LIABILITIES

QUIZ: THEORIES
1. It is a marketing scheme whereby an entity grans award credits to
customers and the entity can redeem the award credits in exchange for
free or discounted goods.
a. Customer loyalty program
b. Premium plan
c. Marketing Program
d. Loyalty award
QUIZ: THEORIES
2. The award credits granted to customers under a customer loyalty
program is often described as
a. Points
b. Awards
c. Credits
d. Royalty
QUIZ: THEORIES
3. The consideration allocated to the points is measured at
a. Stand-alone selling price of the points
b. Carrying amount of goods to be received in exchange
c. Fair value of the goods to be received in exchange
d. The proportion of the stand-alone selling price of the points relative
to the total of the stand-alone selling price of the points and the
stand-alone selling price of the goods
QUIZ: THEORIES
4. Under a customer loyalty program, the consideration allocated to the
points
a. Shall be recognized as revenue immediately
b. Shall not be accounted for as revenue separately
c. Shall be recognized initially as deferred revenue and amortized as
revenue over a reasonable period
d. Shall be recognized initially as deferred revenue and subsequently
recognized as revenue upon the redemption of the points
QUIZ: THEORIES
5. The retail store received cash and issued gift certificates that are
redeemable in merchandise. How would the deferred revenue account
be affected by the redemption and non redemption of certificates,
respectively?
a. Decrease and No effect
b. Decrease and Decrease
c. No effect and No Effect
d. No effect and Decrease
QUIZ: THEORIES
6. A retail store received cash and issued a gift certificate that is
redeemable in merchandise. When the gift certificate was issued
a. Deferred revenue account should be decreased
b. Deferred revenue account should be increased
c. Revenue account should be decreased
d. Revenue account should be increased
QUIZ: THEORIES
7. Magazine subscription collected in advance are treated as?
a. A contra account to magazine subscription receivable*
b. Deferred revenue in the liability section
c. Deferred revenue in the equity section
d. Magazine subscription refund in the income statement in the period
collected
QUIZ: THEORIES
8. When an entity received an advance payment for special order goods
that are to be manufactured and delivered within six months, the
advance payment is reported as
a. Deferred charge
b. Contra asset account
c. Current liability
d. Non current Liability **
 Quiz: PROBLEM
9. In an effort to increase sales, B company inaugurated a sales promotion campaign on
June 30, 2025, whereby the entity placed a coupon in each package of razor blades sold,
the coupons being redeemable for a premium. Each premium costs P50 and five
coupons must be presented by a customer to received a premium. The entity estimated
that only 60 percent of the coupons issued will be redeemed. For the six months ended
December 31, 2015 the entity provided the ff information:
Packages of razor blades sold 400,000
Premiums purchased 30,000
Coupons redeemed 100,000

What is the estimated liability for premium claims outstanding on December 31, 2025
a. 1,000,000
b. 1,400,000
c. 1,800,000
d. 2,400,000
10. CC Company has a bonus agreement which provided that the
general manager shall receive an annual bonus of 10% of the net
income after bonus and tax. The income tax rate is 30%. The general
manager received P280,000 for the current year bonus. What is the
income before bonus and tax?
a. 4,280,000
b. 4,000,000
c. 2,800,000
d. 3,720,000
QUIZ:
1.A
2.A
3.D
4.D
5.B
6.B
7.B
8.C
9. B
10. A
Solution
9.
Coupons to be redeemed (400,000 x 240,000
60%)
Coupons redeemed (100,000)
Coupons outstanding 140,000

Est. liability (140,000 / 5 x P50) 1,400,000

Solution
10.
Income after bonus and tax (280,000 / 10% ) 2,800,000
Income before tax ( 2,800,000 / 70% ) 4,000,000
Income before bonus and tax (4,000,000+280,000) 4,280,000