School of Management

Bachelor of Science in Accountancy and Bachelor of Science in Management

Accounting
NAME: DATE:
SECTION: SCORE:

INTERMEDIATE ACCOUNTING 1
QUIZ 3
Direction:

Put your final answers in the below table.

TRUE OR FALSE MULTIPLE CHOICE PROBLEM SOLVING

1 1 1 Score Breakdown
2 2 2 T or F
3 3 3 MC
4 4 4 PS
5 5 5 Solution
6 6 6 Total
7 7 7
8 8 8
9 9 9
10 10 10
11 11
12 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20

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TRUE OR FALSE (10 Points)

1. There is a discount when the yield rate is greater than the stated
rate.
2. Errors made by the company’s book may be adjusted on the bank’s
record.
3. Petty cash fund is credited when there is a board resolution
pronouncement to decrease its balance.
4. If an investment is not acquired within three (3) months before its
maturity but matures within twelve (12) months after the reporting
period, it is called a short-term investment and classified as
current asset.
5. Resignation of a company official is an accountable event.
6. Condonation of accounts receivable from a client is an accountable
event.
7. Before December 2001, the IASB’s interpretative body is called the
Standards Interpretations Committee (SIC). SIC issued SIC
Interpretations.
8. Professional Regulation Commission (PRC) is under the supervision of
the Philippine Regulatory Board of Accountancy (PRBOA).
9. CPAs are required to register with the PRBOA and PRC for the
practice of public accountancy.
10. Under the public sector, a field of practice for CPAs, function
involves assisting management in planning, controlling, and
decision-making activities.

MULTIPLE CHOICE(20 Points)

11. Which is/are correct? Inventories are assets

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 or services.
E. A, B, and C

12. Which of the following is correct about inventories?

A. Inventories include goods in process.
B. Inventories include raw materials that are used in the production
process.
C. Inventories include finished goods.
D. All of the above

13. Which of the following should not be included in inventory?

A. Land held for sale by a real estate firm.
B. Shares and bonds held for sale by a brokerage firm.
C. Properties held for sale by a property developer.
D. Materials to be used in production by a manufacturing entity.
E. All of these are included in inventory.

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14. Under the concept of FOB shipping point
A. Ownership is transferred to the buyer upon the receipt of the goods
purchased.
B. Ownership is transferred to the buyer upon the shipment of the
goods purchased.
C. Ownership remains with the seller upon the shipment of the goods
purchased.
D. Ownership remains with the seller even if the buyer already
received the goods.
E. A and C

15. Under the concept of FOB destination

F. Ownership is transferred to the buyer upon the receipt of the
goods purchased.
G. Ownership is transferred to the buyer upon the shipment of the
goods purchased.
H. Ownership remains with the seller upon the shipment of the goods
purchased.
I. Ownership remains with the seller even if the buyer already
received the goods.
J. A and C

16. Statement 1: The seller is compelled and actually paid for the
freight charges under FOB shipping point – freight collect.
Statement 2: The seller is compelled and actually paid for the
freight charges under FOB destination – freight prepaid.
Statement 3: The buyer is compelled and actually paid for the freight
charges under FOB shipping point – freight collect.
Statement 4: The buyer is compelled and actually paid for the freight
charges under FOB shipping point – freight prepaid.

A. False, True, True, False

B. True, False, True, False
C. False, False, True, True
D. True, False, False, True

17. Statement 1: Under the term FOB shipping point – freight collect,
the buyer is the one who shoulders and actually paid for the freight
charges.
Statement 2: Under the term FOB destination – freight prepaid, the
seller is the one who shoulders and actually paid for the freight
charges.
Statement 3: Under the term FOB shipping point – freight collect,
the seller is the one who shoulders and actually paid for the freight
charges.
Statement 4: Under the term FOB destination – freight prepaid, the
buyer is the one who shoulders and actually paid for the freight
charges.

A. False, True, True, False

B. True, False, True, False
C. True, True, False, False
D. False, False, True, True

Page 3 of 11 M.S.M.C.
18. Statement 1: Under the term FOB shipping point – freight prepaid,
the buyer is the one who shoulders the freight charges but it is the
seller who made the actual payment of the freight.
Statement 2: Under the term FOB destination – freight collect, the
seller is the one who shoulders the freight charges but it is the
buyer who made the actual payment of the freight.
Statement 3: Under the term FOB shipping point – freight collect,
the buyer is the one who shoulders the freight charges but it is the
seller who made the actual payment of the freight.
Statement 4: Under the term FOB destination – freight prepaid, the
seller is the one who shoulders the freight charges but it is the
buyer who made the actual payment of the freight.

A. False, True, True, False

B. True, False, True, False
C. True, True, False, False
D. False, False, True, True

19. Goods out on consignment must be included in the inventory of

K. The consignor.
L. The consignee.
M. Both the consignor and consignee.
N. Neither the consignor nor the consignee.

20. Which of the following must be included in inventory?

I. Goods in transit and sold FOB destination
II. Goods in transit and purchased FOB destination
III. Goods in transit and sold FOB shipping point
IV. Goods in transit and purchased FOB shipping point
V. Goods purchased under bill-and-hold arrangement
VI. Goods sold under bill-and-hold arrangement

O. I, IV and V
P. I, IV, and VI
Q. II, III, and V
R. II, III, and VI

21. Which of the following must be included in inventory?

I. Goods purchased under installment basis
II. Goods sold under installment basis
III. Segregated special order goods, not yet shipped
IV. Segregated regular order goods, not yet shipped

S. I and III
T. I and IV
U. II and III
V. II and IV

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22. Statement 1: The periodic inventory system calls for physical
inventory counting of goods on hand at the end of the accounting
period.
Statement 2: The periodic inventory system is best applied when
inventory items are smaller in value.
Statement 3: The perpetual inventory system requires the maintenance
of detailed inventory record with the use of stock cards.
Statement 4: The perpetual inventory system is best applied when
inventory items are large in quantities.

A. True, True, False, True

B. True, True, True, False
C. True, True, True, True
D. True, False, True, False

23. A merchandising company uses an automated accounting system in

which the serial number of each item of inventory in the system is
entered. This allows the company to keep track of each item's movement.
Which inventory system is the most likely to be adopted by the
aforementioned company?
A. Periodic inventory system
B. Perpetual inventory system
C. Advanced accounting system
D. Either A or B

24. Under this inventory system, a physical count is necessary before

profit is determined.
A. Periodic inventory system
B. Perpetual inventory system
C. SME inventory system
D. Under no such system

25. Under this inventory system, a physical count is necessary only

for internal control purposes
A. Periodic inventory system
B. Perpetual system system
C. Computerized accounting system
D. Under no such system

26. Which of the following is incorrect regarding the periodic and

perpetual inventory system?
A. When an entity purchased goods, under periodic, purchase account
is debited while under perpetual, merchandise inventory is debited.
B. When an entity returned goods to supplier, under periodic, purchase
returns and allowances is credited while under perpetual,
merchandise inventory is credited.
C. When an entity made a sale on account, both inventory systems debit
accounts receivable and credit sales, no other journal entry is
added.
D. When an entity made a cash sale, both inventory systems debit cash
and credit sales, however, an additional entry is needed under
perpetual to establish the cost of goods sold account.

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 27. An entry debiting merchandise inventory and crediting cost of
goods sold should be made when
W. Goods are sold and the periodic inventory system is used.
X. Goods are sold and the perpetual inventory system is used.
Y. Goods are returned and the periodic inventory system is used.
Z. Goods are returned and the perpetual inventory system is used.

28. An entry debiting cost of goods sold and crediting merchandise

inventory should be made when
AA. Goods are sold and the periodic inventory system is used.
BB. Goods are sold and the perpetual inventory system is used.
CC. Goods are returned and the periodic inventory system is used.
DD. Goods are returned and the perpetual inventory system is used.

29. Which inventory cost flow method is appropriate to use if the

inventory items are not interchangeable?
EE. Specific identification method.
FF. FIFO method.
GG. Average method.
HH. Either B or C.

30. LUMA NA Co. buys and sells antiques. Each product in unique. If
the entity adopts IAS 2 Inventories, the company
A. Is required to use specific identification method.
B. Is required to use FIFO method.
C. Is required to use average method.
D. Has the option of using either FIFO or specific identification.

PROBLEM SOLVING (30 Points)

Problem 1
Tin Company incurred the following costs:
Materials 800,000
Storage Costs of finished goods 180,000
Irrecoverable purchase taxes 60,000
Delivery to customers 50,000
31. At what amount should the inventory be measured?
Problem 2
At year-end, Tin Company purchased goods costing P400,000 FOB destination.
These goods were delivered at year-end. The costs incurred in connection
with the sale and delivery of the goods were:
Packaging for shipment 15,000
Shipping 25,000
Special handling charges 10,000
32. What total cost should be included in inventory?

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Problem 3
Tin Company has incurred the following costs during the current year:
Cost of purchases based on vendors’ invoices 4,000,000
Trade discounts on purchases already deducted
from vendors’ invoices 500,000
Freight and insurance on purchases 800,000
Import duties 400,000
After-sales warranty costs 200,000
Sales Commission 300,000
Other handling costs 250,000
33. What is the total cost of purchases?
Problem 4
Tin Company had the following transactions during December:
Inventory shipped on consignment to Dal-mi Company 1,500,000
Freight paid by Tin 50,000
Inventory received on consignment from Do-san Company 1,200,000
Freight paid by Do-san 50,000

No sales of consigned goods were made in December.

34. What amount should be included in inventory on December 31?

Problem 5
Tin Company included the following in inventory at year-end:
Merchandise out on consignment at sale price,
including 30% markup on sales 1,500,000
Goods held on consignment by Tin 700,000
Goods purchased in transit, shipped FOB shipping point 1,300,000
35. At what amount should the inventory be reduced?
Problem 6
Tin Company provided the following inventory data at year-end:
Cost NRV
Skis 2,200,000 2,500,000
Boots 1,700,000 1,500,000
Ski equipment 700,000 800,000
Ski apparel 400,000 500,000
36. What amount should be reported as inventory at yearend?
Problem 7
Tin Company provided the following information for an inventory at year-
end:
Historical cost 1,500,000
Estimated selling price 1,200,000
Estimated completion and selling cost 250,000
Replacement cost 1,000,000

37. What amount should be reported as inventory at year-end?

Page 7 of 11 M.S.M.C.
Problem 8
Tin Company determined the following information for an inventory at year-
end:
Historical Cost 2,500,000
Current replacement cost 1,600,000
Net realizable value 1,700,000
NRV less a normal profit margin 1,500,000
Fair Value 2,000,000

38. What amount should be reported as inventory at year-end:

Problem 9
On December 31, 2019, Tin Company has outstanding purchase commitments for
80,000 gallons at P20 per gallon of raw material.

It is determined that the market price of the raw material has declined to
P17 per gallon on December 31, 2019 and it is expected to decline further
to P15 in the first quarter of 2020.

39. What should be recognized as loss on purchase commitment in

2019?
Problem 10
On October 1, 2019, Tin Company entered into a 6-month, P5,000,000 purchase
commitment for a supply of a special product.

On December 31, 2019, the market value of this material had fallen to
P4,800,000

On March 31, 2020, the market value of the purchase commitment is

P4,500,000.

40. What amount should be recognized as loss on purchase commitment

in 2020?
Problem 11
Tin Company had the following amounts all at retail:
Beginning inventory 180,000
Purchases 6,000,000
Purchase Return 300,000
Net markup 900,000
Net markdown 140,000
Sales 3,600,000
Sales Return 90,000
Employee discounts 80,000
Normal shortage 130,000
Abnormal shortage 200,000

41. What is the ending inventory at retail?

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Problem 12
On June 1, 2019, Tin Company sold merchandise with a list price of P5,000,000
to Dal-mi on account. Tin allowed trade discounts of 30% and 20%.
On June 11, 2019, the customer paid in full. Credit terms were 2/10, n/30
and the sale was made FOB shipping point. Tin prepaid P200,000 of delivery
costs for Dal-mi as an accommodation.

42. What amount should be reported as sales revenue?

43. What amount was received by Tin from Dal-mi as remittance in

full?
Problem 13
Tin Company regularly buys shirts from Do-San Company and is allowed trade
discounts of 20% and 10% from the list price. Tin made a purchase during
the year and received an invoice with a list price of P800,000, a freight
charge of P20,000 and payment terms of 2/10, n/30.

44. What is the cost of the purchase?

Problem 14
Tin Company reported the following information for the current year:
Beginning Inventory 5,000,000
Purchases 26,000,000
Freight In 2,000,000
Purchase Return and Allowances 3,500,000
Purchase Discounts 1,500,000
Sales 40,000,000
Sales returns 3,000,000

A physical inventory taken at year-end resulted in an ending inventory of

P4,000,000. At year-end, unsold goods out on consignment with selling price
of P1,000,000 are in the hands of consignee. The gross profit was 40% on
sales.

45. What is the cost of goods available for sale?

Problem 15
Tin Company revealed the following transactions for the year 2023:

January 1, 2023 Tin Company sold a piece of machinery with carrying

amount of P3,000,000 in exchange for a 9-month, 10%
note with face value of P4,000,000.

April 1, 2023 Tin Company discounted the note with recourse. The
bank discount rate is 12%. The discounting transaction
is accounted for as a secured borrowing.

October 1, 2023 The maker dishonored the note receivable. Tin Company
paid the bank the maturity value of the note plus the
protest fee of P20,000.

December 31, 2023 Tin Company collected the dishonored note in full plus

Page 9 of 11 M.S.M.C.
 10% annual interest on the total amount due.

46. What is the amount of proceeds received by Tin Company from the
discounting of note receivable?

47. What is the interest expense to be recognized by Tin Company on

April 1, 2023?

48. What is the amount collected by Tin Company from the customer on
December 31, 2023?

Problem 16
The Cash in Bank account of Mariotte Company disclosed a balance of
P2,030,000 as of December 31. The bank statement as of December 31 showed
a balance of P1,060,000. Upon comparing the bank statement with cash
records, the following facts were developed:

(a) The company’s account was charged on December 26 for a customer’s

uncollectible check amounting to P300,000.

(b) A two-month, 17% P600,000 customer’s note dated October 25,

discounted on November 25, was dishonored on December 25, and the bank
charged the company P620,000, which included a protest fee of P20,000.

(c) A customer’s check for P154,000 was entered as P145,000 by the

depositor.

(d) Check no. 142 for P124,250 was entered in the cash disbursements
journal at P122,450 and check no. 156 for P32,900 was entered as
P329,000.

(e) Bank service charges of P18,300 for December were not yet
recorded on the books.

(f) A bank memo stated that a customer’s note for P250,000 and
interest of P10,000 had been collected on December 28; and the bank
charged P5,000. No entry was made on the books when the note was sent
to the bank for collection.

(g) Receipts on December 31 for P240,000 were deposited on January

2 of the subsequent year.

(h) The following checks were outstanding on December 31:

No. 123 P30,000 No. 154 P40,000
143* 20,000 157 60,000
144 70,000 159 70,000
147 30,000 169 50,000

*Certified by the bank in December.

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 (i) A deposit of P200,000 was recorded by the bank on December 5,
but it should have been recorded for Marionne Company rather than
Mariotte Company.

(j) Petty cash of P100,000 was included in the Cash in Bank balance.

(k) Proceeds from cash sales of P600,000 for December 18 were stolen.
The company expects to recover this amount from the insurance company.
The cash receipts were recorded in the books, but no entry was made
for the loss.

(l) The December 21 deposit included a check for P200,000 that had
been returned on December 15 marked NSF. Mariotte Company had made no
entry upon return of the check. The redeposit of the check on December
21 was recorded in the cash receipts journal of Mariotte Company as a
collection on account.

49. Compute for the adjusted cash in bank balance on December 31.

Problem 17
The following information belongs to Rizza Company as of the end of its
first year of operation:
Payment on short-term borrowings P75,000
Proceeds from issuance of ordinary shares 600,000
Proceeds from short-term borrowings 140,000
Sales (80% collected during the year) 1,687,500
Disbursements for income taxes 95,000
Purchases of fixed assets 500,000
Bad debt written off 60,000
Disbursements for cost and expenses 1,350,000
Depreciation of fixed assets 80,000

50. How much is the ending cash balance during the year?

END OF EXAMINATION

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