This document contains 31 multiple choice questions related to accounting concepts such as the accounting cycle, cash and cash equivalents, notes receivable, and accounts receivable. Specifically, it tests understanding of adjusting entries, cash accounts, accounting for notes receivable including interest calculation, and methods of using receivables to obtain cash like factoring, discounting, and assignment.
This document contains 31 multiple choice questions related to accounting concepts such as the accounting cycle, cash and cash equivalents, notes receivable, and accounts receivable. Specifically, it tests understanding of adjusting entries, cash accounts, accounting for notes receivable including interest calculation, and methods of using receivables to obtain cash like factoring, discounting, and assignment.
This document contains 31 multiple choice questions related to accounting concepts such as the accounting cycle, cash and cash equivalents, notes receivable, and accounts receivable. Specifically, it tests understanding of adjusting entries, cash accounts, accounting for notes receivable including interest calculation, and methods of using receivables to obtain cash like factoring, discounting, and assignment.
An optional step in the accounting cycle is the preparation of:
a. Adjusting entries b. Closing entries c. Statement of cash flows d. Postclosing trial balance 2. The normal balance of the account is on the a. Debit side of the account b. Credit side of the account c. Side represented by increase in the account balance d. Side represented by decrease in the account balance 3. Adjusting entries affect a. One nominal account and one real account b. Two nominal accounts c. Two real accounts d. No particular combination of nominal and real accounts 4. The Philippine Financial Reporting Standards collectively include: a. PFRS corresponding to IFRS b. PAS corresponding to IAS c. Philippine Interpretations corresponding to IFRIC and SIC Interpretations and Interpretations developed by PIC d. All of these are included in Philippine Financial Reporting Standards 5. REMOVAL NALIWAT Company shows the following account balances in their financial records as of December 31, 2019: Checking account at Morgan Bank, P(20,000); Checking Account at Land Bank, P500,000; Payroll account-National Bank, P100,000; Foreign bank account – restricted;, P750,000; Postage stamps, P22,000; Employees’ postdated checks, P30,000; IOU from president’s brother, P75,000; Traveler’s check, P50,000; No-sufficient fund check, P18,000; Petty cash fund (P16,000 in currency and expenses receipts for P84,000), P100,000 and Cashier’s checks, P36,000. What is the correct cash balance to be reported in the balance sheet of REMOVAL NALIWAT on December 31, 2019? a. 582,000 b. 686,000 c. 702,000 d. 704,000 6. At year-end, Myra Company reported cash and cash equivalents which comprised the following: Cash on hand 500,000 Demand Deposit 4,000,000 Certificate of Deposit 2,000,000 Postdated customer check 300,000 Petty cash fund 50,000 Traveler’s check 200,000 Manager’s check 100,000 Money order 150,000
What is the amount should be reported as cash at year-end?
a. P7,000,000.00 b. P4,800,000.00 c. P6,800,000.00 d. P5,000,000.00 7. Bank overdraft should be a. Reported as a deduction from the current asset section b. Reported as deduction from cash c. Netted against cash and a net cash amount reported d. Reported as a current liability 8. Under existing accounting rules, cash is considered as a: a. Fixed Asset b. Financial Asset c. Depreciable Asset d. Non-monetary Asset 9. A petty cash system is designed to a. Cash checks for employees b. Handle cash sales c. Account for all small cash receipts and disbursements d. Pay small miscellaneous expenses 10. The amount reported as “Cash” on a company’s statement of financial position normally should exclude: a. Petty cash fund b. Post-dated checks issued by the company c. Post-dated checks payable to the company d. Undelivered checks to the payee written and signed by the company 11. On December 31, 2019, DIRE NAAK Company sold used equipment with carrying amount of P 2,000,000 in exchange for a noninterest bearing note of P5,000,000 requiring ten annual payments of 500,000.00. The first payment was made on December 31,2020. The market interest for similar note was 12%. The present value of an ordinary annuity of 1 at 12% is 5.65 and 5.33 for nine periods. What is the carrying amount of the note receivable on December 31, 2019? a. 5,000,000 b. 2,285,000 c. 2,665,000 d. 4,500,000 12. What is the gain on sale of equipment to be recognized in 2019? a. 3,000,000 b. 2,175,000 c. 825,000 d. 0 13. What amount should be recognized as interest income for 2020? a. 600,000 b. 339,000 c. 31,800 d. 300,000 14. What is the carrying amount of the note receivable on December 31, 2020? a. 2,664,000 b. 4,500,000 c. 2,825,000 d. 2,325,000 15. On January 1, 2015, Maluyahalawas Company sold equipment with a carrying amount of P4,800,000 in exchange for P6,000,000 noninterest bearing note due on January 1, 2018. There was no established exchange price for the equipment. The prevailing interest rate for this note was 10%. The present value of 1 at 10% for three periods is 0.75. What amount should be reported as gain or loss on sale of equipment? a. 1,200,000 gain b. 2,700,000 gain c. 300,000 gain d. 300,000 loss 16. What amount should be reported as interest income for 2015? a. 600,000 b. 500,000 c. 450,000 d. 90,000 17. On July 1 of the current year, an entity received a one-year note receivable bearing interest at the market rate. The face amount of the note receivable and the entire amount of the interest are due in one year. When the note receivable was recorded on July 1, which of the following was debited? I. Interest receivable II. Unearned discount on note receivable a. I only b. Both I and II c. Neither I nor II d. II only 18. Subsequent to initial recognition, a loan receivable shall be measured at: a. Cost b. Amortized cost using the straight line method c. Amortized cost using the effective interest method d. Fair value 19. In calculating the carrying amount of loan receivable, the lender adds to the principal: I. Direct origination cost II. Indirect origination cost III. Origination fee charged to borrower a. I only b. I and II only c. I and III only d. I, II, and III 20. Which of the following is not a means of using receivables to obtain immediate cash? a. Pledge and assignment of receivables b. Factoring of accounts receivable c. Discounting of accounts receivable d. Aging of accounts receivable 21. The amount of receivables that are hypothecated or pledged against borrowing should be: a. Included in total receivables with disclosure b. Included in total receivables without disclosure c. Excluded from total receivables with disclosure d. Excluded from total receivable without disclosure 22. Why would an entity sells account receivable to another entity? a. To improve the quality of credit granting process b. To limit its legal liability c. To accelerate access to amount collected d. To comply with customer agreements 23. Which of the following is a method to generate cash from accounts receivable? a. Assignment b. Factoring c. Assignment and factoring d. Assignment, factoring, & discounting 24. When the accounts receivable are sold outright, the accounts receivable have been: a. Pledged b. Assigned c. Factored d. Collaterized 25. On April 1, 2019, Vivien Company discounted with recourse a 9-month, 10% note dated January 1, 2019 with face of P6,000,000. The bank discount rate is 12%. The discounting transaction is accounted for as conditional sale with recognition of contingent liability. On October 1, 2019, the maker dishonored the note receivable. The entity paid the bank the maturity value of the note plus protest fee of P50,000. On December 31, 2019, the entity collected the dishonored note in full plus 12% annual interest on the total amount due. What amount was received from the note discounting on April 1, 2019? a. 6,063,000 b. 6,450,000 c. 6,150,000 d. 5,963,000 26. What amount should be recognized as loss on note discounting? a. 450,000 b. 387,000 c. 87,000 d. 63,000 27. What is the total amount collected from the customer on December 31, 2019? a. 6,450,000 b. 6,500,000 c. 6,695,000 d. 6,662,500 28. If the discounting is secured borrowing, what is included in the journal entry to record trancsaction? a. Debit loss on discounting P87,000 b. Debit interest expense P87,000 c. Credit liability for note discounted P6,063,000 d. Credit interest income P63,000 29. The assignor’s equity in assigned accounts that is required to be disclosed in the notes to the FS is equal to: a. Bank loan balance b. Assigned accounts receivable c. Bank loan balance minus the assigned accounts receivable d. Assigned accounts receivable minus the bank loan balance 30. When the accounts receivable of a company are sold outright to a company that normally buys accounts receivable, the accounts receivable are said to have been: a. Pledged b. Assigned c. Factored d. Collateralized 31. Factoring of accounts receivable is usually done on a: a. With recourse, notification basis b. Without recourse, notification basis c. With recourse, non-notification basis d. Without recourse, non-notification basis