Random Flashcards

(54 cards)

1
Q

A gain arising from change in the fair value pf an investment property for which an
entity has opted to use the fair value model is recognized in
A. Share Premium
B. Profit or Loss
C. Share warrants outstanding
D. Retained Earnings

A

B. Profit or Loss

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2
Q

A lease liability is measured at
A. The fair value of the underlying asset
B. The present value of fixed lease payments
C. The absolute amount of lease payments
D. The present value of lease payments

A

D. The present value of lease payments

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3
Q

A lessee with a lease containing a purchase option that is reasonably certain to be
exercised should depreciate the right of use asset over
A. Useful life life of the asset or lease term, whichever is longer
B. Useful life of the asset or lease term, whichever is shorter
C. Lease term
D. Useful life of the asset

A

D. Useful life of the asset

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4
Q

A machine with a four-year estimated useful life and an estimated 25% residual
value was acquired at the beginning of the current year. The increase in accumulated
depreciation for the second year using the double declining balance method would be
A. Original cost X 85% X 50%
B. Original cost X 50%
C. Original cost X 85% X 50% X 50%
D. Original cost X 50% X 50%

A

D. Original cost X 50% X 50%

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5
Q

After initial recognition, an entity shall measure a note payable at
A. Amortized cost
B. Either amortized cost or fair value through profit or loss
C. Fair value through profit or loss
D. Either amortized cost or fair value through other comprehensive income

A

B. Either amortized cost or fair value through profit or loss

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6
Q

All of the following are revenue accounts, except
A. Accrual of interest by a lending institution
B. Income generated from sale of goods by a candy shop
C. Income from services provided by an accounting firm
D. Accrual of interest by a maker of a note

A

D. Accrual of interest by a maker of a note

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7
Q

Depletion Expense
A. Excludes restoration cost from the depletable cost
B. Excludes intangible development cost from the depletable cost
C. Includes tangible equipment cost in the depletable cost
D. Is usually part of cost of goods sold

A

D. Is usually part of cost of goods sold

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8
Q

Disclosure is usually not required for
A. Contingent losses that are remote and can be reasonably estimated
B. Contingent gains that are probable and can be reasonably estimated
C. Contingent losses that are probable and can be reasonably measured
D. Contingent losses that are reasonably possible and cannot be reasonably
estimated

A

A. Contingent losses that are remote and can be reasonably estimated

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9
Q

. Each of the following companies is a merchandising company except a
A. Wholesale department store
B. Space rentals
C. Candy store
D. Grocery store

A

B. Space rentals

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10
Q

How would the amortization of premium on bonds payable affect carrying amount
of bonds payable and interest expense respectively?
A. Increase and decrease
B. Decrease and decrease
C. Increase and increase
D. Decrease and increase

A

B. Decrease and decrease

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11
Q

If the financial asset is held for trading or if the financial asset is measured at
fair value through profit or loss, transaction costs directly attributable to the
acquisition shall be
A. Deferred and amortized over a reasonable period
B. Expensed immediately when incurred
C. Capitalized as cost of the financial asset
D. Included as component of other comprehensive income

A

B. Expensed immediately when incurred

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12
Q

. In a debt restructuring that is considered an asset swap, the gain on
extinguishment is equal to the
A. excess of the carrying amount of the debt over the carrying amount
of the asset
B. excess of the fair value of the asset over the carrying amount.
C. excess if the fair value of the asset over the carrying amount of the debt
D. excess of the carrying amount of the debt over the fair value of the asset

A

A. excess of the carrying amount of the debt over the carrying amount
of the asset

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13
Q

It is the deferred tax consequence attributable to a taxable temporary difference.
A. Current tax asset
B. Deferred tax liability
C. Current tax liability
D. Deferred tax asset

A

B. Deferred tax liability

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14
Q

It is the systematic allocation of the amortizable amount of an intangible asset
over the useful life.
A. Depreciation
B. Expiration
C. Allocation
D. Amortization

A

D. Amortization

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15
Q

On October 1, 2019, an entity borrowed cash and signed a three-year interestbearing note on which the principal is payable on October 1, 2019 and interest is
payable every September 30. On December 31, 2019, accrued interest payable
should
A. be reported as current liability
B. be reported as part of noncurrent note payable
C. be reported as noncurrent liability
D. not be reported as liability

A

A. be reported as current liability

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16
Q

Statement 1: PAS 36, paragraph 104, provides that when an impairment loss is
recognized for a cash generating unit (CGU), such loss shall be allocated first to the
goodwill allocated to the CGU and then to all other noncash assets of the cash CGU
prorate based on carrying amount.
Statement 2: The revaluation surplus that is realized because of the use of the asset
or disposal of the asset may be transferred directly to retained earnings.
A. Both statements are true
B. Only Statement 2 is true
C. Neither statements are true
D. Only Statement 1 is true

A

A. Both statements are true

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17
Q

The components of defined benefit cost include all, except
A. service cost
B. net interest
C. remeasurements
D. contribution to the plan

A

D. contribution to the plan

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18
Q

The service cost of a defined benefit plan comprises all, except
A. Current service cost
B. Gain or loss on settlement
C. Past service cost
D. Net interest

A

D. Net interest

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19
Q

. Trade receivables are classified as current assets if they are reasonably
expected to be collected
A. Within one year
B. Within the normal operating cycle
C. Within one year or within the operating cycle, whichever is longer.
D. Within one year or within the operating cycle, whichever is shorter

A

C. Within one year or within the operating cycle, whichever is longer.

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20
Q
  1. What is the treatment of customer’s postdated check?
    A. Accrued income
    B. Prepaid expense
    C. Accounts receivable
    D. Considered as cash
A

C. Accounts receivable

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21
Q

When bonds are retired prior to maturity with proceeds from a new bond issue,
any gain or loss from the early extinguishment should be
A. amortized over the life of the new bond issue.
B. recognized in retained earnings.
C. amortized over the remaining original life of the retired bond issue.
D. recognized in income from continuing operations.

A

D. recognized in income from continuing operations.

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22
Q

Which of the following additional disclosures must be made when an entity
chooses the cost model as the accounting policy for investment property?
A. Present value of the property
B. Fair value of the property
C. Net realizable value of the property
D. The discounted value of the property

A

B. Fair value of the property

23
Q

. Which of the following best describes the expense approach of accounting for
warranty cost?
A. Expensed when incurred
B. Expensed when liability is accrued
C. Expensed when warranty claims are certain
D. Expensed when paid

A

A. Expensed when incurred

24
Q

Which of the following concepts relates to the allowance method in accounting
for uncollectible accounts receivable?
A. Bad debt expense is an estimate that is based only on aging
B. Bad debt expense is management determination of which accounts will
be sent to the attorney for collection.
C. Bad debt expense is an estimate that is based on historical and
prospective information
D. Bad debt expense is based on the actual amount determined to be
uncollectible

A

C. Bad debt expense is an estimate that is based on historical and
prospective information

25
Which of the following is most likely item to result in a deferred tax asset? A. Using accelerated depreciation for tax purposes but straight line depreciation for accounting purposes B. Using the cost recovery method of recognizing construction revenue for tax purposes but using percentage of completion method for financial reporting purposes C. Unearned revenue D. Prepaid expense
C. Unearned revenue
26
Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation which ends with adjusted cash balance? A. Note receivable collected by bank in favor of the depositor and credited to the account of the depositor B. NSF customer check C. Service charge D. Erroneous bank debit
A. Note receivable collected by bank in favor of the depositor and credited to the account of the depositor
27
Which of the following should not be taken into account when determining the cost of inventories? A. Storage costs of partly finished goods B. Recoverable purchase taxes C. Import duties on shipping of inventory inward D. Trade discounts
B. Recoverable purchase taxes
28
Which of the following statements is true concerning recognition of unrealized gains and losses on financial assets? I. Unrealized gains and losses on financial assets held for trading shall be included in profit or loss. II. Unrealized gains and losses on financial assets measured at amortized cost shall be included as component of other comprehensive income. A. Neither I nor II B. Both I and II C. I only D. II only
C. I only
29
Which will not require an estimate of inventory? A. Determination of the ending inventory to be shown on the statement of financial position at year-end B. Proof of the reasonable accuracy of the physical inventory C. Interim financial statements are prepared D. Inventory destroyed by typhoon
A. Determination of the ending inventory to be shown on the statement of financial position at year-end
30
An employee of a large manufacturing company in Davao City earned 960,000 during the current year. The employee is covered by the firm’s defined contribution plan which requires the entity to contribute the equivalent of 5% of the employee’s salary or 48,000 for the current year to a trustee. The company paid 70,000 pesos total in which 22,000 is in respect for services to be rendered in the next year. In the current year how much is employee benefit expense?
Answer:48,000 960,000 x 5% = 48,000
31
Asoos Company purchased office materials and paid cash P1,800 from National bookstore which offers 10% cash discount to every purchase. The entry to be prepared by Asoos to record the purchase includes a debit to office supplies in the amount of
Answer: 1,800 Office Supplies 1,800 Purchase Discount 180 Cash 1,620
32
At the beginning of current year, Amanda company entered into a ten year non cancelable lease requiring year end payments of P3,000,000. Amanda’s incremental borrowing rate is 12%, while the lessor’s implicit interest rate, known to Amanda is 10%. Present value factors for an ordinary annuity for 10 periods are 6.145 at 10% and 5.650 at 12%. On the same date, Amanda company paid initial direct cost of P600,000 in negotiating and securing the leasing arrangement. Ownership of the property remains with the lessor at expiration of the lease. The leased property has an estimated economic life of 12 years. What is the lease liability at the end of current year?
Answer: 17,278,500 Lease Liab. Beg. (3m x 6.145) 18,435,000 1st payment 3,000,000 Interest (1,843500) (18,435,000 x 10%) (1,156,500) Lease Liab End 17,278,500
33
Bonakeed Company purchased an investment property on January 1, 2017 for P2,500,000. The property has a useful life of 40 years and on December 31, 2019 had a fair value of P3,000,000. On December 31, 2019, the property was sold for net proceeds of P2,900,000. The entity used fair value model to account for the investment property. What is the gain or loss on disposal to be recognized for the year ended December 31, 2019?
Answer: (100,000) PV 2,900,000 CA (3,000,00) Loss on Disposal 100,000
34
Choo Babells pays weekly salaries of P40,000 on Friday for a five-day week ending on that day. If the calendar period ends on Wednesday, the effect of adjusting entry is increase in expense in the amount of
Answer: 24,000 40,000 / 5 = 8,000 x 3 = 24,000
35
During 2019, Dayang Dayang Company sold 500,000 boxes of cake mix under a new sales promotional program. Each box contains one coupon which entitles the customer to a baking pan upon remittance of P40. Dayang pays P50 per pan and P5 for handling and shipping. Dayang estimates that 80% of the coupons will be redeemed, even though only 300,000 coupons had been processed during 2019. What amount should Dayang report as a liability for unredeemed coupons on December 31, 2019?
Net Prem. Exp 50 + 5 – 40 = 15 Coupons to be redeemed (80% x 500,0000) 400,000 Coupons to be redeemed (300,000) Coupons outstanding 100,000 Liab. For unredeemed coupons (100,000 x 15) 1,500,000
36
During January of the current year, Jeanneth Company which maintains a perpetual inventory system, recorded the following information pertaining to its inventory: Units Unit cost Balance on 1/1 20,000 100 Purchased on 1/7 12,000 300 Sold on 1/20 18,000 Purchased 1/25 8,000 500 Under the FIFO periodic method, what amount should Jeanneth report as inventory at January 31?
Answer: 7,800,000 20,000 – 12,000 = 2,000 x 100 = 200,000 12,000 x 300 = 3,600,000 8,000 x 500 = 4,000,000 7,800,000
37
Faith Company reported taxable income of P3,000,000 in its income tax return for the year ended December 31, 2019, the end of the first year of operations. Temporary differences between financial income and taxable income for the year are as follows: Tax depreciation in excess of book depreciation 300,000 Accrual for product liability claim in excess of actual claim 450,000 Reported installment sales income in excess of taxable installment sales 975,000 The enacted income tax rate is 30% for 2019 and future years. What is the total income tax expense to be reported in the 2010 income statement?
Answer: 1,147,500 Taxable Income 3,000,000 Tax Deprn 300,000 Installment sales (975,000) 2,325,000 x 30% + 450,000 = 1,147,500
38
Feyt Company provided the following information relating to current operations: Accounts receivable, January 1 P 4,000,000 Accounts receivable collected 8,400,000 Cash sales 2,000,000 Inventory, January 1 4,800,000 Inventory, December 31 4,400,000 Purchases 8,000,000 Gross margin on sales 4,200,000 What is the balance of accounts receivable on December 31?
Answer: 6,200,000 Inv. Jan 1 4,800,000 Purchases 8,000,000 Goods Available for Sale 12,800,000 Inv. Dec. 31 (4,400,000) COGS 8,400,000 Gross margin on sale 4,200,000 Gross sales 12,600,000 Cash Sales (2,000,000) Credit Sales 10,600,000 AR Jan 1 4,000,000 Total 14,600,000 AR collected (8,400,000) AR Dec. 31 6,200,000
39
In preparing the August 31, 2019 bank reconciliation, Appendix Company provided the following information: Balance per bank statement P 1,800,000 Deposit in transit 320,000 Return of customer’s check for insufficient fund 65,000 Outstanding checks 270,000 Bank service for August 10,000 Collection on notes 325,000 Balance per book 1,600,000 What is the adjusted cash in bank on August 31, 2019?
Answer: 1,850,000 Balance per bank statement 1,800,000 Deposit on Transit 320,000 Total 2,120,000 Outstanding Checks (270,000) Adjusted Bank Balance 1,850,000
40
Indira company acquired an equity instrument for P8,000,000 on March 31, 2012 to be measured at fair value through other comprehensive income. The direct acquisition costs incurred amounted to P1,400,000. On December 31, 2012, the fair value of the instrument was P11,000,000 and the transaction costs that would be incurred on the sale of the investment were estimated at P1,200,000. What amount of unrealized gain should be recognized in other comprehensive income for the year ended December 31, 2012?
Answer: 1,600,000 FV Dec 31 11,000,0000 Acquisition Cost (8m + 1.4m) (9,400,000) UG OCI 1,600,000
41
Kainin Company exchanged a car from its inventory for a computer to be used as a long-term asset. The following information relates to this exchange: Historical cost of the car P 900,000 Accumulated depreciation of the car 300,000 List selling price of the car 900,000 Fair value of the computer 860,000 Cash difference paid by Kainin 100,000 What amount of gain should be recognized on the exchange?
Answer: 160,000 FV of computer 860,000 Cash Paid (100,000) FV of car – asset given 760,000 CA of car (900T – 300T) (600,000) Gain on exchange 160,000
42
Lady Bug Company provided the following information for the current year: Allowance for doubtful accounts January 1 P 180,000 Sales 8,500,000 Sales returns and allowances 700,000 Sales discounts 300,000 Accounts written off as uncollectible 250,000 The entity provided for doubtful accounts expense at the rate of 3% of net sales. What is the allowance for doubtful accounts at year-end?
Answer: 155,000 Sales 8,500,000 Sales Returns & Allo. (700,000) Sales Discount (300,000) Net Sales 7,500,000 Allow. For Doubtful Acct. – Beg 180,000 Doubtful Acct. Exp (7.5m x 3%) 225,000 Accounts Written Off (250,000) Allow. For doubtful acct – End 155,000
43
Manika Monika Company which has a calendar year accounting period, purchased a new machine for P2,000,000 on April 1, 2014. At that time, the entity expected to use the machine for nine years and then sell it for P200,000. The machine was sold for P1,100,000 on September 30, 2019. The entity uses straight-line method and do not recognize depreciation in the year of acquisition. Instead, the company recognizes full depreciation in the year of disposal. What amount should be recognized as gain on disposal on September 30, 2019?
Answer: 100,000 (2m -200T) 1,800,000 (1,800,000 / 9 x 5) 1,000,000 (5= 2015 to 2019) (1,100,000 – 1,000,000) 100,000
44
Matrix company computed a pretax accounting income of 7,500,000 for its first year of operations ended Dec. 31, 2018. In preparing the income tax return for 2018, the following differences are noted between accounting income and taxable income. Nondeductible expenses 300,000 Nontaxable revenue 750,000 Unearned income reported In Financial statement (expected to be earned in 2019) 1,500,000 Provision for doubtful accounts 150,000 Income tax rate 30% What is the current tax expense
Answer: 2,610,000 Pre-Tax Income 7,500,000 Non-deductible exp 300,000 Non-taxable rev (750,000) Acctng Income Subject to Tax 7,050,000 Unearned 1,500,000 Doubtful Accts 150,000 Taxable Income 8,700,000 Current Tax Income (8.7m x 30%/) 2,610,000
45
On Aug. 1, your company paid P108,000 good for one year’s insurance that you have debited to Prepaid Insurance. At year end Dec. 31, what amount of insurance will be shown in the financial position?
Answer: 63,000 108,000 x 5/12 = 45,000 108,000 – 45,000 = 63,000
46
On January 1, 2012, Gliezel company purchased marketable equity securities to be held as “trading” for P2,500,000. The entity also paid commission, taxes and other transaction costs amounting to P100,000. The securities had a market value of P2,750,000 on December 31, 2012. No securities were sold during 2012. The transaction costs that would be incurred on the disposal of the investment are estimated at P50,000. What amount of unrealized gain on these securities should be reported in the 2012 income statement?
Answer: 250,000 PV 2,750,000 CA (2,500,000) UG 250,000
47
On January 1, 2019, Mariz Company acquired a tract of land for 10,500,000. The entity paid a 2,500,000 down payment and signed a non interest bearing note for the balance which is due on January 1, 2022. There was no established exchange price for the land and the note had no ready market. The prevailing interest rate for this type of note was 12%. The present value of 1 at 12% for 3 periods is .7118. What is the carrying amount of the notes payable on Dec. 31, 2019?
Answer: 6,377,728 NP (10,500,000 – 2,500,000) 8,000,000 Discount on NP (*2,305,600 –** 683,328) (1,622,272) CA 6,377,728 *8m x .7118 = 5, 694,400 – 8,000,000 = 2,305,600 ** 5, 694,400 x 12% = 683,328
48
On January 1, 2019, Wessie Company issued 9% bonds in the face amount of P5,000,000, which mature on January 1, 2029. The bonds were issued for P4,695,000 to yield 10%. Interest is payable annually on December 31. The entity used the interest method of amortizing bond discount. On December 31, 2020, what is the carrying amount of the bonds payable?
Answer: 4,735,950 Int Paid (9%) Int Exp. (10%) Amortiz. CA Jan. 2019 4,695,000 Dec. 2019 450,000 469,500 19,500 4,714,500 Dec. 2020 450,000 471,450 21,450 4,735,950
49
Piggery Corporation had the following account balances on December 31, 2019: Cash in bank-current account P 5,000,000 Cash in bank-payroll account 1,000,000 Cash on hand 500,000 Cash in bank-restricted account for building construction expected to be disbursed in 2020 3,000,000 Time deposit, purchased December 15, 2019 and due on February 15, 2020 2,000,000 What total amount should be reported as “cash and cash equivalents” on December 31, 2019?
Answer: 8,500,000 CIB-current 5,000,000 CIB- payroll 1,000,000 Cash on Hand 500,000 Time in Deposit 2,000,000 Total CCE 8,500,000
50
Ravenclaw Company developed a trademark to distinguish its products from those of the competitors. Marketing research to study consumers tastes P 400,000 Design cost of trademark 1,500,000 Legal fee of registering trademark 245,000 Advertising to establish recognition of trademark 200,000 Registration fee with Intellectual Property Office 75,000 What amount should be capitalized as cost of trademark?
Answer: 1,820,000 1,500,000 245,000 75,000 1,820,000
51
. Ronald Trumpet Company has an incentive compensation plan under which a branch manager received 10% of the branch income after deduction of the bonus but before deduction of income tax. Branch income for the current year before the bonus and income tax was P1,760,000. The tax rate is 30%. What is the bonus for the current year?
Answer: 170,000 After Bonus & Before Tax B= 10% (1,760,000 – B) B= 176,000 – 0.10B B + 0.10B = 176,000 1.10B = 176,000 B= 176,000 / 1.10 B= 160,000
52
. Silingan Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor to relieve its financial stress. Silingan has a P2,500,000 note payable to Lebakero Bank. The bank accepted an equity swap in Silingan Company in the form of 200,000 ordinary shares quoted at P12 per share. The par value is P10 per share. What amount should be recognized as gain from the debt extinguishment as a result of the “equity swap”?
Answer: 100,000 NP 2,500,000 FV of shares (200T x 12) (2,400,000) Gain on debt extinguishment 100,000
53
The following data are provided related to a defined benefit plan: Fair value of plan assets – beginning 7,500,000 Actual return on plan assets 1,350,000 Contribution to the fund 1,500,000 Benefits paid 300,000 Interest income on plan assets 6% How much is the re-measurement gain?
Answer: 900,000 1,3500,00 7,500,000 x 6% (450,000) 900,000
54
The following figures are among those pertaining to Dianne company’s operations for the six months ended June 30, 2011: Sales, P12,000,000; Beginning inventory, P3,000,000 and Purchases, P7,800,000. On June 30, 2011, all of Dianne’s inventory was destroyed by fire. If the gross profit rate is 30% based on sales, how much is the estimated cost of this destroyed inventory?
Answer: 2,400,000 3,000,000 + 7,800,000 10,800,000 12,000,000 x 70% (8,400,000) (100%-30%) 2,400,000