INTERMEDIATE ACCOUNTING – MIDTERM EXAMINATION
1. Maldives Airlines has three segments namely
Aircraft Maintenance Services, Inflight Food
Services, and Inflight Accessory Products.
Inflight Accessory Products, the closing division,
is deemed inconsistent with the long-term
direction of the entity.
Management decided to dispose of Inflight
Accessory Products.
On November 15, 2019, the board of directors
of Xavier Company voted to approve the
disposal and an announcement was made.
On that date, the carrying amount of Inflight
Accessory Products' net assets was P90,000,000
and the fair value less cost of disposal was
P70,000,000.
Inflight Accessory Products' revenue and
expenses for 2019, respectively, were
P50,000,000 and P45,000,000, including
interest of P5,000,000 attributable to Inflight
Accessory Products.
There was no further impairment of assets
between November 15 and December 31, 2019.
The income tax rate is 30%
What amount of loss from discontinued
operation should be reported for 2019?
10,500,000
2. Which of the following best describes working
capital?
Current assets minus current liabilities
3. Disclosure of information about estimation
uncertainty and judgments is either voluntary
or mandatory.
True
4. Cost Effectiveness can be described as
Requires consideration of costs and value of
information
5. Conglomerates and Friends Inc. engaged during
the year in the following transactions:
Key management personnel
2,000,000
compensation
Sales to affiliated entities 3,000,000
What total amount should be included as
related party disclosures in the company's
SEPARATE financial statement for the current
year?
5,000,000
6. Pacman Sporting Goods is preparing its annual
report for its financial year-end. The company's
controller has asked for your help in
determining how best to disclose information
on depreciation method. Which portion of the
notes to the financial statement should this
information be disclosed?
In the summary of significant accounting
policies note
7. In order for a noncurrent asset to be classified
as held for sale, the sale must be highly
probable. What is the meaning of highly
probable?
The probability is higher than more likely than
not.
8. The entity shall measure a noncurrent asset or
disposal group classified as held for sale at
Lower between carrying amount and fair value
less cost of disposal
9. Which of the following would appear FIRST in a
statement of retained earnings?
Prior period error
10. Any current appropriations for a particular
purpose as approved by the Board of Directors
of a business entity should be presented as
Deduction from retained earnings and addition
to the reserves section
 INTERMEDIATE ACCOUNTING – MIDTERM EXAMINATION
11. Jodie Sweets and Pastries reporting operating 15. What is the treatment of any gain on
expenses as distribution and general and subsequent increase in the fair value less cost of
administrative. disposal of a noncurrent asset classified as held
for sale?
The adjusted trial balance at the end of the The gain shall be recognized but not in excess
current year included the following expense of the cumulative impairment loss previously
accounts: recognized.

Accounting and legal fees 1,450,000 16. Which event after the reporting period would
Advertising 1,500,000
require adjustment?
Freight Out 750,000
Loss on a lawsuit the outcome of which was
Interest 600,000
Loss on sale of long-term deemed uncertain at year-end
300,000
investment
Officers' salaries 2,250,000 17. Which of the following is not a required
Property taxes and minimum disclosure about related party
300,000
insurance transactions?
Rent for office space 1,800,000 The amount of similar transaction with
Sales salaries and
1,400,000 unrelated parties to establish that comparable
commissions
related party transaction has been entered at
arm's length
One-half of the rented premises is occupied by
the sales department.
18. The Purge Company reported that
What total amount should be included in
remuneration and other payments made to the
distribution expenses for the current year?
entity's chief executive officer during the
4,550,000
current year were:
12. Which of the following options for presenting Annual salary 2,000,000
other comprehensive income is preferred? Share options and other share-
1,000,000
A continuation from net income in the income based payments
statement or a separate statement that begins Contributions to retirement
500,000
with net income benefit plan
Reimbursement for travel
1,200,000
expenses for business trip
13. Which of the following is not an element
included in preparing a Statement of
What total amount should be disclosed as
Comprehensive Income?
"compensation" to key management personnel
Retained earnings
in the notes to financial statements of the
company?
14. During a period when an entity is under the
3,500,000
direction of a particular management, financial
reporting will directly provide information
19. Which of the following is NOT a component of
about
the financial statements?
Entity performance and management
Report of board of directors
performance
 INTERMEDIATE ACCOUNTING – MIDTERM EXAMINATION
20. Mirror On The Wall Inc. provided the following 25. Miraflores Ventures prepared draft financial
information at year-end: statements that showed the profit before tax
for the year ended December 31, 2019 at
Share premium 1,000,000 P9,000,000. The board of directors authorized
Accounts payable 1,100,000
the financial statements for issue on March 20,
Preference share capital,
2,000,000 2019.
at par
Ordinary share capital, at
3,000,000 A fire occurred at one of Elaine's sites on
par
Sales 10,000,000 January 15, 2020 with resulting damage
Total expenses 7,800,000 amounting to P7,000,000, only P4,000,000 of
Treasury shares at cost – which is covered by insurance. The repairs will
500,000
ordinary take place and be paid for in April 2020.
Dividends 700,000
Retained earnings –
1,000,000 What amount should be reported as profit
beginning
before tax in the financial statements?
What amount should be reported as total 9,000,000
shareholders' equity at year-end?
8,000,000 26. Which portion of the statement of changes in
equity should the declaration of dividends
21. Which is not a component of the statement of during the year be presented?
comprehensive income? Deducted from retained earnings
Prior period adjustments – component of RE
27. Which of the following elements is not included
22. Revenue recognition is best described as in preparation the statement of financial
Criteria usually satisfied upon delivery of position?
goods sold. Gain or loss from derecognition of financial
asset measured at amortized cost as required
23. An entity classified a noncurrent asset by PFRS 9
accounted for under the cost model as held for
sale at the current year-end. Because no offers 28. Pacman Sporting Goods is preparing its annual
were received at an acceptable price, the entity report for its financial year-end. The company's
decided at the end of the net year not to sell controller has asked for your help in
the asset but to continue to use it. The asset determining how best to disclose information
shall be measured at the end of the next year at on the composition of investments. Which
what amount? portion of the notes to the financial statement
The lower of carrying amount on the basis that should this information be disclosed?
the asset had never been classified as held for In a separate disclosure note
sale and recoverable amount
29. Consigned goods that are not yet sold by a
24. Technically, offsetting in financial statements is consignee shall be accounted for as current
accomplished when assets in the books of the consignee.
Gain or loss from disposal of non current asset False
is reported by deducting from the proceeds the
carrying amount of the asset and the related 30. The change in equity from non-owner
disposal cost transactions
Comprehensive income
 INTERMEDIATE ACCOUNTING – MIDTERM EXAMINATION
31. Financial assets at fair value through profit or
loss amounting to P1,000,000 includes the
company's own shares at cost of P300,000 will
be reported as:
700,000 current assets
32. During the year, Marian Company was sued by
a competitor for P5,000,000 for infringement of
a patent. Based on the advice of the legal
counsel, the entity accrued the sum of
P3,000,000 as a provision on December 31,
2019. Subsequently, on March 15, 2020, the
Supreme Court decided in favor of the party
alleging infringement of the patent and ordered
the defendant to pay the aggrieved party a sum
of P3,500,000. The financial statements were
prepared by management on February 15, 2020
and approved by the board of directors for
issuance on March 31, 2020. What amount
should be recognized as accrued liability on
December 31, 2019?
3,500,000
33. Which of the following elements is not
considered when preparing the statement of
cash flows?
Refinancing of the maturity terms of a loan
acquired for the purchased of a 10-year loan
from Bank of the Philippine Islands
34. Which event after the end of reporting period
would generally require disclosure?
Settlement of litigation when the event that
gave rise to the litigation occurred in a prior
period
35. Going concern assumption can be best
described as
The entity will continue indefinitely for a
foreseeable future.
36. What is the objective of financial statements?
To provide information about the financial
position, financial performance and changes in
financial position useful to a wide range of
users
37. On January 1, 2019, Job Company purchased
land at a cost of P6,000,000. The entity used the
revaluation model for this asset.
The fair value of the land was P7,000,000 on
December 31, 2019 and P8,500,000 on
December 31, 2020.
On July 1, 2021, the entity decided to sell the
lad and therefore classified the asset as held for
sale.
The fair value of the land on this date is
P7,600,000. The estimated cost of disposal is
very minimal.
On December 31, 2021, the land was sold for
P8,000,000.
What amount should be recognized as gain or
loss on sale of land in 2021?
400,000 gain
38. Vernon Company had two operating divisions,
one manufacturing farm equipment, and the
other office supplies. Both divisions are
considered separate components.
The farm equipment component had been
unprofitable and on September 1, 2019, the
entity adopted a plan to sell the assets of the
division.
The actual sale was effected on December 15,
2019, at a price of P3,000,000. The carrying
amount of the division’s assets was P5,000,000
The farm equipment division incurred a before-
tax operating loss of P1,500,000 from the
beginning of the year through December 15,
2019.
The entity’s after-tax income from continuing
operations is P9,000,000. The income tax rate is
30%
What amount should be reported as net income
for the current year?
6,550,000
 INTERMEDIATE ACCOUNTING – MIDTERM EXAMINATION
39. Which of the following best describes cash
equivalents?
Treasury bill purchased on October 25, 2019
with maturity date on January 03, 2020.
40. Jaybe-M Company reported net income of
P7,410,000 for the current year.
The auditor raised questions about the
following amounts that had been included in
net income:
Unrealized loss on financial
asset at fair value through
(540,000)
other comprehensive
income
Gain on early retirement of
2,200,000
bonds payable
Adjustment of profit of prior
year for error in
(750,000)
depreciation; net of tax
effect
Loss from fire (1,400,000)
Gain from change in fair
value attributable to credit
500,000
risk of financial liability
designated at FVPL
What is the adjusted net income for the current
year?
8,200,000
41. Which of the following statements does not
indicate a high probability for a noncurrent
asset to be classified as held for sale?
The sale is expected to qualify for recognition
as completed sale within two years from date
of classification of the asset as held for sale
42. When an entity changes the reporting period
longer or shorter than 1 year, an entity shall
disclose all of the following, except
The fact that similar entities in the
geographical area in which the entity operates
have done so
43. Pacman Sporting Goods is preparing its annual
report for its financial year-end. The company's
controller has asked for your help in
determining how best to disclose information
on a related-party transactions. Which portion
of the notes to the financial statement should
this information be disclosed?
In a separate disclosure note
44. Which is a purpose of notes to financial
statements?
All of these can be considered a purpose of the
notes.
45.  Correction of errors in prior period are included
in
Retained earnings
46. An entity that entered into a related party
transaction would be required to disclose all of
the following information, except
Nature of any future transactions planned
between the parties and the terms involved
47. Ako Na Lang Sana Inc. reported net assets
totalling P8,750,000 at year-end which included
the following:
Treasury shares of Ako Na Lang
250,000
Sana Inc. at cost
Idle machinery 100,000
Trademark 150,000
Allowance for inventory
200,000
writedown
What amount should be reported as net assets
at year-end?
8,500,000
48. In the statement of changes in equity, the effect
of a change in accounting policy is presented
Separately for each component of equity
 INTERMEDIATE ACCOUNTING – MIDTERM EXAMINATION
49. Hello, Goodbye and Iloveyou Inc. showed the On December 31, 2019, what total amount
following current assets at year-end: should be reported as current liabilities?
3,900,000
Cash 3,200,000 51. Mommy & Baby Team Company provided the
Accounts receivable 2,500,000
following Information at year-end:
Inventory 2,000,000
Total current assets 7,700,000
Cash account reveals the
following:
Cash on hand, including
customer postdated check
500,000
P100,000 and employee IOU
P50,000
Cash in bank per bank
statement (outstanding check 2,700,000
at year-end P200,000) What is the shareholders' equity at year-end?
Total Cash 3,200,000 8,900,000

What total amount should be reported as 52. Manila Whitesands Bay Inc. incurred the
current asset? following costs during the current year?
7,500,000
Property taxes 250,000
Freight in 1,750,000
50. Gar Company reported the following account
Doubtful accounts 1,600,000
balances on December 31, 2019: Officers' salaries 1,500,000
Insurance 850,000
Accounts payable 1,900,000 Sales representative salaries 2,150,000
Bonds payable 3,400,000 Interest on inventory loan 500,000
Premium on bonds Research and development
200,000 1,000,000
payable expense
Deferred tax liability 400,000
Dividend payable 500,000 What amount of these costs should be reported
Income tax payable 900,000 as administrative expenses?
Note payable, due 4,200,000
600,000
January 31, 2020
53. At year-end, the current assets of Furrdelicious
Glamor Inc. revealed cash and cash equivalents
of P700,000, accounts receivable of P1,200,000
and inventories of P600,000.  Based on the
examination undertaken by the external auditor
of the company, the accounts receivable
disclosed the following:

Share capital 6,000,000 Trade accounts 930,000

Share premium 3,500,000 Allowance for doubtful
(20,000)
Cumulative translation accounts
2,000,000
adjustment - debit Claims against shipper for
30,000
Treasury shares, at cost 700,000 goods lost in transit
Retained earnings 1,500,000 Selling price of unsold 260,000
Cumulative unrealized goods sent to Furrdelicious
gain on option contract
600,000
designated as cash flow
hedge
 INTERMEDIATE ACCOUNTING – MIDTERM EXAMINATION
260/1.3=200k 55. Gold Company provided the following trial
Glamor Inc. on consignment only the 60k balance on June 30, 2019:
at 130% of cost and not is deductible
included in ending in inventory Cash overdraft 100,000
inventory it will be Accounts
350,000
included sale receivable
Total accounts receivable 1,200,000 Inventory 580,000
Prepaid expenses 120,000
What total amount should be reported as Land held for sale 1,000,000
current assets at year-end? Property, plant and
950,000
equipment, net
2,440,000
Accounts payable 200,000
Accrued expenses 150,000
Share premium 250,000
54. Gold Company provided the following trial Share capital 1,500,000
balance on June 30, 2019: Retained earnings 800,000
3,000,000 3,000,000
Cash overdraft 100,000
Accounts
350,000
receivable
Inventory 580,000
Prepaid expenses 120,000
Land held for sale 1,000,000
Property, plant and
950,000
equipment, net
Accounts payable 200,000
Accrued expenses 150,000
Share premium 250,000
Share capital 1,500,000
Retained earnings 800,000
3,000,000 3,000,000
Checks amounting to P300,000 were written to vendors
Checks amounting to P300,000 were written to
and recorded on June 29, 2019 resulting in a cash
vendors and recorded on June 29, 2019
overdraft of P100,000.  The checks were mailed on July
resulting in a cash overdraft of P100,000.  The
9, 2019.
checks were mailed on July 9, 2019.
Land held for sale was sold for cash on July 15,
Land held for sale was sold for cash on July 15,
2019.
2019.
The entity issued the financial statements on
The entity issued the financial statements on
July 31, 2019.
July 31, 2019.

What total amount should be reported as

What total amount should be reported as
stockholder’s equity?
current assets?
2,550,000
2,250,000