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B-ACTG123 BSM11 2nd Sem (2021-2022)

Standalone assessment

ACTG123 Summative Assessment 4

Submissions
Here are your latest answers:

Question 1
A company purchased land to be used as the site for the construction of a plant. Timber was cut from the building site so that construction of the plant could begin. The
proceeds from the sale of the timber should be

Response: deducted from the cost of the land

Correct answer: deducted from the cost of the plant

Score: 0 out of 1 No

Question 2
Jerry Company had the following account balances on December 31, 2020:

Petty cash fund 25,000 Cash on hand 250,000

Cash in bank-current account 2,000,000 Cash in bank – payroll account 500,000
Cash in bank -restricted account for plant addition for disbursement in early 2021

250,000 Cash in sinking fund set aside for bond payable, due June 30, 2021
750,000
Time deposit 1,000,000

The Petty cash fund included unreplenished December 2020 PCF vouchers of P2,500 and employee IOUs of P2,500. The Cash on hand included a P50,000 check payable to
the entity dated January 31, 2021.

What total amount should be reported as Cash and cash equivalents on December 31, 2020?

Response: 3,720,000

Correct answer: 4,470,000

Score: 0 out of 1 No

Question 3
Rebel Co. purchased a new trademark and incurred the following costs:

Purchase price, P 2,000,000

Nonrefundable VAT, P100,000
Training costs on the use of the trademark, P140,000
Research costs associated with the trademark purchase, P480,000
Legal cost for registering the new trademark, P210,000
Administrative salaries, P 240,000

What is the initial cost of the trademark?

Response: P 2,310,000

Correct answer: P 2,310,000

Score: 1 out of 1 Yes

Question 4
Information on ABC Co. is shown below:
30-Jul Aug. 31
Book balance 132,200 180,000
Book debits 60,000
Book credits ?
Bank balance 100,600 169,000
Bank debits 20,600
Bank credits ?
Notes collected by bank 10,000 35,000
Debit memos 7,800 8,900
Understatement of book receipts - 2,800
Deposit in transit 45,000 43,800
Outstanding checks 11,200 3,900

How much is the adjusted disbursement in August

Response: P13,300

Correct answer: P13,300

Score: 1 out of 1 Yes

Question 5
Hercules Co. started a research and development project on a new product on January 1, 20x1.

The total cost incurred before reaching technical feasibility amounted to P2,000,000 while development cost after reaching technical feasibility amounted to P2,500,000
before year-end.
Prior to commercial production, the entity paid legal and registration fees amounting to P500,000 in filing for a patent on the new product on July 1, 20x1.

Early in January 20x2, an additional amount of P1,000,000 was incurred to develop the project to the full manufacturing stage.
The Patent was approved in early January 20x2 and is valid for 20 years.

However, the entity expected technological advancements will render the new product virtually obsolete by December 31, 20x6.

The entity decided to account separately for any capitalized development cost.

What amount should be reported as amortization of intangible assets for the year 20x2?

Response: P500,000

Correct answer: P800,000

Score: 0 out of 1 No

Question 6
Con Hotel Corporation recently purchased Hay Hotel and the land on which it is located with the plan to tear down the Hay Hotel and build a new luxury hotel on the site.
The demolition costs of the Hay Hotel should be

Response: capitalized as part of the cost of the new hotel

Correct answer: capitalized as part of the cost of the new hotel

Score: 1 out of 1 Yes

Question 7
Which of the following is not a basic characteristic of a system of cash control?

Response: Combined responsibility for handling and recording cash

Correct answer: Combined responsibility for handling and recording cash

Score: 1 out of 1 Yes

Question 8
ABC received from a customer a one-year, P375,000 note bearing annual interest of 8%. After holding the note for six months, ABC discounted the note at Super Bank at an
effective interest rate of 10%.

How much did ABC receive from the bank?

Response: P384,750.00

Correct answer: P384,750.00

Score: 1 out of 1 Yes

Question 9
Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in the depositor's records and to identify bank errors. Adjustments should be
recorded for
Response: all items, except bank errors, outstanding checks, and deposits in transit

Correct answer: all items, except bank errors, outstanding checks, and deposits in transit

Score: 1 out of 1 Yes

Question 10
The following accounts were taken from ABC Inc.’s statement of financial position at December 31, 2017:

Accounts receivable P4,100,000

Allowance for doubtful accounts 100,000
Net credit sales P7,500,000

If doubtful accounts are 3% of accounts receivable, determine the bad debt expense to be reported for 2017.

Response: P 223,000

Correct answer: P 223,000

Score: 1 out of 1 Yes

Question 11
On January 1, 20x1, Entity A obtained a 12%, ₱6,000,000 loan, specifically to finance the construction of a building. The proceeds of the loan were temporarily invested and
earned interest income of ₱180,000. The construction was completed on December 31, 20x1. How much borrowing costs are capitalized to the cost of the constructed
building?

Response: P 540,000

Correct answer: P 540,000

Score: 1 out of 1 Yes

Question 12
On July 1, 20x1, Town Company purchased for ₱540,000 a warehouse building and the land on which it is located. The following data were available concerning the
property:
Current appraised value Seller’s original cost
Land 200,000 140,000
Warehouse building 300,000 280,000
Totals 500,000 420,000

Town should record the land at

Response: P 216,000

Correct answer: P 216,000

Score: 1 out of 1 Yes

Question 13
The following information applied to Fly Inc. for 2020:
Merchandise purchased for resale ₱400,000
Freight-in 16,000
Freight-out 10,000
Purchase returns 4,000

Fly's 2020 inventoriable cost was

Response: P412,000

Correct answer: P412,000

Score: 1 out of 1 Yes

Question 14
Entity A acquires equipment on 1/1/20x1, information on costs is as follows:
Purchase price, gross of ₱10,000 trade discount 800,000
Non-refundable purchase taxes 20,000
Delivery and handling costs 40,000
Installation costs 30,000
Present value of decommissioning and restoration costs 10,000

Assume the equipment has a useful life of 10 years and a residual value of ₱90,000. Entity A uses the straight line method of depreciation. On December 31, 20x2, Entity A
revalues the equipment at a fair value of ₱820,000. There is no change in the residual value and the remaining useful life of the asset. How much are the revaluation surplus
on December 31, 20x2 and revised depreciation expense in 20x3 and in subsequent periods, respectively?
Response: Revaluation surplus - P 90,000 ; Revised annual depreciation - P91,250

Correct answer: Revaluation surplus - P 90,000 ; Revised annual depreciation - P91,250

Score: 1 out of 1 Yes

Question 15
Statement I: An entity acquires debt instruments to be held under a "hold to collect and sell" business model. The entity shall classify the debt instruments either a fair value
through other comprehensive income or fair value through profit or loss.
Statement II: A financial asset held under a "hold to collect" business model is classified under the amortized cost measurement category.

Response: TRUE, TRUE

Correct answer: FALSE, TRUE

Score: 0 out of 1 No

Question 16
Mutant Company made the following expenditures during the current year:

Cost to develop computer software for internal use in the MIS, P1,000,000
Cost of the market research activities, P 700,000

What total amount should be reported in the income statement as research and development expense?

Response: P 700,000

Correct answer: 0

Score: 0 out of 1 No

Question 17
Transactions for the month of June were:
Purchases Sales
June 1 (balance) 1,200 @ ₱3.20 June 2 900 @ ₱5.50
June 3 3,300 @ 3.10 June 6 2,400 @ 5.50
June 7 1,800 @ 3.30 June 9 1,500 @ 5.50
June 15 2,700 @ 3.40 June 10 600 @ 6.00
June 22 750 @ 3.50 June 18 2,100 @ 6.00
June 25 450 @ 6.00

Assuming that perpetual inventory records are kept in pesos, the ending inventory on a FIFO basis is

Response: P 6,195

Correct answer: P 6,195

Score: 1 out of 1 Yes

Question 18
Which of the following methods may be used to estimate doubtful accounts?
I. Percentage of credit dales
II. Percentage of receivables
III. Aging of receivables
IV. Combination of these methods

Response: [none]

Correct answer: All of these

Score: 0 out of 1 No

Question 19
Presented below is information pertaining to ABC Co.:
Cost Retail
Inventory, January 1 21,750 35,000
Purchases 138,250 200,750
Freight-In 5,000 -----
Purchase discounts 1,250 ------
Purchase returns 13,000 21,500
Departmental Transfers-In (Debit) 2,500 3,750
Departmental Transfers-Out (Credit) 2,000 3,000
Markups 15,000
Markup cancellations 5,000
Markdowns 30,000
Markdown cancellations 7,500
Abnormal spoilage (theft and casualty loss) 12,500 17,500
Sales 109,500
Sales returns 6,250
Sales discounts 2,500
Employee discounts 1,250
Normal spoilage (shrinkage and breakages) 500

How much is the ending inventory under the Average cost method?

Response: P 60,000

Correct answer: P 60,000

Score: 1 out of 1 Yes

Question 20
Tent Retailers purchased merchandise with a list price of ₱90,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. Tent should record the cost
of this merchandise as

Response: P64,800

Correct answer: P64,800

Score: 1 out of 1 Yes

Question 21
ABC received from a customer a one-year, P375,000 note bearing annual interest of 8%. After holding the note for six months, ABC discounted the note at Super Bank at an
effective interest rate of 10%.

If the discounting is treated as a borrowing, what amount of loss from discounting should ABC recognize?

Response: P5,250

Correct answer: P0

Score: 0 out of 1 No

Question 22
Ame, Inc. exchanged a truck with a carrying amount of ₱12,000 and a fair value of ₱20,000 for a truck and ₱5,000 cash. The fair value of the truck received was ₱15,000. At
what amount should Ame record the truck received in the exchange?

Response: P 15,000

Correct answer: P 15,000

Score: 1 out of 1 Yes

Question 23
On June 1, 2016, ABC Corporation purchased as a long-term investment 4,000 of the P1,000 face value, 8% bonds of DEF Corporation for P3,645,328. Interest is payable
semiannually on December 1 and June 1. The bonds mature on June 1, 2022. On November 1, 2017, ABC sold the bonds for a total consideration of P3,925,000. ABC
intended to hold these bonds until they matured.

The gain on sale of investment in bonds on November 1, 2017 is

Response: P80,235

Correct answer: P80,235

Score: 1 out of 1 Yes

Question 24
Hera Company provided the following information:
Balance per bank statement, May 31 1,300,000 Balance per book – May 31 1,405,000
Deposits outstanding 150,000 Bank service charge (5,000)
Checks outstanding (50,000)
Correct bank balance-May 31 1,400,000 Correct book balance-May 31 1,400,000

June data are as follows: Bank Book

Checks recorded 1,100,000 1,250,000
Deposits recorded 800,000 900,000
Service charges recorded 25,000 -
Note collected by bank, P 250,000 plus interest 275,000
NSF checks returned with June 30 statement 50,000
Balances 1,200,000 1,050,000

What is the adjusted cash balance on June 30?

Response: 1,250,000

Correct answer: 1,250,000

Score: 1 out of 1 Yes

Question 25
ABC, Inc. acquired 50,000 ordinary shares of AAA for P5 per share and 125,000 ordinary shares of BBB Corp for P10 per share on January 2, 2016. Both AAA Inc and
BBB Corp have 500,000 ordinary shares outstanding. Both securities are being held as long-term investments. Changes in retained earnings for AAA and BBB for 2016 and
2017 are as follows
AAA, Inc. BBB, Corp
Retained earnings, 1/1/2016 P1,000,000 (P175,000)
Cash dividends, 2016 (125,000) -
Profit for 2016 200,000 325,0000
Retained earnings, 12/31/2016 1,075,000 150,000
Cash dividends, 2017 (150,000) (50,000)
Profit for 2017 300,000 125,000
Retained earnings, 12/31/2017 1,125,000 225,000

Market value of share:

12/31/2016
12/312017
P7.00
6.50
P12.00
15.00

The carrying amount of investment in BBB, Inc. as at December 31, 2017 is

Response: P 1,350,000

Correct answer: P 1,350,000

Score: 1 out of 1 Yes

Question 26
A 90-day 15% interest-bearing note receivable is sold to a bank without recourse after being held for 60 days. The proceeds are calculated using a 12% interest rate. The
amount credited to note receivable at the date of the discounting transaction would be

Response: The face value of the note

Correct answer: The face value of the note

Score: 1 out of 1 Yes

Question 27
A purchased patent has a remaining legal life of 15 years. It should be

Response: Amortized over its useful life if less than 15 years

Correct answer: Amortized over its useful life if less than 15 years

Score: 1 out of 1 Yes

Question 28
Hercules Co. started a research and development project on a new product on January 1, 20x1.

The total cost incurred before reaching technical feasibility amounted to P2,000,000 while development cost after reaching technical feasibility amounted to P2,500,000
before year-end.
Prior to commercial production, the entity paid legal and registration fees amounting to P500,000 in filing for a patent on the new product on July 1, 20x1.

Early in January 20x2, an additional amount of P1,000,000 was incurred to develop the project to the full manufacturing stage.
The Patent was approved in early January 20x2 and is valid for 20 years.

However, the entity expected technological advancements will render the new product virtually obsolete by December 31, 20x6.

The entity decided to account separately for any capitalized development cost.

What amount should be capitalized as development cost?

Response: P2,500,000
Correct answer: P3,500,000

Score: 0 out of 1 No

Question 29
Intangible assets have all of the following characteristics, except:

Response: they provide benefits to current operations only

Correct answer: they provide benefits to current operations only

Score: 1 out of 1 Yes

Question 30
The debit for a non-refundable sales tax properly levied and paid on the purchase of machinery preferably would be a charge to

Response: the machinery account

Correct answer: the machinery account

Score: 1 out of 1 Yes

Question 31
The effective interest rate on bond is higher than the stated rate when bond sells

Response: Above face amount

Correct answer: Below face amount

Score: 0 out of 1 No

Question 32
Hercules Co. started a research and development project on a new product on January 1, 20x1.

The total cost incurred before reaching technical feasibility amounted to P2,000,000 while development cost after reaching technical feasibility amounted to P2,500,000
before year-end.
Prior to commercial production, the entity paid legal and registration fees amounting to P500,000 in filing for a patent on the new product on July 1, 20x1.

Early in January 20x2, an additional amount of P1,000,000 was incurred to develop the project to the full manufacturing stage.
The Patent was approved in early January 20x2 and is valid for 20 years.

However, the entity expected technological advancements will render the new product virtually obsolete by December 31, 20x6.

The entity decided to account separately for any capitalized development cost.

What amount should be capitalized as the cost of patent?

Response: P 3,500,000

Correct answer: P500,000

Score: 0 out of 1 No

Question 33
ABC Company purchased 40,000 ordinary shares on October 1 for P6,600,000 to be held for trading. On November 30, the investee distributed a 10% stock dividend when
the market price of the share was P250. On December 31, the entity sold 4,000 shares for P1,000,000.

What amount should be reported as gain on sale of investment for the current year?

Response: P 400,000

Correct answer: P 400,000

Score: 1 out of 1 Yes

Question 34
Statement 1: An entity may classify assets other than land and/or building as investment property.
Statement 2: The lump sum acquisition cost of land and building need not be allocated to the land and building if both assets are classified as investment property measured
under the fair value model.

Response: FALSE, FALSE

Correct answer: FALSE, TRUE

Score: 0 out of 1 No

Question 35
Yesterday, you wrote a ₱2M check and gave it to a supplier as payment for the goods you have purchased. Today, you received your bank statement. You noticed that the
₱2M check is not reflected in the statement. What should you do?

Response: Treat the ₱2M check as outstanding check in your bank reconciliation for today.

Correct answer: Treat the ₱2M check as outstanding check in your bank reconciliation for today.

Score: 1 out of 1 Yes

Question 36
ABC Company acquired a building on January 1, 2016 for P9M. At that date, the building had a useful life of 30 years. On December 31, 2016 the fair value of the building
was P9.6M and on December 31, 2017, the fair value is P9.8M. The building was classified as an investment property and accounted for under the fair value model.

What amount should be carried in the statement of financial position and recognized in profit or loss for 2017?

Response: Carrying Amount: P8,700,000; Profit or Loss: P300,000 expense

Correct answer: Carrying Amount: P9,800,000; Profit or Loss: P200,000 gain

Score: 0 out of 1 No

Question 37
I will answer the questions in this quiz honestly using my own knowledge. I will not ask anyone to help me answer the quiz and I will not share my answers with other
students as well. As a future CPA, I will start building my integrity by being honest and truthful in all my dealings specifically in relation to my academic work. I will study
and complete this quiz trusting in the Lord's Grace and my own ability. I offer my performance for this quiz for God's greater glory. Amen.

Response: True

Correct answer: True

Score: 0 out of 0 No

Question 38
The advantage of relating a company’s bad debt expense to its outstanding receivable is that this approach

Response: Gives a reasonably correct statement of receivables in the balance sheet.

Correct answer: Gives a reasonably correct statement of receivables in the balance sheet.

Score: 1 out of 1 Yes

Question 39
Light Company bought a machine for ₱300,000 on January 1, 20x8. The machine's useful life is 10 years and it is estimated to have a zero residual value and is depreciated
using the straight-line method.

The revalued amount of the machine is as follows:

December 31 Fair values of the machine
20x8 ₱ 360,000
20x9 335,000
2x10 320,000

The enacted tax rate was 30% for each year

The revaluation surplus in the equity section of Light Company’s December 31, 20x8 statement of financial position is

Response: Answer not given

Correct answer: P 63,000

Score: 0 out of 1 No

Question 40
ABC, Inc. acquired 50,000 ordinary shares of AAA for P5 per share and 125,000 ordinary shares of BBB Corp for P10 per share on January 2, 2016. Both AAA Inc and
BBB Corp have 500,000 ordinary shares outstanding. Both securities are being held as long-term investments. Changes in retained earnings for AAA and BBB for 2016 and
2017 are as follows
AAA, Inc. BBB, Corp
Retained earnings, 1/1/2016 P1,000,000 (P175,000)
Cash dividends, 2016 (125,000) -
Profit for 2016 200,000 325,0000
Retained earnings, 12/31/2016 1,075,000 150,000
Cash dividends, 2017 (150,000) (50,000)
Profit for 2017 300,000 125,000
Retained earnings, 12/31/2017 1,125,000 225,000

Market value of share:

12/31/2016
12/312017
P7.00
6.50
P12.00
15.00

The income from investment in BBB, Inc. in 20016 is

Response: P 0

Correct answer: P 81,250

Score: 0 out of 1 No

Question 41
At the end of its first year of operations, December 31, 2017, ABC, Inc. reported the following information:
Accounts receivable, net of allowance for doubtful accounts
P9,500,000
Customer accounts written off as uncollectible during 2017
240,000
Bad debts expense for 2017 840,000

What should be the balance in accounts receivable at December 31, 2017, before subtracting the allowance for doubtful accounts?

Response: P 9,740,000

Correct answer: P 10,100,000

Score: 0 out of 1 No

Question 42
Entity A acquires equipment on January 1, 20x1. Information on costs is as follows:

Purchase price, gross of ₱10,000 trade discount 800,000

Non-refundable purchase taxes 20,000
Delivery and handling costs 40,000
Installation costs 30,000
Present value of decommissioning and restoration
costs 10,000
Assume the equipment has a useful life of 10 years and a residual value of ₱90,000. Entity A uses the straight line method of depreciation. How much are the depreciation
expense in 20x1 and the carrying amount of the equipment on December 31, 20x2, respectively?

Response: Depreciation Expense - P 80,000 ; Carrying amount 12/31/x2 - P 810,000

Correct answer: Depreciation Expense - P 80,000 ; Carrying amount 12/31/x2 - P 730,000

Score: 0 out of 1 No

Question 43
As of December 31, 20x1, the petty cash fund of TUMULT COMMOTION Co. with a general leger balance of P15,000 comprises the following:
Coins and currencies P 2,550
Petty cash vouchers:
Gasoline for delivery equipment P3,000
Medical supplies for employees 2,040
IOU’s:
Advances to employees 2,220
A sheet of paper with names of several employees
together with contribution to bereaved employee,
attached is a currency of 2,400
Checks:
Check drawn to the order of the petty cash custodian 3,000
Personal check drawn by the petty cash custodian 2,400

The entry to record the replenishment of the petty cash fund includes

Response: A debit to cash short/overage account of P2,190 and a credit to cash in bank of P9,450

Correct answer: A debit to cash short/overage account of P2,190 and a credit to cash in bank of P9,450

Score: 1 out of 1 Yes

Question 44
In a case of a patent infringement suit, the suit may be either successful or lost. The results of the legal decision are accounted for as follows:

Response: after recognizing the results of the lawsuit as an expense, amortize the remaininbg baalnce of the patent over its remaining economic life

Correct answer: if successful, debit the cost of the lawsuit to legal expense

Score: 0 out of 1 No

Question 45
At the current year-end, Moonlight Co. purchased for P60/share all 200,000 of Starlight Co.'s outstanding ordinary shares. On this date, the acquiree's statement of financial
position showed net assets of P10,000,000. The fair value of the acquiree's identifiable assets on this date was P800,000 in excess of the carrying amount.
In the statement of financial position, what amount should be reported as goodwill from the acquisition?

Response: P1,200,000

Correct answer: P1,200,000

Score: 1 out of 1 Yes

Question 46
The cost of land typically includes the purchase price and all of the following costs except

Response: cost of private driveways and parking lots

Correct answer: cost of private driveways and parking lots

Score: 1 out of 1 Yes

Question 47
19. The following information is available for Keribels Company for 2020:
Freight-in ₱ 60,000
Purchase returns 150,000
Selling expenses 300,000
Ending inventory 520,000

The cost of goods sold is equal to 300% of selling expenses.

What is the cost of goods available for sale?

Response: P1,420,000

Correct answer: P1,420,000

Score: 1 out of 1 Yes

Question 48
When intangible assets are self-generated, costs incurred in development phase are

Response: expensed immediately, unless they meet all of the conditions for capitalization under PAS 38 Intangible Assets

Correct answer: expensed immediately, unless they meet all of the conditions for capitalization under PAS 38 Intangible Assets

Score: 1 out of 1 Yes