Multiple Choice Flashcards
(22 cards)
A depreciable asset has an estimated 15% salvage value. At the end of its estimated useful life the accumulated depreciation would equal the original cost of the asset under which of the following depreciation method?
StraightLine Productive Method
a. Yes Yes
b. Yes No
c. No Yes
d. No No
D. No No
When property is acquired in a dissimilar exchange, its cost is usually determined by reference to the
a. fair value of asse acquired plus cash payment
b. recorded amount of the asset surrendered plush cash payment
c. appraised valued determined by the management
d. fair value of asset surrendered plush cash payment
d. fair value of asse surrendered plush cash payment
A company issued a bond with stated rate of interest that is less than effective interest rate on date of issuance. The bond was issued on one of the interest payment dates. What should the company report on the first interest payment date?
a. An interest expense that is less than the cash payment made to the bondholders
b. An interest expense that is greater than the cash payment made to the bondholders
c. A debit to the unamortized bond discount
d. A debit to the unamortized bond premium
b. An interest expense that is greater than the cash payment made to the bondholders
A company issued bonds at 98, with a maturity value of 50,000. The entry the company uses to record the original issue should include which of the following?
a. A debit to bond discount of Php. 1,000
b. A credit to bonds payable of Php. 49,000
c. A credit to bond premium if Php. 1,000
A debit to bonds payable of Php. 50,000
a. A debit to bond discount of Php. 1,000
For income statement purposes depreciation is a variable expense if the depreciation method used for book purposes is
a. units-of-production
b. straight line
c. sum of digits
d. declining balance
a. units-of-production
If an impairment of property, plant and equipment is indicated, any impairment losses is recorded at an amount equal to the
a. Excess of the carrying amount over the fair value of the asset.
b. Excess of the carrying amount over the recoverable amount of the asset
c. Excess of the carrying amount over the discounted cash flows from the asset
d. Excess of the recoverable amount over the carrying amount of the asset
b. Excess of the carrying amount over the recoverable amount of the asset
The effect of a stock dividend is
a. To permanently capitalize a portion of the company’s retained earnings.
b. To achieve a reduction in the market price per share by decreasing the number of outstanding shares
c. To issue to the stockholders some evidence of an increase in stockholders’ equity after paying a cash dividend.
d. An increase in the stockholders’ payments to the corporation, although assets and liabilities are not affected by the declaration of a stock dividend.
a. To permanently capitalize a portion of the company’s retained earnings.
A company may effect a reverse stock split in order to
a. Increase the number of shares outstanding
b. Raise the unit market price of its shares
c. Reduce the market price per share
d. Obtain a wider distribution of shares
b. Raise the unit market price of its shares
Borrowing costs related to a qualifying asset shall be
A. Capitalized
b. Expensed in the period incurred
c. Neither capitalized nor expensed in the period incurred
d. Capitalized or expensed in the period incurred, upon the decision of management
A. Capitalized
What is the amount charged to retained earnings when treasury shares are reissued as divi-dends?
a. Cost of the treasury sheres
b. Fair value of the treasury shares
c. Par value of the treasury shares
d. Book value of the treasury shares
c. Par value of the treasury shares
What is the minimum book value to be disclosed in the balance sheet for a plant asset which is expected to be sold for reasonable amount at the end of its useful life?
a. Zero
b. Salvage value
c. Depreciable cost
d. Total original cost less accumulated depreciation
b. Salvage value
Depreciation
a. is a cash expense
b. is an allocation of property, plant, and equipment cost to the time period of usefulness, in a systematic and rational manner.
c. expense of P2,000 reflects a P2,000 increase in liquid funds.
d. is a process of recognizing the decreasing value of an asset over time.
d. is a process of recognizing the decreasing value of an asset over time.
Lark Company issued a note solely in exchange for cash. Assuming that the items listed below differ in amount the present value of the note at issuance is equal to
a. Face amount
b. Proceeds received
c. Proceeds received discounted at the prevailing interest rate
d. Face amount discounted at the prevailing interest rate
b. Proceeds received
For bonds payable, the cash interest paid in each interest period is:
a. different depending upon the date of sale.
b. not the same amount when the stated and yield interest rates are different.
C.the same amount regardless of whether the bond was sold at par, a discount, or a premium.
d. dependent on the initial amount of accrued interest.
C.the same amount regardless of whether the bond was sold at par, a discount, or a premium.
Which of the following statements is true?
a. If a bond is sold at its face amount, the stated and effective interest rates are the same.
b. The yield or effective interest rate on a bond is equal to the stated rate if the bond premium or discount is amortized by using the straight line method.
c. Interest revenue and expense related to bonds are always computed using the stated rate of interest.
d. The terms “yield rate”, “stated rate”, and “market rate” are generally interchangeable when referring to interest on bonds.
b. The yield or effective interest rate on a bond is equal to the stated rate if the bond premium or discount is amortized by using the straight line method.
The cost of an item of property, plant and equipment acquired in a nonmonetary exchange is measured at the
a. Fair value of the asset given up
b. Carrying amount of the asset give up
c. Carrying amount of the asset received
d. Fair value of the asset received
a. Fair value of the asset given
A company purchased land to be used as the site for the construction of a plant. Timber was cut from the building site so construction of the plant could begin. The proceeds from the sale of the timber should be
a. Deducted from the cost of the plant
b. Deducted from the cost of the land.
c. Classified as income.
d. Netted against the cost to clear the land and expensed as incurred.
b. Deducted from the cost of the land
If a bond was sold at 108, the stated rate of interest was:
a. lower than market rate
b. not related to market rate
c.higher than market rate
d. equal to market rate.
c.higher than market rate
How would a stock split in which the per value per share decreases in proportion to the number of additional shares lesued affect each of the following?
Addt’l paid in. Retained
Capital. Earnings
A. Increase. No effects
B. No effects. No Effects
C. No effects. Decrease
D. Increase. Decrease
B. No effects. No Effects
Harvey Company purchased equipment under deferred payment contract. The agreement was to pay P100,000 annually for 6 years. The equipment should be measured at
a. Present value of a P100,000 annuity for 5 years at the bank prime interest rate.
B. P500,000 plus imputed internet
C. Present value of 1,000 annuity for 5 years at an imputed interest
D. 500,000
C. Present value of 1,000 annuity for 5 years at an imputed interest
A company reacquires shares of its own during the fiscal year and reports the transaction in the theoretically correct manner. What effect will this transaction have on shareholders’ equity and eemings per share, respectively?
a. Increase and decrease
b. decrease and decrease
c. decrease and increase
d. Increase and no effect
b. decrease and decrease
