EASY

The obligation to pay for goods that an entity has ordered represents a liability. TRUE

Customer Loyalty Program is a marketing scheme whereby an entity grants award credits to customers and the entity can
redeem the award credits in exchange for free or discounted goods. TRUE

Process costing is suitable when homogeneous products are manufactured in large volume. TRUE

Under Average Method there is no assumed flow of manufacturing operations. TRUE

The obligation to pay for goods that an entity expects to order represents a liability. FALSE

Marketing Program is a marketing scheme whereby an entity grants award credits to customers and the entity can
redeem the award credits in exchange for free or discounted goods. FALSE

Process costing is suitable when homogeneous products are manufactured in large volume. FALSE

Under Average Method there is an assumed flow of manufacturing operations. FALSE

Which company is most likely to use process costing?

a. A manufacturer of nuclear reactors.
b. A construction contractor.
c. A cannery.
d. A textbook publisher.
Ans : C

The numerator of weighted-average unit cost calculations is

a. current period cost.
b. cost of beginning inventory.
c. current period cost plus cost of beginning inventory.
d. cost of goods sold.
Ans : C

Among the short-term obligations of Lance Company as of December 31, the balance sheet date, are notes payable
totaling P250,000 with the Madison National Bank. These are 90-day notes, renewable for another 90-day period.
These notes should be classified on the balance sheet of Lance Company as
a. current liabilities.
b. deferred charges.
c. long-term liabilities.
d. intermediate debt.
Ans : A
Which of the following is a current liability?
a. Preferred dividends in arrears
b. A dividend payable in the form of additional shares of stock
c. A cash dividend payable to preferred stockholders
d. All of these
Ans : C

Which company is most likely to use process costing?

a. A cannery.
b. A textbook publisher.
c. A manufacturer of nuclear reactors.
d. A construction contractor.
Ans : A

The numerator of weighted-average unit cost calculations is

a. cost of goods sold.
b. current period cost plus cost of beginning inventory.
c. cost of beginning inventory.
d. current period cost.
Ans : B

Among the short-term obligations of Lance Company as of December 31, the balance sheet date, are notes payable
totaling P250,000 with the Madison National Bank. These are 90-day notes, renewable for another 90-day period.
These notes should be classified on the balance sheet of Lance Company as
a. intermediate debt.
b. long-term liabilities.
c. deferred charges.
d. current liabilities.
Ans : D

Which of the following is a current liability?

a. A cash dividend payable to preferred stockholders
b. A dividend payable in the form of additional shares of stock
c. Preferred dividends in arrears
d. All of these
Ans : A

The data below are from the records of Kwizbi, Inc. in December 31, 2018:

Accounts Payable P 600,000

ACCTNG Bank, net debit balance 50,000
Customers’ accounts with credit balances 20,000
Employees’ income tax payable 80,000
Salaries Payable 375,000
Notes payable (issued in 2018 maturing in
20 semi-annual installments beginning April 1, 2019) 3,800,000
The amount to be shown as total current liabilities on Kwizbi’s statement of financial position at December 31, 2018 is
a. 1,455,000 c. 1,435,000
b. 1,505,000 d. 1,485,000

Ans : A
The data below are from the records of Kwizbi, Inc. in December 31, 2018:

Accounts Payable P 600,000

ACCTNG Bank, net debit balance 50,000
Customers’ accounts with credit balances 25,000
Employees’ income tax payable 80,000
Salaries Payable 375,000
Notes payable (issued in 2018 maturing in
20 semi-annual installments beginning April 1, 2019) 4,000,000
The amount to be shown as total current liabilities on Kwizbi’s statement of financial position at December 31, 2018 is
a. 1,530,000 c. 1,505,000
b. 1,480,000 d. 1,455,000

Ans : B

The data below are from the records of Kwizbi, Inc. in December 31, 2018:

Accounts Payable P 605,000

ACCTNG Bank, net debit balance 45,000
Customers’ accounts with credit balances 15,000
Employees’ income tax payable 80,000
Salaries Payable 380,000
Notes payable (issued in 2018 maturing in
20 semi-annual installments beginning April 1, 2019) 3,800,000
The amount to be shown as total current liabilities on Kwizbi’s statement of financial position at December 31, 2018 is
a. 1,510,000 c. 1,460,000
b. 1,445,000 d. 1,495,000

Ans : C

The data below are from the records of Kwizbi, Inc. in December 31, 2018:

Accounts Payable P 610,000

ACCTNG Bank, net debit balance 55,000
Customers’ accounts with credit balances 25,000
Employees’ income tax payable 75,000
Salaries Payable 390,000
Notes payable (issued in 2018 maturing in
20 semi-annual installments beginning April 1, 2019) 4,100,000
The amount to be shown as total current liabilities on Kwizbi’s statement of financial position at December 31, 2018 is
a. 1,565,000 c. 1,540,000
b. 1,485,000 d. 1,510,000

Ans : D
The data below are from the records of Kwizbi, Inc. in December 31, 2018:

Accounts Payable P 595,000

ACCTNG Bank, net debit balance 45,000
Customers’ accounts with credit balances 35,000
Employees’ income tax payable 95,000
Salaries Payable 400,000
Notes payable (issued in 2018 maturing in
20 semi-annual installments beginning April 1, 2019) 4,000,000
The amount to be shown as total current liabilities on Kwizbi’s statement of financial position at December 31, 2018 is
a. 1,570,000 c. 1,535,000
b. 1,490,000 d. 1,525,000

Ans : D

The data below are from the records of Kwizbi, Inc. in December 31, 2018:

Accounts Payable P 620,000

ACCTNG Bank, net debit balance 30,000
Customers’ accounts with credit balances 25,000
Employees’ income tax payable 75,000
Salaries Payable 400,000
Notes payable (issued in 2018 maturing in
20 semi-annual installments beginning April 1, 2019) 4,200,000
The amount to be shown as total current liabilities on Kwizbi’s statement of financial position at December 31, 2018 is
a. 1,570,000 c. 1,540,000
b. 1,515,000 d. 1,545,000

Ans : C

The data below are from the records of Kwizbi, Inc. in December 31, 2018:

Accounts Payable P 615,000

ACCTNG Bank, net debit balance 40,000
Customers’ accounts with credit balances 30,000
Employees’ income tax payable 90,000
Salaries Payable 390,000
Notes payable (issued in 2018 maturing in
20 semi-annual installments beginning April 1, 2019) 3,900,000
The amount to be shown as total current liabilities on Kwizbi’s statement of financial position at December 31, 2018 is
a. 1,555,000 c. 1,525,000
b. 1,515,000 d. 1,485,000

Ans : B
The data below are from the records of Kwizbi, Inc. in December 31, 2018:

Accounts Payable P 600,000

ACCTNG Bank, net debit balance 50,000
Customers’ accounts with credit balances 25,000
Employees’ income tax payable 100,000
Salaries Payable 420,000
Notes payable (issued in 2018 maturing in
20 semi-annual installments beginning April 1, 2019) 4,200,000
The amount to be shown as total current liabilities on Kwizbi’s statement of financial position at December 31, 2018 is
a. 1,565,000 c. 1,540,000
b. 1,615,000 d. 1,590,000

Ans : A

Taylor, president of the TS COMPANY, has a bonus arrangement with the company under which she receives 15% of the
net income (after deducting taxes and bonuses) each year. For the current year, the net income before deducting either
the provision for income taxes or the bonus is P 4,000,000. The bonus is deductible for tax purposes, and the tax rate is
30%. Determine the amount of Ana Rosa’s bonus.

a. 380,090 c. 380,900
b. 380,009 d. 380,000

Ans : A

Taylor, president of the TS COMPANY, has a bonus arrangement with the company under which she receives 8% of the
net income (after deducting taxes and bonuses) each year. For the current year, the net income before deducting either
the provision for income taxes or the bonus is P 4,500,000. The bonus is deductible for tax purposes, and the tax rate is
30%. Determine the amount of Ana Rosa’s bonus.

a. 238,366 c. 238,663
b. 238,636 d. 238,633

Ans : B

Taylor, president of the TS COMPANY, has a bonus arrangement with the company under which she receives 12% of the
net income (after deducting taxes and bonuses) each year. For the current year, the net income before deducting either
the provision for income taxes or the bonus is P 4,450,000. The bonus is deductible for tax purposes, and the tax rate is
30%. Determine the amount of Ana Rosa’s bonus.

a. 344,438 c. 344,834
b. 344,348 d. 344,843

Ans : C
Taylor, president of the TS COMPANY, has a bonus arrangement with the company under which she receives 20% of the
net income (after deducting taxes and bonuses) each year. For the current year, the net income before deducting either
the provision for income taxes or the bonus is P 4,650,000. The bonus is deductible for tax purposes, and the tax rate is
30%. Determine the amount of Ana Rosa’s bonus.

a. 571,503 c. 571,305
b. 571,530 d. 571,053

Ans : D

Taylor, president of the TS COMPANY, has a bonus arrangement with the company under which she receives 18% of the
net income (after deducting taxes and bonuses) each year. For the current year, the net income before deducting either
the provision for income taxes or the bonus is P 4,250,000. The bonus is deductible for tax purposes, and the tax rate is
30%. Determine the amount of Ana Rosa’s bonus.

a. 475,757 c. 475,755
b. 475,557 d. 475,577

Ans : D

Taylor, president of the TS COMPANY, has a bonus arrangement with the company under which she receives 11% of the
net income (after deducting taxes and bonuses) each year. For the current year, the net income before deducting either
the provision for income taxes or the bonus is P 4,550,000. The bonus is deductible for tax purposes, and the tax rate is
30%. Determine the amount of Ana Rosa’s bonus.

a. 325,032 c. 325,302
b. 325,203 d. 325,230

Ans : C

Taylor, president of the TS COMPANY, has a bonus arrangement with the company under which she receives 15% of the
net income (after deducting taxes and bonuses) each year. For the current year, the net income before deducting either
the provision for income taxes or the bonus is P 4,300,000. The bonus is deductible for tax purposes, and the tax rate is
30%. Determine the amount of Ana Rosa’s bonus.

a. 408,957 c. 408,795
b. 408,597 d. 408,579

Ans : B

Taylor, president of the TS COMPANY, has a bonus arrangement with the company under which she receives 12% of the
net income (after deducting taxes and bonuses) each year. For the current year, the net income before deducting either
the provision for income taxes or the bonus is P 4,150,000. The bonus is deductible for tax purposes, and the tax rate is
30%. Determine the amount of Ana Rosa’s bonus.

a. 321,587 c. 321,857
b. 321,758 d. 321,785

Ans : A
AVERAGE

In computation of equivalent production, under AVERAGE the work done last month on the units in process, beginning is
ignored and not considered in the computation of the equivalent production while under FIFO the work done last month
on the units in process, beginning is considered. TRUE

A retail store received cash and issued gift certificates that are redeemable in merchandise. Therefore, deferred revenue
account will be decreased by redemption and will also be decreased by non-redemption of certificates. TRUE

The amount recognized as the warranty provision should be the best estimate of the expenditure to settle the present
obligation. Where no reliable estimate can be made, no warranty liability is recognized. TRUE

Under PFRS9, Paragraph 3.3.1 asset swap is treated as a derecognition of financial liability or extinguishment of an
obligation. Paragraph 3.3.3 provides that the difference between the carrying amount of the financial liability and the
consideration given shall be recognized in profit or loss. TRUE

In computation of equivalent production, under FIFO the work done last month on the units in process, beginning is
ignored and not considered in the computation of the equivalent production while under AVERAGE the work done last
month on the units in process, beginning is considered. FALSE

A retail store received cash and issued gift certificates that are redeemable in merchandise. Therefore, deferred revenue
account will be decreased by redemption and no effect by non-redemption of certificates. FALSE

The amount recognized as the warranty provision should be the best estimate of the expenditure to settle the present
obligation. Where no reliable estimate can be made, warranty liability is still recognized. FALSE

Under PFRS9, Paragraph 3.3.1 asset swap is treated as a derecognition of financial liability or extinguishment of an
obligation. Paragraph 3.3.3 provides that the difference between the carrying amount of the financial liability and the
consideration given shall be recognized in comprehensive income. FALSE

The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-
average method:
A) does not consider the degree of completion of beginning work in process inventory when computing
equivalent units of production.
B) considers ending work in process inventory to be fully complete.
C) will always yield a higher cost per equivalent unit.
D) All of the above.

ANS: A
Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning
of the production process. The equivalent units for materials at Malcolm would be the sum of:
A) units in ending work in process and the units started.
B) units in beginning work in process and the units started.
C) units in ending work in process and the units started and completed.
D) units in beginning work in process and the units started and completed.

ANS: B

Which of the following statements is false?

a. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the
obligation on a long-term basis and demonstrates an ability to complete the refinancing.
b. Cash dividends should be recorded as a liability when they are declared by the board of directors.
c. Under the cash basis method, warranty costs are charged to expense as they are paid.
d. FICA taxes withheld from employees' payroll checks should never be recorded as a liability since the employer
will eventually remit the amounts withheld to the appropriate taxing authority.

ANS: D

Which of the following statements is correct?

a. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the
obligation on a long-term basis.
b. A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to
consummate a refinancing.
c. A company may exclude a short-term obligation from current liabilities if it is paid off after the balance sheet
date and subsequently replaced by long-term debt before the balance sheet is issued.
d. None of these.

ANS: D

The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-
average method:
A) considers ending work in process inventory to be fully complete.
B) does not consider the degree of completion of beginning work in process inventory when computing
equivalent units of production.
C) will always yield a higher cost per equivalent unit.
D) All of the above.

ANS: B

Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning
of the production process. The equivalent units for materials at Malcolm would be the sum of:
A) units in ending work in process and the units started.
B) units in beginning work in process and the units started and completed.
C) units in ending work in process and the units started and completed.
D) units in beginning work in process and the units started.
ANS: D

Which of the following statements is false?

a. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the
obligation on a long-term basis and demonstrates an ability to complete the refinancing.
b. FICA taxes withheld from employees' payroll checks should never be recorded as a liability since the employer
will eventually remit the amounts withheld to the appropriate taxing authority.
c. Under the cash basis method, warranty costs are charged to expense as they are paid.
d. Cash dividends should be recorded as a liability when they are declared by the board of directors.

ANS: B

Which of the following statements is correct?

a. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the
obligation on a long-term basis.
b. A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to
consummate a refinancing.
c. A company may exclude a short-term obligation from current liabilities if it is paid off after the balance sheet
date and subsequently replaced by long-term debt before the balance sheet is issued.
d. None of these.

ANS: D