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NATIONAL COLLEGE OF BUSINESS AND ARTS

Cubao . Fairview . Taytay

Quizzes – Accounting 6-07 Prof Joel P Wanagen

Multiple Choice. Choose the best answer by shading the box that corresponds to your letter choice on the
answer sheet provided. Show your solutions to problems.

1 When the word accrued is used in connection with a current liability, it means that
a. The liability will not come due in subsequent accounting period.
b. An expense has been incurred but is unpaid at the financial statement date.
c. The liability is being contested and may not be paid.
d. An expense has been incurred for which cash has been paid.
2 Rent revenue received two months in advance should be accounted for as
a. A current liability
b. Revenue in the month of collection
c. An accrued liability
d. A separate item in the shareholders’ equity
3 A company receives an advance payment for special order goods that are to be produced and delivered in
subsequent period. The payment should be reported in the balance sheet as
a. Contra asset account c. Current liability
b. Noncurrent account d. Deferred charge
4 Unamortized discount issued bonds should be reported on the balance sheet of the issuer as
a. A direct deduction from the present value of the liability
b. A deferred change
c. A part of issue cost
d. A direct deduction from the face value of the bonds
5 The principal classifications of liabilities are
a. Current liabilities and non-current liabilities
b. Current liabilities, non-current liabilities and deferred revenue
c. Current liabilities and deferred revenue
d. Non-current liabilities and deferred revenue
6 It is an existing liability of uncertain timing or uncertain amount
a. Provision c. Accrued liability
b. Contingent liability d. Notes payable
7 What should be the amount to be recognized as the provision?
a. Best estimate of the expenditure c. Maximum of the range
b. Minimum of the range d. Midpoint of the range
8 Which is incorrect concerning a contingent liability?
a. A contingent liability is either probable or measurable but not both
b. An enterprise should not recognize a contingent liability in the financial statements
c. A contingent liability is disclosed only
d. If a contingent liability is remote, disclosure is also required
9 The issuer of a 10-year bond sold at face value three years ago with the interest payable February 1 and August
1 each year should report on its December 31 balance sheet
a. Liability for accrued interest c. Increase in deferred charge
b. An addition to bonds payable d. Contingent liability
10 Which of the following uncertainties is normally accrued?
a. Pending or threatened litigation c. Obligations related to product warranties
b. General or unspecified business risk d. Risk of property loss due to fire
11 Among the short-term obligations at year-end are notes payable with certain bank. These are 90-day notes,
renewable for another 90-day period. What is the classification of the notes payable?
a. Deferred credits b. Current liabilities
b. Noncurrent liabilities d. Intermediate debt
NATIONAL COLLEGE OF BUSINESS AND ARTS
Cubao . Fairview . Taytay

Quizzes – Accounting 6-07 Prof Joel P Wanagen

Multiple Choice. Choose the best answer by shading the box that corresponds to your letter choice on the
answer sheet provided. Show your solutions to problems.

12 Which of the following sets of conditions would give rise to the accrual of loss or an expense?
a. Amount of loss is reasonably estimable and event occurs infrequently
b. Amount of loss is reasonably estimable and occurrence of event is probable
c. Event is unusual in nature and occurrence of event is probable
d. Event is unusual in nature and event occurs infrequently
13 These liabilities are generally classified as current even they are due to be settled more than twelve months
after the balance sheet date
a. Dividends payable c. Deferred revenues
b. Notes payable d. Trade payable
14 A financial liability that is due to be settled within 12 months after the reporting period shall be classified as
noncurrent when
a. It is refinanced on a longterm basis before the issuance of financial statement
b. The entity has no discretion to refinance for at least 12 months
c. It is refinanced on a longterm basis after the end of reporting period
d. It is refinanced on a longterm basis on or before the end of reporting period
15 When an entity breaches under longterm loan agreement on or before the end of the reporting period with in
the effect that the liability becomes payable on demand, the liability is classified as
a. Current under all circumstances
b. Noncurrent under all circumstances
c. Current if the lender has agreed after the reporting period and before the issuance of the financial statements
not to demand payment as a consequence of the breach
d. Noncurrent if the lender agreed after the reporting period to provide a grace period for at least 12 months
after the reporting period
16 For liability to exist
a. A past transaction or event must have occurred
b. The exact amount must be known
c. An obligation to pay cash in the future must exist
d. The identify of the party owed must be known
17 Which does not meet the definition of liability?
a. An obligation to provide goods or services in the future
b. The signing of contact of a three-year employment contract at fixed annual salary
c. A note payable with no specified maturity date
d. An obligation that is estimated in amount
18 Which of the following is not considered a characteristic of a liability?
a. Present obligation
b. Arises from past event
c. Results in an outflow of resources
d. Liquidation is reasonably expected to require use of current assets
19 Which of the following should be classified as noncurrent liabilities?
a. Unearned revenue
b. Mandatorily redeemable preference shares
c. The currently maturing portion of long term-debt
d. Accrued salaries payable to management
NATIONAL COLLEGE OF BUSINESS AND ARTS
Cubao . Fairview . Taytay

Quizzes – Accounting 6-07 Prof Joel P Wanagen

Multiple Choice. Choose the best answer by shading the box that corresponds to your letter choice on the
answer sheet provided. Show your solutions to problems.

20 Which of the following is not a liability?


a. Deposits received from customer c. Stock dividend payable
b. Unearned revenue d. Zero interest-bearing note payable
21 At December 31, 2016, Tristan’s Department Store had 1,000 gift certificates outstanding, which had been sold
to customers during 2016 for P 500.00 each. Tristan’s operates on a gross margin of 60% of its sales. What
amount of revenue pertaining to the 1,000 outstanding gift certificates should be deferred at December 31,
2016?
a. P 300,000.00 c. P 500,000.00
b. P 200,000.00 d. P 0.00
22 During 2016, Cardona Corporation became involved in a tax dispute with the BIR. At December 31, 2016
Cardona’s tax advisor believed that an unfavorable outcome was probable and the best estimate of additional
tax was P 500,000.00, but could be as much as P 650,000.00. After the 2016 financial statements were issued,
Cardona received and accepted a BIR settlement offer of P 550,000.00. What amount of accrued liability
would Cardona have reported in its December 31, 2016 balance sheet?
a. P 650,000.00 c. P 500,000.00
b. P 5500,000.00 d. P 575,000.00
23 In packages of its products, San Mateo Corporation includes coupons that may be presented at retail stores to
obtain discounts on other San Mateo’s products. Retailers are reimbursed for the face amount of coupons
redeemed plus 10% of that amount for handling costs. San Mateo honors requests for coupon redemption by
retailers up to three months after the consumer expiration date. San Mateo estimates that 70% of all coupons
issued will ultimately be redeemed. Information relating to coupons issued by San Mateo during 2016 is as
follows:
Consumer expiration date Dec 31, 2016
Total face of coupons P 600,000.00
Total payments to retailers on Dec 31, 2016 220,000.00
What amount should San Mateo repost as liability for unredeemed coupons at December 31, 2016?
a. P 308,000.00 c. P 200,000.00
b. P 242,000.00 d. P 380,000.00
24 Revealing Company, Inc. has the following account balances on December 31, 2016:
Accounts payable P 1,500,000.00
Bonds payable, due in December 2017 2,500,000.00
Discount on bonds payable 300,000.00
Cash dividend payable 800,000.00
Notes payable, due in December 2018 2,000,000.00
Based on the above data, what total amount should be reported as current liabilities?
a. P 4,500,000.00 c. P 6,500,000.00
b. P 5,100,000.00 d. P 7,800,000.00
25 The effective interest on a 12-month zero-interest-bearing note payable of P 300,000.00, discounted at the
bank at 10% is
a. 10.00% c. 9.99%
b. 10.87% d. 11.11%