Name: ____________________________

1. Under the IFRS Conceptual Framework (2010), which of the following is considered a fundamental characteristic rather than an enhancing
characteristic of financial information?
a. Timeliness
b. Verifiability
c. Understandability
d. Faithful Representation
2. Which of the following does not relate to Verifiability?
a. Quantified information need not be a single point estimate to be verifiable. A range of possible amounts and the related probabilities can
also be verified.
b. Generally, the older the information is the less useful it is. However, some information may continue to be useful long after the
end of a reporting period because, for example, some users may need to identify and assess trends.
c. Direct verification means verifying a representation through direct observation, for example, by counting cash.
d. An example indirect verification is verifying the carrying amount of inventory by checking the inputs and recalculating the ending inventory
using the same cost flow assumption.
3. Which government body is responsible for the design, preparation and approval of accounting systems of government agencies?
a. Department of Budget & Management c. COA
b. Bureau of Treasury d. Government Agencies
4. The amortization of intangible assets over their useful lives is justified by the
a. Economic entity assumption
b. Going concern assumption
c. Monetary unit assumption
d. Historical cost assumption
5. Which step in the accounting cycle is completed later than the others?
a. Posting
b. Adjustments
c. Journalizing
d. Identification and measurement of transactions
6. This accounting objective emphasizes the importance of the Income Statement as it is geared toward proper income or performance
determination of the enterprise
a. Fund theory
b. Entity theory
c. Proprietary theory
d. Residual equity theory
7. Under the Conceptual Framework for Financial Reporting(2010), which of the ff statements is NOT a feature of financial information’s
“Comparability” characteristics?
a. Comparability is uniformity
b. A comparison requires at least two items
c. Consistency, although related to comparability, is not the same.
d. Comparability is the goal; consistency helps to achieve the goal.
8. Consistency in financial reporting requires that:
a. Gains and losses should not appear in the income statement
b. Effect of changes in accounting treatment be properly disclosed
c. Accounting procedures be adopted that give a consistent rate of return
d. Expenses be reported as charges against the period in which they are incurred
9. The information provided by financial reporting pertains to:
a. Individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers
b. Business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers
c. Individual business enterprises, industries and an economy as a whole, rather than to members of society as consumers
d. An economy as a whole and to members of society as consumers, rather than to individual enterprises or industries
10. During a period when an enterprise is under the direction of particular management, financial reporting will directly provide information about:
a. Management performance but not enterprise performance
b. Enterprise performance but not management performance
c. Both enterprise performance and management performance
d. Neither enterprise performance and management performance
11. Which of the ff is most like not considered as cash for financial reporting purposes?
a. Bank drafts and money orders
b. Stale checks issued to creditors
c. Post-dated checks from customers
d. Undelivered checks to trade suppliers
12. Cash denominated in foreign currency shall be translated to Philippine peso using
a. Closing rate
b. Average rate
c. Passing rate
d. Historical rate
13. Significant deposits in a foreign bank subject to foreign bank restriction should be classified as:
a. As non-trade receivables with appropriate disclosure
b. As part of noncurrent assets with appropriate disclosure
c. As cash and cash equivalents with appropriate disclosure
d. As held-to-maturity securities with appropriate disclosure
14. Checks drawn before balance sheet date but held for later delivery (UNDELIVERED CHECKS)
a. Should be treated as trade receivable
b. Should be regarded as cash equivalents
c. Should be restored back to cash balance
d. Should be treated as outstanding checks for bank reconciliation process
15. What happens when an entity records the payment of payable made in the subsequent period as if it were made in the current period?
a. Window dressing
b. Lapping
c. Kiting
d. Fishing
16. Which of the following is an INCORRECT application of the Imprest system of cash control?
a. Cash receipts must be deposited on a regular basis
b. Cash disbursements must be made through checks, regardless of the amount
c. Material amount of cash disbursements must be made in the form of checks
d. Insignificant cash disbursements must be made out of the petty cash fund
17. What is the major purpose of an Imprest petty cash fund?
a. To ease the payment of cash to vendors
b. To effectively control cash disbursements
c. To effectively plan cash inflows and outflows
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 d. To determine the honesty of the petty cashier
18. Under the Imprest fund system, the ‘petty cash fund’ account is debited
a. Only when the fund is created
b. When the fund is created and every time it is replenished
c. When the fund is created and when the size of the fund is increased
d. When the fund is abolished and when the size of the fund is decreased
19. IOUs found in the petty cash drawer at the time of replenishment should be reported as part of
a. Inventories
b. Receivables
c. Trading securities
d. Cash and cash equivalents
20. An employee asks for an authorized reimbursement of transportation charges out of the Imprest petty cash fund. To document this
transaction, the petty cashier should
a. Debit ‘transportation expense’
b. Debit ‘receivable from employee’
c. Credit ‘cash and cash equivalents’
d. Prepare the petty cash voucher only
21. A debit balance (i.e., shortage) in the ‘Cash Short or Over’ account at the end of the period that can be attributed to the fault of the petty
cashier is treated as a
a. Receivable from employee
b. Miscellaneous expense
c. Miscellaneous income
d. Payable to employee
22. Balance per bank is LESS than correct balance. Assuming no error was committed, there must be
a. Deposits in transit
b. Outstanding checks
c. Erroneous bank debit
d. Deposits credited by the bank but not yet recorded by the company
23. Which will NOT require an adjusting entry in the depositor’s books?
a. Bank service charge
b. No-sufficient-Fund (NSF) check from customer
c. Deposits of another company is credited to the account of the depositor
d. Check for payment amounting to P 690 is recorded by the depositor as P 6,900
24. Statement I: TRADE receivables are classified as current assets if they are to be collected within one year or within the normal operating
cycle, whichever is shorter.
Statement II: NON-TRADE receivables are classified as current assets if they are to be collected within one year or within the normal
operating cycle, whichever is longer.
a. Both Statements are true c. Only statement I is true
b. Both Statements are false d. Only statement I is false
25. What is an example of TRADE receivables?
a. Claims in litigation c. Amounts due from customers
b. Loans to employees d. Amounts due to customers
26. Which of the ff accounts is considered as a form of receivable?
a. Accrued Income c. Prepaid Expense
b. Accrued Expense d. Unearned Income
27. Uncollectible account expense:
a. Represents the loss in accounts receivable that eventually turn out to be uncollectible
b. Is the amount an entity must pay whenever a customer fails to pay his or her account
c. Should not occur if a company properly investigates customers based on credit history
d. Is the amount an entity must pay to a collection agent to recover amounts on overdue accounts
28. The advantage of relating bad debt experience to accounts receivable is that this approach
a. Does not require knowledge of the balance in the allowance for doubtful accounts
b. Gives a reasonably correct amount of receivables in the balance sheet
c. Does not require estimates of uncollectible accounts
d. Relates bad debt expense to period of sale
29. Which method of recording bad debt loss is consistent with accrual accounting?
a. Allowance Method c. Percent of sales method
b. Direct Write-off method d. Percent of accounts receivable
30. Under the allowance method, the entry to recognize bad debt expense:
a. Increases net income c. Has no effect on current assets
b. Decreases current assets d. Has no effect on net income
31. Under the allowance method, the allowance for doubtful accounts would decrease when:
a. Specific account receivable is collected
b. Accounts previously written off is collected
c. Specific uncollectible account is written off
d. Account previously written off becomes collectible
32. Under the allowance method, the entry to record the write-off of a specific account would:
a. Decrease both accounts receivable and net income
b. Increase the allowance for uncollectible accounts and decrease net income
c. Decrease both accounts receivable and the allowance for uncollectible accounts
d. Decrease accounts receivable and increase the allowance for uncollectible accounts
33. Under the allowance method, entries at the time of collection of an account previously written off would:
a. Increase net income
b. Have no effect on net income
c. Decrease the allowance for doubtful accounts
d. Have no effect on the allowance for doubtful accounts
34. Statement I: Interest bearing long-term receivables shall be stated at face value.
Statement II: Non-interest bearing long-term receivables shall be stated at present value
Statement III: Short term receivables, interest bearing or not, are generally stated at face value.
a. All statements are true
b. All statements are false
c. Only statement II is false
d. Only statement III is false
35. Which accounting principle or concept permits the direct write-off method of accounting for bad debts?
a. full-disclosure principle b. business entity concept
c. matching principle d. materiality principle

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 Laboratory Exercise 001

the checkbook balance of JR Company on December 31, 2016 was P4,000,000. Data about certain cash items
follow:

1. A customer check amounting to P200,000 dated January 2, 2017 was included in the December 31, 2016
checkbook balance.
2. Another customer check for P500,000 deposited on December 22, 2016 was included in its checkbook
balance but returned by the bank for insufficiency of fund. This check was redeposited on December 26,
2016 and cleared two days later.
3. A P400,000 check payable to supplier dated and recorded on December 30, 2016 was mailed on January
16, 2017.
4. A petty cash fund of P50,000 with the following summary on December 31, 2016

Coins and currencies 5,000

Petty cash vouchers 43,000
Return value of 20 cases of soft drinks 2,000
  50,000
A check of P43,000 was drawn on December 31, 2016 payable to Petty Cash.

Question:

1. What is the "cash" balance on December 31, 2016?

Benson Plastics Company deposits all receipts and makes all payments by check. The following information is
available from the cash records:
 
MARCH 31 BANK RECONCILIATION
Balance per bank                                          P26,746
Add:  Deposits in transit                                    2,100
Deduct:  Outstanding checks                            (3,800)
Balance per books                                         P25,046
  
Month of April Results
                                                                                            Per Bank        Per Books
Balance April 30                                                                      P27,995            P28,855
April deposits                                                                            10,784              13,889
April checks                                                                               11,600              10,080
April note collected (not included in April deposits)                          3,000                -0-
April bank service charge                                                                35                    -0-     
April NSF check of a customer returned by the bank
            (recorded by bank as a charge)                                        900                    -0-
 
Questions:
1. Calculate the amount of the April 30:
P5 205
Deposits in transit - 

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 P2 280
Outstanding checks -
 
2. What is the April 30 adjusted cash balance? 
P30 920

ASSIGNMENT 001

1. Is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
Answer: Financial Instrument
2. It is the most common measure of financial transactions
Answer: Historical cost
3. Which of the following is not a characteristic of a financial instrument?
Answer: The contract shall not give rise to a financial asset of one party and financial
liability or equity instrument of another party.
4. The system of analyzing the effects of transactions and recording them in items of debit and
credit is known as
Answer: Double entry bookkeeping system
5. What is the quality of information that enables users to better forecast future operations?
Answer: Relevance
6. All are non-financial assets except;
Answer: Cash
7. The underlying theme of the conceptual framework is
Answer: Decision usefulness
8. It is structed representations of the financial position and financial performance of an entity
Answer: Financial statements
9. Which measurement base are used in preparing the financial statements according to the
Conceptual Framework?
Answer: Historical cost, current cost, realizable value and present value
10.The debt and credit are made in the books of original entry called
Answer: Journal

Short Quiz 002

1. The focus of government accounting is the custody and administration of;
Answer: Public funds
2. It refers to a firm commitment to provide credit under pre-specified terms and conditions.
Answer: Loan commitment
3. The Chairman and members of the FRSC shall have a term of renewable for another term.
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Answer: 3 years
4. Includes maintaining the records, producing the financial reports, preparing the budgets, and
controlling and allocating the resources of the entity
Answer: Private Accounting
5. Represent the rules, procedures, practice and standard followed in the preparation and
presentation of financial statements.
Answer: Generally accepted accounting principles
6. Financial information can be used as an input to processes employed by users to predict future
outcomes
Answer: predictive value
7. After initial recognition, an entity shall measure a financial asset either at
Answer: fair value or amortized cost
8. Classifying is the sorting or grouping of similar and interrelated economic transactions into
their respective classes. It is actually accomplished by
Answer: Posting to the ledger
9. This refers to a debit instrument which can be converted at a specified price into equity of the
issuer
Answer: Convertible debt
10. Those who have ready access to accounting information for their decision-making
needs;
Answer: Internal Users

Short Quiz 002

1. What is the adjusting entry for a customer NSF check
Answer: Debit accounts receivable and credit cash
2. Which of the following should be disclosed in a summary of significant accounting policies?
I. Management’s intention to maintain or vary the dividend payout ratio.
II. Criteria for determining which investments are treated as cash equivalents
III. Composition of the sales order backing by segment
Answer: I and III
3. What happens when a petty cash is in use?
Answer: Expenses paid with petty cash are recorded when the fund is replenished
4. The entry to replenish the petty cash fund for P100 of various minor expenditures would
include a_________?
Answer: debit to Petty Cash
5. Which of the following statements is false?
Answer: A certified check is one drawn by a bank upon itself
6. Which of the following is not a basis characteristic of a system of cash control?
Answer: Combined responsibility for handling and recording cash
5-2
 9. Philip Company had the following account balances on December 31, 2016

Cash in bank-current account 5,000,000

Cash in bank-payroll account 1,000,000
Cash on hand 500,000

Cash in bank-restricted account for building construction expected

To be finished in 2003 3,000
Time deposit purchased on
December 15, 2016 and due on
March 15, 2017 2,000,000

The cash on hand includes a P200,000 check payable to Philip, dated January 15, 2017. What
amount should be reported as cash and cash equivalents on December 31, 2016?

Answer: 8,300,000

11. An employee asks for an authorized reimbursement of transportation charges out of

the Imprest petty cash fund. To document this transaction, the petty cash cashier should?
Answer: Prepare the petty cash voucher

Assignment 003
1. Long-term notes receivable which nominally bear no interest or an interest which is
unreasonably low shall be recognized initially at
Answer: Present Value
2. Non trade receivables are classified as current assets only if they are seasonably expected to
be realized in cash
Answer: Within one year, the length of the operating cycle notwithstanding
3. Which of the following methods of determining bad debt expense most closely matches
expense to revenue?
Answer: Charging bad debts with percentage of sales for that period.
4. Which of the following is not an objective evidence of impairment of financial asset?
Answer: A decline in the fair value of the asset below its previous carrying amount
5. Which of the following best describes a non-interest bearing note receivable?
Answer: Includes an unspecified principal amount and an unspecified interest amount
6. Jerome Company received a seven-year zero-interest-bearing note on February 22, 2017, In
exchange for property it sold to House Company. There was no established exchange price for
this property and the note has no ready market. The prevailing rate of interest for a note of
this type was 7% on February 22, 2017, 7.5% on December 31, 2017, 7.7% on February 22,
6-2
 2018, and 8% on December 31, 2018. What interest rate should be used to calculate the
interest revenue from this transaction for the years ended December 31, 2017 and 2018,
respectively?
Answer: 7% and 7%
7. Which of the following methods of determining bad debt expense does not match expense and
revenue?
Answer: Charging bad debts as accounts are written off as uncollectible
8. When a note receivable is dishonored, it is debited to;
Answer: Accounts receivable at face value plus interest and other charges
9. After being held for 30 days, a 90-day 10% interest bearing note was discounted at a bank at
12%: Discount will be based on;
Answer: 60 days at 12%
10. If there is an evidence that an important loss on loan receivable has been incurred, the
amount of the loss is equal to the;
Answer: Excess of the carrying amount of the loan receivable over the present value
of the cash flows related to the loan.

Short Quiz 003

1. What is an imputed interest?
Answer: Interest based on implicit rate
2. Assuming that the deal measure of short-term receivable in the balance sheet is the
discounted value of the cash to be received in the future, failure to follow this practice usually
does not make the balance sheet misleading because
Answer: The amount of discount is not material
3. It refers to the amount of cash expected to be collected or the estimated recoverable amount?
Answer: Net Realizable Value
4. Promissory note may be used except:
Answer: When a notes receivable is dishonored
5. On January 1 2017, Chan Company’s allowed for doubtful accounts had a credit balance of
P300,000. During 2017, Chan charged P640,000 to doubtful accounts expense, wrote off
P460,000 of uncollectible accounts receivable, and unexpectedly recovered P120,000 of bad
debts written off in the prior year. The allowance for doubtful accounts at December 31, 2017
should be
Answer: P600,000
6. The commonly used method in accounting for sales discount is
Answer: Gross method
7. When the stated rate is greater than the market rate, the note is at (a)
Answer: Premium

7-2
8. Assuming that the ideal measure of short-term receivable in the balance sheet is the
discounted value of cash to be received in the future, failure to follow this practice usually
does not make the balance sheet misleading because
Answer: The amount of discount is not material
9. It refers to the period of time the interest will pass. It is usually based on a 360-day year
unless it was stated in the problem to find the weighted average interest.
Answer: Term
10. This pertains to the means of converting a catalog list price to the prices actually charged.
Answer: Trade Discounts

Assignment 004
1. The discounted value of the note received by the endorser of the note from the bank is called;
Answer: Proceeds
2. It pertains to the rate of interest used by the bank in computing discount.
Answer: Discount rate
3. After being held for 40 days, a 120-day 12% interest-bearing note receivable was discounted
at a bank at 15%. The proceeds received from the bank equal
Answer: Maturity value less the discount at 15%
4. If a note receivable is discounted without recourse
Answer: Note receivable shall be credited
5. The amount of interest earned by the bank is called;
Answer: Discount
6. Common internal controls for accounts receivable include the following except;
Answer: Review accounts payable journal entries
7. Receivables, as an asset, normally has
Answer: Debit balance
8. If the factor retains a portion of the purchase price to cover probable sales discounts, returns
and allowances such amount is charged to a
Answer: Receivable from factor
9. It pertains to the total amount due on the note at maturity date.
Answer: Maturity Value
10. Notes receivable discounted with recourse should be;
Answer: Excluded from total receivables with disclosure of the contingent liability

Long Quiz 002

1. On December 31, 2017, Green Lantern Company finished consultation services and accepted in exchange
a promissory note with a face value of 400,000, a due date of December 31, 2020, and a stated rate of 5%,
with interest receivable at the end of each year. The fair value of the services is not readily determinable and
the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate
imputed rate of interest of 10%.
The following interest factors are provided:
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able Factors For Three Periods                                5%                 10%           
            Future Value of 1                                                      1.15763          1.33100
            Present Value of 1                                                       .86384         .75132
            Future Value of Ordinary Annuity of 1                  3.15250          3.31000
            Present Value of Ordinary Annuity of 1                 2.72325          2.48685
 
Instructions
350,265
(a)       Determine the present value of the note. - 
(b)       Prepare a Schedule of Note Discount Amortization for Green Company under the effective interest method. 
(Round to whole dollars.)
Answer:
Green Company
Schedule of Note Discount Amortization

Effective Interest Method

5% Note Discounted at 10% (Imputed)

 
Unamortized
Cash Interest Effective Discount
Date Discount Present Value of Note
5% Interest 10% Balance
Amortized
12/31/17       49,735 350,265

12/31/18 20,000 35,027 15,027 34,708 365,292

12/31/19 20,000 36,529 16,529 18,179 381,821

12/31/20 20,000 38,179 18,179 0 400,000

  60,000 109,735 49,735    

Question 2:
Entries for bad debt expense.
A trial balance before adjustment included the following:
                                                                        Debit                                         Credit           
            Accounts receivable                          80,000
            Allowance for doubtful accounts                                                             730
            Sales                                                                                                   340,000
            Sales returns and allowances            8,000
 
Give journal entries assuming that the estimate of uncollectible is determined by taking:
A. 5% of gross accounts receivable
3,270
Bad Debt Expense                                         
3,270
                        Allowance for Doubtful Accounts                          
           
80,000
Gross receivables         
5%">5%
Rate                            

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 4,000
Total allowance needed  
730
Present allowance            
3,270
Adjustment needed         
 
B.  1% of net sales.
 
3,320
Bad Debt Expense                                         
3,320
                        Allowance for Doubtful Accounts                           
 
340,000
Sales                                        
8,000
Sales returns and allowances      
332,000
Net sales                                    
1%
Rate                                              
3,320
Bad debt expense                          

Question 3:
Accounts receivable in the amount of 250,000 were assigned to the Fast food Finance Company by Marshmallow,
Inc., as security for a loan of 200,000. The finance company charged a 4% commission on the face amount of the
loan, and the note bears interest at 9% per year.
During the first month, Marshmallow collected 130,000 on assigned accounts. This amount was remitted to the
finance company along with one month's interest on the note.
Instructions
Make all the entries for Marshmallow Inc. associated with the transfer of the accounts receivable, the loan, and the
remittance to the finance company.
Answer:
192,000
Cash                                                    
8,000
Finance Charge                                    
200,000
            Notes Payable                                               
 
130,000
Cash                                                    
130,000
            Accounts Receivable                                     
 
130,000
Notes Payable                                    
1,500
Interest Expense                               
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 131,500
            Cash                                                                

Long Quiz 002

1. A transfer of financial assets should be reported as sale if certain conditions are met. Which of
the following is one of the conditions?
Answer: Transferees may pledge or exchange the assets
2. Which of the following is used to account for probable sales discount, sales returns, and sales
allowances?
Answer: Due from factor: Yes Recourse Liability: No
3. The transferor is considered to have surrendered control over its receivables if;
Answer: All of the above must occur
4. If the transferor of accounts receivable cannot meet all conditions for sale, the transferor
records the proceeds received as a debit to Cash and records a corresponding credit to a
Answer: Liability Account
5. On January 2, year 1, Emo Co. sold equipment with a carrying amount of P480,000 in
exchange for a P600,000 noninterest-bearing note due January 2, year 4. There was no
established exchange price for the equipment. The prevailing rate of interest for a note of this
year type at January 2, year 1, was 10%. The present value of P1 at 10% for three periods is
0.75.
In Emo’s year 1 income statement, what amount should be reported as interest income?
Answer: P45,000
6. Signal Corp. factored P750,000 of accounts receivable to Thorne Company on December 3,
year 2. Control was surrendered by Signal. Throne accepted the receivables subject to
recourse for nonpayment. Thorne assessed a fee 2% and retains a Holdback equal to 4% of
the accounts receivable. In addition, Thorne charged 12% interest computed on a weighted
average time to maturity of the receivables of fifty-one days. The fair value of the recourse
obligation is P15,000. Assuming all receivables are collected, Signal’s cost of factoring the
receivables would be;
Answer: P27,575
7. If a transfer of receivables with recourse qualifies to be recognized as a sale, the proceeds
from the sale are
Answer: Reduced by the fair value of the recourse obligation.
8. When a customer purchases merchandise inventory from a business organization, she may be
given a discount which is designed to induce prompt payment. Such a discount is called a(n)
Answer: Cash discount
9. All but one of the following are required before a transfer of receivables can be recorded as a
sale.
Answer: The transferor maintains continuing involvement
11-2
 10. The percentage-of-sales method results in a more accurate valuation of receivables on
the balance sheet.
Answer: False
11. Which of the following is true?
Answer: The arrangement of having collateral transferred to a secured party is known as
a pledge
12. What is the preferable presentation of accounts receivable from officers, employees, or
affiliated companies on a statement of financial position
Answer: As assets but separately from other receivables
13. If a transfer of receivables with resource is not classified as a sale, and the proceeds
received are less than the net receivables, the difference shall be treated as a(n)
Answer: Discount on transferred receivables that is to be amortized to interest expense
over the borrowing period.
14. AC Inc. made a P10,000 sale on account with the following terms: 1/15, n/30. If the
company uses the net method to record sales made on credit, how much should be recorded
as sales revenue?
Answer: P9,900
15. Bojun Company assigned its receivable to Joy Bank on a without-recourse basis.
Control was surrendered in the transaction to Joy Bank. Bojun received cash as a result of the
transaction, which is best described as;
Answer: Sale of Bojun’s accounts receivable to Joy, with the risk of uncollectible
accounts transferred to Joy
16. Maxwell Corporation factored, with guarantee (recourse), P100,000 of accounts
receivable with Huskie Financing. The finance charge is 13%, and 5% was retained to cover
sales discounts, sales returns, and sales allowances. What amount of cash would Maxwell
receive on the sale of receivable?
Answer: P92,000
17. Why is the allowance method preferred over the direct write-off method of accounting
for bad debts?
Answer: Improved matching of bad debts expense with revenue
18. Moon Inc. factors P1,000,000 of its accounts receivable with guarantee (recourse) for a
finance charge of 4% The finance company retains an amount equal to 8% of the accounts
receivable for possible adjustments. What would be the debit to Cash in the journal entry to
record this transaction?
Answer: P880,000
19. Laugh Co. purchased from Oak Co. a P20,000, 8%, five-year note that required five
equal annual year-end payments of P5,009. The note was discounted to yield a 9% rate to
laugh. At the date of purchase, Laugh recorded the note at its present value of P19,48. Laugh

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 does not elect the fair value option for reporting its financial liabilities. What should be the
total interest revenue earned by Leaf over the life of this note?
Answer: 5,560
20. In deciding when financing with receivables is a secured borrowing a sale, the critical
element is the extent to which;
Answer: The transferee has received substantially all the risks and rewards of ownership.
21. Tay Corp. factored P400,000 of accounts receivable to Rick Corp. on July 1, year 2.
Control was surrendered by Tay. Rick accepted the receivables subject to recourse for
nonpayment. Rick assessed a fee of 2% and retains a holdback equal to 5% of the accounts
receivable. In addition, Rick charged 15% interest computed on a weighted-average time to
maturity of the receivables of forty-one days. The fair value of the recourse obligation is
P12,000
Answer: P365,260
22. The purpose of assigning accounts receivable is to;
Answer: Provide collateral for a loan
23. Which of the ff. is not a basic form of financing agreement to obtain cash from accounts
receivable?
Answer: Deferring
24. The equity of the assignor in assigned accounts is equal to;
Answer: Assigned accounts receivable minus the bank loan balance
25. Which of the following is a generally accepted method of determining the amount of
the adjustment to bad debt expense?
Answer: A percentage of sales not adjusted for the balance in the allowance
26. Moon Inc assigns P1,500,000 of its accounts receivables as collateral for a P1 million
loan with a bank. The bank assesses a 3% finance fee and charges interest on the note at
6%. What would be the journal entry to record this transaction?
Answer: Debit Cash for P970,000, Debit Finance Charge for P30,000, and credit notes
payable for P1,000,000
27. Shell Company has the following account balances at year-end: Accounts receivable
P80,000
Allowances for doubtful accounts 4,800 Sales discount 3,200 Shell should report accounts receivable
at a net amount of
Answer: 75,000
28. Scary Corp. factored P600,000 of accounts receivable to Brave Corp. on October 1,
year 2. Control was surrendered by Scary. Brave accepted the receivables subject to recourse
for nonpayment. Brave assessed a fee of 3% and retains a holdback equal to 5% of the
accounts receivable. In addition, Brave charged 15% interest computed on a weighted-
average time to maturity of the receivables of fifty-four days. The fair value of the recourse
obligation is P9,000. Scar will receive and record cash of;
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Answer: P538,685
29. Which of the following concepts relates to using the allowance method in accounting for
accounts receivable?
Answer: Bad debt expense is an estimate that is based on historical and prospective
information
30. Which of the following is considered a sale of receivables?
Answer: None of the choices

Assignment 005
Korman Company has the following securities in its portfolio of trading equity securities on December 31, 2010:
  Cost Fair Value
5,000 shares of Thomas Corp., Common $155,000 $139,000
10,000 shares of Gant, Common   182,000   190,000
   $337,000  $329,000
 
All of the securities had been purchased in 2010. In 2011, Korman completed the following securities transactions:
March 1    Sold 5,000 shares of Thomas Corp., Common @ $31 less fees of $1,500.
April 1      Bought 600 shares of Werth Stores, Common @ $45 plus fees of $550.
 
The Korman Company portfolio of trading equity securities appeared as follows on December 31, 2011:
12-31-10
a)    the 2010 adjusting entry. Date :
8 000
Securities Fair Value Adjustment (Trading)                                       
 
3-1-11
(b)    the sale of the Thomas Corp. stock. Date :
153,500
Cash                                             
1,500
Loss on Sale of Securities                 
155 000
Trading Securities                           
4-1-11
(c)    the purchase of the Werth Stores' stock. Date :
27 550
Cash                        

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 12-31-11
(d)    the 2011 adjusting entry. 
19 450
Securities Fair Value Adjustment (Trading)                     

Check

SHORT QUIZ 005

Bonds payable issued with scheduled maturities at various dates are called

Select one:
a. Term bonds
b. Bearer Bonds
c. None of the choices

d. Serial bonds
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Question 2
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From an investor's point of view, a liquidating dividend from an investee is:

Select one:
a. A dividend declared by the investee in excess of its earnings in the current year
b. A dividend declared by the investee in excess of the investee's retained earnings
c. A dividend declared by the investee in excess of its earnings since acquisition by the investor

d. Any dividend declared by the investee since acquisition

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Question 3
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The term used for bonds that are unsecured as to principal is

Select one:
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a. callable bonds
b. indebenture bonds
c. debenture bonds

d. junk bonds
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Question 4
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It is defined as a market in which transactions for the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis

Select one:
a. Stock market
b. Principal market
c. Active market

d. Global market
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Question 5
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The fair value at initial recognition is

Select one:
a. The price paid to acquire the asset
b. The price paid to acquire the asset less transaction costs
c. The carrying amount of the asset acquired

d. The price paid to transfer or sell the asset

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Question 6

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Correct
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Trading on the equity is

Select one:
a. The "revaluation surplus" related to increases or decreases in items such as property, plant, and equipment.
b. The amount each share would receive if the entity were liquidated.
c. A return on assets that is higher than the cost of financing these assets.

d. The ratio of the entity's cash dividends to net income.

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Question 7
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The fair value option

Select one:
a. Must be applied to all instruments the entity holds
b. All of the choices are correct.
c. May be selected as a valuation method by the entity at any time during the first two years of ownership

d. Reports all gains and losses in income

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Question 8
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On January 1, 2012, Jordan Inc. acquired 30% of Nico Corp. Jordan used the equity method to account for the
investment. On January 1, 2013, Jordan sold 2/3 of its investment in Nico. It no longer had the ability to exercise
significant influence over the operations of Nico. How should Jordan have accounted for this change?

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Select one:
a. Jordan should use the fair-value method for 2013 and future years but should not make a retrospective
adjustment to the investment account.
b. Jordan has the option of using either the equity method or the fair-value method for 2012 and future years.
c. Jordan should continue to use the equity method to maintain consistency in its financial statements.

d. Jordan should restate the prior years' financial statements and change the balance in the investment account as
if the fair-value method had been used since 2012.
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Question 9
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A transaction whereby the outstanding shares are called in and replaced by a larger number, accompanied by a
reduction in the par or stated value of each share.

Select one:
a. Cash dividends
b. Split up
c. Share Split

d. ex-dividend
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Question 10
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Fair value is;

Select one:
a. Market-based measurement and not an entity-specific measurement
b. And entity-specific measurement and not a market-based measurement
c. Market-based measurement and an entity-specific measurement
d. Neither a market based measurement nor an entity-specific measurement

Assignment 006

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 1. On January 2, 2016, Lovely, Inc. acquired a 15% interest in CPS Corp. by paying P8,000,000 for 100,000
ordinary shares. On this date, the net assets of CPS Corp totaled P40,000,000. The fair values of CPS
corp.'s identifiable assets and liabilities were equal to their book values. Lovely did not have the ability to
exercise significant influence over the operating and financial policies of CPS. Lovely received dividends of
P1.40 per share from CPS on October 1, 2016. CPS reported net income of P5,000,000 for the year ended
December 31, 2016. Lovely classified the investment as at fair value through other comprehensive income.
Market price for the 100,000 shares was P9,000,000 on December 31, 2016.
Lovely paid P30,000,000 on January 1, 2017 for 300,000 additional CPS ordinary shares, which represents
a 25% interest in CPS. The fair value of CPS Corp.'s identifiable assets, net of liabilities, was equal to their
book values of P92,000,000. As a result of this additional acquisition, Lovely has the ability to exercise
significant influence over the operating and financial policies of CPS. Lovely received a dividend of P2.70
per share on October 5, 2017. CPS reported net income of P6,000,000 for the year ended December 31,
2017. The investment's fair value on December 31, 2017, is P45,000,000.
What amount of gain on remeasurement to equity should be reported in the 2017 income statement?
Answer: 0
2. On January 2, 2016, Lovely, Inc. acquired a 15% interest in CPS Corp. by paying P8,000,000 for 100,000
ordinary shares. On this date, the net assets of CPS Corp totaled P40,000,000. The fair values of CPS
corp.'s identifiable assets and liabilities were equal to their book values. Lovely did not have the ability to
exercise significant influence over the operating and financial policies of CPS. Lovely received dividends of
P1.40 per share from CPS on October 1, 2016. CPS reported net income of P5,000,000 for the year ended
December 31, 2016. Lovely classified the investment as at fair value through other comprehensive income.
Market price for the 100,000 shares was P9,000,000 on December 31, 2016.
Lovely paid P30,000,000 on January 1, 2017 for 300,000 additional CPS ordinary shares, which represents
a 25% interest in CPS. The fair value of CPS Corp.'s identifiable assets, net of liabilities, was equal to their
book values of P92,000,000. As a result of this additional acquisition, Lovely has the ability to exercise
significant influence over the operating and financial policies of CPS. Lovely received a dividend of P2.70
per share on October 5, 2017. CPS reported net income of P6,000,000 for the year ended December 31,
2017. The investment's fair value on December 31, 2017, is P45,000,000.
What is the total amount of investment-related income that should be reported in the 2016 income
statement?
Answer: P140,000
3. On January 2, 2016, Lovely, Inc. acquired a 15% interest in CPS Corp. by paying P8,000,000 for 100,000
ordinary shares. On this date, the net assets of CPS Corp totaled P40,000,000. The fair values of CPS
corp.'s identifiable assets and liabilities were equal to their book values. Lovely did not have the ability to
exercise significant influence over the operating and financial policies of CPS. Lovely received dividends of
P1.40 per share from CPS on October 1, 2016. CPS reported net income of P5,000,000 for the year ended
December 31, 2016. Lovely classified the investment as at fair value through other comprehensive income.
Market price for the 100,000 shares was P9,000,000 on December 31, 2016.
Lovely paid P30,000,000 on January 1, 2017 for 300,000 additional CPS ordinary shares, which represents
a 25% interest in CPS. The fair value of CPS Corp.'s identifiable assets, net of liabilities, was equal to their
book values of P92,000,000. As a result of this additional acquisition, Lovely has the ability to exercise
significant influence over the operating and financial policies of CPS. Lovely received a dividend of P2.70
per share on October 5, 2017. CPS reported net income of P6,000,000 for the year ended December 31,
2017. The investment's fair value on December 31, 2017, is P45,000,000.
What is the goodwill arising from the acquisition of additional 300,000 shares on January 1, 2017?

Answer: P2,200,000

4. In January 2, 2016, Lovely, Inc. acquired a 15% interest in CPS Corp. by paying P8,000,000 for 100,000
ordinary shares. On this date, the net assets of CPS Corp totaled P40,000,000. The fair values of CPS
corp.'s identifiable assets and liabilities were equal to their book values. Lovely did not have the ability to
exercise significant influence over the operating and financial policies of CPS. Lovely received dividends of
P1.40 per share from CPS on October 1, 2016. CPS reported net income of P5,000,000 for the year ended
December 31, 2016. Lovely classified the investment as at fair value through other comprehensive income.
Market price for the 100,000 shares was P9,000,000 on December 31, 2016.
Lovely paid P30,000,000 on January 1, 2017 for 300,000 additional CPS ordinary shares, which represents
a 25% interest in CPS. The fair value of CPS Corp.'s identifiable assets, net of liabilities, was equal to their
book values of P92,000,000. As a result of this additional acquisition, Lovely has the ability to exercise
significant influence over the operating and financial policies of CPS. Lovely received a dividend of P2.70
per share on October 5, 2017. CPS reported net income of P6,000,000 for the year ended December 31,
2017. The investment's fair value on December 31, 2017, is P45,000,000.
In the December 31, 2016, statement of financial position, what is the carrying amount of the investment in
equity.

Answer: P9,000,000

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 5. On January 2, 2016, Lovely, Inc. acquired a 15% interest in CPS Corp. by paying P8,000,000 for 100,000
ordinary shares. On this date, the net assets of CPS Corp totaled P40,000,000. The fair values of CPS
corp.'s identifiable assets and liabilities were equal to their book values. Lovely did not have the ability to
exercise significant influence over the operating and financial policies of CPS. Lovely received dividends of
P1.40 per share from CPS on October 1, 2016. CPS reported net income of P5,000,000 for the year ended
December 31, 2016. Lovely classified the investment as at fair value through other comprehensive income.
Market price for the 100,000 shares was P9,000,000 on December 31, 2016.
Lovely paid P30,000,000 on January 1, 2017 for 300,000 additional CPS ordinary shares, which represents
a 25% interest in CPS. The fair value of CPS Corp.'s identifiable assets, net of liabilities, was equal to their
book values of P92,000,000. As a result of this additional acquisition, Lovely has the ability to exercise
significant influence over the operating and financial policies of CPS. Lovely received a dividend of P2.70
per share on October 5, 2017. CPS reported net income of P6,000,000 for the year ended December 31,
2017. The investment's fair value on December 31, 2017, is P45,000,000.
What is the carrying amount of the investment in associate on December 31, 2017?

Answer: P40,320,000

SHORT QUIZ 006

1. Which of the following best describes a swap?
Answer: not traded on an organized exchange and is customized to meet the needs of the parties.
2. All of the following are characteristics of a derivative financial instrument except the instrument
Answer: requires a large investment at the inception of the contract.
3. If you elect to not take a discount on trade credit, the effective interest rate on the funds thus obtained
__________ as the time you take to pay increases
Answer: Falls
4. Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is
equal to
Answer: the market rate multiplied by the beginning-of-period carrying amount of the bonds
5. Stock dividends on common stock should be recorded at their fair market value by the investor when the related
investment is accounted for under which of the following methods?
Answer:  Cost (No); Equity (No)
6. Which of the following risks are inherent in an interest rate swap agreement?
I. The risk of exchanging a lower interest rate for a higher interest rate.
II. The risk of nonperformance by the counter party to the agreement.
Answer: Both I and II.
7. DEF Co. purchased a P250,000 life insurance policy on the life of one of its key officers. When is the value of
this policy an asset of the company?
Answer: If the company is the beneficiary and has the right to cancel the policy at its option.
8. The determination of the value or settlement amount of a derivative involves a calculation which uses:
I.An underlying.
II. A notional amount.
Answer: Both I and II.
9. The market price of a bond issued at a discount is the present value of its principal amount at the market rate of
interest
Answer: Plus the present value of all future interest payments at the market rate of interest
10. An investment in an associate or joint venture is accounted for by using the equity method when a parent,
with an investment in an associate and joint venture, elects not to present consolidated financial statements.
Answer: False

LONG QUIZ 003

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ASSIGNMENT 007

Question 1:
The book value of the XYZ Trading’s inventory at year end of 2016 is P9, 500, 000. Included in the amount are the
following items:

1. Merchandise in transit, purchased FOB shipping point, P680, 000

2. Goods held on consignment, P500, 000
3. Goods out on consignment, at cost plus 50% mark up on cost plus  P10, 000 delivery charge, P610, 0000

Required: What is the correct amount of inventory?

8 800 000
Answer: The correct amount of inventory is   
Question 2:

BC Company regularly buys merchandise from DEF Co. and is allowed a trade discount of 20% from the list price.
Crossings made a purchase on March 20, 2016, and received an invoice with a list price of P150, 000, a freight
charge of P2, 500, and payment terms of net 30 days.

Required: What is the total cost of merchandise purchased?

122 500
Answer: The total cost of merchandise is 

Question 3:

Flint Co. records purchase discounts lost and uses perpetual inventories.  Prepare journal entries in general journal
form for the following:
 
(a)       Purchased merchandise costing 900 with terms 2/10, n/30.
(b)       Payment was made thirty days after the purchase.

Required: What is the correct Accounts Payable (a) and Purchase Discounts Lost (b)?
882
(a)            Accounts Payable                         
 
18
(b)        Purchase Discounts Lost                  

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