Intermediate Accounting 3 ACTG-6257 exam answers

A change in measurement basis is

a change in accounting policy Correct

A change in reporting entity is actually a change in accounting

policy Correct

A company required a building, paying a portion of the purchase price in cash and issuing a mortgage note payable to the seller for the balance. In a statement of cash flows, what amount is included in investing activities for the above transaction?

cash payment Correct

A complete set of financial statements includes all of the following components, except

Environmental reports and value added statements Correct

A. Corp. has a total equity of P 200 at the beginning of the period. During the period, A Corp. earns a profit of P 40 and declares dividends of P 10. The total equity at the end of the period is P 250.

FALSE Correct

All of the following are components of , except

Unrealized gain and loss on financial asset held for trading Correct

An entity shall classify an asset as current when (choose the incorrect one)

The asset is cash or cash equivalent that is restricted to settle a liability for more than twelve months after the reporting period. Correct

An entity shall present all items of income and expense recognized in a period

Either I or II Correct

An entity shall present expenses using a classification based on

Either the nature of expenses or the function of expenses within the entity, whichever provides information that is reliable and more relevant. Correct

An entity that changed its method of inventory valuation from weighted average to FIFO shall account for the change as

a change in accounting policy and account for it retrospectively. Correct

An interim financial report shall include, as a minimum, all of the following components, except

Accounting policies and explanatory notes Correct

ASB Company provided the following information for the current year:

P 8,200,000 Correct

Brent Corp. beginning inventory on January 1 was understated by P 260,000 and the ending inventory was overstated by P 520,000.

P 780,000 understated Correct

Brook Corporation reports operating expenses in two categories (1) selling, and (2) general and administrative. The adjusted trial balance at December 31, 20x1, including the following expense and loss accounts:

P 480,000 Correct

Change in accounting policy does not include

change in estimated useful life of an asset. Correct

Comprehensive income includes

Both profit and loss and Correct

Corrections of error are reported in

retained earnings Correct

During 2020, an entity discovered that ending inventory reported in its 2019 financial statements was understated. How should the entity account for this understatement?

Restate the financial statements with corrected balances for all prior periods presented. Correct

During the year ended December 31, 2020, Zoila Company paid interest totaling P 100,000. The prepaid interest expense is P 23,500 and P 18,000 respectively on December 31, 2019 and 2020. The interest payable is P 45,000 and P 53,500, respectively on December 31, 2019 and 2020.

P 114,000 Correct

Each material class of similar items shall be presented separately and items of a dissimilar nature or function shall be presented separately unless they are immaterial.

Materiality and aggregation Correct

Entity C’s total equity at the end of the period is P 230. During the period, Entity C earns profit of P 40 and declares total dividends of P 10. Entity C’s total equity at the beginning of the period was P 200.

TRUE Correct

Failure to record accrued salaries at the end of an accounting period results in

overstated retained earnings Correct

Financial statements are structured representation of the financial position and performance of an entity. The objective of general purpose financial statements is to provide information about the entity’s (choose the incorrect one)

valuation Correct

Financial statements must be prepared at least

Annually Correct

Firm B’s total equity at the beginning of the period was P 40. During the period, Firm B incurs loss of P 4 and declares total dividends of P 10. Total equity of Firm B at the end of the period is P 26.

TRUE Correct

For interim financial reporting, an expropriation gain occurring in the second quarter shall be

recognized in the second quarter Correct

For interim reporting, an inventory loss from a market decline in the second quarter shall be recognized as a loss

in the second quarter. Correct

Gold Company provided the following information at year-end:

P 8,000,000 Correct

Green Company incurred the following costs during the current year:

P 4,200,000 Correct

Guard Company reported the following account balances on December 31, 2020:

P 3,900,000 Correct

In a classified statement of financial position, PAS 1 Presentation of Financial Statements requires deferred tax assets and deferred tax liabilities to be presented as

non-current items Correct

In a statement of cash flows using indirect method of presenting cash flow from operating activities, depreciation is treated as an adjustment to reported profit because depreciation

reduces the reported profit but does not involve an outflow of cash. Correct

In a statement of cash flows, proceeds from the sale of a company’s own bonds or mortgages should be classified as

financing activity Correct

In a statement of cash flows, receipt from sale of property, plant, and equipment would be classified as cash inflows from

investing activity Correct

In a statement of comprehensive income, showing expenses according to their function, which of the following is included in the line item “Administrative expenses?”

legal and accounting fees Correct

In preparing a statement of cash flows, sale of treasury shares at an amount greater than cost would be classified as a/ an

financing activity Correct

In preparing a statement of cash flows, which of the following transactions would be considered an investing activity?

sale of a business segment Correct

includes all of the following, except

actuarial gain on defined benefit plan that is fully recognized through Correct

Interim financial report means a financial report containing

Either I or II Correct

Interim financial reports shall include as a minimum

A condensed set of financial statements and selected notes Correct

It is the residual interest in the assets of the entity after deducting all of its liabilities.

Equity Correct

It is the total income less expenses, excluding the components of .

Profit or loss Correct

Items of dissimilar nature or function

Must be presented separately in financial statements if those items are material. Correct

Items reported as prior period adjustments

are reflected as adjustments of the opening balance of retained earnings of the earliest period presented. Correct

Lily Corporation’s transactions for the year ended December 31, 2019 included the following:

P 175,000 Correct

Little Company reported the following current assets on December 31, 2020:

P 6,700,000 Correct

Non-current liabilities include

All of these are non-current liabilities Correct

On December 31, 2019, CAL Company sold merchandise for P 750,000 to Biday Company. The terms of the sale were net 30, F.O.B. shipping point. The merchandise was shipped on December 31, 2019, and arrived at Biday on January 5, 2020.

understated by P 600,000. Correct

On December 31, 2020, Key Company had the following balances in the accounts maintained at First National Bank:

P 3,400,000 Correct

Orchidia Company’s prepaid insurance was P 500,000 at December 31, 2020 and P 250,000 at December 31, 2019. Insurance expense was P200,000 for 2020 and P 150,000 for 2019.

P 200,000 Correct

Partner Company reported operating expenses as distribution and general or administrative.

P 4,550,000 Correct

PAS 1 Presentation of Financial Statements

does not prescribe the order or format in which an entity presents items in the financial statements. Correct

Prior period errors are omissions from and misstatements in the financial statements of one or more periods arising from a failure to use or misuse of reliable information that

Both I and II Correct

Quezon Company, a calendar-year entity, had the following income before tax provision and effective annual tax rate for the first three quarters of the current year:

P 1,350,000 Correct

Red Company which began operations on January 2019 has elected to use cash basis accounting for tax purposes and accrual basis accounting for financial statements. The entity reported sales of P 1,750,000 and P 800,000 in the tax returns for years ended December 31, 2020 and 2019, respectively. The entity reported accounts receivable of P 300,000 and P 500,000 on December 31, 2020 and 2019, respectively.

P 1,550,000 Correct

Revenue may be derived from any of the following activities except

borrowing from banks Correct

Separate line items of expenses by function include

cost of sales, administrative expenses and distribution expenses Correct

Separate line items of expenses by nature include

Depreciation, purchases of materials, transport costs, employee benefits and advertising costs. Correct

Show Company provided the following trial balance on December 31,

P 4,900,000 Correct

Show Company provided the following trial balance on December 31, 2020 which had been adjusted except for income tax expense:

P 3,300,000 Correct

Statement of Cash flows is

a financial statement that reports the cash inflows and outflows for an accounting period. Correct

The declaration of cash dividends by the board of directors

is an activity that would not be reported in a statement of cash flows. Correct

The effect of a change in accounting estimate shall be recognized prospectively by including it in profit or loss of

current period and future periods if the change affects both Correct

The effects of transactions and other events on economic resources and claims are depicted in the periods in which those effects occur even if the resulting cash receipts and payments occur in a different period.

Accrual accounting Correct

The elements directly related to the measurement of financial performance are

Income and expenses Correct

The elements directly related to the measurement of financial position are

Assets, liabilities and equity Correct

The expenses are classified according to their function, as part of cost of sales, distribution costs, administrative activities and other operating activities.

Cost of sales method Correct

The following costs were incurred by LIP company, a manufacturer during 20x1:

P 260,000 Correct

The following information is available for Champaca Company for the year ended December 31, 2020.

P 260,000 Correct

The following was taken from the 2020 financial statements of Tulip

P 4,292,000 Correct

The following was taken from the 2020 financial statements of Tulip Company.

P 4,292,000 Correct

The funds contributed by shareholders in excess of par or stated value

share premium Correct

The major financial statements include all, except

Statement of changes in financial position Correct

The operating cycle of an entity

It is the time between the acquisition of materials entering into a process and their realization in cash or cash equivalent. Correct

The presentation and classification of items in the financial statements shall be retained from one accounting period to the next.

Consistency of presentation Correct

Intermediate Accounting 3

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