1. Which of the following is not true regarding standards for interim reporting?

A. Declines in inventory value should be deferred to future interim periods.

B. Use of the gross margin method for computing cost of goods sold must be disclosed.

C. Costs and expenses not directly associated with interim revenue must be allocated to interim periods on a reasonable basis.

D. Gains and losses that arise in an interim period should be recognized in the interim period in which they arise if they would not normally be deferred at year-end.

2. Ascension Company has estimated that total depreciation expense for the year ending December 31, 2014 will amount to P2,000,000, and the 2014 year-end bonuses to employees will total P4,000,000. Ascension paid P500,000 property taxes assessed for the year 2014. On June 30, 2014, Ascension incurred a permanent inventory loss from market decline of P800,000 and extraordinary loss of P200,000. In the interim income statement for the six months ended June 30, 2014, what total amount expense relating to these items should be reported?

A. 4,250,000

B. 3,850,000

C. 3,750,000

D. 3,450,000

3. On January 1, Lessor Company signed a 1-year rental with quarterly payments of P100,000 due at the end of each quarter. In addition, the lessee must pay contingent rent of 5% of all sales in excess of P10,000,000. The contingent rent is paid in one payment on December 31. The same lessee has used the building for the past 5 years, and in each of those years the lessee reached the contingent rent threshold of P10,000,000 in sales. Sales of the lessee for the first two quarters are as follows:

March 31 P3,200,000

June 30 3,000,000

The rent expense should be reflected in Lessee’s quarterly income statement for the three months ended June 30 is

A. 100,000 

B. 125,000 

C. 130,000 D

. 160,000

4. The following transactions for Brutavious Enterprises during the second quarter of 2014: • Sales amounted to P5,000,000 and related cost of goods sold was P3,000,000 • Selling expenses for the given period was P250,000. • Depreciation is usually recorded by Brutavious at annual amount of P1,200,000. • Real property taxes for the year in the amount of P600,000 were paid on April 1, 2014. • An inventory loss arising from a temporary market decline of P400,000 had occurred on June 30, 2014.

Ignoring income taxes, net income for the second quarter ending June 30, 2014 should be

A. 750,000 

B. 900,000 

C. 1,150,000 

D. 1,300,000

Answer rating: 100% (QA)

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