Acc204 Midterm Exam Set B.docx
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UNIVERSITY OF LUZON PEREZ BLVD. DAGUPAN CITY COLLEGE OF ACCOUNTANCY ACC204 NAME: ___________________________________ DATE: JANUARY 18, 2019
MIDTERM EXAM-SET B PERMIT #: _______________________________ SCORE: __________________________________
DIRECTION: Encircle the best answer. STRICTLY NO ERASURE. 1. Which is not considered a characteristic of a liability? a. Present obligation b. Arises from past events c. Results in an outflow of resources d. Liquidation is reasonably expected to require use of existing resources classified as current assets 2. For a liability to exist a. A past transaction or event must have occurred. b. The exact amount must be known c. The identity of the party owed must be known d. An obligation to pay cash in the future must exist 3.
Which of the following should be included in current liabilities? a. Trade notes payable b. Short-term zero-interest bearing note payable c. Unearned revenue d. All of these are included in current liabilities
4. The “amortized cost” of bonds payable means a. Face amount plus premium on bonds payable b. Face amount minus discount on bonds payable c. Face amount minus bonds issue cost d. Face amount plus premium on bonds payable, minus discount on bonds payable and minus bond issue cost 5. Bonds that mature on a single date are called a. Term bonds b. Serial bonds
c. Debenture bonds d. Callable bonds
6. Bonds issued with schedule maturities at various dates are called a. Convertible bonds c. Serial bonds b. Term bonds d. Callable bonds 7. When bonds are sold between interest dates, any accrued interest is credited to a. Interest payable c. Interest receivable b. Interest revenue d. Bonds payable 8. What is the interest rate written on the face of the bond? a. Nominal rate b. Stated rate c. Coupon rate, nominal rate or stated rate d. Market. yield or effective rate 9. What is the rate of interest actually incurred a. Yield rate b. Effective rate c. Coupon rate, nominal rate or stated rate d. Market. yield or effective rate 10. When the effective interest method is used, the periodic amortization would a. Increase if the bonds were issued at a discount b. Increase if the bonds were issued at a premium c. Decrease if the bonds were issued at a premium d. Increase if the bonds were issued at either a discount or a premium 11. Harden Company reported the following information on December 31, 2016: Bonds payable P5,000,000
UNIVERSITY OF LUZON PEREZ BLVD. DAGUPAN CITY COLLEGE OF ACCOUNTANCY Discount on bonds payable Loan payable, with P500,000 payable semi-annually starting 06/30/2017 Accounts payable Unearned rent income Income tax payable Cash dividends payable Cash surrender value of officers' life insurance Patent Advances to employees Deferred tax liability Share dividends payable
500,000 2,500,000 1,000,000 300,000 250,000 100,000 75,000 50,000 45,000 15,000 150,000
Total liabilities to be reported in the company’s December 31, 2016 statement of financial position is: a. 8,835,000 c. 7,545,000 b. 8,665,000 d. 7,325,000 12. An analysis of Howard Company’s liabilities on December 31, 2016 disclosed the following information: Accounts payable, after deducting debit balances in suppliers' accounts amounting to P100,000 and postdated checks of P50,000 Bonds payable Premium on Bonds payable Mortgage payable Share dividends payable Credit balances in customers' accounts Premium payable Deferred tax liability Deferred revenue Accrued expenses
P4,000,000 1,000,000 100,000 850,000 750,000 500,000 600,000 200,000 175,000 150,000
The deferred tax liability is based on temporary differences that will reverse in 2017. A) Total amount of current liabilities in the statement of financial position is: a. 5,400,000 c. 5,775,000 b. 5,575,000 d. 7,375,000 B) Total amount of non-current liabilities in the statement of financial position is: a. 2,400,000 c. 2,325,000 b. 2,345,000 d. 2,235,000 13. Tim Co. has a 10%, P2,000,000 loan payable as of December 31, 2016 that is maturing on July 1, 2017. Interest on the loan is due every July 1 and December 31. On February 1, 2017, Tim Co., entered into a refinancing agreement with a bank to refinance the loan on a long-term basis. Both parties are financially capable of honouring the agreement’s provision. Tim’s financial statements were authorized for issue on March 15, 2017? How much is presented as current liability in relation to the loan in Tim’s 2016 year-end financial statements? a. 2,000,000 c. 100,000 b. 200,000 d. Nil 14. On January 1, 2016, Allen Co, availed a 3-year, P2,000,000 loan from a bank. The loan agreement requires Allen to maintain a current ratio of 2:1. If the current ratio falls below 2:1, the loan becomes payable on demand. As of December 31, 2016, Allen’s current ratio is 1:8:1. On January 5, 2017, the bank agreed not to collect the loan in 2017 and gave Allen 12 months to rectify the breach of loan agreement. How much is presented as current liability in relation to the loan in Allen’s 2016 year-end financial statements?
UNIVERSITY OF LUZON PEREZ BLVD. DAGUPAN CITY COLLEGE OF ACCOUNTANCY a. 2,000,000 b. 200,000
c. 100,000 d. Nil
15. Duncan Company’s account payable balance at December 31, 2016 was P8,000,000 before considering the following data: Goods shipped to Duncan FOB shipping point on December 15, 2016 were lost in transit. The invoice cost of P500,000 was not recorded by Duncan. On January 15, 2017, Duncan filed a P500,000 claim against the common carrier. On December 30, 2016, a vendor authorized Duncan to return for full credit goods shipped and billed at P200,000 on December 15, 2016. The returned goods were shipped by Duncan on December 31, 2016. A P200,000 credit memo was received and recorded on January 5, 2017. What should Duncan report as accounts payable on December 31, 2016? a. 8,500,000 c. 7,800,000 b. 8,300,000 d. 7,500,000 16. Tony Co. provides an incentive compensation plan under which its chief executive officer receives a bonus equal to 10% of the company in excess of P880,000 before bonus and income tax. If income before bonus and income tax for 2016 amounted to P2,200,000 and income tax rate is 30% the amount of bonus would be a. 220,000 c. 132,000 b. 200,000 d. 120,000 17. On January 1, 2017, Davao Company bought a machine from Tagum Co. In lieu of cash payment, Davao gave Tagum a 4-year, P4,000,000, 15% note payable. Principal is due on December 31, 2020 but interest is due annually every December 31. The prevailing interest rate for this type of note is 10% Based on the above data, answer the following (carry all decimal places in computing for the present value) A) How much is the cost of the machinery acquired on January 1, 2017? a. 3,783,973 c. 4,000,000 b. 3,796,160 d. 4,633,973 B) How much is the carrying amount of the note on December 31, 2017? a. 4,000,000 c. 4,497,370 b. 4,347,107 d. 4,578,468 C) How much is the current portion of the note on December 31, 2017? a. Nil c. 150,263 b. 71, 077 d. 4,497,370 D) How much is the noncurrent portion of the note on December 31, 2017? a. Nil c. 150,263 b. 71, 077 d. 4,497,370 18. On January 1, 2016, Compostela Co. acquired machinery from Nabunturan Co. In lieu of cash paymen, Compostela giave Nabunturan a 3-year, P1,200,000 noninterest-bearing note payable. Principal is due in equal payments every December 31 beginning on December 31, 2016. The prevailing interest rate for this type of note is 12%. Based on the above data, answer the following: A) How much is the cost of the machinery acquired on January 1, 2016? a. Nil c. 39,280 b. 110,720 d. 960,720 B) How much is the carrying amount of the note on December 31, 2016? a. 676,006 c. Nil b. 800,000 d. 357,127 C) How much is the current portion of the note on December 31, 2016? a. Nil c. 357,127 b. 318,879 d. 38,248 D) How much is the noncurrent portion of the note on December 31, 2016? a. Nil c. 357,127 b. 318,879 d. 38,248
UNIVERSITY OF LUZON PEREZ BLVD. DAGUPAN CITY COLLEGE OF ACCOUNTANCY 19. On January 1, 2016, Occidental Co. borrowed 10% , P2,500,000 five-year loan from the National Bank. Interests are payable annually starting December 31, 2016. National charges 5% non-refundable loan origination fee representing service fee. The effective interest rate for this type of loan is 11.3866%. Based on the above data, answer the following: A) How much is the carrying amount of the loan on January 1, 2016? a. 2,375,000 c. 2,250,000 b. 2,319,700 d. 2,625,000 B) How much is the carrying amount of the loan payable on December 31, 2017? a. 2,395,432 c. 2,443,540 b. 2,418,190 d. 2,375,000 20. On January 1, 2016, Bukidnon Co. issued 3-year bonds with a face value of P1,200,000 and stated interest of 8% per year. The bonds mature in 3 equal annual installments every December 31. The interest is also payable every December 31. The bonds were acquired to yield 10%. The bonds were appropriately classified as financial liability at amortized cost? How much is the issue price of bonds on January 1, 2016? a. 1,158,926 b. 907,875
c. 1,432,125 d. 896,042
21. On January 1, 2016, Lanao del Norte Company issued 10%, 3-year bonds with face value of P5,000,000 at 98. Additionally, Lanoa del Norte Company paid bond issue cost of P140,000. After consideration of bond issue costs to the initial measurement, the calculated effective rate is 12%. The interest is payable annually on December 31. Lanao del Norte Company uses the effective interest method in amortizing discount and issue cost. What is the carrying value of the payable on December 31, 2016? a. 5,000,000 c. 4,848,600 b. 4,840,000 d. 4,831,200 22. On December 31, 2016, Misamis Oriental Company issued 5,000 of its 8% 10-year P1,000 face value bonds with detachable warrants at 110. Each bonds carried a detachable warrant for 10 ordinary shares of Misamis Oriental’s P100 par value at a specified option price of P120. Immediately after issuance, the market value of the bonds without warrants as P4,800,000 and the market value of the warrants was P1,200,000. In the December 31, 2016 statements of financial position, what amount should Misamis Oriental report as bonds payable? a. 5,500,000 c. 5,000,000 b. 4,800,000 d. 4,400,000
GODBLESS! “If you remain in me and my words remain in you, ask whatever you wish and it will be done for you.” - John. 15:7
MIDTERM EXAM-SET B PERMIT #: _______________________________ SCORE: __________________________________
DIRECTION: Encircle the best answer. STRICTLY NO ERASURE. 1. Which is not considered a characteristic of a liability? a. Present obligation b. Arises from past events c. Results in an outflow of resources d. Liquidation is reasonably expected to require use of existing resources classified as current assets 2. For a liability to exist a. A past transaction or event must have occurred. b. The exact amount must be known c. The identity of the party owed must be known d. An obligation to pay cash in the future must exist 3.
Which of the following should be included in current liabilities? a. Trade notes payable b. Short-term zero-interest bearing note payable c. Unearned revenue d. All of these are included in current liabilities
4. The “amortized cost” of bonds payable means a. Face amount plus premium on bonds payable b. Face amount minus discount on bonds payable c. Face amount minus bonds issue cost d. Face amount plus premium on bonds payable, minus discount on bonds payable and minus bond issue cost 5. Bonds that mature on a single date are called a. Term bonds b. Serial bonds
c. Debenture bonds d. Callable bonds
6. Bonds issued with schedule maturities at various dates are called a. Convertible bonds c. Serial bonds b. Term bonds d. Callable bonds 7. When bonds are sold between interest dates, any accrued interest is credited to a. Interest payable c. Interest receivable b. Interest revenue d. Bonds payable 8. What is the interest rate written on the face of the bond? a. Nominal rate b. Stated rate c. Coupon rate, nominal rate or stated rate d. Market. yield or effective rate 9. What is the rate of interest actually incurred a. Yield rate b. Effective rate c. Coupon rate, nominal rate or stated rate d. Market. yield or effective rate 10. When the effective interest method is used, the periodic amortization would a. Increase if the bonds were issued at a discount b. Increase if the bonds were issued at a premium c. Decrease if the bonds were issued at a premium d. Increase if the bonds were issued at either a discount or a premium 11. Harden Company reported the following information on December 31, 2016: Bonds payable P5,000,000
UNIVERSITY OF LUZON PEREZ BLVD. DAGUPAN CITY COLLEGE OF ACCOUNTANCY Discount on bonds payable Loan payable, with P500,000 payable semi-annually starting 06/30/2017 Accounts payable Unearned rent income Income tax payable Cash dividends payable Cash surrender value of officers' life insurance Patent Advances to employees Deferred tax liability Share dividends payable
500,000 2,500,000 1,000,000 300,000 250,000 100,000 75,000 50,000 45,000 15,000 150,000
Total liabilities to be reported in the company’s December 31, 2016 statement of financial position is: a. 8,835,000 c. 7,545,000 b. 8,665,000 d. 7,325,000 12. An analysis of Howard Company’s liabilities on December 31, 2016 disclosed the following information: Accounts payable, after deducting debit balances in suppliers' accounts amounting to P100,000 and postdated checks of P50,000 Bonds payable Premium on Bonds payable Mortgage payable Share dividends payable Credit balances in customers' accounts Premium payable Deferred tax liability Deferred revenue Accrued expenses
P4,000,000 1,000,000 100,000 850,000 750,000 500,000 600,000 200,000 175,000 150,000
The deferred tax liability is based on temporary differences that will reverse in 2017. A) Total amount of current liabilities in the statement of financial position is: a. 5,400,000 c. 5,775,000 b. 5,575,000 d. 7,375,000 B) Total amount of non-current liabilities in the statement of financial position is: a. 2,400,000 c. 2,325,000 b. 2,345,000 d. 2,235,000 13. Tim Co. has a 10%, P2,000,000 loan payable as of December 31, 2016 that is maturing on July 1, 2017. Interest on the loan is due every July 1 and December 31. On February 1, 2017, Tim Co., entered into a refinancing agreement with a bank to refinance the loan on a long-term basis. Both parties are financially capable of honouring the agreement’s provision. Tim’s financial statements were authorized for issue on March 15, 2017? How much is presented as current liability in relation to the loan in Tim’s 2016 year-end financial statements? a. 2,000,000 c. 100,000 b. 200,000 d. Nil 14. On January 1, 2016, Allen Co, availed a 3-year, P2,000,000 loan from a bank. The loan agreement requires Allen to maintain a current ratio of 2:1. If the current ratio falls below 2:1, the loan becomes payable on demand. As of December 31, 2016, Allen’s current ratio is 1:8:1. On January 5, 2017, the bank agreed not to collect the loan in 2017 and gave Allen 12 months to rectify the breach of loan agreement. How much is presented as current liability in relation to the loan in Allen’s 2016 year-end financial statements?
UNIVERSITY OF LUZON PEREZ BLVD. DAGUPAN CITY COLLEGE OF ACCOUNTANCY a. 2,000,000 b. 200,000
c. 100,000 d. Nil
15. Duncan Company’s account payable balance at December 31, 2016 was P8,000,000 before considering the following data: Goods shipped to Duncan FOB shipping point on December 15, 2016 were lost in transit. The invoice cost of P500,000 was not recorded by Duncan. On January 15, 2017, Duncan filed a P500,000 claim against the common carrier. On December 30, 2016, a vendor authorized Duncan to return for full credit goods shipped and billed at P200,000 on December 15, 2016. The returned goods were shipped by Duncan on December 31, 2016. A P200,000 credit memo was received and recorded on January 5, 2017. What should Duncan report as accounts payable on December 31, 2016? a. 8,500,000 c. 7,800,000 b. 8,300,000 d. 7,500,000 16. Tony Co. provides an incentive compensation plan under which its chief executive officer receives a bonus equal to 10% of the company in excess of P880,000 before bonus and income tax. If income before bonus and income tax for 2016 amounted to P2,200,000 and income tax rate is 30% the amount of bonus would be a. 220,000 c. 132,000 b. 200,000 d. 120,000 17. On January 1, 2017, Davao Company bought a machine from Tagum Co. In lieu of cash payment, Davao gave Tagum a 4-year, P4,000,000, 15% note payable. Principal is due on December 31, 2020 but interest is due annually every December 31. The prevailing interest rate for this type of note is 10% Based on the above data, answer the following (carry all decimal places in computing for the present value) A) How much is the cost of the machinery acquired on January 1, 2017? a. 3,783,973 c. 4,000,000 b. 3,796,160 d. 4,633,973 B) How much is the carrying amount of the note on December 31, 2017? a. 4,000,000 c. 4,497,370 b. 4,347,107 d. 4,578,468 C) How much is the current portion of the note on December 31, 2017? a. Nil c. 150,263 b. 71, 077 d. 4,497,370 D) How much is the noncurrent portion of the note on December 31, 2017? a. Nil c. 150,263 b. 71, 077 d. 4,497,370 18. On January 1, 2016, Compostela Co. acquired machinery from Nabunturan Co. In lieu of cash paymen, Compostela giave Nabunturan a 3-year, P1,200,000 noninterest-bearing note payable. Principal is due in equal payments every December 31 beginning on December 31, 2016. The prevailing interest rate for this type of note is 12%. Based on the above data, answer the following: A) How much is the cost of the machinery acquired on January 1, 2016? a. Nil c. 39,280 b. 110,720 d. 960,720 B) How much is the carrying amount of the note on December 31, 2016? a. 676,006 c. Nil b. 800,000 d. 357,127 C) How much is the current portion of the note on December 31, 2016? a. Nil c. 357,127 b. 318,879 d. 38,248 D) How much is the noncurrent portion of the note on December 31, 2016? a. Nil c. 357,127 b. 318,879 d. 38,248
UNIVERSITY OF LUZON PEREZ BLVD. DAGUPAN CITY COLLEGE OF ACCOUNTANCY 19. On January 1, 2016, Occidental Co. borrowed 10% , P2,500,000 five-year loan from the National Bank. Interests are payable annually starting December 31, 2016. National charges 5% non-refundable loan origination fee representing service fee. The effective interest rate for this type of loan is 11.3866%. Based on the above data, answer the following: A) How much is the carrying amount of the loan on January 1, 2016? a. 2,375,000 c. 2,250,000 b. 2,319,700 d. 2,625,000 B) How much is the carrying amount of the loan payable on December 31, 2017? a. 2,395,432 c. 2,443,540 b. 2,418,190 d. 2,375,000 20. On January 1, 2016, Bukidnon Co. issued 3-year bonds with a face value of P1,200,000 and stated interest of 8% per year. The bonds mature in 3 equal annual installments every December 31. The interest is also payable every December 31. The bonds were acquired to yield 10%. The bonds were appropriately classified as financial liability at amortized cost? How much is the issue price of bonds on January 1, 2016? a. 1,158,926 b. 907,875
c. 1,432,125 d. 896,042
21. On January 1, 2016, Lanao del Norte Company issued 10%, 3-year bonds with face value of P5,000,000 at 98. Additionally, Lanoa del Norte Company paid bond issue cost of P140,000. After consideration of bond issue costs to the initial measurement, the calculated effective rate is 12%. The interest is payable annually on December 31. Lanao del Norte Company uses the effective interest method in amortizing discount and issue cost. What is the carrying value of the payable on December 31, 2016? a. 5,000,000 c. 4,848,600 b. 4,840,000 d. 4,831,200 22. On December 31, 2016, Misamis Oriental Company issued 5,000 of its 8% 10-year P1,000 face value bonds with detachable warrants at 110. Each bonds carried a detachable warrant for 10 ordinary shares of Misamis Oriental’s P100 par value at a specified option price of P120. Immediately after issuance, the market value of the bonds without warrants as P4,800,000 and the market value of the warrants was P1,200,000. In the December 31, 2016 statements of financial position, what amount should Misamis Oriental report as bonds payable? a. 5,500,000 c. 5,000,000 b. 4,800,000 d. 4,400,000
GODBLESS! “If you remain in me and my words remain in you, ask whatever you wish and it will be done for you.” - John. 15:7
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