R4ACADS-FINACC-PREFINAL[1]

Easy TOP: Deferred revenue

1. An entity is a retailer of home appliances and offers a service contract on each appliance sold. The entity sells
appliances on installment contracts but all service contracts must be paid in full at the time of sale.
Collections received for service contracts should be recorded as an increase in a
a. Sales contracts receivable valuation account
b. Deferred revenue account
c. Service revenue account
d. Shareholders' equity valuation account

Easy TOP: Presentation

2. Which of the following is not an acceptable presentation of current liabilities?
a. Offsetting current liabilities against assets that are to be applied to their liquidation.
b. Showing current liabilities in the order of liquidation preference.
c. Listing current liabilities in the order of maturity.
d. Listing current liabilities according to amount.

Easy TOP: Intangible Assets, Airline gate rights

3. An airline entity purchased airline gate rights at an international airport with a legal life of five years. However,
the entity has the ability and right to extend the rights every ten years for an indefinite period of time. Over
what period of time should the entity amortize the gate rights?
a. 5 years c. 40 years
b. 15 years d. The rights should not be amortized.
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Average TOP: Segment information

4. Congo Company provided the following data for the current year:
Sales 60,000,000
Cost of goods sold 28,000,000
Expenses 14,000,000
Depreciation 4,000,000
Income tax expense 4,000,000
The entity has two major reportable segments, X and Y. An analysis revealed that P1,000,000 of the total
depreciation expense and P2,000,000 of the expenses are related to general corporate activities. The
remaining expenses and sales are directly allocable to segment activities according to the following
percentages:
Segment X Segment Y Others
Sales 40% 45% 15%
Cost of goods sold 35 50 15
Expenses 40 40 20
Depreciation 40 45 15
What amount should be reported as profit of Segment X?
a. 6,600,000 c. 8,200,000
b. 5,400,000 d. 7,000,000

Difficult TOP: Bank reconciliation, Adjusted cash balance

5. Susan Company showed the following information on August 31, 2014.
Balance of cash in bank account 1,300,000
Balance of bank statement 1,200,000
Outstanding checks, August 31:
Number 555 10,000
761 55,000
762 40,000
763 25,000
764 65,000
765 70,000
Receipts of August 31, deposited September 1 275,000
Service charge for August 5,000
NSF check received from a customer 85,000
The cashier-bookkeeper had misappropriated P30,000 and an additional PI 0,000 by charging sales
discounts and crediting accounts receivable. The stub for check number 765 and the invoice relating thereto
show that it was for P50,000. It was recorded incorrectly in the cash disbursements journal as P70,000. This
check was drawn in payment of an account payable. Payment has been stopped on check number 555 which
was drawn in payment of an account payable. The payee cannot be located. What is the adjusted cash in
bank on August 31, 2014?
a. 1,230,000 c. 1,210,000
b. 1,200,000 d. 1,240,000
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Average TOP: Depletion & Depreciation

On July 1, 2014, Lam Company, a calendar year corporation, purchased the rights to a mine. The total
purchase price was P16,400,000, of which P2,000,000 was allocable to the land. Estimated reserves were
1,800,000 tons. The entity expects to extract and sell 25,000 tons per month. The entity purchased new
equipment on July 1,2014. The equipment cost P7,500,000 and had a useful life of 8 years. However, after
all the resource is removed, the equipment will be of no use and will be sold for P300,000.

6. What amount should be recorded as depreciation of the mining equipment for 2014?
a. 1,450,000 c. 600,000
b. 300,000 d. 900,000

Average TOP: Goodwill

7.Casanova Company purchased another entity for P5,000,000 cash. The following carrying amount and fair value
were associated with the items acquired in this business combination:
Carrying amount Fair value
Accounts receivable 2,000,000 2,000,000
Inventory 1,000,000 500,000
Government contract 0 1,000,000
Equipment 400,000 500,000
Short-term loan payable (2,000,000) (2,000,000)
Net assets 1,400,000 2,000,000
The fair value associated with the acquired entity's government contract is not based on any legal or
contractual relationship. In addition, for obvious reason, there is no open market trading for an intangible
of this sort. What is the goodwill arising from the business combination?
a. 0 c. 4,000,000
b. 3,600,000 d. 3,000,000
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Difficult TOP: Computer Software, Comprehensive

During the current year, Awesome Company incurred costs to develop and produce a routine, low-risk
computer software product.
Completion of detailed program design 1,300,000
Costs incurred for coding and testing to establish technological feasibility 1,000,000
Other coding costs after establishment of technological feasibility 2,400,000
Other testing costs after establishment of technological feasibility 2,000,000
Costs of producing product masters for training materials 1,500,000
Duplication of computer software and training materials from product
masters (1,000 units) 2,500,000
Packaging product (500 units) 900,000

8.What total amount of the costs incurred should be expensed immediately?

a. 6,700,000 c. 8,200,000
b. 4,400,000 d. 2,300,000

Average TOP: Service cost | Past service cost

9. Anna Company amended a pension plan at the beginning of current year.
Before amendment After amendment
Accumulated benefit obligation 950,000 1,425,000
Projected benefit obligation 1,300,000 1,900,000
What is the total amount of past service cost as a result of the plan amendment?
a. 475,000 c. 125,000
b. 600,000 d. 950,000

Average TOP: Accrued benefit cost

10. On December 31, 2014, Kerr Company provided the following information in relation to a defined benefit
plan:
Fair value plan assets 3,450,000
Accumulated benefit obligation 4,300,000
Projected benefit obligation 5,700,000
What is the accrued liability on December 31, 2014?
a. 2,250,000 c. 1,400,000
b. 850,000 d. 5,700,000