INTERIM QUIZ
1. ABC Corp. experienced a P50,000 decline in the market value of its inventory in the first quarter of its fiscal year.
ABC had expected this decline to reverse in the third quarter, and in fact, the third quarter recovery exceeded
the previous decline by P10,000. ABC’s inventory did not experience any other declines in market value during
the fiscal year. What amounts of loss and/or gain should ABC report in its interim financial statements for the
first and third quarters? (Sample Answer: 10,000 gain, 20,000 loss) 50,000 loss, 50,000 gain
2. True or False. If an estimate of an amount reported in an interim period is changed significantly during the
financial interim period in the financial year but a separate financial report is not published for that period, the
nature and amount of that change must be disclosed in the notes to the annual financial statements or interim
reports whichever is deemed practicable. FALSE
3. ABC Corp. has estimated that total depreciation expense for the year ending December 31, 20X1 will amount to
P180,000, and that 20X1 year-end bonuses to employees will total P360,000. In ABC's interim income statement
for the six months ended June 30, 20X1, what is the total amount of expense relating to these two items that
should be reported? 90,000 + 180,000 = 270,000
4. Advertising costs may be accrued or deferred to provide an appropriate expense in each period for (Indicate YES
or NO under each reporting period. Two answers required) Interim Financial Reporting and Year-end Financial
Reporting (Sample answer: No, No) Yes, Yes
5. In January 20X2, Pace, Inc. estimated that its year-end bonus to executives would be P480,000 for 20X2. The
actual amount paid for the year-end bonus for 20X1 was P440,000. The estimate for 20X2 is subject to year-end
adjustment. What amount, if any, of expense should be reflected in Pace's quarterly income statement for the
three months ended March 31, 20X2? 120,000
6. True or False. In deciding how to recognize, measure, classify, or disclose an item for interim financial reporting
purposes, materiality is to be assessed in relation to the interim period financial data, not forecasted annual
data. TRUE
7. True or False. Revenues that are received seasonally, cyclically or occasionally within a financial year should not
be anticipated or deferred as of the interim date, if anticipation or deferral would not be appropriate at the end
of the financial year. TRUE
8. True or False. Costs that are incurred unevenly during a financial year should be anticipated or deferred for
interim reporting purposes if, and only if, it is also appropriate to anticipate or defer that type of cost at the end
of the financial year. TRUE
9. An inventory loss from market decline of P900,000 occurred in April 20X1. CD Company recorded this loss in
April 20X1 after its March 31, 20X1, quarterly report was issued. None of this loss was recovered by the end of
the year. How should this loss be reflected in the quarterly income statements of CD Company? (Sample answer:
December 450,000) JUNE 900,000
10. On January 15, 20X1, ABC Company paid property taxes (not income tax) on its factory building for the calendar
year 20X1 in the amount of P320,000. In the first week of April 20X1, ABC made unanticipated major repairs
(capitalize) to its plant equipment at a cost of P800,000. These repairs will benefit operations for the remainder
of the calendar year. How should these expenses be reflected in ABC's quarterly income statements ( 3/31/X1;
6/30/X1; 9/30/X1; 12/31/X1)? (Sample Answer: 100,000; 200,000; 300,000; 400,000) Answers must be in
nearest peso. 80,000; 346,667; 346,667; 346,667
11. ABC Company, a calendar-year corporation, has the following income before income tax provision and
estimated effective annual income tax rates for the first three quarters of 20A:
First - P60,000; 40%
Second - 70,000 - 40%
Third - 40,000 - 45%
ABC’s income tax provision in its interim income statement for the third quarter should be 76,500 – 52,000 =
24,500
12. True or False. If the annual financial statements were consolidated (group) statements, the interim statements
should be group statements as well. TRUE
13. True or False. Measurements for interim reporting purposes should be made on a year-to-date basis, based
upon the entity’s discretion. FALSE
14. In its first interim period, Star had P600 of income before taxes and an estimated tax rate of 30%. In its second
interim, Star had P700 of income before taxes and its estimated tax rate was 40%. Star’s tax expense for the
second interim period was: 1,300 x 40% = 520 – (600 x 30%) = 340
15. True or False: Income tax expense should be recognized based on the best estimate of the weighted average
annual effective income tax rate expected for the full financial year. TRUE
