TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES

College of Business Education

FINAL EXAMINATION – 2nd SEMESTER SY 2019 - 2020
Accounting 017 (Intermediate Accounting 1)
SET C
Name: _______________________________________________ Date: ______________
Section: ______________________________________________ Score: _____________
Choose the best answer.

Swaziland Company provided the following year-end data:

2019 2018

Accounts receivable 1,250,000 900,000

Allowance for doubtful accounts -10,000 -15,000

Allowance for sales returns -20,000 -25,000

Net realizable value 1,220,000 860,000

The entity reported doubtful accounts expense in 2019 of 30,000 and had products returned for

credits totaling 15,000 at sale price. The Gross sales for 2019 amounted to 6,250,000

1. How much is the accounts receivable written off during the year?

a. P35,000 b. P30,000 c. P15,000 d. P10,000

Swaziland Company provided the following year-end data:

2019 2018

Accounts receivable 1,250,000 900,000

Allowance for doubtful accounts -10,000 -15,000

Allowance for sales returns -20,000 -25,000

Net realizable value 1,220,000 860,000

The entity reported doubtful accounts expense in 2019 of 30,000 and had products returned for

credits totaling 15,000 at sale price. The Gross sales for 2019 amounted to 6,250,000

2. How much was collected from customers during 2019?

a. P6,600,000 b. P5,900,000 c. P5,865,000 d. P5,850,000

3. On January 1, 2020, Chantal Company sold the following merchandise inventory:

Buyer Mode of payment      

Celine Company 10% promissory note amounting to 300,000

  payable every end of the year for three periods.  

 Mariah Company Noninterest bearing note amounting to 750,000 payable in

  3 annual installment every end of the year.

( Use 3 decimal places for
  Effective rate is 12% PVF)

How much is the note receivable at year-end?

a. P849,200 b. P622,560 c. P600,000 d. P596,130

4. Sahaya Bank loaned P5,000,000 to a borrower on January 1, 2017.
Terms includes principal payment of 1,000,000 each end of the year for three periods.
However, during 2019, the borrower began to experience financial difficulties, requiring the bank to reassess the
collectibility of the loan. Effective rate is 8%. The company uses 3 decimal places for PV factor.
The bank determined that the loan will be collected unlikely.
How much is the impairment loss for 2019?
a. P0 b. P217,000 c. P222,000 d. P423,000

5. Which method of recording bad debts loss is consistent with accrual accounting?
a. Allowance method c. Percent of sales method
b. Direct writeoff method d. Percent of accounts receivable method
6. Which is correct regarding estimation of uncollectible accounts receivable based on percentage of sales?
a. Emphasizes measurement of accounts receivable
b. Emphasizes measurement of bad debt expense
c. Emphasizes measurement of total assets
d. Acceptable only for tax purposes
7. Which of the following is added to the principal amount of the loan in computing the carrying amount of the loan?
a. Direct loan origination cost incurred by the lender
b. Indirect loan origination cost incurred by the lender
c. Interest incurred by the borrower
d. Loan origination fee charged to the borrower
8. Which are financial assets?
a. Cash, cash equivalents, receivables, inventories and investment in equity securities
b. Cash, cash equivalents, receivables, property, plant and equipment and intangible assets
c. Cash, cash equivalents, receivables, inventories, and property, plant and equipment
d. Cash, cash equivalents, receivables, investment in debt securities and investment in equity securities
Related data of December 31, 2020 are:
Security No. of shares Initial Cost Fair value Transaction cost
A 1,000 200,000 300,000 10,000
B 10,000 1,520,000 1,810,000 85,000
C 20,000 2,800,000 3,050,000 138,000
The entity sold 10,000 shares of B on January 5, 2021 for 2,450,000
9. If measured at FVOCI, How much is the unrealized gain - OCI in 2020?
a. P0 b. P202,000 c. P407,000 d. P640,000

Related data of December 31, 2020 are:

 Security No. of shares Initial Cost Fair value Transaction cost
A 1,000 200,000 300,000 10,000
B 10,000 1,520,000 1,810,000 85,000
C 20,000 2,800,000 3,050,000 138,000
The entity sold 10,000 shares of B on January 5, 2021 for 2,450,000
10. If measured at FVOCI, how much is the net effect on retained earnings in 2021?
a. P1,047,000 b. P845,000 c. P640,000 d. P0

Related data of December 31, 2020 are:

Security No. of shares Initial Cost Fair value Transaction cost

A 1,000 200,000 300,000 10,000

B 10,000 1,520,000 1,810,000 85,000

C 20,000 2,800,000 3,050,000 138,000

The entity sold 10,000 shares of B on January 5, 2021 for 2,450,000

11. If measure FVPL, how much is the unrealized gain in 2020?

a. P0 b. P202,000 c. P407,000 d. P640,000

12. Turkey Company owned for trading 30,000 ordinary share at ₱95 per share
During the year, the investee distributed 30,000 share rights to the investor.
The investor was entitled to buy one new share in exchange for 75 in cash & rights of 3
Each share had a market value of ₱130 and each right had a market value of ₱28
on the date of issue.
How much is the new shares that are acquired by exercising the rights.
a. P1,590,000 b. P2,250,000 c. P2,850,000 d. P3,090,000
13. On April 1, 2019, Franz Inc. purchased 22,000 shares of Zi Inc.at cost per share of ₱250
Chi Company's outstanding ordinary is 100,000 .
During the year, Zi Inc. paid cash dividends of ₱2,500,000 & had net income of ₱6,000,000
How much is the Investment in associate at year-end?
a. P6,407,500 b. P6,270,000 c. P6,077,500 d. P5,940,000
14. What are instruments representing ownership shares and rights to acquire ownership of shares?
a. Investment in debt securities c. Marketable securities
 b. Investment in equity securities d. Shareholders’ equity
15. What would happen when share dividends of different class are received?
a. No formal entry is made only memorandum entry
b. Cash is debited and dividend income is credited
c. Investment account is debited and dividend income is credited
d. New investment account is debited and original investment account is credited
16. What is an entity over which the investor has significant influence?
a. Associate b. Investee c. Mutual fund d. Venture capital organization
17. Under the equity method for investors, how will Investment account and investor’s net income be affected by
investee’s payment of cash dividends?
a. Increase in Investment account and increase in investor’s net income.
b. Increase in Investment account and no effect on investor’s net income.
c. Decrease in Investment account and decrease in investor’s net income.
d. Decrease in Investment account and no effect on investor’s net income.
18. When an investor uses the equity method to account for investment in ordinary shares, when will the investment
account increases?
a. A proportionate interest in the net income of the investee.
b. A cash dividends received from the investee.
c. Periodic amortization of the goodwill.
d. Depreciation related to the excess of the market value over the carrying amount of the investee’s depreciable
assets at the date of purchase by the investor.
On January 1, 2019, Panama Company purchased 5,000,000 face amount 8%
bonds for 4,562,000 to be held as financial assets at amortized cost. The bonds were
purchased to yield 10% interest.
The bonds mature on January 1, 2025 and pay interest annually on December 31 using effective interest method.
The fair value of the bonds at December 31, 2019 is 4,850,000 .
The fair value of the bonds at December 31, 2020 is 4,960,000 .
19. How much is the carrying amount of investment in bonds at Dec. 31, 2019?
a. P4,680,020 b. P4,662,000 c. P4,618,200 d. P4,562,000
On January 1, 2019, Panama Company purchased 5,000,000 face amount 8%
bonds for 4,562,000 to be held as financial assets at amortized cost. The bonds were
purchased to yield 10% interest.
The bonds mature on January 1, 2025 and pay interest annually on December 31 using effective interest method.
The fair value of the bonds at December 31, 2019 is 4,850,000 .
The fair value of the bonds at December 31, 2020 is 4,960,000 .
20. If measured at FVOCI, how much is the carrying amount of the investment in bonds at Dec. 31, 2020?
a. P4,556,380 b. P4,680,000 c. P4,906,200 d. P4,960,000
On January 1, 2019, Panama Company purchased 5,000,000 face amount 8%
bonds for 4,562,000 to be held as financial assets at amortized cost. The bonds were
purchased to yield 10% interest.
The bonds mature on January 1, 2025 and pay interest annually on December 31 using effective interest method.
The fair value of the bonds at December 31, 2019 is 4,850,000 .
The fair value of the bonds at December 31, 2020 is 4,960,000 .
 21. If measured at FVPL, how much is the interest income at December 31, 2020?
a. P496,000 b. P461,820 c. P461,820 d. P400,000

22. On January 1, 2020, Danish Inc. acquired 5-year bonds with face amount of P8,000,000

The nominal rate is 10%

The effective is 12%

The transaction cost directly attributable to the bonds is P180,000 .

The interest is payable annually on December 31.

The entity used the effective interest method and 3 decimal places for PVF.

How much is the present value of the investment in bonds at purchase date?

a. P7,423,200 b. P7,909,280 c. P8,090,720 d. P8,576,800

23. What will happen if the effective rate is greater than the nominal rate?
a. Bonds sells at face amount c. Bonds sells at premium
b. Bonds sells at discount d. Bonds sells at maturity value
24. How should transaction costs directly held to acquisition of bond investment at amortized cost be treated?
a. Accounted for separately as deferred charge c. Expensed outright
b. Component of other comprehensive income d. Part of initial carrying amount
25. How will the cash paid to the bond issuer be if the investor purchased the bond between interest dates at a
premium?
a. Less than the face amount of the bond
b. More than the face amount of the bond
c. The same as the face amount of the bond
d. The same as the face amount of the bond plus accrued interest
26. What is the interest rate written on the face of bond?
a. Nominal rate b. Market rate c. Effective rate d. Yield rate

27. Data of Marimar Company as of December 31, 2019:

Accounts payable       400,000

Accrued interest expense     150,000

Accrued interest income     250,000

Contested BIR tax assessment - possible obligation   300,000

Deferred income       100,000

Prepaid rent       350,000

Serial bonds payable - with semiannual payment of 500,000
 5,000,000

Share dividends payable     400,000

Note payable - Trade (due January 31, 2021)   3,000,000

Note payable - Bank loan (due March 12, 2020)   2,000,000

How much is the current liabilities at December 31, 2019?

a. P3,650,000 b. 4,150,000 c. P6,150,000 d. P6,650,000

28. On January 1, 2020, Chantal Company purchased an equipment from Heidi Company amounted to 3,800,000
Chantal issued a noninterest bearing note with an effective interest rate of 12% as payment.
It is payable in 5 equal payment beginning January 1, 2020. (Use 3 decimal places for PVF).
How much is the present value of the note on December 31, 2020?
a. P3,068,120 b. P2,739,800 c. P2,308,576 d. P1,825,094

On January 1, 2020, Nicaragua Company purchased machine from Argentina Company amounted to 800,000
Argentina issued a noninterest bearing note with an effective interest rate of 14% as payment.
It is payable in 5 equal payment beginning December 31, 2020.
The company uses 3 decimal places for PVF.
29. How much is the present value of the note at December 31, 2020?
a. P371,514 b. P466,179 c. P549,280 d. P626,240

30. How much is the interest expense on December 31, 2020?

a. P112,000 b. P76,899 c. P65,274 d. P65,265

31. Other than financial liabilities measured at fair value through profit or loss, how are financial liabilities
subsequently measured under PFRS?
a. Fair value if acceptable to the entity
b. Amortized cost using the effective interest method
c. Amortized cost using the stated interest method
d. The amount of undiscounted cash that would be required to settle the obligation at the end of reporting period.
32. Which of the following is not an essential characteristic of a liability?
a. It is a present obligation that entails settlement by probable future transfer or use of cash.
b. The liability must be an unavoidable obligation
c. The transaction or the other event creating the obligation must have occurred.
d. The obligation must be settled to an identifiable party.
33. Some liabilities such as trade payables are expected to be settled in more than 12 months after the accounting
period. How will the entity classify these items in the statement of financial position?
a. Current
b. Non-current
c. First classify it as non-current since the term is more than 12 months, then reclassify to current if the term
is less than 12 months.
 d. It depends on the entity’s policy
34. Which of the following is incorrect when an entity shall classify a liability as current?
a. The entity expect to settle the liability within the entity’s operating cycle
b. The entity holds the liability for the purpose of trading
c. The liability is due to be settled within the 12 months after the reporting period
d. The entity has an unconditional right to defer settlement of the liability for at least 12 months after the
accounting period.
35. Which of the following are financial liabilities?
a. Accounts payable, note payable and debt restructured
b. Accounts payable, note payable and accrued salaries payable
c. Accounts payable note payable and estimated liability
d. Accounts payable, bonds payable and contingent liability
36. Which is statement is correct?
a. Accounts payable are always recorded at present value under net method
b. Accounts payable is recorded at net of cash discount and not trade discount under net method
c. Accounts payable is recorded at net of trade discount and not cash discount under net method
d. Accounts payable is recorded at net of trade discount and cash discount under net method

On January 1, 2020, Colombia Company received 5,385,000 for a 5,000,000

face amount 12% bond, a price that yields 10% .

Bonds pay interest annually every December 31. The bond issue costs is 150,000 .

On December 31, 2020, the fair value of the bond is determined to be 5,125,000 based all on

credit risk factor. .

37. Under fair value option, how much is reported in the Statement of Profit or loss for 2020?
a. P750,000 b. P600,000 c. P538,500 d. P490,000

On January 1, 2020, Colombia Company received 5,385,000 for a 5,000,000

face amount 12% bond, a price that yields 10% .

Bonds pay interest annually every December 31. The bond issue costs is 150,000 .

On December 31, 2020, the fair value of the bond is determined to be 5,125,000 based all on

credit risk factor. .

38. Under fair value option, how much is the carrying amount of the bonds payable on December 31, 2020?
a. P5,385,000 b. P5,250,000 c. P5,125,000 d. P5,000,000

On January 1, 2020, Colombia Company received 5,385,000 for a 5,000,000

face amount 12% bond, a price that yields 10% .

Bonds pay interest annually every December 31. The bond issue costs is 150,000 .

On December 31, 2020, the fair value of the bond is determined to be 5,125,000 based all on

credit risk factor. .

39. Under effective interest method, how much is the interest expense for 2020?
 a. P646,200 b. P600,000 c. P538,500 d. P523,500

On January 1, 2020, Colombia Company received 5,385,000 for a 5,000,000

face amount 12% bond, a price that yields 10% .

Bonds pay interest annually every December 31. The bond issue costs is 150,000 .

On December 31, 2020, the fair value of the bond is determined to be 5,125,000 based all on

credit risk factor. .

40. Under effective interest method, how much is the carrying amount of the bonds payable on Dec. 31, 2020?
a. P5,385,000 b. P5,250,000 c. P5,158,500 d. P5,125,000
41. How would bond issue cost recorded under fair value option?
a. Outright expense c. Netted against Bond premium
b. Lump to Bond Discount d. Amortized evenly using the straight line method
42. When Bonds payable is recorded other than amortized cost using the effective interest method, bonds is
measured at what amount?
a. Face value c. Fair value
b. Face value minus bond discount d. Fair value minus bond discount
43. Data on December 31, 2019:
Cash in bank - current account 2,250,000
Petty cash fund 125,000
Cash restricted for addition to plant 2020 1,600,000
Cash and cash equivalents, December 31, 2019
Additional notes:
Cash in bank included compensating balance against current bank loan of 600,000
The compensating balance is legally restricted as to withdrawal.
Unreplenished petty cash as of year-end amounts to 5,000 .
How much is the cash and cash equivalents at year-end?
a. P1,770,000 b. P1,775,000 c. P2,370,000 d. P3,970,000

Lithunia Company related data are:

Bank service charge for April 20,000
Check deposit by the entity during April was not collectible and has been marked
"NSF" by the bank and returned 40,000
Deposits made but not yet recorded by the bank 130,000
Checks written and mailed but not yet recorded by the bank 100,000
The entity found a customer check for 35,000 payable to the entity that had not been deposited
and had not been recorded.
The general ledger showed a bank account balance of 920,000
Saving deposit in other bank closed by BSP 800,000
Currency and coins on hand 250,000
Petty cash fund 50,000
 44. How much is the unadjusted cash balance per bank?
a. P960,000 b. P935,000 c. P905,000 d. P900,000
Lithunia Company related data are:
Bank service charge for April 20,000
Check deposit by the entity during April was not collectible and has been marked
"NSF" by the bank and returned 40,000
Deposits made but not yet recorded by the bank 130,000
Checks written and mailed but not yet recorded by the bank 100,000
The entity found a customer check for 35,000 payable to the entity that had not been deposited
and had not been recorded.
The general ledger showed a bank account balance of 920,000
Saving deposit in other bank closed by BSP 800,000
Currency and coins on hand 250,000
Petty cash fund 50,000
45. How much is the unadjusted cash balance per bank?
a. P960,000 b. P935,000 c. P905,000 d. P900,000

46. Jakarta Company provided following information at month-end:

Cash in bank per bank statement 8,000,000
Deposit in transit 1,200,000
Outstanding checks (including certified check of
P200,000) 1,500,000
Note collected by bank for the entity 1,100,000
Service charge for the current month 20,000
NSF checks of customers returned by bank 500,000
Error in recording a check in the book 100,000
Recorded amount 200,000
Check amount 100,000
How much is the unadjusted cash in bank per ledger at month-end?
a. 7,065,000 b. 7,220,000 c. 7,270,000 d. 7,750,000
47. When will the petty cash fund in a widely used system be debited?
a. When the fund is created only
b. When the fund is created and everytime it is replenished
c. When the fund is created and when the size of the fund is increased
d. When the fund is created and when the fund is decreased
48. Which is included in “cash”?
a. Petty cash fund c. Three month time deposit
b. Money market instrument d. Cash in sinking fund
49. Which should not be included in the Cash and cash equivalents?
a. Checks drawn before the reporting date but held for later delivery to creditors
b. 60 day time deposit
c. US dollars deposited in a foreign currency depository account
d. Cash reserved for the acquisition of machinery
50. Which is correct regarding adjusting entries for a bank reconciliation?
a. May include a debit to office expense for bank service charge
b. May include a debit to accounts payable for an NSF customer check
c. May include a debit to accounts receivable for an NSF customer check
d. May include the balance per bank section