CASH AND CASH EQUIVALENTS

1. If a petty cash fund is established in the amount of P2,500, and contains P2,000 in cash and P450 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credit to the following accounts

A. Petty cash, P450.B. Petty cash, P500.C. Cash, P450; cash over and short, P50D.

Solution:Expenses P 450Cash Short 50

Cash P 500

Difficulty: Easy

CURRENT LIABILITIES1. Orville Company records its purchases at gross amounts but wishes to change to

recording purchases net of purchase discounts. Discounts available on purchases recorded from October 1, 2012 to September 30, 2013 totaled P2,000. Of this amount, P200 is still available in the accounts payable. The balances in the accounts as of and for the year ended September 30, 2013, before conversion are:

Purchases 100,000Purchase discounts taken

800

Accounts payable 30,000What amount should be reported as accounts payable on September 30, 2013?

A. 29,800B. 29,200C. 28,800D. 28,200

Solution:Accounts payable P 30,000Less: Available discount 200Accounts payable, Sept. 30, 2013 P 29,800

Practical Accounting 1 - Current Liabilities (Easy)

INCOME TAX

Rommel Corporation prepared the following reconciliation for its first year of operations:Pretax financial income for 2014

P1,200,000

Tax exempt interest (100,000)Originating temporary difference

(300,000)

Taxable income P800,000The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2014 is 28%. What amount should be reported in its 2014 income statement as the current portion of its provision for income taxes?

A. 224,000B. 320,000C. 336,000D. 480,000

Solution:800,000 x 28% = P 224,000

Practical Accounting 1 - Income Tax (Easy)

OTHER EMPLOYEE BENEFITS

Employees are each entitled to 20 days of paid holiday leave per year. Unused holiday leave cannot be carried forward and does not vest. The holiday leave is

A. Short-term employee benefitB. Postemployment benefitC. Other long-term benefitD. Termination benefit

Theory of Accounts - Other Employee Benefits (Easy)

STATEMENT OF FINANCIAL POSITION

Which of the following best exemplifies a contingency that is reported in the notes to the financial statements?

Losses from potential future lawsuits

Loss from a lawsuit settled out of court prior to the end of the fiscal year

Warranty claims on future sales

Estimated loss from an ongoing lawsuit

Theory of Accounts - Statement of Financial Position (Easy)

ASSETS HELD FOR SALE

While an asset is 'held for sale,' PFRS 5 prohibits

Any further cost being capitalized as part of the asset

The recognition of any maintenance costs for the asset in profit or loss of the period

The recognition of any cash flows from the asset as 'operating cash flows;

The asset from being depreciated

Theory of Accounts - Assets Held for Sale (Easy

CASH AND ACCRUAL BASIS

Accrual basis of accounting

Omits adjusting at the end of the period

Leads to the reporting of more complete information than does cash basis accounting

Is not acceptable under GAAP

Results in higher income than cash basis accounting

Theory of Accounts - Cash and Accrual Basis (Easy)

FINANCIAL ASSETS AT FAIR VALUE

In addition to financial assets at fair value through profit or loss, which of the following categories of financial assets is measured at fair value in the balance sheet?

Available-for-sale financial assets

Held-to-maturity investments

Loans and receivables

Investments in unquoted equity instruments

Theory of Accounts - Financial Asset at Fair Value (Easy)

TIME VALUE OF MONEY

What is interest?

Payment for the use of money.

An equity investment.

Return on capital.

Loan.

Theory of Accounts - Time Value of Money (Easy)