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Quiz No. 1 - Midterm Answer Key

The document provides information about a quiz for an accounting course. It includes multiple choice questions and a word problem regarding inventory valuation for a company that experienced damage to its financial records from a flood. The word problem provides purchasing and cost data and asks to calculate beginning inventory, units sold, ending inventory value, and the cost of inventories to be presented in the statement of profit or loss.

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Dolliejane Mercado
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38 views4 pages

Quiz No. 1 - Midterm Answer Key

The document provides information about a quiz for an accounting course. It includes multiple choice questions and a word problem regarding inventory valuation for a company that experienced damage to its financial records from a flood. The word problem provides purchasing and cost data and asks to calculate beginning inventory, units sold, ending inventory value, and the cost of inventories to be presented in the statement of profit or loss.

Uploaded by

Dolliejane Mercado
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Wesleyan University-Philippines
College of Business and Accountancy
Quiz No. 1 – Midterm
AC 2 – Conceptual Framework

I. Multiple Choice (20 Points)

1. PAS 1 requires an assessment of the entity’s ability to continue as a going


concern each time financial statements are prepared. Who is responsible in
making this assessment?
a. Accountant
b. Auditor
c. Management
d. Government regulatory body

2. These are the end product of the financial reporting process and the means by
which information gathered and processed is periodically communicated to
users.
a. Financial reporting
b. Financial statements
c. Financial products
d. Accounting statements

3. Which of the following is not one of the general features of financial


statements under PAS 1?
a. Fair presentation and compliance with PFRSs
b. Going Concern
c. Cash Basis
d. Materiality and aggregation

4. Who is responsible for the preparation and the fair presentation of an


entity’s financial statements in accordance with the PFRSs?
a. Any accountant
b. Certified Public Accountant
c. Auditor
d. Management

5. This type of presentation of statement of financial position does not show


distinctions between current and noncurrent items.
a. Classified presentation
b. Unclassified presentation
c. Non-discriminating presentation
d. Awesome presentation

6. In making an economic decision, an investor needs information on the amounts


of an entity’s economic resources and claims to those resources. That investor
would most likely refer to which of the following financial statements?
a. Statement of financial position
b. Statement of comprehensive income
c. Statement of cash flows
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d. Statement of changes in equity

7. Which of the following financial statements would be dated as at a certain


date?
a. Statement of financial position
b. Statement of profit or loss and other comprehensive income
c. Statement of cash flows
d. All of these

8. Imagine you are a business manager. You would be most awesome as a manager in
which of the following independent scenarios?
a. Your company has an average total assets of ₱10M during the year. At the
end of the year, your company reported profit of ₱1M. The average return
of other similar companies with the same level of assets is 30%.
b. Your adoption of accounting policy has led to the immediate recognition of
expenses. Those costs could have otherwise been allocated over several
periods. Accordingly, your company did not declare dividends during the
period. This resulted to a decline in the market value of your company’s
stocks while the prices of all other stocks in the stock market have
increased.
c. You changed your company’s method of allocating costs from an accelerated
method to a straight-line method. The change met the requirements of the
PFRSs. This led to the smoothing of expenses, which increased your
company’s profit during the period by 12%, above the industry average.
d. You are great at closing deals, that’s why you’re a boss. Eager to increase
your company’s resources, you were able to obtain a ₱20M loan from a bank.
Interest expense on the loan during the year was ₱3.4M while the return on
investments of loan proceeds was 2%.

9. This comprises all “non-owner changes in equity.” It excludes owner changes


in equity, such as subscription, issuance, and reacquisition of share capital
and declaration of dividends.
a. Other comprehensive income
b. Changes in equity
c. Total comprehensive income
d. Profit or loss

10. Materiality judgment is least likely to be applied in which of the


following?
a. in determining whether an item warrants separate presentation in the
financial statements or is to be aggregated with other items
b. in determining whether information could influence the decisions of users,
and therefore, must be presented in the financial statements
c. in determining whether the cost of processing and communicating information
exceeds the benefits expected to be derived from it
d. whether additional information needs to be provided, including the level
of detail and conciseness of the information’s presentation
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II. Problem Solving (8 Points)

Everything Will Be Okay Company reported that a flood recently destroyed many
of the financial records. The entity used an average cost inventory valuation
system.

The entity made a physical count at the end of each month in order to determine
monthly ending inventory value. By examining various documents, the following
data are gathered:

Ending Inventory at April 31 60,000 units

Total Cost of units available for sale in April 1,452,100

Cost of goods sold during April 1,164,100

Cost of beginning inventory, April 1 4.00 per unit

Gross Profit on sales for April 935,900

Date Units Unit Cost Total Cost

April 5 55,000 5.10 280,500

April 11 53,000 5.00 265,000

April 15 45,000 5.50 247,500

April 16 47,000 5.30 249,100

Total Purchases 200,000 1,042,100

Questions:

a. What is the number of units on April 1?


b. How many units were sold during the month of April?
c. What is the cost of inventory on April 31?
d. How much is the cost of ending inventories that should be presented in the
Statement of Profit or Loss and Other Comprehensive Income?
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Solution:

1 Cost of units available for sale in April 1,452,100


Purchases for April (1,042,100)
Cost of inventory - April 1 410,000
Number of units - April 1 (410,000/4.00) 102,500

2 April 1 Inventory 102,500


Purchases for April 200,000
Total Units available for sale for April 302,500
April 30 Inventory (60,000)
Units sold during the month of April 242,500

3 Average Unit Cost (1,452, 100/302,500) 4.8


Inventory - April 30 (60,000 x 4.80) 288,000

Inventories should presented in Statement of Financial


4 Position. 0

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