MODULE # 4Post-test

STATEMENT OF FINANCIAL POSITION

1. Which of the following should be disclosed in the financial statements as contingent liability?

a. The entity has accepted liability prior to year-end for unfair dismissal of an employee and is to pay damages.

b. The entity has received a letter from a supplier complaining about an old unpaid invoice.

c. The entity is involved in a legal; case which it may possibly lose, although this is not probable.

d. The entity has not yet paid claims under sales warranties.

2. A retail store received cash and issued a gift certificate that is redeemable in merchandise. When the gift certificate was issued, a

a. Deferred revenue account should be decrease

b. Deferred revenue account should be increase

c. Revenue account should be decreased

d. Revenue account should be increase

3. Which of the following must be included on the face of statement of financial position?

a. Number of shares authorized

b. Contingent Asset

c. Contingent Liability

d. Investment Property

4. Appropriation for plant expansion is reported under

a. Plant, Property, and Equipment

b. Current assets

c. Retained Earnings

d. Intangible Assets

5. Which of the following statements is true?

I. Financial flexibility is a company's ability to respond and adapt to financial adversity and unexpected needs and opportunities.

II. On the balance sheet, an adjunct account reduces either an asset, a liability, or an owners' equity account.

a. Statement A is true and Statement B is false.

b. Statement A is false and Statement B is true.

c. Both Statements are true.

d. Both Statements are false.

6. It refers to the availability of cash over the longer term to meet maturing obligations?

a. Liquidity

b. Solvency

c. Profitability

d. Both a and b

7. It is the ability of the entity to meet currently maturing obligations

a. Profitability

b. Solvency

c. Liquidity

d. Maturity

8. The following are considered as characteristics of an asset, except

a. The cost of the asset can be measured reliably

b. The asset provides future economic benefits

c. The asset is the result of the future events

d. The asset is controlled by the entity

9. These are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

a. Liabilities

b. Assets

c. Equity

d. None of the above

10. Which of the following should not be considered as a current asset in the balance sheet?

a. Installment notes receivable due over 18 months in accordance with normal trade practice.

b. Prepaid taxes which cover assessments of the following operating cycle of the business.

c. Equity or debt securities purchased with cash available for current operations.

d. The cash surrender value of a life insurance policy carried by a corporation, the beneficiary, on its president.

11. Which of the following is a limitation of the balance sheet?

a. Many items that are of financial value are omitted.

b. Judgments and estimates are used.

c. Current fair value is not reported.

d. All of these

12. What is the appropriate treatment for a contingent asset in the financial statements of an entity?

a. Disclosure of information in the notes but not recognized in the financial

statements.

b. Recognition in the financial statements and a note disclosure.

c. Recognition in the financial statements but no further disclosure in the notes.

d. Not recognized in the financial statements and neither disclosed in notes.

13. If an entity expects and has the discretion to refinance on a long-term basis, the notes payable should be reclassified as

a. Current Liabilities

b. Noncurrent Asset

c. Non-current Liabilities

d. Current liabilities

14. Which of the following is not an acceptable presentation of current liabilities?

a. Listing current liabilities in the order of maturity

b. Listing current liabilities according to amount

c. Offsetting current liabilities against assets that are to be applied to their liquidation

d. Showing current liabilities in the order of liquidation preference

15. Non-current liabilities often referred to as:

a. Other long-term provisions

b. Long-terms debts

c. Other long-term financial liabilities

d. Other non-current non-financial liabilities

16. All are classified as current liabilities, except:

a. Deferred tax liability

b. Short-term borrowing

c. Current provisions

d. Trade and other payables

17. Which of the following is not a component of contributed capital under equity section?

a. Ordinary shares

b. Treasury shares

c. Preference share

d. Share premium

18. The trading securities and other investments in quoted equity instrument is an example of what line item under current assets?

a. Financial assets at fair value

b. Financial assets at book value

c. Other current assets

d. Noncurrent assets

19. Which is not true about the Statement of Financial Position in the given choices?

a. Biological Assets should be reported in the statement of financial position

b. The number of shares authorized for issue should be reported in the statement of

financial position or the statement of changes in equity or in the notes

c. Provision should be recognized in the statement of financial position

d. A revaluation surplus on a noncurrent asset in the current year should be recognized in the income statement

20. The analysis of the statement of financial position is useful in assessing the liquidity, which is the ability to

a. Satisfy short-term obligations.

b. Maintain profitable operations.

c. Maintain past levels of preferred and ordinary dividends

d. Survive major economic downturn.