RIZAL TECHNOLOGICAL UNIVERSITY-

BONI
COLLEGE OF BUSINESS &
ENTREPRENEURIAL TECHNOLOGY
DEPARTMENT OF ACCOUNTANCY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

THE 4th MOCK COMPREHENSIVE EXAMINATION

Intermediate Accounting 1&2

Pray before taking the examination and answer with integrity. This aims to help you test your knowledge and
wit in answering the different comprehensive exam subjects and prepare yourself in the actual exam and in the
future examinations. Don’t be pressured. Just test yourself to be able to know weak points and be prepare for
those. Good luck and God bless you!

I. THEORIES

1. A legal obligation is an obligation that is derived from all of the following, except

A. A contract
B. Legislation
C. Other operation of law
D. An established pattern of past practice

2. An entity shall measure a noncurrent asset or disposal group classified as held for sale at

A. Fair value less cost to sell

B. Carrying amount
C. Lower of carrying amount and fair value less cost to sell
D. Higher of carrying amount and fair value less cost to sell

3. How should trade discounts be dealt with when valuing inventories at the lower of cost and net realizable
value?

A. Added to cost
B. Ignored
C. Deducted in arriving at NRV
D. Deducted from cost

4. Which of the following items should be included in a company’s inventory at the balance sheet date?

A. Goods in transit purchased FOB Destination

B. Goods received from another company for sale on consignment
C. Goods sold to a customer which are being held for the customer to call for the customer’s
convenience
D. Goods in transit purchased FOB Shipping Point

5. Property dividends are recorded

A. As dividend income at carrying amount of the property

B. As dividend income at fair value of the property
C. As return of investment and therefore credited to investment account
D. By means of memorandum only
 Page 1 of 7

RIZAL TECHNOLOGICAL UNIVERSITY-

BONI
COLLEGE OF BUSINESS &
ENTREPRENEURIAL TECHNOLOGY
DEPARTMENT OF ACCOUNTANCY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

6. Items credited to the account of the depositor which include deposits acknowledged by bank and credit
memos.

A. Bank debits
B. Bank credits
C. Cash receipts
D. None of the above

7. If an entity owns and manages a hotel, services provided to guests are a significant component of the
arrangement as a whole. In such a case, the hotel is classified as

A. Investment property
B. Owner-occupied property
C. Partly investment property and partly owner-occupied property
D. Neither investment property nor partly owner-occupied property

8. An entity purchased a plant asset under a deferred payment contract. The agreement was to pay P10,000
at the time of purchase and P10,000 at the end of each of the next five years. The plant asset is measured
initially at

A. The present value of a P10,000 ordinary annuity for five years

B. P60,000 plus imputed interest
C. P60,000
D. P60,000 less imputed interest

9. Cost to sell include all of the following, except

A. Legal costs
B. Stamps and similar transaction taxes
C. Costs of removing the asset
D. Finance cost

10. The factors that are considered in determining the useful life of an intangible asset include all of the
following, except

A. Technical obsolescence
B. Expected action of competitors
C. Expected usage of the asset by the entity
D. Residual value

11. The amortization method used shall reflect the pattern in which t he asset’s economic benefits are
consumed by the entity. If such pattern cannot be determined reliably, what is the amortization method
used?

A. Straight line
B. Production method
C. Diminishing balance method
D. Double declining balance method
 Page 2 of 7

RIZAL TECHNOLOGICAL UNIVERSITY-

BONI
COLLEGE OF BUSINESS &
ENTREPRENEURIAL TECHNOLOGY
DEPARTMENT OF ACCOUNTANCY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

12. It is the present value of the cash flows an entity expects to arise from the continuing use of an asset and
from its disposal at the end of its useful life or expects to incur when settling a liability.

A. Entity-specific value
B. Fair value
C. Value in use
D. Discounted value

13. The effective interest rate on bonds is higher than the stated rate when bonds sell

A. At face value
B. Above face value
C. Below face value
D. At maturity value

14. If a 5-year bond matures on October 1, 2012 and interest is payable semiannually, the interest dates are

A. April 1 and October 1

B. January 1 and July 1
C. May 1 and November 1
D. Not determinable

15. A entity returned merchandise purchased on account. Under a perpetual inventory system, the
account credited in the journal entry to record the return is

A. Purchases
B. Purchase returns and allowances
C. Inventory
D. Accounts payable

II. PROBLEMS

16. The following information pertained to Red Co. for the year:

Purchases ₱102,800
Purchase discounts 10,280
Freight in 15,420
Freight out 5,140
Beginning inventory 30,840
Ending inventory 20,560

What amount should Red Co. report as cost of goods sold for the year?

A. ₱102,800
B. ₱118,220
C. ₱123,360
D. ₱128,500
 Page 3 of 7

RIZAL TECHNOLOGICAL UNIVERSITY-

BONI
COLLEGE OF BUSINESS &
ENTREPRENEURIAL TECHNOLOGY
DEPARTMENT OF ACCOUNTANCY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

17. On January 1, 2014, Ken Company's allowance for doubtful accounts had a credit balance of P300,000.
During 2014, Ken charged P640,000 to doubtful accounts expense, wrote off P460,000 of uncollectible
accounts receivable, and unexpectedly recovered P 1 20,000 of bad debts written off in the prior year. The
allowance for doubtful accounts at December 31, 2014 should be

A. 600,000
B. 640,000
C. 940,000
D. 480,000

18. A bank granted a 10-year loan to a borrower in the amount of P1,500,000 with stated interest rate of 6%.
Payments are due monthly and are computed to be P16,650. The bank incurred P40,000 of direct loan
origination cost and P20,000 of indirect loan origination cost. In addition, the bank charged the borrower a 4-
point nonrefundable loan origination fee. What is the carrying amount of the loan receivable to be reported
initially by the bank?

A. 1,440,000
B. 1,480,000
C. 1,500,000
D. 1,520,000

19. Shure Company builds and sells equipment used in manufacturing pharmaceuticals. On December 31,
2013, the entity has financial assets at fair value through profit or loss at ₱1,000,000, goodwill valued at
₱1,500,000, prepaid insurance at ₱50,000, patent valued at ₱2,500,000, and a customer list valued at
₱500,000. What amount should be reported as total intangible assets on December 31, 2013?

A. 4,000,000
B. 5,500,000
C. 4,500,000
D. 3,000,000

For items 20 and 21, consider the following:

Davac Company insured the life of its president for P2,000,000, the entity being the beneficiary of an
ordinary life insurance policy. The annual premium is P80,000 and the policy is dated January 1, 2014.

The cash surrender values are P15,000 on December 31, 2016 and P19,000 on December 31, 2017.

The entity followed the calendar year as the fiscal period. The president died on October 1, 2017 and the
policy is settled on December 31, 2017.

20. What is the gain on life insurance settlement?

A. 1,962,000
B. 2,000,000
C. 1,961,000
D. 1,981,000
 Page 4 of 7

RIZAL TECHNOLOGICAL UNIVERSITY-

BONI
COLLEGE OF BUSINESS &
ENTREPRENEURIAL TECHNOLOGY
DEPARTMENT OF ACCOUNTANCY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

21. What is the life insurance expense for 2017?

A. 80,000
B. 60,000
C. 77,000
D. 57,000

Items 22 and 23 are based on the following information:

At the beginning of the current year, Newman Company purchased a parcel of land as a factory site for
P1,000,000.

An old building on the property was demolished to pave the way for the construction of a new building
which was completed at year-end.

Demolition of old building 100,000

Architect fee 175,000
Legal fee for title investigation and purchase contract 25,000
Construction cost 5,450,000

22. What amount should be recorded as cost of land?

A. 1,125,000
B. 1,000,000
C. 1,100,000
D. 1,025,000

23. What amount should be recorded as cost of building?

A. 5,475,000
B. 5,750,000
C. 5,725,000
D. 5,450,000

24. Figaro Company acquired land and paid in full by issuing ₱600,000 of its 10 percent bonds payable and
40,000 ordinary shares with part value of ₱10. The share was selling at ₱19 and the bonds were trading at
102. What amount should be recorded as cost of the land?

A. 988,000
B. 1,000,000
C. 1,372,000
D. 1,387,200
 Page 5 of 7

RIZAL TECHNOLOGICAL UNIVERSITY-

BONI
COLLEGE OF BUSINESS &
ENTREPRENEURIAL TECHNOLOGY
DEPARTMENT OF ACCOUNTANCY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

25. Star Company assigned ₱4,000,000 of accounts receivable as collateral for a ₱2,000,000 6% loan with a
bank. The entity also paid a finance fee of 5% on the transaction upfront. What amount should be recorded as
a gain or loss on the transfer of accounts receivable?

A. 200,000 loss
B. 100,000 loss
C. 240,000 gain
D. 0

26. Forester Company has reclassified certain assets as biological assets. The total value of the forest
assets is ₱6,000,000 which comprises:

Freestanding trees 5,100,000

Land under tress 600,000
Roads in forests 300,000

In the statement of financial portion, what total amount of the forest assets should be classified as
biological assets?

A. 5,100,000
B. 5,700,000
C. 5,400,000
D. 6,000,000

27. At the beginning of the current year, Winn company traded in an old machine having a carrying amount of
₱1,680,000 and paid a cash difference of ₱600,000 for a new machine having a cash price of ₱2,050,000.
What amount of loss should be recognized on the exchange?

A. 600,000
B. 230,000
C. 370,000
D. 0

28. In an audit of Mindanao Company on December 31, 2013, the following data are gathered:

Balance per book 1,000,000

Bank charges 3,000
Outstanding checks 235,000
Deposit in transit 300,000
Customer note collected by bank 375,000
Interest on customer note 15,000
Customer check returned NSF 62,000
Depositor’s note charged to account 250,000

What is the adjusted cash in bank on December 31, 2013?

A. 1,575,000
B. 1,065,000
C. 1,075,000
D. 1,325,000
 Page 6 of 7

RIZAL TECHNOLOGICAL UNIVERSITY-

BONI
COLLEGE OF BUSINESS &
ENTREPRENEURIAL TECHNOLOGY
DEPARTMENT OF ACCOUNTANCY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

Consider the information below for items 29 and 30.

Trado Company accepted from a customer P1,000,000 face amount, 6-month, 8% note date April 15,
2017.

On the same date, the entity discounted the note without recourse at a 10% discount rate. 29.

What amount of cash was received from the discounting?

A. 1,040,000
B. 990,000
C. 988,000
D. 972,000

30. What is the loss on note receivable discounting?

A. 50,000
B. 40,000
C. 52,000
D. 12,000
Page 7 of 7