ACC 109: INTERMEDIATE ACCOUTNING, PART 4 3RD GRADING EXAMINATION WITH VERIFIED ANSWERS

D THIS PAGE BEFORE STARTING THE ASSESSMENT This is a ___ paged test and is composed of 1 section and has a total score of sixty (60) points. You have eighty (80) Minutes to finish this examination. The breakdown of th ...

D THIS PAGE BEFORE STARTING THE ASSESSMENT This is a ___ paged test and is composed of 1 section and has a total score of sixty (60) points. You have eighty (80) Minutes to finish this examination. The breakdown of the exam is as follows: (1) Multiple-choice Section. The questions in this section is with four answer choices. The test is composed of 60 questions and is rated as 1 point each. All things unnecessary for the test must be put in front of the testing area. Use pencil only in shading. Write all your answers on the designated answer sheet. Further, erasures are strictly NOT allowed 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. Page 1 of 19 LEARNING OBJECTIVE: This assessment measures the competence of the student in terms of his/her application of knowledge and skills in the following topics: 1. Shareholder’s Equity 2. Share-based payment 3. Book Value per share 4. Earnings per share 5. Diluted Earnings per share 6. Statement of financial Position 7. Statement of Profit and Loss and Other comprehensive income 8. Revenue from contracts with customers 9. Noncurrent assets held for sale and discontinued Operations 10. Statement of Changes in Equity 11. Statement of cash flows 12. Accounting policies, changes in estimates, and errors 13. Events after reporting period 14. Related parties 15. Operating segments 16. Interim financial Reporting 17. Cash basis to accrual basis of accounting ACC 109: INTERMEDIATE ACCOUTNING, PART 4 3RD GRADING EXAMINATION SET A 1.In a corporate form of business organization, legal capital is best defined as a. the amount of capital the state of incorporation allows the company to accumulate over its existence. b. the par value of all capital stock issued. c. the amount of capital the federal government allows a corporation to generate. d. the total capital raised by a corporation within the limits set by the Securities and Exchange Commission. 2.Total stockholders' equity represents a. a claim to specific assets contributed by the owners. b. the maximum amount that can be borrowed by the enterprise. c. a claim against a portion of the total assets of an enterprise. d. only the amount of earnings that have been retained in the business. 3.On January 1, 2007, Golden Corporation had 110,000 shares of its P5 par value common stock outstanding. On June 1, the corporation acquired 10,000 shares of stock to be held in the treasury. On December 1, when the market price of the stock was P8, the corporation declared a 10% stock dividend to be issued to stockholders of record on December 16, 2007. What was the impact of the 10% stock dividend on the balance of the retained earnings account? a. P50,000 decrease b. P80,000 decrease c. P88,000 decrease d. No effect 4. Entity A had 200,000 ordinary shares outstanding all throughout 20x1. In 20x2, the following share issuances occurred:  On April 1, 20,000 shares were issued for cash.  On September 30, a 10% bonus issue (share dividend) was declared.  On November 1, a 2-for-1 share split was issued. Entity A had the following profits: 2,200,000 in 20x2 and 1,800,000 in ₱ ₱ 20x1. What are the earnings per share to be disclosed in Entity A’s 20x2 comparative financial statements? 20x2 20x1 a. 4.22 4.02 b. 4.37 4.07 c. 4.65 4.09 d. 4.78 4.12 5. The following statements relate to PAS1 Presentation of Financial Statements. Choose the correct statement. a. Many entities also present, outside the financial statements, reports and statements such as environmental reports and value added statements, particularly in industries in which environmental factors are significant and when employees are regarded as an important user group. Reports and statements presented outside financial statements should be accounted for using applicable PFRSs. b. Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. c. An entity whose financial statements do not comply with PFRSs shall make an explicit and unreserved statement of such noncompliance in the notes. If the entity’s financial statements do comply with PFRSs, there is no Page 2 of 19 ACC 109: INTERMEDIATE ACCOUTNING, PART 4 3RD GRADING EXAMINATION SET A need to make an explicit and unreserved statement of such compliance in the notes. d. Financial statements shall not be described as complying with PFRSs unless they comply with most of the requirements of PFRSs. 6. Which of the following financial statements would not be dated as covering a certain reporting period? a. Statement of financial position b. Statement of profit or loss and other comprehensive income c. Statement of cash flows d. Statement of changes in equity Use the following information for the next two questions: The records of HACK TO CHOP Co. on December 31, 20x1 showed the following information: Sales 2,000,000 Sales discounts 20,000 Cost of sales 800,000 Distribution costs 96,000 Administrative costs 240,000 Casualty loss on typhoon 40,000 Dividends received from investments in FVPL 24,000 Dividends received from investment in associate 48,000 Share in the profit of an associate 72,000 Dividends declared and paid 28,000 Interest expense 44,000 Unrealized gain on investments in FVPL 30,000 Unrealized gain on investments in FVOCI 38,000 Income tax expense 300,000 Loss on revaluation 26,000 Remeasurements of the net defined benefit liability (asset) - gain 22,000 Correction of understatement in depreciation in prior year 32,000 Translation adjustment of foreign operation – loss 8,000 7. How much is the other comprehensive income? a. 42,000 b. 36,000 c. 34,000 d. 26,000 8. How much is the total comprehensive income? a. 612,000 b. 627,000 c. 516,000 d. 584,000 Solution: HACK TO CHOP Co. Statement of profit or loss and other comprehensive income For the year ended December 31, 20x1 Sales 2,000,000 Sales discounts (20,00 0) Net sales 1,980,000 Page 3 of 19 ACC 109: INTERMEDIATE ACCOUTNING, PART 4 3RD GRADING EXAMINATION SET A Cost of sales (800,000 ) Gross profit 1,180,000 Distribution costs (96,000 ) Administrative costs (240,000) Dividends received from investments in FVPL 24,00 0 Share in the profit of an associate 72,00 0 Unrealized gain on investments in FVPL 30,00 0 Casualty loss on typhoon (40,000 ) Interest expense (44,00 0) Profit before tax 886,000 Income tax expense (300,000 ) Profit for the year 586,000 Other comprehensive income: Items that will not be reclassified subsequently to profit or loss: Loss on revaluation (26,000 ) Unrealized gain on investments in FVOCI 38,00 0 Remeasurements of defined benefit pension plans 22,00 0 34,00 0 Items that may be reclassified subsequently to profit or loss: Loss on translation of foreign operation (8,0 00) Other comprehensive income for the year 26,0 00 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 612,00 0 9. ABC Co., a dealer of medical machines, enters into the following contracts: I. ABC Co. transfers a machine to X Hospital at contract inception but ABC Co. retains legal title until the full payment of the consideration. II. ABC Co. transfers a machine to Y Medical Clinic at contract inception. The consideration is due after two years. At contract inception, Y is undergoing financial difficulties. This raises significant doubt in Y’s ability and intention of paying the consideration. ABC Co. cannot reliably estimate the outcome of the contract. III. ABC Co. transfers a machine to Z Co. under a lease contract. The contractual period is 5 years, which is equal to the machine’s estimated useful life. At the end of the contract, Z Co. is given the option of purchasing the machine. ABC’s past experience shows that almost all customers avail of the purchase option. Page 4 of 19 ACC 109: INTERMEDIATE ACCOUTNING, PART 4 3RD GRADING EXAMINATION SET A Identify the contracts to which PFRS 15 may be applied. a. Contract 1 c. Contracts 1 and 3 b. Contract 2 d. None of these 10. A good or service is distinct if: I. The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer. II. The promise to transfer the good or service is separately identifiable from other promises in the contract. a. I only c. I and II b. II only d. none of these 11. According to PFRS 5, gain on impairment reversal on an asset held for sale is a. recognized for the fair value change during the period. b. recognized in other comprehensive income. c. recognized only to the extent of cumulative impairment losses previously recognized. d. not recognized. 12. The results of a discontinued operations are presented in the statement of profit or loss a. before the profit or loss from continuing operations but after the profit for the year. b. after the profit or loss from continuing operations but before the profit for the year. c. separately from the profit or loss from continuing operations and it does not affect the profit for the year. d. as an adjustment to the beginning balance of the retained earnings. Use the following information for the next two questions: The following were the cash transactions of Entity A during the period: