EVERYONE

5. Grant Company accepted a ₱400,000 face value, 6-month, 10 percent note dated May 15 from a

customer. On that same date Grant discounted the note at Eagle National Bank at a 12 percent

discount rate. How much cash should Grant receive from the bank on May 15?

a. ₱400,000

b. ₱396,000

c. ₱394,800

d. ₱387,200

6. Goods in transit that are shipped f.o.b. destination should be

a. included in the inventory of the seller.

b. included in the inventory of the buyer.

c. included in the inventory of the shipping company.

d. none of these.
7. Cross Co. accepted delivery of merchandise which it purchased on account. As of December 31,

Cross had recorded the transaction, but did not include the merchandise in its inventory. The

effect of this on its financial statements for December 31 would be

a. net income, current assets, and retained earnings were understated.

b. net income was correct and current assets were understated.

c. net income was understated and current liabilities were overstated.

d. net income was overstated and current assets were understated.

8. All of the following costs should be expensed in the period they are incurred except for

a. manufacturing overhead costs for a product manufactured and sold in the same accounting

period.

b. costs which will not benefit any future period.

c. depreciation of idle manufacturing capacity resulting from an unexpected plant shutdown.

d. storage costs that are necessary in bringing the asset to its intended condition.
9. Which of the following cost flow formulas can be applied by an entity whose inventories that are

purchased last are sold first?

a. LIFO

b. FIFO

c. Weighted average cost

d. b or c

10. On June 1, 2004, Noll Corp. sold merchandise with a list price of ₱30,000 to Linn on account. Noll

allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made f.o.b.

shipping point. Noll prepaid ₱600 of delivery costs for Linn as an accommodation. On June 12,

2004, Noll received from Linn a remittance in full payment amounting to

a. ₱16,464. b. ₱17,052. c. ₱17,064. d. ₱16,794.

11. The following information was derived from the 2004 accounting records of Kelly Co.:
Kelly's Goods

Kelly's Central Warehouse Held by Consignees

Beginning inventory ₱260,000 ₱ 28,000

Purchases 950,000 140,000

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