Napuli, Elize Samantha C.

CBET-01-502P

Part 1-A

1. An estimated liability is an obligation for which there is no definitive amount.

Instead, the accountant must make an estimate based on the available data. Example
of an estimated liability is a warranty reserve that is based on an estimate of the
number of warranty claims that will be received. They are generally identified as
current liability on the statement of financial position.
2. It should be a present obligation which timing or amount is uncertain but is probable
to occur and could be reliably estimated.
3. A contingent liability is a possible obligation that arises from past event and whose
existence will be confirmed only by the occurrence or nonoccurrence of one or more
uncertain future events not wholly within the control of the enterprise.
4. It is not recognized because it is not probable to occur or its amount cannot be reliably
measured. It is only disclose, unless it’s remote.
5. Contingent assets are possible assets whose existence will be confirmed by the
occurrence or non-occurrence of uncertain future events that are not wholly within the
control of the entity. Contingent assets are not recognized, but they are disclosed when it
is more likely than not that an inflow of benefits will occur.

Part 1-B

1. D
2. D
3. C
4. D
5. D
6. A
7. C
8. C
9. B
10. A
11. A
12. A
13. A
14. A
 15. B
16. B
17. D
18. D
19. A
20. B

EQUITY

Part II-A

1. Elements that are generally constituting shareholder’s equity are: (1) share capital or
capital stock such as ordinary share capital and preference share capital, (2) subscribed
capital Stock, (3) share premium reserve or additional paid in capital like excess of par
(issue price over par), share options outstanding, and donated capital, (4) other equity
reserves, such as appropriation and translation reserves, and then (5) accumulated profits
and losses or retained earnings
2. Capital stock or share capital represents the contribution equal to the par or stated value
of the shares purchased by owners or the total contribution by the owners, in case of no-
par, no stated value share capital.
3. Classes of share capital include ordinary and preference share capital. An ordinary share
is an equity instrument that is subordinate to all other classes of equity instrument. It
represents the residual ownership interest in the corporation. They bear the ultimate risk
of loss and receive the benefits of the success of corporation. They control the
management of the corporation. On the other hand, preference shares are special class of
shares that possesses certain preferential rights that are not found in ordinary shares. Such
preferences may include preference over dividends and preference over assets. Generally,
they have no voting right.
4. A share of stocks represents a unit of equity ownership in a company while the shares
certificate is a written document signed on behalf of a corporation that serves as legal
proof of ownership of the number of shares indicated.
5. The subscribed capital stock is the total number of shares that is bought by the
shareholders but not yet fully paid.

Part II-B

1. D
2. C
3. C
4. B
5. B
6. D
7. A
8. C
9. A
10. B
11. D
12. A
13. D
14. B
15. B
16. A
17. A
18. B
19. A
20. B