If the ending inventory balance is understated, net income of the same period 1 point a. will be overstated. b. will be understated. c. will be unaffected. d. cannot be determined from the above information. Clear selection If ending inventory on December 31, 2017, is overstated by P 30,000, what is the effect on net income for 2018? 1 point a. Net income is overstated by P 30,000. b. Net income is understated by P 30,000. c. Net income is overstated by P 60,000. d. The answer cannot be determined from the information given. Clear selection Net realizable value can be defined as 1 point a. selling price. b. selling price less costs to complete and sell. c. selling price plus costs to complete and sell. d. acquisition cost plus costs to complete and sell. Clear selection Which of the following would not be included in the cost of work in process inventory? 1 point a. Cost of electricity to operate factory equipment b. Maintenance costs of factory equipment c. Depreciation on office equipment in the sales manager's office d. Depreciation on factory equipment Clear selection Goods on consignment are 1 point a. included in the consignee's inventory. b. recorded in a consignment out account which is an inventory account. c. recorded in a consignment in account which is an inventory account. d. All of the above. Goods on consignment should be included in the inventory of 1 point a. the consignor but not the consignee. b. the consignee but not the consignor. c. both the consignor and the consignee. d. neither the consignor nor the consignee. Clear selection If goods shipped FOB destination are in transit at the end of the year, they should be included in the inventory balance of the 1 point a. seller. b. common carrier. c. buyer. d. bank. The specific identification method of inventory costing 1 point a. eliminates all opportunity for profit manipulation. b. matches the flow of recorded costs with the physical flow of goods. c. can be used only with a perpetual inventory system. d. is a violation of generally accepted accounting principles. Merchandise shipped FOB shipping point on the last day of the year should ordinarily be included in 1 point a. the buyer's inventory balance. b. the seller's inventory balance. c. neither the buyer's nor seller's inventory balance. d. both the buyer's and the seller's inventory balances. Which inventory pricing method best approximates specific identification in most manufacturing situations? 1 point a. Activity-based costing b. FIFO c. Average cost d. LIFO Which of the following is not true of the perpetual inventory method? 1 point a. Purchases are recorded as debits to the inventory account. b. The entry to record a sale includes a debit to Cost of Goods Sold and a credit to Inventory. c. After a physical inventory count, Inventory is credited for any missing inventory. d. Purchase returns are recorded by debiting Accounts Payable and crediting Purchase Returns and Allowances. Assume that a company records purchases net of discount. If the company bought merchandise valued at P 10,000 on credit terms 3/15, net 30, the entry to record a payment for half of the purchase within the discount period would include a debit to 1 point a. Accounts Payable for P 4,850 and a credit to Cash for P 4,850. b. Accounts Payable for P 5,000 and a credit to Cash for P 5,000. c. Accounts Payable for P 4,850 and to Interest Expense for P 150, and a credit to Cash for P 5,000. d. Accounts Payable for P 5,000 and to Interest Revenue for P 150 and to C ash for P 5,000. In accounting for inventories, which of the following statements is incorrect? 1 point In daily transactions, strict adherence to the passing of legal title is not practicable. Regardless of location, an entity shall report in its financial statements all inventories over which it holds legal title to or has gained control of the related economic benefits. On inventory cut-off, an entity shall include in its inventory only those goods which are on hand. Goods that are in transit as of inventory cut-off date may be included as part of inventory. Identify the incorrect statement regarding goods in transit. 1 point Depending on the terms of sales contract, goods in transit may form part of the inventories of the buyer or the seller or, in rare cases, both the buyer and the seller. Accounting procedures for goods in transit are normally performed only on inventory cut -off. Goods in transit form part of the inventory of the entity who holds legal title to the goods. Accounting for goods in transit are normally performed by trading or manufacturing entities but not by service oriented entities. The major objective of inventory accounting is 1 point valuation of assets in the statement of financial position proper matching of costs with related revenues proper selection of appropriate cost flow formula proper determination of periodic income and valuation of assets What are the gross sales for the month of December? 1 point P 118,000 P 120,000 P 130,000 P 144,000 answer not given SANZEN SEKAI Company sold merchandise on credit to SANTORYU Company for P 1,000 on July 1, with terms of 2/10, net /30. On July 6, SANTORYU returned P 200 worth of merchandise claiming the materials were defective. On July 8, SANZEN SEKAI received a payment from SANTORYU and credited Accounts Receivable for P 450. On July 24, SANTORYU Company paid the remaining balance on its account. What was the total cash received from SANTORYU during July? 1 point P 441 P 450 P 791 P 800 answer not given Compute the net realizable value of the accounts receivable of GAMMA KNIFE Company at December 31, 2018. 1 point P 804,000 P 799,200 P 763,200 P 727,200 answer not given The net realizable value of the accounts receivable at December 31 should be 1 point P 450,000. P 443,000. P 425,000. P 418,000. answer not given The allowance for doubtful accounts balance at December 31, after adjusting entries, should be 1 point P 45,000. P 84,000. P 90,000. P 99,000. answer not given If the basis for estimating bad debts is 1 percent of net sales, the correct amount of doubtful accounts expense for 2018 is 1 point P 22,800. P 23,200. P 28,880. P 34,880. answer not given ICE AGE 's doubtful accounts expense for the year ended December 31 is 1 point P 80,000. P 96,000. P 120,000. P 160,000. answer not given Based on its past collection experience, ASURA Company provides for bad debts at the rate of 2 percent of net credit sales. On January 1, 2018, the allowance for doubtful accounts credit balance was P 10,000. During 2018, ASURA wrote off P 18,000 of uncollectible receivables and recovered P 5,000 on accounts written off in prior years. If net credit sales for 2018 totaled P 1,000,000, the doubtful accounts expense for 2018 should be 1 point P 17,000. P 20,000. P 23,000. P 35,000. answer not given If MONSTER POINT bases its estimate of bad debts on the aging of accounts receivable, doubtful accounts expense for the current year ending December 31 is 1 point P 47,000. P 48,000. P 50,000. P 52,000. answer not given CONCASSER doubtful accounts expense for the year ending December 31, 2018 is 1 point P 1,500. P 2,400. P 3,000. P 3,900. answer not given What is the cash balance at December 31 of the first year? 1 point P 75,000 P 85,000 P 105,000 P 140,000 answer not given In the current asset section of ONI GIRI December 31, 2018, balance sheet, what total amount should be reported as Cash? 1 point P 380,000 P 375,000 P 255,000 P 250,000 answer not given Assume the following facts for COUP DE VENT Company: The month-end bank statement shows a balance of P 40,000; outstanding checks total P 2,000; a deposit of P 8,000 is in transit at month-end; and a check for P 400 was erroneously charged against the account by the bank. What is the correct cash balance at the end of the month? 1 point P 33,600 P 34,400 P 45,600 P 46,400 answer not given What is the correct cash balance at July 31? 1 point P 52,875 P 54,375 P 54,450 P 54,825 answer not given The August 31 bank statement of GREEN STAR Inc. showed a balance of P 113,000. Deducted in arriving at this amount was a customer's NSF check for P 2,400 that had been returned. GREEN STAR had received no prior notice concerning this check. In addition to the bank statement, other records showed there were deposits in transit totaling P 17,200 and that outstanding checks totaled P 10,800. What is the cash balance per books at August 31 (prior to adjustments)? 1 point P 121,800 P 119,400 P 117,000 P 115,400 answer not given What is THUNDER BAGUA Company’s accounts receivable balance at December 31, 2018? 1 point P 82,000. P 62,000. P 20,000. P 146,000. answer not given The accounts receivable as of December 31, 2016 is 1 point P 3,000,000 P 333,333 P 300,000 P 2,444,000 answer not given The allowance for doubtful accounts as of December 31, 2016 is 1 point P 20,000 P 180,000 P 120,000 P 146,640 answer not given The net realizable value of accounts receivable as of December 31, 2016 is 1 point P 307,340 P 2,874,000 P 2,814,000 P 2,291,360 answer not given The doubtful account expense for the year 2016 is 1 point P 181,000 P 21,000 P 121,000 P 147,640 answer not given MANA ZONE Co. sells goods either on cash basis or on 6-month installment basis. On January 1, 2019, goods with cash price of ₱50,000 were sold at an installment price of ₱75,000. Which of the following statements is correct? 1 point Net receivable of ₱75,000 is recognized on the date of sale. Net receivable of ₱50,000 is recognized upon full payment of the total price. The ₱20,000 difference between the cash price and installment price is recognized as interest income on the date of sale. Net receivable of ₱50,000 is recognized on the date of sale. DREAM WORLD Co. sells goods for ₱150,000 to a customer who was granted a special credit period of 1 year. The entity normally sells the goods for ₱120,000 with a credit period of one month or with a ₱10,000 discount for outright payment in cash. How much is the initial measurement of the receivable? 1 point 150,000 120,000 130,000 110,000 At what total net amount will the notes be initially recognized? 1 point 65,000 53,673 62,357 50,000 On August 1, 2019, BLACK DIVIDER Co. received a ₱1,200,000, 10%, 3-year note receivable in exchange for a vacant lot carried in the books at ₱850,000. Principal, in three equal installments, plus interest are due annually starting August 1, 2020. Current market rates as of April 1, 2019, December 31, 2019, and December 31, 2020 are 10%, 12% and 13%, respectively. How much interest receivable is recognized on December 31, 2020? 1 point 33,333 40,000 50,000 60,000 On January 1, 2019, DRAGON’S ROAR Co. extended a ₱1,200,000 loan to one of its officers as part of ABC Co.’s car and housing assistance program. The note received is due on January 1, 2022 and bears 10% interest compounded annually. How much interest receivable is recognized on December 31, 2020 statement of financial position? 1 point 132,000 120,000 168,000 252,000 On January 1, 2019, EQUINOX Co. sold a transportation equipment with a historical cost of ₱1,000,000 and accumulated depreciation of ₱300,000 in exchange for cash of ₱100,000 and a non interest-bearing note receivable of ₱800,000 due on January 1, 2022. The prevailing rate of interest for this type of note is 12%.How much is the carrying amount of the receivable on December 31, 2020? 1 point 800,000 569,424 637,755 714,286 On January 1, 2019, DEATH SCYTHE Co. sold transportation equipment with a historical cost of ₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱500,000 and a non interest-bearing note receivable of ₱8,000,000 due in 4 equal annual installments starting on December 31, 2019 and every December 31 thereafter. The prevailing rate of interest for this type of note is 12%.How much is the carrying amount of the receivable on December 31, 2020? 1 point 4,803,663 3,380,102 6,074,699 6,000,000 On January 1, 2019, BLACK METEORITE Co. sold transportation equipment with a historical cost of ₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱100,000 and a non interest-bearing note receivable of ₱4,000,000 due in 4 equal annual installments starting on January 1, 2019 and every January 1 thereafter. The prevailing rate of interest for this type of note is 12%.How much is the carrying amount of the receivable on January 1, 2021? 1 point 892,857 3,380,102 6,074,699 6,000,000 On January 1, 2019, DIMENSION SLASH Co. sold machinery with historical cost of ₱3,000,000 and accumulated depreciation of ₱900,000 in exchange for a 3-year, ₱2,100,000 non interest-bearing note receivable due in equal semi-annual payments every July 1 and December 31 starting on July 1, 2019. The prevailing rate of interest for this type of note is 10%.How much is the interest income in 2019? 1 point 88,825 177,649 128,964 164,591 The prevailing rate of interest for this type of note is 10%. How much is the carrying amount of the receivable on December 31, 2019? 1 point 467,354 438,016 376,345 428,346 On January 1, 2019, SALAMANDER’S BREATH Co. sold inventory costing ₱1,800,000 with a list price of ₱2,200,000 and a cash price of ₱2,000,000 in exchange for a ₱2,400,000 non interest-bearing note due on December 31, 2021.How much is the carrying amount of the receivable on December 31, 2019? 1 point 2,125,390 2,135,341 2,098,343 2,000,000 On January 1, 2019, SYLPH’S BREATH Co. sold machinery with historical cost of ₱5,000,000 and accumulated depreciation of ₱1,900,000 in exchange for a 3-year, 3%, ₱3,000,000 note receivable. Principal is due on January 1, 2022 but interest is due annually every December 31. The prevailing interest rate for this type of note is 12%. How much is the carrying amount of the receivable on December 31, 2019? 1 point 2,159,324 2,249,324 2,543,685 3,000,000 On July 1, 2019, CHRONO STASIS Co. sold machinery costing ₱12,000,000 with accumulated depreciation of ₱9,000,000 in exchange for a 3-year, 3%, ₱4,000,000 note receivable. Principal is due on July 1, 2022 but interests are due semiannually every July 1 and January 1. The prevailing interest rate for this type of note is 12%. How much is the interest income in 2019? 1 point 186,893 381,399 94,147 120,000 On March 1, 2019, ORIGIN FLASH BARRAGE Co. received a ₱1,000,000, 12%, oneyear note dated January 1, 2019 from LICHT, Inc. in exchange for a ₱1,000,000 past due account. How much interest income is recognized in 2019? 1 point 120,000 100,000 90,000 0 On January 1, 2019, Bank extended a 12%, ₱1,000,000 loan to Principal is due on January 1, 2023 but interests are due annually every January 1. incurred direct loan origination costs of ₱88,394 and indirect loan origination costs of ₱18,000. In addition, Bank charged a 2.5-point nonrefundable loan origination fee. How much is the interest income in 2020?104,973105,364106,339136,661 1 point 104,973 105,364 106,339 136,661 When accounts receivables were pledged, a. a journal entry should be made to derecognized the accounts receivables pledged and to record the pledge transaction. The loan transaction should be recorded separately. b. the accounts receivables pledged should be separately presented in the face of the statement of financial position separate from other receivables. c. specific receivables are set up as collateral security for borrowings the only accounting issue is that of adequate disclosure. Which of the following is not a valid comparison between pledging and assignment of accounts receivable? 1 point Under pledge, all accounts receivables are set as collateral security for borrowings; under assignment only specific receivables are set as collateral security. In pledging, the lender has limited rights to inspect the borrower’s records to achieve assurance that the receivables do exist; in assignment the lender will make an investigation of the specific receivables that are being proposed for assignment and will approve those that are deemed worthy to be held as collateral security. No journal entry is made for the pledged receivables; an entry is made for the assigned receivables. • Pledged accounts receivable remain the assets of the borrower and continue to be presented in its financial statements, with appropriate disclosure of the ple dge transaction; assigned receivables are assets of the lender/assignee but the assignment is disclosed in the financial statements of the borrower/assignor. In pledge, the amount borrowed is independent from the amount of accounts receivables pledged; in assignment, normally only 70% to 90% of the amount of accounts receivables assigned is advanced as a loan to the borrower. When accounts receivables are factored on a “with recourse” basis, the factoring is usually treated as 1 point a secured borrowing an outright sale a transfer of financial asset without recognition of liability created in the transfer. • derecognition of financial asset when the transferor neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset and has not retained control. The transferor recognizes separately as assets or liabilities any rights and obligations created in the transfer, such as the proceeds on the factoring and the recourse obligation. LIEBE Co. had ₱3 million in accounts receivable recorded on its books. LIEBE wanted to convert the ₱3 million in receivables to cash in a more timely manner than waiting the 45 days for payment as indicated on its invoices. Which of the following would alter the timing of LIEBE' s cash flows for the ₱3 million in receivables already recorded on its books? 1 point Change the due date of the invoice. Factor the receivables outstanding. Discount the receivables outstanding. Demand payment from customers before the due date. Which of the following is true when accounts receivable are factored without recourse? 1 point The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of the transaction. The receivables are used as collateral security for a promissory note issued to the factor by the owner of the receivables. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables. The financing cost (interest expense) should be recognized ratably over the col lection period of the receivables. Accounts receivable of a company sold outright to a financing company without recourse are said to have been 1 point Pledged Factored Assigned collateralized GRIMOIRE Co. accepted a ₱5,000, 8%, 90-day note receivable for services rendered to a client. Thirty days later GRIMOIRE discounted the note at a bank at 10%. The entry to record the proceeds from sales of the note would include a: 1 point credit to notes receivable for ₱50,000 debit to cash for ₱51,000 credit to interest income for ₱33.33 debit to loss from discounting of note for ₱150 A note receivable that is sold (i.e., discounted) to obtain early cash must be: 1 point retained in the accounts in the same manner as before discounting reported as an extraordinary loss if it is dishonored disclosed as a contingent liability if it is discounted without recourse reported as sale or a loan When a company discounts its notes receivable at a bank and the discounting is treated as secured borrowing, the discounting is recorded in a 1 point liability account asset account contra-asset account expense account After being held for 30 days, a 90-day, 15% interest bearing note receivable was discounted at a bank at 18%. The proceeds received from the bank upon discounting would be the: 1 point face value less the discount at 18% face value plus the discount at 18% maturing value less the discount at 18% maturing value plus the discount at 18% How much of these items would typically be reported as inventory in the financial statements? 5 points Your answer 2,300,000 Determine the adjusted balance of Inventory as of December 31, 2016: 2 points Your answer Inventory: 1,550,000 Determine the adjusted balance of Accounts Payable as of December 31, 2016: 2 points Your answer Accounts Payable: 710,000 Determine the adjusted balance of Net Sales on December 31, 2016: 2 points Net Sales: 4,650,000 Determine the adjusted balance of Net Purchases on December 31, 2016: 2 points Your answer Net purchase: 2,320,000 Determine the adjusted balance of Net Income on December 31, 2016: 2 points Net Income: 540,000