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Chapter 1
Statement of Financial Position
NAME:
Professor:
QUIZ 1:
Date:
Section:
Score:
1. Which of the following statements is correct?
a. PAS 1 Presentation of Financial Statements prescribes the basis for presentation of general and
special purpose financial statements to improve both inter-comparability and
intracomparability.
b. Intra-comparability is also referred to as horizontal comparability while inter-comparability
is also referred to as vertical comparability.
c. Working capital is the net amount of a company’s relatively liquid resources. It is the excess
of total assets over total liabilities.
d. Equity is the residual interest in the net assets of an entity.
2. According to PAS 1, these are financial statements intended to serve the needs of users who do
not have the authority to demand financial reports tailored for their own needs.
a. General purpose financial statements
b. Common purpose financial statements
c. Regular financial statements
d. All-purpose financial statements
3. The assessment of an entity’s going concern shall cover a minimum period of
a. one year
c. three years
b. three months
d. any of these
4. In which of the following instances would a liability that would otherwise be presented as current
is presented as noncurrent?
a. The liability is payable on demand but the entity estimates that it is probable that the lender
will not demand payment within 12 months after the reporting period.
b. The liability is payable on demand but the lender promises the entity after the reporting period
that the lender will not demand payment in the next 12 months.
c. The entity enters into a refinancing agreement after the reporting period but before the
financial statements are authorized for issue.
d. The entity enters into a refinancing agreement and the refinancing agreement is completed by
the balance sheet date.
5. In a classified balance sheet, deferred tax assets/liabilities are presented as
a. non-current items if the deferred taxes are not expected to reverse within 12 months after the
reporting period
b. noncurrent items
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c. current items
d. a or c
6. General purpose financial statements are those statements that cater to the
a. common and specific needs of a wide range of external and internal users.
b. common needs of a wide range of external and internal users.
c. common needs of a wide range of external users.
d. specific needs of a wide range of external users.
7. In virtually all circumstances, a fair presentation is achieved by compliance with applicable
IFRSs. A fair presentation also requires an entity: (choose the incorrect statement)
a. to select and apply accounting policies in accordance with PAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors. PAS 8 sets out a hierarchy of authoritative guidance that
management considers in the absence of a Standard or an Interpretation that specifically
applies to an item.
b. to present information, including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information.
c. to provide additional disclosures when compliance with the specific requirements in PFRSs is
insufficient to enable users to understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial performance.
d. to establish a system of internal control the responsibility for which is the entity’s
management. Furthermore, the entities financial statements should be audited by an independent
external party at least annually.
8. Each component of the financial statements shall be identified clearly. In addition, the following
information shall be displayed prominently, and repeated when it is necessary for a proper
understanding of the information presented:
I.
The name of the reporting entity or other means of identification, and any change in that
information from the preceding balance sheet date;
II. Whether the financial statements cover the individual entity or a group of entities;
III. The balance sheet date or the period covered by the financial statements, whichever is
appropriate to that component of the financial statements;
IV. The presentation currency, as defined in PAS 21 The Effects of Changes in Foreign Exchange Rates
V.
The level of rounding used in presenting amounts in the financial statements.
a. I, II, III c. I, II, IV, V
b. I, II, III, IV
d. I, II, III, IV, V
9. When an entity’s balance sheet date changes and the annual financial statements are presented for
a period longer or shorter than one year, an entity shall disclose, in addition to the period covered
by the financial statements:
I.
The reason for using a longer or shorter period
II. The fact that comparative amounts for the income statement, statement of changes in equity,
cash flow statement and related notes are not entirely comparable
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III. The amounts charged to the beginning balance of the retained earnings, net of tax IV. Proforma financial statements, as a supplemental information in the notes
a. I, II
b. I, III
c. I, III, IV
d. I, II, III, IV
10. All of the following statements are correct, except
a. The operating cycle of an entity is the time between the acquisition of assets for processing
and their realization in cash or cash equivalents.
b. When the entity’s normal operating cycle is not clearly identifiable, its duration is presumed
to be twelve months.
c. Current assets include assets (such as inventories and trade receivables) that are sold,
consumed or realized as part of the normal operating cycle even when they are not expected
to be realized within twelve months after the balance sheet date.
d. Some liabilities are part of the working capital used in the entity’s normal operating cycle.
Such operating items are classified as current liabilities even if they are due to be settled more
than twelve months after the balance sheet date.
e. When an entity presents current and non-current assets and current and non-current liabilities
as separate classifications on the face of its balance sheet, it shall classify deferred tax assets
(liabilities) as current assets (liabilities) if the deferred tax assets (liabilities) are expected to reverse
within twelve months after the end of reporting period.
f.
“Love is patient, love is kind. It does not envy, it does not boast, it is not proud. It does not dishonor others, it is not
self-seeking, it is not easily angered, it keeps no record of wrongs. Love does not delight in evil but rejoices with the
truth. It always protects, always trusts, always hopes, always perseveres.” – (1 Corinthians 13:4-7)
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NAME:
Date:
Professor:
Section:
Score:
QUIZ 2:
1. Below are the account balances prepared by the bookkeeper for SQUELCH TO SILENCE
Company as of December 31, 20x1:
Assets
Liabilities
Cash
30,000
Accounts payable
40,000
Accounts receivable, net
88,000
Notes payable
200,000
Inventory
80,000
Prepaid income tax
16,000
Prepaid assets
10,000
Investment in subsidiary
20,000
Land held for sale
56,000
Property, plant and equipment
100,000
Totals
400,000
Additional information:
- Cash consists of the following:
Petty cash fund (unreplenished petty cash expenses, ₱3,000)
Cash in bank
Payroll fund
28,000 Tax fund
14,000
Cash to be contributed to a sinking fund set up for the retirement
of bonds maturing on December 31, 20x3
Total Cash
-
240,000
4,000
(20,000)
4,000
30,000
Checks amounting to ₱61,000 were written to suppliers and recorded on December 30, 20x1,
resulting to a bank overdraft of ₱20,000. The checks were mailed on January 5, 20x2.
- Accounts receivable consists of the following:
Accounts receivable
80,000
Allowance for uncollectability
( 10,000) Credit balance in
customers’ accounts
( 6,000) Selling price of unsold goods sent
on consignment to QUELL, Inc.
at 120% of cost and excluded from SQUELCH’s inventory
24,000
Accounts receivable, net
88,000
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The inventory includes cost of goods amounting to ₱20,000 that are expected to be sold beyond 12
months but within the ordinary course of business. Also, the inventory includes cost of consigned
goods received on consignment from Alpha-Numerix Co. amounting to ₱10,000.
Prepaid income tax represents excess of payments for quarterly corporate income taxes during
20x1 over the actual annual corporate income tax as of December 31, 20x1.
Prepaid assets includes a ₱4,000 security deposit on an operating lease which is expected to expire
on March 31, 20x3. The security deposit will be received on lease expiration.
The land qualified for classification as “asset held for sale” under PFRS 5 Non-current Assets Held
for Sale and Discontinued Operations as of December 31, 20x1.
Accounts payable is net of ₱12,000 debit balance in suppliers’ accounts. Accounts payable includes
the cost of goods held on consignment from Alpha-Numerix Co. which were included in
inventory.
The notes payable are dated July 1, 20x1 and are due on July 1, 20x4. The notes payable bears an
annual interest rate of 10%. Interest is payable annually. How much is the adjusted working
capital?
a.
b.
c.
d.
2.
334,000
289,000
264,000
215,000
The ledger of INFIRM SICK Co. as of December 31, 20x1 includes the following:
10% Note payable
80,000 12% Note
payable 120,000
14% Mortgage note payable
60,000
Interest payable
-
Additional information:
- INFIRM Co.’s financial statements were authorized for issue on April 15, 20x2.
- The 10% note payable is due on July 1, 20x2 and pays semi-annual interest every July 1
andDecember 31. On January 28, 20x2, INFIRM Co. entered into a refinancing agreement with a
bank to refinance the entire note by issuing a long-term obligation.
- The 12% note payable is due on March 31, 20x2 and pays annual interest every March 31.
OnJanuary 31, 20x2, INFIRM Co. extended the maturity of the note to March 31, 20x3 under the
existing loan agreement. The extension of maturity date is at the option of INFIRM.
- The 14% mortgage note is due on December 31, 20x9. Per agreement with the creditor, INFIRM is
topay quarterly interests on the note, failure to do so will render the note payable on demand.
INFIRM failed to pay the 3rd and 4th quarterly interests on the note during 20x1. How
much is the total current liabilities?
a.
119,000
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b. 155,000
c. 172,000
d. 189,000
Use the following information for the next three questions:
The ledger of COLTISH UNDISCIPLINED Co. in 20x1 includes the following:
Jan. 1, 20x1
Dec. 31, 20x1
Current assets
1,200,000
?
Noncurrent assets
4,000,000
?
Current liabilities
900,000
1,000,000
Noncurrent liabilities
?
3,000,000
Additional information:
- COLTISH’s working capital as of December 31, 20x1 is twice as much as the working capital as of
January 1, 20x1.
- Total equity as of January 1, 20x1 is ₱1,700,000. Profit for the year is ₱2,400,000 while dividends
declared amounted to ₱1,000,000. There were no other changes in equity during the year.
3. How much is the total noncurrent liabilities as of January 1, 20x1?
a. 2,600,000
b. 2,800,000
c. 3,200,000
d. 3,400,000
4. How much is the total current assets as of December 31, 20x1?
a. 1,600,000
b. 800,000
c. 300,000
d. 2,200,000
5. How much is the total noncurrent assets as of December 31, 20x1?
a. 4,500,000
b. 6,500,000
c. 5,800,000
d. 5,500,000
6. HARANGUE INFLATED SPEECH Co. had the following information for 20x1:
Accounts receivable turnover
10:1
Total assets turnover
2:1
Average receivables during the year
₱400,000
Total assets, January 1, 20x1
800,000
How much is the total assets as of December 31, 20x1?
a. 4,000,000
b. 3,800,000
c. 3,200,000
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d. 2,800,000
“A wise man will hear and increase learning, and a man of understanding will attain wise counsel.” (Proverbs 1:5)
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