Accountancy Department

ACCCOB2 Quiz No. 4

3rd Term, AY 2022-2023
SET A
NAME: _______________________________________________ Section ________________
ID NUMBER: __________________________________________

GENERAL INSTRUCTIONS. (Points will be deducted for any violation.)

1. Write your name, ID number and section on the test questionnaire and worksheet or scannable form.
2. Shade HEAVILY the scannable form using BLACK BALLPEN ONLY.
3. Do not detach any portion of the questionnaire.
4. Anyone caught cheating will have a grade of 0.0 in the course.
5. iPods, cellular phone, laptops and other similar gadgets and communication devices are not allowed during the
quiz.
6. Read the instructions carefully before you start.
7. Any questions regarding the quiz shall be addressed directly to the faculty only.
8. The quiz is good for 1 hour and 30 minutes.
God bless everyone!
TRUE OR FALSE. Shade heavily the letter of your choice. STRICTLY NO ERASURES. (1 pt. each)
1. Which of the following is a characteristic of a current liability but not of a noncurrent liability?
Unavoidable obligation.
Present obligation that entails settlement by probable future transfer of cash, goods or services.
Settlement is expected within the normal operating cycle or within 12 months, whichever is
longer.
The obligating event creating the liability has already occurred.
2. Magazine subscriptions collected in advance are treated as
A contra account to magazine subscriptions receivable
Deferred revenue in the liability section
Deferred revenue in the shareholders’ equity section
Magazine subscription refund in the income statement in the period collected
3. A note payable is recorded at present value if it is a/an
Payable within one year
Zero interest-bearing note payable within one year
Zero interest-bearing note payable beyond one year
Interest-bearing note, whether short-term or long-term
4. An entity sells appliances that include a three-year warranty. Service calls under the warranty are
performed by an independent mechanic under a contract with the entity. Based on experience,
warranty costs are expected to be incurred for each machine sold. When should the entity recognize
these warranty costs?
Evenly over the life of the warranty
When the service calls are performed
When payments are made to the mechanic
When the machines are sold
5. Share dividends distributable should be classified on the
Income statement as an expense
Statement of financial position as an asset
Statement of financial position as a liability
Statement of financial position as an item of equity
6. Estimated liabilities are disclosed in financial statements by
Note to the financial statements
Showing the amount among the liabilities but not extending to the total liability
An appropriation of retained earnings
Appropriately classifying them as regular liabilities in the statement of financial position
7. Rent revenue collected over one year in advance should be reported as
Revenue in the year collected Separate item of shareholders’ equity
Current liability Accrued liability
8. What does a current ratio inform you about a company?
Assets available in current operation The company’s liquidity
The company’s solvency The company’s profitability
9. Which of the following is the correct definition of a provision?
A possible obligation arising from past event
A liability of uncertain timing or amount
A liability which cannot be easily measured
An obligation to transfer funds to an entity
10. From a liquidity standpoint it is more desirable for a firm to have
Current assets equal to current liabilities.
Current liabilities exceeding current assets.
Current assets exceeding current liabilities.
Current liabilities exceeding non-current liabilities.
11. Which of the following statements is true concerning the measurement of a provision?
I. The amount recognized as a provision should be the best estimate of he expenditure
required to settle the present obligation at the end of reporting period.
II. The best estimate of the expenditure required to settle the present obligation is the amount
that an entity would rationally pay to settle the obligation at the end of reporting period or to
transfer it to a third party at that time.
I only Both I and II
II only Neither I nor II
12. What is the market rate of interest for a bond issue which sells for more than face value?
Less than rate stated on the bond
Equal to rate stated on the bond
Higher than rate stated on the bond
Independent of rate stated on the bond
13. If bonds are issued at a premium, this indicates that
The yield rate of interest exceeds the nominal rate.
The nominal rate of interest exceeds the yield rate.
The yield and nominal rates coincide.
No necessary relationship exists between the two rates.
14. How would the amortization of premium on bonds payable affect each of the following?
Carrying amount of bond Net income
Increase Decrease
Increase Increase
Decrease Decrease
Decrease Increase
15. How would the amortization of discount on bonds payable affect each of the following?
Carrying amount of bond Net income
Increase Decrease
Increase Increase
Decrease Decrease
Decrease Increase
16. When an entity issued a note solely in exchange for cash, the present value of the note at issuance
is equal to
Face amount
Face amount discounted at the market interest rate
Proceeds received
Proceeds received discounted at the market interest rate
17. Which of the following is not one of the basic rights of a shareholder?
The right to participate in earnings
The right to maintain proportional interest in the corporation.
The right to participate in the proceeds of the sale of corporate assets upon liquidation of
corporation.
The right to inspect the accounting records of the corporation.
18. This should be adopted by the corporation within one month after the receipt of the official notice of
issuance of its Certificate of Incorporation from the SEC. This is a summary of how the
corporation’s internal affairs are carried out and managed.

Articles of Incorporation Extension of corporate life

By-laws Management contract
19. The following are contained in the Articles of Incorporation, except

Principal office of the corporation which must be in the Philippines.

Names, nationalities and residences of incorporators, which must not be less than seven and not
more than fifteen.
For stock corporations, amount of authorized capital stock in lawful money of the Philippines,
number of shares into which it is divided, the par value in case of par value shares.
Term of existence of the corporation.
20. Which among the following statements is incorrect?

Preference share is entitled to a fixed dividend rate.

Ordinary share is not entitled to receive dividend in arrears – dividend which were not declared
for distribution during prior years.
Cumulative preference share is entitled to dividends in excess of the fixed dividend rate.
Ordinary shares have the right to vote and right to participate in profit.

21. Which is not a function of the Corporate Treasurer?

To receive in the name and for the benefit of the corporation, all subscriptions, contributions, or
donations.
To certify the information about authorized share capital and number of subscribed shares and
the paid-up portion of the subscription that has been duly received.
To keep in safe custody the seal of the company.
To keep correct books of account of all the business and transactions of the corporation.
22. An entity is a retailer of home appliances and offers a service contract on each appliance sold. The
entity sells appliances on installment contracts but all service contracts must be paid in full at the
time of sale. Collections received for service contracts shall be recorded as an increase in

Deferred revenue account Shareholders’ equity valuation account

Sales contracts receivable Service revenue account
23. How would proceeds received from the advance sale of nonrefundable tickets for a theatrical
performance be reported in the seller’s financial statements before the performance?

Revenue for the entire proceeds

Revenue to the extent of related costs expended
Unearned revenue to the extent of related costs expended
Unearned revenue for the entire proceeds
 24. Diluted earnings per share means that

In the presence of a fixed dividend rate for preferred stock, the dividends of common stock are
diluted.
Whenever preferred stock is cumulative and fully participating, the dividends of common stock
are diluted.
In the presence of preferred stockholders, the earnings per share of common stockholders are
diluted.
In the presence of cumulative and fully participating preferred stockholders, the earnings per
share of common stockholders are diluted.

PROBLEM SOLVING. Shade the letter of your choice. Solutions MUST BE IN PROPER
ACCOUNTING FORMAT, otherwise, will not be given points credit if not followed. (2 pts each)

25. Jinton Corporation's authorized share capital amounts to P7,500,000 for Common Stock and
P5,000,000 for Preferred Stock. Below are the details of total paid-in capital from the two classes of shares
previously issued during the recently held initial public offering:
Class of Share issued and outstanding Total Paid-In Capital
Common Stock, P15 par value 3,000,000
Preferred Stock, P25 par value 3,750,000
On the statement of changes in equity, what is the number of issued and outstanding shares for
each class?
Common Preferred Common Preferred
A. 200,000 150,000 C. 120,000 250,000
B. 500,000 200,000 D. 300,000 150,000

26-27. Aussie Gal Corporation has the following data for 2022:
12% preferred stock, par value of P200, 10,000 shares issued and outstanding 2,000,000
Common stock, par value of P100, 5,000 shares issued and outstanding 500,000
No dividends were declared during the past two years.
Unrestricted retained earnings is P3,000,000.
The Board declared P900,000 cash dividend in 2022.

26. Considering that preferred stock is non-cumulative and non-participating, how much
amount of cash dividend per share was distributed to common stock?
A. P36.00 B. P132.00 C. P112.00 D. P12.00

27. Considering the same information above, how much dividends were issued to preferred
stock?
A. 112.00 B. 36.00 C. 132.00 D. 24.00

28-29. Carson Corporation has the following data for 2022:

18% preferred stock, par value of P100, 2,000 shares issued and outstanding 200,000
Common stock, par value of P50, 12,000 shares issued and outstanding 600,000

No dividends were declared during 2020 and 2021.

Unrestricted retained earnings is P2,000,000.
The Board declared P500,000 cash dividend in 2022.

28. Considering that preferred stock is cumulative and fully participating, how much cash
dividend per share shall be distributed to preferred stock?
A. 54.00 B. 62.50 C. 89.50 D. 32.67

29. Considering that preferred stock is cumulative and fully participating, how much cash
dividend per share shall be distributed to common stock?
 A. 32.67 B. 31.25 C. 26.75 D. 54.00

30-31. Hero Corporation has the following data for 2022:

18% preferred stock, par value of P75, 3,000 shares issued and outstanding 225,000
Common stock, par value of P50, 8,000 shares issued and outstanding 400,000
Net income for the year amounted to 1,700,000.
Dividends of P50 was distributed to each preferred stock.

30. Compute for the Earnings per Share. Round off answers up to two decimal places.
A. 193.75 B. 207.44 C. 212.50 D. 516.67

31. Referring to the same table above, assume that there are NO preferred stock. Only common
stocks are issued by Hero Corporation. Compute for the EPS. Round off answers up to two decimal
places.
A. 516.67 B. 207.44 C. 566.67 D. 212.50

32. On January 1, 2022, Groot Trading issued its 12% bonds at face amount of P5,000,000, which will
mature on January 1, 2027. The bonds were issued at P5,500,000 to yield 10%, resulting in bond premium
of P500,000. Interest is payable every Dec. 31. Groot uses the effective interest method in amortizing
bond premium. What amount should be reported as the carrying value of the bonds at December 31,
2022?
B
A. 5,550,000.00 . 5,450,000.00 C. 5,340,000.00 D. 5,050,000.00

33. On January 1, 2022, Nanook Trading issued its 8% bonds at face amount of P5,000,000, which will
mature on January 1, 2027. The bonds were issued for P4,650,000. Interest is payable every December
31. The market rate of interest for this type of bond is 10%. What amount should be reported as the
carrying value of the bonds at December 31, 2022?

A. 4,585,000.00 B. 4,715,000.00 C. 5,065,000.00 D. 4,935,000.00

34. In July 5, 2022, the delivery van of Whelps Company met a road mishap and caused physical injuries
to its driver. The company driver had sued Whelps contesting that no preventive maintenance was made
on the company's vehicles for the past 12 months. The legal counsel of Whelps believes that it is possible
but not probable that the outcome of the lawsuit would cost the company settlement ranging from P300,000
to P450,000. What amount should be taken up as liability in the Statement of Financial Position as
of December 31, 2022?
A. 0 B. 450,000 C. 300,000 to 450,000 D. 300,000

35. Secret Enterprises had the following data as of December 31, 2022:

Non-Current Assets 3,000,000.00 Non-Current Liabilities 2,000,000.00

Total Assets 5,650,000.00 Total Liabilities 3,500,000.00
Compute for the Current Ratio. Round off final answer to two decimal places.
A. 2.83 B. 1.61 C. 1.50 D. 1.77

36. Carson Company estimates it annual warranty expense at 5% of annual net sales. The gross sales for
2022 amounted to P5,000,000. Balance of warranty liability on January 1, 2022 was P75,000. During 2022,
sales discounts given to customers amounted to a total of P80,000. Warranty payments made during the
year amounted to P200,000. What is the balance of warranty liability as of December 31, 2022?
50,00 B 121,00 C 125,00 275,00
A. 0 . 0 . 0 D. 0

37. During 2022, Marvel Company sold 2,000 shirts under a new sales promotional program. For every 5
shirts bought, a customer is entitled to one free shirt. One shirt costs Marvel Company P50. It is estimated
that 90% of the shirts sold will be processed for redemption. During 2022, 300 free shirts were distributed
to customers who availed of the sales promotional campaign. What amount should be reported as a
liability for unredeemed shirts December 31, 2022?`
A. 3,000.00 B. 5,000.00 C. 9,000.00 D. 15,000.00

“We go through our careers and things happen to us. Those experiences made me what I am.”
- Thomas Keller