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ARRIESGADO COLLEGE FOUNDATION INC.

Bonifacio St., Tagum City


FINANCIAL ACCOUNTING PART 3
Midterm Exam
Name: ________________________________________ Score: _________ Rating:_____
Multiple Choices: Encircle the correct answer.
1. Which of the following is a characteristic of a change in accounting
estimate?
a. It usually need not be disclosed
b. It does not affect the financial statement of prior period.
c. It should be reported through the restatement of financial statement.
It makes necessary the reporting of pro forma amounts for prior periods.
2. A change in the residual value of an asset arising because additional
information has been obtained is.
a. An accounting change that should be reported in the period of change and
future periods if the change affects both.
b. An accounting change that should be reported by restating the financial
statement of all prior periods presented.
c. A correction of an error.
d. Not an accounting change.
3. Accounting changes are often made even though in theory this may be a
violation of the accounting concept of
a. Materiality
b. Consistency
c. Prudence
d. Objectivity
4. Which is not classified as an accounting change?
a. Change in accounting policy
b. Change in accounting estimate
c. Error in the financial statement
d. All of these are classified as an accounting change
5. Which of the following statements is TRUE regarding interim reporting?
a. The independent review is required for interim financial statements.
b. Interim reports are required on quarterly basis.
c. Interim reports are not required.
d. Interim reports require the preparation of only a statement of
comprehensive income and a statement of financial position.
Problem Solving

1. On January 1, 2015, Milan Company determined that a revision in the


estimate associated with the depreciation of storage facilities was
appropriate. The facilities, purchased on January 1, 2013, for P6, 000, 000.,
had been depreciated using the straight line method with an estimated
residual value of P600,000 and an estimated useful life of 20 years. The
entity has determined that the expected remaining useful life of the storage
facilities is 10 years with an estimated residual value of P800, 000. What is
the depreciation for 2015?
2. On January 1 2011 Roma company purchased heavy duty equipment for
P4,000,000. On the date of installation, it was estimated that the equipment
has a useful life of 10 years and a residual value of P4000,000. On January 1
2015, the entity decided to review the useful Life of the equipment and the
residual value. The entity determined that the useful life of the equipment
was 12 years from the date acquisition and the residual value was P460,000.
What is the depreciation expense for 2015?
3. Acute Company was organized on January 1 2012. In preparing the
financial statements for the year ended December 31 2014, the entity used
the following original cost and useful life for property, plant and equipment.
Building
Machinery
Furniture

Original cost
15,000,000
10,500.000
3,500,000

Useful life
15 years
10 years
7 years

On January 1 2015, the entity decided to review the useful life of the property, plant
and equipment. On such date, the remaining useful life is 10 years for the building,
7 years for machinery an 5 years for the furniture. The entity used the straight line
method of depreciation with no residual value. What is the total depreciation for
2015?
4. Timmy Company provided the following information in relation to revenue earned
by operating segments for the current year.
Intersegment
Segment
sales
Alo
3,000
Bix
4,000
Cee
000
Dil
59, 000

Sales to unaffiliated
Total revenue
customers
5,000
8,000
8,000
12,000
4, 000

43, 000

16, 000

4,

Combined
83, 000
Elimination
Consolidated
60, 000

60, 000
0

23, 000
(23, 000)

60, 000

(23,000)
00

What total revenue should be disclosed by the reportable segments?


5. Aurora Company provided the following profit ( loss ) relating to operating
segments:
V
3, 400, 000
W
1, 000, 000
X
( 2, 000, 000 )
Y
400, 000
Z
( 200, 000 )
What are the reportable segments based on profit or loss?
6. Correy Company provided the following data relating to operating segments:
INDUSTRY
REVENUE
PROFIT
TOTAL 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?