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C. Either A or B.: Discussion Problems
C. Either A or B.: Discussion Problems
1. Interim financial report means a financial report 5. The terms and conditions of employment with The
containing Pleasing Company include entitlement to share in the
a. A complete set of financial statements for an staff bonus system, under which 5% of the profits for the
interim period. year before charging the bonus are allocated to the bonus
b. A set of condensed financial statements for an pool, provided the annual profits exceed P50 million. The
interim period. profits (before accrual of any bonus) for the first half of
c. Either a or b. 2019 amount to P40 million and the latest estimate of
d. Neither a nor b. the profits (before accrual of any bonus) for the year as a
whole is P60 million.
2. PAS 34 Interim Financial Reporting specifies
a. The content of an interim financial report that is How much should be recognized in profit or loss in
described as conforming to PFRS. respect of the staff bonus for the half year to 30 June
b. The entities required to publish interim financial 2019, according to PAS34 Interim financial reporting?
report a. Nil c. P2.0 million
b. P3.0 million d. P1.5 million
f DRILL
1. On June 30, 2019, Sasa Corp. incurred a P200,000 net 4. During the third quarter of 2019, the accountant at the
loss from disposal of a business segment. Also, on Bonifacio Company discovered that a machine
June 30, 2019, Sasa paid P80,00O for property taxes purchased January 2, 2017 for P600,000 had been
assessed for the calendar year 2019. What amount of erroneously charged against first quarter net income in
the foregoing items should be included in the 2017. The machine should have been depreciated at a
determination of Sasa‘s net income or loss for the 6- rate of P10,0O0 per month. The correction of this error
month interim period ended 3une 30, 2019? should include
a. P280,000 c. P180,000 a. A charge of P330,O00 to income before taxes of
b. P240,000 d. P140,000 the third quarter of 2019.
b. An adjustment of P240,000 to the previously
declared income before taxes of the first quarter of
2. On March 15, 2019, Anda Co. paid property taxes of 2019.
P120,000 on its factory building for calendar year c. An adjustment of P270,000 to the previously
2019. On April 1, 2019, Anda ‘ made P240,000 in declared income before taxes of the first quarter of
unanticipated repairs to its plant equipment. The 2019.
repairs will benefit operations for the remainder of the d. An adjustment of P30,00O to the previously
calendar year. What total amount of these expenses declared income before taxes of the first quarter of
should be included in Anda’s quarterly income 2019.
statement for the 3 months ended 3une 30, 2019?
a. P 60,000 c. P150,000
b. P110,000 d. P270,000 5. Davao Corp. expects to sustain an operating’ loss of
P1,000,000 for the full year ending December 31, its
first year of operations. It operates entirely in one
3. Aldivinco Corp. experienced a P50,000 decline in value jurisdiction where the tax rate is 40%. Tax credits for
of its inventory in the first quarter of its fiscal year. the year total P100,0O0. No permanent differences
Aldivinco had expected this decline to reverse in the are expected. Realization of the full tax benefit of the
third quarter, and in fact, the third quarter recovery expected operating loss and of the anticipated tax
exceeded the previous decline by P10,000. Aldivinco‘s credits is more likely than not. Thus, Davao expects to
inventory did not experience any other declines in recognize the full tax benefit at year-end as a deferred
value during the fiscal year. What amounts of loss or tax asset with a valuation allowance of P0. For the
gain should Aldivinco report in its interim financial quarter ended March 31, Davao reports an operating
statements for the first and third quarters? loss of P200,000. How much of a tax benefit should
Davao report for the interim period ended March 31?
First Ouarter Third Ouarter a. P 0 c. P100,000
a. P0 P0 b. P80,000 d. P125,000
b. PO P10,000 gain
c. P50,000 loss P50,000 gain
d. P50,000 loss P60,000 gain
SUGGESTED ANSWERS
1. C
2. A
3. A
4. C
5. C
6. B
7. A
8. A
9. A
10. B
11. A
12. B
DRILL
1. B
2. B
3. C
4. D
5. C
periods of August to October. Because the entity’s
business is seasonal, PAS 34 suggests
PAS 34 Interim Reporting
A. Additional notes be written in the interim reports
1. Under PAS 34, interim financial reports should be
about the seasonal nature of the business
published
B. Disclosure of the financial information for the
A. Within a month of the half-year end latest and comparative 12-month period in addition
B. On a quarterly basis to the interim report
C. Once in a year at any time in that year C. Additional disclosure in the accounting policy note
D. Whenever the entity wishes D. No additional disclosure
2. The IASB encourages publicly traded entities to provide 7. An entity is preparing half-yearly financial information
interim financial reports in line with PAS 34. The period to be covered by the FS is
the 6 months to June 30, 20X7. A new IFRS has been
A. At least at the end of the half-year end and within published that is effective for periods beginning on or after
60 days of the end of interim period January 1, 20X7. The entity must adopt the PFRS
B. Within a month of the half-year end
C. On a quarterly basis A. In the FS for the year to December 31, 20X7, only
D. Whenever the entity wishes B. In its interim FS to June 30, 20X7, only
C. In its interim FS to June 30, 20X7 and its annual
3. If an entity does not prepare interim financial reports, FS to December 31, 20X7
then D. At its own discretion
A. The year-end financial statements are deemed not 8. Which of the following statements is true concerning
to comply with PFRS interim financial reporting?
B. The year-end financial statements’ compliance
with PFRS is not affected A. An extraordinary is defined as being material based
C. The year-end financial statements will not be on the relationship of the item to the interim period
acceptable under local legislation results
D. Interim financial reports should be included in the B. The results of a disposal of a business segment
year-end financial statements maybe considered material for the interim period
but not for the annual period
4. Interim financial report shall include as a minimum C. No income tax effect will be recognized in an
interim period that incur a loss
A. A complete set of financial statements complying
D. The income tax rate to be used for an interim period
with PAS 1
is based on the estimated income tax and return on
B. A condensed set of financial statements and
annual income
selected notes
C. A balance sheet and income statement only 9. Which of the following is an acceptable practice as it
D. A condensed balance sheet, income statement, and relates to interim financial reporting?
cash flow statement only
A. Delayed recognition of inventory market declines
5. PAS 34 states a presumption that anyone reading interim until year end
financial reports will B. Delayed recognition of unplanned standard cost
system variance until year end
A. Understand all PFRS
C. Use of variable costing inventory method for
B. Have access to the records of entity
determining inventory cost
C. Have access to the most recent annual report
D. Used of the grossed profit method to determine
D. Not make decisions based on the report
interim inventory accounts
6. An entity owns a number of farms that harvest produced
seasonally. Approximately 80% of entity’s sales are in the
10. Minimum disclosure are not required as part of interim A. Can be recognized in any interim period provided
financial reporting they are recognized in the year of incurrence
B. Should be recognized in the year of incurrence if
A. Sales or gross revenue they cannot be allocated among interim periods on
B. Primary and fully diluted earnings per share a reasonable basis
C. Contingent items C. Should be allocated in a pro rata basis to all interim
D. Segment information periods from the date of incurrence to the end of
11. Which of the following inventory procedures cannot be fiscal year
applied for interim reporting? D. May be treated as if they were annualized cost
A. Estimation of inventory using gross profit method 16. Most interim periods gain and losses, for the purpose
B. Delayed recognition of permanent losses from of interim disclosure
inventory market declines A. Are deferred until year end
C. Delayed recognition of temporary inventory B. Are followed to be offset against each other
market declines C. Are recognized in the interim period of incurrence
D. Earnings per share presentation D. Are allocated ratably over remaining interim
12. Minimum disclosure requirements for companies using periods
interim financial information will include which of the 17. Interim income tax expense is based on
following?
A. An estimate of annual tax rate
A. Sales and cost of goods sold for the current quarter B. Four times the interim period’s pretax earnings if
and the current year to date the interim period is a quarter
B. The contribution margin by product line for C. The interim period’s pretax earnings and tax rate
current quarter and the current year to date applicable in the period
C. Primary and fully diluted EPS for each period D. The average income tax rate for all previous
presented interim periods and the current interim period
D. An interim statement of financial position
18. How is the income tax expense for the third quarter
13. For interim financial reporting, an inventory loss from interim period computed?
a temporary market decline in the first quarter which can
be reasonably be expected to be restored in the fourth A. The annual rate multiplied by the third quarter
quarter pretax earnings
B. The estimated tax rate for the first three quarters
A. Should be recognize as a loss proportionately in based on annual rate, less a similar estimate for the
each of the first, second, third and fourth quarter first two quarters
B. Should be recognize as a loss in the first quarter C. The rate applicable during the third quarter
C. Need not be recognize as a loss in the first quarter multiplied by four times the third quarter pretax
D. Should be recognize as a loss in each of the first, earnings
second and third quarter D. One-half of the difference between total estimated
14. Which of the following need not be disclosed in interim annual income tax expense and the income tax for
financial statements? the first two quarters
20. When preparing an interim period, unusual or non- A. In full in the first quarter
recurring items should be B. In full in the second quarter
C. An allocated portion in each quarter of the year
A. Deferred and recognize in the last interim period of D. All expenses affecting more than one quarter
the fiscal year in which they occurred should be recognized in the last year of the fiscal
B. Recognized in full in the interim period in which year
they occurred
C. Ignored because the focus of interim reporting is on 25. Conceptually, interim financial statements can be
recurring items described as emphasizing
D. Apportioned over the interim period in which first
A. Timeliness over reliability
recognized subsequent interim periods of the fiscal
B. Reliability over relevance
year
C. Relevance over comparability
21. Which statements best describes a view of interim D. Comparability over neutrality
reports relative to annual reports, for purpose of interim
26. For external reporting purpose, it is appropriate to use
reporting?
estimated gross profit rates to determine the cost of goods
A. An interim period should be viewed primarily as an sold for
integral part of an accounting period
B. An interim period should be viewed as a period I. Interim financial reporting
which stands alone II. Year-end financial reporting
C. Interim period must be audited, as are annual report A. I only
D. Interim reports are required under GAAP B. II only
C. Both I and II
22. Choose the correct statement concerning recognition of D. Neither I nor II
expense in interim reports.
27. Which entries are required by PAS 34 to present
A. All interim period costs must be associated with interim financial reports?
revenue in the interim period
B. Some cost can be allocated arbitrarily to any of the I. Publicly-listed entities
interim periods reported within the year II. Private entities
A. I only
C. Cost which are directly associated with revenue
B. II only
should be matched against that revenue in the
C. Both I and II
interim period
D. Neither I nor II
D. Interim period expense recognition follows GAAP
for annual periods for all cost 28. Not a required statement when an entity presents
quarterly interim reports for 2019
23. Which of the following methods of inventory valuation
is allowable at interim dates but not at year end? A. Statement of financial position at June 30, 2012
and December 31, 2018
A. Retail method
B. Statement of comprehensive income for the 6
B. Specific identification
months ending June 30, 2019 and June 30, 2018
C. Weighted average
D. Estimated gross profit rates C. Statement of comprehensive income for the 3
months ending June 30, 2019 and June 30, 2018
D. Statement of cash flows for the 3 months ending
June 30, 2019 and June 30, 2018
29. For interim financial reporting, an extraordinary gain
occurring in the second quarter should be