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The document contains multiple choice questions related to accounting concepts such as royalty expense, interest expense, accounting policy changes, bonds, and investments. For each question, there are 4 potential answer choices and the correct answer is indicated by "1/1". The questions cover topics like expense recognition, accounting for policy changes, calculation of bond interest, valuation of investments, and more.
The document contains multiple choice questions related to accounting concepts such as royalty expense, interest expense, accounting policy changes, bonds, and investments. For each question, there are 4 potential answer choices and the correct answer is indicated by "1/1". The questions cover topics like expense recognition, accounting for policy changes, calculation of bond interest, valuation of investments, and more.
The document contains multiple choice questions related to accounting concepts such as royalty expense, interest expense, accounting policy changes, bonds, and investments. For each question, there are 4 potential answer choices and the correct answer is indicated by "1/1". The questions cover topics like expense recognition, accounting for policy changes, calculation of bond interest, valuation of investments, and more.
During 2016, Cooke Company acquired patent right and remitted
royalties of P3, 000,000. The entity reported prepaid royalties of P550, 000 and P450, 000, royalties payable of P800,000 and P750,000, respectively, on December 31, 2015 and 2016. What amount should be reported s royalty expense for 2016? * 1/1 2,050,000 3,300,000 2,950,000 3,100,000 On March 1, 2018, Pyne Furniture Co. issued P700, 000 of 10 percent bonds to yield 8 percent. Interest is payable semiannually on February 28 and August 31. The bonds mature in ten years. Pyne Furniture Co. is a calendar-year corporation. The interest expense to be recognized in 2018 profit or loss is * 1/1 P 53,000 P 52,925 P 58,933 P58, 333 Effective January 1, 2016, King Company adopted the accounting policy of expensing advertising and promotion costs when incurred. Previously, advertising and promotion costs applicable to future periods were recorded in prepaid expenses. The entity can justify the change, which was made for both financial statement and income tax reporting purposes. The prepaid advertising and promotion costs totaled P600, 000 on December 31, 2016. The income tax rate is 30%. What is the net charge against income for 2016 as a result of the change? * 1/1 180,000 0 600,000 420,000 Excelsia Company issued rights to subscribe to its stock, the ownership of 4 shares entitling the shareholders to subscribe for 1 share at P100. Healing Company owns 50,000. The share is quoted right-on at 125. What is the cost of the new investment if all of the stock rights are exercised by the investor? * 1/1 1,250,000 1,450,000 1,500,000 1,562,500 On December 31, 2017, Ulster Co. issued P 200,000 of 8% serial bonds, to be repaid in the amount of P40, 000 each year. Interest is payable annually on December 31. The bonds were issued to yield 10% a year. The bonds proceeds were P 190,280 based on the present values at December 31, 2017 of the five annual payments. In its December 31, 2018 statement of financial position, at what amount should Ulster report the carrying amount of the bonds? * 1/1 P153, 308 P150, 280 P139, 380 P149, 100 Figaro Company acquired land and paid in full by issuing P600, 000 10 percent bonds payable and 40,000 ordinary shares with par value of P10. The share was selling a P19 and the bonds were trading at 102.16. What amount should be recorded as cost of land? * 1/1 988,000 1,000,000 1,372,000 1,387,000 What is the effect of stock dividend of the same class? * 0/1 Increase in investment account and increase in cost per share No effect on investment account but decrease in cost per share No effect on investment account but increase in cost per share Decrease in investment account and increase in cost per share Correct answer Decrease in investment account and increase in cost per share Bamco Company purchased a new machine on a deferred payment basis. A down payment of P100, 000 was made and 4 monthly installments of P250,000 are to be made at the end of each month. The cash equivalent price of the machine was P950, 000. The entity incurred and paid installation costs amounting P30, 000.8. What is the amount to be capitalized as cost of the machine? * 1/1 1,100,000 980,000 950,000 1,130,000 On June 1, 2018, Jefferson Controls, Inc. issued P 12,000,000 of 10 percent bonds at P 10,348,080. Interest is payable semiannually on May 31 and November 30. The bonds mature in 15 years. Jefferson Controls, Inc. is a calendar-year corporation. * 1/1 P10, 372,655 P10, 391,103 P 12,000,000 P10, 368,965 Universal Company failed to accrue warranty cost of P10, 000 on December 31, 2014. In addition, a change from straight line to accelerated depreciation made at the beginning of 2015 resulted in a cumulative effect of P60, 000 on retained earnings. * 1/1 160,000 60,000 100,000 0 Which of the following is false? * 1/1 Futures contracts are more liquid than forward contracts. Futures contracts are marked to market. Futures contracts allow fewer delivery options than forward contracts. Futures contracts trade on a financial exchange. Starlight Company owned a building on January 1, 2016 with historical cost of P40, 000,000. The property is depreciated over 40 years on a straight line basis with no residual value. The entity adopted a policy of revaluation of property. The building has so far been revalued twice at fair value as follows: January 1, 2017 46,800,000 January 1, 2019 55,500,000 Before income tax, what is the revaluation surplus on January 1, 2017? * 1/1 7,800,000 6,800,000 4,800,000 5,800,000 On January 1,2015 ,Bing Company purchased 30,000 shares of Latt Company’s 200,000 outstanding ordinary shares for P6,000,000. On that date, the carrying amount of the acquired shares on Latt’s books was P4,000,000. Bing attributed the excess of cost over carrying amount to patent. The patent has a remaining useful life of 10 years. During 2015, Bing’s officers gained a majority on Latt’s board of directors. Latt Company reported earnings of P5,000,000 for the year ended December 31,2015 ,and declared and paid dividend of P3,000,000 during 2015. * 1/1 6,100,000 6,000,000 6,300,000 6,750,000 Bravo Company acquired 20,000,000 shared of Alpha Company on January 1, 2015 at P120 per share. Alpha Company had 80,000 shares outstanding with the carrying amount of P8,000,000. The difference between the carrying amount and fair value of Alpha Company of January 1, 2015 is attributable to a broadcast license which is intangible asset. Alpha Company recorded earnings of P3,600,000 and 3,900,000 for the 2015 and 2016, respectively, and paid per-share dividend of P16 in 2015 and P20 in 2016. Bravo Campany has a 20-year straight line amortization policy for the broadcast license. What is the carrying amount of the investment in associate on December 31, 2015? * 1/1 2,800,000 3,300,000 2,060,000 2,960,000 On January 1, 2018, Tinoc Company borrows P2,000,000 from National Bank at 12% annual interest. In addition, Tinoc is required to keep a compensatory balance of P200,000 on deposit at National Bank which will earn interest at 4%. The effective interest that Tinoc pays on its P2,000,000 loan is * 0/1 10.0% 11.6% 12.0% 12.9% Correct answer 12.9% Naga Company produces bottled grape juice. Grape juice concentrate is typically bought and sold by the pound. The entity uses 50,000 pounds of grape juice concentrate each month. On November 1, 2017, the entity entered into a grape juice concentrate futures contract as a cash flow hedge to buy 50,000 pounds of concentrate on February 1, 2018 at a price of P50 per pound.The market price on December 31, 2017 and February 1, 2018 of the grape juice concentrate is P38 per pound. The market rate of interest is 11%. The periodic system is used.6. What amount should be recognized on December 31, 2017 as derivative asset or liability? * 1/1 540,540 liability 540,540 asset 600,000 liability 600,000 asset
On 1 January 2013, Entity A issued a 10 per cent convertible
debenture with a face value of P10, 000,000 maturing on 31 December 2022. The debenture is convertible into ordinary shares of Entity A at a conversion price of P25 per share. Interest is payable half-yearly in cash. At the date of issue, Entity A could have issued nonconvertible debt with a ten-year term bearing a coupon interest rate of 11 per cent. On 1 January 2018, the convertible debenture has a fair value of P11, 200,000. Entity A makes a tender offer to the holder of the debenture to repurchase the debenture for P11, 200,000, which the holder accepts. At the date of repurchase, Entity A could have issued non-convertible debt with a five-year term bearing a coupon interest rate of 8 per cent. Compute the amount to be recognized in profit or loss as a result of the repurchase of the debenture. * 1/1 P1, 577,200 P1, 188,650 P1, 200,000 Nil Which of the following causes the futures price of an asset to increase, everything else held constant? * 1/1 Higher income received while carrying the underlying asset. Lower expected spot price for the underlying asset. Higher expected spot price for the underlying asset. Higher costs of carrying the underlying asset. Which of the following statements is incorrect? * 1/1 An entity’s personnel should be given well- defined responsibilities The responsibility for receiving merchandise and paying for it should usually be given to one person Certain clerical personnel should be rotated among various jobs The accounting function should be separated from the custodianship of assets Which of the following is false? * 0/1 1,130,000 1,100,000 980,000 950,000 Correct answer 980,000 On January 1, 2015, Aker Company acquired a machine at a cost of P2, 000,000. The machine is depreciated on the straight line method over a five-year period with no residual value. Because of a bookkeeping error, no depreciation was recognized in the 2015 financial statements. The oversight was discovered during the preparation of the 2016 financial statements. What is the depreciation expense on the machine for 2016? * 1/1 800,000 500,000 400,000 0 Flakes Company applied revaluation accounting to plant asset with carrying amount of P4, 000,000 on January 1, 2017, useful life of 4 years, and no residual value. Deprecation is calculated on the straight line basis. On December 31, 2017, independent appraisers determined that the asset had a fair value of P3, 750,000. What is the journal entry to record the revaluation on December 31, 2017? * 1/1 Credit depreciation P750,000 Debit accumulated depreciation P250,000 Credit plant asset P750,000 Credit revaluation surplus P750,000 On April 1, 2015, Tyrone Company purchased 40% of the outstanding ordinary shares of Clarke for 10,000,000. On the date, Clarke’s net assets were P20,000,000 and Ben cannot attribute the excess of the cost of its investment in Clarke over its equity in Clarke’s net assets to any particular factor. The investee;s net income for 2015 is P5,000,000. What is the maximum amount which could be included in 2015income before tax reflect the ‘’equity in net income of investee’’? * 1/1 1,400,000 1,850,000 1,500,000 2,000,000 On March 1, 2018, Marie Company issued 10,000 of its P 1,000 face value bonds at 95 plus accrued interest. Marie Company paid bonus issue cost of P 1,000,000. The bonds were dated November 1, 2017, mature on November 1, 2027, and bear interest at 12% payable semiannually on November 1 and May 1. The net amount that Marie receive from the bond issuance is * 1/1 8, 500,000 9,500,000 9, 900,000 8, 900,000 On 1 January 2013, Entity A issued a 10 per cent convertible debenture with a face value of P1, 000,000 maturing on 31 December 2022. The debenture is convertible into ordinary shares of Entity A at a conversion price pf P25 per share. Interest is payable half-yearly in cash. On 1 January 2018, to induce the holder to convert the convertible debenture promptly, Entity A reduces the conversion price to P20 if the debenture is converted before 1 March 2018. The market price of Entity A's ordinary shares on the date the terms are amended is P40 per share. Compute the amount to be recognized in profit or loss as a result of the amendment of the terms. * 1/1 P200, 000 P400, 000 P50, 000 P0 On July 1, 2012 Ecclesiates Corporation issued for P960, 000 one thousand of its 9 percent, P1,000 bonds. The bonds are dated July 1, 2012, and mature on July 1, 2022. Interest is payable semiannually on January 1 and July 1. Ecclesiates uses the straight-line method amortizing bond discount. On July 1, 2018, Ecclesiates reacquired all of the bonds at 101 and retired them. How much loss should Ecclesiastes report on this early extinguishment of debt for the year ended December 31, 2018? * 1/1 P50, 000 P26, 000 P10, 000 P34, 000 The printing costs and legal fees associated with the issuance of bonds should * 1/1 Not be reported as expense until the period the bonds matured or are retired Be reported as a deduction from the face amount of bonds payable Be expenses when incurred Be recorded as reduction of the bond issue amount and then amortized over the life of the bonds During the year ended December 31, 2016, Clay Company paid interest totaling P100, 000. The prepaid interest expense is P23, 500 and P18, 000, respectively, on December 31, 2015 and 2016. The interest payable is P45, 000 and P53, 500, respectively on December 31, 2015 and 2016. What amount of interest expense should be reported for 2016? * 1/1 86,000 97,000 103,000 114,000 Klein Company provided the following information pertaining to operating segments for the year ended December 31, 2015: Combined profit of segments reporting profit 30,000,000 Combined loss of segments reporting loss (20,000,000) Combined profit and loss of all segments 10,000,000 To qualify as reportable segment, the segment operating profit or loss should at least be what amount? * 1/1 2,000,000 3,000,000 1,000,000 1,250,000 Bravo Company acquired 20,000,000 shared of Alpha Company on January 1, 2015 at P120 per share. Alpha Company had 80,000 shares outstanding with the carrying amount of P8,000,000. The difference between the carrying amount and fair value of Alpha Company of January 1, 2015 is attributable to a broadcast license which is intangible asset. Alpha Company recorded earnings of P3,600,000 and 3,900,000 for the 2015 and 2016, respectively, and paid per-share dividend of P16 in 2015 and P20 in 2016. Bravo Campany has a 20-year straight line amortization policy for the broadcast license. What is the carrying amount of the investment in associate on December 31, 2016? * 1/1 3,500,000 2,400,000 3,515,000 4,275,000 On July 1, 2016, Roxy Company obtained fire insurance at an annual premium of P72, 000 payable on July 1 of each year. The first premium payment was made July 1, 2016. On October1, 2016, the entity paid P24, 000 for real estate taxes to cover the period ending September 30, 2017. On December 31, 2016, what amount should be reported as prepaid expenses? * 1/1 48, 000 36,000 54,000 60,000 Luffy Company acquired 30% of Naruto Company’s voting share capital for P2,000,000 on January 1, 2015. Luffy’s 30% interest in Naruto gave Luffy the ability to exercise significant influence over Naruto’s operating and financial policies. During 2015, Naruto earned of P800,000 and paid dividend of P500,000. Naruto reported earnings of P1,000,000 for the 6 months ended June 30, 2016, and P2,000,000 for the year ended December 31, 2016. On july 1, 2016, Luffy sold half of the investment in south for P1,500,000 cash. Naruto paid dividend of P600,000 on October 1, 2016. The fair value of the retained investment is P1,600,000 on July 1, 2016 and 1,800,000 on December 31, 2016. The retained investment is to be held as financial asset at fair value through profit or loss. Before income tax, what amount should be included in the 2015 income statement as a result of the investment? * 1/1 140,000 240,000 800,000 500,000 Luffy Company acquired 30% of Naruto Company’s voting share capital for P2,000,000 on January 1, 2015. Luffy’s 30% interest in Naruto gave Luffy the ability to exercise significant influence over Naruto’s operating and financial policies. During 2015, Naruto earned of P800,000 and paid dividend of P500,000. Naruto reported earnings of P1,000,000 for the 6 months ended June 30, 2016, and P2,000,000 for the year ended December 31, 2016. On july 1, 2016, Luffy sold half of the investment in south for P1,500,000 cash. Naruto paid dividend of P600,000 on October 1, 2016. The fair value of the retained investment is P1,600,000 on July 1, 2016 and 1,800,000 on December 31, 2016. The retained investment is to be held as financial asset at fair value through profit or loss. On December 31, 2015, what is the carrying amount of the investment in associate? * 1/1 2,090,000 2,500,000 2,240,000 2,000,000 Adam Company owned 50,000 ordinary shares of Bland Company. These 50,000 shares were purchased by Adam for P120 per share. On August 30,2015, Bland distributed 50,000 stock rights to Adam. Adam was entitled to buy one new share of Bland company for P90 cash and two of these rights. On August 30,2015, each share had market value of P130 and each right had a market value of P20. What total cost should be recorded for the new shares that are acquired by exercising the rights? * 1/1 5,500,000 3,050,000 2,250,000 3,250,000 Which of the following is usually considered cash? * 1/1 Certificate of deposit Postdated check Checking account Money market saving certificate Flakes Company applied revaluation accounting to plant asset with carrying amount of P4, 000,000 on January 1, 2017, useful life of 4 years, and no residual value. Deprecation is calculated on the straight line basis. On December 31, 2017, independent appraisers determined that the asset had a fair value of P3, 750,000. What is the journal entry to record depreciation for 2017? * 1/1 Debit depreciation P250,000 Debit depreciation P1,000,000 Credit accumulated depreciation P250,000 Debit accumulated depreciation P1,000,000 During the current year, Cale Company sold a piece of equipment used in production. The equipment had been accounted for using the revaluation model and details of the accounts on the date of sale are as follows. Sale price 5,000,000 Carrying amount 4,500,000 Revaluation surplus 1,000,000 Which of the following s correct about recording the sale? * 1/1 The gain that should be recorded in profit and loss is P500,000 and the P1,000,000 revaluation surplus should be transferred to retained earnings The gain that should be recorded in other comprehensive income is P500,000 The gain that should be recorded in other comprehensive income is P1,500,000 The gain that should be recorded in profit and loss is P1,500,000 Star Company owned an equipment costing P5, 200,000 with original residual value of P400, 000. The life of the asset is 10 years and was depreciated using the straight line method. The equipment has a replacement cost of P8, 000,000 with residual value of P200,000. The age of the asset is 4 years. The appraisal of the equipment showed a total revised useful life of 12 years and the entity decided to carry the equipment at revalued amount. Before income tax, what amount should be initially reported as revaluation surplus? * 1/1 1,600,000 1,680,000 2,600,000 6,680,000 On December 31, 2018 , Atimonan Company issued 8,000 of its 8%, 10-year P 1,000 face value bonds with detachable warrants at 120. Each bond carried a detachable warrant for two shares of Atimonan's P100 par value ordinary shares at a specified option price P150. Immediately after issuance, the market value of bonds ex-warrants was P8, 100,000 and the market value of the warrants was P900, 000. The issuance of the bonds increased Atimonam's equity by * 1/1 P 1,500,000 P 900,000 P 960,000 0 On July 1,2015, Miller Company purchased 25% of Wall Company’s outstanding ordinary shares and no good will resulted from the purchase. Miller appropriately carried this investment at equity and the balance of Miller’s investment account was P1,900,000 on December 31,2015 , and paid dividend totalling P480,000 on December 31,2015. How much did Miller pay for the 25% interest in Wall? * 1/1 2,020,000 1,720,000 1,870,000 2,170,000 Which is false concerning measurement of cash and cash equivalents? * 1/1 If a bank or financial institution holding the funds of the entity is in bankruptcy or financial difficulty, cash should be written down to estimated realizable value Cash is measured at face value Cash in foreign currency is measured at the current exchange rate Cash equivalents should be measured at maturity value, meaning face value plus interest On January 1, 2011, Clark Company purchased a new building at a cost of P6, 000,000. Depreciation was computed on the straight line basis at 4% per year. On January 1, 2016, the building was revalued at a fair value of P8, 000,000. Before income tax, what is the revaluation surplus on December 31, 2016? * 1/1 3,072,000 1,920,000 3,040,000 1,900,000 Reid Company. Which began operations on January 1, 2015, has elected to use cash basis accounting for tax purposes and accrual basis accounting statements. The entity reported sales of P1, 750,000 and P800, 000 in the tax returns for the years ended December 31, 2016 and 2015, respectively. The entity reported accounts receivable of P300, 000 and P500, 000 on December 31, 2016 and 2015, respectively. What amount should be reported as sales in the income statements for 2016? * 1/1 1,950,000 1,550,000 2,050,000 1,450,000 On January 1,2015 ,Mylene Company purchased 50,000 shares of another entity for P3,600,000. On October 1,2015 ,the new entity received 50,000 stock rights from the investee. Each right entitled the shareholder to acquire one share for P85. The market price of the investee’s share was P100 immediately before the rights were issued and P90 immediately after the rights were issued. On December 1,2015 ,the entity exercised all stock rights. On December 31,2015 ,the entity sold 25,000 shares at P90 per share. The stock rights are not accounted for separately. The FIFO approach used. What is the gain on sale of investment that should be recognized in 2015? * 1/1 125,000 287,000 450,000 700,000 On January 1, 2018, Marimar Company issued 10,000 of its 12%, P1, 000 face values 5- year bonds at 105. Interest on the bonds is payable annually every December 31. In condition with the sale of these bonds, Marimar paid the following expenses: Promotion costs P 100, 000 Engraving and printing 400,000 Underwriter's commissions 500,000 Using straight-line method, what amount should Marimar report as bond interest expense for the year 2018? * 1/1 P 1,600,000 P 1,200,000 P 1,000,000 P 1,300,000 On January 2, 2013, Picard Enterprises issued P2, 400,000 of 8 percent, 15 year semiannual coupon bonds. Each bond is convertible into 40, P15 par, ordinary shares, which was trading at P20 per share on the date of the bond issue. The bonds were issued at 106. Without the conversion feature, the bond would have been issued for 104.5. On January 2, 2018, all of the bonds were converted into ordinary shares. The market price of the shares was P28 per share on the date of conversion. The issue premium is amortized using the straight-line method. The issuance of the bonds increased the entity's equity by * 1/1 P144, 000 P36, 000 Nil P108, 000 Thunder Company floated a serial bond issue in 2016. Details of the issue are as follows: Total amount P 5,000,000 Date of issue October 2, 2016 Proceeds from issue P4, 900,000 Interest rate 5% per annum Interest payment date October 1 Maturity date P 1,000,000 annually, starting October 1, 2018 Using the bond outstanding method of amortizing discount, compute the interest expense to be recognized for the year ended December 31, 2018. * 1/1 P261, 250 P257, 500 P273,750 P 237, 500 On December 31, 2016, Ashe Company had a P990, 000 balances in the advertising expense account before any year-end adjustments. Radio and television advertising spots broadcast during December 2016 were billed to Ashe on January 4, 2017. The invoice cost of P50, 000 was paid on January 15, 2017. Included in the P990, 000 is P60, 000 for newspaper advertising fora January 2017 sales promotional campaign. What amount should be reported as advertising expense for 2016? * 1/1 930,000 1,040,000 1,000,000 980,000 What is a compensating balance? * 1/1 Demand deposit account balance Minimum deposit required to be maintained in connection with a borrowing arrangement Saving account balance Temporary investment serving as collateral for outstanding loan