[Author name]
Intermediate Accounting 1 Prelim Examination
For items 1 to 2
On January 1, 2021, a tract of land that originally cost P800,000 was
sold by Hailey Corp. The company received a P1,200,000 note as
payment. It bears interest rate of 4% and is payable in 3 annual
installments of P400,000 plus interest on the outstanding balance. The
prevailing rate of interest for a note of this type is 10%. The present
value table shows the following present value factors of 1 at 10%
Present value factor of 1 for 3 periods 0.75132
Present value factor of 1 for 2 periods 0.82645
Present value factor of 1 for 1 period 0.90909
Present value of an ordinary annuity of 1 for 3 periods 2.48685
1. The gain to be recognized on the sale of the land is? a.
P276,847
b. P194,740
c. P400,000
d. P0
2. The interest income to be reported for 2021 should be? a.
P120,000
b.
P107,685
c. P59,685
d. P48,000
3. Which statement is incorrect regarding cost formulas?
a. Specific identification of cost means that specific costs are attributed to
identified inventory
b. The FIFO formulas assumes that the items of inventory that were purchased or
produced last are sold first, and consequently the items remaining in inventory
at the end of the period are those earlier purchased or produced
Page 1 of 13
, [Author name]
c. Under the weighted average cost formula, the cost of each item is determined
from weighted average of the cost of similar items at the beginning of a period
and the cost of similar items purchased or produced during the period
d. The average cost formulas may be calculated on a periodic basis, or as each
additional shipment is received, depending upon the circumstances of the entity
4. How should import duties 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
Page 2 of 13
Intermediate Accounting 1 Prelim Examination
For items 1 to 2
On January 1, 2021, a tract of land that originally cost P800,000 was
sold by Hailey Corp. The company received a P1,200,000 note as
payment. It bears interest rate of 4% and is payable in 3 annual
installments of P400,000 plus interest on the outstanding balance. The
prevailing rate of interest for a note of this type is 10%. The present
value table shows the following present value factors of 1 at 10%
Present value factor of 1 for 3 periods 0.75132
Present value factor of 1 for 2 periods 0.82645
Present value factor of 1 for 1 period 0.90909
Present value of an ordinary annuity of 1 for 3 periods 2.48685
1. The gain to be recognized on the sale of the land is? a.
P276,847
b. P194,740
c. P400,000
d. P0
2. The interest income to be reported for 2021 should be? a.
P120,000
b.
P107,685
c. P59,685
d. P48,000
3. Which statement is incorrect regarding cost formulas?
a. Specific identification of cost means that specific costs are attributed to
identified inventory
b. The FIFO formulas assumes that the items of inventory that were purchased or
produced last are sold first, and consequently the items remaining in inventory
at the end of the period are those earlier purchased or produced
Page 1 of 13
, [Author name]
c. Under the weighted average cost formula, the cost of each item is determined
from weighted average of the cost of similar items at the beginning of a period
and the cost of similar items purchased or produced during the period
d. The average cost formulas may be calculated on a periodic basis, or as each
additional shipment is received, depending upon the circumstances of the entity
4. How should import duties 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
Page 2 of 13
