Name: Answer Key Date:

Year and Section: Score:

Intermediate Accounting 3 Midterm Activity No. 1

Prepared by: Alyssa Celian V. Torres, CPA

At the end of the year 2024, the accountant of Gymssential Company abruptly resigned and therefore, the journal entries were not adjusted. Transactions during
the year is provided below.
March 1 The company received an P10,000 advance payment from Customer A for 12 months gym membership. The company used income method to
record this transaction.
March 31 A hiptrust machine was purchased by the company costing P650,000 with an estimated useful life of 6 years and at the end of its life, it can be
sold for P50,000.
April 30 The company sold P5,000 worth of gym clothes on account. The accountant debited notes receivable upon recording this transaction.
July 31 Paid P180,000 advance payment for a 12-month lease contract. The company used expense method to record this transaction.
December 31 The accrued salaries of P45,000 was not recorded in the books.

Prepare the initial and adjusting entry and determine the effect on profit, assets, liabilities, and equity of the failure to prepare necessary adjusting entries.
Initial Entry Adjusting Entry Profit Assets Liabilities Equity

1. 2. 3. 4. 5. 6.

7. 8. 9. 10. 11. 12.

13. 14. 15. 16. 17. 18.

19. 20. 21. 22. 23. 24.

25. 26. 27. 28. 29. 30.

ILY Corporation reported its net income for 2022 P5,000,000, for 2023 P4,500,000, and for 2024 P4,800,000. Upon auditing the company, errors have been
committed by the accountant which must be corrected. These errors are the following.
A. December 31, 2022 ending inventory is overstated by P120,000.
B. January 1, 2024 beginning inventory is understated by P150,000.
C. December 31, 2022 accrued interest payable is understated by P40,000.
D. December 31, 2024 accrued interest payable is overstated by P90,000.
E. Depreciation Expense of P180,000 was not recorded for the year 2023.
F. Depreciation Expense of P30,000 was overstated for the year 2024.

31. What is the adjusted net income in 2022?

32. What is the adjusted net income in 2023?
33. What is the adjusted net income in 2024?

On January 1, 2023, ACVT Company had 300,000 ordinary shares outstanding. The company also had the following transactions during and next year.
March 1, 2023 Sold 35,000 shares May 31, 2024 Issued a 3 for 1 share split
July 31, 2023 Sold 16,000 shares June 1, 2024 Sold 50,000 shares
September 30, 2023 Issued a 30% share dividend
December 1, 2023 Reacquired 15,000 shares

34. What is the ordinary shares outstanding for 2023 for the comparative financial statement at the end of 2024?
35. What is the weighted average number of ordinary shares outstanding for 2024 for the comparative financial statement at the end of 2024?

On March 31, 2024, Like a River Company issued P2,500,00 12% convertible bonds at face amount. Each P10,000 bond is convertible into 100 ordinary shares.
At the end of the year, the entity reported a net income of P3,500,000. The weighted average number of ordinary shares outstanding is 100,000 shares and the
current year’s tax rate is 30%.

36. Solve for the basic earnings per share

37. Solve for the diluted earnings per share

Grumpy Company is subject to the requirements of segment reporting. In the income statement for the current year, the entity reported revenue of P50,000,000
wherein 10% of this is composed of intersegment sales. Expenses is at P35,000,000 which includes payroll costs of P10,000,000.
38. What is the minimum amount of sales to a major customer?
39. What is the minimum amount of external revenue to be disclosed by reportable segments?
 Initial Entry Adjusting Entry Profit Assets Liabilities Equity
1. Cash P10,000 2. Income P1667 3. OVER 4. NE 5. UNDER 6. OVER
Income P10,000 Unearned Income P1667
7. Hipthrust Machine P650,000 8. Dep’n Expense P75,000 9. OVER 10. OVER 11. NE 12. OVER
Cash P650,000 Acc. Dep’n P75,000
13. Notes Receivable P5,000 14. Accounts Receivable P5,000 15. NE 16. NE 17. NE 18. NE
Income P5,000 Notes Receivable P5,000
19. Rent Expense P180,000 20. Prepaid Rent P105,000 21. UNDER 22. UNDER 23. NE 24. UNDER
Cash P180,000 Rent Expense P105,000
25. No Entry 26. Salaries Expense P45,000 27. OVER 28. NE 29. UNDER 30.OVER
Salaries Payable P45,000

2022 2023 2024

Unadjusted Net Income 5,000,000 4,500,000 4,800,000
December 31, 2022 ending inventory (120,000) 120,000
is overstated by P120,000.

January 1, 2024 beginning inventory 150,000

is understated by P150,000.

December 31, 2022 accrued interest (40,000) 40,000

payable is understated by P40,000.

December 31, 2024 accrued interest 90,000

payable is overstated by P90,000.

Depreciation Expense of P180,000 (180,000)

was not recorded for the year 2023.

Depreciation Expense of P30,000 30,000

was overstated for the year 2024.

Adjusted Net Income 31. P4,840,000 32. P4,480,000 33. P5,070,000

34. Outstanding Ordinary Shares 2023 for comparative year 2024

• 1/1/23 300,000 x 1.3 x 3 = 1,170,000
• 3/1/23 35,000 x 1.3 x 3 = 136,500
• 7/31/23 16,000 x 1.3 x 3 = 62,400
• 12/1,23 15,000 x 3 = (45,000)
= 1,323,900
35. Weighted Average Number of Ordinary Shares Outstanding for 2024
• 1/1/24 1,323,900 x 12/12 = 1,323,900
• 6/1/24 50,000 x 7/12 = 29,167
= 1,353,067

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆−𝑷𝒓𝒆𝒇𝒆𝒓𝒓𝒆𝒅 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝟑,𝟓𝟎𝟎,𝟎𝟎𝟎−𝟎

36. 𝑩𝒂𝒔𝒊𝒄 𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 = = = 𝟑𝟓
𝑾𝒆𝒊𝒈𝒉𝒕𝒆𝒅 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑶𝑺𝑶 𝟏𝟎𝟎,𝟎𝟎𝟎

𝟗
𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆+𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 𝑵𝒆𝒕 𝒐𝒇 𝑻𝒂𝒙 𝟑,𝟓𝟎𝟎,𝟎𝟎𝟎+(𝟐,𝟓𝟎𝟎,𝟎𝟎𝟎 𝒙 𝟏𝟐% 𝒙 𝒙 𝟕𝟎%)
37. 𝑫𝒊𝒍𝒖𝒕𝒆𝒅 𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 = = 𝟐,𝟓𝟎𝟎,𝟎𝟎𝟎
𝟏𝟐
𝟗 = 𝟑𝟎. 𝟖
𝑾𝒆𝒊𝒈𝒉𝒕𝒆𝒅 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑶𝑺𝑶+𝑷𝒐𝒕𝒆𝒏𝒕𝒊𝒂𝒍 𝑶𝑺 𝟏𝟎𝟎,𝟎𝟎𝟎+(( 𝟏𝟎,𝟎𝟎𝟎 𝒙 𝟏𝟎𝟎 𝒙𝟏𝟐)

38. 50,000,000x90%x10% = 4,500,000

39. 50,000,000x90%x10% = 4,500,000