Intermediate Accounting 2

INTERMEDIATE ACCOUNTING 2
PRELIM QUIZ 1 20/20

When the entity's normal operating cycle is not clearly identifiable, its duration
is assumed to be twelve months.
=TRUE
Stock dividends distributable should be classified on the

=balance sheet as an item of stockholders' equity.
Which obligations are classified as current even if they are expected to be

settled after more than twelve months from the end of the reporting period?
= Trade payables and accruals for employees and other operating costs
Which of the following is not true about the discount on short-term notes
payable?
= The Discount on Notes Payable account should be reported as an asset on the
balance sheet.
Which of the following items is a current liability?

= Bonds (for which there is an adequate appropriation of retained earnings) due
in eleven months.
Where is debt callable by the creditor reported on the debtor's financial

statements?
= Current liability.
Which of the following should not be included in the current liabilities section of
the balance sheet?
= All of these are included
If the rate stated on the face of the note is higher than the market rate of
interest, the discounted amount is higher than the face value of the note,
resulting in discount on notes payable.
=FALSE
Events, favorable and unfavorable that occur between the end of the reporting
period and the date when the financial statements are authorized for issue.
=Events before the reporting Period
Which of the following may be a current liability?

= All of these
The principal classification of liabilities are:

=Current liabilities and noncurrent liabilities
Which of the following is a current liability?

=A cash dividend payable to preferred stockholders
A period within which the entity can rectify the breach and during which the
lender cannot demand immediate repayment.
=Grace Period

= None of these
Liabilities are
= obligations arising from past transactions and payable in assets or services in
the future.
Which of the following is true about accounts payable?

1. Accounts payable should not be reported at their present value.
2. When accounts payable are recorded at the net amount, a Purchase
Discounts account will be used.
3. When accounts payable are recorded at the gross amount, a Purchase
Discounts Lost account will be used.
=1
Current liabilities or short-term obligations are not discounted anymore but

measured, recorded and reported at their face amount.
=TRUE
An entity has been served a legal notice at year-end by the DENR to fit smoke
detectors in its factory on or before middle of next year. The cost of fitting
smoke detector can be measured reliably. How should the entity treat this in its
financial statements at year-end?
=No provision is recognized at year end because there is no present obligation
for the future expenditure since the entity can avoid the future expenditure by
changing the method of operations but disclosure is required
The following events occurring between the end of the reporting period and the
date the financial statements are authorized for issue shall qualify for disclosure
as nonadjusting events, meaning, the loans remain as current liabilities except
for:
= The granting by the lender of a grace period to rectify a breach of a long-term
loan agreement ending at least twelve months before the reporting period.
Among the short-term obligations of Lance Company as of December 31, the

balance sheet date, are notes payable totaling P250,000 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 Lance Company as
= current liabilities
PRELIM QUIZ 2 20/20

On January 1, 2018, West Company issued 9% bonds in the face amount of
P5,000,000, which mature on January 1, 2028. The bonds were issued for
P4,695,000 to yield 10%.
Interest is payable annually on December 31. The entity used the interest
method of amortizing bond discount.
What is the interest expense for 2018?
=469,500
An example of a notional amount is interest rate

=FALSE
Statement 1: The discount on bonds payable and the premium on bonds

payable shall be considered separate from the bonds payable account.
Statement 2: Both accounts shall be treated inconsistently as valuation accounts
of the bond liability.
=Both statements are False
Any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity
=financial instrument
On July 1, 2018, Tara Company issued 4,000 of 8%, P1,000 face value bonds
payable for P3,504,000. The bonds were issued to yield 10%.
The bonds are dated July 1, 2018 and mature on July 1, 2028. Interest is payable
semiannually on January 1 and July 1.
Using the effective interest method, what amount of the bond discount
should be amortized for the six months ended December 31, 2018?
=15,200
On November 1, 2018, Mason Company issued P8,000,000 of 10-year, 8% term

bonds dated October 1, 2018. The bonds were sold to yield 10% with total
proceeds of P7,000,000 plus accrued interest. Interest is paid every April 1 and
October 1.
What amount should be reported as accrued interest payable on December 31,
2018?
=160,000
Written promises to pay to the creditor
=notes payable
Which of the following statements is false?

=Social security taxes withheld from employees' payroll checks should never be
recorded as a liability since the employer will eventually remit the amounts
withheld to the appropriate taxing authority.
The following are true for the valuation of notes except:

=initially recorded at fair value
On March 1, 2018, Cain Company issued at 103 plus accrued interest 4,000 of
9%, P1,000 face value bonds. The bonds are dated January 1, 2018 and mature
on January 1, 2028.
Interest is payable semiannually on January 1 and July 1. The entity paid bond
issue cost of P200,000.
What is the net cash received from the bond issuance?
=3,980,000
Aye Company is authorized to issue P5,000,000 of 6%, 10-year bonds dated July
1, 2018 with interest payments on June 30 and December 31. When the bonds
are issued on November, 1, 2018, the entity received cash of P5,150,000
including accrued interest.
What is the discount or premium on bonds payable?
=50,000 bond premium
On April 1, 2018, Greg Company issued at 99 plus accrued interest, 2,000 of 8%

P1,000 face value bonds. The bonds are dated January 1, 2018, mature on
January 1, 2028, and pay interest on January 1 and July 1. The entity paid bond
From the bond issuance, what is the net cash received?
=1,950,000
Statement 1: A bond's price is equal to the sum of the present value of the
principal and the present value of the periodic interest.
Statement 2: If the stated rate = the market rate, the bond will sell at par.
=Both statements are True
On January 1, 2018, Carrow Company issued 10% bonds in the face amount of
P1,000,000 that mature on January 1, 2028.
The bonds were issued for P886,000 to yield 12%, resulting in bond discount of
P114,000.
The entity used the interest method of amortizing bond discount. Interest is
payable on January 1 and July 1.
For the year ended December 31, 2018, what amount should be reported as
bond interest expense?
=106,510
On June 30, 2018, Huff Company issued at 99, five thousand of 8%, P1,000 face
value bonds.
The bonds were issued through an underwriter to whom the entity paid bond
On June 30, 2018, what amount should be reported as bond liability?
=4,525,000
On January 31, 2018, Beau Company issued P3,000,000 maturity value, 12%
bonds for P3,000,000 cash. The bonds are dated December 31, 2017 and
mature on December 31, 2027. Interest is payable semiannually on June 30 and
December 31.
What amount of accrued interest payable should be reported on September 30,
2018?
=90,000
On July 1, 2018, Carr Company issued at 104, five thousand of 10% P1,000 face
value bonds. The bonds were issued through an underwriter to whom the entity
paid bond issue cost of P125,000.
On July 1, 2018, what amount should be reported as bond liability?
5,075,000
Consists of cash or property received which are returnable to the depositor or
which have been collected or otherwise accumulated to be remitted to third
parties.
=Deposits and advances
Recording estimated warranty expense in the current year best follows which
accounting principle?
=Matching
An entity receives an advance payment for special order goods that are to be
manufactured and delivered within 6 months. The advance payment shall be
reported in the entity’s balance sheet as
=Current liability
PRELIM EXAM
Derivative that confers the right, but not the obligation, to buy or sell a security
- normally an equity - at a certain price before expiration.
= 10%.
=warrants
Callable preference shares permit the corporation at its option to redeem the
outstanding preference shares at stipulated prices.
=true
The 10% bonds payable of Nixon Company had a net carrying amount of
P570,000 on December 31, 2016. The bonds, which had a face value of
P600,000, were issued at a discount to yield 12%. The amortization of the bond
discount was recorded under the effective-interest method. Interest was paid on
January 1 and July 1 of each year. On July 2, 2017, several years before their
maturity, Nixon retired the bonds at 102. The interest payment on July 1, 2017
was made as scheduled. What is the loss that Nixon should record on the early
retirement of the bonds on July 2, 2017? Ignore taxes.
=P42,000.X
Contingent liabilities will or will not become actual liabilities depending on

= The present condition suggesting a liabilityX
The following relates to debt financing except:

= can be availed if it has adequate security offered to creditorsX
For a liability to exist

= An obligation to pay cash in the future must existX
The likelihood that the future event will or will not occur can be expressed by a
range of outcome. Which range means that the future event occurring is very
slight?
= ProbableX
These are liabilities arising from the purchase of goods, materials, supplies or
services on an open charge account basis.
= Accounts payable/trade payable
Statement 1: For bond outstanding method, the procedure is simply to divide

the amount of bond premium or bond discount by the life of the bonds to arrive
at the periodic amortization.
Statement 2: Under the effective interest method, a constant interest rate based
on the carrying (book) value of the bonds is recognized as interest expense each
period, resulting in unequal recorded amounts of interest expense.
= Both statements are TrueX
When a corporation desires to raise additional funds for a long-term purposes, it
may borrow by issuing bonds and notes ___________ or it may obtain funds by
issuing additional share capital to shareholders _______________.
= equity financing ; debt financingX
These are amounts collected in advance that have not yet been earned and
recorded as revenues pending completion of the earning process.
= Unearned revenue
An entity operates chemical plants. Its published policies include a commitment

to making good any damage caused to the environment by its operations. It has
always honored this commitment. Which of the following scenarios relating to
the entity would give rise to an environmental provision?
= One past experience it is likely that a chemical spill which would result in
having to pay fines and penalties will occur in the next year.X
On January 1, 2016, Crown Company sold property to Leary Company. There was
no established exchange price for the property, and Leary gave Crown a
P2,000,000 zero-interest-bearing note payable in 5 equal annual installments of
P400,000, with the first payment due December 31, 2016. The prevailing rate of
interest for a note of this type is 9%. The present value of the note at 9% was
P1,442,000 at January 1, 2016. What should be the balance of the Notes Payable
account on the books of Leary at December 31, 2016 after adjusting entries are
made, assuming that the effective-interest method is used?
= P1,571,780
At the beginning of 2016, Winston Corporation issued 10% bonds with a face
value of P600,000. These bonds mature in five years, and interest is paid
semiannually on June 30 and December 31. The bonds were sold for P555,840 to
yield 12%. Winston uses a calendar-year reporting period. Using the effective-
interest method of amortization, what amount of interest expense should be
reported for 2016? (Round your answer to the nearest dollar.)
= P68,832X
An entity has been served a legal notice at year-end by the Department of

Environment and Natural Resources to fit smoke detectors in its factory on or
before middle of the next year. The cost of fitting smoke detector can be
measured reliably. How should the entity treat this in its financial statements at
year-end?
= No provision is recognized at year-end because there is no present obligation
for the future expenditure since the entity can avoid the future expenditures by
changing the method of operations, but disclosure is required.
Current liabilities are measured at

= Face value
A business borrowed P40,000 on March 1 of the current year by signing a 30

day, 6% interest bearing note. When the note is paid on March 31, the entry to
record the payment should include a
= Debit to Interest Expense P200
Under this method, the Purchases account and the Accounts Payable are
recorded at the gross invoice price.
= Gross method
When another party will reimburse some or all of the expenditure required to
settle a provision, the reimbursement should only be recognized when its receipt
is...
= ProbableX
Which of the following is not considered a characteristic of a liability?

= Liquidation is reasonably expected to require use of existing resources
classified as current assets.
Bonds that are secured by a lien against real estate

= real estate mortgage
Financial liability is any liability that is:

= a contractual obligation to exchange financial assets or financial liabilities with
another entity under conditions that are potentially unfavorable to the entityX
Under IFRIC 12, an entity shall account for the award credits as a "separately
component of the initial sale transaction".
=FALSE
During May, CircuitSound sold 500 portable CD players for P50 each. Each CD
player cost CircuitSound P25 to purchase and carried a one-year warranty. If 10
percent typically need to be replaced over the warranty period, what amount
should CircuitSound debit Product Warranty Expense for in June?
= 1,250
An investment technique used to offset a potential loss on one investment by

purchasing a second investment with the expectations that it will perform in the
opposite way.
= Hedging
The features most frequently associated with preference shares include all of
the following except
= Callable at the option of the shareholder.
Pending litigation would generally be considered

= Estimated liabilityX
The effective interest on a 12-month, zero-interest-bearing note payable of
P300,000, discounted at the bank at 10% is
= 10%.X
Question 1
Correct
Mark 1.00 out of 1.00
Flag question
Question text
Select one:
a.
All of these
b.
A dividend payable in the form of additional shares of stock
c.
A cash dividend payable to preferred stockholders
d.
Preferred dividends in arrears
Feedback
Your answer is correct.
Question 2
Correct
Flag question
Question text
An entity has been served a legal notice at year-end by the DENR to fit smoke
detectors in its factory on or before middle of next year. The cost of fitting
smoke detector can be measured reliably. How should the entity treat this in its
financial statements at year-end?
Select one:
a.
Recognize a provision for the current year equal to one half only of the
estimated amount
b.
Recognize a provision for the current year equal to the estimated amount
c.
No provision is recognized at year end because there is no present obligation for
the future expenditure since the entity can avoid the future expenditure by
changing the method of operations but disclosure is required
d.
Ignore this for purposes of the financial statements at year-end.
Feedback
Question 3
Correct
Flag question
Question text
If the rate stated on the face of the note is higher than the market rate of
interest, the discounted amount is higher than the face value of the note,
resulting in discount on notes payable.
Select one:
True
False
Question 4
Correct
Flag question
Question text
Liabilities are
Select one:
a.
any accounts having credit balances after closing entries are made.
b.
obligations to transfer ownership shares to other entities in the future.
c.
deferred credits that are recognized and measured in conformity with generally
accepted accounting principles.
d.
obligations arising from past transactions and payable in assets or services in
the future.
Feedback
Question 5
Correct
Flag question
Question text
Select one:
True
False
Question 6
Correct
Flag question
Question text
Select one:
a.
3
b.
2
c.
Both 2 and 3 are true.
d.
1
Feedback
Question 7
Correct
Flag question
Question text
Select one:
a.
A long-term debt maturing currently, which is to be paid with cash in a sinking
fund
b.
None of these
c.
A long-term debt maturing currently, which is to be retired with proceeds from a
new debt issue
d.
A long-term debt maturing currently, which is to be converted into common
stock
Feedback
Question 8
Correct
Flag question
Question text
The following events occurring between the end of the reporting period and the
date the financial statements are authorized for issue shall qualify for disclosure
as nonadjusting events, meaning, the loans remain as current liabilities except
for:
Select one:
a.
Refinancing on a long-term basis
b.
The granting by the lender of a grace period to rectify a breach of a long-term
loan agreement ending at least twelve months before the reporting period.
c.
Rectification of a breach of a long-term loan agreement
d.
None of the above
Feedback
Question 9
Correct
Flag question
Question text
The principal classification of liabilities are:
Select one:
a.
Current liabilities and deferred revenue
b.
Current liabilities and noncurrent liabilities
c.
Noncurrent liabilities and deferred revenue
d.
Current liabilities, noncurrent liabilities and deferred revenue
Feedback
Question 10
Correct
Flag question
Question text
Select one:
a.
long-term liabilities
b.
current liabilities
c.
intermediate debt
d.
deferred charges
Feedback
Question 11
Correct
Flag question
Question text
A period within which the entity can rectify the breach and during which the
lender cannot demand immediate repayment.
Select one:
a.
Period of time
b.
Breaktime
c.
Time Keeper
d.
Grace Period
Feedback
Question 12
Correct
Flag question
Question text
When the entity's normal operating cycle is not clearly identifiable, its duration
is assumed to be twelve months.
Select one:
True
False
Question 13
Correct
Flag question
Question text
Which obligations are classified as current even if they are expected to be
settled after more than twelve months from the end of the reporting period?
Select one:
a.
Income tax payable
b.
Bank overdrafts
c.
Dividends payable
d.
Trade payables and accruals for employees and other operating costs
Feedback
Question 14
Correct
Flag question
Question text
Select one:
a.
Bonds (for which there is an adequate sinking fund properly classified as a long-
term investment) due in three months.
b.
Bonds due in three years.
c.
Bonds (for which there is an adequate appropriation of retained earnings) due in
eleven months.
d.
Bonds to be refunded when due in eight months, there being no doubt about the
marketability of the refunding issue.
Feedback
Question 15
Correct
Flag question
Question text
Select one:
a.
Deferred Revenue
b.
All of these
c.
Withheld Income Taxes
d.
Deposits Received from Customers
Feedback
Question 16
Correct
Flag question
Question text
payable?
Select one:
a.
The Discount on Notes Payable account should be reported as an asset on the
balance sheet.
b.
The Discount on Notes Payable account has a debit balance.
c.
All of these are true.
d.
When there is a discount on a note payable, the effective interest rate is higher
than the stated discount rate.
Feedback
Question 17
Correct
Flag question
Question text
Select one:
a.
balance sheet as a liability.
b.
balance sheet as an item of stockholders' equity.
c.
income statement as an expense.
d.
balance sheet as an asset.
Feedback
Question 18
Correct
Flag question
Question text
Events, favorable and unfavorable that occur between the end of the reporting
period and the date when the financial statements are authorized for issue.
Select one:
a.
Reporting Events
b.
Events before the reporting Period
c.
Events Period
d.
Events after the reporting period
Feedback
Question 19
Correct
Flag question
Question text
the balance sheet?
Select one:
a.
Short-term zero-interest-bearing notes payable
b.
All of these are included
c.
Trade notes payable
d.
The discount on short-term notes payable
Feedback
Question 20
Correct
Flag question
Question text
Where is debt callable by the creditor reported on the debtor's financial
statements?
Select one:
a.
Long-term liability.
b.
Current liability if the creditor intends to call the debt within the year, otherwise
a long-term liability.
c.
Current liability.
d.
Current liability if it is probable that creditor will call the debt within the year,
otherwise a long-term liability.
Feedback
Question 1
Correct
Flag question
Question text
Select one:
a.
150,000 bond premium
b.
50,000 bond premium
c.
150,000 bond discount
d.
No bond premium and discount
Feedback
Question 2
Correct
Flag question
Question text
P4,695,000 to yield 10%.
Select one:
a.
469,500
b.
500,000
c.
450,000
d.
422,550
Feedback
Question 3
Correct
Flag question
Question text
Statement 1: A bond's price is equal to the sum of the present value of the
principal and the present value of the periodic interest.
Statement 2: If the stated rate = the market rate, the bond will sell at par.
Select one:
a.
Both statements are False
b.
Both statements are True
c.
Statement 1 is True; Statement 2 is False
d.
Statement 1 is False; Statement 2 is True
Feedback
Question 4
Correct
Flag question
Question text
Select one:
a.
1,980,000
b.
1,910,000
c.
1,950,000
d.
2,020,000
Feedback
Question 5
Correct
Flag question
Question text
Select one:
a.
24,800
b.
19,840
c.
30,400
d.
15,200
Feedback
Question 6
Correct
Flag question
Question text
The following are true for the valuation of notes except:
Select one:
a.
initially recorded at fair value
b.
subsequent to initial recognition, the carrying amount of a non- interest bearing
note is equal to its face value less the adjusted balance of the discount on notes
payable
c.
the carrying amount of an interest bearing note is its face value plus any
accrued interest
d.
discount on notes payable is transferred to interest expense over the life of
note, using the effective interest rate method
Feedback
Question 7
Correct
Flag question
Question text
Statement 1: The discount on bonds payable and the premium on bonds
payable shall be considered separate from the bonds payable account.
Statement 2: Both accounts shall be treated inconsistently as valuation accounts
of the bond liability.
Select one:
a.
b.
c.
d.
Feedback
Question 8
Correct
Flag question
Question text
Which of the following statements is false?
Select one:
a.
A company may exclude a short-term obligation from current liabilities if it
intends to refinance the obligation on a long-term basis and have an
unconditional right to defer settlement of the liability for at least 12 months.
b.
Under the cash basis method, warranty costs are charged to expense as they
are paid.
c.
Social security taxes withheld from employees' payroll checks should never be
recorded as a liability since the employer will eventually remit the amounts
withheld to the appropriate taxing authority.
d.
Cash dividends should be recorded as a liability when they are declared by the
board of directors.
Feedback
Question 9
Correct
Flag question
Question text
An example of a notional amount is interest rate
Select one:
True
False
Question 10
Correct
Flag question
Question text
Consists of cash or property received which are returnable to the depositor or
which have been collected or otherwise accumulated to be remitted to third
parties.
Select one:
a.
Deposits and advances
b.
Loyalty program
c.
Premiums
d.
Unearned revenue
Feedback
Question 11
Correct
Flag question
Question text
Any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity
Select one:
a.
deep-discount bonds
b.
mortgage bond
c.
financial instrument
d.
debt securities
Feedback
Question 12
Correct
Flag question
Question text
on January 1, 2028.
Select one:
a.
4,120,000
b.
3,980,000
c.
4,180,000
d.
4,320,000
Feedback
Question 13
Correct
Flag question
Question text
P114,000.
Select one:
a.
53,160
b.
100,000
c.
106,510
d.
50,000
Feedback
Question 14
Correct
Flag question
Question text
December 31.
2018?
Select one:
a.
180,000
b.
240,000
c.
270,000
d.
90,000
Feedback
Question 15
Correct
Flag question
Question text
October 1.
2018?
Select one:
a.
106,667
b.
160,000
c.
116,667
d.
175,000
Feedback
Question 16
Correct
Flag question
Question text
Select one:
a.
5,200,000
b.
5,325,000
c.
4,875,000
d.
5,075,000
Feedback
Question 17
Correct
Flag question
Question text
Recording estimated warranty expense in the current year best follows which
accounting principle?
Select one:
a.
Full disclosure
b.
Consistency
c.
Materiality
d.
Matching
Feedback
Question 18
Correct
Flag question
Question text
Written promises to pay to the creditor
Select one:
a.
notes payable
b.
long-term lease obligations
c.
bonds payable
d.
pension obligations
Feedback
Question 19
Correct
Flag question
Question text
value bonds.
Select one:
a.
4,525,000
b.
4,950,000
c.
4,575,000
d.
5,000,000
Feedback
Question 20
Correct
Flag question
Question text
Select one:
a.
Deferred charge
b.
Noncurrent liability
c.
Contra asset account
d.
Current liability
Feedback
Question 1
Correct
Flag question
Question text
Which of the following is not considered a characteristic of a liability?
Select one:
a.
Arises from past events.
b.
Present obligation.
c.
Results in an outflow of resources.
d.
Liquidation is reasonably expected to require use of existing resources classified
as current assets.
Feedback
Question 2
Correct
Flag question
Question text
Bonds that are secured by a lien against real estate
Select one:
a.
chattel mortgage bond
b.
registered bonds
c.
coupon bonds
d.
real estate mortgage
Feedback
Question 3
Correct
Flag question
Question text
At the beginning of 2016, Winston Corporation issued 10% bonds with a face
value of P600,000. These bonds mature in five years, and interest is paid
semiannually on June 30 and December 31. The bonds were sold for P555,840 to
yield 12%. Winston uses a calendar-year reporting period. Using the effective-
interest method of amortization, what amount of interest expense should be
reported for 2016? (Round your answer to the nearest dollar.)
Select one:
a.
P66,700
b.
P68,832
c.
P66,500
d.
P66,901
Feedback
Question 4
Correct
Flag question
Question text
December 31.
2018?
Select one:
a.
240,000
b.
180,000
c.
270,000
d.
90,000
Feedback
Question 5
Correct
Flag question
Question text
When another party will reimburse some or all of the expenditure required to
settle a provision, the reimbursement should only be recognized when its receipt
is...
Select one:
a.
Virtually certain
b.
Possible
c.
Probable
d.
More probable than not
Feedback
Question 6
Correct
Flag question
Question text
Select one:
a.
1,980,000
b.
1,950,000
c.
1,910,000
d.
2,020,000
Feedback
Question 7
Correct
Flag question
Question text
Select one:
a.
All of these
b.
Deposits Received from Customers
c.
Withheld Income Taxes
d.
Deferred Revenue
Feedback
Question 8
Correct
Flag question
Question text
the balance sheet?
Select one:
a.
The discount on short-term notes payable
b.
Short-term zero-interest-bearing notes payable
c.
All of these are included
d.
Trade notes payable
Feedback
Question 9
Correct
Flag question
Question text
payable?
Select one:
a.
When there is a discount on a note payable, the effective interest rate is higher
than the stated discount rate.
b.
All of these are true.
c.
The Discount on Notes Payable account should be reported as an asset on the
balance sheet.
d.
The Discount on Notes Payable account has a debit balance.
Feedback
Question 10
Incorrect
Flag question
Question text
A business borrowed P40,000 on March 1 of the current year by signing a 30
day, 6% interest bearing note. When the note is paid on March 31, the entry to
record the payment should include a
Select one:
a.
Debit to Interest Expense P200
b.
Credit to Cash for P40,000
c.
Debit to Interest Payable P200
d.
Credit to Cash for P42,400
Feedback
Your answer is incorrect.
Question 11
Correct
Flag question
Question text
Current liabilities are measured at
Select one:
a.
Face value
b.
Historical cost
c.
Discounted value
d.
Present value
Feedback
Question 12
Correct
Flag question
Question text
Under IFRIC 12, an entity shall account for the award credits as a "separately
component of the initial sale transaction".
Select one:
True
False
Question 13
Correct
Flag question
Question text
Select one:
a.
5,200,000
b.
4,875,000
c.
5,325,000
d.
5,075,000
Feedback
Question 14
Correct
Flag question
Question text
The following relates to debt financing except:
Select one:
a.
dividends on shares are declared at the discretion of the board of directors
b.
present owners remain in control of the corporation
c.
interest incurred is a deductible expenses in arriving at taxable income
d.
can be availed if it has adequate security offered to creditors
Feedback
Question 15
Correct
Flag question
Question text
Select one:
a.
150,000 bond discount
b.
No bond premium and discount
c.
50,000 bond premium
d.
150,000 bond premium
Feedback
Question 16
Correct
Flag question
Question text
An investment technique used to offset a potential loss on one investment by
purchasing a second investment with the expectations that it will perform in the
opposite way.
Select one:
a.
Hedging
b.
Swaps
c.
Warrants
d.
Heging
Feedback
Question 17
Correct
Flag question
Question text
On January 1, 2016, Crown Company sold property to Leary Company. There was
no established exchange price for the property, and Leary gave Crown a
P2,000,000 zero-interest-bearing note payable in 5 equal annual installments of
P400,000, with the first payment due December 31, 2016. The prevailing rate of
interest for a note of this type is 9%. The present value of the note at 9% was
P1,442,000 at January 1, 2016. What should be the balance of the Notes Payable
account on the books of Leary at December 31, 2016 after adjusting entries are
made, assuming that the effective-interest method is used?
Select one:
a.
P1,553,600
b.
P1,571,780
c.
P1,442,000
d.
P2,000,000
Feedback
Question 18
Correct
Flag question
Question text
The effective interest on a 12-month, zero-interest-bearing note payable of
P300,000, discounted at the bank at 10% is
Select one:
a.
11.11%.
b.
9.09%.
c.
10%.
d.
10.87%.
Feedback
Question 19
Correct
Flag question
Question text
The features most frequently associated with preference shares include all of
the following except
Select one:
a.
Convertible into ordinary shares.
b.
Callable at the option of the shareholder.
c.
Preference as to assets in the event of liquidation.
d.
Non-voting.
Feedback
Question 20
Correct
Flag question
Question text
on January 1, 2028.
Select one:
a.
4,180,000
b.
4,320,000
c.
4,120,000
d.
3,980,000
Feedback
Question 21
Correct
Flag question
Question text
value bonds.
Select one:
a.
5,000,000
b.
4,575,000
c.
4,950,000
d.
4,525,000
Feedback
Question 22
Correct
Flag question
Question text
Under this method, the Purchases account and the Accounts Payable are
recorded at the gross invoice price.
Select one:
a.
Expense method
b.
Net method
c.
Gross method
d.
Accrual method
Feedback
Question 23
Correct
Flag question
Question text
These are liabilities arising from the purchase of goods, materials, supplies or
services on an open charge account basis.
Select one:
a.
Contingencies
b.
Deferred revenue
c.
Accounts payable/trade payable
d.
Provisions
Feedback
Question 24
Correct
Flag question
Question text
P114,000.
Select one:
a.
100,000
b.
106,510
c.
50,000
d.
53,160
Feedback
Question 25
Correct
Flag question
Question text
Financial liability is any liability that is:
Select one:
a.
an equity instrument of another entity
b.
a contract that will or may be settled in the entity's own equity instruments
c.
a contractual obligation to deliver cash or another financial asset to another
entity
d.
a contractual obligation to exchange financial assets or financial liabilities with
another entity under conditions that are potentially unfavorable to the entity
Feedback
Question 26
Correct
Flag question
Question text
Select one:
True
False
Question 27
Correct
Flag question
Question text
Select one:
a.
Reminder
b.
Notice
c.
Memo
d.
Warrants
Feedback
Question 28
Correct
Flag question
Question text
The 10% bonds payable of Nixon Company had a net carrying amount of
P570,000 on December 31, 2016. The bonds, which had a face value of
P600,000, were issued at a discount to yield 12%. The amortization of the bond
discount was recorded under the effective-interest method. Interest was paid on
January 1 and July 1 of each year. On July 2, 2017, several years before their
maturity, Nixon retired the bonds at 102. The interest payment on July 1, 2017
was made as scheduled. What is the loss that Nixon should record on the early
retirement of the bonds on July 2, 2017? Ignore taxes.
Select one:
a.
P12,000.
b.
P33,600.
c.
P42,000.
d.
P37,800.
Feedback
Question 29
Correct
Flag question
Question text
When a corporation desires to raise additional funds for a long-term purposes, it
may borrow by issuing bonds and notes ___________ or it may obtain funds by
issuing additional share capital to shareholders _______________.
Select one:
a.
debt financing ; equity financing
b.
debt financing ; debt financing
c.
equity financing ; debt financing
d.
equity financing ; equity financing
Feedback
Question 30
Correct
Flag question
Question text
Select one:
a.
A long-term debt maturing currently, which is to be converted into common
stock
b.
None of these
c.
A long-term debt maturing currently, which is to be retired with proceeds from a
new debt issue
d.
A long-term debt maturing currently, which is to be paid with cash in a sinking
fund
Feedback
Question 31
Correct
Flag question
Question text
Select one:
a.
1
b.
2
c.
Both 2 and 3 are true.
d.
3
Feedback
Question 32
Correct
Flag question
Question text
These are amounts collected in advance that have not yet been earned and
recorded as revenues pending completion of the earning process.
Select one:
a.
Contra asset
b.
Unearned revenue
c.
Premiums
d.
Loyalty program
Feedback
Question 33
Correct
Flag question
Question text
For a liability to exist
Select one:
a.
The identity of the party owed must be known
b.
A past transaction or event must have occurred
c.
An obligation to pay cash in the future must exist
d.
The exact amount must be known
Feedback
Question 34
Incorrect
Flag question
Question text
Pending litigation would generally be considered
Select one:
a.
Non-monetary liability
b.
Estimated liability
c.
Contingent liability
d.
Current liability
Feedback
Question 35
Correct
Flag question
Question text
P4,695,000 to yield 10%.
Select one:
a.
469,500
b.
450,000
c.
422,550
d.
500,000
Feedback
Question 36
Correct
Flag question
Question text
Select one:
a.
income statement as an expense.
b.
balance sheet as an item of stockholders' equity.
c.
balance sheet as a liability.
d.
balance sheet as an asset.
Feedback
Question 37
Correct
Flag question
Question text
Select one:
a.
Current liability
b.
Deferred charge
c.
Contra asset account
d.
Noncurrent liability
Feedback
Question 38
Correct
Flag question
Question text
Select one:
a.
24,800
b.
15,200
c.
30,400
d.
19,840
Feedback
Question 39
Correct
Flag question
Question text
An entity has been served a legal notice at year-end by the Department of
Environment and Natural Resources to fit smoke detectors in its factory on or
before middle of the next year. The cost of fitting smoke detector can be
measured reliably. How should the entity treat this in its financial statements at
year-end?
Select one:
a.
Recognize a provision for the current year equal to the estimated amount.
b.
No provision is recognized at year-end because there is no present obligation for
the future expenditure since the entity can avoid the future expenditures by
changing the method of operations, but disclosure is required.
c.
Recognize a provision for the current year equal to one-half only of the
estimated amount.
d.
Ignore this for purposes of the financial statements at year-end.
Feedback
Question 40
Correct
Flag question
Question text
Statement 1: For bond outstanding method, the procedure is simply to divide
the amount of bond premium or bond discount by the life of the bonds to arrive
at the periodic amortization.
Statement 2: Under the effective interest method, a constant interest rate based
on the carrying (book) value of the bonds is recognized as interest expense each
period, resulting in unequal recorded amounts of interest expense.
Select one:
a.
b.
c.
d.
Feedback
Question 41
Correct
Flag question
Question text
October 1.
2018?
Select one:
a.
160,000
b.
106,667
c.
116,667
d.
175,000
Feedback
Question 42
Correct
Flag question
Question text
Liabilities are
Select one:
a.
obligations arising from past transactions and payable in assets or services in
the future.
b.
deferred credits that are recognized and measured in conformity with generally
accepted accounting principles.
c.
any accounts having credit balances after closing entries are made.
d.
obligations to transfer ownership shares to other entities in the future.
Feedback
Question 43
Correct
Flag question
Question text
Select one:
a.
Bonds (for which there is an adequate sinking fund properly classified as a long-
term investment) due in three months.
b.
Bonds to be refunded when due in eight months, there being no doubt about the
marketability of the refunding issue.
c.
Bonds (for which there is an adequate appropriation of retained earnings) due in
eleven months.
d.
Bonds due in three years.
Feedback
Question 44
Correct
Flag question
Question text
Callable preference shares permit the corporation at its option to redeem the
outstanding preference shares at stipulated prices.
Select one:
True
False
Question 45
Correct
Flag question
Question text
Select one:
a.
A cash dividend payable to preferred stockholders
b.
All of these
c.
A dividend payable in the form of additional shares of stock
d.
Preferred dividends in arrears
Feedback
Question 46
Correct
Flag question
Question text
Select one:
a.
deferred charges
b.
intermediate debt
c.
current liabilities
d.
long-term liabilities
Feedback
Question 47
Correct
Flag question
Question text
An entity operates chemical plants. Its published policies include a commitment
to making good any damage caused to the environment by its operations. It has
always honored this commitment. Which of the following scenarios relating to
the entity would give rise to an environmental provision?
Select one:
a.
The government has outlined plans for a new law requiring all environmental
damage to be rectified.
b.
A chemical spill from one of the entity's plants has caused harm to the
surrounding area and wildlife.
c.
Recent research suggests there is a possibility that the entity's actions may
damage surrounding wildlife.
d.
One past experience it is likely that a chemical spill which would result in having
to pay fines and penalties will occur in the next year.
Feedback
Question 48
Correct
Flag question
Question text
During May, CircuitSound sold 500 portable CD players for P50 each. Each CD
player cost CircuitSound P25 to purchase and carried a one-year warranty. If 10
percent typically need to be replaced over the warranty period, what amount
should CircuitSound debit Product Warranty Expense for in June?
Select one:
a.
1,000
b.
2,500
c.
1,250
d.
250
Feedback
Question 49
Correct
Flag question
Question text
Contingent liabilities will or will not become actual liabilities depending on
Select one:
a.
The degree of uncertainty
b.
Whether they are probable and estimable
c.
The outcome of a future event
d.
The present condition suggesting a liability
Feedback
Question 50
Incorrect
Flag question
Question text
The likelihood that the future event will or will not occur can be expressed by a
range of outcome. Which range means that the future event occurring is very
slight?
Select one:
a.
Probable
b.
Remote
c.
Certain
d.
Reasonably possible
Feedback
MIDTERM QUIZ 1
At the beginning of the current year, Ashe Company was organized with
authorized capital of 100,000 shares of P200 par value.
January 10 Issued 25,000 shares at P220 a share.
March 25 Issued 1,000 shares for legal services when the fair
value was P240 a share.
September 30 Issued 5,000 shares for a tract of land when the fair
What amount should be reported for share premium?
=840,000
At the beginning of the current year, Ria company issued 10,000 ordinary shares
of P20 par value and 20,000 convertible preference shares of P20 par value for a
total of P800,000.
At this date, the ordinary share was selling for P36, and the convertible
preference share was selling for P27.
What is the share premium from the issuance of ordinary shares?
=120,000
total of P800,000.
What amount of the proceeds should be allocated to the ordinary shares?
=320,000
total of P800,000.
What is the share premium from the issuance of preference shares?
=80,000
Nest Company issued 100,000 ordinary shares. Of these, 5,000 shares were held
as treasury on January 1, 2018. During 2018, transactions were as follows:
May 1 1,000 shares of treasury were sold.
Aug. 1 10,000 unissued shares were sold.
Nov. 15 A 2-for-1 share split took effect.
On December 31, 2018, how many shares were outstanding?
= 212,000
The shareholders of Dorr Company approved a two-for-one split of the entity’s

share capital, and an increase in authorized shares from 100,000 shares with
P20 par value to 200,000 shares with P10 par value.
The shareholders’ equity accounts immediately before the split shares were
share capital P1,000,000, share premium P150,000 and retained earnings
P1,350,000.
What is the balance of the retained earnings after the share split is effected?
=1,350,000
At the beginning of the current year, Cove Company, a closely held entity,
issued 6% bonds with a maturity value of P6,000,000, together with 10,000
ordinary shares of P50 par value, for a combined cash amount of P11,000,000.
If issued separately, the bonds would have sold for P4,000,000 on an 8% yield to
maturity basis.
What amount of the proceeds should be allocated to the ordinary shares?
=5,000,000
During the current year, Line Company received a donation of 2,000 shares with
P50 par value from a shareholder. On that date, the share market value was
P350. The shares were originally issued for P250 per share.
What is the decrease in shareholders’ equity as a result of the donation?
=0
During the current year, Alto Company declared a 1 for 5 reverse share split,
when the market value of share was P100.
Prior to the split, the entity had 100,000 shares of P10 par value issued and
outstanding.
After the split, what is the par value of the share?
=50
At the beginning of the current year, Cove Company, a closely held entity,
issued 6% bonds with a maturity value of P6,000,000, together with 10,000
ordinary shares of P50 par value, for a combined cash amount of P11,000,000.
If issued separately, the bonds would have sold for P4,000,000 on an 8% yield to
maturity basis.
What amount should be reported for share premium on the issuance of the
ordinary shares?
=6,500,000
On January 1, 2018, Vey Company had 125,000 shares issued which included
25,000 shares held as treasury.
January 1 through October 31 – 13,000 treasury shares were distributed to
officers as part of a share compensation plan.
November 31 – A 3-for-1 share split took effect.
December 31 – The entity purchased 5,000 of its own shares to discourage an
unfriendly takeover. These shares were not retired.
On December 31, 2018, how many shares were outstanding?
=334,000
On January 1, 2018, Vey Company had 125,000 shares issued which included
25,000 shares held as treasury.
January 1 through October 31 – 13,000 treasury shares were distributed to
officers as part of a share compensation plan.
November 31 – A 3-for-1 share split took effect.
December 31 – The entity purchased 5,000 of its own shares to discourage an
unfriendly takeover. These shares were not retired.
On December 31, 2018, how many shares were issued?
=375,000
Seco Company was incorporated on January 1, 2018.

Jan. 2 Number of shares authorized 80,000
Feb. 1 Number of shares issued 60,000
July 1 Number of shares reacquired but not 5,000
canceled
Dec. 1 Two-for-one share split
On December 31, 2018, what is the number of shares outstanding?

=110,000
At the beginning of the current year, Ashe Company was organized with
authorized capital of 100,000 shares of P200 par value.
January 10 Issued 25,000 shares at P220 a share.
March 25 Issued 1,000 shares for legal services when the fair
September 30 Issued 5,000 shares for a tract of land when the fair
What amount should be reported as share capital?
=6,200,000

P1,350,000.
What is the balance of the share premium after the share split is effected?
P1,350,000.
What is the balance of the share premium after the share split is effected?
= 150,000
East Company issued 1,000 shares with P5 par to Howe as compensation for
1,000 hours of legal services performed.
Howe usually bills P160 per hour for legal services. On the date of issuance, the
share was trading on a public exchange at P140.
By what amount should the share premium account increase as a result of the
transaction?
=135,000
Nest Company issued 100,000 ordinary shares. Of these, 5,000 shares were held
as treasury on January 1, 2018. During 2018, transactions were as follows:
May 1 1,000 shares of treasury were sold.
Aug. 1 10,000 unissued shares were sold.
Nov. 15 A 2-for-1 share split took effect.
On December 31, 2018, how many shares were issued?
=220,000
Beck Company issued 200,000 ordinary shares when it began operations in

2017 and issued an additional 100,000 shares in 2018.
The entity also issued preference shares convertible into 100,000 ordinary
shares. In 2018, the entity purchased 75,000 ordinary shares to be held in
treasury.
On December 31, 2018, how many ordinary shares were outstanding?
= 225,000
total of P800,000.
What amount of the proceeds should be allocated to the preference shares?
=480,000
Negros Company was incorporated on January 1, 2018 with the following

authorized capitalization:
Ordinary share capital, 200,000 shares, no par, P100 stated 20,000,000
value
Preference share capital, 200,000 shares, 10% fixed rate, P50 10,000,000
par value
During 2018, the entity issued 150,000 ordinary shares for a total of
P18,000,000 and 50,000 preference shares at P60 per share. In addition, on
December 15, 2018, subscriptions for 20,000 preference shares were taken at a
purchase price of P100. These subscribed shares were paid for on January 15,
2019. Net income for 2018 was P5,000,000.
What amount should be reported as total contributed capital on December
31, 2018?
=23,000,000
MIDTERM QUIZ 2
Lauretta Company reported the following shareholders’ equity on January 1,
2018:
Share capital 1,500,000
Share premium 3,000,000
Retained earnings 2,000,000
The entity had 400,000 authorized shares of P5 par value, of which 300,000
shares were issued and outstanding.
On March 1, 2018, the entity acquired 50,000 shares for P10 per share to be
held as treasury. The shares were originally issued at P8 per share. The entity
used the cost method to account for treasury shares.
On December 31, 2018, the entity declared and distributed a property dividend
of inventory. The inventory had a P750,000 carrying amount and a P1,000,000
fair value. The net income for 2018 was P2,500,000.
What amount should be reported as unappropriated retained earnings on
December 31, 2018?
= 3,000,000
Gonzalez Company has 350,000 shares of P10 par value common stock
outstanding. During the year, Gonzalez declared a 10% stock dividend when
the market price of the stock was P30 per share. Four months later Gonzalez
declared a P.50 per share cash dividend. As a result of the dividends declared
during the year, retained earnings decreased by
=1,242,500
Global Company, a real estate developer, is owned by five founding

shareholders.
On December 31, 2018, the entity declared a property dividend of a “one-
bedroom flat” for each shareholder. The property dividend is payable on January
31, 2019.
On December 31, 2018, the carrying amount of a one-bedroom flat is
P1,000,000 and the fair value is P1,500,000.
However, the fair value is P1,800,000 on December 31, 2018 and P1,900,000 on
January 31, 2018.
What amount of gain is included in profit or loss as a result of the settlement of
the property dividend on January 31, 2019?
= 4,500,000
Kimm, Inc. had net income for 2017 of P2,120,000 and earnings per share on
common stock of P5. Included in the net income was P300,000 of bond interest
expense related to its long-term debt. The income tax rate for 2017 was 30%.
Dividends on preferred stock were P400,000. The payout ratio on common stock
was 25%. What were the dividends on common stock in 2017?
= 430,000
Baden Corporation owned 20,000 shares of Terney Corporation’s P5 par value

common stock. These shares were purchased in 2014 for P180,000. On
September 15, 2018, Baden declared a property dividend of one share of Terney
for every ten shares of Baden held by a stockholder. On that date, when the
market price of Terney was P14 per share, there were 180,000 shares of Baden
outstanding. What NET reduction in retained earnings would result from this
property dividend?
= 162,000
On June 30, 2017, when Vietti Co.'s stock was selling at P65 per share, its capital
accounts were as follows:
Capital stock (par value P50; 60,000 shares issued) P3,000,000
Premium on capital stock 600,000
If a 100% stock dividend were declared and distributed, capital stock would be
= 6,000,000
On November 1, 2018, Grande Company declared a property dividend of

equipment payable on March 1, 2019.
The carrying amount of the equipment is P3,000,000 and the fair value is
P2,500,000 on November 1, 2018.
However, the fair value less cost to distribute the equipment is P2,200,000 on
December 31, 2018 and P2,000,000 on March 1, 2019.
What is the dividend payable on December 31, 2018?
= 2,200,000
On January 1, 2017, Golden Corporation had 110,000 shares of its P5 par value
common stock outstanding. On June 1, the corporation acquired 10,000 shares
of stock to be held in the treasury. On December 1, when the market price of the
stock was P8, the corporation declared a 10% stock dividend to be issued to
stockholders of record on December 16, 2017. What was the impact of the 10%
stock dividend on the balance of the retained earnings account?
=80,000 decrease
Tomlin, Inc. has outstanding 300,000 shares of P2 par common stock and 60,000
shares of no-par 8% preferred stock with a stated value of P5. The preferred
stock is cumulative and nonparticipating. Dividends have been paid in every
year except the past two years and the current year.
Assuming that P63,000 will be distributed as a dividend in the current year, how
much will the preferred stockholders receive?
= 63,000

shareholders.
31, 2019.
January 31, 2018.
= 9,000,000
Assuming that P183,000 will be distributed, and the preferred stock
is also participating, how much will the common stockholders receive?
=90,000
Cyan Company issued 200,000 shares of P5 par value of P10 per share. On
January 1, 2018, the retained earnings amounted to P3,000,000.
In March 2018, the entity reacquired 50,000 treasury shares at P20 per share. In
June 2018, the entity sold 10,000 of these shares to corporate officers for P25
per share. The entity used the cost method to record treasury shares.
Net income for the year ended December 31, 2018 was P600,000.
What amount should be reported as unappropriated retained earnings at year-
end?
= 2,800,000
Diamond’s Corporation has an investment in 5,000 shares of Sigmond Company

common stock with a cost of P218,000. These shares are used in a property
dividend to stockholders of Diamond’s. The property dividend is declared on May
25 and scheduled to be distributed on July 31 to stockholders of record on June
15. The market value per share of Sigmond stock is P63 on May 25, P66 on June
15, and P68 on July 31. The net effect of this property dividend on retained
earnings is a reduction of
=218,000

P2,500,000 on November 1, 2018.
What amount of loss on distribution of property dividend is recognized on March
1, 2019?
=200,000
Assuming that P150,000 will be distributed as a dividend in the current year,
how much will the common stockholders receive?
=78,000
East Company had sufficient retained earnings in 2018 as a basis for dividends
but was temporarily short of cash.
The entity declared a dividend of P1,000,000 on April 1, 2018, and issued
promissory notes to the shareholders in lieu of cash.
The notes, which were dated April 1, 2018, had a maturity date of March 31,
2019 and a 10% interest rate.
How should the scrip dividend and related interest be accounted for?
=Debit retained earnings P1,000,000 on April 1, 2018 and debit interest
expense P75,000 on December 31, 2018.

shareholders.
31, 2019.
January 31, 2018.
= 7,500,000
Vittly Corporation owned 900,000 shares of Nixon Corporation stock. On

December 31, 2018, when Vittly's account "Investment in Common Stock of
Nixon Corporation" had a carrying value of P5 per share, Vittly distributed these
shares to its stockholders as a dividend. Vittly originally paid P8 for each share.
Nixon has 3,000,000 shares issued and outstanding, which are traded on a
national stock exchange. The quoted market price for a Nixon share was P7 on
the declaration date and P9 on the distribution date.
What would be the reduction in Vittly's stockholders' equity as a result of the
above transactions?
=4,500,000
Cyan Company issued 200,000 shares of P5 par value of P10 per share. On
January 1, 2018, the retained earnings amounted to P3,000,000.
In March 2018, the entity reacquired 50,000 treasury shares at P20 per share. In
June 2018, the entity sold 10,000 of these shares to corporate officers for P25
per share. The entity used the cost method to record treasury shares.
Net income for the year ended December 31, 2018 was P600,000.
What is the total amount of retained earnings at year-end?
= 3,600,000

P2,500,000 on November 1, 2018.
What is the measurement of the equipment on December 31, 2018?
=2,200,000
MIDTERM EXAM
The residual interest in a corporation belongs to the
=common stockholders
When treasury stock is purchased for more than the par value of the stock and
the cost method is used to account for treasury stock, what account(s) should
be debited?
=Treasury stock for the purchase price.
In a corporate form of business organization, legal capital is best defined as

=the amount of capital the state of incorporation allows the company to
accumulate over its existence.X
Which of the following is not a legal restriction related to profit distributions by a

corporation?
=The amount distributed to owners must be in compliance with the state laws
governing corporations.X
Glenn Company provided the following information at year-end:

Preference share capital, P100 par 2,300,000
Share premium – preference share 805,000
Ordinary share capital, P10 par 5,250,000
Share premium – ordinary share 2,750,000
Subscribed ordinary share capital 50,000
Note payable 4,000,000
Subscription receivable – ordinary share 400,000
What is the amount of legal capital?

=7,550,000X
Pryor Corporation issued a 100% stock dividend of its common stock which had
a par value of P10 before and after the dividend. At what amount should
retained earnings be capitalized for the additional shares issued?
=Par value
At the beginning of current year, Hanna Company reported the following

shareholders’ equity:
Share capital, P10 par, outstanding 225,000 shares 2,250,000
Share premium 900,000
During the current year, the entity had the following share transactions:
* Acquired 6,000 treasury shares for P270,000.
* Sold 3,600 treasury shares at P50 a share.
* Sold the remaining treasury shares at P41 per share.
What is the total amount of share premium at year-end?
=870,000X
The pre-emptive right enables a stockholder to

=share proportionately in any new issues of stock of the same class.
Treasury shares are

=shares held as an investment by the treasurer of the corporation.X
During 2018, Hyatt Company issued P110 per share, 15,000 convertible
preference shares of P100 par value. One preference share may be converted
into three ordinary shares of P25 par value at the option of the preference
shareholder.
On December 31, 2018, all of the preference shares were converted into
ordinary shares. The market value of the ordinary share at the conversion date
was P40.
What amount should be credited to share premium as a result of conversion?
=150,000X
In 2017, Rona Company issued 50,000 shares of P10 par value for P100 per
share.
In 2018, the entity reacquired 2,000 shares at P150 per share and immediately
canceled these 2,000 shares.
1. In connection with the retirement of shares, what amount should be
debited to share premium?
= 180,000
Cash dividends are paid on the basis of the number of shares

=outstanding less the number of treasury shares.X
Which of the following represents the total number of shares that a corporation
may issue under the terms of its charter?
= authorized shares
Stockholders' equity is generally classified into two major categories:

= appropriated capital and retained earnings.X
Stockholders of a business enterprise are said to be the residual owners. The

term residual owner means that shareholders
= bear the ultimate risks and uncertainties and receive the benefits of
enterprise ownership.
The pre-emptive right of a common stockholder is the right to

= receive cash dividends before they are distributed to preferred stockholdersX.
If management wishes to "capitalize" part of the earnings, it may issue a

= stock dividend.
Stock that has a fixed per-share amount printed on each stock certificate is
called
= par value stock.
Vicar Company was organized on January 1, 2018 with 100,000 authorized
shares of P100 par value. On January 5, the entity issued 75,000 shares at P140
per share.
On December 31, the entity purchased 5,000 shares at P110 per share. The
entity used the par value method to record the purchase of the treasury shares.
What is the balance of the share premium from treasury shares on December
31, 2018?
= 150,000
In 2017, Rona Company issued 50,000 shares of P10 par value for P100 per
share.
In 2018, the entity reacquired 2,000 shares at P150 per share and immediately
canceled these 2,000 shares.
In connection with the retirement of shares, what amount should be debited to
retained earnings?
= 180,000X
Mara Company provided the following data at year-end:
Authorized share capital 5,000,000

Unissued share capital 2,000,000
Subscribed share capital 1,000,000
Subscription receivable 400,000
Share premium 500,000
Retained earnings unappropriated 600,000
Retained earnings appropriated 300,000
Revaluation surplus 200,000
Treasury shares, at cost 100,000
What total amount should be reported as shareholders’ equity?

= 4,900,000X
An entry is not made on the
= An entry is made on all of these dates.X
A primary source of stockholders' equity is

= both income retained by the corporation and contributions by stockholders.
When a corporation issues its capital stock in payment for services,

the least appropriate basis for recording the transaction is the
=par value of the shares issued.
During 2018, Hyatt Company issued P110 per share, 15,000 convertible
preference shares of P100 par value. One preference share may be converted
into three ordinary shares of P25 par value at the option of the preference
shareholder.
On December 31, 2018, all of the preference shares were converted into
ordinary shares. The market value of the ordinary share at the conversion date
was P40.
What amount should be credited to ordinary share capital as a result of
conversion?
= 1,500,000X
Total stockholders' equity represents

= a claim against a portion of the total assets of an enterprise.
Which dividends do not reduce stockholders' equity?

= Stock dividends
In January 2018, Castro Corporation, a newly formed company, issued 10,000

shares of its P10 par common stock for P15 per share. On July 1, 2018, Castro
Corporation reacquired 1,000 shares of its outstanding stock for P12 per share.
The acquisition of these treasury shares
= increased total stockholders' equity.X
Vicar Company was organized on January 1, 2018 with 100,000 authorized
shares of P100 par value. On January 5, the entity issued 75,000 shares at P140
per share.
On December 31, the entity purchased 5,000 shares at P110 per share. The
entity used the par value method to record the purchase of the treasury shares.
What is the balance of the share premium from the original issuance of shares
on December 31, 2018?
=3,800,000X
Day Company held 10,000 shares of P10 par value as treasury reacquired for
P120,000. On December 31, 2018, the entity reissued all 10,000 shares for
P190,000.
What is credited for the excess of the reissue price over the cost of treasury
shares?
= Gain on sale of investment P70,000X
FINALS QUIZ 1
On December 31, 2018, Bain Company sold a machine with 12-year useful life to
another entity and simultaneously leased it back for one year.
Sale price 360,000
Carrying amount 330,000
Present value of reasonable lease rentals (P3,000 for 12 months 34,100
@ 12%)
What amount of revenue from the sale should be reported in 2018?

=30,000
Minimum lease payments may include a

=any of these.
Major reason/s why a company may become involved in leasing to other

companies is (are)
=all of these
Silay Company has established a defined benefit pension plan for the
employees. Annual payments under the pension plan are equal to 3% of an
employee’s highest lifetime salary multiplied by the number of years with the
entity. An employee’s salary in 2018 was P500,000.
The employee is expected to retire in 10 years, and the salary increases are
expected to average 4% per year during that period. On December 31, 2018,
the employee has worked for 15 years. The future value of 1 at 4% for 10
periods is 1.48.
What is the annual pension payment that should be used in computing the
projected benefit obligation on December 31, 2018?
=333,000
Camia Company is in the business of leasing new sophisticated equipment. As

lessor, the entity expects a 12% return.
At the end of the lease term, the equipment will revert to Camia Company.
On January 1, 2018, an equipment is leased to another entity under a direct
financing lease.
Cost of equipment to Camia 5,500,000
Residual value – unguaranteed 400,000
Annual rental payable in advance 959,500
Useful life and lease term 8 years
Implicit interest rate 12%
First lease payment January 1, 2018
What is the gross investment in the lease?

=8,076,000
On January 1, 2018, Wren Company leased a building to Brill under an operating

lease for ten years at P500,000 per year, payable the first day of each lease
year. Wren paid P150,000 to a real estate broker as a finder fee.
The building is depreciated P120,000 per year. Wren incurred insurance and
property tax expense totaling P90,00 for the year.
What is the net rent income for 2018?
=275,000

financing lease.
What is the unearned interest income on January 1, 2018?

= 2,576,000
An essential element of a lease conveyance is that the

=lessor conveys less than his or her total interest in the property.
On December 1, 2018, Tell Company leased office space for five years at a
monthly rental of P600,000. On the same date, the entity paid the lessor the
following amounts:
Bonus to obtain lease 300,000
First month’s rent 600,000
Last month’s rent 600,000
Security deposit refundable at lease 800,000
expiration
Installation of new walls and offices 3,600,000
What total amount of the expenses relating to the utilization of the office space
should be reported for 2018?
=665,000
Elysee Company leased a machine with a fair value of P1,650,000 for a period of
5 years under a finance lease. The initial direct costs included in negotiating the
lease amounted to P12,500.
The present value of the minimum lease payments discounted at the rate
implicit in the lease is P1,584,000.
At what amount should the machine be recognized initially in the financial
statement?
=1,596,500
The methods of accounting for a lease by the lessee are

=operating and capital lease methods.
Which of the following best describes current practice in accounting for leases?
=Leases similar to installment purchases are capitalized
While only certain leases are currently accounted for as a sale or purchase,
there is theoretic justification for considering all leases to be sales or purchases.
The principal reason that supports this idea is that
=a lease reflects the purchase or sale of a quantifiable right to the use of
property.
What impact does a bargain purchase option have on the present value of the
minimum lease payments computed by the lessee?
=The lessee must increase the present value of the minimum lease payments by
the present value of the option price.
On January 1, 2018, Babson Company leased two automobiles for executive use.
The lease requires Babson to make five annual payments of P1,300,000
beginning January 1, 2018. At the end of the lease term, December 31, 2022,
the entity guaranteed the residual value of the automobiles at P1,000,000. The
lease qualifies as a finance lease. The interest rate implicit in the lease is 9%.
Present value factors for the 9% rate implicit in the lease are as follows:
For an annuity due with 5 payments (in 4,240
advance)
For an ordinary annuity with 5 payments 3,890
Present value of 1 for 5 periods 0.650
What is the finance lease liability immediately after the first required payment?
=4,862,000

financing lease.
What is the interest income for 2018?

=544,860
Which of the following is an advantage of leasing?

=All of these
Howe Company leased equipment to Kew Company on January 1, 2018, for an

eight-year period expiring December 31, 2025. Equal payments under the lease
are P500,000 and are due on January 1 of each year. The first payment was
made on January 1, 2018.
The selling price of the equipment is P2,900,000 and the carrying amount is
P2,000,000. The lease is appropriately accounted for as a sales type lease.
The present value of the lease payments at an implicit interest rate of 12% is
P2,780,000.
What amount of gross profit on sale should be reported for 2018?
=780,000
Which of the following is a correct statement of one of the capitalization criteria?

=The lease term is equal to or more than 75% of the estimated economic life of
the leased property.
The amount to be recorded as the cost of an asset under capital lease is equal
to the
=present value of the minimum lease payments or the fair value of the asset,
whichever is lower.
FINALS QUIZ 2
On January 1, 2018, Kamagong Company granted 100 share options each to 500
employees, conditional upon the employee’s remaining in the entity’s employ
during the vesting period.
The share options vest at the end of a three-year period. On grant date, each
share option has a fair value of P30.
The par value per share is P100 and the option price is P120.
On December 31, 2019, 30 employees have left and it is expected that on the
basis of a weighted average profitability, a further 30 employees will leave
before the end of the three-year period.
On December 31, 2020, only 20 employees actually left and all of the share
options are exercised on such date.
What is the share premium upon exercise of the share options on December 31,
2020?
= 2,250,000
An entity has entered into a contract with another entity. The latter will supply
the former with a range of services. The payment for those services will be in
cash and based upon the price of former’s ordinary shares on completion of the
contract. What type of share-based payment transaction does this represent?
= Cash-settled share-based payment transaction
On January 1, 2018, Kamagong Company granted 100 share options each to 500
employees, conditional upon the employee’s remaining in the entity’s employ
during the vesting period.
The share options vest at the end of a three-year period. On grant date, each
share option has a fair value of P30.
The par value per share is P100 and the option price is P120.
On December 31, 2019, 30 employees have left and it is expected that on the
basis of a weighted average profitability, a further 30 employees will leave
before the end of the three-year period.
On December 31, 2020, only 20 employees actually left and all of the share
options are exercised on such date.
What is the compensation expense for 2020?
= 470,000
These are transactions in which the entity receives goods or services as

consideration for equity instruments of the entity including shares and share
options.
= Equity settled share-based payment transactions
On January 1, 2018, Oak Company granted share options to certain key

employees as additional compensation. The options were for 100,000 ordinary
shares of P10 par value at an option price of P15 per share.
Market price of this share on January 1, 2018 was P20. The fair value of each
share option on January 1, 2018 is P8.
The options were exercisable beginning January 1, 2018 and expire on
December 31, 2019. On December 31, 2018, all share options were exercised.
What amount of compensation expense should be reported in 2018?
= 800,000*
On January 1, 2018, Oak Company granted share options to certain key
employees as additional compensation. The options were for 100,000 ordinary
shares of P10 par value at an option price of P15 per share.
Market price of this share on January 1, 2018 was P20. The fair value of each
share option on January 1, 2018 is P8.
The options were exercisable beginning January 1, 2018 and expire on
December 31, 2019. On December 31, 2018, all share options were exercised.
What amount should be recognized as share premium upon exercise of the
share options on December 31, 2018?
= 1,300,000*
Irish Company granted 10,000 share options to each of its five directors on
January 1, 2018. The options vest on January 1, 2022. The fair value oe ach
option on January 1, 2018 is P50 and it is anticipated that all of the share
options will vest on January 1, 2022.
What amount should be reported as increase in expense and equity for the year-
ended December 31, 2018?
= 625,000
The method that must be used to measure employee stock options and other
payments given to employees in the form of equity securities is:
= Fair value
It is the difference between the fair value of the shares to which the
counterparty has the right to subscribe and the price the
counterparty is required to pay for those shares.
= Intrinsic value
A cash-settled share-based payment shall give rise to an increase in which of

the following?
= A liability
Sydney Corporation granted 1,000 stock options to its employees on January 1,

2016, for services performed during 2016 and 2017. At the date of the grant,
the fair value of the stock options is P6,000. The options are exercisable on
January 1, 2018, and expire on June 30, 2018. On July 1, 2018, it was determined
that none of the options were exercised. On December 31, 2018, Sydney
Corporation should
= Not adjust or reverse compensation expense.
In connection with a share option plan for the benefit of key employees, Ward
Company intends to distribute treasury shares when the options are exercised.
These shares were bought in 2017 at P42 per share. The par value per share is
P30.
On January 1, 2018, the entity granted share options of 100,000 shares at an
option price of P38 per share as additional compensation for services to be
rendered over the next three years.
The options are exercisable during a 2-year period beginning January 1, 2021, by
grantee still employed by the entity.
Market price of share was P47 at the grant date.
The fair value of the share option is P12 on grant date. All share options were
exercised during 2021.
What amount should be recognized as share premium upon exercise of the
share options in 2021?
= 800,000
If share-based payment transaction provides that employees have the right to

choose the settlement whether in cash or shares, the entity is deemed to have
issued
= A compound financial instrument
For cash settled share-based payment transactions, an entity shall measure the
goods or services received and the liability incurred at the
= Fair value of the liability
The entity has issued a range of share options to employees. What type of
share-based payment transaction does this represent?
= Equity-settled share-based payment transaction
On June 30, 2018, Newman Company granted compensatory share options for
30,000 P20 par value ordinary shares to certain key employees. The market
price of the share on that date was P36 and the option price was P30. The Black-
Scholes option pricing model measured the total compensation expense to be
P5,400,000.
The options are exercisable beginning January 1, 2021, provided the key
employees are still in entity’s employ at the time the options are exercised. The
options expire on June 30, 2022.
On January 15, 2021, when the market price of the share was P42, all 30,000
options were exercised.
What is the compensation expense for 2020?
= 1,080,000
In connection with a share option plan for the benefit of key employees, Ward
Company intends to distribute treasury shares when the options are exercised.
These shares were bought in 2017 at P42 per share. The par value per share is
P30.
On January 1, 2018, the entity granted share options of 100,000 shares at an
option price of P38 per share as additional compensation for services to be
rendered over the next three years.
The options are exercisable during a 2-year period beginning January 1, 2021, by
grantee still employed by the entity.
Market price of share was P47 at the grant date.
The fair value of the share option is P12 on grant date. All share options were
exercised during 2021.
What amount should be reported as compensation expense for 2018?
= 400,000
On January 1, 2018, Kline Company granted Morgan, the president,

compensatory share options to buy 10,000 ordinary shares of P10 par value.
The options call for a price of P20 per share and are exercisable in 3 years
following the grant date. Morgan exercised the options on December 31, 2018.
The market price of the share was P60 on January 1, 2018, and P70 on
December 31, 2018. The fair value of the share option is P30 on the date of
grant.
What is the net increase in shareholders’ equity as a result of the grant and
exercise of the options?
= 200,000
How should an entity recognize the change in the fair value of the liability in
respect of a cash-settled share-based payment transaction?
= Should recognize in profit or loss
On June 30, 2018, Newman Company granted compensatory share options for
30,000 P20 par value ordinary shares to certain key employees. The market
price of the share on that date was P36 and the option price was P30. The Black-
Scholes option pricing model measured the total compensation expense to be
P5,400,000.
The options are exercisable beginning January 1, 2021, provided the key
employees are still in entity’s employ at the time the options are exercised. The
options expire on June 30, 2022.
On January 15, 2021, when the market price of the share was P42, all 30,000
options were exercised.
What is the share premium upon exercise of share options in 2021?
= 5,700,000
FINALS EXAM
On January 1, 2018, Glade Company leased computer equipment to Blass
Company under a direct financing lease. The equipment has no residual value at
the end of the lease and the lease does not contain bargain purchase option.
The entity wishes to earn 8% interest on a 5-year lease of equipment with a cost
of P3,234,000. The present value of an annuity due of 1 at 8% for 5 years is
4.312.
What is the total interest revenue that Glade will earn over the lease term?
=1,394,500
Rapp Company leased a new machine to Lake Company on January 1, 2018. The
lease expires on January 1, 2023. The annual rental is P900,000.
Additionally, on January 1, 2018, Lake paid P500,000 to Rapp as a lease bonus
and P250,000 as a security deposit to be refunded upon expiration of the lease.
What amount of rental revenue should be reported for 2018?
=1,000,000
Pine Company reported pretax financial income of P800,000 for the year ended
December 31, 2018.
In the computation of income taxes, the following data were considered:
Nontaxable gain 350,000
Depreciation deducted for tax purposes in excess of depreciation 50,000
deducted for book purposes
Estimated tax payment in 2018 70,000
Enacted tax rate 30%
What is the total income tax expense?

=85,000X
Pine Company reported pretax financial income of P800,000 for the year ended
December 31, 2018.
In the computation of income taxes, the following data were considered:
Nontaxable gain 350,000
Depreciation deducted for tax purposes in excess of depreciation 50,000
deducted for book purposes
Estimated tax payment in 2018 70,000
Enacted tax rate 30%
What amount should be reported as current tax liability on December 31, 2018?
=120,000X
As an inducement to enter a lease, Aris Company, a lessor, granted Hompson

Company, a lessee, nine months of free rent under a five-year operating lease.
The lease was effective on July 1, 2018 and provided for monthly rental of
P100,000 to begin April 1, 2019.
In the income statement for the year ended June 30, 2019, what amount should
be reported as rent expense?
=1,020,000
In 2018, Tiger Company reported pretax financial income of P5,000,000.
Included in the pretax financial income are P900,000 of nontaxable life
insurance proceeds received as a result of the death of an officer, P1,200,000 of
estimated warranty expense accrued on December 31, 2018, and P200,000 of
life insurance premiums for a policy for an officer.
No income tax was previously paid during the year and the income tax rate is
30%.
What is the income tax payable on December 31, 2018?
=1,650,000
Meg Company leased equipment from Wee Company on July 1, 2018 for an
eight-year period expiring June 30, 2026.
Equal payments under the lease are P600,000 and are due on July 1 of each
year. The first payment was made on July 1, 2018. The rate of interest
contemplated by Meg and Wee is 10%.
The cash selling price of the equipment is P3,520,000 and the carrying amount
is P2,800,000. The lease is appropriately recorded as a sales type lease.
1. What amount of profit on the sale should be recorded for the year ended
December 31, 2018?
=300,000X
Huskie Company reported in the income statement for the current year pretax
income of P400,000.
The following items are treated differently per tax return and per book:
Tax return Book
Royalty income 20,000 40,000
Depreciation expense 125,000 100,000
Payment of a penalty None 15,000
Income tax rate 30%
What is the total tax expense?

=120,000X
Huskie Company reported in the income statement for the current year pretax
income of P400,000.
The following items are treated differently per tax return and per book:
Tax return Book
Royalty income 20,000 40,000
Depreciation expense 125,000 100,000
Payment of a penalty None 15,000
Income tax rate 30%
What amount should be reported as current portion of income tax expense?

=138,000X
Viking Company reported in the income statement for the year ended December
31, 2018 pretax income of P1,000,000.
Tax return Accounting record
Rent income 70,000 120,000
Depreciation 280,000 220,000
Premiums on officers’ life insurance 90,000
Income tax rate 30%

=267,000X
On January 1, 2018, Glen Company leased a building to Dix Company for a ten-
year term at an annual rental of P500,000.
At inception of the lease, Glen received P2,000,000 covering the first two years’
rent of P1,000,000 and a security deposit of P1,000,000.
This deposit will not be returned to Dix upon expiration of the lease but will be
applied to payment of rent for the last two years of the lease.
What portion of the P2,000,000 should be reported as noncurrent liability on
Decemebr 31, 2018
=1,500,000X
On January 1, 2018, Glade Company leased computer equipment to Blass

Company under a direct financing lease. The equipment has no residual value at
the end of the lease and the lease does not contain bargain purchase option.
The entity wishes to earn 8% interest on a 5-year lease of equipment with a cost
of P3,234,000. The present value of an annuity due of 1 at 8% for 5 years is
4.312.
What is the interest revenue to be reported by Glade for 2018?
=258,720X
Hilton Company reported pretax financial income of P6,200,000 for the current
year. Included in other income was P200,000 of interest revenue from
government bonds held by the entity. The income statement included
depreciation expense of P500,000 for a machine with cost of P3,000,000. The
income tax return reported P600,000 as depreciation on the machine. The
enacted tax rate is 30% for the current year and future years.
What is the current tax expense for the current year?
=1,860,000X
On December 31, 2018, Thunder Company sold land with a cost of P1,500,000
to Victoria Company for P2,300,000 when the land’s fair value was P2,150,000.
Thunder Company immediately entered into a cancelable lease agreement to
use the land for 2 years at an annual rental of P20,000.
What amount of profit should Thunder record on the sale of land for 2018?
=650,000X
Tantrum Company began operations at the beginning of the current year. At the
end of the first year of operations, the entity reported P6,000,000 income before
income tax in the income statement but only P5,100,000 taxable income in the
tax return.
Analysis of the P900,000 difference revealed that P500,000 was a permanent
difference and P400,000 was a temporary tax liability difference related to a
current asset. The enacted tax rate for the current year and future years is 30%.
What is the total income tax expense to be reported in the income statement for
the current year?
=1,950,000X
Jana Company leased a building for 20 years with effect from January 1, 2018.
The useful life of the building is 40 years. As part of the negotiations for the
lease, the lessor granted Jana a rent-free period.
Annual rentals of P1,600,000 are payable in advance on January 1, commencing
in 2018.
What amount of rent expense should be recognized for the year ended
December 31, 2018?
=1,440,000
Meg Company leased equipment from Wee Company on July 1, 2018 for an
eight-year period expiring June 30, 2026.
Equal payments under the lease are P600,000 and are due on July 1 of each
year. The first payment was made on July 1, 2018. The rate of interest
contemplated by Meg and Wee is 10%.
The cash selling price of the equipment is P3,520,000 and the carrying amount
is P2,800,000. The lease is appropriately recorded as a sales type lease.
What amount of interest revenue should be recorded for the year ended
December 31, 2018?
=352,000X
On January 1, 2018, Park Company signed a 10-year operating lease for office
space at P960,000 per year.
The lease included a provision for additional rent of 5% of annual company sales
in excess of P5,000,000.
The sales for the year ended December 31, 2018 totaled P6,000,000.
Upon execution of the lease, the entity paid P240,000 as a bonus for the lease.
What is the rent expense for the year ended December 31, 2018?
=1,010,000X
Tantrum Company began operations at the beginning of the current year. At the
end of the first year of operations, the entity reported P6,000,000 income before
income tax in the income statement but only P5,100,000 taxable income in the
tax return.
Analysis of the P900,000 difference revealed that P500,000 was a permanent
difference and P400,000 was a temporary tax liability difference related to a
current asset. The enacted tax rate for the current year and future years is 30%.
What is the current tax expense?
=1,530,000
In 2018, Tiger Company reported pretax financial income of P5,000,000.

Included in the pretax financial income are P900,000 of nontaxable life
insurance proceeds received as a result of the death of an officer, P1,200,000 of
estimated warranty expense accrued on December 31, 2018, and P200,000 of
life insurance premiums for a policy for an officer.
No income tax was previously paid during the year and the income tax rate is
30%.
=1,560,000X

Intermediate Accounting 2

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Intermediate Accounting 2

Uploaded by

Copyright:

Available Formats

INTERMEDIATE ACCOUNTING 2

PRELIM QUIZ 1 20/20

Stock dividends distributable should be classified on the

Which obligations are classified as current even if they are expected to be

Which of the following items is a current liability?

Where is debt callable by the creditor reported on the debtor's financial

Which of the following may be a current liability?

The principal classification of liabilities are:

Which of the following is a current liability?

Which of the following is a current liability?

Which of the following is true about accounts payable?

Current liabilities or short-term obligations are not discounted anymore but

Among the short-term obligations of Lance Company as of December 31, the

PRELIM QUIZ 2 20/20

An example of a notional amount is interest rate

Statement 1: The discount on bonds payable and the premium on bonds

On November 1, 2018, Mason Company issued P8,000,000 of 10-year, 8% term

Which of the following statements is false?

The following are true for the valuation of notes except:

On April 1, 2018, Greg Company issued at 99 plus accrued interest, 2,000 of 8%

Contingent liabilities will or will not become actual liabilities depending on

The following relates to debt financing except:

For a liability to exist

Statement 1: For bond outstanding method, the procedure is simply to divide

An entity operates chemical plants. Its published policies include a commitment

An entity has been served a legal notice at year-end by the Department of

Current liabilities are measured at

A business borrowed P40,000 on March 1 of the current year by signing a 30

Which of the following is not considered a characteristic of a liability?

Bonds that are secured by a lien against real estate

Financial liability is any liability that is:

An investment technique used to offset a potential loss on one investment by

Pending litigation would generally be considered

The shareholders of Dorr Company approved a two-for-one split of the entity’s

Seco Company was incorporated on January 1, 2018.

On December 31, 2018, what is the number of shares outstanding?

The shareholders of Dorr Company approved a two-for-one split of the entity’s

Beck Company issued 200,000 ordinary shares when it began operations in

Negros Company was incorporated on January 1, 2018 with the following

Global Company, a real estate developer, is owned by five founding

Baden Corporation owned 20,000 shares of Terney Corporation’s P5 par value

On November 1, 2018, Grande Company declared a property dividend of

Global Company, a real estate developer, is owned by five founding

Diamond’s Corporation has an investment in 5,000 shares of Sigmond Company

On November 1, 2018, Grande Company declared a property dividend of

Global Company, a real estate developer, is owned by five founding

Vittly Corporation owned 900,000 shares of Nixon Corporation stock. On

On November 1, 2018, Grande Company declared a property dividend of

In a corporate form of business organization, legal capital is best defined as

Which of the following is not a legal restriction related to profit distributions by a

Glenn Company provided the following information at year-end:

What is the amount of legal capital?

At the beginning of current year, Hanna Company reported the following

The pre-emptive right enables a stockholder to

Treasury shares are

Cash dividends are paid on the basis of the number of shares

Stockholders' equity is generally classified into two major categories:

Stockholders of a business enterprise are said to be the residual owners. The

The pre-emptive right of a common stockholder is the right to

If management wishes to "capitalize" part of the earnings, it may issue a

Mara Company provided the following data at year-end:

Authorized share capital 5,000,000