MULTIPLE CHOICE QUESTIONS

MC1.
One of the objectives of the statement of financial position is to
provide information that assists users in assessing a firm's solvency,
which is the ability to

a. satisfy short-term obligations.

b. meet all obligations as they come due.
C. maintain IAS levels of preference and ordinary dividends.
d. survive a major economic downturn.

MC2. Which form of the statement of financial position lists current

liabilitie after current assets, emphasizing the working capital of
the enterprise?

a. Account form
b. Report form
C. Financial position formn
d Horizontal form

MC3. Which of the following is a non-current liability on December 31,

2021 statement of financial position?

a. Bonds payable maturing on March 31, 2022, which were

refinanced by issuing 5-year bonds payable in 2022 before
issuance of the 2021 financial statements.
b. Mortgage note payable due March 15, 2022, which was
rolled over in 2021 after the issuance of the 2021 financial
statements.
C. Mortgage note payable due March 15, 2022, which was
converted into ordinary shareS of the company in 2022
before the issuance of the 2021 financial statements.
d. Mortgage note payable due March 15, 2022, in which the
entity as of December 31, 2021 has the discretion and
intention to roll over for a period of at least 24 months from
the original maturity date.

MC4. Events that occur after the reporting period but prior to the
issuance of financial statement are called

a. prior events.
b. post-closing events.
C. events after the reporting period.
d. unaudited events.
MC5. Which of the following statements is correct?

a.
A company may exclude a maturing long-term obligation
under current liabilities if the firm intends to refinance the
obligation on a basis.
long-term
b. A company may exclude a maturing long-term obligation
from current liabilities if the firm can demonstrate an ability
to consummate refinancing on a long-term basis.
C. A company shall classify its financial liability as non-current
if the entity has the discretion to refinance or roll over an
obligation for at least twelve months after the reporting
period under an existing loan facility, even if the obligation
would otherwise be due within shorter period.
a
d. A Company should continue to classify its long-term
liabilities as non-current, even when they are due to be
settled within one year, if based on the financial status of the
company, refinancing is considered inevitable.

MC6. LAS 1 Presentation of Financial Statements normal order

suggests a
for the presentation of the notes to the financial statements.
What
is this normal order?

1) Statement of measurement basis and

accounting policies
applied
2) Supporting information or computation foor line items
presented and aggregated in the financial statements
3) Statement of compliance with
Philippine Financial Reporting
Standards
4) Commitments, contingencies and other
and non-financial disclosures required financial

a. 1, 3, 2, 4
b. 3, 1,4, 2
C. 3, 1, 2, 4
d. 3, 2, 1,4
MC7. The
refinancing
term basis
of a
currently maturing long-term debt on a
completed on or before the reporting date
such debt be classified as
long
a requires that
a. current liability.
b. non-current liability.
C. current liability or
non-current liability, the
debtor. at option of o
d.
non-adjusting event that
the financial statements. shall be disclosed in
the notes
MCSOn Deccmber 31, 2021, a company lawyer determines that it is
Drobable that the company wil lose a legal c a s e filcd by its suppliers
and estimates that the loss wouild be bctween P% million and P10
million. On January 1O, 2022, a scttlcment wasmade and the
company paid P9 million. How should this be reported in the
company financial statements for the year ended December 31,
2021, which were issued on March 10, 2022?

As a loss of P10 million in the statement of

a.
comprehensive
ncome.
b. As a provision of P8 million in the statement of financial
statements
C. As a provision of P9 million in the statement of financial
position
d. As a component of the notes to the financial statements only

MC9. The following data are made available for the purposes of stating the
financial position of Say, Inc. on December 31, 2021:

Cash, including sinking fund of P5,000,000 with 20,000,0oo

trustee
Notes receivable (including P2,000,000 of notes
pledged with ABC Bank) 12,000,000
Accounts receivable, net of allowance for expected
credit losses 7,900,000
Inventory, including P6,000,000 cost of goods in
transit purchased FOB destination and
P5,000,000 cost of goods in transit purchased
FOB shipping point. Both goods were received 28,000,000
January 3, 2022.

How much current assets should be shown in the statement of

financial position at December 31, 2021?

a. P56,900,000
b. P58,900,000
C. P61,900,000
d. P67,900,000
MC10 Hay Company was incorporated on July 1, 2021, with P2,000,00bo
irom the issuance of shares and borrowed funds of P300,000.
During the remainder of 2021, the company's profit was P100,000.
On December 15, Hay Company paid P8,000 cash dividends. No
additional activities affected owner's equity in 2021. At December
31, 2021, Hay Company's liabilities had increased to P376,000.
 In Hay's December 31, 2021 statement of financial position.
tion, total
assets should be reported at

P2.392,000
b. P2.400.000
P2,468,000
d P2.768.000

MC11. For purposes ot stating the working

capital of Jay Trading on
December 31, 2021, the following data are
submitted
Cash on hand and in bank, net of P50,000 bank
overdraft
P 560,000
Petty cash (unreplenished petty cash expenses,
P4,000) 10,000
Notes receivable
Accounts receivable, net of accounts with
credit
500,000
balance of P100,000
Merchandise inventory, including 1,100,000
goods held on
consignment of P180,000
Prepaid expenses 1,480,000
Total current assets 90,000
P3,740,000
Accounts payable, net of accounts with debit
balance of P50,000 P 600,000
Notes payable (due
every May 31)
annually at
P1,000,000 payable
Accrued expenses 2,000,00o
Total current liabilities
80,000
How much total P2,680,000
current assets should
statement of financial be presented on
on the
2021? position of Jay Trading on December 31,
a.
b.
P3,740,000
C.
P3,756,000
d.
P3,706,000
P3,606,000
MC12. Use the
same
information given in MC11.
liabilities should
Jay Trading present in How much total current
position on December its statement of current
31, 2021? financar
a.
b P2.680,000
C.
P1,880,000
d. P1,830,000
P1,780,000
MC13 The current asset section of the statement of financial position
preparcd by the accountant of Day Company as of December 31,
2021 follows:

Cash P 332,000
Accounts receivable 2,087,000
Financial assets at fair value
through profit
Inventory (taken by physical count on Dec. 31, 2021)
or loss 355,000
1,240,0000
An examination of the accounts showed the following:

Cash on hand including custoner's DAIF check for

P12,000 P 47,000
Cash in bank (reconciliation shows bank charges in
December 2021 not yet taken up by company,
P9,000) 285,000
Total cash balance P332,000
Customers' debit balances P2,034,0o0
Allowance for bad debts (97,000)
Selling price of goods invoiced at 150% of cost on
December 27, 2021 but delivered on January
10, 2022 150,000
Total accounts receivable balance P2.087.000
What is the correct amount of current assets at December 31,
2021?

a. P4,070,000
b. P4,014,000
C. P3,955,000
d. P3,855,000
MC14. Pay Company had the following assets at December 31, 2021:

Cash (of which P25,000 is earmarked for the

acquisition of equipment) P490,000
Investment in equity securities held for immediate
trading (including P200,000 fair value of
shares of Pay Company intended to be sold in
2022, purchased for P190,000) 380,000
Accounts receivable, net (including P500,000 due
from an officer; no due date specified) 1,250,00o
Non-trade notes receivable (due in semi-annual
installments of P50,000 every March 1 and
September 1) 300,000
Merchandise inventory 900,000
Prepaid expenses 80,000
Plant and equipment, net 3,750,000
 How much is Pay Company's total current assets?

a. P2,475,000
b. P2,425,000
C. P3,400,000
d. P2,745,000
MC15. Use the information given MC14. How much is
same
in
Company's total non-current assets? Pay

a. P4,475,000
b P4,675,000
C. P4,725,000
d. P4,750,000

MC16. Ray Company had the following liabilities at December 31, 2021
Trade accounts payable, net of debit balances
totaling P65,000 in supplier's accounts
Accrued expenses P1,125,000
Interest payable 136,0000
Income tax payable 96,000
Mortgage payable due in equal annual installments 150,000
until October 31, 2026
Share dividends declared but
not yet issued
750,000
Claims for the unclaimed 300,000
the company coveredwages by employees of
in a
considered to be probable) pending lawsuit (not
250,000
How much is the total
current liabilities of Ray Company to
shown on its December 3 DE
2021 1, statement of financial
a.
P1,272,000 position?
b. P1,722,000
C.
d.
P2,022,000
P2,207,000
MC17. Way
Company's adjusted trial balance at
includes the following: December 31, 204
Ordinary share capital, PS
par
Share premiumn P36,000,000
Treasury shares, at cost 48,000,000
Net unrealized loss 3,000,000
value through otherequity securities at fair
on

Retained appropriated comprehensive income 1,200,000

for contingencies
Unappropriated retained earnings 9,000,000
12,000,000
 NNN

w w N
 The total current assets in Kay's December 31, 20211 statement of
financial position is

a. P6,030,000
b. P5,555,000
C. P5,530,000
d. P5,055,000
MC19. Using the information given in MC18, the total current liabilities in
Kay's December 31, 2021 statement of financial position is

a. P1,980,000
b. P2,455,000
C. P2,579,000
d. P2,649,000

MC20. Using the information given in MC18, the retained earnings balance
in Kay's December 31, 2021 statement of financial position is

a. P4,401,000
b. P4,486,000
C. P4,876,000
d. P4,767,000
(AICPA Adapted)
MC21. Bay Corporation trial balance included the
balances at December 31, 2021:
following account

Accounts payable - P4,500,000; Bonds payable, due December 31,

2022 P7,500,000; Discount bonds
Dividends
on
payable -

P900,000;
payable on January 31, 2022 P2,400,000; Notes
payable due January 31, 2025 P6,000,000.
How much is included in the current liabilities
section of Bay
Corporation's December 31, 2021 statement of financial position?
a. P13,500,000
b. P15,300,000
C. P19,500,000
d. P23,400,000
MC22. The following selected accounts and additional
taken from Ken Corporation at December
information are
2021: 31,
Cash P150,000; Accounts receivable P2,100,000;
Inventories
-

P1,600,000; Accounts payable-P550,000;

P800,000; 12% Notes
Employees' income taxes payable P6,500.
payable
 Additional information:

The P2,100,000 balance in accounts receivable

represents
the entire amount owed to the of this
company; amount,
P500,000 represents a long-term advance to its president.
The remaining amount is from trade customers and 5% of
that amount is estimated to be uncollectible.

Inventories (taken by physical count) include P200,000 of

goods held on
consignment. Office supplies on hand of
P50,000 are also included in the balance.

The accounts payable balance includes a supplier's invoice

for P95,000 received through facsimile message representing
goods shipped FOB destination and are still in transit at
year-end.
The 12% interest-bearing note is dated June 1, 2021 and
matures May 31, 2022. Accrued interest on the note has
not been recorded.

How much should Ken Corporation report as total current assets at

December 31, 2021?

a. P3,020,000
b. P3,070,000
C. P3,165,000
d. P3,270,000
MC23. Use the same information given in MC22. How much should Ken
Corporation report as total current liabilities at December 31, 2021?

a. P1,309,500
b. P1,317,500
C. P1,261,500
d. P1,371,500

MC24. At the beginning of the year, a corporation had total assets of

P4,000,000, total liabilities of P2,000,000 and total share capital of
P800,000. During the year, the corporation earned profit of
P5,000,000 and paid cash dividends of P1,000,000. At the end of
the year, the company had total assets of P8,700,000 and its total
share capital remained at P800,000.
 What is the amount of the total liabilities at the end of the vearo

a. P2.000,000
b. P2.100.000
C P2.700.000
P6.000.000

MC25. Pen Company is preparing its December 31, 2021 statement of

financial position. The following items may be reported as either
current or noncurrent liability.

On December 31, 2021, Pen declared a cash

dividend of
P2.50 per share to shareholders of record on December
31.
The dividend is payable on
January 15, 2022. Pen has
issued 1,000,000 ordinary shares, of which
50,000 shares
are held in the
treasury.
Also, December 31, Pen declared a 10% bonus issue to
on
shareholders of record on January 15, 2022. The
will be distributed on dividends
January 31, 2022. Pen's ordinary
shares have a par value of P10
per share and a fair value of
P38 per share.

At December 31, bonds payable of P10

outstanding. The bonds pay 12% interest everymillion are
30 and mature in installments
of P2,500,000
September
September 30, beginning September 30, every
2022.
At December 31, 2021, customer advances
During 2021, Pen collected P30 million of were P12 million.
and advances of P25 million were customer advances
earned.
At December 31, 2021, retained
future inventory losses amounted toearnings appropriated for
P1.5 million.
How much of the
foregoing is classified as current liabilities?
a. P10,175,000
b P22,175,000
C. P22,300,000
d P58,275,000
MC26. A draft of the condensed statement of
financial position for BFFF
Company as of December 31, 2021 contains the following selected
list of assets and their balances:

Accounts receivable P 247,000

Cash 98,000
Deferred tax asset 85,000
Property, plant and equipment
(net of P550,000 accumulated depreciation) 3,200,000
Prepaynments 130,000
Inventories (based on physical count at
December 31, 2021) 220,000
The following information has been obtained:

The accounts receivable balance included P60,000 sales

price of goods in transit to customers at December 31, 2021,
P40,000 of which were shipped FOB destination. The
company maintains a uniform mark up on sales at 25%.

Towards the end of the year, the company sent out goods to
a consignee costing P80,000. This transaction with the
consignee was recorded allowing a markup of 25% on cost.
An account sale submitted by the consignee on December
31, 2021 indicated that goods costing P22,000 are still
unsold.

Incuded in prepayments is cash surrender value of officer's

life insurance policy of P15,000.

Included in property, plant and equipment are:

land acquired in 2021 intended as a future plant site

costing P800,000
equipment costing P200,000 that is fully depreciated,
but still being used by the entity

P1,200,000 purchase price of land with an

undetermined future use

What are the correct amounts of Accounts Rcceivable, Inventory and

Property, Plant arnd Equipment, respectively, at December 31, 2021?

a P179,500; P272,000; P1,200,000

b. P179,500; P272,000: P2,000,000
C. P207,000; P250,000; P2,000,000o
d. P279,500; P228,000; P1,800,00
The following totals are taken from the December 31, 2021 statement
of financial position of Aquamarine Company.

Current assets P3,500,000

Non-current assets 8,000,000
Current liabilitiecs 2,400,000
Non-current liabilities 2,700,000

Additional infornmation:

Cash of P380,000 has been placed in a fund for the

(a) retirement of long-term debt. The cash and long-term debt
have been offset and are not reflected in the financial
statements.

(a) Non-current assets include P500,000 cost of treasury shares

and land costing P3,000,000. This land had been retired
from active use and reclassified as "Held for Sale". The sale
is highly probable and is expected to be consummated in
July 2022. Based on negotiation with the potential buyer,
estimated sales price is P3,500,000; transfer costs of
P250,000 are expected to be incurred.

(b) Cash of P140,000 has been set aside to pay taxes due. The
cash and taxes payable have been offset and do not appear
in the financial statements.

(c) Advances on salespersons' commissions in the amount of

P210,000 have been made. Also, sales commissions payable
total P240,000. The net liability of P30,000 is included in
current liabilities.

d) The company, as of December 31, 2021, was a defendant in

a lawsuit for violation of a contract with a supplier. As of
December 31, the company believed it was probable that
estimated damages of P180,000 would result; thus, a
liability was recorded on that date. In March 2022, however.
the court decided the case and made an order to the
company to pay the plaintift the amount of P168,000.

Required:
Make the necessary adjustments and determine the
following
Jinancial statements were authorized for issue on April 10, (the
2022):
1 Total current assets
2 Total non-current assets
3 Total current liabilities
4. Total non-current liabilities