Long Quiz

Name: _________________________ Score:_________

Section: ________________________ Date:__________

Smart Company has the following financial assets as of December 31, 2014

(a) A P300,000 accounts receivable that is not held for trading

(b) An P800,000 investment in equity instrument quoted in an active market that is not held for trading
(c) A P500,000 investment in equity instrument that is not held for trading and does not have quoted price, and hose fair
value cannot be reliably measured
(d) A P600,000 purchased debt security with the objective to hold the asset to collect the contractual cash flows that are solely
payment of interest and principal.
(e) A P700,000 purchased debt security in an active market that Smart Company plants to hold to maturity. Smart Company
has a business model with the objective of trading the security to make profit for changes in the fair value of debt
securities.
(f) A P400,000 investment in equity instrument that is quoted in an active market. Smart Company has no intention to sell
the investment
(g) A P600,000 investment in equity that is held for trading

1. What amount of financial assets – measured at amortized cost?

a. 300,000 c. 700,000
b. 600,000 d. 900,000

2. What amount of financial asset under the category – investment in equity to profit or loss should be separately reported
in the December 31, 2014 statement of financial position?
a. 300,000 c. 700,000
b. 600,000 d. 900,000

3. What amount of financial asset under the category – investment in equity through other comprehensive income should be
separately reported in the December 31, 2014 statement of financial position?
a. 1,200,000 c. 1,700,000
b. 1,300,000 d. 2,400,000

4. What amount of financial asset under the category – investment in debt security at fair value should be separately
reported in the December 31, 2014 statement of financial position?
a. 600,000 c. 1,300,000
b. 700,000 d. 2,000,000

As of December 31, 2011, Freeze Company has a legal right to set off cash flows due Frozen Company against amounts due
from Froze Company and has the intention to settle net or simultaneously. The following are the payables of Freeze Company
to Frozen Company: P2,000,000 on March 31, 2012; P6,000,000 on June 30, 2012 and P5,000,000 on October 31, 2012. Freeze
Company has the following receivables from Frozen Company: P1,000,000 on January 15, 2012; P8,000,000 on June 30, 2012
and P2,000,000 on December 15, 2012.

5. What amount of financial asset should Freeze Company report in its December 31, 2011 statement of financial position?
a. None c. 8,000,000
b. 5,000,000 d. 11,000,000

6. What amount of financial liability should Freeze Company report in its Decemebr 31, 2011 statement of financial position?
a. None c. 7,000,000
b. 5,000,000 d. 13,000,000

7. X Company, a parent company has reported following current account in its financial records as of
December 31, 2014:
Cash and cash equivalents 3,000,000
Loans and receivables 20,000,000
Merchandise inventory 2,000,000
Prepaid expenses 500,000
Total 25,500,000

Included in the loans and receivables is a P5,000,000 loan to M Company, a subsidiary. The loan is repayable on
demand but the demand feature is primarily a form of protection or a tax-driven feature of the loan and it is the
intention of both parties that the loan will remain outstanding for foreseeable future.
 What is the correct amount of current asset should X Company report in its December 31, 2011 financial position?
a. 20,500,000 c. 25,000,000
b. 23,500,000 d. 25,500,000

8. Cooler Company owns the following investments:

Investment equity through profit or loss 600,000
Investment in equity to other comprehensive income 350,000
Investment in debt 470,000

Cooler Company has a business model of collecting all contractual cash flows for the interest and principal until maturity
for all debt securities.

Cooler will report securities in its long-term investments section of

a. Exactly P950,000
b. Exactly P1,070,000
c. Exactly P1,420,000
d. P820,000 or an amount less than P820,000, depending on the circumstances

9. Flexible Company has a business model of managing debt security investment by trading on regular basis. The Company
has reported the following fair value of investments before the preparation of its December 31, 2014 statement of financial
position:

Equity investment to profit or loss P1,500,000

Equity investment through other comprehensive income 2,000,0000
Debt investment 4,000,000

Included in the equity investment to profit or loss is a P900,000 current fair value of equity investment originally classified
as investment to profit or loss acquired three years ago. The company held the investment for three years due to a large
unexpected downturn in the stock market.

What amount of investment to profit or loss should Flexible Company report in its December 31, 2014 statement of
financial position?
a. 2,000,000 c. 4,500,000
b. 3,100,000 d. 5,500,000

The accounts and balances shown below were taken from Basic Company’s trial balance on December 31, 2015. All
adjusting entries have been made.

Wages payable, P250,00; Cash, P175,000; Bonds payable, P600,000; Dividends Payable, P140,000; Prepaid Rent, P136,000;
Inventory, P820,000; Investments in Sinking Fund Assets, P525,000; Investment to profit or loss securities, P153,000;
Premium on Bonds Payable, P48,000; Investment in Subsidiary, P1,020,000; Taxes Payable, P228,000; Accounts Payable
P248,000; Accounts Receivable. P366,000; Property, Plant & Equipment, P1,200,000; Patents – net, P150,000; Accumulated
Depreciation – PPE, P400,000, Land held for future business site, P900,000.

10. How much should be reported in Basic’s December 31, 2014 statement of financial position as current and non-current
assets, respectively?
a. 1,650,000 and 2,375,000 c. 1,800,000 and 2,225,000
b. 1,650,000 and 3,395,000 d. 1,800,000 and 3,795,000

11. How much should be reported in Basic’s December 31, 2014 statement of financial position as current and non-current
liabilities, respectively?
a. 776,000 and 552,000 c. 916,000 and 640,000
b. 866,000 and 648,000 d. 916,000 and 648,000
12. Beloved Corporation’s trial balance contained the following account balances at December 31, 2014:
Investment to profit or loss associate 150,000
Prepaid insurance 30,000
Cash and cash equivalents 330,000
Inventory 900,000
Equipment and furniture, net 990,000
Patent, net 120,000
Accounts receivable 480,000
Land (held for capital appreciation) 1,2000,000

How much is the total current assets in Beloved’s December 31, 2014 statement of financial position?
a. 1,890,000 c. 2,190,000
b. 2,010,000 d. 2,430,000

13. Halo, Inc. reported the following items in its December 31, 2014 trial balance.

Accounts payable 1,089,000

Advances to employees 45,000
Unearned Rent Revenue 288,000
Estimated liability under warranties 258,000
Cash surrender value of officer’s life insurance 75,000
Bonds payable 5,000,000
Discount on bonds payable 225,000
Trademark 6,410,000

How much should be reported as total liabilities in its December 31, 2014 statement of financial position?
a. 6,410,000 c. 6,845,000
b. 6,800,000 d. 7,410,000

14. Head Company prepared a draft of its 2014 statement of financial position. The draft statement reported current liabilities
totaling P2,000,000. However, none of the following items were included in the preliminary at December 31, 2014.
Accounts payable 300,000
Bonds payable, due 2015 500,000
Unamortized discount on bonds payable 60,000
Dividends payable – January 31, 2015 160,000
Notes payable, due 2016 400,000
Unamortized bonds issue costs 20,000

At which amount should Head’s current liabilities be correctly reported in the December 31, 2014 statement of financial
position?
a. 2,880,000 c. 2,960,000
b. 2,900,000 d. 3,020,000

15. Pilot Company had the following items at December 31, 2014:

Accounts payable 330,000

Unsecured notes, 9% due July 1, 2015 800,000
Accrued expenses 210,000
Provision for litigation 2,700,000
Deferred income tax liability 150,000
Bonds payable, due March 31, 2015 6,000,000

The contingent liability is an accrual of probable losses of a 6,000,000 lawsuit filed against Pilot Company. Pilot’s legal
counsel expects the suit to be settled in 2106. The counsel has estimated that Pilot will be liable for damages in the amount
of P2,700,000.

The deferred income tax liability is not related to an asset for financial reporting and is expected to reverse in 2016.

What is the amount of current liabilities that Pilot should report in its December 31, 2014 statement of financial position?
a. 6,690,000 c. 9,390,000
b. 7,340,000 d. 11,960,000
16. Penny Company had the following items at December 31, 2011:

Accounts payable 500,000

8% Notes payable – First bank due July 1, 2012 1,000,000
Accrued expenses 600,000
9% Bonds payable, due March 31, 2015 5,000,000

The Company has an existing loan facility arrangement with First Bank where in the bank can no cancel unilaterally the
loan and the scheduled maturity of this facility is on December 31, 2014. Penny Company intends to roll over the
P1,000,000 through the three-year facility arrangement.

What amount of current liabilities should Penny Company report in its December 31, 2012 statement of financial position?
a. 1,100,000 c. 1,600,000
b. 1,500,000 d. 2,100,000

17. As of December 31, 2014, the current liabilities at Maze Company totaled P1,500,000 before any year-end adjustments
relating to the following:

On December 19, 2014, a supplier authorized Maze Company to return for full credit, goods shipped and billed at P45,000
on December 9, 2014. The returned credit memo was received by Maze Corporation on January 2, 2015.

During December 2014, Maze received P75,000 from a customer as an advance payment for a merchandise which Maze
will make according to the customer’s specification. For this transaction, Maze has a P75,000 credit balance in its accounts
receivable from said customer on December 31, 2014.

On December 28, 2014, the company wrote and recorded checks to creditors totaling P400,000 which would cause on
overdraft of P100,000 in the company’s bank account on December 31, 2014. The checks mere mailed to January 9, 2015.

What amount should Maze Company report as total current liabilities in its December 31, 2014 statement of financial
position?
a. 1,155,000 c. 1,855,000
b. 1,630,000 d. 1,930,000

18. Bride Company began operations on January 1, 2014 with P1,000,000 from the issuance of shares and borrowed funds of
P450,000.Net income for 2014 was P300,000 and Bride paid a P225,000 cash dividend on December 19, 2014. No additional
transactions affected owner’s equity in 2014. At December 31, 2014, liabilities of the company had increased to P597,000.

In Bride’s December 31, 2014 statement of financial position, how much should be reported as its total assets?
a. 1,525,000 c. 1,750,000
b. 1,672,000 d. 1,760,000

19. A draft of Bell Company’s 2014 statement of financial position reported total assets of P1,093,750 of which the following
items were included:

Treasury shares of Bell Company at cost, which approximates market value on 30,000
December 31
Unamortized patents 14,000
Cash surrender value of life insurance on corp. executives 17,125
Translation reserve – Debit 10,5000

At what amount should Bell’s total assets be correctly reported in its December 31, 2014 statement of financial position?
a. 1,052,125 c. 1,062,625
b. 1,053,250 d. 1,063,750

20. Party Company reported total assets of P1,050,000 and total liabilities of P680,000 in its December 31, 2014 statement of
financial position. The following transactions occurred during 2015:
 On August 1, Party Company issued an additional 5,000 ordinary shares at P25 per share.
 The Company paid dividends totaling P80,000
 Net income during the year was P110,000
 Reacquired treasury shares of 2,000 at P30; subsequently, reissued 1,000 for P39 per share.
 No other changes occurred in Shareholders’ Equity during the year.
 What is the balance of Party’s Shareholders’ Equity section in its December 31, 2015 statement of financial position?
a. 400,000 c. 525,000
b. 504,000 d. 685,000

21. Help Company adjusted trial balance at December 31, 2014 includes the following account balances:
Ordinary share capital, P3 par 3,000,000
Subscription receivable due 2015 300,000
Share premium 4,000,000
Treasury shares, at cost 250,000
Net unrealizable loss on equity securities, net 100,000
Reserve for unissued earthquake losses 750,000
Accumulated profits 1,000,000
Ordinary shares subscribed 500,000
Reserve for treasury shares 250,000

What amount should Help Company report as total shareholder’s equity in its December 31, 2014 statement of financial
position?
a. 8,400,000 c. 9,150,000
b. 8,900,000 d. 9,200,000

22. Lincoln Company provided the following account balances on December 31, 2014:

Accounts payable, P125,000; Accrued taxes, P50,000; Cash surrender value of life insurance, P30,000; Ordinary share
capital. P1,000,000; Dividends payable-preference, P150,000; Mortgage payable (P200,000 due in six months), P1,2000,000;
Notes payable – 20% due on January 2, 2015, P1,5000,000; Share premium, P250,000; Preference share capital, P45,000;
Accumulated profits – December 31, 2014, P550,000; Unearned rent income, P25,000; Dividends payable – ordinary,
P100,000

How much should Lincoln Company report as Shareholders’ equity on December 31, 2014?
a. 1,450,000 c. 2,250,000
b. 1,650,000 d. 2,500,000

23. For the year ended December 31, 2014, Transformers Inc. reported the following:
Net income 600,000
Preference share capital dividends declared 100,000
Ordinary share capital dividend declared 20,000
Unrealized holding loss, net of tax 10,000
Retained earnings, beginning balance 800,000
Ordinary share capital 400,000
Accumulated Other Comprehensive Income, beginning balance 50,000

What would Transformers report as the ending balance of Retained Earnings?

a. 1,390,000 c. 1,280,000
b. 1,330,000 d. 1,270,000

24. Green Company had 60,000 shares of P100 par, 5% cumulative preference shares outstanding as at December 31, 2014.
There were no dividends in arrears as of December 31, 2012. The Company did not declared dividends during 2013.
During 2014, Green paid cash dividends of P200,000 on its preference shares.

How should Green present the dividends in arrears in its 2014 financial statements?
a. Accrued liability of P300,000
b. Disclosure of P300,000
c. Accrued liability of P400,000
d. Disclosure of P400,000
25. The draft financial statements of Clarion Company for the year ended December 31, 2014 are currently under
consideration by directors. The net asset for the year is shown as P3,500,000. Since December 31, 2014 the following events
have occurred, but not have been reflected in any way in the draft financial statements to that date.

Item 1 – A substantial quantity of slow-moving inventory was sold for P320,000. The inventory had cost P600,000 and
have been valued for the accounts at December 31, 2014 at its estimated net realizable value of P400,000.

Item 2 – A trade receivable paid the amount owing of P130,000 un full. At December 31, 2014 where were doubts as to
whether it would be paid, and a specific provision for the full amount had been made in the accounts.

What is the adjusted amount of net asset should Clarion Company report in its December 31, 2014 statement of financial
position?
a. 3,420,000 c. 3,550,000
b. 3,500,000 d. 3,630,000

26. The draft financial statements of Unleashed Company for the year ended December 31, 2014 are currently under
consideration by directors. The shareholders’ equity for the year is shown as P2,600,000. Since December 31, 2014 the
following events have occurred, but not have been reflected in any way in the draft financial statements to that date.

Item 1 – It was discovered that an error was made in arriving at the inventory figure at December 31, 2014. Inventory
which had a cost of P300,000 with a net realizable value of P400,000 were omitted.

Item 2 – In December 2014 plants to merge with Sahara Company were announced and the company will be issuing
ordinary shares with a total value of P3,000,000

What is the adjusted amount of shareholders’ equity should Unleashed Company report in its December 31, 2014
statement of financial position?
a. 2,600,000 c. 3,000,000
b. 2,900,000 d. 5,900,000

27. Loves Marketing Corporation sells merchandise with a cot of P300,000 to Intel Corporation for P420,000 and a credit
period of six months. Loves Marketing Corporation normal selling price would have been P375,000 with a credit period of
one month and with a discount of P15,00 for cash on delivery.

What amount of revenue from sales should Loves Marketing Corporation recognize?
a. 360,000 c. 405,000
b. 375,000 d. 420,000

28. Diesel fuel held as inventory at 1 November 3014 was P125,00 and there were invoices awaited for P17,000. During the
year to 31 October 2015, diesel fuel invoices of P854,000 were paid, and a delivery worth of P13,000 had yet to invoiced.
At 31 October 2015, diesel fuel inventory was valued at P98,000. The diesel fuel to be charged as an expense in the profit
or loss of the year to 31 October 2015 is
a. 851,000 c. 885,000
b. 877,000 d. 911,000

29. The electricity account of Velvet Company for the year ended June 30, 2015 were as follows:

Opening balances for electricity accrual of July 1, 2014 30,000

Payments made during the year:
08/01/14 – for three months to July 31, 2014 60,000
11/01/14 – for three months to October 31, 2014 72,000
01/01/15 – for three months to January 31, 2015 90,000
06/30/15 – for three months to April 30, 2015 84,000

What amount of electricity expense should Velvet Company report in its June 30, 2015 statement of comprehensive
income?
a. 306,000
b. 324,000
c. 332,000
d. 342,000
30. As invoice for telephone charge consists of two elements. One is quarterly rental charge, payable in advance for each of
three-month period; the other is a quarterly charge for calls made payable in arrears.

At April 1, 2014, the previous invoice dated March 31, 2014 had included rental charge of P9,000. Estimated call charges
during March 2014 were P8,000.

During the following 12 months, invoices totaling P214,500 were received on June 1, September 1, December and March 1,
2015, each containing rental charges of P9,000 as well as charges. Estimated call charges during March 2015 were P12,000.

The amount to be charged to profit or loss statement for the year ended March 31, 2015 in respect of telephone cost is:
a. 214,500 c. 221,500
b. 218,500 d. 232,500

31. Ortia C0. had the following account balances

Sales 120,000
Cost of goods sold 60,000
Salary expense 10,000
Depreciation expense 20,000
Dividend revenue 4,000
Utilities expense 8,000
Rental revenue 20,000
Interest expense 12,000
Sales returns 11,000
Advertising expense 13,000
What would Ortiz report as total expenses if the company uses the natural presentation?
a. 63,000 c. 127,000
b. 123,000 d. 134,000

32. Korte Company reported the following information for 2014:

Sales revenue 500,000

Cost of goods sold 350,000
Operating expenses 55,000
Unrealized holding gain on equity securities 20,000
Cash dividends received on securities 2,000
For 2014, Korte would repor comprehensive income before tax of
a. 117,000
b. 115,000
c. 97,000
d. 20,000

33. For the year ended December 31, 2014, Traffic Inc. reported the following:
Net income 180,000
Preference share dividends declared 30,000
Ordinary share dividend declared 6,000
Unrealized holding loss, net of tax 3,000
Retained earnings 240,000
Ordinary share capital 12,000
Accumulated Other Comprehensive Income, Beginning balance, net of tax 15,000

What amount of Traffic report as its ending balance of Accumulated Other Comprehensive Income?
a. 18,000
b. 15,000
c. 12,000
d. 3,000

34. Presented below is selected information pertaining to the Bone Company:

Cash balance, January 1, 2011 13,000
Accounts receivable, January 1, 2011 19,000
Collections from customers in 2011 210,000
Capital account balance, January 1, 2011 38,000
Total assets, January 1, 2011 75,000
 Cash investments added July 1, 2011 5,000
Total assets, December 31, 2011 101,000
Cash balance, December 31, 2011 20,000
Accounts receivable, December 31, 2011 36,000
Merchandise taken for personal use during 2011 11,000
Total liabilities 41,000

How much is the net income for 2011?

a. 22,000
b. 26,000
c. 28,000
d. 30,000

35. Presented below certain account balances of Home Products Company

Ending inventory 48,000
Rental income 6,500
Interest expense 12,700
Purchase returns and allowances 10,500
Beginning accumulated profits 114,400
Ending accumulated profits 134,000
Freight-in 10,100
Dividends income 71,000
Sales returns 12,400
Sales discounts 7,800
Selling expenses 99,400
Sales 390,000
Income tax 21,856
Beginning inventory 45,300
Purchases 190,000
Purchase discounts 2,500
Administrative expenses 82,500

Based on the data given above, how much would be the net income during the current year?
a. 46,444
b. 48,400
c. 50,320
d. 68,000

36. The net sales of Grass Manufacturing Company in 2014 is P580,000. The cost of goods manufactured is P480,000. The
beginning inventories of Goods in Process and Finished Goods are P82,000 and P65,000, respectively. The ending
inventories are Goods in process – P75,000, Finished Goods – P55,000. The Selling Expenses and General and
Administrative Expenses are 5% and 2.5% of Cost of sales, respectively.

How much would be the net profit before tax in the year 2014?
a. 45,725
b. 53,250
c. 83,000
d. 90,000

37. The following information was taken from the accounting records of Gomez Company for the year ended December 31,
2014:
Decrease in finished goods inventory 700,000
Increase in raw materials inventory 300,000
Freight out 900,000
Factory overhead 6,000,000
Direct labor 4,000,000
Raw materials purchased 8,600,000

There was no work in process inventory at the beginning or at the end of the year

The cost of goods sold is –

 a. 17,600,000
b. 18,200,000
c. 18,400,000
d. 19,000,000

38. Banana Corporation’s trial balance of income statement accounts for the year ended December 31, 2014 included the
following:
Debit Credit
Sales 600,000
Cost of sales 240,000
Administrative expenses 60,000
Loss on sales of equipment 36,000
Commission to sales persons 40,000
Interest revenue 20,000
Freight out 12,000
Loss due to expropriation of company assets 40,000
Bad debts expense 12,000

Additional information:
Finished goods inventory
January 1, 2014 400,000
December 31, 2014 360,000

Banana’s income tax rate is 32%

How much is the cost of goods manufactured

a. 200,000
b. 212,000
c. 280,000
d. 292,000