University of Rizal System – Binangonan Campus

COLLEGE OF ACCOUNTANCY
2nd Year

IAC 3
QUIZ #2

1. The basis of classifying assets as current assets is

a. The accounting cycle or 1 year, whichever is longer

b. The accounting cycle or 1 year, whichever is shorter
c. The operating cycle or 1 year, whichever is longer
d. The operating cycle or 1 year, whichever is shorter

2. Boksoon Company provided you the following information for the year 2021:

Net purchase 200,000

Sales discounts 8,000
Income tax expense 24,000
Operating expenses 92,000
Sales 400,000
Inventory, 1/2/21 100,000
Inventory, 12/31/21 60,000

In Boksoon’s Profit or Loss Statement for the year 2021, using the Functional presentation, the
gross profit

a. should not be reported

b. should be reported at 36,000
c. should be reported at 152,000
d. should be reported at 160,000

3-6. The adjusted trial balance of Eomma Company includes the following accounts on December 31,
2021:

Sales 5,000,000
Commission income 28,000
Interest expense 180,000
Inventory, 12/31/21 520,000
Purchases, net of returns 2,800,000
Sales commissions 500,000
Administrative salaries 720,000
Office supplies expense 110,000
Dividends declared 800,000
Dividend income 16,000
Gain on sale of equipment 100,000
Rent expense 400,000
Unrealized gain on investment @ FVPL 55,000
Unrealized gain on investment @ FVOCI 88,000
Depreciation expense – store equipment 70,000
Depreciation expense – office equipment 50,000
Freight – in 80,000
Freight – out 120,000

Additional information:

● Merchandise inventory, January 1, 2021, 450,000

● Income tax rate, 30%
 ● Rent expense is allocated 60% selling, 40% administrative

Compute for the following:

3. Cost of sales

a. 2,950,000
b. 2,870,000
c. 2,810,000
d. 2,730,000

4. Total selling expenses

a. 690,000
b. 730,000
c. 810,000
d. 930,000

5. Profit or loss

a. 167,300
b. 228,900
c. 419,000
d. 239,000

6. Total comprehensive income

a. 168,400
b. 229,800
c. 255,300
d. 327,000

7. The accounts from the Shareholder’s Equity section of the balance sheet of Appa Company showed
the following at December 31, 2020:

Ordinary shares capital (P10 par) 475,000

Share premium 6,640,000
Retained earnings 780,000

During 2021, Appa Company had the following transactions:

● Issued an additional 90,000 ordinary shares @ 17 per share

● Purchased 10,000 ordinary shares @ 20 per share
● Sold treasury shares @ 25 per share
● Declared total cash dividends amounting to 200,000
● Net income for the year, 350,000

7. How much is the total shareholder’s equity on December 31, 2021?

a. 9,535,000 c. 9,735,000
b. 9,553,000 d. None of the choices

8. A customer has sued Pretty Company for 250,000 because of the injuries sustained by the
customer’s child in November 2021 while in the premises of the company. Legal counsel opines that
it is probable that the lawsuit will be settled for between 100,000 and 250,000, with the following
likely outcome: 20% to be settled at 100,000; 45% to be settled at 200,00; 35% to be settled at
250,000. The legal counsel also stated that the company can pau up to maximum of 250,000.

a. A liability of 183,333 and disclose a contingent liability of 66,667

b. A liability 0f 197,500 and recognize a contingent asset of 52,500 in SFP
c. A liability of 250,000
d. A disclosure of contingent liability of 52,500 and recognize a provision of 197,500
9-10. You are auditing the financial statements of Nicki Co. for the year ended December 31, 2018.
Nicki Co. maintains records under cash basis and only keeps records of its cash receipts and
disbursements. As part of your audit, you were requested to convert the records to the accrual
basis.

You were able to gather the following information:

Dec 2017 Dec 2018

Outstanding sale invoices 536,000 835,000

Advance collection from customers 0 125,000
Unpaid merchandise invoices 544,000 423,000
Advance payments to suppliers 98,000 0

The cash receipt and disbursement records revealed the following information:

● Amount collected from customers, 9,890,000

● Total payments to suppliers of merchandise, 5.615,000

9. What is the total sales for 2018 under accrual basis?

a. 10,013,000 c. 10,064,000
b. 9,716,000 d. 10,189,000

10. What is the total COS for 2018 under accrual basis?

a. 5,396,000 c. 6,136,000
b. 5,494,000 d. 5,736,000

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“To have a clear vision of what you wanted to be in the future, you have to
make decisions that are not clouded.”