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INTERMEDIATE ACCOUNTING PRACTICE SETS 1

1. Darwin Company provided the following information at year-end:

Cash P 1,500,000
Accounts receivable 1,200,000
Inventory, including inventory expected in the ordinary
course of operations to be sold beyond 12 months
amounting to P700,000 1,000,000
Financial asset held for trading 300,000
Equity investment at fair value through other
comprehensive income 800,000
Equipment held for sale 2,000,000
Deferred tax asset 150,000

What amount should be reported as total current assets at year-end?


a. 6,000,000
b. 4,000,000
c. 6,800,000
d. 4,800,000

2. Petite Company reported the following current assets on December 31, 2018:

Cash P5,000,000
Accounts receivable 2,000,000
Inventory, including goods received on
consignment P200,000 800,000
Bond investment at fair value through other
comprehensive income 1,000,000
Prepaid expenses, including deposit of P50,000 made on
inventory to be delivered in 18 months 150,000
Total current assets P8,950,000

Cash in general checking account P3,500,000


Cash fund to be used to retire bonds payable in 2020 1,000,000
Cash held to pay value added taxes 500,000
Total cash P5,000,000

What total amount of current assets should be reported on December 31, 2018?
a. 6,750,000
b. 6,700,000
c. 7,700,000
d. 7,750,000

3. Rice Company was incorporated on January 1, 2018 with P5,000,000 from the issuance of
share capital and borrowed funds of P1,500,000. During the first year, net income was
P2,500,000.
On December 15, the entity paid a P500,000 cash dividend. On December 31, 2018, the
liabilities had increased to P1,800,000.

On December 31, 2018, what amount should be reported as total assets?

a. 6,500,000
b. 9,300,000
c. 8,800,000
d. 6,800,000

4. Mirr Company was incorporated on January 1, 2018 with proceeds from the issuance of
P7,500,000 in share capital and borrowed funds of P1,100,000.

During the first year, revenue from sales and consulting amounted to P8,200,000, and
operating costs and expenses totaled P6,400,000.

On December 15, 2018, the entity declared a P300,000 cash dividend, payable to
shareholders on January 15, 2019. The liabilities increased to P2,000,000 by December 31,
2018.

On December 31, 2018, what amount should be reported as total assets?

a. 11,000,000
b. 11,300,000
c. 10,100,000
d. 12,100,000

5. Arabian Company reported the following current assets at year-end:

Cash P4,500,000
Accounts receivable 7,900,000
Notes receivable, net of discounted note P500,000 2,900,000
Inventory 4,000,000
Deferred charges 1,000,000
P19,400,000

Accounts receivable comprised the following:

Trade accounts receivable P 5,000,000


Allowance for doubtful accounts ( 500,000)
Claims against shipper for goods lost in transit 400,000
Selling price of Arabian Company’s unsold goods sent to
Tar Company on consignment at 150% of cost
and excluded from Arabian’s ending inventory 3,000,000
P 7,900,000

What amount should be reported as total current assets at year-end?


a. 17,400,000
b. 17,000,000
c. 18,400,000
d. 15,400,000

6. East Company reported the following current assets at year-end:

Cash P 3,200,000
Accounts receivable 3,000,000
Inventory 2,800,000
Prepaid insurance 200,000
Total current assets P 9,200,000

The accounts receivable consisted of the following:

Customers’ accounts P 1,420,000


Employees’ account – current 240,000
Advances to subsidiary 260,000
Allowance for uncollectible accounts ( 120,000)
Subscription receivable, not collectible currently 1,200,000
Total accounts receivable P 3,000,000

What amount should be reported as current assets at year-end?


a. 8,000,000
b. 9,200,000
c. 7,740,000
d. 8,940,000

7. Ivan Company showed the following current assets at year-end:


Cash P 3,200,000
Accounts receivable 2,500,000
Inventory 2,000,000
Total current assets P 7,700,000

Cash on hand, including customer postdated check


P100,000 and employee IOU of P50,000 500,000
Cash in bank per bank statement (outstanding
Check at year-end P200,000) 2,700,000
Total cash P 3,200,000

What total amount should be reported as current assets?

a. 7,700,000
b. 7,450,000
c. 7,400,000
d. 7,500,000

8. Gar Company reported the following liability account balances on December 31, 2018:

Accounts payable P 1,900,000


Bonds payable, due December 31, 2019 3,400,000
Discount on bonds payable 200,000
Deferred tax liability 400,000
Dividends payable 500,000
Income tax payable 900,000
Note payable, due January 31, 2020 600,000

On December 31, 2018, what total amount should be reported as current liabilities?
a. 7,100,000
b. 6,700,000
c. 6,500,000
d. 6,900,000

9. Brite Company provided the following information on December 31, 2018:

Accounts payable P 550,000


Notes payable, 8% unsecured, due July 1, 2019 4,000,000
Accrued expenses 350,000
Contingent liability 450,000
Deferred tax liability 250,000
Senior bonds payable, 7%, due March 31, 2019 5,000,000

The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit filed against
the entity.

The legal counsel expects the suit to be settled in 2019 and has estimated that the entity will
be liable for damages in the range of P450,000 to P750,000.

The deferred tax liability is not related to an asset for financial reporting and is expected to
reverse in 2019.

What total amount should be reported as current liabilities on December 31, 2018?
a. 10,350,000
b. 10,150,000
c. 9,900,000
d. 4,900,000

10. Burma Company disclosed the following information:

Accounts payable, after deducting debit balances in


suppliers’ accounts amounting to P100,000 P 4,000,000
Accrued expenses 1,500,000
Credit balances for customers’ accounts 500,000
Share dividend payable 1,000,000
Claims for increase in wages and allowance by employees
of the entity, covered in a pending lawsuit 400,000
Estimated expenses in redeeming prize coupons 600,000

What amount should be reported as total current liabilities?


a. 6,700,000
b. 6,600,000
c. 7,100,000
d. 7,700,000
11. Mazda Company reported the following liability balances on December 31, 2018:

10% note payable issued on October 1, 2017, maturing


October 1,2019 P 2,000,000
12% note payable issued on March 1, 2017, maturing
on March 1,2019 4,000,000

The 2018 financial statements were issued on March 31, 2019.

Under the loan agreement for the 10% note payable, the entity has the discretion to
refinance the obligation for at least twelve months after December 31,2018.

On March 1, 2019, the entire P4,000,000 balance of the 12% not payable was refinanced
through issuance of long-term obligation payable lump-sum.

What amount of notes payable should be classified as current on December 31, 2018?
a. 6,000,000
b. 4,000,000
c. 2,000,000
d. 0

12. Willem Company reported the following liabilities on December 31, 2018:

Accounts payable P 2,000,000


Short-term borrowings 1,500,000
Bonds payable due 2019 3,000,000
Premium on bonds payable 500,000
Mortgage payable, current portion P500,000 3,500,000
Bank loan, due June 30, 2019 1,000,000

The P1,000,000 bank loan was refinanced with a 5-year loan on December 31, 2018. The
financial statements were issued march 1, 2019.

What total amount should be reported as current liabilities on December 31, 2018?
a. 7,500,000
b. 5,000,000
c. 8,500,000
d. 4,000,000

13. Ronna Commpany provided the following information on December 31, 2018:

Accounts payable, net of creditor’s debit balances of P200,000 P 2,000,000


Accrued expenses 800,000
Bonds payable, due December 31, 2020 4,500,000
Premium on bonds payable 500,000
Deferred tax liability 500,000
Income tax payable 1,100,000
Cash dividend payable 600,000
Share dividend payable 400,000
Note payable – 6% due March 1, 2019 1,500,000
Note payable – 8% due October 1, 2019 1,000,000

The financial statements for 2018 were issued on March 31, 2019.

On December 31, 2018, the 6% note payable was refinanced on a long-term basis.

Under the long-term agreement for the 8% note payable, the entity has the discretion to
refinance the obligation for at least twelve months after December 31, 2018.

1. What amount should be reported as total current liabilities?


a. 7,200,000
b. 4,700,000
c. 6,200,000
d. 5,100,000

2. What amount should be reported as total noncurrent liabilities?


a. 8,400,000
b. 5,500,000
c. 8,000,000
d. 7,500,000

14. Manchester Company provided the following information on December 31, 2018:

Employee income taxes withheld P 900,000


Cash balance at First State Bank 2,500,000
Cash overdraft at Harbor Bank 1,300,000
Accounts receivable with credit balance 750,000
Estimated expenses of meeting warranties 500,000
Estimated damages as a result of unsatisfactory
performance on a contract 1,500,000
Accounts payable 3,000,000
Deferred serial bonds, issued at par and bearing interest
at 12%, payable in semiannual installments of P500,000
due April 1 and October 1 of each year, the last bond to
be paid on October 1, 2024. Interest is also paid semiannually. 5,000,000

What amount should be reported as total current liabilities on December 31, 2018?

a. 8,100,000
b. 7,950,000
c. 9,100,000
d. 7,350,000

15. Charice Company provided the following information on December 31, 2018:

 Accounts payable amounted to P500,000 and accrued expenses totaled P300,000 on


December 31, 2018.
 On December 15, 2018, the entity declared a cash dividend of P7 per share on 100,000
outstanding shares, payable on January 15, 2019.
 On July 1, 2018, the entity issued P5,000,000, 8% bonds for P4,400,000 to yield 10%. The
bonds mature on June 30, 2023, and pay interest annually every June 30.
 The pretax financial income was P8,500,000 and taxable income was P6,000,000. The
difference is due to P1,000,000 permanent difference and P1,500,000 of taxable
temporary difference to reverse in 2019.
 The income tax rate is 30%. The entity made estimated income tax payments during the
year of P1,000,000.

What amount should be reported as total current liabilities on December 31, 2018?
a. 3,500,000
b. 2,700,000
c. 2,300,000
d. 2,500,000

16. United Company provided the following current assets and shareholders’ equity at year-end:

Cash P 600,000
Financial assets at fair value through profit or loss,
including cost of P300,000 of United Company shares 1,000,000
Accounts receivable 3,500,000
Inventory 1,500,000
Total current assets P6,600,000

Share capital P5,000,000


Share premium 2,000,000
Retained earnings 500,000
Total shareholders’ equity P7,500,000

What amount should be reported as total shareholders’ equity?


a. 7,200,000
b. 7,500,000
c. 7,800,000
d. 5,200,000

17. Kalinga Company provided the following information at year-end:

Share capital P15,000,000


Share premium 5,000,000
Treasury shares, at cost 2,000,000
Actuarial loss on defined benefit plan 1,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment – credit 1,500,000

What amount should be reported as total shareholders’ equity?


a. 31,500,000
b. 32,500,000
c. 28,500,000
d. 25,500,000

18. Silver Company provided the following information at year-end:


Share premium P 1,000,000
Accounts payable 1,100,000
Preference share capital, at par 2,000,000
Ordinary share capital, at par 3,000,000
Sales 10,000,000
Total expenses 7,800,000
Treasury shares at cost – ordinary 500,000
Dividends 700,000
Retained earnings – beginning 1,000,000

What total shareholders’ equity should be reported at year-end?


a. 8,000,000
b. 8,500,000
c. 5,800,000
d. 8,700,000

19. Mont Company reported net assets totaling P8,750,000 at year-end which included the
following:

Treasury shares of Mont Company at cost P250,000


Idle machinery 100,000
Trademark 150,000
Allowance for inventory writedown 200,000

What amount should be reported as net assets at year-end?


a. 8,500,000
b. 8,400,000
c. 8,300,000
d. 8,200,000

20. Puzzle Company provided the following information at year-end:

Cash and cash equivalents P 500,000


Accounts receivable, net of allowance of P100,000 2,000,000
Inventory 6,000,000
Property, plant and equipment at carrying amount 12,000,000
Accounts payable 4,400,000
Wages payable 1,500,000
Share capital 6,000,000
Share premium 4,000,000

The only asset not listed is short-term investment.

The only liabilities not listed are a P3,000,000 note payable due in two years and related
accrued interest of P100,000 due in four months.

The current ratio at year-end is 1.5 to 1.00.

1. What is the amount of current liabilities?


a. 5,900,000
b. 6,000,000
c. 9,000,000
d. 8,900,000

2. What is the amount of short-term investment?


a. 700,000
b. 400,000
c. 500,000
d. 0

3. What is the balance of retained earnings at year-end?


a. 2,000,000
b. 6,000,000
c. 5,000,000
d. 1,500,000

21. Kenya Company provided the following information on December 31, 2018:

Cash in bank, net of overdraft P500,000 P 5,000,000


Petty cash, unreplenished petty cash expenses P10,000 50,000
Notes receivable 4,000,000
Accounts receivable, net of customers’ accounts with
credit balances P1,500,000 6,000,000
Inventory 3,000,000
Bond sinking fund 3,000,000
Total current assets P21,050,000

Accounts payable, net of suppliers’ accounts with debit


balances of P1,000,000 P 7,000,000
Notes payable 4,000,000
Bond payable due June 30, 2019 3,000,000
Accrued expenses 2,000,000
Total current liabilities P16,000,000

1. What amount should be reported as total current assets on December 31, 2018?
a. 19,040,000
b. 20,040,000
c. 20,050,000
d. 24,040,000

2. What amount should be reported as total current liabilities on December 31, 2018?
a. 19,000,000
b. 16,000,000
c. 15,500,000
d. 15,000,000

22. Gold Company provided the following trial balance on December 31, 2018:

Cash overdraft P 100,000


Accounts receivable P 350,000
Inventory 600,000
Prepaid expenses 100,000
Land held for sale 1,000,000
Property, plant and equipment 950,000
Accounts payable 200,000
Accrued expenses 150,000
Ordinary share capital 1,500,000
Share premium 250,000
Retained earnings _________ 800,000
P3,000,000 P3,000,000

Checks amounting to P300,000 were written to vendors and recorded on December 29,
2018 resulting in a cash overdraft of P100,000. The checks were mailed on January 15, 2019.

Land held for sale was sold for cash on January 31, 2019.

The entity issued the financial statements on March 31, 2019.

1. What amount should be reported as current asser?


a. 2,250,000
b. 2,050,000
c. 1,950,000
d. 1,250,000

2. What amount should be reported as current liabilities?


a. 650,000
b. 500,000
c. 350,000
d. 300,000

3. What is the total shareholders’ equity?


a. 2,550,000
b. 1,750,000
c. 1,500,000
d. 2,300,000

23. Trey Company provided the following trial balance at year-end which had been adjusted
except for income tax expense:

Cash P 600,000
Accounts receivable 1,650,000
Prepaid taxes 300,000
Accounts payable P 140,000
Share capital 500,000
Share premium 680,000
Retained earnings 630,000
Foreign currency translation adjustment 400,000
Revenue 3,600,000
Expenses 2,600,000 _________
P5,550,000 P5,550,000

During the current year, estimated tax payments of P300,000 were charged to prepaid taxes.
The entity has not yet recorded income tax expense.
There were no differences between financial and taxable income. The tax rate is 30%.

Included in accounts receivable is P500,000 due from the customer. Special terms granted to
this customer require payment in equal semiannual installments of P125,000 every April 1
and October 1.

1. What amount should be reported as total current assets at year-end?


a. 2,000,000
b. 2,200,000
c. 2,300,000
d. 2,250,000

2. What amount should be reported as total retained earnings at year-end?


a. 1,680,000
b. 1,200,000
c. 1,330,000
d. 1,630,000

24. Mint Company provided the following account balances at year-end which had been
adjusted except for income tax expense:

Cash P 600,000
Accounts receivable 3,500,000
Cost in excess of billings on long-term contracts 1,600,000
Billings in excess of cost on long-term contracts 700,000
Prepaid taxes 450,000
Property, plant and equipment at carrying amount 1,510,000
Note payable – noncurrent 1,620,000
Share capital 750,000
Share premium 2,030,000
Retained earnings unappropriated 900,000
Retained earnings restricted for note payable 160,000
Earnings from long-term contracts 6,680,000
Costs and expenses 5,180,000

All receivables on long-term contracts are considered to be collectible within 12 months.


During the year, estimated tax payments of P450,000 were charged to prepaid taxes. The
entity has not recorded income tax expense. The tax rate is 30%.

At year-end, what amount should be reported as


1. Total retained earnings?
a. 1,950,000
b. 2,110,000
c. 2,400,000
d. 2,560,000

2. Total noncurrent liabilities?


a. 1,620,000
b. 1,780,000
c. 2,320,000
d. 2,480,000

3. Total current assets?


a. 5,000,000
b. 4,100,000
c. 5,700,000
d. 6,150,000

4. Total shareholders’ equity?


a. 2,940,000
b. 2,780,000
c. 4,890,000
d. 4,730,000

25. Shaw Company provided the following trial balance on December 31, 2018 which had been
adjusted except for income tax expense:

Cash P 600,000
Accounts receivable 2,800,000
Inventory 2,000,000
Property, plant and equipment (net) 10,500,000
Accounts payable and accrued liabilities P 1,800,000
Income tax payable 1,500,000
Deferred tax liability 700,000
Share capital 2,500,000
Share premium 3,000,000
Retained earnings, January 1 3,500,000
Net sales and other revenue 15,000,000
Costs and expenses 10,000,000
Income tax expense 2,100,000 __________
P28,000,000 P28,000,000

The accounts receivable included P1,000,000 due from a customer and payable in quarterly
installments of P125,000. The last payment is due December 30, 2020.

During the year, estimated tax payment of P600,000 was charged to income tax expense.
The income tax rate is 30%.

On December 31, 2018, what amount should be reported as


1. Total current assets?
a. 3,400,000
b. 4,400,000
c. 5,400,000
d. 4,900,000

2. Total current liabilities?


a. 2,700,000
b. 3,300,000
c. 4,050,000
d. 3,450,000
3. Retained earnings?
a. 8,500,000
b. 6,400,000
c. 7,000,000
d. 3,500,000

26. Cara Company provided the following information for the current year:
January 1 December 31
Current assets 700,000 ?
Property, plant and equipment 3,000,000 4,000,000
Current liabilities ? 300,000
Noncurrent liabilities 1,000,000 ?

Working capital of P600,000 remained unchanged. Net income for the current year was
P400,000. No dividends were declared during the year and there were no other changes in
shareholders’ equity.

1. What is the amount of current assets on December 31?


a. 900,000
b. 300,000
c. 600,000
d. 450,000

2. What is the shareholders’ equity on December 31?


a. 3,000,000
b. 2,600,000
c. 2,700,000
d. 3,700,000

3. What is the amount of noncurrent liabilities on December 31?


a. 2,200,000
b. 1,100,000
c. 1,600,000
d. 1,900,000

27. Goodrich Company provided the following information on December 31, 2018:

Accounts payable P6,500,000


Bank note payable – 10% 3,000,000
Bank note payable – 11% 5,000,000
Mortgage note payable – 10% 2,000,000
Bonds payable 4,000,000

 The P3,000,000, 10% note was issued March 1, 2018, payable on demand. Interest is
payable every six months.
 The one-year P5,000,000, 11% note was issued January 15, 2018. On December 31,
2018, the entity negotiated a written agreement with the bank to replace the note with
a 2-year, P5,000,000, 10% note to be issued January 15, 2019.
 The 10% mortgage note was issued October 1, 2015, with a term of 10 years. Terms of
the note give the holder the right to demand immediate payment within 10 days from
the date the payment is due. On December 31, 2018, the entity is three months behind
in making the required interest payment.
 The bonds payable are ten-year, 8% bonds, issued June 30, 2009. Interest is payable
semiannually on June 30 and December 31.

1. What amount should be reported as total current liabilities?


a. 15,650,000
b. 11,650,000
c. 20,650,000
d. 13,650,000

2. What amount should be reported as total noncurrent liabilities?


a. 8,000,000
b. 7,000,000
c. 5,000,000
d. 0

28. Aroma Company provided the following information on December 31, 2018:

Cash P 300,000
Accounts receivable 800,000
Inventory 1,650,000
Prepaid expenses 250,000
Property, plant and equipment 8,800,000
Accumulated depreciation 800,000
Accounts payable 1,250,000
Accrued expenses 250,000
Bonds payable 4,000,000
Share capital 5,000,000
Retained earnings 500,000

A P500,000 note payable to bank, due on June 30, 2019, was deducted from the balance on
deposit in the same bank.

The entity recorded checks of P200,000 in payment of accounts payable on December 31,
2018. These checks were still on hand on January 20, 2019.

An advance payment of P100,000 from a customer for goods to be delivered in 2018 was
deducted from accounts receivable.

1. What total amount should be reported as current assets on December 31, 2018?
a. 3,800,000
b. 3,600,000
c. 3,700,000
d. 3,900,000

2. What total amount should be reported as current liabilities on December 31, 2018?
a. 2,100,000
b. 2,300,000
c. 1,900,000
d. 2,200,000
29. Daet Company provided the following account balances and related information at year-
end:

Cash P3,700,000
Accounts receivable 1,500,000
Allowance for doubtful accounts 200,000
Inventory 2,000,000
Prepaid insurance 300,000
Total current assets P7,700,000

Analysis of cash
Cash in bank P1,300,000
Bank overdraft in another bank ( 300,000)
Cash set aside for plant addition 2,000,000
Petty cash fund 10,000
Cash withheld from wages 190,000
General cash 500,000
Total cash P3,700,000

The accounts receivable included past due accounts in the amount of P100,000. The account
is deemed uncollectible and should be written off.

The inventory included goods held on consignment amounting to P150,000 and goods of
P200,000 purchased and received at year-end. Neither of these items have been recorded as
purchase.

The prepaid insurance included cash surrender value of life insurance of P50,000.

1. What is the adjusted cash balance?


a. 2,000,000
b. 1,700,000
c. 4,000,000
d. 2,300,000

2. What is the adjusted balance of accounts receivable?


a. 1,200,000
b. 1,400,000
c. 1,300,000
d. 1,500,000

3. What is the adjusted inventory?


a. 2,200,000
b. 2,000,000
c. 1,850,000
d. 1,600,000

4. What total amount should be reported as current assets at year-end?


a. 5,500,000
b. 5,100,000
c. 5,300,000
d. 5,200,000

30. Icarus Company provided the following data at year-end:

Cash P2,000,000
Accounts receivable 3,000,000
Inventory 1,900,000
Prepaid expenses 100,000
Accounts payable 2,500,000
Interest payable 150,000
Income tax payable 300,000
Money claim of the union pending final decision 500,000
Mortgage payable, due in four annual installments 2,000,000

Analysis of cash
Cash in bank P1,650,000
Customer check market NSF 100,000
Employee IOU 50,000
Deposit with court for case under litigation 200,000
Total cash P2,000,000

Analysis of accounts receivable


Customers’ debit balances P1,600,000
Advances to subsidiary 400,000
Advances to suppliers 200,000
Advances to officers due currently 300,000
Allowance for doubtful accounts ( 100,000)
Selling price of merchandise invoiced at 120% of cost,
undelivered and excluded from inventory 600,000
Total accounts receivable P3,000,000

1. What amount should be reported as total current assets?


a. 6,600,000
b. 6,300,000
c. 6,800,000
d. 6,400,000

2. What amount should be reported as total current liabilities?


a. 3,450,000
b. 3,400,000
c. 3,950,000
d. 3,700,000
INTERMEDIATE ACCOUNTING PRACTICE SETS 1 ANSWERS

1. A 16. A
2. B 17. A
3. C 18. A
4. A 19. A
5. A 20. (1) B, (2) C, (3) A
6. C 21. (1) D, (2) A
7. D 22. (1) A, (2) A, (3) A
8. C 23. (1) A, (2) C
9. C 24. (1) B, (2) A, (3) C, (4) C
10. A 25. (1) D, (2) A, (3) C
11. B 26. (1) A, (2) A, (3) C
12. A 27. (1) A, (2) C
13. (1) B, (2) C 28. (1) A, (2) B
14. A 29. (1) A, (2) B, (3) C, (4) A
15. D 30. (1) B, (2) A