CAPITOL UNIVERSITY

College of Business & Accountancy

Corrales Extension, Cagayan de Oro City

INTERMEDIATE ACCOUNTING 3

Final Exam

Name:__________________________________ Score:______________

Permit No. ______________________________ Date:_______________

I. MULTIPLE CHOICE QUESTIONS: Write your answers in the answer sheet provided. STRICLY NO
ERASURES.

Statement of cash flows

1. Jacqueline Company reported net income of P3,000,000 for the current year. Changes occurred in certain accounts as
follows:
Equipment 250,000 increase
Accumulated depreciation 400,000 increase
Note payable 300,000 increase

During the year, the entity sold equipment costing P250,000 with accumulated depreciation of P120,000 for a gain of
P50,000. In December of the current year, the entity purchased equipment costing P500,000 with P200,000 cash and a
12% note payable of P300,000. In the statement of cash flows, what amount should be reported as net cash provided
by operating activities?
A. 3,400,000 C. 3,520,000
B. 3,470,000 D. 3,570,000

2. In 2020, a storm surge completely destroyed a building belonging to Holland Company. The building cost of P100,000 and
had accumulated depreciation of P48,000 at the time of the loss. The entity received a cash settlement from the
insurance entity and reported a loss of P21,000. In the 2020 statement of cash flows, what is net change reported in
the investing activities?
a. 10,000 increase C. 31,000 increase
b. 21,000 decrease D. 52,000 decrease

3. Fara Company reported bonds payable of P47,000 on December 31, 2020, and P50,000 on December 31, 2021. During
2021, the entity issued P20,000 of bonds payable in exchange for equipment. There was no amortization of bond
premium or discount during the year. What amount should be reported in the 2021 statement of cash flows for
redemption of bonds payable?
A. 3,000 C. 20,000
B. 17,000 D. 23,000

4. King Company provided the following information for the current year:
Dividends paid 300,000
Proceeds from issuance of shares 250,000
Borrowing under a line of credit 200,000
Proceeds from issuance of convertible bonds 100,000
Proceeds from sale of building 150,000

What is the increase in cash flows provided by financing activities?

A. 50,000 C. 250,000

Subject: Date prepared: Prepared by: Checked by: Approved by:

Intermediate June 9, 2022 FRTPaurom Dr. Elizabeth E. Figueroa

Frank Paurom,
Subject Teacher
Acctg. 3 CPA,MBM Dean
Chairperson
CAPITOL UNIVERSITY
College of Business & Accountancy
Corrales Extension, Cagayan de Oro City

B. 150,000 D. 550,000

Questions 5 thru 9 are based on the following information:

Kristy Company used the direct method to prepare statement of cash flows:
2021 2020
Cash 35,000 32,000
Accounts receivable 33,000 30,000
Inventory 31,000 47,000
Property, plant and equipment 100,000 95,000
Unamortized bond discount 4,500 5,000
Cost of goods sold 250,000 380,000
Selling expenses 141,500 172,000
General and administrative expenses 137,000 151,300
Interest expense 4,300 2,600
Income tax expense 20,400 61,200
756,700 976,100

Allowable for doubtful accounts 1,300 1,100

Accumulated depreciation 16,500 15,000
Trade accounts payable 25,000 17,500
Income taxes payable 21,000 27,100
Deferred income taxes 5,300 4,600
8% callable bonds payable 45,000 20,000
Share capital 50,000 40,000
Share premium 9,100 7,500
Retained earnings 44,700 64,600

Subject: Date prepared: Prepared by: Checked by: Approved by:

Intermediate June 9, 2022 FRTPaurom Dr. Elizabeth E. Figueroa

Frank Paurom,
Subject Teacher
Acctg. 3 CPA,MBM Dean
Chairperson
CAPITOL UNIVERSITY
College of Business & Accountancy
Corrales Extension, Cagayan de Oro City

Sales 538,800 778,700

756,700 976,100

The entity purchased P5,000 in equipment during 2021. The entity allocated one-third of the depreciation expense to
selling expenses and remainder to general administrative expenses. There was no write-off of accounts receivable
during 2021. What amounts should be reported in the statement of cash flows for the following:

5. Cash collected from customers?

A. 535,800 C. 541,600
B. 536,000 D. 541,800
6. Cash paid for goods to be sold?
A. 226,500 C. 257,500
B. 242,500 D. 258,500
7. Cash paid for selling expenses?
A. 140,000 C. 141,500
B. 141,000 D. 142,000
8. Cash paid for interest?
A. 1,700 C. 4,300
B. 3,800 D. 4,800
9. Cash paid for income taxes?
A. 15,000 C. 20,400
B. 19,700 D. 25,800

Questions 10 thru 12 are based on the following information.

Vanessa Company provided the following data:
2021 2020
Cash 350,000 150,000
Accounts receivable, net 840,000 580,000
Merchandise Inventory 660,000 420,000
Prepaid expenses 50,000 100,000
Long-term investment 80,000 -
Property, plant and equipment 1,130,000 600,000
Accumulated depreciation 110,000 50,000
Accounts payable 530,000 440,000
Accrued expenses 140,000 130,000
Dividends payable 70,000 -
Note payable – long-term debt 500,000 -
Share capital 1,200,000 900,000
Retained earnings 560,000 330,000
Net credit sales 6,400,000 4,000,000
Cost of goods sold 5,000,000 3,200,000
Expenses 1,000,000 520,000
Net income 400,000 280,000

All accounts receivable and accounts payable relate to trade merchandise. Accounts payable are recorded net and
always paid to take all of the discounts allowed. The allowance for doubtful accounts at the end of 2021 was the same
as at the end of 2020. No receivables were charged against the allowance during 2021.

The proceeds from the note payable were used to finance a new store building. Share capital was sold to provide
additional working capital.

Subject: Date prepared: Prepared by: Checked by: Approved by:

Intermediate June 9, 2022 FRTPaurom Dr. Elizabeth E. Figueroa

Frank Paurom,
Subject Teacher
Acctg. 3 CPA,MBM Dean
Chairperson
CAPITOL UNIVERSITY
College of Business & Accountancy
Corrales Extension, Cagayan de Oro City

10. What is the net cash provided by operating activities for the current year?
A. 100,000 C. 200,000
B. 110,000 D. 400,000
11. What is the net cash used in investing activities for the current year?
A. 80,000 C. 610,000
B. 530,000 D. 660,000
12. What is the net cash provided by financing activities for the current year?
A. 140,000 C. 500,000
B. 300,000 D. 700,000

Segment reporting
13. Correy Company and its divisions are engaged solely in manufacturing operations.

Segment Revenue Operating Profit Assets

A 10,000,000 1,750,000 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 1,200,000 12,500,000
D 3,000,000 550,000 7,500,000
E 4,250,000 675,000 7,000,000
F 1,500,000 225,000 3,000,000

How many reportable segments does Correy have?

a. Three C. Five
b. Four D. Six

14. Ina Company, a publicly-owned entity, assesses performance and makes operating decisions using for the reportable
segments total revenue of P7,680,000 and total profit and loss of P406,000. The total profit and loss included
intersegment profit of P61,000. In addition, the entity has P5,000 of common costs for the reportable segments that
are not allocated in reports reviewed by the chief operating decision-maker. For purposes of segment reporting, what
amount should be reported as segment profit of the reportable segments?
A. 345,000 C. 406,000
B. 350,000 D. 411,000

Interim reporting
15. On June 30, 2020, Line Company incurred a P100,000 net loss from disposal of a business segment. Also, on June 30,
2020, the entity paid P40,000 for property taxes assess for the 2020. What amount should be included in the
determination of net income or loss for the six-month interim period ended June 30, 2020?
A. 70,000 C. 120,000
B. 90,000 D. 140,000

16. Jessa Company reported P4,750,000 net income for the quarter ended September 30, 2020 which included the
following after tax items:

 A P3,000,000 expropriation gain, realized on April 30, 2018, was allocated equally to the second, third and
fourth quarters of 2020.
 An P800,000 cumulative-effect loss resulting from a change in inventory valuation method was recognized on
August 1, 2020.

The entity paid P2,400,000 on February 1, 2020, for 2020 calendar year property taxes. Of this amount, P600,000 was
allocated to the third quarter ended September 30, 2020. What amount should be reported as net income for the third
Subject: Date prepared: Prepared by: Checked by: Approved by:

Intermediate June 9, 2022 FRTPaurom Dr. Elizabeth E. Figueroa

Frank Paurom,
Subject Teacher
Acctg. 3 CPA,MBM Dean
Chairperson
CAPITOL UNIVERSITY
College of Business & Accountancy
Corrales Extension, Cagayan de Oro City

quarter?
A. 4,550,000 C. 5,550,000
B. 5,150,000 D. 5,750,000

Shareholder’s equity
17. Zinc Company reported the following information on December 31, 2020:

Ordinary share capital, P3 par 600,000

Share premium 800,000
Treasury shares, at cost 50,000
Net unrealized loss on available-for-sale securities 20,000
Retained earnings appropriately for uninsured earthquake loss 150,000
Retained earnings unappropriated 200,000

What amount should be reported as total shareholder’s equity on December 31, 2020?
A. 1,680,000 C. 1,780,000
B. 1,720,000 D. 1,820,000

18. On January 1, 2020, Alyanna Company had 110,000 shares issued and 100,000 shares outstanding. The entity had the
following transactions in 2020:
March 1 Issued 15,000 shares
June 1 Resold 2,500 shares
of treasury September 1 Completed a 2-for-1
share split

What is the number of shares outstanding on December 31, 2020?

A. 117,500 C. 235,000
B. 230,000 D. 250,000

Subject: Date prepared: Prepared by: Checked by: Approved by:

Intermediate June 9, 2022 FRTPaurom Dr. Elizabeth E. Figueroa

Frank Paurom,
Subject Teacher
Acctg. 3 CPA,MBM Dean
Chairperson
19. Rudd Company had 700,000 ordinary shares authorized and 300,000 shares outstanding on December 31, 2020.
The following events occurred during 2021:

January 31 Declared 10% stock dividend

June 30 Purchased 100,000 shares
August 1 Reissued 50,000
November 30 Declared 2-for-1 stock split

On December 31, 2021, how many ordinary shares are outstanding?

A. 560,000 C. 630,000
B. 600,000 D. 660,000

20. Arp Company reported the following outstanding share capital on December 31, 2020:

 30,000 preference shares, 5% cumulative, par value P10, fully participating as to dividends. No dividends
were in arrears.
 200,000 ordinary shares, par value P1

On December 31, 2020, the entity declared dividends of P100,000. What was the amount of dividends payable to
ordinary stockholders?
A. 10,000 C. 40,000
B. 34,000 D. 47,500

21. On December 1, 2020, Nilo Company declared a property dividend of marketable securities to be distributed on
December 31, 2020 to shareholders of record on December 15, 2020. On December 1, 2020, the trading securities
had a carrying amount of P60,000 and a fair value of P78,000. What is the effect of this property dividend on 2020
retained earnings after all nominal accounts are closed?
a. 78,000 decrease C. 0
b. 60,000 decrease D. 18,000 increase

22. Mine Company declared and distributed a 15% share dividends with fair value of P5,000,000 and par value of
P4,000,000 and a 30% share dividend with a fair value of P10,000,000 and par value of P7,000,000. What amount
should be recognized as share premium from share dividend?
A. 0 C. 3,000,000
B. 1,000,000 D. 4,000,000

23. At the current year-end, Danica Company issued 4,000 ordinary shares of P100 par value in connection with a
stock dividend. The market value per share on the sale of declaration was P150. The shareholder’s equity
immediately before issuance of stock dividend comprised share capital P100 par P2,000,000, share premium
P3,000,000 and retained earnings P1,500,000. What amount should be reported as retained earnings immediately
after the stock dividend?
A. 900,000 C. 1,500,000
B. 1,100,000 D. 2,100,000

24. On July 1, 2020, Bart Company had 200,000 ordinary shares of P10 par outstanding, and the market price of the
share is P12. On the same date, the entity declared a 1-for-2 reverse share split. The par of the share was
increased from P10 to P20 and one new P20 par share was issued for each two P10 shares outstanding.
Immediately before the 1-for-2 reverse stock split, the share premium was P450,000. What is the balance of the
share premium account immediately after the reverse stock split is effected?
A. 0 C. 650,000
B. 450,000 D. 850,000

25. Cyan Company issued 20,000 ordinary shares of P5 par at P10 per share. On December 2020, the retained
earnings amounted to P300,000. In March 2021, the entity reacquired 5,000 shares at P20 per share. In June
2021, the entity sold 1,000 of these shares to corporate officers for P25 per share. The cost method is used to
record treasury shares. Net income for 2021 was P60,000. On December 31, 2021, what amount should be
reported as retained earnings?
A. 360,000 C. 375,000
B. 365,000 D. 380,000

26. On January 1, 2020, Troy Company reported share capital P20 par P2,000,000, share premium P1,000,000 and
retained earnings P3,500,000. The entity used the cost method of accounting for treasury shares. During 2020, the
entity acquired 20,000 treasury shares for P600,000, sold 15,000 treasury shares at P25 per share and declared
the remaining treasury shares as dividends when the fair value of the shares is P40. Net income for 2020 was
P1,500,000. What amount should be reported as retained earnings on December 31, 2020?
A. 4,725,000 C. 4,800,000
B. 4,775,000 D. 4,925,000

27. Lourdes Company reported that assets decreased by P9,000,000 and liabilities also decreased by P16,000,000 in
the current year. It was determined that a financial asset at FVTOCI decreased by P400,000 due to fair value
change and an investment in associate increased by P600,000 due to share in the net income of the associate. The
entity received equipment valued at P500,000 from a shareholder as donation and corrected prior period error
resulting from an overstatement of ending inventory for P1,500,000. What is the net income for the current year?
A. 6,900,000 C. 8,000,000
B. 7,800,000 D. 8,400,000

28. On December 31, 2020, Eagle Company reported P1,750,000 of appropriated retained earnings for the
construction of a new building which was completed in 2021 at a total cost of P1,500,000. In 2021, the entity
appropriated P1,200,00 of retained earnings for the construction of a new plant. Also, P2,000,000 of cash was
restricted for the retirement of bonds due in 2022. What amount of appropriated retained earnings should be
reported on December 31, 2021?
A. 1,200,000 C. 2,950,000
B. 1,450,000 D. 3,200,000

29. Meg Company provided the following information:

 Dividends on 1,000 cumulative preference shares, 6%, P10 par value, have not been declared or paid for
three years.
 Treasury shares that cost P15,000 were reissued for P8,000.
What amount of retained earnings should be appropriated as a result of these items?
A. 0 C. 7,000
B. 1,800 D. 8,800
30. Karen Company provided the following data for the year ended December 31, 2020:

Retained earnings unappropriated, January 1 200,000

Over-depreciation of 2019 due to prior period error 100,000
Net income for 2020 1,300,000
Retained earnings appropriated for treasury shares (original
balance is P500,000 but reduced by P200,000 by reason of
reissuance of the treasury shares) 300,000
Retained earnings appropriated for contingencies (beginning
balance P700,000, but increased by current
appropriation of P100,000) 800,000
Cash dividends paid to shareholders 500,000
Change in accounting policy from FIFO to
average – credit adjustment 150,000

What is the balance of unappropriated retained earnings on December 31, 2020?

A. 1,150,000 C. 1,750,000
B. 1,350,000 D. 1,950,000

31. Andrew Company issued 200,000 shares of P5 par value at P10 per share. On January 1, 2020, the retained
earnings amounted to P3,000,000. In March 2020, the entity reacquired 50,000 treasury shares at P20 per share.
In June 2020, the entity sold 10,000 of these shares to corporate officers for P25 per share. The entity used the
cost method to record treasury shares. Net income for the year ended December 31, 2020 was P4,000,000 and
the entity paid cash dividends of P1,000,000 on December 31, 2020, what amount should be reported as
unappropriated retained earnings?
A. 5,000,000 C. 5,800,000
B. 5,200,000 D. 6,000,000

Earnings per share & book value per share

32. Keshia Company provided the following share transactions for the current year.

January 1 Shares outstanding

February 1 Issued for cash
May 1 Acquired treasury shares
August 1 25% stock dividend
September 1 Resold treasury shares
November 1 Issued 3 for 1 share split

What is the weighted-average number of shares for EPS computation?

A. 103,750 C. 307,500
B. 305,000 D. 311,250

Accounting changes & accounting errors

33. On January 1, 2020, Gamma Company changed the inventory method from weighted average to FIFO for both financial
and income tax reporting. The change resulted in a P600,000 increase in the January 1, 2020 inventory balance. The
income tax rate is 30%. What is included in the journal entry to effect the accounting change?
A. Debit income tax payable P180,000 C. Credit income tax payable P180,000
B. Debit inventory P420,000 D. Credit retained earnings P600,000

34. Jeric Company purchased machinery on January 1, 2020 for P6,300,000. The entity used the sum of years’ digits
method with no residual value to depreciate the asset for the first two years of the estimated six-year life. In
2022, the entity changed to the straight-line depreciation method. The depreciation recorded under sum of years’
digits method totaled P1,800,000 for 2020 and P1,500,000 for 2021. The depreciation under straight-line method
would have been P1,050,000 each for 2020 and 2021. The tax rate is 30%. What is the cumulative effect of this
change as an adjustment of retained earnings on January 1, 2022?
A. 0 C. 1,200,000
B. 840,000 D. 1,350,000

35. During 2020, Patrick Company changed from the cost recovery method to the percentage of completion method.
The tax rate is 30%. Gross profit figures are as follows:

2018 2019 2020

Cost recovery method 3,800,000 5,000,000 5,600,000
Percentage of completion method 6,400,000 7,600,000 8,400,000

How should this accounting change to be reported in 2020?

A. 3,640,000 increase in profit or loss
B. 5,600,000 increase in profit or loss
C. 3,640, 000 increase in retained earnings
D. 5,600,000 increase in retained earnings

36. On January 31, 2021, Air Company agreed to pay the former president P300,000 under a deferred compensation
arrangement. Air should have recorded this expense in 2020 but did not do so. The income tax expense would
have been P70,000 lower in 2020 had it properly accrued this deferred compensation. What is the adjustment of
retained earnings on January 1, 2021?
A. 230,000 debit C. 230,000 credit
B. 370,000 debit D. 300,000 credit

37. Rowelma Company reported the following during the year ended December 31, 2020

a. It was decided to write off P1,000,000 from inventory as it was obsolete.

b. Sales of P1,500,000 had been omitted from the financial statements for 2019.

What amount should be reported as prior period error in the financial statement for 2020?
A. 500,000 C. 1,500,000
B. 1,000,000 D. 2,500,000
Other comprehensive basis of accounting
38. Greg Company reported revenue of P1,250,000 in the accrual basis income statement for the year ended June 30, 2021.
Accounts receivable, June 30, 2020 400,000
Accounts receivable, June 30, 2021 530,000
Uncollectible accounts written off during the fiscal year 15,000

Under the cash basis, what amount should be reported as revenue?

A. 835,000 C. 1,105,000
B. 850,000 D. 1,135,000

39. David Company reported the following machinery on December 31, 2020:
Cost Accumulated depreciation
Acquired in December 2017 4,000,000 1,600,000
Acquired in December 2019 1,000,000 200,000
Index numbers at the end of each year are 120 for 2017, 125 for 2019, and 350 for 2020. What should be reported in a
hyperinflationary statement of financial position prepared on December 31, 2020 as the carrying amount of the machinery?
A. 3,200,000 C. 8,960,000
B. 7,800,000 D. 9,240,000

40. Greg Company reported revenue of P1,250,000 in the accrual basis income statement for the year ended June 30, 2021.

Accounts receivable, June 30, 2020 400,000

Accounts receivable, June 30, 2021 530,000
Uncollectible accounts written off during the fiscal year 15,000

Under the cash basis, what amount should be reported as revenue?

A. 835,000 C. 1,105,000
B. 850,000 D. 1,135,000

************************END OF EXAMINATION******************

Subject: Date prepared: Prepared by: Checked by: Approved by:

Intermediate June 10, 2022 FRTPaurom Dr. Elizabeth E. Figueroa

Frank Richard T. Paurom
Subject Teacher
Acctg.3 Chairperson Dean
ITEM ANSWER ITEM ANSWER
1 B 21 B
2 C 22 B
3 B 23 B
4 C 24 B
5 A 25 A
6 A 26 B
7 B 27 D
8 B 28 A
9 D 29 A
10 B 30 B
11 C 31 B
12 B 32 B
13 C 33 C
14 C 34 A
15 C 35 C
16 A 36 A
17 A 37 C
18 C 38 C
19 A 39 D
20 A 40 C

Subject: Date prepared: Prepared by: Checked by: Approved by:

Intermediate June 10, 2022 FRTPaurom Dr. Elizabeth E. Figueroa

Frank Richard T. Paurom
Subject Teacher
Acctg.3 Chairperson Dean