lOMoARcPSD|46623112

IA1-SE- Reviewer

BS accountancy (University of Cebu)

Scan to open on Studocu

Studocu is not sponsored or endorsed by any college or university

Downloaded by Jessica Lazaro ([email protected])
 lOMoARcPSD|46623112

IA1- FINAL EXAM 6. Which of the following should not be reported as inventory?
1. The interest on a noninterest bearing note is equal to
A. Land acquired for resale by a real estate firm
A. The excess of the face value over the present value B. Shares and bonds held for resale by a brokerage firm
B. The excess of the present value over the face value C. Partially completed goods held by a manufacturing entity
C. The excess of the market value over the present value D. Machinery acquired by a manufacturing entity for use in the production
D. Zero process

2. Which of the following is not objective evidence of impairment of a 7. During periods of rising prices, when the FIFO inventory cost flow
financial asset? method is used, a perpetual inventory system would

A. Significant financial difficulty of the issuer or obligor. A. Not be permitted

B. A decline in the fair value of the financial asset below the previous carrying B. Result in a higher ending inventory than a periodic inventory system
amount. C. Result in the same ending inventory as a periodic inventory system
C. A breach of contract, such as a default or delinquency in interest or principal D. Result in a lower ending inventory than a periodic inventory system
payment.
D. The lender, for economic or legal reason relating to the borrower's financial 8. The amount of any writedown of inventory to net realizable value and all
difficulty, grants to the borrower a concession that the lender would not losses of inventory shall be
otherwise consider.
A. Recognized as operating expense in the period the writedown or loss occurs
3. The equity of the assignor in assigned accounts is equal to B. Recognized as "other expense" in the period the writedown or loss occurs
C. Recognized as component of cost of sales in the period the writedown or loss
A. Assigned accounts receivable occurs
B. Bank loan balance D. Deferred until the related inventory is sold
C. Assigned accounts receivable minus the bank loan balance
D. Bank loan balance minus the assigned accounts receivable 9. The gross profit method of inventory valuation is not valid when

4. If a note receivable is discounted WITH recourse A. There is substantial increase in the quantity of inventory during the year
B. There is substantial increase in the cost of inventory during the year
A. A contingent liability does not exist C. The gross margin percentage changes significantly during the year
B. Note receivable discounted is credited D. All ending inventory is destroyed by fire before it can be counted
C. Liability for note receivable discounted is credited
D. Note receivable must be credited 10. A major advantage of the retail inventory method is that it

5. If a note receivable is discounted WITHOUT recourse A. Permits entities to avoid taking an annual physical inventory
B. Gives a more accurate measurement of inventory than other methods
A. The contingent liability may be disclosed in either a contra account to note C. Hides costs from customers and employees
receivable or in a note to the financial statements D. Provides a method for inventory control and facilitates determination of the
B. Liability for note receivable discounted shall be credited periodic inventory
C. Note receivable shall be credited
D. The transaction shall be accounted for as a secured borrowing as opposed to a
sale

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

11. 14. The entry to record a note receivable discounted with a bank most likely
includes

a. Debiting cash equal to the maturity value of the note

b. Crediting note receivable equal to the maturity value of the note
c. Debiting cash equal to the face amount of the note
d. Crediting note receivable equal to the face amount of the note

15. Which of the following is most likely not a condition before a transfer of
receivables is accounted for as a sale?
a. II, III, IV, V
b. III, IV, VI a. The transferred assets have been isolated from the transferor.
c. I, II b. The transferor's obligation under the recourse provisions can be reasonably
d. II, III, IV, V, VI estimated.
c. The transferee has the right to pledge or exchange the transferred assets.
12. Which of the following costs of conversion cannot be included in cost of d. The transferor does not maintain effective control over the assets through an
inventory? agreement to repurchase the assets before their maturity.

a. Cost of direct labor. 16. Which of the following is true when accounts receivable are factored
b. Factory rent and utilities. without recourse?
c. Salaries of sales staff (sales department shares the building with factory
supervisor). a. The transaction may be accounted for either as a secured borrowing or as a
d. Factory overheads based on normal capacity. sale, depending upon the substance of the transaction.
b. The receivables are used as collateral for a promissory note issued to the factor
13. by the owner of the receivables.
c. The factor assumes the risk of collectability and absorbs any credit losses in
collecting the receivables.
d. The financing cost (interest expense) should be recognized ratably over the
collection period of the receivables.

17. A higher interest rate results to

a. increased amount of present value.

b. decreased amount of present value.
c. same amount of present value.
a. 88 d. Answer cannot be determined.
b. 76
c. 98 18. A shorter period results to
d. 94
a. increased amount of present value.
b. decreased amount of present value.
c. same amount of present value.

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

d. Answer cannot be determined.

19. Which of the following results to the smallest value?

a. Present value of an annuity due of 1 @12%, n=5

b. Present value of an ordinary annuity of 1 @12%, n=5
c. Present value of 1 @12%, n=5
d. Present value of 1 @14%, n=5

20. Present value is

a. the value now of a future amount.

b. the amount that must be invested now to produce a known future value.
c. always smaller than the future value.
d. all of these.

~PROBLEM SOLVING~

1.

A. P2,965,000
B. P2,240,000
C. P5,360,000
D. P2,140,000

4. Based on the above info, what is the carrying amount of the loan
receivable on December 31, 2017?

A. P800,000 A. P7,000,000
B. P600,000 B. P5,449,600
C. P660,000 C. P4,860,000
D. P740,000 D. P5,949,600

2. Based on the above info, in the 2005 income statement, what amount
should be reported as gain or loss on sale of equipment?

A. P1,500,000 gain
B. P100,000 loss
C. P500,000 gain
D. P500,000 loss

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

A. P1,745,000
B. P1,700,000
C. P1,545,000
D. P2,250,000

A. P3,700,685
B. P3,700,000
C. P3,750,000
D. P4,700,685 A. P2,550,000
B. P1,950,000
7. Based on the above info, assuming all receivables are collected, C. P2,500,000
Binalonan Company’s cost of factoring the receivables would be D. P2,700,000

A. P250,000
B. P299,315
C. P49,315
D. P0

A. P5,092,500
B. P5,250,000
C. P4,842,000
D. P5,170,000
A. P5,610,000
B. P5,500,000
C. P5,375,000
D. P5,450,000

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

A. P9,500,000
B. P8,000,000
C. P9,000,000
D. P7,000,000

A. P3,800,000
B. P2,000,000
C. P1,800,000
D. P1,000,000

A. P427,000
B. P486,500
A. P600,000 C. P480,000
B. P700,000 D. P477,000
C. P650,000
D. P1,500,000

A. FIFO P9,400,000 and LIFO P4,200,000 respectively

B. FIFO P4,200,000 and LIFO P9,400,000 respectively
C. FIFO P9,400,000 and LIFO P5,800,000 respectively
D. FIFO P4,200,000 and LIFO P7,000,000 respectively

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

A. PERPETUAL P8,400,000 and PERIODIC P7,000,000 respectively

B. PERPETUAL P7,000,000 and PERIODIC P8,400,000 respectively
C. PERPETUAL P8,400,000 and PERIODIC P7,500,000 respectively
D. PERPETUAL P7,000,000 and PERIODIC P7,500,000 respectively
A. P3,120,000
B. P3,200,000
C. P3,000,000
D. P3,840,000

A. P5,000,000
B. P4,500,000
C. P500,000
D. P0

A. P9,100,000
B. P8,680,000
C. P8,400,000
D. P7,700,000

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

A. P7,000,000
B. P5,250,000
C. P5,110,000
D. P4,750,000
a. A debit to cash short/overage account of P2,190 and a credit to cash on hand
IA1- QUIZ of P9,450.
b. A credit to cash short/overage account of P810 and a credit to cash of
P12,450.
c. A debit to cash short/overage account of P810 and a credit to petty cash fund
of P12,450.
d. A debit to cash short/overage account of P2,190 and a credit to cash in bank
of P9,450.

3. Additional information pertaining to the image below: (1) The payments

of ₱2,000 and ₱50,000 shown on the bank statement pertain to the cost of
checkbook requested from the bank and the monthly amortization of a
bank loan, respectively. The loan payment includes payment for interest of
₱8,000. (2) Deposits shown on the bank statement but not on the cash
ledger represent collections of accounts receivable.
Question 3: How much is the deposit in transit?
a. P660,000
b. P810,000
c. P900,000
d. P960,000

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

5. Based on the information above, how much is the adjusted cash

balance?

a. P1,940,000
b. P1,760,000
c. P1,380,000
d. P1,904,000

a. P136,200
b. P134,400
c. P132,600
d. P208,900

a. P160,000
b. P102,000
c. P52,000
d. P380,000

4. Based on the information above, how much is the credit memo?

a. P52,000
b. P160,000
c. P760,000
d. P380,000 a. P94,000
b. P120,000
c. P124,000
d. P150,000

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

8. Based on its past collection experience, Ace Company provides for bad a. P1,500
debts at the rate of 2 percent of net credit sales. On January 1, 2002, the b. P2,400
allowance for doubtful accounts credit balance was ₱10,000. During 2002, c. P3,000
Ace wrote off ₱18,000 of uncollectible receivables and recovered ₱5,000 on d. P3,900
accounts written off in prior years. If net credit sales for 1999 totaled
₱1,000,000, the doubtful accounts expense for 2002 should be

a. P17,000
b. P20,000
c. P23,000
d. P35,000

a. P467,354
b. P438,016
c. P376,345
d. P428,346

a. P1,271,036
b. P1,423,560
a. P738,000 c. P3,380,102
b. P740,000 d. P1,594,388
c. P742,000
d. P750,000

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

13.
a. P756,000
b. P820,000
c. P823,200
d. P840,000

16. Based on the above info, entries during the first month would include a

a. debit to Cash of ₱220,760.

b. debit to Bad Debt Expense of ₱7,400.
c. debit to Allowance for Doubtful Accounts of ₱7,400.
d. debit to Accounts Receivable of ₱230,860.

17. On September 1, Riva Co. assigns specific receivables totaling ₱750,000

to Pacific Bank as collateral on a ₱625,000, 12 percent note. Riva Co. will
continue to collect the assigned accounts receivable. Pacific also assesses a
2 percent service charge on the total accounts receivable assigned. Riva Co.
is to make monthly payments to Pacific with cash collected on assigned
accounts receivable. Collections of assigned accounts during September
totaled ₱260,000 less cash discounts of ₱3,500. What amount is owed to
Pacific by Riva Co. for September collections plus accrued interest on the
note to September 30?
a. P2,965,000
b. P2,240,000 a. P260,000
c. P5,360,000 b. P262,750
d. P2,140,000 c. P264,000
d. P266,250
14. Based on the above info, what is the carrying amount of the loan
receivable on December 31, 2017? 18. On January 1, Parent Company gave Kids, Inc. a ₱5,000, 2-month, 6
percent note in payment of its account. One month later, Kids discounted
a. P7,000,000 the note at the bank at 8 percent. The cash that Kids received from the
b. P5,449,600 bank was (rounded to the nearest dollar)
c. P4,860,000
d. P5,949,600 a. P4,960.
b. P5,010
c. P5,016
d. P5,022

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

19. Use the following information for the next two questions: Queen Co. a. P5,940
records purchases at net amounts. On May 5 Queen purchased b. P5,868
merchandise on account, ₱32,000, terms 2/10, n/30. Queen returned c. P5,910
₱2,000 of the May 5 purchase and received credit on account. At May 31 d. P5,985
the balance had not been paid. The amount to be recorded as a purchase
return is 23.

a. P1,800
b. P2,040
c. P2,000
d. P1,960

20. Based on the above info, by how much should the account payable be
adjusted on May 31?

a. P0
b. P680
c. P640
d. P600

a. P3,000
b. P2,500
c. P4,400
d. P4,900

24.

a. P5,700
b. P5,760
c. P6,195
d. P6,300

22. Based on the above info, assuming that perpetual inventory records a. P18,000
are kept in units only, the ending inventory on an average-cost basis, b. P5,400
rounded to the nearest dollar, is c. P9,000
d. P11,700

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

25. 27.

a. P900,000
b. P1,480,000
c. P1,330,000
d. P1,420,000

28. Inventories shall be measured at

a. Cost
b. Net realizable value
c. Lower of Cost and Net Realizable Value
d. Higher of Cost and Net Realizable Value

29. Inventories are usually written down to net realizable value

a. P60,750
b. P60,000 a. Item by item
c. P61,050 b. By classification
d. P62,400 c. By total
d. By segment
26. Based on the above info, how much is the ending inventory under the
FIFO cost method? 30. Net realizable value is

a. P60,750 a. Current replacement cost

b. P60,000 b. Estimated selling price
c. P61,050 c. Estimated selling price less estimated cost to complete
d. P62,400 d. Estimated selling price less estimated cost to complete and estimated cost to
sell

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

IA1- MIDTERM EXAM

1. The amount reported as "Cash" on a company's statement of
financial position normally should exclude

a. postdated checks that are payable to the company.

b. cash in a payroll account.
c. undelivered checks written and signed by the company.
d. petty cash.

2. Which of the following would not be classified as cash?

a. Personal checks
b. Travelers' checks
c. Cashiers' checks
d. Postdated checks

3. What is the proper accounting treatment for a stale check? a. Option A

b. Option B
a. Revert back to cash and accounts payable. c. Option C
b. Revert back to cash and a credit to gain. d. Option D
c. Ignored
d. Either a or b

4. Which of the following is not a basic characteristic of a system of

cash control?

a. Use of a voucher system

b. Combined responsibility for handling and recording cash
c. Daily deposit of all cash received
d. Internal audits at irregular intervals

5. The principal purpose of a voucher system is to provide assurance a. P1,200,000

that b. P1,250,000
c. P1,800,000
a. all cash receipts are deposited intact in the bank. d. P1,850,000
b. all cash disbursements are approved before a check is issued.
c. all cash receipts are recorded in the accounting records.
d. all purchase invoices are supported by debit memoranda.

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

a. P110,000
b. P385,000
c. P460,000
d. P860,000
a. A debit to cash short/overage account of P2,190 and a credit to cash on hand
of P9,450.
b. A credit to cash short/overage account of P810 and a credit to cash of P12,450.
c. A debit to cash short/overage account of P810 and a credit to petty cash fund
of P12,450.
d. A debit to cash short/overage account of P2,190 and a credit to cash in bank of
P9,450.

11. It is a report that is prepared for the purpose of bringing the

balances of cash per records and per bank statement into agreement.

a. Bank statement
b. Check Disbursement Voucher
c. Bank reconciliation
a. 660,000 d. Bank deposit slip
b. 810,000
c. 900,000 12. These are deposits made but not yet credited by the bank to the
d. 960,000 depositor’s bank account.

a. Credit memos (CM)

b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

13. These are deductions made by the bank to the depositor’s bank 18. Which of the following represents a debit memo?
account but not yet recorded by the depositor.
a. Collections made by the bank on behalf of the depositor.
a. Credit memos (CM) b. Interest income earned by the deposit.
b. Debit memos (DM) c. Loan proceeds directly credited or added by the bank to the depositor’s
c. Outstanding checks (OC) account.
d. Deposits in transit (DIT) d. Interest expense on a loan that is directly deducted from the depositor’s
account.
14. These are additions made by the bank to the depositor’s bank
account but not yet recorded by the depositor. 19. Which of the following is not a debit memo?

a. Credit memos (CM) a. Bank service charges

b. Debit memos (DM) b. No sufficient funds checks (NSF)
c. Outstanding checks (OC) c. Automatic debits representing payments of bills by the bank on behalf of the
d. Deposits in transit (DIT) depositor
d. Direct deposits of customers to the depositor’s account
15. These are checks drawn and released to payees but are not yet
encashed with the bank. 20. As an internal control, bank reconciliation statements are usually
prepared
a. Credit memos (CM)
b. Debit memos (DM) a. on a daily basis.
c. Outstanding checks (OC) b. on a monthly basis.
d. Deposits in transit (DIT) c. annually every year-end.
d. whenever the accountant feels like it.
16. Which of the following is added to the cash balance per books when
preparing a bank reconciliation statement?

a. Credit memo
b. Debit memo
c. Outstanding check
d. Deposit in transit

17. Which of the following is added to the cash balance per bank
statement when preparing a bank reconciliation statement?

a. Credit memo
b. Debit memo
c. Outstanding check a. P980,000
d. Deposit in transit b. P960,000
c. P920,000
d. P940,000

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

a. P290,000
b. P285,000
c. P307,500
d. P267,500 a. P13,900
b. P22,500
c. P17,700
c. P27,300

25. According to the provided information in Question 24, how much is the
bank debits for the month of December?

a. P56,400
b. P55,200
c. P43,800
d. P54,600

26. According to the provided information in Question 24, how much is the
a. P330,000 adjusted cash balance per bank for the month of December?
b. P300,000
c. P370,000 a. P24,000
d. P410,000 b. P27,600
c. P21,600
d. P31,200

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

27. According to the provided information in Question 24, how much is the 32. The category "trade receivables" includes
adjusted bank receipts for December?
a. advances to officers and employees.
a. P54,600 b. income tax refunds receivable.
b. P61,500 c. claims against insurance companies for casualties sustained.
c. P65,100 d. none of these.
d. P65,300
33. Which of the following should be recorded in Accounts Receivable?
28. According to the provided information in Question 24, how much is the
adjusted book disbursements for December? a. Receivables from officers
b. Receivables from subsidiaries
a. P55,200 c. Dividends receivable
b. P56,400 d. None of these
c. P60,000
d. P64,800 34. When the direct write-off method of recognizing bad debt expense
is used, the entry to write off a specific customer account would
29. According to the provided information in Question 24, how much is the
adjusted cash balance per bank for the month of December? a. increase net income.
b. have no effect on net income.
a. P21,600 c. increase the accounts receivable balance and increase net income.
b. P27,600 d. decrease the accounts receivable balance and decrease net income.
c. P24,000
d. P31,200 35. When comparing the allowance method of accounting for bad debts
with the direct write-off method, which of the following is true?
30. According to the provided information in Question 24, how much is the
book balance for December 31? a. The direct write-off method is exact and also better illustrates the matching
principle.
a. P18,600 b. The allowance method is less exact but it better illustrates the matching
b. P40,800 principle.
c. P24,000 c. The direct write-off method is theoretically superior.
d. P11,200 d. The direct write-off method requires two separate entries to write off an
uncollectible account.
31. Which of the following is incorrect?
36. When the allowance method of recognizing bad debt expense is
a. The operating cycle always is one year in duration. used, the entry to record the write-off of a specific uncollectible account
b. The operating cycle sometimes is longer than one year in duration. would decrease
c. The operating cycle sometimes is shorter than one year in duration.
d. The operating cycle is a concept applicable both to manufacturing and retailing a. allowance for doubtful accounts.
enterprises. b. net income.
c. net realizable value of accounts receivable.
d. working capital.

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

41. At January 1, 20x1, Judy Co. had a credit balance of ₱260,000 in its
allowance for uncollectible accounts. Based on past experience, 2% of Judy
's credit sales have been uncollectible. During 20x1, Judy wrote off
₱325,000 of uncollectible accounts. Credit sales for 20x1 were ₱9,000,000.
In its December 31, 20x1, balance sheet, what amount should Judy report
as allowance for uncollectible accounts?

a. P115,000
b. P180,000
c. P245,000
d. P440,000
a. Option A \
b. Option B
c. Option C
d. Option D

38. When the allowance method of recognizing bad debt expense is

used, the entries at the time of collection of a small account previously
written off would

a. increase net income.

b. increase the allowance for doubtful accounts.
c. decrease net income.
d. decrease the allowance for doubtful accounts.
a. P94,000
39. A method of estimating bad debts that focuses on the balance b. P120,000
sheet rather than the income statement is the allowance method based on c. P124,000
d. P150,000
a. direct write-off.
b. aging the trade receivable accounts.
c. credit sales.
d. specific accounts determined to be uncollectible.

a. ₱22,800.
b. ₱23,200.
a. a customer pays its account balance. c. ₱28,880.
b. a customer defaults on its account. d. ₱34,880.
c. a previously defaulted customer pays its outstanding balance.
d. estimated uncollectible receivables are too low.

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

47. Based on its past collection experience, Ace Company provides for bad
debts at the rate of 2 percent of net credit sales. On January 1, 2002, the
allowance for doubtful accounts credit balance was ₱10,000. During 2002,
Ace wrote off ₱18,000 of uncollectible receivables and recovered ₱5,000 on
accounts written off in prior years. If net credit sales for 1999 totaled
₱1,000,000, the doubtful accounts expense for 2002 should be

a. ₱17,000.
a. ₱450,000. b. ₱20,000.
b. ₱443,000. c. ₱23,000.
c. ₱425,000. d. ₱35,000.
d. ₱418,000.

a. ₱45,000.
b. ₱84,000.
c. ₱90,000. a. ₱738,000.
d. ₱99,000. b. ₱740,000.
c. ₱742,000.
d. ₱750,000.

a. ₱80,000.
b. ₱96,000.
c. ₱120,000.
d. ₱160,000.

Downloaded by Jessica Lazaro ([email protected])

 lOMoARcPSD|46623112

a. ₱1,500.
b. ₱2,400.
c. ₱3,000.
d. ₱3,900.

50. Gray Company had an accounts receivable balance of ₱50,000 on

December 31, 2001, and ₱75,000 on December 31, 2002. The company
wrote off ₱20,000 of accounts receivable during 2002, and collected ₱3,000
on an account written off in 2000. Sales for the year 2002 totaled ₱620,000.
All sales were on account. The amount collected from customers on
accounts receivable during 2002, including recoveries, was

a. ₱575,000.
b. ₱578,000.
c. ₱600,000.
d. ₱595,000.

Downloaded by Jessica Lazaro ([email protected])