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INTERMEDIATE ACCOUNTING 1
FIRST GRADING EXAMINATION
1.
Which of the following is not one of the components of an accounting information system?
a. Personnel
b. Accounting policies
c. Equipment and devices used to expedite accounting work
d. T-account
2.
This concept views each transaction as having a two-fold effect on values – a value received and a value parted with,
and each transaction is recorded using at least two accounts.
a. Equilibrium
c. Twins concept
b. Duality
3.
d. No I.D., No entry concept
It is a formal record where transactions are initially recorded.
a. Journal entries
c. Master file
b. Ledger
d. Journal
4.
A company paid its property taxes on October 1 for the period October 1, year 1 to September 30, year 2. When the
payment was made, the company debited property taxes expense and credited cash for ₱8,000. The adjusting entry at
December 31, year 1 would include which of the following:
a. debit prepaid property taxes, ₱6,000.
b. credit prepaid property taxes, ₱6,000.
c. credit property tax expense, ₱2,000.
d. debit property tax expense, ₱6,000.
5.
The adjusting entry to recognize an expense that has been incurred but not yet paid involves a debit and a credit to
a. an asset account and a liability account, respectively.
b. an asset or contra asset account and an expense account, respectively.
c. an expense account and a liability account, respectively.
d. a receivable account and a revenue account, respectively.
6.
The total credits in the statement of financial position columns of a worksheet are ₱2,161,200, while the total debits in
the income statement columns are ₱740,400. The total debits in the adjusted trial balance are ₱2,970,000. How much is
the profit (loss) for the period?
a. 68,400
b. 80,800
c. (68,400)
d. (80,800)
7.
ABC Co. records all disbursements using nominal accounts. On December 31, 20x1, ABC Co. has total expenses of
₱4,000,000 before considering the following:
Advertisement costs paid during December 20x1 totaled ₱40,000. The advertisement was aired on TV on January 5,
20x2.
A two-year insurance on assets was obtained on July 1, 20x1 for ₱96,000.
On July 15, 20x1, ABC Co. entered into an operating lease requiring monthly payments of ₱240,000 starting on the
date of the lease contract and every 15th of the month thereafter.
Office supplies expense has a balance of ₱80,000. The physical count of office supplies revealed a balance of ₱64,000.
(a)
(b)
(c)
(d)
How much is the adjusted total expenses?
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a.
b.
c.
d.
2,894,000
3,704,000
3,896,000
4,022,000
8.
On March 1, an entity received ₱3,000 from a client as an advance for 12 months’ worth of delivery services. The entity
initially recorded the receipt as a debit to cash and a credit to delivery service revenue. The adjusting entry on
December 31 would include a
a. debit to delivery service revenue for ₱2,500.
b. credit to unearned delivery service revenue for ₱500.
c. credit to delivery service revenue for ₱500.
d. No adjusting entry is required because the delivery service exactly covers a one-year period.
9.
ABC Co. prepared its unadjusted trial balance and determined that the totals of debits and credits do not equal.
Further investigation revealed the following:
The debit posting for a cash sale was omitted.
2,000
The balance of Inventory was listed as a credit instead of debit
12,000
The balance of Insurance expense was listed as Rent expense
3,000
Unearned interest income was listed as a debit instead of credit
5,000
(a)
(b)
(c)
(d)
How much is the difference between the total debits and total credits in the trial balance?
a.
b.
c.
d.
16,000 excess debits
16,000 excess credits
22,000 excess debits
22,000 excess credits
10. The credit total of a trial balance exceeds the debit total by ₱350. In investigating the cause of the difference, the
following errors were determined:
(a) A credit to Accounts receivable of ₱550 was not posted.
(b) A ₱5,000 debit to be made to the Purchases account was debited to Accounts payable instead.
(c) A ₱3,000 credit to be made to the Sales account was credited to the Accounts receivable account instead.
(d) The Interest payable account balance of ₱4,500 was included in the trial balance as ₱5,400.
How much is the reconciled balance using the information given above?
a.
b.
c.
d.
4,750
5,640
6,240
7,450
11. Alaking Co. received cash to be held in trust for Ambit Co. under an escrow agreement. How should Alaking Co.
report the amount received in its financial statements?
a. as part of cash
b. as a liability
c. as an asset and a liability
d. as an off-balance sheet item that is disclosed in the notes
12. Under the imprest system of handling petty cash funds, the petty cash fund account is credited when
a. disbursement is made out of the fund.
b. the fund is replenished.
c. the fund is not replenished and the fund is adjusted for the disbursements during the period.
d. the imprest balance of the fund is increased.
13. When a bank receives cash from a depositor, the bank credits which of the following accounts?
a. Cash on hand
b. an appropriate income account
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c.
d.
Cash in bank
Deposit liability
14. The policies and procedures used to safeguard assets, ensure accurate business information, and ensure compliance
with laws and regulations are called
a. voucher system.
b. bank reconciliation.
c. internal controls.
d. proof of cash.
15. Which of the following is not considered an internal control over cash?
a. rotating duties among employees with cashier responsibilities
b. separating the responsibilities for cash custody and cash recording
c. management’s operating style
d. voucher system
16. It is a fund that is used to pay relatively small amounts.
a. pretty cash fund
b. small fund
c. cute little cash fund
d. petty cash fund
17. If the Cash Short and Over account has a credit balance at the end of the period and the investigation for the
discrepancy was without merit, the balance would be reported in the financial statements as
a. receivable from an employee.
b. loss.
c. other liabilities.
d. other income or gain.
18. Trask Corporation's checkbook balance on December 31, 2001 was ₱8,000. In addition, Trask held the following items
in its safe on December 31:
₱2,000
● Check payable to Trask Corporation, dated January 2, 2002, not included in December 31 checkbook balance
●
Check payable to Trask Corporation, deposited on December 20 and included in the December 31
checkbook balance but returned by the bank on December 30, stamped "NSF." The check was redeposited
on Jan. 2, 2002 and cleared on Jan. 7
400
●
Post-dated checks not reflected in the checkbook balance
150
●
Check drawn on Trask Corporation's account, payable to a vendor, dated and recorded December 31, but
not mailed until January 15, 2002, deducted from checkbook balance
1,000
The proper amount to be shown as cash on Trask's balance sheet at December 31, 2001, is
a.
b.
c.
d.
₱7,600.
₱8,000.
₱8,600.
₱9,750.
19. On December 31, 20x1, West Company had the following cash balances:
Cash in banks
₱1,800,000
Petty cash funds (all funds were reimbursed on 12/31/x1)
50,000
Cash in banks includes ₱600,000 of compensating balances against short-term borrowing arrangements at December 31,
20x1. The compensating balances are not legally restricted as to withdrawal by West. In the current assets section of West's
December 31, 20x1, balance sheet (statement of financial position), what total amount should be reported as cash?
a. 1,200,000
b. 1,250,000
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c.
d.
1,800,000
1,850,000
20. At December 31, 20x3, Beth Co. had the following balances in the accounts it maintains at XYZ Bank:
Checking account #101
175,000
Checking account #201
(10,000)
Money market account
25,000
90-day certificate of deposit, due 2/28/x4
50,000
180-day certificate of deposit, due 3/15/x4
80,000
Beth Co. classifies debt securities acquired three months or less before maturity date as cash equivalents. In its December
31, 20x3 statement of financial position, what amount should Beth Co. report as cash and cash equivalents?
a. 330,000
b. 250,000
c. 240,000
d. 225,000
21. Sneeze Co. established a petty cash fund of ₱1,400. The following were the fund disbursements during the period:
Freight-out
₱740
Transportation expense
240
Office supplies expense
230
Miscellaneous expense
170
In addition to the receipts (source documents) for the above items, the petty cash box contained ₱8 in coins and an IOU of
₱8 from the secretary handling the fund. The IOU is to be treated as salary advance. The company uses a cash over and
short account, as needed. The company decided to decrease the petty cash fund to ₱1,000 after replenishing the fund. How
much is the cash (shortage) or overage during the period?
a.
b.
c.
d.
(4)
4
(12)
12
22. Which of the following is added to the cash balance per bank statement when preparing a bank reconciliation
statement?
a.
b.
c.
d.
Credit memo
Debit memo
Outstanding check
Deposit in transit
23. Journal entries based on the bank reconciliation are required on the depositor’s books for:
a. additions to the balance according to the depositor’s records
b. deductions from the balance according to the depositor’s records
c. both a and b
d. both additions to and deductions from the balance according to the bank’s records
24. The amount of the outstanding checks is included on the bank reconciliation as:
a. an addition to the balance per bank statement
b. a deduction from the balance per bank statement
c. an addition to the balance per depositor’s records
d. a deduction from the balance per depositor’s records
25. 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
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NSF check returned by bank
Bank service charges for December
500
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. Jane made the
correct entry.
●
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.
b.
c.
d.
net debit to cash for ₱2,020.
net credit to cash for ₱700.
credit to notes receivable for ₱2,500.
net debit to accounts receivable for ₱590.
26. Entity A is preparing its March 31, 20x1 bank reconciliation. The following information was determined:
●
The cash balance per books is ₱280,000, while the cash balance per bank statement is ₱320,000.
●
Credit memo – ₱20,000
●
Debit memo – ₱15,000
●
Deposits in transit – ₱75,000
●
Outstanding checks – ₱25,000
●
The disbursements per books are overstated by ₱45,000.
●
The bank debits are understated by ₱40,000.
How much is the adjusted balance of cash?
a.
b.
c.
d.
370,000
330,000
285,000
380,000
27. 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
28. Ramos Company had the following bank reconciliation at March 31:
Balance per bank statement, 3/31 ........................
Add: Deposit in transit .................................
₱ 93,000
20,600
₱113,600
Less: Outstanding checks ................................
(25,200)
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₱ 88,400
Balance per books, 3/31 .................................
Data per bank statement for the month of April follow:
₱116,800
Deposits ..............................................
Disbursements .........................................
99,400
All reconciliation items at March 31 cleared through the bank in April. Outstanding checks at April 30 totaled ₱15,000.
What is the amount of cash disbursements per books in April?
a.
b.
c.
d.
78,900
89,200
91,900
92,200
29. Washing Co. had the following bank reconciliation at March 31, 20x1:
Balance per bank statement, 3/31/x1
46,500
Add deposit in transit
10,300
56,800
Less outstanding checks
12,600
Balance per books, 3/31/x1
44,200
Data per bank for the month of April 20x1:
Deposits………………………………………...….58,400
Disbursements ……………………………………49,700
All reconciling items at March 31, 20x1 cleared the bank in April. Outstanding checks at April 30, 20x1 totaled ₱7,000. There
were no deposits in transit at April 30, 20x1. What is the cash balance per books at April 30, 20x1?
a.
b.
c.
d.
42,800
56,800
52,200
48,200
30. The Eric Manufacturing Company received its bank statement for the month ending May 31. The bank statement
indicates a balance of ₱32,400. The cash account as of the close of business on May 31 has a balance of ₱8,350. In
reconciling the balances, the following items were discovered:
(a)
Collection by bank of note for ₱1,500 less collection fees of ₱250.
(b)
Deposits in transit, ₱51,000.
(c)
The bank charged the depositor ₱800 for overdrafts.
(d)
Checks outstanding on May 31, ₱79,100.
(e)
A check issued to Scott Corp. for ₱4,500 was not recorded in Eric Company's books. The check cleared the bank
in May.
How much is the adjusted balance of cash?
a.
b.
c.
d.
4,300
5,200
6,600
9,800
31. The overdraft per bank statement of ABC Co. was ₱36,088 as of March 31, 20x1. The following information was
gathered.
● Interest on overdraft for the quarter ended March 20x1 – ₱1,248 (not yet entered in cash book)
● Check deposited with the bank but did not yet clear – ₱4,680
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● Check issued but not yet presented for payment – ₱6,110
● A check for ₱2,600, discounted with the bank earlier, was dishonored. ABC Co. is not yet aware of the dishonor.
How much is the overdraft per ABC’s cashbook on March 31, 20x1?
a.
b.
c.
d.
37,518
43,201
33,670
46,370
32. Under the allowance method of recognizing bad debts on trade accounts receivable, the effect of writing off an account
to an entity's working capital is
a. increase
b. decrease
c. either a or b depending on the current level of the entity's working capital
d. no effect
33. At 30 September 2000, Z Ltd. had a provision for doubtful debts of ₱37,000. During the year ended 30 September 2001
the company wrote off debts totaling ₱18,000, and at the end of the year, it is decided that the provision for doubtful
debts should be ₱20,000. What should be included in the income statement for bad and doubtful debts?
a. ₱35,000 debit
b. ₱1,000 debit
c. ₱38,000 debit
d. ₱1,000 credit
34. At the close of its first year of operations, December 31, 2004, Linn Company had accounts receivable of ₱490,000, after
deducting the related allowance for doubtful accounts. During 2004, the company had charges to bad debt expense of
₱90,000 and wrote off, as uncollectible, accounts receivable of ₱40,000. What should the company report on its balance
sheet at December 31, 2004 as accounts receivable before the allowance for doubtful accounts?
a. ₱620,000
c. ₱440,000
b. ₱540,000
d. ₱360,000
35. During the year, Jantz Company made an entry to write off a ₱4,000 uncollectible account. Before this entry was made,
the balance in accounts receivable was ₱80,000 and the balance in the allowance account was ₱4,500. The net realizable
value of accounts receivable after the write-off entry was
a. ₱80,000.
c. ₱71,500.
b. ₱79,500.
d. ₱75,500.
36. The following information is available for Reagan Company:
Allowance for doubtful accounts at Dec. 31, 2003
₱ 8,000
Credit sales during 2004
400,000
Accounts receivable deemed worthless and written
off during 2004
9,000
It has been determined that an allowance for doubtful accounts of ₱9,500 is needed at December 31, 2004. What amount
should Reagan record as "bad debt expense" for the year ended December 31, 2004?
a.
b.
₱8,500
₱9,500
c. ₱10,500
d. ₱17,500
Use the following information for the next two questions:
A trial balance before adjustments included the following:
Debit
Credit
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Sales
₱425,000
Sales returns and allowance
₱14,000
Accounts receivable
53,000
Allowance for doubtful accounts
760
37. If the estimate of uncollectibles is made by taking 1% of net sales, the amount of the adjustment is
a. ₱3,350.
c. ₱4,250.
b. ₱4,110.
d. ₱4,870.
38. If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount of the adjustment is
a. ₱4,540.
c. ₱5,224.
b. ₱5,300.
d. ₱6,060.
39. For the month of December, the records of Balin Corporation show the following information:
Cash received on accounts receivable
₱ 70,000
Cash sales
60,000
Accounts Receivable, December 1
160,000
Accounts Receivable, December 31
148,000
Accounts Receivable written-off as uncollectible
2,000
How much are the gross sales in December?
a. ₱118,000
c. ₱130,000
b. ₱120,000
d. ₱144,000
40. An analysis and aging of accounts receivable of the Lucille Company at December 31, 2002 showed the following:
Accounts Receivable ..................................
₱840,000
Allowance for Doubtful Accounts
(before adjustment) ................................
36,000
Accounts estimated to be uncollectible ...............
76,800
(cr)
Compute for the net realizable value of the accounts receivable of Lucille Company at December 31, 2002.
a. ₱804,000
c. ₱763,200
b. ₱799,200
d. ₱727,200
41. ABC Co. has been recognizing bad debt expenses based on the direct write-off method. In 20x4, ABC Co. decided to
change to the allowance method and that doubtful accounts shall be estimated using the percentage of receivables
method. The percentage is to be computed based on all available historical data up to a maximum of four years.
Information for five years is shown below:
Year
Write-offs
Recoveries
Net credit sales
20x0
10,000
600
80,000
20x1
7,000
1,000
100,000
20x2
10,000
3,000
160,000
20x3
15,000
5,000
200,000
20x4
28,000
2,000
240,000
70,000
11,600
780,000
The balances of accounts receivables on January 1, 20x4 and December 31, 20x4 are ₱100,000 and ₱200,000, respectively.
How much is the doubtful accounts expense to be recognized in 20x4?
a. 24,980
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b. 34,000
c. 34,890
d. 38,980
42. According to the PFRSs, receivables (with allowed practical expedient for trade receivables) are initially recognized
at
a.
b.
c.
d.
fair value.
present value.
cost.
fair value plus transaction costs.
43. Which of the following statements is incorrect regarding the initial recognition of receivables?
a. On initial recognition, the fair value of a short-term receivable may be equal to its face amount.
b. On initial recognition, the fair value of a long-term receivable bearing a reasonable interest rate is deemed equal
to its face amount.
c. On initial recognition, the fair value of a long-term noninterest bearing receivable is deemed equal to the present
value of future cash flows from the instrument discounted at the effective interest rate on initial recognition.
d. On initial recognition, the fair value of all interest-bearing receivables is deemed equal to their face amount.
44. Scott Company received a one-year non-interest-bearing note receivable. When the note receivable was recorded,
which of the following were debited or credited?
Interest Receivable
Discount on Note Receivable
a.
Yes
Yes
b.
Yes
No
c.
No
Yes
d.
No
No
45. What factor should you use for a ₱2,000 note receivable that is collectible in full after five years?
a. Present value of 1
b. Present value of an ordinary annuity of 1
c. Present value of an annuity due of 1
d. Any of these
46. On Jan. 2, 20x1, an entity sold a machine in which the receipt of the consideration is deferred to May 1, 20x2. The total
collection on May 1, 20x2 will include both principal and interest. Assuming interest at a 10% rate, the initial
measurement of the receivable would be computed as the total collection multiplied by what time value of money
factor?
a. Future value of annuity of 1
b. Future value of 1
c. Present value of annuity of 1
d. Present value of 1
47. Which of the following is true regarding non-interest bearing note receivables?
a. they are always discounted to their present value on initial recognition
b. they include a specified principal amount but an unspecified interest amount
c. they include a specified principal and specified interest
d. they cause no interest income to be recognized over their term
e. they include an unspecified principal and an unspecified interest
48. 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.
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c.
d.
5% of the July 1, 2010 present value of the amount due on June 30, 2012.
4% of the July 1, 2010 present value of the amount due on June 30, 2012.
49. 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
Fact pattern for the next three independent questions:
Information on a note receivable:
Face amount
₱800,000
Effective interest
14%
50. The note is due in lump sum in five years’ time. What is the carrying amount of the note at initial recognition?
a. 415,495
b. 432,158
c. 567,823
d. 591,834
51. The note is due in four equal annual installments. The first installment is due one period from initial recognition. What
is the carrying amount of the note at initial recognition?
a. 582,742
b. 567,823
c. 591,834
d. 602,158
52. The note is due in five equal annual installments. The first installment is due at initial recognition. What is the carrying
amount of the note at initial recognition before any collection?
a. 582,742
b. 567,823
c. 602,158
d. 626,194
53. On January 1, 20x1, Extra Co. received a 4-year, noninterest bearing note of ₱1,000,000 in exchange for land with
carrying amount of ₱500,000. The note is due on December 31, 20x4. The effective interest rate is 14%. How much is
the carrying amount of the note on the Dec. 31, 20x2 and what is the net effect of the transaction in Extra Co.’s 20x1
profit or loss?
Carrying amount on Dec. 31, 20x2
Net effect in 20x1 P/L
Increase (Decrease)
a.
b.
c.
d.
674,971
769,467
674,971
769,467
82,891
174,971
94,496
(9,189)
54. On January 2, 20x3, Zyrus Co. sold equipment with a carrying amount of ₱480,000 in exchange for a ₱600,000
noninterest bearing note due January 2, 20X6. There was no established exchange price for the equipment. The
prevailing rate of interest for a note of this type at January 2, 20x3 was 10%. In Zyrus' 20x3 income statement, what
amount should be reported as interest income?
a. 9.000
c. 50,000
b. 45,000
d. 60,000
Use the following information for the next two questions:
On January 1, 20x1, Kakadwa 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
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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%.
55. How much is the interest income in 20x1?
a. 408,230
b. 278,334
c. 328,964
d. 288,220
56. How much is the carrying amount of the receivable on December 31, 20x1?
a. 1,690,510
c. 2,690,051
b. 892,857
d. 1,594,388
Use the following information for the next three questions:
Bilag Co. received the following note:
Face amount
Effective interest
₱1,200,000
11%
57. The note is due in lump sum in five years’ time. What is the carrying amount of the note at the end of the second year?
a. 793,360
c. 897,430
b. 877,430
d. 977,430
58. The note is due in four equal annual installments. The first installment is due one period from initial recognition. What
is the carrying amount of the note at the end of the second year?
a. 930,734
c. 733,114
b. 877,430
d. 513,758
59. The note is due in four equal annual installments. The first installment is due one period from initial recognition. How
much is the balance of the unearned interest income (discount on note receivable) at the end of the second year?
a. 86,242
c. 87,289
b. 76,632
d. 88,643
60. On July 1, 2002, Cornell Corp. received a one-year note with a face value of ₱900,000 and a stated interest rate of 15
percent in exchange for a machine with a fair value of ₱1,000,000. What is the effective interest rate on the note?
a. 16.67 percent
c. 3.5 percent
b.
15.0 percent
d. 11.11 percent
BONUS QUESTION:
61. Why did the accountant cross-foot amounts in the worksheet?
a. probably to get the adjusted balance of an account
b. because the amount cannot cross-foot the accountant
c. to get into the other side of the worksheet
d. because the accountant does not have a ruler to make a double-rule
“Consider it pure joy, my brothers and sisters, whenever you face trials of many kinds, because you know that the testing of your faith
produces perseverance.” (James 1:2-3)
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