ACC 106: INTERMEDIATE ACCOUNTING 1

P3 EXAM – SET A
PHINMA UNIVERSITY OF PANGASINAN
COLLEGE OF MANAGEMENT AND ACCOUNTANCY
INTERMEDIATE ACCOUNTING 1 P3 EXAM – SET A
NAME: SCORE:
SECTION: DATE:
G E N E R A L D I R E C T I O N S
Read this page before starting the Assessment

This is a 14 paged test and has a total score of 55 points. You have ninety
(90) Minutes to finish this examination.

(1) Multiple-choice question Section. LEARNING OBJECTIVES:

The questions in this section are with four This assessment measures the
answer choices. The test is composed of 55 competence of the student in
questions and is rated as 1 point each. Write terms of his/her application of
your answer in CAPITAL Letters before the knowledge and skills in the
number. For the problems, provide solutions. following topics:
No solution no point. 1. The Accounting Process
All things unnecessary for the test 2. Cash and Cash Equivalents
must be put in front of the testing area. Use 3. Bank Reconciliation
BLACK or BLUE ink ballpen only. Write all 4. Accounts Receivable
5. Notes Receivable
your answers on the designated answer sheet.
6. Loans Receivable
Further, erasures are strictly NOT allowed 7. Inventories
and will invalidate your answers.

You may NOT use smart phones or reference materials during the testing
session. Only the allowed calculators should be used.

Try to answer all questions. In general, if you have some knowledge about a
question, it is better to try to answer it. You will not be penalized for
guessing.

Be sure to allocate your time carefully so you can complete the entire test
within the exam session. You may go back and review your answers at any time
during the exam session.

Those who are caught cheating or doing acts not allowed during the exam
shall be instructed to surrender their test papers and shall leave the testing
room immediately. Subsequently, their papers shall be rated as ZERO.

This concludes the instruction page.

You may now begin answering.

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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
Part 1. Multiple choice. Write your answer before the number in CAPITAL letter.
Provide solution for the problems.

1. According to IAS 7- Statement of cash flows, Cash equivalents are

A. Short-term and highly liquid investments that are readily convertible into
cash
B. Short-term and highly liquid investments that are readily convertible
into cash with remaining maturity of three months
C. Short-term and highly liquid investments that are readily convertible
into cash and acquired three months before maturity
D. Short-term and highly liquid marketable equity securities

2. Which of the following shall not be considered “cash” for financial reporting
purposes?
a. Petty cash c. Coin, currency and available funds
b. Money orders, certified checks and bank draft d. Postdated checks and
IOUs.

3. Cash set aside for a particular purpose (i.e. restricted) is

A. Immediately classified as non-current
B. May be classified as current or non-current depending on the purpose for
its establishment
C. Still classified as current asset regardless of the purpose for its
establishment
D. Recorded in off-balance sheet records

4. When a petty cash fund is used, which of the following is true?

A. The balance of the petty cash fund should be reported on the balance sheets
as investment.
B. The petty cashier summaries of petty cash payments serve as a journal
entry that is posted to the appropriate general ledger account.
C. The reimbursement of the petty cash fund should be credited to the cash
account.
D. Entries that include a credit to the cash account should be recorded
at the time the payment from the petty cash fund is made.

5. Which of the following items must be added to the cash balance per ledger
in preparing a bank reconciliation which ends with adjusted cash balance?
A. Note receivable collected by the bank in favor of the depositor and credited
to the account of the depositor
B. NSF customer check
C. Service charge
D. Erroneous bank debit

6. Trade receivables are classified as current assets if they are reasonably

expected to be collected
A. Within one year
B. Within the normal operating cycle
C. Within one year or within the operating cycle, whichever is shorter
D. Within one year or within the operating cycle, whichever is longer

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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
7. Accounts receivable shall be recognized initially at
A. Face value C. Maturity Value
B. Discounted value D. Current value

8. Credit balances in accounts receivable shall be classified as

A. Current liabilities C. Long term liabilities
B. Part of accounts payable D. Deduction from accounts receivable

9. Which method of recording bad debts loss is consistent with accrual

accounting?
A. Allowance method C. Percent of sales method
B. Direct write-off method D. Percent of accounts receivable method

10. When the allowance method of recognizing uncollectible accounts is used, the
entry to record the write off of a specific account would
A. Decrease both accounts receivable and the allowance for uncollectible
accounts.
B. Decrease accounts receivable and increase the allowance for uncollectible
accounts.
C. Increase the allowance for uncollectible accounts and decrease net income
D. Decrease both accounts receivable and net income

11. When the allowance method of recognizing bad debts expense is used, the
allowance for doubtful accounts would decrease when
A. Specific account receivable is collected
B. Account previously written off is collected
C. Account previously written off becomes collectible
D. Specific uncollectible account is written off

12. A debit balance in the allowance for doubtful accounts

A. Should never occur
B. Is always the result of management not providing a large enough allowance
in order to manage earnings
C. May occur before the end of the period adjustment for uncollectible
accounts
D. may exist even after the end of the period adjustment for uncollectible
accounts.

13. On July 1, 2012, an entity obtained a two-year 8% note receivable for

service rendered. At that time, the market rate of interest was 10%. The
face amount of the noted and the entire amount of interest are due on June
30, 2014. Interest receivable on December 31, 2012 is
A. 5% of the face amount of the note
B. 4% of the face amount of the note
C. 5% of the July 1, 2012 present value of the amount due on June 30, 2014
D. 4% of the July 1, 2012 present value of the amount on June 30, 2014
14. The interest on a non interest bearing note is equal to

A. The excess of the face value over the present value

B. The excess of the present value of over the face value
C. the excess of the market value over the present value
D. Zero

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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
15. In an entity’s April 30, 2012 statement of financial position a note
receivable was reported as a noncurrent asset and accrued interest for eight
months was reported as a current asset. Which of the following terms would
fit the entity’s note receivable?
A. Both principal and interest are payable on August 31, 2012 and August 31,
2013
B. Principal and interest are due December 31, 2012
C. Both principal and interest are payable on December 31, 2012 and December
31, 2013
D. Principal is due August 31, 2013, and interest is due August 31, 2012 and
August 31, 2013

16. Inventories are assets (choose the incorrect one)

A. Held for sale in the ordinary course of business.
B. In the process of production for sale.
C. In the form of materials or supplies to be consumed in the production
process or in the rendering of services.
D. Held for use in the production or supply of goods and services.

17. The following are costs excluded from the cost of inventories, except
A. abnormal amounts of wasted material, labor or other product costs;
B. storage cost, unless those costs are necessary in the production process
before a further production stage;
C. administrative overheads that do not contribute to bringing inventories to
their present location and condition;
D. Import duties

18. When using the moving average method of inventory valuation, a new unit cost
must be computed after each
A. Purchase C. Purchase and issuance from inventory
B. Issuance from inventory D. Month-end

19. To determine an inventory valuation that using the retail method under the
average method, the computation of the cost to retail percentage should.
A. Include markups but not markdowns C. Include markdowns but not markups
B. Include markups and markdowns D. Exclude markups and markdowns

20. The use of the gross profit method assumes

A. the amount of gross profit is the same as in prior years
B. sales and cost of goods sold have not changed from previous years
C. Inventory values have not increased from previous years
D. the relationship between selling price and cost of goods sold is similar to
prior years.

21. Which of the following represents the best justification for valuing the
inventories at the lower of cost and net realizable value?
A. It is easier to keep track of market value that it is to keep track of
cost as market value is available from any supplier
B. Cost loses its relevance for the determination of cost of goods sold if
the cost of inventory has been incurred in an earlier accounting period.
C. The Balance sheet valuation of inventory is the most important
consideration in the preparation of financial statements.
D. The practice of writing inventories below cost to net realizable value is
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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
consistent with the view that assets should not be carried in excess of
amount expected to be realized from their sale or use.

22. Lower of cost or net realizable value

A. is most conservative if applied to the total inventory’
B. is the most conservative if applied to major categories of inventory
C. is the most conservative if applied to individual items of inventory
D. must be applied to major categories for taxes.

23. When a portion of the inventories has been pledged to secure the payment of
indebtedness:
A. The fact of a portion having been pledge to secure the payment of
indebtedness:
B. The value of the portion pledged should be deducted from the value of the
inventories shown in the current assets section of the balance sheet.
C. The value of the portion pledge should be transferred from current assets to
noncurrent assets.
D. The value of the inventories shown in the current assets section of the
balance sheet remains the same but the fact of having been pledge a
portion of the inventories should be disclosed in the financial
statements or notes.

24. The beginning-of-the-year total equity for a firm was P40,000. During the
year, the firm issued ordinary shares for total proceeds of P20,000 net
income, and paid P5,000 in cash dividends. If ending total liabilities are
P100,000, what is ending total assets?
a. P165,000 c. P175,000
b. P 45,000 d. P100,000

25. The trial balance prepared at December 31 did not balance. Dr total was
P159,250 and Cr total was P153,200. In determining the cause of the
difference, you discovered the following errors: a credit to cash of P650
was not posted; a P2,000 credit to be made to the Sales account was
credited to the Accounts receivable account instead; the wages payable
account balance of P9,300 was listed in the trial balance as P3,900. The
correct trial balance is
a. 153.200 c. 160,600
b. 159,250 d. 161,250

26. Xyrelle Corporation loaned P60,000 to another corporation on December 1,

2018 and received a 3-month, 8% interest- bearing note with face value of
P60,000. What adjusting entry should Rice make on December 31, 2018?
a. Debit Interest Receivable and credit Interest Income, P1,200.
b. Debit cash and credit Interest Income, P400.
c. Debit Interest Receivable and credit Interest income, P400.
d. Debit Cash and credit Interest Receivable, P1,200.

27. Xyrelle Company received P9,600 on April 1, 2018 for one year’s rent in
advance and recorded the transaction with a credit to a nominal account.
The December 31, 2018 adjusting entry is
a. debit Rent Income and credit Unearned Rent, P2,400.
b. debit Rent Income and credit Unearned Rent. P7,200.
c. debit Unearned Rent and credit Rent Income, P2,400.
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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
d. debit Unearned Rent and credit Rent Income, P7,200.

28. On December 31 of the current year, Norielyn Company’s bookkeeper made an

entry debiting Supplies Expense and crediting Supplies on Hand for
P12,600. The Supplies on Hand account had a P15,300 debit balance on
January 1. The December 31 balance sheet showed Supplies on Hand of
P11,400. Only one purchase of supplies was made during the month, on
account. The entry for that purchase was
a. debit Supplies on hand, P8,700 and credit Cash, P8,700.
b. debit Supplies Expense, P8,700 and credit Cash, P8,700.
c. debit Supplies on Hand, P8,700 and credit Accounts Payable, P8,700.
d. debit Supplies on Hand, P16,500 and credit Accounts Payable, P16,500.

29. On December 31, 2018, the cash account of Marissa Company has a debit
balance of P3,500,000. An analysis of the cash account shows the following
details:

Undeposited collections P 60,000

Cash in bank-PCIB checking account 500,000
Cash in bank-PNB (overdraft) (50,000)
Undeposited NSF check received from a customer, dated 15,000
December 1, 2018
Undeposited check from a customer, dated January 15, 2019 25,000
Cash in bank-PCIB (fund for payroll) 150,000
Cash in bank-PCIB (savings deposit) 100,000
Cash in bank-PCIB (money market instrument, 90 days) 2,000,000
Cash in foreign bank (restricted) 100,000
IOUs from officers 30,000
Sinking fund Cash 450,000
Listed stock held as temporary investment 120,000
P3,500,000

Cash and cash equivalents on Jen’s December 31, 2018 statement of

financial position should be
a. P2,760,000 c. P2,885,000
b. P2,810,000 d. P2,935,000

30. The following items were included as cash in the books of Gotch Co.:
Checking account at Security Bank (P 1,200)
Checking account at BPI 5,335
Checking account at Citytrust used for payment 5,500
salaries
Postage stamps 107
Employee’s post-dated check 2,300

I.O.U from the employee 200

A check marked “DAIF” 1,250
11Postal money order 500
Petty cash fund (P324 in expense receipts) 500
Certificate of time deposit with BPI 5,000
A gold ring surrendered as security by a customer who 1,500
lost his wallet (at market value)

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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
The correct amount that should be reported as cash is
a. P11,835 c. P16,511
b. P11,011 d. P11,511

31. If a petty cash fund is established in the amount of P250, and contains
P200 in cash and P45 in receipts for disbursement when it is
replenished, the journal entry to record replenishment should include
credit to the following accounts
a. Petty Cash, P45. c. Cash, P45; Cash Over and short, P5.
b. Petty Cash, P50. d. Cash, P50.

32. The bookkeeper of Santa Clara Co. recently prepared the following bank
reconciliation:

Santa Clara
Co. Bank
Reconciliatio
n December
31, 2018
Balance per bank statement P126,000
Add:
Deposit in transit P8,700
Checkbook printing charge 210
Error in recording check No. 25 (issued in 1,600
December)
NSF check 5,000 15,510
P141,930
Deduct:
Outstanding checks P4,480
Note collected by bank (includes P50 9,500 13,980
interest)
Balance per books P127,950

Santa Clara has P9,100 cash on hand on December 31, 2018

The amount Santa Clara should report as cash on the statement of financial
position as of December 31, 2018 should be
a. P120,260 c. P130,640
b. P139,740 d. P132,240

33. Part of Tsibog Co.’s unadjusted trial balance at December 31, 2018 showed a
cash balance of P17,400. The balance per bank statement was P12,000 on
December 31, 2018. Outstanding checks amounted to P6,900. Interest of P40
was credited to the enterprise’s account by the bank during December, but
has not yet been entered on the company’s books.

Assuming no errors exist in the company’s cash balance, deposits in

transit at December 31, 2018 amount to
a. P 5,400 c. P12,300
b. P12,260 d. P12,340

Use the following information for the next two question:

The following bank reconciliation is presented for Firenze Corp. for the month
of November 2018:
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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
Balance per bank statement, P18,040
11/30/2013
Add: deposit in transit P 4,150
Erroneous bank charge 1,500 5,650
Subtotal 23,690
Less: Outstanding checks 7,820
Balance per books, 11/30/2013 P15,870
Data for the month of December
2013 follow:
Per bank
December deposits/credits P 26,100
December charges/debits 22,420
Balance 12/30/2013 21,720

All items that were outstanding as of November 30 cleared through the bank in
December, including the bank charge. In addition, P2,500 in checks were
outstanding as of December 31, 2018.

34. The amount of cash receipts per books in December 2018 is

a. P20,450 c. P24,600
b. P21,950 d. P31,750

35. The amount of cash disbursement per books in

December 2018 is
a. P14,600 c. P24,920
b. P17,100 d. P27,740

36. On April 28, 2014 Malcom Company sold merchandise with a list price of
P5,000,000 to Forbes. Malcom allowed trade discounts of 20% and 10%.
Credit terms were 5/10, n/30. The goods were shipped FOB destination,
freight collect. Total freight charges paid by the Forbes amounted to
P50,000. On may 8, 2014, Malcom received from Forbes full remittance of
a. P3,370,000 c. P3,550,000
b. P3,420,000 d. P3,600,000

37. The Balance of Selected accounts taken from January 1, 2014 statement of
financial position of Huygens Company were as follows:

Accounts receivable P2,500,000

Allowance for doubtful accounts 60,000
The following summary of transactions affecting accounts receivable
occurred during the year ended December 31. 2013.
Sales – all on account (2/10, 1/15, n/30) P 7,935,000
Cash received from customers 8,000,000
The cash received includes the following:
Customer paying within the 10-day 4,410,000
discount period
Customer paying within the 15-day 2,475,000
discount period
Recovery of accounts written off 15,000
Customers paying beyond the discounted ?
period
Accounts receivable written off as worthless 55,000
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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
Credit memoranda for sales return 30,000

The balance of accounts receivable on December 31, 2014 is

a. P2,350,000 c. P2,250,000
b. P2,235,000 d. P2,365,000

38. Gomez Company’s net accounts receivables were P400,000 at December 31,
2013 and P440,000 at December 31, 2014. Net cash sales for 2014 were
P260,000. The accounts receivable turnover for 2014 was7.0. what were
Gomez’s total net sales for 2014?
a. P1,820,000 c. P2,940,000
b. P3,200,000 d. P2,680,000

39. On July 1, 2014, Shaw received Co. sold a machine costing P500,000 with
accumulated depreciation of P380,000 on the date of sale. Shaw received as
consideration for the sale, a P300,000 noninterest-bearing note, due July
1, 2017. There was no established exchanged price for the equipment and the
note had no ready market. The prevailing rate of interest for a note of
this type of July 1, 2014 was 12% and 13% on December 31, 2014. In relation
to this
transaction, the total income to be recognized in Shaw’s 2014 profit or loss
is (Round off present value factors to four decimal places)
a. P180,000 c. P101,445
b. P37,910 d. P50,000

40. Payla Company borrowed from Gold Bank under a 10-year loan in the amount
of P5,000,000 with interest rate of 6%. Payment are due monthly and are
computed to be P55,500. Gold Bank incurs P200,000 of direct loan
originated cost and P50,000 of indirect loan origination cost. In
addition, Gold Bank charges Payla a 5-point nonrefundable loan origination
fee. Gold bank, the lender, has carrying amount of
a. P5,200,000 c. P4,750,000
b. P5,000,000 d. P4,950,000

41. Bangui Company provides for doubtful account expense at the rate of 3
percent of credit sales. The following data are available for last year:

Allowance for Doubtful Accounts, P 54,000

January 1
Accounts written off as 60,000
uncollectible
Collection of accounts written 15,000
off
Credit sales, year-ended December 3,000,000
31

The allowance for doubtful accounts balance at December 31,

after adjusting entries, should be
a. P45,000 c. P90,000
b. P84,000 d. P99,000

42. Alilem Company operates in an industry that has a high rate of bad debts.
On December 31, 2014, before any year- end adjustments, the accounts

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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
receivable balance was P20,000,000 and its allowance for doubtful accounts
balance was P1,500,000. The year-end balance reported for the allowance
for doubtful accounts is based on the following schedule:
Age Amoun Uncollecti
t ble %
Under 30 days P 10,000,000 5%
31 – 180 days 5,000,000 10%
181 – 360 days 3,000,000 30%
More than 1 year 2,000,000 100%

The which have been outstanding for more than one year and 100%
uncollectible would be written off immediately. What should be the doubtful
accounts expense for the year ended December 31, 2014?
a. P1,900,000 c. P3,900,000
b. P2,400,000 d. P2,000,000

43. Cabugao Company began operation on January 1, 2013. On December 31, 2013,
Cabugao provide for uncollectible accounts base on 5% of annual credit
sales on January 1, 2014, Cabugao changed its method of determining its
allowance for uncollectible accounts to the percentage of accounts
receivable. The rate of uncollectible accounts was determined to be 15% of
the ending accounts receivable balance. In addition, Cabugao rote of all
account receivable that were over one year old. The following additional
information relates to the years ended December 31, 2013 and 2014.

2014 2013
Credit sales P8,000,000 P6,000,000
Collections (including collections 6,950,000 4,500,000
on recovery)
Account written off 70,000 None
Recovery in accounts previously 20,000 None
written off

How much is the provision for uncollectible accounts for

the year ended December 31, 2014? a. P125,000 c.
P400,000
b. P122,000 d. P 72,000

Use the following information for the next two questions.

(Round off present value factors to four decimal places)
On December 31,2014, Merciful Bank entered into a debt restructuring
agreement with Miserable Corp., which was experiencing financial
difficulties. A note for P1,000,000 and one year’s accrued interest was
due on this date from Miserable was restricted as follows:
 reduced the principal obligation to P700,000.
 forgave the P120,000 of accrued interest for 2014.
 extended the maturity date to December 31, 2017.
 reduced the interest rate to 8%.

Interest is payable annually on December 31, beginning 2015. In

accordance with the agreement, Miserable made payments to Merciful Bank
on December 31, 2015, 2016 and 2017.
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P3 EXAM – SET A

44. The loan impairment to be recognized in Merciful

Banks 2014 profit or loss is
a. P477,422 c. P487,239
b. P420,000 d. P 0

45. How much interest income should Merciful Bank report for the
year ended December 31, 2015?
a. P75,931 c. P56,000
b. P64,258 d. P 0

46. Cadiz, Inc., assigned P10,000 to a finance company, receiving an advance

of 90% less a service charge of P400. Later P2,000 of these receivables
were collected and remitted to the finance company with an additional
P200 of interest. Given this information, which entry would not be made?
a. Cash 8,600

Assignment Service Charge expense 400

Accounts Receivable 9,000
b. Note Payable 2,000
Interest Expense 200
Cash 2,200
c. Cash 2,000
Accounts Receivable Assigned 2,000
d. Accounts Receivable Assigned 10,000
Accounts Receivable 10,000

Use the following information for the next two questions.

Seller Corp. factored P400,000of accounts receivable with Buyer, Inc., on a
without-recourse basis. The factor charge was 1,75% of the amount of
receivables, and an additional 4% was retained to cover probable adjustments.
In addition to the factor charge, a finance charge was withheld equal to 12%
annually for any amounts advanced prior to the due dates of the receivables.
The charge was based on 100% of the face value. The average credit term was 30
days from the date of transfer. According to the terms of the factoring
agreement, Seller was to handle returned goods, allowances, and shipping
disputes. Buyer was to collect the cash and acknowledge sales discounts, but
such discounts were to be charged to Seller. Credit losses were to be absorbed
by buyer. Seller has not recorded any bad debt expense related to the factored
receivables. The following transactions pertain to this factoring arrangement:

Aug. 1 The receivable records were transferred to Buyer. Buyer estimated

that P2,900 of the accounts will prove to be uncollectible.
31 Buyer collected P234,000 during August after allowing for P9,000
of sales discounts. Sales returns and allowances during August
totaled P2,400.
Sept. 20 Buyer wrote off a P2,000 account after learning of the company’s
bankruptcy.
30 Buyer collected P151,720 during September. Sales returns and
allowances during September totaled P880.
Oct. 10 Seller and Buyer made a final cash settlement.

47. What net cash proceeds did Seller ultimately

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P3 EXAM – SET A
realize from the factoring?
a. P389,000 c. P380,000
b. P385,720 d. P376,720

48. What was the factor’s net income from the factoring?
a. P11,000 c. P9,000
b. P3,280 d. P2,000

49. Seller Co. is a calendar-year retailer, its year-end physical count on

inventory on hand did not consider the effects of the following transactions:
 Good with a cost of P50,000 were shipped by Seller FOB shipping point
on December 30 and were tendered to and accepted by the buyer on
January 4.
 Goods with a cost of P40.000 were shipped FOB destination by a vendor on
December 30 and were tendered to and accepted by Seller on January 4.
 Goods were sold on the installment basis by Seller. Installment
receivables representing sales of goods with a cost of P30,000 were
reported at year-end. Seller retains title to such goods until full
payment is made.
 Goods with a cost of P20,000 were held on consignment for a vendor. These
goods were excluded from the count although they were sold in January.

If inventory based solely on the physical count of items on hand equaled P1

million. Seller should report inventory at year-end of
a. P1,000,000 c. P1,040,000
b. P1,070,000 d. P1,020,000

Use the following information for the next two questions.

Miller Inc. is a wholesaler of office supplies. The activity for model III
calculators during August is shown below:

Date Balance/ Units Cost

Transaction
Aug. Inventory 2,000 P36.00
1
7 Purchase 3,000 37.20
12 Sales 3,600
21 Purchase 4,800 38.00
22 Sales 3,800
29 Purchase 1,600 38.60

50. If Miller Inc. uses o FIFO perpetual inventory system, the ending
inventory of model III calculators at August 31 is reported as
a. P152,288 c. P150,080
b. P152,960 d. P150,160

51. If Miller Inc. uses a weighted average cost periodic inventory system,
the ending inventory of Model III calculators at August 31 is reported as
a. P150,080 c. P150,160
b. P152,960 d. P146,400

52. Caravan Development Corporation bought a 10-hectare land in Novaliches, to

be improved subdivided into lots, and eventually sold. Purchase price of
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P3 EXAM – SET A
the land was P58,000,000. Taxes and documentation expenses on the transfer
of the property amounted to P800,000. The lots were classified as follows:

Lot Number Selling Total

class of price clearing
lots per lot costs
A 10 P1,000,000 None
B 20 800,000 P1,000,000
C 30 700,000 3,000,000
D 40 600,000 8,000,000

Purchase and improvement costs allocated for class B lots under the
relative sales value method of inventory valuation are
a. P13,485,700 c. P12,200,000
b. P10,800,000 d. P12,047,600
53. Bautista Company accounting records indicated the following for 2014:

Inventory, January P 6,000,000

1
Purchases 20,000,000
Sales 30,000,000

A physical inventory taken on December 31, 2014 resulted in an ending inventory

of P4,500,000. The gross profit on sales remained constant at 30% in recent
years. Bautista suspects some inventory may have been taken by a new
employee. At December 31, 2014 what is the estimated cost of missing
inventory?
a. P5,000,000 c. P5000,000
b. P4,500,000 d. P 0

54. The Bayambang Corporation was organized on January 1, 2013. On December 31,
2014, the corporation lost most of its inventory in a warehouse fire just
before the year-end count of inventory was to take place. Data from the
records disclosed the following:

2013 2014
Beginning inventory, P 0 P1,020,000
January 1
Purchases 4,300,000 3,460,000
Purchases returns and 230,600 323,000
allowances
Sales 3,940,000 4,180,000
Sales returns and 80,000 100,000
allowances

On January 1, 2014, the Corporations pricing policy was changed so

that the gross profit rate would be three percentage points higher than
the one earned in 2013.

Salvaged undamaged merchandise was marked to sell at P120,000 while damaged

merchandise was marked to sell at P80,000 had an estimated realizable value
of P18,000.

How much is the inventory loss due to fire?

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 ACC 106: INTERMEDIATE ACCOUNTING 1
P3 EXAM – SET A
a. P918,200 c. P856,200
b. P947,000 d. P824,600

55. The records of Binmaleys Department Store report the following data for the
month of January 2014:
Sales P7,100,00
0
Sales allowance 100,000
Sales returns 500,000
Employee discounts 200,000
Theft and other losses 100,000
Initial markup on purchases 2,900,000
Additional mark up 250,000
Mark up cancellations 100,000
Mark down 600,000
Mark down cancellations 100,000
Freight on purchases 100,000
Purchases at cost 4,500,000
Purchase returns at cost 240,000
Purchase returns at sales 350,000
price
Beginning inventory at cost 440,000
Beginning inventory at 800,000
sales price

Using the average retail inventory method,

Binmaleys ending inventory is
a. P360,000 c. P420,000
b. P384,000 d. P448,000

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