MTE Q1 Flashcards
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 againat current assets
d. Showing current liabilities in the order of liquidation
c. Offsetting current liabilities againat current assets
Which is not a characteristic of a liability?
a. Present obligation
b. Arises from past event
c. Results in a transfer of economic resource
d. Liquidation is reasonably expected to require use of current asset
d. Liquidation is reasonably expected to require use of current asset
Which does not meet the definition of a liability?
a. The signing of an employment contract at fixed salary
b. An obligation to provide goods or services in the future
c. A note payable with no speciried maturity date
d. An obligation that is estimated in amount
a. The signing of an employment contract at fixed salary
The most relevant measurement of liabilities at initial recognition should always reflect
a. The expectation of the management
b. Historical cost
c. The credit standing of the entity
d. The single most likely minimum possible amount
c. The credit standing of the entity
What is the relationship between and liability?
a. Present value is used to measure certain liabilities
b. Present value is not used to measure liabilities
c. Present value is used to measure all liabilities
d. Present value is used to measure current liabilities
a. Present value is used to measure certain liabilities
If a long-term debt becomes callable due to the violation of a loan covenant
a. The debt may continue to be classified as noncurrent
b. The debt should be reclassified as current
c. Cash must be reserved to pay the debt
d. Retained earnings must be restricted
b. The debt should be reclassified as current
Classifying liabilities as either current or noncurrent helps creditors assess
a. Profitability
b. The relative risk of an entity’s liabilities
c. The degree of an entity’s liabilities
d. The amount of an entity’s liabilities
b. The relative risk of an entity’s liabilities
An entity received an advance payment for special order goods that are to be manufactured and delivered within six months. How should the advance payment be reported?
a. Deferred charge
b. Contra asset account
c. Current liability
d. Noncurrent liability
c. Current liability
The most common type of liability is
a. One that comes into existence due to a loss contingency
b. One that must be estimated
c. One that comes into existence due to a gain contingency
d. One to be paid in cash and for which the amount and timing are known
d. One to be paid in cash and for which the amount and timing are known
What is the classification of debt callable by the creditor?
a. Noncurrent liability
b. Current liability
c. Current liability if the creditor intends to call the debt within one year
d. Current liability if it is probable that the creditor will call the debt within one year
b. Current liability
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 a 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 20% 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. 196.548
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
An analysis of Royina G. Company’s liabilities disclosed the following:
- Accounts payable, after deducting debit balances in suppliers’ accounts amounting to P22,500 (accounts payable included non-trade liabilities of P32,500) - 105,000
- Accrued expenses - 15,000
- Credit balances of customers’ accounts - 13,500
- Stock dividends payable - 70,000
- Claims for increase in wages and allowances by employees of the company, covered in a pending lawsuit - 125,000
- Estimated liabilities for premiums - 60,000
How much should be presented as total current liabilities in the statement of financial position?
a. 6,000
b. 168,500
c. 183,500
d. 216,000
d. 216,000
