and 10%. The entity made a purchase on Feb 1 and received
any invoice with a list price of P600,000, a freight charge of P50,000, and
payment terms of net 30 days. What is the cost of the purchase?
a) P482,000
b) P468,000
c) P432,000
d) P650,000
48. During the year, Gray Company purchased a new machine. A P200,000 down
payment was made and a three monthly installment of P400,000. The cash
price would have been P1,300,000. The entity paid no installation charges
under the monthly payment plan but a P20,000 installation charge would
have been incurred with a cash purchase. What amount should be
capitalized as cost of the machine?
a) P1,420,000
b) P1,400,000
c) P1,320,000
d) P1,300,000
49. Steve Company exchanged the equipment with a carrying amount of
P1,200,000 and a fair value of P2,000,000 for the equipment and P100,000
cash. The fair value of the equipment received was P1,800,000. The cash
flows from the new equipment are not expected to be significantly different
from the cash flows of the old equipment. At what amount should the
equipment received in the exchange be recorded?
a) P2,000,000
b) P1,800,000
c) P1,100,000
d) P1,200,000
53. On December 31, 2020, the building of Arena Company with a carrying
amount of P25,000,000 and remaining useful life of 8 years has been
determined to have a fair value of P40,000,000. Income tax rate is 35%.
Arena Co. depreciates its building using the straight-line method.
Compute for the revaluation surplus after tax.
a) P20,000,000
b) P14,000,000
c) P15,000,000
d) P9,750,000
54. Piper Company values its inventory at the lower of FIFO cost or net
realizable value (NRV). The inventory accounts at December 31, 2021, had
the following balances.
Raw materials P 450,000
Work in process 900,000
Finished goods 1,105,000
On January 10, 2021, Piper purchased raw materials with a list price of
P350,000 and was given a trade discount of 20% and 10%; terms 1/15,
n/30. Bolinao values inventory at the net invoice price.
The entry on January 10 will include a debit to Raw Materials Inventory of:
a) P249,480
b) P252,000
c) P280,000
d) P350,000
55. Using the same information given in No. 54, the repossessed inventory on
February 5 is most likely to be valued at:
a) P4,100
b) P15,600
c) P27,100
d) P30,800
56. On, January 21, 2021, the biological assets of Trio Company consist of ten
2-year-old animals with fair value less cost to sell of P12,000 each for a total
of P120,000.
Transactions during the year include the following:
• One animal aged 2.5 years was purchased on July 1, 2021 for P13,800
• One animal was born on July 1, 2021
• No animals were sold or disposed during the year
What is the fair value less cost to sell on December 31, 2021?
a) P143,800
b) P163,300
c) P177,800
d) P188,300
57. Using the same information given in No. 56, what is the carrying amount on
December 31, 2021?
a) P145,800
b) P143,800
c) P140,800
d) P135,800
58. Using the same information given in No. 56, the increase in fair value of
biological assets in 2021 due to price change is:
a) P34,000
b) P37,000
c) P19,500
d) P21,500
59. On December 31, 2005, Reese Co. is in financial difficulty and cannot pay
a note due that day. It is a P600,000 note with P60,000 accrued interest
payable to Trear, Inc. Trear agrees to accept from Reese equipment that has
a fair value of P290,000, an original cost of P480,000, and accumulated
depreciation of P230,000. Trear also forgives the accrued interest, extends
the maturity date to December 31, 2008, reduces the face amount of the
note to P250,000, and reduces the interest rate to 6%, with interest payable
at the end of each year.
60. Using the same information given in No. 59, Reese should recognize a gain
on the partial settlement and restructure of the debt of
a) P0
b) P15,000
c) P55,000
d) P75,000
61. Using the same information given in No. 59, Reese should record interest
expense for 2008 of
a) P0
b) P15,000
c) P30,000
d) P45,000
62. Lockey Company prepared the following bank reconciliation on June 30.
All reconciliation items on June 30 cleared the bank on July 31. Deposit
in transit totaled P600,000 and checks outstanding amounted to
P1,000,000 on July 31.
63. Bright Company purchased a trace of land for a factory site at P3,000,000.
The entity razed an old building on the property to make room for the
construction of the new building and sold the materials salvaged from the
demolition. Demolition of old building, 200,000. Legal fees for purchase
contract, 250,000. Title guarantee insurance, 50,000. Proceeds from sale of
salvaged materials, 20,000.
It was also determined that the net cash inflows from the asset will total
P2,000,000 per year, and that its fair value less cost to sell is P10,000,000.
The appropriate discount rate is 8%.
69. Using the same information above, how much is the depreciation expense
in 2023?
a) 1,432,016
b) 1,342,016
c) 1,324,106
d) 1,423,016
1. (D)
2. (A) If goods are shipped FOB destination, legal title (and control) is not
transferred until the goods are delivered to the buyer’s destination.
3. (D)
4. (D) Agricultural produce is the harvested product of the entity’s biological
assets.
5. (A)
6. (B)
7. (A)
8. (D)
9. (C)
10. (A)
11. (C) Inventory cost should not include abnormal waste storage costs,
administrative overheads, unrelated to production selling costs... [IAS 2.16 and
2.18]
12. (A)
13. (B) PV of 1 since the entity does not have to pay until after 3 years.
14. (D) The major characteristics of property, plant, and equipment are: (1) They are
acquired for use in operations and not for resale. (2) They are long-term in
nature and usually subject to depreciation. and (3) They possess physical
substance.
15. (A) In reference to IAS 41 paragraph 13.
16. (A) Bearer plant is a living plant that:
• Used in the production or supply of agricultural produce
• Expected to bear produce for more than a period
• Has remote likelihood of being sold as agricultural produce except
incidental scrap sales
17. (C) According to PAS 41, Biological assets should be measured on initial
recognition and at subsequent reporting dates at fair value less costs to
sell, unless fair value cannot be reliably measured.
18. (B) Under retail inventory method:
• Under Retail inventory method, purchase discounts usually are
considered as a reduction of the cost of purchases.
• Under Retail inventory method, freight costs are treated as a part of the
purchase cost;
• Under Retail inventory method, purchase returns and allowances are
ordinarily considered both a reduction of the price at both cost and retail
19. (C) Administration and other general overhead costs are not costs of an item
of property, plant and equipment.
20. (D) Revaluations shall made the sufficient regularity to ensure that the carrying
amount does not differ materially from that which would be determined using
fair value at the end of the reporting period. The frequency of revaluation
depends upon the changes in fair values of the items of PPE being
revalued.
21. (C)
22. (C)
23. (A)
24. (C)
25. (D)
26. (A) The IASB decided to clarify that items such as spare parts, stand-by
equipment and servicing equipment shall be recognized as property, plant and
equipment when they meet the definition of property, plant and equipment. If
they do not meet this definition they are classified as inventory (Classification of
Servicing Equipment - Amendments to IAS 16)
27. (C)
28. (C)
29. (C)
30. (A)
31. (B) P29,100,000
Sales P6,400,000
Sales return (55,000)
Net sales 6,345,000
Inventory, January 1 P 900,000
Purchases 5,200,000
Purchase returns (100,000)
Freight in 80,000
Goods available for sale 6,080,000
Cost of good sold (70% x 6,345,000) (4,441,500)
Inventory, December 31 1,638,500
Physical Inventory, December 31 750,000
Cost of missing inventory 888,500
Purchase price 55
Cost P110,000
FV of fence (2,000,000)
50. (A) P0
Since there is no commercial substance
61. (A) P0
The effective-interest rate is 0%.