Saturday, June 20, 2009


Here is the complete answer key for the auditing theory by SALOSAGCOL and TIU. Yu will find these so helpful in youe review. Have a very nice time , and God Bless.

Im asking for an apology for some of the chapters dont have numbers yet on the corresponding answer. I will edit it as soon as possible.

I have received comments that some of the chapters lack answers..
sorry for the inconvenience, i will attend to your problem as soon as i could find the copy of the answers.

Update: May 2, 2014 - I found an answer key online because I lost mine,

1. c 2.b 3.c 4.c 5.b 6.c 7.b 8.c 9.d 10.c 11.b 12.d 13.c 14.d 15.c 16.b 17.a 18.a 19.d 20.d 21.b 22.c 23.a 24.b 25.b 26.d 27.c 28.c 29.c 30.b 31.b 32.d 33.b 34.d 35.d 36.c 37.b 38.b 39.d 40.c 41.d 42.d 43.a 44.a 45.b 46.c

1. c 2.c 3.a 4.c 5.d 6.d 7.a 8.c 9.d 10.b 11.d 12.c 13.c 14.a 15.c 16.b 17.b 18.d 19.d 20.a 21.a 22.b 23.c 24.a 25.a 26.c 27.a 28.a 29.c 30.c 31.c 32.b 33.b 34.b 35.c 36.b 37.d 38.b 39.c 40.d 41.c 42.d
43.c 44.d 45.a 46.a 47.d

1.b 2.c 3.c 4.c 5.c 6.b 7.d 8.c 9.d 10.c 11.d 12.c 13.a 14.a 15.b 16.a 17.b 18.b 19.b 20.a 21.b 22.d 23.b 24.b 25.b 26.a 27.d 28.a 29.c 30.c 31.a 32.c 33.b 34.d 35.c 36.b 37.a 38.a 39.d 40.a 41.a 42.b 43.d 44.c 45.a 46.a 47.b 48.b 49.d 50.d 51.c 52.b 53.b 54.d 55.d 56.c 57.a 58.b 59.c 60.b 61.c 62.d 63.b 64.a 65.a











Saturday, June 13, 2009

Nursing Board Exam Result

Bachelor of Science in Nursing is the required degree for a person who wants to take the Nursing board exam.

Why are millions of Filipinos taking up nursing?

Top answer for these question is because nursing is a demand profession globaly. Many Filipinos believe that a brighter future is in outside the country where a much bigger compensation is waiting, and the easiest way to go abroad is to be a nurse. Some other reason which I really do admire is that they took up nursing because of passion and because of the love of service to offer to there fellow men.

88,649 aspired nurses coming from the different schools and regions of the Philippines took up the November 2008 Nursing Licensure Examination. It is said that these batch has the highest number of board takers ever recorded and predicted that the number of examinees will increase each year.

Out of these almost 90,000 takers, only 39,455 or 44.51% has passed the said licensure examination and the list of Nursing Board Exam Result are scattered all over the net.

Surely the prediction will be true for I know that those 55.49% who did not pass will take again and push there luck on the exam these june of 2009.

Electronics and Communications Engineering Saga

Electronics and Communications Engineering is definitely not an easy degree to obtain. What's even more difficult is passing the board exam set up by Philippine Regulatory Commision or PRC in order for one to earn his/her license and become a bonafide Electronics Engineer. To pass it, of course you need basic requirements in which any field/courses require. Among the list are discipline, hardwork, courage, perserverance and prayers.

If one lacks any of these traits, then eventually passing the board exam would rather lay in darker area, since not having the right attitude, one does not only decreases the hope of earning a license but even more difficult is overcoming the challenges in which life has drawn upon each individual as we travel a rough road in a journey called life.

Aside from those basic traits, one of course be in need of retention. Retention of learnings or review in that should be one of the key weapons in the time of actual gameplay. Memory surely play and important role in this course, no matter how much ECE review materials you have or no matter how much time you have spent on your board exam review. All of these boils down to nothing. if you haven't rememered anything. Maybe at certain time of study, you may have learn all the electronics theory, but its useless if after a day you'd remember none. Other than undestanding the basic principles, memory is a tool one must not neglect in electronics and communications formulas. Unlike understanding the theories discovered or otherwise stated by supergenius engineers and scientist, formulas though have been established by these sage-brainiacs, still they do not require as much analysis as compared to understanding principles. Most of the problem involving formulas needs very little analysis in which it all simply become a method of mere substitution, a very common problem for basic mathematics. As long as you know how to use your own calculator( ES 991), in which for these case, even elementary students knows how to do it, then your more than good to go!

Aside from those, there are more other things to learn, you must also learn to make sacrifices. This is the difficult part, since if we are already attached with most of the things, one will be having a very difficult decision to give up all the things he/she is used to be doing. This will be in the form of hobbies, vices, sleeping perhaps, too much eating?!..haha...

As engineers, one should also be capable of facing numbers and hopefully love them. Absolutely, these figures revolve around the world of innovators, creators and designers, a field in which engineers will be of so much value. Architects and engineers of the ancient worlds are the first ones to understand them. And the products are the great pyrmids, great wall of china, and other powerful structures that stands today(not just structure but also inventions, principles and etc). Diode theory, Bipolar Junction Transistors applications and Field Effect transistor theory can be explained clearly through the universal language of mathematics. Everything in this world are in way, can be represented in numbers. To understand this is to sharpen an engineers skill much faster. Some people are born gifted with numbers, and others are not, but all can be mastered with constant correct practice. One can't really compare his progress vs. the uber-geek's fast approach of solving ultra-advanced math problems who laughs at Laplace Transforms like their doing simple addition axioms. Differential & Integral Calculus maybe difficult for you to handle, but just remember what Rocklee from the world of Naruto said, "A dropout will surpass a genius through hardwork." Well, not specifically true though for his case since he was not able to surpass the abilities of Sasuke and Neiji both of which are coming from legendary genius clans, but then, at some point, he was able to put these geniuses into shock, prove them wrong and showed them that though he wasn't born gifted, he can still become a great ninja.

So for a fellow like yourself who may be taking the electronics board exam in the future, picture it as a training in becoming a Genin, Jounin, then just like Naruto, in becoming a Hokage. Let no one hinder you from achieving this goal, be unselfishly stubborn as Naruto, and remember to always believe that nothing is impossible. Recent studies conclude that our mind-set foretells our future. Courage, perserverance & ambition are your surefire tools in overcoming each challenge.

Good Luck and God Speed.

Friday, June 12, 2009

Accounting Review Materials - Problems

Sharpen your accounting skill by practicing always. As the famous adage goes "Practice makes Perfect".

To become a CPA needs perseverance. Never quit in every problems that you will encounter. Take every problem as an oppurtunity for you to achieve your dream.

Loans and Receivable

1.Lopez Inc. had accounts receivable of P200,000 and an allowance for doubtful accounts of P8,500. What is the amortized cost of the accounts receivable?

2. At the end of its first year of operations, December 31, 2006, Neil Co. had accounts receivable of P6,000,000, net of related allowance for doubtful accounts. During 2006, Neil recorded charges to doubtful accounts expense of P900,000 and wrote of P200,000 of uncollectible accounts receivable. On December 31, 2006, how much should Neil report as accounts receivable before the allowance for doubtful accounts?

3.The following data are available on December 31, 2006 for Curious Co.:

Sales 1,600,000
Accounts receivable 400,000
Allowance for doubtful accounts, January 1, 2006 20,000
Accounts written off 5,000

What is the doubtful account expense for 2006 under the following approaches?
a.Percentage of sales (the estimate is 3%)
b.Percentage of accounts receivable (the estimate is 8%)
c.Aging (the estimate is P50,000)
d.Direct write off

4.At December 31, before adjusting and closing the accounts had occurred, the allowance for doubtful accounts of Wise Corp. showed a debit balance of P5,300. An aging of the accounts receivable indicated the amount probably uncollectible to be P3,900. Under these circumstances, a year-end adjusting entry for uncollectible accounts expense would include a debit to uncollectible accounts expense of

5.On December 31, 2006, Valiant Co. had an unadjusted credit balance of P100,000 in its allowance for uncollectible accounts. An analysis of trade accounts receivable at that date revealed the following:

Age Amount Estimated Uncollectible
0 – 30 days 6,000,000 5%
31 – 60 days 400,000 10%
Over 60 days 200,000 P150,000

What amount should Valiant report as doubtful accounts expense?

6. Care Co.’s allowance for doubtful accounts had a credit balance of P20,000 at December 31, 2005. Care accrues doubtful accounts expense at 4% of credit sales. During 2006, Care’s credit sales amounted to P3,000,000, and uncollectible accounts totaling P50,000 were written off. The aging of accounts receivable indicated that a P100,000 allowance for doubtful accounts was required at December 31, 2006. What doubtful accounts expense should Care report for 2006?

7.At the end of January 2006, the unadjusted trial balance of Value Corp. included the following accounts:

Debit Credit
Sales (90% represent credit sales) 800,000
Accounts receivable 550,000
Allowance for doubtful accounts 4,280

Value uses the balance sheet approach in estimating uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be P16,600.
a.What is the amount of uncollectible accounts expense recognized in Value’s income statement?
b.What is the amortized cost of Value’s accounts receivable in January 31 balance sheet?

8.On January 1, 2006, the balance of the accounts receivable of Easy Co. was P207,000, while the allowance for doubtful accounts was a credit of P7,800. The following data were gathered:

Credit Sales Write-offs Recoveries
2003 1,110,000 26,000 2,150
2004 1,225,000 29,500 3,750
2005 1,465,000 30,000 3,600
2006 1,500,000 31,000 4,200

Doubtful accounts are provided for as a percentage of credit sales. The accountant calculates the percentage annually by using the experience of the three years prior to the current year. Cash receipts in 2006 from credit sales amounted to P1,380,200. What is the amount of allowance for bad debts at December 31, 2006?

9.Slice Co. factored P10,000 of its accounts receivable to finance company for P8,500. An allowance for bad debts equal to P300 was previously established for these accounts. The finance company withheld 5% of the purchase price as protection against sales returns and allowances.

Prepare journal entries assuming:
a.Sale of receivable without recourse.
b.Sale of receivable with recourse and the recourse obligation has an estimated fair value of P500.

10.On December 1, 2006, Eternity Co. assigned on a non-notification basis accounts receivable of P3,000,000 to a bank in consideration for a loan of 80% of the receivable less a 5% service fee on the account assigned. Eternity collected assigned accounts of P2,000,000 and remitted the collections to the bank in partial payment for the loan. The bank applied first the collection to the interest and the balance to the principal. The agreed interest is 1% per month on the loan balance. In its December 31, 2006 balance sheet, Eternity should report the note payable as a current liability at

11. On January 1, 2006, Davis Corp. assigned P500,000 of accounts receivable to the Bombay Finance Co. Davis gave a 14% note for P450,000 representing 90% of the assigned accounts and received proceeds of P432,000 after deduction of a 4% fee. On February 1, Davis remitted P80,000 to Bombay Finance, including interest for 1 month on the unpaid balance. As a result of this P80,000 remittance, by what amount accounts receivable assigned and notes payable will be decreased?

12. Scarbrough Corp. factored P600,000 of accounts receivable to Duff Corp. on October 1, 2004. Control was surrendered by Scarbrough. Duff accepted the receivables subject to recourse for nonpayment. Duff assessed a fee of 3% and retains a holdback equal to 5% of the accounts receivable. In addition, Duff charged 15% interest computed on a weighted-average time to maturity of the receivables of fifty-four days. The fair value of the recourse obligation is P9,000. Scarbrough will receive and record cash of

13.Hindu Co. sells P40,000 of accounts receivable to a factor and receives 94% of the value of the factored accounts less a 10% commission based on the gross amount of factored accounts receivable. After the journal entry to record this factoring transaction is made, at what amount total asset will be reduced?

14.The following transactions are from among those experienced by Mole Co.:

On March 14, the company sold merchandise, P2,050,000 to ABC Co., FOB destination, 2/10, n/30.

On April 7, it received a 60-day, 12% note dated April 5 from ABC. The face of the note was the amount of the invoice minus freight charge of P50,000 paid by the customer in connection with the March 14 sale.

On April 20, the note of ABC was discounted with the bank at 15%.

On June 4, it received notification from the bank that ABC dishonored its note, Accordingly, Mole paid the bank the amount due including protest fee and other charges of P10,000.

On July 4, Mole received cash from ABC for the full amount of its indebtedness plus interest on the original face value.

Prepare journal entries to record the above transactions.

15. Harlem Co. received from a customer a 1-year, P500,000 note bearing annual interest of 8%. After holding the note for 4 months, Harlem discounted the note at a bank at an effective interest rate of 10%. What amount of cash did Harlem receive from the bank?

16. Tazz Co. accepted from a customer a P4,000,000, 90-day, 12% note dated August 31, 2006. On September 30, 2006, Tazz discounted the note at 15%. However, the proceeds were not received until October 1, 2006. In the September 30, 2006 balance sheet, what is the amount of accrued interest revenue?

17. On July 1, 2006, Rex Co. sold goods in exchange for P200,000, 8-month, non-interest bearing note receivable. At the time of sale, the note’s market rate of interest was 12%. What amount did Rex receive when it discounted the note at 10% on September 1, 2006?

18. Jane Co. discounted its “own” P50,000, 1-year note at a bank, at a discounted rate of 12%, when the prime rate was 10%. In reporting the note on Jane’s balance sheet prior to note’s maturity, what rate should Jane use for the accrual of interest?

19.On May 17, West Co. accepted a P6,500, 8%, 90-day note from a customer. On June 11, the note was discounted at 10%. At maturity date, the note was dishonored and the bank charged a P25 protest fee. What amount would West Co. debit to Notes Receivable Dishonored?

20. Alden Co. sold an 80% pro-rata interest in a P2,000,000 note receivable to Stone Co. for P1,920,000. The note was originally issued at face value. Future benefits and cost of servicing the note are immaterial.
a.What is the amount of gain or loss Alden should recognize on this transfer of a partial interest?
b.What is the fair value of the note?

Cash and cash Equevalents

1.On December 1, 2005, Lagoon Co. established an imprest petty cash fund. The operations of the fund for the last month of 2005 and the first month of 2006 are summarized as follows:

a.On December 1, 2005, the petty cash fund was established by cashing a company check for P20,000 and delivering the proceeds to the cashier.

b.On December 21, 2005, a request for replenishment of the fund was received by the accounts payable department, supported by appropriate signed vouchers, summarized as follows:
Selling expenses 5,035
Administrative expenses 6,025
Miscellaneous expenses 2,150

A check for P13,560 was drawn payable to the petty cash cashier.

c.On December 31, 2005, the company’s independent auditor counted the fund in connection with the year-end audit and found the following:
Cash in petty cash fund 10,660
Employee’s check with January date (postdated) 850
Expense vouchers properly approved:
Selling expenses 3,355
Administrative expenses 4,020
Miscellaneous expenses 965

The petty cash fund was not replenished at year-end.

d.On January 15, 2006, the employee’s check held in the petty cash fund at December 31 was encashed and the proceeds retained in the fund.

e.On January 31, 2006, a request for replenishment was made and a check was drawn to restore the fund to its original balance of P20,000. The support voucher for January 2006 expenditures are summarized below:

Selling expenses 1,200
Administrative expenses 4,060
Miscellaneous expenses 2,200

Record the transactions in a general journal form.

2. A company had a petty cash account with a stated balance of P300 on January 1, 2006. Petty cash expenses for the month of January were as follows: postage – P45, supplies used – P145, and parking fees – P30. At the end of January 2006, the auditor counted the money in the petty cash fund and found P50 cash on hand. What should be the journal entry regarding the petty cash fund at January 31, 2006?

3. Crunchy Co. established a P3,000 petty cash fund. You found the following items in the fund:

Cash and currency 1,683.80
Expense vouchers 829.80
Advance to salesman 200.00
IOU from employee 300.00

In the entry to replenish the fund, what amount should be debited to cash short or over account?

4. On January 1, 2006, Morris Co. established an imprest petty cash fund for P10,000 by writing a check drawn against its general checking account. On January 30, 2006, the fund contained the following:

Currencies and coins 3,000
Receipts for office supplies 4,000
Receipts for postage (still unused) 2,000
Receipts for transportation 600

On January 31, 2006, the company wrote a check to replenish the fund. What is the amount of replenishment under the imprest fund system?

5. The petty cash fund of ABC Co. showed the following:

Currencies and coins 4,200
Petty cash vouchers 2,000
A check drawn by the company to the order of petty cash
custodian representing her salary for the period 3,000
A sheet of paper with the names of several employees
together with contributions to Bantay Bata in an envelop 800

What is the amount of petty cash to be reported by ABC Co.?

6. The cash account of your client includes the following:
Petty cash fund (P400 in form of paid vouchers) 600
Undeposited receipt (including postdated check of P700) 12,700
Cash in bank (P400 still outstanding per bank statement) 23,400
Bond sinking - cash 18,000
IOU signed by officers and employees 1,500

What is the amount of cash to be reported for balance sheet presentation purposes?

7. Warbird Co. had the following cash balance at December 31, 2006:

Undeposited coins and currencies 35,000
Unrestricted demand deposits 1,450,000
Company check written and deducted from the demand deposit
but not scheduled to be mailed until January 2, 2007 180,000
Time deposit restricted for use (expected use in year 2007) 3,000,000

In exchange for a guarantee line of credit, Warbird has agreed to maintain a minimum balance of P150,000 in its unrestricted demand deposit account. How much should Warbird report as “Cash” in its December 31, 2006 balance sheet?

8. The Kitty Co. has the following bank accounts and items on hand:

Payroll account – Equitable Bank 2,500,000
Value Added Tax account – Equitable Bank 1,000,000
Checking account – Equal Bank ( 500,000)
Employee’s NSF check 100,000
Postage stamps 3,000
Traveler’s check 300,000
IOU from the company’s president 500,000
Customer check undeposited for lack of countersignature 400,000
Money order 700,000
Petty cash fund (expense receipts of P10,000) 50,000

What is the correct cash balance to be reported by Kitty Co.?

9. Leonardo Co. had the following balances at December 31, 2006:

Cash in bank – current account 4,000,000
Cash in bank – payroll account 1,500,000
Cash on hand 500,000
Treasury bills, purchased November 15, 2006 and
due February 15, 2007 2,000,000

The cash on hand includes a P200,000 customer check payable to Leonardo dated January 15, 2007. What should be reported as “Cash and Cash Equivalents” on December 31, 2006?

10.In preparing its bank reconciliation for the month of May, Jolly Co. has available the following information:

Balance per bank statement, May 31 18,025
Deposit in transit, May 31 3,125
Outstanding checks, May 31 2,875
Check erroneously deducted by bank from Jolly’s account, May 20 1,250
Bank service charges for May 150

What is the corrected cash balance at May 31?

11. On December 31, 2006, Tiger Co. had the following cash balances:

Cash in bank 5,000,000
Petty cash fund 50,000
Time deposit, one year, due March 1, 2007 1,000,000
Savings deposit 500,000

A check of P100,000 dated January 15, 2007 in payment of accounts payable was recorded and mailed on December 28, 2006. In the current assets section of the December 31, 2006 balance sheet, what amount should be reported as “Cash and Cash Equivalents”?

12. Pretty Co.’s bank statement for the month of May included the following information:

Bank service charge for May 1,300
Check deposited by Pretty during May was not collectible
and has been marked “NSF” by the bank and returned 4,000

In comparing the bank statement to its own cash records, Pretty found the following:

Deposits made but not yet recorded by the bank 13,240
Checks written and mailed but not yet recorded by the bank 9,870

All the deposits in transit and outstanding checks have been properly recorded in Pretty’s books.. Pretty also found a check for P3,500, payable to Pretty Co., that had not yet been deposited and had not been recorded in Pretty’s books. Pretty’s books show a bank account balance of P92,130 (before any adjustments or corrections). What is Pretty Co.’s correct cash balance at May 31?

13. In preparing its October 31, 2006 bank reconciliation, Apple Co. has made available the following information:

Balance per bank statement, October 31, 2006 180,500
Bank service charge for October 1,000
Deposit in transit 32,500
NSF checks 6,000
Outstanding checks 27,500

What is the cash balance per book?

14. Rocks Co. has the following partial bank reconciliation:

Balance per bank 50,000
Balance per books 51,240
Deposit in transit 10,000

Interest earned?
Checks outstanding 8,600
Bank service charge 20
NSF check 100

a.How much interest was earned?
b.Assuming a combination entry, when the adjusting journal entry is made to record the bank reconciliation, what amount of cash should be debited?

15. The Super Co.’s cash account ledger shows a balance o P1,652,000 at October 31, 2006. The bank statement, however, shows a balance of P2,090,000 at the same date. The only reconciling items consists of a bank service charge of P2,000, a large number of outstanding checks totaling P590,000 and a deposit in transit. What is the deposit in transit in October 31, 2006 bank reconciliation?

16. The following bank reconciliation is presented for the Queen Co. for the month of October 2006:
Balance per bank statement, October 31, 2006 18,040
Add: Deposit in transit 4,150
Total 22,190
Less: Outstanding checks 6,320
Balance per books, October 31, 2006 15,870
Data for the month of November 2006 follow:
Per Bank:
November deposits 26,100
November disbursements 22,420

All items that were outstanding as of October 31, 2006 cleared through the bank in November. In addition, P2,500 in checks were outstanding as of November 30, 2006. What is the balance of cash per books at November 30, 2006?

17. The reconciliation of Tableland Co.’s bank account at May 31, was as follows:

Balance per bank statement 10.500
Deposit in transit 1,500
Checks outstanding ( 150)
Correct cash balance 11,850
Balance per books 11,864
Bank service charge ( 14)
Correct cash balance 11,850
June data are as follows:

Bank Books
Checks recorded 11,500 11,800
Deposited recorded 8,100 9,000
Service charge recorded 12
Collections by bank (including interest of P100) 2,100
NSF check returned with June statement
(will be redeposited, assumed to be good) 50
Balances, June 30 9,138 9,050

What is the amount of outstanding checks at June 30?

18. The accountant of Luneta Co. prepared the following bank reconciliation dated June 30, 2006:
Balance per bank 980,000
Deposit in transit 40,000
Outstanding checks (140,000)
Balance per book 880,000
There were total deposits of P650,000 and charges for disbursements of P900,000 for July 2006 per bank statement. All reconciliation items as at June 30, 2006 cleared the bank on July 31, 2006. Checks outstanding amounted to P10,000 on July 31, 2006. How much was the cash disbursements per book in July 2006?

19. Colors Co. had the following bank reconciliation at May 31, 2006:
Balance per bank 465,000
Deposit in transit 100,000
Outstanding checks (125,000)
Balance per book 440,000
There were total deposits of P600,000 and charges for disbursements of P500,000 for June 2006 per bank statement. All reconciliation items at May 31, 2006 cleared through the bank in June. Outstanding checks at June 30, 2006 totaled P75,000 and deposits in transit amounted to P150,000. What is the amount of cash receipts per book in June 30, 2006?

20.The following bank reconciliation of Maverick Co. were provided at May 31, 2006:
Balance per bank statement 210,000
Deposit in transit 30,000
Checks outstanding ( 3,000)
Adjusted bank balance 237,000
Balance per books 237,280
Bank service charge ( 280)
Correct cash balance 237,000
June data are as follows:

Bank Books
Checks recorded 230,000 236,000
Deposited recorded 162,000 180,000
Service charge recorded 240
Collections by bank (including interest of P2,000) 42,000
NSF check returned with June 30 statement
(to be redeposited) 1,000
Balances, June 30 182,760 181,000

What is the cash in bank balance that should be shown on June 30, 2006

Accounting Review Materials - Theory

To be a Certified Public Accountant is not that easy. Their are lot of things to be considered. What i want to share is just a point one percent on becoming an accountant.

Being resourceful is one of the keys, having materials and stuff is an advantage. For we know that, Mostly we can not get these accounting review materials for free.

So here are few study materials i want to share with you. Being resourceful is obviously not enough. We must also study and practice solving as often as we could.

Study well and enjoy.


1.Initially, loans and receivables are measured at
a.Fair value c. Fair value plus transaction costs that are directly attributable to acquisition
b.Maturity value d. Maturity value plus transaction costs that are directly attributable to acquisition

2.Subsequent to initial recognition, loans and receivables are measured at
a. Cost c. Amortized cost using the straight line method
b. Fair value d. Amortized cost using the effective interest method

3.These are receivables consisting of open accounts with customers.
a. Trade receivables c. Accounts receivables
b. Nontrade receivables d. Notes receivables

4.Receivable balances should be valued at their face amount minus
a.Allowance for bad debts.
b.Allowance for sales discounts.
c.Allowance for sales returns.
d.Allowance for bad debts and other anticipated adjustments, which will reduce the receivables to estimated realizable value.

5.The allowance for doubtful receivables should be deducted from the related asset, the asset being shown on the balance sheet at
a.Gross, less allowance c. Gross, and the allowance as a current liability
b.Net, with the allowance indicated parenthetically d. Both “a” and “b”

6.Which of the following would be classified as trade receivable?
a.Cash dividends receivable c. Claims in litigation
b.Loans to employees d. Amounts due from customers

7.When individual customers’ accounts have credit balances of material amounts, these amounts
a.May be shown as “credit balances of customers’ accounts” in the current assets section.
b.May be deducted from the debit balance in other customers’ accounts on the balance sheet.
c.Must be reported (or disclosed) separately in the liability section of the balance sheet.
d. Should be omitted from the balance sheet.

8.Receivables denominated in a foreign currency should be translated at the
a.Exchange rate at the balance sheet date c. Exchange rate when the receivable arise
b.Average exchange rate during the year d. Exchange rate at the beginning of the year

9.Trade receivables are classified as current assets if they are reasonably expected to be collected
a.Within one year.
b.Within the normal operating cycle.
c.Within one year or within the operating cycle, whichever is shorter.
d.Within one year or within the operating cycle, whichever is longer.

10.In case of long-term installment receivables (real estate, installment sales) where a major portion of the receivable will collected beyond the normal operating cycle
a.The entire receivables are shown as current without disclosure of the amount not currently due.
b.The entire receivables are shown as non-current.
c.Only the portion currently due is shown as current and the balance as non-current.
d.The entire receivables are shown as current with disclosure of the amount not currently due.

11.On a balance sheet, what is the preferable presentation of notes or accounts receivable from officer, employees, or affiliated companies?
a.As trade notes and accounts receivable if they otherwise qualify as current assets.
b.As assets but separately from other receivables.
c.As offset to capital.
d.By means of notes or footnotes.

12.Which of the following statements is not valid in the determining balance sheet disclosure of accounts receivable?
a.Accounts receivables should be identified on the balance sheet as pledged, if they are used as security for loan even though the loan is shown on the same balance sheet as a liability.
b.That the portion of installment accounts receivable from customer, which falls due more than 12 months from the balance sheet date usually would be excluded from current assets.
c.Allowances may be deducted from the accounts receivable for discounts, returns, and adjustments to be made in the future on accounts shown in the current balance sheet.
d.Trade receivables re best shown separately from nontrade receivables where amounts of each ar material.

13.Accounts receivable are classified as current assets
a.Only if convertible into cash within 60 days or sooner.
b.Only if the allowance method is used to estimate the uncollectible accounts.
c.Only if convertible into cash within one year.
d.Whenever the accounts receivable arise from normal sales of merchandise to customers, regardless of the credit terms.

14.Uncollectible account expense
a.Should not occur if the credit department properly investigates prospective customers who wish to purchase merchandise on credit.
b.Is the amount of cash a business must pay each time a credit customer fails to pay his or her account.
c.Is the amount a business must pay to a collection agency to recover amounts on overdue accounts receivable.
d.Represents the loss in the value of accounts receivable which eventually turn out to be uncollectible.

15.The allowance method of recognizing bad debts expense can be applied in more than one way. What two conditions must be met before the allowance method can be used?
a.Bad debts must be expected and material.
b.Bad debts must be relevant and reliable.
c.Bad debts must be probable and estimable.
d.Bad debts must be consistent over time and the method used to estimate them must be consistently applied.

16.A company in its first year of operations and has never written off any accounts receivable as uncollectible. When the allowance method of recognizing bad debts expense is used, the entry to recognize the expense
a.Increases net income c. Has no effect on current assets
b.Decreases current assets d. Has no effect on net income

17.When the allowance method of recognizing bad debts expense is used, the entry to record the specific write-off of an uncollectible account would decrease
a.Net accounts receivable c. Net income
b.Allowance for bad debts d. Working capital

18.When the allowance method of recognizing bad debts expense is used, the entries at the time of collection of an account previously written off would
a.Decrease the allowance for bad debts account.
b.Increase net income.
c.Have no effect on the allowance for bad debts account.
d.Have no effect on net income.

19.In the preparation of an accounts receivable aging schedule at the end of the fiscal year, the accountant of a company, makes a series of computations, e.g. 6% of the total balance of accounts which are 30 days past due, added to 12% of the total balance of accounts which are 31 to 60 days past due, etc. Which of the following does the sum of the resulting amounts from the series of computations cited above best represents?
a.It represents the expenses for bad debts for the year.
b.It represents the amount to be added to the allowance for doubtful accounts in the financial statements at the end of the year.
c.It represents the desired credit balance of the allowance for doubtful accounts to be reported in the financial statements at the end of the year.
d.It represents the desired credit balance of the allowance for doubtful accounts to be reported in the financial statements at the beginning of the year.

20.If accounts receivable are pledged against borrowings, the amount of accounts receivable pledged should be
a.Excluded from the total receivables with disclosure.
b.Excluded from the total receivables without disclosure.
c.Included in total receivables with disclosure.
d.Included in total receivables without disclosure.

21.A form of receivables financing which consists of an absolute sale of accounts receivables.
a. Pledged of receivables c. Factoring of receivables
b. Assignment of receivables d. Discounting of receivables

22.It is a financing arrangement whereby one party formally transfer its rights to accounts receivable to another party in consideration for a loan.
a. Pledge c. Factoring
b. Assignment d. Discounting

23.It is a financing arrangement that is usually done on a “without recourse, notification basis”.
a. Pledge c. Factoring
b. Assignment d. Discounting

24.The equity of assignor in assigned accounts is equal to
a.Assigned accounts receivable c. Assigned accounts receivable minus the bank loan balance
b.Bank loan balance d. Bank loan balance minus the assigned accounts receivable

25.The account Equity in Assigned Account Receivable should be classified as
a. An asset c. A liability
b. A contra asset d. A contra liability

26.When accounts receivable are factored without recourse, what account does the transferor credit?
a. Accounts receivable assigned c. Liability
b. Sales d. Accounts receivable

27.The factor’s holdback arising from factoring of accounts receivable is shown as
a.Current assets separately c. Current assets as part of trade accounts receivable
b.Noncurrent assets separately d. Deduction from accounts receivable

28.If a note receivable is discounted with recourse
a.A contingent liability does not exist.
b.Note receivable discounted should be credited.
c.Liability for note receivable discounted should be credited.
d.Notes receivable must be credited.

29.If a note receivable is discounted without recourse
a.The contingent liability may be disclosed in either a contra account to note receivable or in a note to the financial statements.
b.Liability for note receivable discounted should be credited.
c.Note receivable should be credited.
d.The transaction should be accounted for as a borrowing as opposed to a sale


1.Inventory is defined as those goods held for sale in the ordinary course of business, in the process of production for such sale, and to be consumed in the production of goods or services available for sale. Which item would not be properly classified as inventory?
a.Manufacturing supplies c. Office supplies
b.Raw materials d. Work in process

2.Inventories do not encompass
a.Merchandise purchased by a retailer and held for resale.
b.Land and other property held for resale by subdivision company or real estate developer.
c.Finished goods produced.
d.Abnormal amounts of wasted materials, labor and other production costs.

3.Inventories should be measured at
a.Cost c. Lower of cost or market
b.Net realizable value d. Lower of cost or net realizable value

4.Net realizable value is
a.Current replacement cost
b.Estimated selling price
c.Estimated selling price less estimated cost to complete
d.Estimated selling price less estimated cost to complete and estimated cost to sell

5.The cost of inventories should comprise all of the following costs, except
a.Cost of purchase.
b.Cost of conversion.
c.Other costs incurred in bringing the inventories to their present location and condition.
d.Selling cost.

6.The cost of purchase of inventories does not include
a.Purchase price.
b.Import duties and taxes.
c.Freight, handling and other costs directly attributable to the acquisition of goods.
d.Trade discounts, rebates and other similar items.

7.The cost of conversion does not include
a.Direct labor c. Variable production overhead
b.Fixed production overhead d. Administrative overhead

8.The cost of inventory of a service provider consist primarily of
a.Labor and other cost of personnel directly engaged in providing the service, including supervising personnel and attributable overhead.
b.Labor and other cost relating to sales and general administrative personnel.
c.Cost of materials used, direct labor incurred and attributable overhead.
d.Operating supplies.

9.When determining the unit cost of an inventory item, which of the following should not be included?
a.Interest on loan obtained to purchase the item.
b.Commission paid when purchased.
c.Labor cost of the item when manufactured.
d.Depreciation of plant equipment used in manufacturing the item.

10.The Purchase Discount Taken account may appear in the accounting records if which method is used to account for purchase discount?
a. Net price method c. Allowance method
b. Gross price method d. Sales price method

11.What is the primary purpose of inventory accounting?
a.To minimize income tax. c. To parallel the physical flow of units of merchandise.
b.To maximize reported income. d. To attain the fairest matching of cost against revenue.

12.In a perpetual inventory system, two entries are normally made to record each sales transaction. The purpose of these entries is best described as follows:
a.One entry recognizes the sales revenue and the other recognizes the cost of goods sold.
b.One entry recognized the purchase of merchandise and the other records the sale.
c.One entry records the cost of goods sold and the other reduces the balance in the inventory account.
d.One entry updates the subsidiary ledger and the other updates the general ledger.

13.As a result of taking an annual physical inventory, it is usually necessary in a perpetual inventory system to make an entry
a.Reducing assets and increasing the cost of goods sold.
b.Reducing assets ad increasing liabilities.
c.Reducing the cost of goods sold.
d.None of the above (a physical inventory usually does not indicate the need for any entries in the accounting records).

14.Which of the following items would most likely be accounted for under a perpetual inventory system?
a. Auto parts c. Hardware
b. Grocery items d. Jewelry

15. An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory is
a. FIFO c. Weighted average
b. Specific identification d. None of the above

16.Cost of goods sold is the same under a periodic system as under a perpetual system when an enterprise uses
a. FIFO c. Weighted average
b. Specific identification d. None of the above

17. The cost of goods available for sale during the period divided by the total units available for sale during the period equals an average units cost multiplied by the units on hand equals cost of ending inventory
a. Weighted average periodic c. Specific identification
b. Weighted average perpetual d. Standard cost

18. This cost method is appropriate for inventories that are segregated for a specific project and inventories that are not ordinarily interchangeable.
a. Specific identification c. Relative sales price
b. Standard cost d. Net realizable value

19.The specific identification method is more appropriate than a flow assumption
a.For a large inventory of identical low-priced items.
b.If each item in the inventory is unique.
c.If purchase costs are rising.
d.If purchase costs are falling.

20.Which of the following is not affected by the inventory valuation method used by a business?
a.Amounts owed for income taxes. c. Amounts paid to acquire merchandise.
b.Cost of merchandise sold. d. Net income of the business.

21. When agricultural crops have been harvested or mineral ores have been extracted and a sale is assured under a forward contract or government guarantee, such inventories are measured at
a. Net realizable value c. Standard cost
b. Cost d. Relative sales price

22.Agricultural produce shall be measured at
a. Fair value c. Fair value less estimated point of sale costs
b. Net realizable value d. Fair value less estimated point of sale costs at the point of harvest.

23.Inventories of broker-traders are measured at
a. Standard cost c. Net realizable value
b. FIFO d. Fair value less cost to sell

24.FOB destination means
a.The freight charge is paid by the seller but chargeable to the buyer.
b.The freight charge is paid by the buyer.
c.The ownership of the goods is transferred upon receipt of the goods by the buyer at the point of destination and the seller is the owner of the goods in transit.
d.The ownership of the goods is transferred upon shipment of the goods, and the buyer is the owner of the goods in transit.

25.Theoretically, freight costs incurred in the transfer of consigned goods from the consignor to the consignee should be considered
a.Expense by the consignor c. Inventoriable by the consignee
b.Expense by the consignee d. Inventoriable by the consignor

26.Theoretically, which of the following costs should be considered inventoriable?

Freight Warehousing
a.No No
b.No Yes
c.Yes No
d.Yes yes

27. The weighted and simple average method of inventory are applicable to which of the following system?

Periodic Perpetual
a.Yes Yes
b.Yes No
c.No Yes
d.No No

28. The moving average method of inventory cost flow is applicable to which of the following inventory system?

Periodic Perpetual
a.Yes Yes
b.Yes No
c.No Yes
d.No No

29. The net method of recording purchases the theoretically accepted method because the cost measured represents the cash equivalent price of the inventory the one used by most companies
c.violates the matching principle more convenient than the gross method from a bookkeeping standpoint

30. The retail inventory method is characterized by
a.the recording of sales at cost
b.the recording of purchases at selling price
c.the reporting of year-end inventory at retail in the financial statements
d.the recording of markups at retail and markdowns at cost

31. A major advantage of the retail inventory method is that it
a.permits companies which use it to avoid taking annual physical inventory more accurate statement of inventory costs than other methods
c.hides costs from customers and employees

d.provides a method for inventory control and facilitates determination of the periodic inventory for certain types of companies

32. It is the increase in sales price above the original sales price minus markup cancellation
a.additional markup c. markdown markup d. mark on

33. It is the decrease in sales price below the original sales price
a.markup c. markdown
b.mark on d. net markdown

34. The retail inventory method would include which of the following in the calculation of the goods available for sale at both cost and retail?
a.freight in c. markup
b.purchase return d. markdown

35. When the conventional retail inventory method is used, markdowns are commonly ignored in the computation of the cost to retail ratio because
a.there may be no markdowns in a given year
b.this tends to give better approximation of the lower of cost or market
c.markups are also ignored
d.this tends to result in the showing of a normal profit margin in a period when no markdown goods have been sold

36. With regards to the retail inventory method, which of the following is the most accurate statement?
a.generally, accountants ignore net markups and net markdowns in computing the cost-price-percentage
b.generally, accountants include both net markups and net markdowns in computing cost-price-percentage
c.this method results in a lower ending inventory cost if net markups are included but net markdowns are excluded in computing the cost-price-percentage is not applicable to LIFO costing

37. What is the treatment of inventory spoilage under the retail method?
a.Ignored c. Deducted from cost of goods available for sale
b.deducted from sales d. Deducted from goods available for sale at retail

38. The use of the gross profit method assumes
a.the amount of gross profit is the same as in prior years
b.sales and cost of goods sold have not changed from previous years
c.inventory values have not increased from previous years
d.the relationship between selling price and cost of goods sold is similar to prior years

39. Which statement is true about the gross profit method? may not be used to estimate inventories for annual statements may not be used to estimate inventories for interim statements may not be used by insurers of inventory may not be used for internal estimates of inventory

40. Accruing net losses on firm purchase commitments for inventory is an example of the accounting concept of
a.periodicity c. realization
b.materiality d. conservatism

41. Losses which are expected to arise from firm and uncancelable commitments for the future purchase of inventory items should, if material, be
a.recognized in the accounts by debiting loss on purchase commitments and crediting estimated liability for loss on purchase commitments
b.disclosed only in the notes
d.charged to retained earnings


1.The account cash on the balance sheet includes currency or cash items on hand as well as peso or foreign currency deposits in bank which are
a.Available for purchase of merchandise.
b.Unrestricted and immediately available for use in non-current operations.
c.Restricted for payment of bonds.
d.Unrestricted and immediately available for use in current operations.

2.As contemplated in accounting, cash includes
a.Money only.
b.Money and negotiable instruments.
c.Any negotiable instruments.
d.Money and any negotiable instruments that is payable in money and acceptable by bank for deposit and immediate credit.

3.Cash equivalents are
a.Short-term and highly liquid investments that are readily convertible into cash.
b.Short-term and highly liquid investments that are readily convertible into cash within remaining maturity of three months.
c.Short-term and highly liquid investments that are readily convertible into cash and acquired three months before maturity.
d.Short-term and highly liquid marketable equity securities.

4. Which of the following is considered cash?
a. Certificates of deposits c. Money market savings certificates
b.Money market checking accounts d. Postdated checks

5.If the balance sheet is December 31, 2005, which of the following cannot qualify as cash equivalent?
a.Three-month Central Bank treasury bill due March 15, 2006.
b.Six-month Central Bank treasury note due March 15, 2006.
c.Three-year Central Bank treasury note purchased on December 31, 2005 and due on March 15, 2006.
d.One-month money market placement.

6.Cash in foreign currency is value at
a. Face value c. Current exchange rate reduced by allowance for expected decline in peso
b. Current exchange rate d. Estimated realizable value

7.If material, deposit in foreign countries which are subject to foreign exchange restriction should be shown separately as
a.Current asset with no disclosure of the restriction.
b.Non-current asset with no disclosure of the restriction.
c.Current assets with disclosure of the restriction.
d.Non-current asset with disclosure of the restriction.

8.Bank overdraft
a.Is a debit balance in a cash in bank account.
b.Is offset against demand deposit account in another bank.
c.Which cannot be offset is classified as current liability.
d.Which cannot be offset is classified as non-current liability.

5.Which of the following statements is false?
a.Certified check is a liability of the bank certifying it.
b.Certified check will be accepted by many persons who would not otherwise accept a personal check.
c.Certified check is one drawn by the bank upon itself.
d.Certified check should not be included in the outstanding checks.

6.A compensating balance
a.Must be included in cash and cash equivalent.
b.Which is legally restricted and related to a long-term loan is classified as current asset.
c.Which is legally restricted and related to a short-term loan is classified separately as current asset.
d.Which is not legally restricted as to withdrawal is classified separately as current asset.

7.Which of the following statements concerning compensating balance agreements is not true?
a.They reduce the amount of cash available to the borrower.
b.They always involve legal restrictions on the cash received.
c.They increase the effective interest rate to the borrower.
d.They must be disclosed in the financial statements footnotes.

8.If the deposit is legally restricted as to withdrawal, the compensating balance related to a long-term loan is shown as
a. Cash c. Long-term investment
b. Other assets d. Current liability

9.Cash on hand and in bank on the balance sheet should exclude
a.Checks drawn before the balance sheet date but held for later delivery to creditors.
b.Time deposits.
c.U.S. dollars deposited in a foreign currency depository unit account.
d.Cash reserved for the acquisition of fixed assets.

10.It is the misappropriation of collection from one customer which is covered when collection is made from another customer.
a. Lapping c. Kiting
b. Window dressing d. Delayed recording

11.The payment of accounts payable made subsequent to the close of the accounting period are recorded as if they were made at the end of the current period.
a. Window dressing c. Kiting
b. Lapping d. Secret reserve

12.Petty cash fund is
a.Separately classified as current asset.
b.Money kept on hand for making minor disbursements of coin and currency rather than writing checks.
c.Set aside for the payment of payroll.
d.Restricted cash.

13.The internal control feature that is specific to petty cash is
a.Separation of duties c. Proper authorization
b.Assignment of responsibility d. Imprest system

14.If petty cashier pays P200 for a transportation out of an imprest petty cash, the journal entry should include
a. Credit to cash for P200 c. Debit to transportation and credit to petty cash for P200
b. Credit to petty cash for P200 d. No journal entry is made

15.The objective of petty cash system is to
a.Facilitate office payment of small miscellaneous items.
b.Cash checks for employees.
c.Account for cash sales.
d.Account for all cash receipts and disbursements.

16.What is the major purpose of an imprest petty cash fund?
a.To effectively plan cash inflows and outflows c. To determine the honesty of petty cashier
b.To ease the payment of cash to vendors d. To effectively control cash disbursements

17.The petty cash account is debited
a.Only when the fund is established.
b.When the fund is established and every time it is replenished.
c.When the fund is established and when the size of the fund is increased.
d. When the fund is established and when the size of the fund is decreased.

18.Usually, if the petty cash fund is not reimbursed just prior to year-end and an appropriate adjusting entry is not made
a.A complete audit is necessary.
b.The petty cash account should be returned to the cashier.
c.Expenses will be overstated and cash will be understated.
d.Expenses will be understated and cash will be overstated.

19.Which statement is true?
a.It would be impossible to have cash shortage or overage if employees were paid in cash rather than by check.
b.The entry to account for daily sales for which a small amount of cash shortage existed would include a debit to cash short or over account.
c.If the cash short or over account has a debit balance at the end of the period, it must de debited to an expense account.
d.A credit balance in cash short or over account should be considered a liability because short changed customer will demand return of this amount.

20.The following statements relate to cash. Which is false?
a.Depositing all receipts intact at the bank and making all cash disbursements by check are important cash controls under an imprest system.
b.Neither the book balance nor the bank balance of cash usually represents the cash balance shown on the balance sheet.
c.A bank reconciliation is the statement sent monthly by a bank to a depositor that list all deposits, checks paid and other credits and charges to the depositor’s account for the month.
d.All of the above.

21.A bank reconciliation is
a.A formal financial statement that lists all of the bank account balances of an enterprise.
b.A merger of two banks that previously were competitors.
c.A statement sent by the bank to depositor on a monthly basis.
d.A schedule that accounts for the differences between an enterprise’s cash balance as shown on its bank statement and the cash balance shown in its general ledger.

22.Bank reconciliation are usually prepared on a monthly basis upon receipt of the bank statement to identify either bank errors or items that need to be adjusted on the depositor’s books. The adjustment should be made for
a.Deposits in transit and outstanding checks.
b.All items except deposits in transit, outstanding checks, and bank errors.
c.Deposits in transit, outstanding checks, and bank errors.
d.All items except bank errors, NSF checks, outstanding checks, and deposits in transit.

23.The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is
a. Outstanding check c. A bank error
b. Deposit in transit d. Banks service charge

24.Which of the following items must be deducted from bank statement balance in preparing a bank reconciliation statements which end with adjusted cash balance?
a. Bank service charge c. Check returned marked NSF
b. Outstanding checks d. Deposit in transit

25.If the balance shown on a company’s bank statement is less than the correct cash balance and neither the company nor the bank has made any errors, there must be
a.Outstanding checks c. Deposits credited by the bank but not yet recorded by the company.
b.Deposit in transit d. Bank charges not yet recorded by the company.

26.If the cash balance shown on a company’s accounting records is less than the correct cash balance and neither the company nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the company.
b.Outstanding checks.
c.Deposit in transit.
d.Bank charges net yet recorded by the company.

27.Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation which ends with adjusted cash balance?
a.Note receivable collected by bank in favor of the depositor and credited to the account of the depositor.
b. NSF customer check.
c. Bank service charge.
d. Erroneous bank credit.

32. Which statement is true?
a.Bank service charge will cause the cash balance per ledger to be higher than that reported by the bank, all other things being equal.
b.Outstanding checks will cause the cash balance per ledger to be greater than the balance reported by the bank, all other things being equal.
c.An error made by the bank by charging an amount to the depositor’s account requires a correcting entry in the depositor’s own records.
d.The cash amount shown in the balance sheet must be the balance reported in the bank statement.

33.What is the adjusting entry for a customer NSF check?
a.Debit cash and credit accounts receivable c. Debit service charge and credit cash
b.Debit accounts receivable and credit cash d. No adjustment in necessary

34.A proof of cash
a.Is a physical count of currencies on hand on balance sheet date.
b.Is a formal statement showing the total cash receipts during the year.
c.Is a four-column bank reconciliation showing reconciliation of cash balances per book and per bank at the beginning and end of the current month and reconciliation of cash receipts and cash disbursements of the bank and depositor during the current month.
d.Is a summary of cash receipts and cash payments.

35.A proof of cash would be useful for
a.Discovering cash receipts that have not been recorded in the journal.
b.Discovering time lag in making deposits.
c.Discovering cash receipts that have been recorded but have not been deposited.
d.Discovering an inadequate separation of incompatible duties of employees.


1.These are assets held by an enterprise for the accretion of wealth, for capital appreciation or for other benefits accruing to the investing enterprise.
a. Investments c. Property, plant and equipment
b. Inventories d. Current assets

2.It is any contract that gives rise to both a financial asset of one enterprise and a financial liability of another enterprise.
a. Financial instrument c. Debt instrument
b. Equity instrument d. Derivative instrument

3.It is any contract that evidences residual interest in the assets of an enterprise after deducting all of its liabilities.
a. Equity instrument c. Loan and receivable
b. Debt instrument d. Financial asset with determinable fair value

4.A financial asset is any asset that is (choose the incorrect one)
b.A contractual right to receive cash or another financial asset from another enterprise.
c.A contractual right to exchange financial instruments with another enterprise under conditions that are potentially unfavorable.
d.An equity instrument of another enterprise.

5.The financial assets held as investment include all of the following, except
a. Trading securities c. Held to maturity securities
b. Available for sale securities d. Investment properties

6.These investments are known as “financial assets at fair value through profit or loss”.
a. Trading securities c. Held to maturity securities
b. Available for sale securities d. Non-marketable equity securities

7.Which type of securities are purchased with the intent of selling them in the near future?
a. Marketable equity securities c. Trading securities
b. Available for sale securities d. Held to maturity securities

8.Which type of securities are purchased with the intent and ability of holding them until the date of maturity?
a. Marketable equity securities c. Trading securities
b. Available for sale securities d. Held to maturity securities

9.Which type of securities are not classified either as held to maturity or trading securities?
a. Marketable equity securities c. Trading securities
b. Available for sale securities d. Held to maturity securities

10.These are created by the enterprise by providing money, goods or services directly to debtor, other than those that are originated with the intent to be sold immediately or in the short-term.
a. Held to maturity investments c. Advances
b. Loans and receivables d. Long-term prepayments

11.These include fees and commissions paid to agents and brokers, levies by regulatory authorities, transfer taxes and duties that are directly attributable to the acquisition of financial assets.
a. Transaction costs c. Incremental costs
b. Acquisition costs d. Borrowing costs

12.Transaction costs directly attributable to the acquisition of trading securities shall be
a. Capitalized as cost of the investment c. Charged to retained earnings
b. Expensed immediately d. Treated as component of equity

13.Which statement is incorrect concerning subsequent measurement of financial assets?
a. Trading securities are measured at fair value.
b.Available for sale securities are measured at fair value.
c.Held to maturity securities are measured at amortized cost using the straight line method.
d.Non-marketable equity securities are measured at cost.

14. Which of the following is the correct statement?
a.Investments in SAS and TS are classified separately in a balance sheet.
b.Investments in SAS include only equity securities.
c.Investments in TS include only debt securities.
d.Increases in the market value of TS and SAS investments always cause the valuation account to decrease.

15. The purpose of the mark-to-market adjustment for securities classified as “available for sale” is?
a.To adjust the valuation of a company’s investment to current market value.
b.To recognize the proper amount of gain or loss on fluctuations in the market value of these securities in the current period income statement.
c.To adjust a corporation’s share capital account to reflect the current market value of the outstanding share capital.
d.Both A and B are correct.

16. Which of the following is the correct statements concerning accounting for investments in TS and SAS?
a.The net effect of all market value changes in investments in TS is reported whereas only realized changes are reported for SAS.
b.Unrealized market value changes for both are reported in earnings.
c.Both are reported at market value.
d.The total effect on income for a period for both types of investments equals dividends received plus interest accrued.

17. Investments in marketable equity and debt securities
a.Only include investments in the capital stock of publicly-traded corporations.
b.May be reported in the balance sheet at market values lower than cost, but never at the values in excess of original cost.
c.Are adjusted to current market value at the end of each accounting period.
d.Are carried in the accounting records at current market values, and therefore do not generate gains or losses when sold at market values.

18.All of the following securities are valued at amortized cost, except
a.Held to maturity securities
b.Loans and receivables
c.Financial assets whose fair value cannot be reliably measured.
d.Available for sale securities.

19. When the market value of a company’s portfolio of available for sale securities is lower than its cost, the difference should be?
a.Accounted for as a liability.
b.Disclosed and described in a note to the financial statements but not accounted for.
c.Accounted for as a valuation allowance deducted from the asset to which it relates.
d.Accounted for as an addition in the shareholder’s equity section of the balance sheet.

20. The test of marketability must be met before investments in equity securities can be properly classified as?
a.Equity investments c. Trading securities or available for sale securities
b.Treasury stock d. Consolidated securities

21.It is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable and willing parties in an arm’s length transaction.
a. Present value c. Book value
b. Fair value d. Net realizable value

22. Short-term investments in marketable debt securities should be valued at fair value.
a.Unless their market value is substantially and permanently below their original cost.
b.Unless their maturity date is beyond one-year or one operating cycle, whichever is longer.
c.Unless they are in a portfolio with short-term equity securities.
d.In all cases.

23. Which of the following statements is true?
a.The fair value method of accounting is the most appropriate method of accounting for short-term investments in marketable equity securities.
b.All bond investments are accounted for by the amortized cost method.
c.The carrying value of an investment in TS or SAS is limited to market value at the date of acquisition.
d.The realized gain or loss on short-term investments in an equity security is usually equal to the difference between its costs and its sale price.

24. Icarus Corporation purchased 25% of the outstanding ordinary shares of ET Corporation yet it obtained only a very minor degree of influence over ET’s affairs. Icaurs plans to hold the shares indefinitely. ET’s ordinary share is traded on the Philippine Stock Exchange, therefore, Incarus should account for its investment using which of the following methods.
a.Fair value method
d.It has a choice from among two of the methods in this list of answers.

25. Which of the following statements is false?
a.A debit valuation allowance balance for an investment in SAS implies a corresponding equity account with a credit balance of the same amount.
b.Unrealized holding gains on investments in SAS may be recognized as a direct increase to equity.
c.Investments in TS may be classified as current or long-term.
d.Investments in SAS may be classified as current or long-term.

26.Unrealized gains and losses on trading securities are
b.Included in the determination of income.
c.Included in the stockholders’ equity.
d.Included in income for unrealized losses and included in equity for unrealized gains.

27. An Unrealized Holding Gain (or Loss) on Investments classified as “available for sale” securities?
a.Is reported in the asset section of the balance sheet, as an adjustment to the carrying value of the marketable securities.
b.Is reported in the equity section of the balance sheet, as either an increase or decrease in total equity.
c.Appears in the current period income statement, combined with realized gains and losses from sale of securities.
d.Both B and C are correct (a one-time decision)

28. For investments in SAS, which of the following market value changes are recognized in earnings?
a.Realized losses only
b.Realized gains and losses only
c.Realized gains and unrealized losses only
d.Unrealized and realized gains and losses.