ACTIVITY #2

1. Liabilities are classified as current

a. when they are expected to be settled within 12 months from the end of the reporting period.
b. when they are expected to be settled beyond 1 year from the end of the reporting period.
c. whenever management wants to classify them as current.
d. any of these.

2. Which of the following accounts is not a liability?

a. Accounts Payable
b. Accounts Receivable
c. Salaries Payable
d. Notes Payable

3. These are receivables that arise from the sale of goods or services in the ordinary course of
business.
a. Accounts receivable
b. Notes receivable
c. Trade receivables
d. Non-trade receivables

4. When are trade receivables presented as current assets?

a. Whenever they are collectible within 12 months from the end of the reporting period.
b. When they are collectible within the entity’s normal operating cycle, even if this extends
beyond 12 months from the end of the reporting period.
c. When they are collectible within the entity’s normal operating cycle or within 12 months
from the end of the reporting period, whichever is shorter.
d. Trade receivables are always presented as current assets.

5. These are present obligations that have resulted from past events and are expected to require
giving up of resources when settling them.
a. Assets
b. Expenses
c. Liabilities
d. Losses

6. Assets less liabilities is

a. Equity
b. Net assets
c. Capital
d. All of these

7. This type of balance sheet (statement of financial position) does not show distinctions between
current and noncurrent assets and liabilities.
a. Classified
b. Unclassified
c. Report form
d. Account form
8. Which of the following is most likely to be a current asset?
a. Accounts payable
b. Land
c. Equipment
d. Cash

9. Entity A is a merchandising business. It is engaged in buying and selling grocery items. Unsold
groceries at the end of the period will be presented in Entity A’s statement of financial position
under which of the following line items?
a. Prepaid supplies
b. Trade and other receivables
c. Property, plant and equipment
d. Inventory

10. The land on which Entity A’s building was constructed is classified in the statement of financial
position as
a. current asset.
b. noncurrent asset.
c. current liability.
d. equity.

11. Accumulated depreciation is most commonly reported in the statement of financial position as
a. a separate current asset.
b. a separate noncurrent asset.
c. a deduction to the related noncurrent asset account.
d. an addition to the related noncurrent asset account.

12. Which of the following is presented as a noncurrent liability in an entity’s statement of financial
position?
a. Accounts payable
b. Notes payable due in 6 months
c. Income tax payable
d. Loans payable due after 5 years

13. Which of the following liabilities is presented as current liability even if it is due to be settled
beyond one year from the end of the reporting period but within the entity’s normal operating
cycle?
a. Accounts receivable arising from sales of goods in the ordinary course of business
b. Notes payable issued in conjunction with the purchase of equipment. The notes payable is
due after 2 years
c. Accounts payable arising from purchases of inventory
d. None of these

14. For purposes of presenting items on the financial statements, assets, liabilities, equity, income
and expenses with similar nature and function within the business are grouped together. These
groupings are called
a. account titles.
b. line items.
c. financial statements.
d. notes.
15. Accounts receivable is commonly presented in the statement of financial position under the
heading
a. Property, plant and equipment
b. Cash and cash equivalents
c. Prepaid assets
d. Trade and other receivables

16. This is the most commonly used format of the balance sheet. It presents the entity’s assets,
liabilities and equity in a vertical manner.
a. Report form
b. Account form
c. Standing form
d. Lying form

17. Entity A reports a loss of ₱60,000 and total expenses of ₱240,000. Entity A’s total income must be
a. 360,000
b. 300,000
c. 180,000
d. 400,000

18. The financial statements most frequently provided include all of the following except the
a. statement of profit or loss and other comprehensive income.
b. statement of financial position.
c. statement of cash flows.
d. statement of retained earnings.

19. An entity has the following assets:

Cash 20,000
Accounts receivable 40,000
Notes receivable (nontrade) - ₱60,000 due within 1 yr. 100,000
Inventory 130,000
Prepaid supplies 10,000
Land 200,000
Building 800,000
Accumulated depreciation (240,000)
Total assets 1,060,000

How much is the total current assets?

a. 200,000
b. 260,000
c. 300,000
d. 360,000

20. An entity has the following liabilities:

Accounts payable 60,000

Notes payable (nontrade) - ₱200,000 due within 1 yr. 1,000,000
Rent payable (due within 1 yr.) 20,000
 Utilities payable 10,000
Interest payable 200,000
Salaries payable 800,000
Unearned income 240,000
Total liabilities 2,330,000

How much is the total current liabilities?

a. 1,330,000
b. 1,530,000
c. 1,830,000
d. 1,930,000

21. Entity A has a capital balance of ₱3,400,000 at the start of the period. During the period, Entity A
earned income of ₱8,800,000 and incurred expenses of ₱4,500,000. The sole proprietor of Entity A
made additional investments of ₱1,200,000 to the business but made a withdrawal of ₱960,000 at
the end of the period. How much is the capital balance of Entity A at the end of the period?
a. 7,849,000
b. 8,497,000
c. 8,740,000
d. 7,940,000

Use the following information for the next three questions:

Entity A’s post-closing trial balance on December 31, 20x1 shows the following account balances:

Accounts Dr. Cr.

Cash 20,000
Accounts receivable 122,000
Allowance for bad debts 30,000
Notes receivable (Trade) 8,000
Inventory 200,000
Prepaid supplies 15,000
Prepaid rent 25,000
Prepaid insurance 10,000
Land 1,000,000
Building 2,000,000
Accumulated depreciation - Bldg. 1,600,000
Equipment 800,000
Accumulated depreciation – Equipment 250,000
Accounts payable 100,000
Notes payable - short term loan 200,000
Notes payable - long term loan
(₱50,000 due within 1 yr.) 1,450,000
Interest payable 65,000
Salaries payable 105,000
Utilities payable 8,000
Unearned income 35,000
Owner’s capital 357,000
4,200,00 4,200,00
Totals 0 0
22. How much is the total current assets?
a. 340,000
b. 370,000
c. 362,000
d. 480,000

23. How much is the total noncurrent liabilities?

a. 1,450,000
b. 1,400,000
c. 1,465,000
d. 1,515,000