LIM

3. What does the current ratio inform you about a company

A. The extent of slow-moving inventories.

B. The company's profitability.

C. The efficient use of assets.

D. The company's liquidity.

4. After initial recognition, bonds payable shall be measured at

1. Amortized cost using the effective interest method.
2. Fair value through profit or loss
3. Fair value through other comprehensive income

A. I and III

B. II and III

C. I,II and III

D. I and II

7. Which of the following is not a liability per financial statement classification?

A. Provision

B. Advances from customers

C. Stock dividends payable

D. Accrued payroll

8. Bonds issued at a premium

A. Effective rate exceeds the nominal rate

B. Effective rate and nominal rate are equal

C. Nominal rate exceeds effective rate

D. No relationship between the two rates

11. MJE Flakes Company offers its customers a pottery cereal bowl if they send in 3 boxtops from Palmer Frosted Flakes boxes. The company estimates that 60% of the boxtops will be redeemed. In 2020, the company sold 675,000 boxes of Frosted Flakes and customers redeemed 330,000 boxtops receiving 110,000 bowls. If the bowls cost Palmer Company P 3 each, how much liability for outstanding premiums should be recorded at the end of 2020

A. 270,000

B. 405,000

C. 330,000

D. 75,000

12. Nganga Corp. issued a total of P4 million par value bonds on January 01, 2020. Nominal interest is 10% and effective interest is 9%. Interest is payable annually every December 31 and the bonds will mature on December 31, 2024. Pertinent present value factors are as follows:

9% 10%

Present value of 1 for 4 periods 0.70843 0.68301

Present value of ordinary annuity of 1 for 4 periods 3.23972 3.16987

What is the carrying amount of the bonds payable on December 31, 2020?

Group of answer choices

A. 4,070,387

B. 4,101,273

C. 4,129,608

D. 4,036,722

13. On March 01, 2020, ABC Company issued a P90,000, 8% interest-bearing note payable from a financial institution in exchange for cash. Interest and principal are payable after one year. How much is the interest expense for 2020?

A. 7,000

B. 6,000

C. 7,200

D. 5,400

14. ABC Company's 2020 financial statements contain the following selected data:

Income taxesP 40,000

Interest expense25,000

Net income after taxes and interest60,000

ABC's times interest earned for 2020 is

A. 3.0 times

B. 4.0 times.

C.5.0 times.

D. 3.4 times.

15. Nganga Corp. issued a total of P4 million par value bonds on January 01, 2020. Nominal interest is 10% and effective interest is 9%. Interest is payable annually every December 31 and the bonds will mature on December 31, 2024. Pertinent present value factors are as follows:

9% 10%

Present value of 1 for 4 periods 0.70843 0.68301

Present value of ordinary annuity of 1 for 4 periods 3.23972 3.16987

What is the issue price of the bonds?

A. 4,000,000

B. 4,129,608

C.4,119,520

D. 4,400,000

16. When the right to receive dividend is forfeited in any one year in which dividend is not declared, the preference share is said to be

A. Nonparticipating

B. Cumulative

C.Noncumulative

D. Participating

17. The board of directors authorize payment of dividend on December 31, Year 1. Those who are registered as shareholders on or before January 15, Year 2 are entitled to receive dividends. The distribution of the dividends will be on February 14, Year 2.

January 15, Year 2 is the

A. Date of record

B. Date of payment

C. Date of distribution

D. Date of declaration

18. Represents the cumulative balance of periodic earnings, dividend distributions, prior period adjustments and other capital adjustments

A. Retained earnings

B. Dividends

C. Shareholders' equity

D. Capital

19. Which statement about treasury share is incorrect?

A. Retained earnings must be appropriated to the extent of the cost of the treasury shares.

B. Treasury shares cannot be legally reissued at a discount (below par value).

C. Treasury shares are shares reacquired but not cancelled.

D. Treasury shares must be the entity's own shares.

20. Which of the following is a legal appropriation?

A. Retained earnings appropriated for plant expansion

B. Retained earnings appropriated for redemption of preference shares

C. Retained earnings appropriated for treasury shares

D. Retained earnings appropriated for plant expansion

21. For reissuance of treasury shares at less than cost, the excess shall be debited to

A. Retained earnings

B. Share premium - treasury

C. Share premium - share capital

D. Loss - other comprehensive income

22. The following will affect retained earnings, except

A. Items in other comprehensive income

B. Dividend declaration

C. Change in accounting policy

D. Prior period adjustment

24. Which of the following is a dividend out of capital

A. Stock dividend

B. Liquidating dividend

C. Scrip dividend

D. all of these