Current Assets
TRUE OR FALSE. Money that is readily available for unrestricted used is part of cash.
TRUE
Depreciation is best described as
A. Asset valuation
B. Current value allocation
C. Useful life determination
D. Cost allocation
D. Cost Allocation
Which of the following terms is associated with recording a contingent liability?
a. Possible.
b. Likely.
c. Remote.
d. Probable.
D. Probable
TRUE OR FALSE. Goodwill should be tested for impairment and not amortized.
TRUE. Goodwill should be tested for impairment and not amortized.
Which of the following should be reported as inventory?
A. Land acquired for use by a real estate firm
B. Shares issued by the entity in raising capital
C. Partially completed goods held by a manufacturing entity
D. Machinery acquired by a manufacturing entity for use in the production process
C. Partially completed goods held by a manufacturing entity
TRUE OR FALSE: Changes in fair value of securities are reported in the Statement of Profit or Loss for Available for sale of securities (FVOCI).
FALSE. FVOCI should be reported in the Statement of other comprehensive income.
Which of the following may be a current liability?
a. Withheld Income Taxes
b. Advanes Received from Customers
c. Deferred Revenue
d. All of these
D. All of these
TRUE OR FALSE. Development costs in capitalizing wasting assets should include cost of tangible equipment which are necessary to exploit or extract minerals.
FALSE. Only intangible development cost is included.
Which item should be excluded from cash and cash equivalent on the current year-end balance sheet of an entity?
A. The minimum cash balance in the entity’s current account which is maintained to avoid service charges.
B. Coins, Money orders, Demand deposits, Personal checks.
C. Time deposit which matures in one year.
D. A customer’s check denominated in a foreign currency.
C. Time deposit which matures in one year.
TRUE OR FALSE: ABC Hotel Corporation recently purchased DEF Hotel and the land on which it is located with the plan to tear down the DEF Hotel and build a new luxury hotel on the site. The demolition cost of the DEF Hotel should be capitalized as part of the cost of the new hotel.
Among the short-term obligations of MJE Company as of December 31, the balance sheet date, are notes payable totaling P 250,000 with the Madison National Bank. These are 90-day notes, renewable for another 90-day period. These notes should be classified on the balance sheet of MJE Company as
a. current liabilities.
b. deferred charges.
c. long-term liabilities.
d. intermediate debt.
A. Current Liabilities
The equity method of accounting for an investment in the common stock of another company should be used when the investment
a. is composed of common stock and it is the investor’s intent to vote the common stock.
b. ensures a source of supply such as raw materials.
c. enables the investor to exercise significant influence over the investee.
d. gives the investor voting control over the investee.
C. enables the investor to exercise significant influence over the investee.
The following information was taken into account for MJE Corporation.
Net Sales P5,000,0000
Accounts Receivable (gross) P3,000,000
Allowance for doubtful accounts (before adjustment) P200,000
If doubtful accounts is based on 10% of net sales. How much is doubtful accounts expense?
A. 100,000
B. 200,000
C. 300,000
D. 500,000
D. 10% X 5,000,000 = 500,000
ABC Co. owns 4,000 of the 10,000 outstanding shares of Penn Corp. common stock for 1,200,000. During 2020, Penn earns P 300,000 and pays cash dividends of P 120,000. Tracy should report investment income for 2020 of ____.
A. 72,000
B. 120,000
C. 480,000
D. Zero
B. 300,000 X 40% = 120,000
Yang Co.’s trial balance included the following account balances at December 31, 2020:
Accounts Payable P500,000
Dividends Payable P50,000
Notes Payable due in 2022 P600,000
Bonds Payable due in June 2021 P500,000
Discount on Bonds Payable P20,000
What is the current liabilities to be reported on December 31, 2020?
A. 550,000
B. 1,030,000
C. 1,070,000
D. 1,630,000
B. 1,030,000 (Accounts Payable, Dividends and bonds Payable, net (deduct discount)
MJE Company purchased a depreciable asset for P2,000,000. The estimated salvage value is P150,000, and the estimated useful life is 400,000 hours. MJE used the asset for 35,000 hours in the current year. The activity method will be used for depreciation. What is the depreciation expense on this asset?
a. 160,870
b. 161,875
c. 175,000
d. 350,000
B. 2,000,000 - 150,000 = 1,850,000/400K hours
=4.625 hours
4.625 X 35,000= 161,875
MJE company has the following information.
There were two amounts missed in the inventory count.
Merchandise sold to JBE, a customer on December 30, F.O.B shipping point. The merchandise cost P7,350, and JBE received it on January 3.
Merchandise sold to Kemp, a customer F.O.B shipping point. The cost of this merchandise was P10,520, and Kemp received the merchandise on January 5.
Which of these two transaction should be accounted as inventories in the Balance Sheet?
None of these would be recognized. To be reported as inventory, it must be FOB destination.
This information pertains to equipment owned by Brigade Company.
Cost of equipment: 200,000
Estimated residual value: 20,000
Estimated useful life: 10 years
Depreciation method: Straight-line
The accumulated depreciation at the end of year 3 is:
200,000 - 20,000 = 180,000/10
18,000 X 3 = 54,000
Toby’s Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is probable that they may lose the case. The attorneys estimated that there is a 80% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be P 500,000. Should Toby's Foot record in the financial Statements? Why or why not?
A provision shall be recognized when:
An entity has a present obligation (legal or constructive) as a result of a past event;
It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
A reliable estimate can be made of the amount of the obligation.
YES.
Danks Corporation purchased a patent for P900,000 on September 1, 2020. It had a useful life of 10 years. On January 1, 2021, Danks spent P220,000 to successfully defend the patent in a lawsuit. Danks feels that as of that date. Life of the patent remains the same. What amount should be reported for patent amortization expense for 2021?
a. P224,000.
b. P90,000.
c. P180,000.
d. P136,000.
Answer: 900,000/10 years = 90,000