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CE2 Answer Key

The document contains a multiple choice test on accounting concepts including: - Classification of expenses on the income statement - Components of comprehensive income - Presentation of comprehensive income - Purpose of reporting comprehensive income - Items included in other comprehensive income - Description of a statement of comprehensive income - Classification of a selling expense It also contains true/false questions and a problem solving section calculating cost of goods sold and ending inventory.

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Hazel Joy Demagante
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113 views

CE2 Answer Key

The document contains a multiple choice test on accounting concepts including: - Classification of expenses on the income statement - Components of comprehensive income - Presentation of comprehensive income - Purpose of reporting comprehensive income - Items included in other comprehensive income - Description of a statement of comprehensive income - Classification of a selling expense It also contains true/false questions and a problem solving section calculating cost of goods sold and ending inventory.

Uploaded by

Hazel Joy Demagante
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MULTIPLE CHOICE

An entity shall present an analysis of expenses using a classification based on


a the nature of expense
b the function of expenses
c either the nature of expenses or the function of expenses, whichever provides information that
is reliable and relevant
d either the nature of expenses or the function of expenses, whichever the entity would prefer to

Comprehensive income includes


a profit or loss
b other comprehensive income
c both profit or loss and other comprehensive income
d neither profit or loss nore other comprehensive income

The two-statement approach of presenting comprehensive income is preparing


a a comparative statement of comprehensive income
b a combined statement of comprehensive income and retained earnings
c a combined income statement and a statement of changes in equity
d a separate income statement and a statement of comprehensive income

What is the purpose of reporting comprehensive income?


a To report trnasactions with owners
b to report a measure of overall entity performance
c to replace net income with a better measure
d to combine from continuing operations with income from discontinued operations

Which of the following is not included in other comprehensive income?


a Gain or loss from translations of the financial statements of a foreign operation
b Unrealized gain or loss on trading investments
c Revaluation surplus for the year
d Remeasurement of defined benefit plan

Which of the following appropriately describes a statement of comprehensive income using the nature
of expense approach?
a Expenses are classified the way they are related to the majour source of revenue
b Expenses are classified according to their characteristics
c Expenses are arranged from largest to smallest
d Miscellaneous expenses are presented last, regardless of amount

Which of the following is classified as a selling expense?


a Salaries of corporate executives
b Salaries of salesmen
c Depreciation of corporate headquarters
d Depreciation of automobile

TRUE OR FALSE

Accumulated Depreciation appears on the income statement.


FALSE. Accumulated depreciation is a contra-asset account.

The account unearned revenue shall be included in the profit or loss statement
FALSE. Unearned revenues are liability account

Under the natural form income statement, the freight-out account is included in the selling and
distribution expense.
FALSE. Natural form income statement does not categorize expenses under selling and distribution.
According to the accounting standard, when preparing the profit or loss statement, revenues are
recognized in the accounting period in which cash is received.
FALSE. Under accrual assumption, revenues are recognized when income is earned.

According to the standard, the finance cost and the income tax expense should be presented as a
separate line item.
TRUE.

PROBLEM SOLVING

Hiligaynon Co.
Selling expenses ₱ 1,250,000.00
Multiply: 6 6.00
Cost of goods sold ₱ 7,500,000.00
Ending inventory 500,000.00
Freight-in (300,000.00)
Purchase returns 900,000.00
Beginning inventory (400,000.00)
Gross Purchases ₱ 8,200,000.00

Company's
Beginning inventory ₱ 250,000.00
Net cost of purchases 85,000.00
Cost of goods sold (285,000.00)
Company's ending inventory ₱ 50,000.00

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