ACC 109_P3 Quiz #1 March 6, 2023

Name: ___________________________________________________________________ Section: ______________________

Instruction: ENCIRCLE THE LETTER OF THE CORRECT ANSWER USING A BALLPEN. NO ERASURES ALLOWED.

1. Which statement is incorrect concerning fair presentation of financial statements?

A. Fair presentation requires the faithful representation of the effects of transactions and other events.
B. Financial statements shall present fairly the financial position, financial performance and cash flows of entity.
C. In virtually all circumstances, a fair presentation in achieved by compliance with applicable PFRS.
D. An entity whose financial statements comply with PFRS shall not make an explicit and unreserved statement of such
compliance in notes.

2. Which statement indicates a going concern?

A. Management intends to liquidate the entity.
B. Management intends to cease the operations of
C. Management has no realistic alternative but to cease the operations of the entity.
D. None of these would indicate going concern

3. The effects of transactions and other events on economic resources and claims are depicted in the periods in which those
effects occur even if the resulting cash receipts and payments occur in a different period.
A. Accrual accounting C. Modified accrual accounting
B. Cash accounting D. Modified cash accounting

4. Technically, offsetting in financial statements is accomplished when

A. The allowance for doubtful accounts is deducted from
B. The accumulated depreciation is deducted from property, plant and equipment.
C. The total liabilities are deducted from total assets.
D. Gain or loss from disposal of noncurrent asset is reported by deducting from the proceeds the carrying amount of the
asset and the related disposal cost.

5. Which statement in relation to financial statements is incorrect?

A. General purpose financial statements do not and cannot provide all of the information that primary users need.
B. General purpose financial statements are designed to show the value of the reporting entity.
C. General purpose financial statements are intended to provide common information to users.
D. Financial statements are largely based on estimation and judgement rather than exact depiction.

6. An entity shall clearly identify each financial statement and display all of the following, except
A. Name of the reporting entity.
B. Names of major shareholders of the entity.
C. The presentation currency.
D. Whether the financial statements cover the individual entity or a group of entities.

7. The primary responsibility for the preparation of the financial statements is reposed in
A. Management of the entity C. External auditor
B. Internal auditor D. Controller

8. An entity shall classify an asset as current under all of the following conditions, except
A. The entity expects to realize the asset or intends to sell or consume it within the entity’s normal operating cycle.
B. The entity holds the assets for the purpose of trading.
C. The entity expects to realize the asset within twelve months after the reporting period.
D. The asset is cash or a cash equivalent that is restricted to settle a liability for more than twelve months after the
reporting period.

9. XYZ Company provided the following data on December 31,2014:

Cash, including sinking fund of P500,000 2,000,000
Notes receivable 1,200,000
Note receivable discounted 700,000
Accounts receivable - unassigned 3,000,000
Accounts receivable - assigned 800,000
Allowance for doubtful accounts 100,000
Equity of assignee in accounts receivable assigned 500,000
Inventory, including P600,000 cost of goods in transit
purchased FOB destination. The goods were
received on January 3, 2015 2,800,000
What total amount of current assets should be reported on December 31,2014?

Cash (2,000,000-500,000) 1,500,000

Notes receivable 1,200,000
Note receivable discounted (700,000)
Accounts receivable - unassigned 3,000,000
Accounts receivable - assigned 800,000
Allowance for doubtful accounts (100,000)
Inventory (2,800,000-600,000) 2,200,000
Total current assets 7,900,000
The equity of the assignee in assigned accounts shall not be offset against the assigned accounts receivable but included in current
ACC 109_P3 Quiz #1 March 6, 2023

liabilities.
The note receivable discounted should be deducted from the total notes receivable with disclosure of contingent liability

10. XYZ Company was incorporated on January 1, 2014 with P5,000,000 from the issuance of share capital and borrowed funds of
P1,500,000. During the first year, net income was P2,500,000. On December 15, the entity paid a P500,000 cash dividend. On
December 31,2014, the liabilities had increased to P1,800,000. On December 31,2014, what amount should be reported as total
assets?

Liabilities 1,800,000
Share capital 5,000,000
Retained earnings (P2,500,000 less dividend P500,000) 2,000,000
Total liabilities and shareholders' equity 8,800,000

11. XYZ Company reported the following liability balances on December 31, 2014:
Accounts payable 5,000,000
Bonds payable, due December 30, 2015 10,000,000
Deferred tax liability 2,500,000
Note payable-bank 4,000,000
The bank note payable matures on June 30, 2015. On March 1, 2015, the bank note payable was refinanced on a long-term basis.
The financial statements were issued on March 31, 2015. What total amount should be reported as current liabilities?

Accounts payable 5,000,000

Bonds payable, due December 30, 2015 10,000,000
Note payable-bank 4,000,000
Total current liabilities 19,000,000

12. XYZ Company had P2,000,000 note payable that is due on February 28, 2015. The entity borrowed P1,600,000 on February 25,
2015 which has a five-year term and used the proceeds to pay down the note and used other cash to pay the balance. How
much of the P2,000,000 note is classified as noncurrent in the December 31,2014 financial statements that were issued on
March 31, 2015?
A. 0 B. 1,600,000 C. 400,000 D. 2,000,000
The whole P2,000,000 becomes current liability since it will be due within 12 months after the reporting period.
13. XYZ Company provided the following information at year-end:
Share capital 15,000,000
Share premium 5,000,000
Treasury shares, at cost 2,000,000
Actuarial loss on defined benefit plan 1,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment-credit 1,500,000
What amount should be reported as total shareholders' equity?

Share capital 15,000,000

Share premium 5,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment - credit 1,500,000
Actuarial loss on defined benefit plan ( 1,000,000)
Treasury shares, at cost ( 2,000,000)
Total shareholders' equity 31,500,000
The credit in the cumulative translation adjustment account is a translation gain.
If the cumulative translation adjustment account has debit balance, it is a translation loss
14. ABC Company provided the following information for 2014:
January 1 December 31
Current assets 240,000 ?
Property, plant, and equipment 1,600,000 1,700,000
Current liabilities ? 130,000
Noncurrent liabilities 580,000 ?
Working capital of P92,000 remained unchanged from January 1 to December 31, 2014. Net income in 2014 was P64,000. No
dividends were declared during 2014 and there were no other changes in owners' equity. What is the amount of noncurrent
liabilities on December 31, 2014?
A. 340,000 C. 580,000 B. 432,000 D. 616,000

.
15. An asset is recognized when
A. The cost or value of the asset can be measured reliably.
B. It is probable that future economic benefit will flow to the entity.
C. The entity obtains control of the rights associated with the asset.
D. It is probable that future economic benefit will flow to the entity and the cost or value of the asset can be measured
reliably.
ACC 109_P3 Quiz #1 March 6, 2023

16. Which of the following should be classified as current asset?

A. Cash surrender value of a life insurance policy.
B. Cash designated for the redemption of callable preference share.
C. Trade installment accounts receivable normally collectible in 18 months.
D. A deposit on machinery ordered, delivery of which will be made within six months.

17. The overall objective of financial reporting is to provide information

A. That is useful for decision making
B. About assets, liabilities and equity
C. About financial performance during a period
D. That allows owners to assess performance of management

18. In which section of the statement of financial position should employment taxes due for settlement in 15 months' time be
presented?
A. Current assets C. Noncurrent assets
B. Current liabilities D. Noncurrent liabilities

19. Working capital is

A. Total current assets
B. Capital invested in business'
C. Total current assets minus total current liabilities
D. The group of assets which enables the entity to operate profitably

20. The presentation and classification of items in the financial statements shall be retained from one accounting period to the
next.
A. Aggregation
B. Consistency of presentation
C. Comparability
D. Materiality

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

A. The nature of expenses.
B. The function of expenses.
C. Either the nature of expenses or the function of expenses, whichever the entity would prefer to present.
D. Either the nature of expenses or the function of expenses, whichever provides information that is reliable and more relevant.

22. Separate line items in an analysis of expenses by function include

A. Cost of sales, administrative expenses and distribution expenses
B. Depreciation, purchases, employee benefits and advertising costs
C. Purchases, transport costs, employee benefits, depreciation, extraordinary items
D. Purchases, distribution costs, administrative costs, employee benefits, depreciation

23. The term "comprehensive income"

A. Is synonymous with the term "net income".
B. Is the net change in owners' equity for the period.
C. Must be reported on the face of the income statement.
D. Includes all changes in equity during a period except those resulting from investments by and distributions to owners.

Use the following information that pertains to beta manufacturing company to answer questions 24 and 25:

Beginning direct materials inventory P 20,000

Beginning WIP inventory 20,000
Beginning finished goods inventory 40,000
Ending direct materials inventory 10,000
Ending WIP inventory 100,000
Ending finished goods inventory 50,000
Purchases 140,000
Direct labor 160,000
Factory overhead 200,000

24. What is the amount of direct materials used during the period?

Beginning materials inventory P 20,000

Add Materials Purchased 140,000
Total cost of materials available for use 160,000
Deduct Materials inventory, End 10,000
Cost of materials used P150,000

25. What is the amount of cost of goods sold during the period?
Cost of goods manufactured P430,000
Add finished goods inventory, beginning 40,000
Total cost of goods available for sale 470,000
ACC 109_P3 Quiz #1 March 6, 2023

Deduct finished goods inventory, end 50,000

Cost of goods sold P420,000

26. Zeno Company maintains a markup of 60% based on cost. The entity's distribution and administrative expenses average 30%
of sales. Sales amounted to P9,600,000 for current year. What is the net income for the current year?
A. 720,000 C. 2,880,000
B. 960,000 D. 3,600,000

27. Parker Company reported operating expenses as distribution cost and general or administrative. The adjusted trial balance at
the end of the current year included the following expense accounts:
Accounting and legal fees 1,450,000- ADMIN
Advertising 1,500,000- DISTRIBUTION
Freight out 750,000- DISTRIBUTION
Interest 600,000- ADMIN
Loss on sale of long-term investment 300,000- OTHER EXPENSE
Officers' salaries 2,250,000- ADMIN
Property taxes and insurance 300,000- ADMIN
Rent for office space 1,800,000-ADMIN AND DISTRIBUTION (1/2)
Sales salaries and commissions 1,400,000-DISTRIBUTION
One-half of the rented premises is occupied by the sales department. What total amount should be included in distribution costs
for the current year?
A. 3,650,000 C. 4,900,000
B. 4,550,000 D. 6,000,000

28. Gianina Company reported the following information for the current year:
Inventory, January 1 2,000,000
Purchases 7,500,000
Purchase returns and allowances 500,000
Sales returns and allowances 750,000
Inventory at December 31 2,800,000
Gross profit rate on net sales 20%
What is the amount of gross sales for the current year?
A. 7,000,000 C. 8,500,000
B. 7,750,000 D. 9,125,000

The adjusted trial balance of Dahlia Company included the following accounts on December 31, 2014:
Sales 9,500,000
Interest revenue 250,000
Gain sale of equipment 100,000
Revaluation surplus during the year 1,200,000 OCI
Share of profit of associate 350,000
Cost of goods sold 6,000,000
Finance cost 150,000
Distribution costs 500,000
Administrative expenses 300,000
Translation loss on foreign operation 200,000 OCI
Income tax expense 950,000
29. The amount of Profit or Loss for the year P2,300,000
30. The amount of Other Comprehensive Income P1,000,000
Bonus: The amount of Total Comprehensive Income P3,300,000