PHILIPPINE CHRISTIAN UNIVERSITY - DASMARINAS CITY

INTERMEDIATE ACCOUNTING 3 - PRELIM

MULTIPLE CHOICE: Choose the best answer. Show your solutions. NO ERASURES.

Clara Company purchased equipment for 5,000 on January 1, 2017 with a useful life of
10 years and no residual value.

On December 31, 2018, the entity classified the equipment as held for sale. The fair
value of

the equipment on December 31, 2018 was 3,300,000 and the cost of disposal 100,000.

On December 31, 2019, the fair value of the equipment was 3,800,000 and the cost of

disposal 200,000. The value in use was determined to be 3,300,000.

On December 31, 2019, the entity believed the the criteria for classification as held for
sale

can no longer be met.

Accordingly, the entity decided not to sell the asset but continue to use it.

1. What is the impairment loss to be recognized on December 31, 2018?

a. 1,300,000

b. 800,000

c. 700,000

d. 0

2. What is the measurement of the equipment that ceases as held for sale on
December 31, 2019?

a. 3,200,000

b. 4,000,000

c. 3,500,000

d. 3,600,000

3. What amount should be reconized in profit or loss as a result of the reclassification in

a. 800,000

b. 300,000

c. 400,000

d. 0

Affiable Company purchased an equipment for 5,000,000 on January 1, 2017. The

On December 31, 2017, the entity classified the equipment as held for sale. On such
date, the fair value less cost of disposal of the equipment was 3,500,000.

On December 31, 2018, the entity believed that the criteria for classification as held for
sale can no longer be met. Accordingly, the entity decided not to sell the equipment
but to continue use it.

On December 31, 2018, the fair value less cost of disposal of the equipment was
2,700,000.

4. What is the carrying amount of the equipment on December 31, 2017 before
classification as held for sale?

a. 5,000,000

b. 4,000,000

c. 3,500,000

d. 4,500,000

5. What amount of impairment loss should be recognized in 2017?

a. 1,500,000

b. 1,000,000

c. 500,000

d. 0

6. What amount should be included in profit or loss in 2018 as a result of the

a. 800,000 gain

b. 800,000 loss

c. 300,000 gain

d. 300,000 loss

7. What is the adjusted carrying amount of the equipment on December 31, 2019?

a. 2,700,000

b.1,800,000

c. 2,000,000

d. 3,000,000

Surreal Company accounted for concurrent assets using the revaluation model. On
October 1, 2017, the entity classified a land as held for sale.

At that date, the carrying amount of the land was 5,000,000 and the balance in the
revaluation surplus was 1,500,000.

At the same date, the fair value of the land was estimated at 5,500,000 and the cost of
disposal at 100,000.

On December 31, 2017, the fair value less cost of disposal of the land did not change.
The land was sold on January 31, 2018 for 6,000,000.

8. What is the impairment loss in 2017?

a. 100,000

b. 500,000

c. 400,000

d. 0

9. What is the adjusted carrying amount of the land on December 31, 2017?

a. 5,000,0000

b. 5,500,000

c. 5,400,000

d. 3,500,000

10. What amount should be reported as gain on disposal of land in 2018?

a. 1,000,000

b. 2,600,000

c. 500,000

d. 600,000

11. What amount of OCI is reclassified to retained earnings in 2018?

a. 1,500,000

b. 2,000,000

c. 500,000

d. 0

Yanxi Company provided the following data for the current year:

Retained earnings, January 1 3,000,000

Dividends declared 1,000,000

Sales 8,350,000

Dividend income 100,000

Inventory, January 1 1,000,000

Purchases 3,700,000

Salaries 1,540,000

Contribution to employees’ pension fund 280,000

Delivery 205,000

Miscellaneous expense 125,000

Doubtful accounts expense 10,000

Depreciation expense 85,000

Loss on sale of investment 100,000

Income from discontinued operation, net of tax 500,000

Income tax expense 105,000

Inventory on December 31 at cost 850,000

Net realisable value of inventory 700,000

12. What is cost of goods sold?

a. 3,850,000

b. 4,000,000

c. 4,150,000

d. 4,700,000

13. What is the total amount of expenses before income tax?

a. 2,345,000

b. 2,065,000

c. 2,450,000

d. 2,245,000

14. What is the net income for the current year?

a. 2,000,000

b. 2,500,000

c. 1,500,000

d. 2,650,000

15. What is the balance of retained earnings on December 31?

a. 4,000,000

b. 4,500,000

c. 3,500,000

d. 4,650,000

Achael Company provided the following information for the current year?

Sales 9,500,000

Interest revenue 250,000

Gain on sale of equipment 100,000

Revaluation surplus during the year 1,200,000

Share of profit of associate 350,000

Cost of goods sold 6,000,000

Finance cost 150,000

Distributions cost 500,000

Administrative expenses 300,000

Translation loss on foreign operation 200,000

Income tax expense 950,000

16. What is the net income for the current year?

a. 2,300,000

b. 3,300,000

c. 4,200,000

d. 2,100,000

Petite Company reported the following current assets on December 31, 2017:

Cash 5,000,000

Accounts Receivable 2,000,000

Inventory, including goods received on

consignment 200,000 800,000

Bond investment at fair value through other

comprehensive income 1,000,000

Prepaid expenses, including a deposit of 50,000

made on inventory to be delivered in 18 months 150,000

Total current assets 8,950,000

Cash in general checking account 3,500,000

Cash fund to be used to retire bonds payable in 2019 1,000,000

Cash held to pay value added taxes 500,000

Total cash 5,000,000

17. What total amount of current assets should be reported on December 31, 2017?

a. 6,750,000

b. 6,700,000

c. 7,700,000

d. 7,750,000

Reesse Company was incorporated on January 1, 2017 with 5,000,000 form the
issuance of share capital and borrowed funds of 1,500,000. During the first year, net
income was 2,500,000.

On December 15, the entity paid a 500,000 cash dividend. On December 31, 2017, the
liabilities had increased to 1,800,000.

18. On December 31, 2017, what amount should be reported as total

a. 6,500,000

b. 9,300,000

c. 8,800,000

d. 6,800,000

American Company reported the following current assets at year-end:

Cash 4,500,000

Accounts receivable 7,500,000

Notes receivable, net of discounted note 500,000 2,000,000

Inventory 4,000,000

Accounts receivable comprised the following:

Trade accounts receivable 5,000,000

Allowance for doubtful accounts ( 500,000)

Selling price of American Company’s unsold goods

sent to Tarsier Company on consignment at

150% of cost and excluded from American’s

ending inventory 3,000,000

7,500,000

19. What amount should be reported as total current assets at year-end?

a. 17,000,000

b. 17,500,000

c. 15,000,000

d. 16,500,000

Liberty Company reported the following current assets at year-end:

Cash 700,000

Accounts receivable 1,200,000

Inventory 600,000

An examination of the accounts receivable revealed the following:

Trade accounts 930,000

Allowance for doubtful accounts ( 20,000)

Claim against shipper for goods lost in transit 30,000

Selling price of unsold goods sent out on

consignment at 130% of cost and not included

in ending inventory 260,000

Total accounts receivable 1,200,000

20. What total amount should be reported as current assets at year-end?

a. 2,440,000

b. 2,210,000

c. 2,500,000

d. 2,240,000

Part 1