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Acctg 6
A. LIABILITIES
1. Which of the following conditions would
be required in the classification of
liability as current?
a. The entity does not have an
unconditional right to defer
settlement of the liability for at
least twelve months after the
reporting period.
b. The liability is due to be settled
beyond twelve months after the
reporting period.
c. The entity does not hold the liability
primarily for the purpose of trading.
d. The entity expects to settle the
liability beyond the entitys operating
cycle.
2. Chuy Koh Company provided the
following data on December 31, 2015:
Accounts Payable
750,000
15% Note Payable issued
October 1, 2014, maturing
June 30, 2016
950,000
12% debentures payable, next annual
principal installment of P600,000
due November 1, 2016
4,800,000
On December 31, 2015, the entity
consummated
a
noncancelable
agreement with the lender to refinance
the 15% Note Payable on a longterm
basis. On December 31, 2015, what total
amount should be reported as current
liabilities?
a. 5,550,000
b. 6,500,000
c. 1,350,000 (750,000+600,000)
d. 1,700,000
B. PREMIUM AND WARRANTY LIABILITY
3. Which approach has the soundest
theoretical support in accounting for
warranties because it properly matches
cost with revenue?
a. Accrual accounting
b. Accrual approach
c. Expense as incurred approach
d. Expense method
4. Money Company offers a cash rebate of
P15 on each P50 package of batteries
sold during 2015. Historically, 10% of
customer mail in the rebate form. During
2015, 4,000,000 packages of batteries
(3M x 0.650)
(3m
6%
2,650,200
H. NOTE PAYABLE
15. When a note payable is exchanged for
property, the stated interest rate is
presumed to be fair when
a. The
stated
interest
rate
is
unreasonable
b. No interest rate is stated
c. The stated interest rate is equal
to the market rate
d. The face amount of the note is
materially different from the cash
sale price for similar property
16. Ming Hoy Company reported a note
payable of P3,500,000 on December 31,
2015. The note is dated September 1,
2015, bears interest at 15% and is
payable in five equal annual payments of
P700,000. The first interest and principal
payment was made on September 1,
2016. What amount should be reported
deposit
100,000
Depreciation deducted for income
tax purposes in excess depreciation
for accounting purposes
150,000
Estimated tax payment in the
current year
130,000
Income tax rate
30%
What amount of current tax liability
should be reported at year-end?
a. 130,000
b. 195,000
c. 65,000
d. 75,000
Pretax Income
700,000
Permanent Difference
100,000
Income subj. to tax
600,000
Rent in advance
Excess Depreciation
(150,000)
Taxable Income
650,000x30%
Current tax liability
=195,000
Payment
200,000
(130,000)
65,000
K. OPERATING LEASE
21. Which
statement
characterizes
an
operating lease?
a. The lessor transfer title of the leased
property to the lease for the duration
of the lease term
b. The lessor records lease expense and
depreciation
c. The lessor records depreciation
and lease revenue
d. The lessee records depreciation and
lease revenue
22. On January 1, 2015, Chuy Company
signed a 5-year operating lease for office
space at P850,000 per year. The lease
included unequal payments of P500,000,
P750,000, P1,000,000, P1,000,000, and
P1,000,000 for 2015, 2016, 2017, 2018,
and 2019, respectively. For the year
ended December 31, 2016, what amount
should be reported as rent expense?
a. 500,000
b. 850,000
[(500T+750T+1M+1M+1M)/5]
c. 750,000
d. 1,000,000
3.79
Annual payment
1,120,000
Gross
Investment
5,600,000
Net Investment
(4,244,800)
(1,120,000x5)
b. 1,500,000
c. 1,000,000
d. 700,000
Gross rentals (700Tx5)
3,500,000
Net
investment
equal
(2,500,000)
Total Financial Revenue
1,000,000
to
FV
P. SHAREHOLDERS EQUITY
31. A redeemable preference share shall be
classified in the statement of financial
position as
a. Noncurrent liability
b. Current liability
c. Either
current
liability
or
noncurrent liability depending on
redemption date
d. Part of shareholders equity
32. Gugmang Giatay Company revealed the
following shareholders equity at yearend:
Preference share capital, P50 par
1,500,000
Share premium PS
705,000
Ordinary share capital, P35
1,050,000
Share premium
2,100,000
Subscribed
ordinary
share
capital
875,000
Retained earnings
2,200,000
Note Payable
500,000
Subscriptions receivable ordinary
500,000
How much is the legal capital?
a. 6,230,000
b. 5,730,000
c. 3,425,000
d. 2,925,000
Q. RETAINED EARNINGS
33. Which of the following statements about
property dividends is not true?
a. A property dividend is usually in the
form of securities of other entities.
b. A property dividend is also called a
dividend in kind.
c. The accounting for a property
dividend should be based on the
carrying amount of the noncash
asset transferred.
d. All of these statements are true.
January
31
dividend
June
30
August
1
November 30
split
Declared
10%
stock
Outstanding 145,000
Jan 31
159,500 (145,00x110%)
June 30
59,500 (159,500100,000)
Aug 1
109,500
(59,500
+50,000)
Nov 30
54,750
(109,500/2)
R. SHARE-BASED
COMPENSATION:
SHARE OPTIONS
35. It is the difference between the fair value
of the shares to which the counterparty
has the right to subscribe and the price
the counterparty is required to pay for
those shares.
a. Fair value
b. Intrinsic value
c. Market value
d. Book value
36. On January 1, 2015, Samokan Company
granted an employee an option to
purchase 10,000 ordinary shares with
P10 par value at P40 per share. The
option became exercisable on December
31, 2016, after the employee completed
two years of service. The fair value of
the share option is P20. The option was
exercised on January 10, 2017. The
share prices are P30 on January 1, 2015,
P45 on December 31, 2015, and P50 on
January 10, 2017.
What is the
compensation expense for 2015?
a. 150,000
b. 100,000 [(10,000x20)/2]
c. 300,000
d. 200,000
S. SHARE-BASED
COMPENSATION:
SHARE APPRECIATION RIGHT
37. What is the measurement date for sharebased payment to employees that is
classified as liability?
a. The service inception date
b. The grant date
c. The settlement date
d. The end of the reporting period
38. LastNaJud Company granted 200 share
appreciation rights to each of the 1,000