Intermediate Accounting 3 Page |1

Name: Date:
Course/year Score:

True or False. Write TRUE if the statement is true, otherwise, write FALSE. Write you answers on the space
provided before the number and use CAPITAL letters only. No erasures on your final answer.

1. The Statement of comprehensive income shows information on an entity’s financial position

during the period.

2. Revenue includes both income and gains.

3. The revenue earned by a merchandising business from its sales of goods is commonly referred to
as sales.

4. If income is greater than expenses, the difference is loss.

5. A statement of comprehensive income that shows expenses by their function is said to have been
prepared using the multi-step approach.

6. The revenue earned by a service business from rendering services is commonly referred to as
service fees.

7. Expenses decrease equity.

8. If total income is ₱100 while total expenses is ₱80, loss is ₱20.

9. The Statement of profit or loss and other comprehensive income is the same with the Income
statement.

10. A statement of comprehensive income that presents separately an entity’s cost of sales is said to
have been prepared using the single-step method.

11. The Statement of profit or loss and other comprehensive income is different from the income
statement.

12. The Statement of comprehensive income shows profit or loss only.

13. An entity can present an income statement alone in lieu of the statement of comprehensive
income.

14. The elements of the statement of comprehensive income are income and expenses.

15. Income increases equity.

16. The residual category of expenses under the function of expense method is “Distribution costs.”

17. Losses incurred on sales of noncurrent assets are presented under “Administrative expenses.”

18. Distribution costs (or Selling expenses) are costs attributable to selling activities.

19. The categories of expenses under the function of expense method include “Cost of sales,”
“Distribution costs,” and “Administrative expenses” only.

20. If profit is ₱100 while other comprehensive income is ₱80, total comprehensive income is ₱20.
Intermediate Accounting 3 Page |2

Instructions: Write your solution and answer on the space provided below the requirement. Encircle your final
answer.

Problem 1
The following items were presented for the purpose of determining comprehensive income.
Profit for the year 2,000 Net change in translation of foreign operation (400)
Stock rights 300 Increase in revaluation surplus 1,000
Dividends (100) Remeasurements of the net defined benefit liability (asset) – loss (200)

21. How much is the other comprehensive income?

22. How much is the total comprehensive income?

Problem 2
The records of Afternoon Sun Co. show the following information:
Doubtful accounts expense 16,000 Freight-out 10,000
Cost of inventories sold 600,000 Freight-in 4,000
Sales commission expense 14,000 Advertising expense 20,000
Loss on sale of equipment 2,000 Interest expense 24,000
Legal and other professional fees 12,000 Insurance expense 100,000
Rent expense (one-half occupied by sales department) 8,000

23. How much is the total distribution (selling) costs?

24. How much is the total administrative expenses?

Problem 3
The records of SOIREE EVENING PARTY Co. showed the following information:
Increase in accounts receivable 100,000 Freight-in 14,000
Collections on accounts 800,000 Freight-out 13,000
Cash sales 120,000 Decrease in accounts payable 60,000
Increase in inventory 40,000 Disbursements for purchases 480,000
Purchase discounts 4,000

25. How much is the gross profit for the year?

Problem 4
The records of BRACKISH SALTY Co. showed the following information:
Accounts receivable, net, Jan. 1, 20x1 40,000 Inventory, Jan. 1, 20x1 120,000
Accounts receivable, net, Dec. 31, 20x1 160,000 Inventory, Dec. 31, 20x1 60,000
Accounts receivable turnover 4:1 Inventory turnover 3:1

26. How much is the gross profit for the year?

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Problem 5
The records of SURLY BAD TEMPERED Co. showed the following information:
Decrease in accounts payable 60,000 Increase in raw materials 100,000
Disbursements for purchases 440,000 Increase in work-in-process inventory 40,000
Decrease in finished goods inventory 50,000
Direct labor is 50% of raw materials used in production
Manufacturing overhead is 20% of prime costs

27. How much is the cost of goods sold?

Problem 6
28. PRENTICE A LEARNER Co. reported profit after tax of ₱210,000. PRENTICE’s income tax rate is 30%.
Operating expenses for the year is 15% of sales and 25% of cost of sales. Other expenses were 10% of sales. How
much is the total sales?

Problem 7
PRENTICE A LEARNER Co. reported profit after tax of ₱210,000. PRENTICE’s income tax rate is 30%. Operating
expenses for the year is 15% of sales and 25% of cost of sales. Other expenses were 10% of sales. How much is the
total sales?
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

29. How much is the profit for the year?

Problem 8
WASHY PALE Co. has the following information on December 31, 20x1:
- Cost of sales is ₱260,000.
- Operating expenses are 13% of sales and 20% of cost of sales.
- Interest expense is 5% of sales.
- Income tax rate is 30%. There were no temporary differences during the year.

30. How much is the profit for the year?