ST. MARY’S COLLEGE OF TAGUM, INC.
HIGHER EDUCATION DEPARTMENT
AE16 – INTERMEDIATE ACCOUNTING III Jeremiah E. Cubar, CPA
SY 2019-2020 Midterm Quiz
NAME: SCORE:
_________________________________________________________________________________________
TEST I: TRUE or FALSE
1. PAS 34 on interim financial reporting mandates the use of integral view over independent view.
2. Gain is reported in the interim period when realized and the loss is reported in the interim period
when incurred, and shall be allocated over the interim periods.
3. Interim reports are not required in entity’s financial statements.
4. The board of directors acting collectively could qualify as the chief operating decision maker.
5. Segment reporting shall apply to consolidated financial statements of a group only.
6. Under accrual basis, a deferral is a transaction that impacts the statement of financial position before
impacting cash.
7. Under cash basis, if cash has been collected, revenue is recorded regardless of earning process.
8. Single entry system is an unacceptable method of bookkeeping system.
9. Reclassifying entry is only applicable if the error is discovered in the same year it is committed and
the books have already been closed.
10. Counterbalancing error makes the income statement for two successive periods incorrect.
11. Noncounterbalancing error makes the income statement of the period in which the error is committed
is incorrect but the succeeding income statement is not affected.
12. The statement of cash flows provides information about the cash receipts and cash payments of an
entity during a period.
13. Cash receipts from royalties and commissions are cash outflows for operating activities.
14. Interest received and dividend received may be classified alternatively as cash flow from investing
activities.
15. Cash advances and loans made by financial institution are usually classified as financing activities.
16. If interim financial statements are presented, four basic financial statements are required.
17. Not for profit entities are also required to report on business segments.
18. Under the accrual basis of accounting, cash receipts and disbursements may precede or coincide
with but never follow the period in which revenue and expense are recognized.
19. When converting from cash basis to accrual basis of accounting, add ending accounts receivable to
cash collections from customers to determine accrual basis service revenue.
20. Failure to record accrued salaries at the end of an accounting period results in overstated retained
earnings.
TEST II. MULTIPLCE CHOICE PROBLEMS
Thricia Lou Company paid or collected during the current year the following items:
Insurance premium paid P15,400
Interest collected 30,900
Salaries paid 135,200
The following balances have been excerpted from Thricia Lou’s balance sheets:
December 31 January 1
Prepaid insurance P1,200 P1,500
Interest receivable 3,700 2,900
Salaries payable 12,300 10,600
1. The insurance expense on the income statement for the current year was
a. P12,700 c. P15,100
b. P15,700 d. P18,100
2. The interest revenue on the income statement for the current year was
a. P24,300 c. P30,100
b. P31,700 d. P37,500
3. The salary expense on the income statement for the current year was
a. P112,300 c. P133,500
b. P136,900 d. P158,100
4. Decker Company assigns some of its patents to other enterprises under a variety of licensing agreements. In
some instances, advance royalties are received when the agreements are signed, and in others, royalties are
remitted within sixty days after each license year-end. The following date are included in Decker’s December 31
balance sheet:
2018 2019
Royalties receivable P90,000 P85,000
Unearned royalties 60,000 40,000
During 2015, Decker received royalty remittances of P200,000. In its income statement for the year ended
December 31, 2019, Decker should report royalty income of
a. P195,000 c. P220,000
b. P215,000 d. P225,000
5. Jadine Company reported a retained earnings balance of P5,000,000 at January 1, 2019. In August 2019,
Jadine determined that insurance premiums of P600,000 for the 3-yr period beginning January 1, 2018 had been
paid and fully expensed in 2018. Jadine has a 35% income tax rate. What amount should Jadine report as
adjusted beginning retained earnings in 2019?
a. P5,260,000 c. P4,740,000
b. P5,390,000 d. P5,130,000
6. After the issuance of its 2018 financial statements, Innah Corp. discovered a computational error of P150,000
in the calculation of its December 31, 2018 inventory. The error resulted in a P150,000 overstatement of cost of
goods sold for the year ended December 31, 2018. In October 2019, Innah paid the amount of P500,000 in
settlement of litigation instituted against it during 2018. Ignore income taxes. In the 2019 financial statement,
the December 31, 2018 retained earnings balance, as previously reported, should be adjusted by a
a. P150,000 credit c. P500,000 debit
b. P350,000 debit d. P650,000 credit
7. Abegail Kaye Limited had net profit after tax of P850,000 for the financial year. Included in this profit was:
• Depreciation expense of P120,000
• Gain on sale of investment of P28,000
Also, accounts receivable increased by P39,000 and inventories decreased by P12,000. The cash flow from