INTERMEDIATE ACCOUNTING PROBLEMS (QUIZ CHAP 1-6) Flashcards
On January 1, 2024, Shaira A. Company issued 9% bonds in the face amount if P5,000,000 which mature on January 1, 2034. The bonds were issued for P4,695,000 to yield 10%.
Interest is payable annually on December 31. The entity used the interest method of amortizing bond discount.
What amount should be reported as interest expense for 2024?
a. 450,000
b. 469,500
c. 422,550
d. 500,000
On December 31, 2024, what is the carrying amount of the bonds Payable?
a. 4,695,000
b. 4,714,500
c. 4,704,750
d. 5,000,000
- B. 469,500
- B. 4,714,500
On January 1, 2024, Chloe SJ. Company issued 9% bonds in face amount of P4,000,000 which mature on January 1, 2034.
The bonds were issued for 3,756,000 to yield 10%, resulting in bond discount of P244,000.
The entity used the interest method of amortizing bond discount. Interest is payable annually on December 31.
On December 31, 2024, what amount should be reported as discount bonds payable?
a. 228,400
b. 208,000
c. 206,440
d. 204,000
What is the carrying amount of bonds payable on December 31, 2024?
a. 3,756,000
b. 4,000,000
c. 3,771,600
d. 3740,400
- A. 228,400
- C. 3,771,600
On December 31, 2024, Kween Y. Company reported bonds payable with carrying amount of P7,360,000 and accrued interest payable of P200,000.
The bonds are retired on December 31, 2024 for P8,160,000 excluding accrued interest.
What amount should be reported as gain or loss on extinguishment of bonds payable?
a. 800,000 gain
b. 800,000 loss
c. 600,000 gain
d. 600,000 loss
b. 800,000 loss
On November 25, 2023, an explosion occurred at a Angelica Y. Company plant after supporting the country of Japan causing extensive property damage to area buildings. By March 10, 2024, claims had been asserted against the entity.
The management and counsel concluded that it is probable that the entity would be responsible for damages, and that P3,500,000 is a reasonable estimate of the liability. Angelica Y.’s P10,000,000 comprehensive public liability has a
P500,000 deductible clause. The financial statements were issued on March 31, 2024.
What amount of loss from lawsuit should be reported for 2023?
a. 3,500,000
b. 3,000,000
c. 500,000
d. 0
What amount of liability from lawsuit should be reported on December 31, 2023?
a. 3,500,000
b. 3,000,000
c. 500,000
d. 0
- c. 500,000
- a. 3,500,000
Jude B. Company provided the following selected transactions related to contingencies. The fiscal year ends on December 31, 2024. Financial statements are issued on April 1, 2025.
In December 2024, Jude B. became aware of a flaw in a product from a restaurant in Cebu City that poses a potential risk of injury. As a result, a product recall appears inevitable. This move would likely cost the entity P1,500,000.
In July 2024, the City of Cebu filed suit against Jude B. asking civil penalties and injunctive relief for violations of anti-standing on waiter law. Jude B. reached a settlement with the city government to pay P4,200,000 in penalties on February 2025.
Jude B. is the plaintiff in a P4,000,000 lawsuit filed against a waiter for calling him “Sir”.
The lawsuit is in final appeal and attorney advised that it is virtually probable that Jude B. will be awarded P3,000,000.
What amount should be reported as accrued liability on December 31, 2024?
a. 1,500,000
b. 4,200,000
c. 5,700,000
d. 0
What amount should be reported as gain from lawsuit in 2024?
a. 4,000,000
b. 3,000,000
c. 3,500,000
d. 0
- c. 5,700,000
- d. 0
During 2024, Zamora filed suit against Castro “Boy Dila” seeking damages for using a water gun in a rider while sticking his tongue out during Wattah event. On December 31, 2024, Zamora’s legal counsel believed that it was probable that Zamora would be successful against Castro for an estimated amount of P1,500,000.
On March 1, 2025, Zamora was awarded P1,000,000 and received full payment therof. The 2024 financial statements were issued February 1, 2025.
How should the award be reported on December 31, 2024?
a. As a receivable and revenue of P1,000,000
b. As a receivable and deferred revenue of P1,000,000
c. As a disclosure of a contingent asset of P1,000,000
d. As a disclosure of a contingent asset of P1,500,000
d. As a disclosure of a contingent asset of P1,500,000
Robin P. Company has an incentive compensation plan under which a branch manager received 20% of the branch income after deduction of the bonus but before deduction of income tax.
Branch income for the current year before the bonus and income tax was P1,650,000. The tax rate is 30%.
What amount should be reported as bonus for the current year?
a. 126,000
b. 150,000
C. 165,000
d. 275,000
d. 275,000
The bonus agreement of Carlos Y. Company provides 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 as bonus.
What amount was reported as income before bonus and tax?
a. 4,280,000
b. 4,000,000
c. 2,800,000
d. 3,720,000
a. 4,280,000
Diwata P. Company has an agreement to pay its sales manager a bonus of 10% of the income after bonus and after tax.
The income for the current year before bonus and tax is P5,250,000.
The income tax rate is 30% of income after bonus.
What amount should be reported as bonus of the sales manager for the current year?
a. 262,500
b. 343,458
c. 177,536
d. 186,548
b. 343,458
Harry R. Corporation’s current liabilities at December 31, 2024
totaled P1,500,000 before any necessary year-end adjustment relating to the following transactions: On December 23, 2024, a vendor authorized Harry R. to return for
full credit, merchandise shipped and billed at P45,000 on December 9, 2024. Harry R. shipped the returned items on December 29, 2024. A P45,000 credit memo was received and recorded by Harry R. on January 2, 2024.
During December 2024, Harry R. received P75,000 from AR dela Serna, an assistant, as an advance payment for vacation trip. From this transaction, Harry R. has a P75,000 credit balance in its accounts receivable from AR dela Serna at December 31, 2024.
What amount should Harry R report as current liabilities in its December 31, 2024?
a. 1,455,000
b. 1,470,000
c. 1,530,000
d. 1,575,000
c. 1,530,000
Alice G. Company sold electrical goods covered by a one-year warranty for any defects. Of the sales of P70,000,000 for the year, the entity estimated that 3% will have major defect, 5% will have minor defect and 92% will have no defect.
The cost of repairs would be P5,000,000 if all the products sold had major defect and P3,000,000 if all had minor defect.
What amount should be recognized as a warranty liability?
a. 8,000,000
b 5,600,000
c. 300,000
d. 190,000
c. 300,000
