Div OS (4400000)

Div PS (1600000)
11170000

Conceptual Framework
QUIZ #1
Multiple Choice
Identify the choice that best completes the statement or answers the question.

1. The financial statements that are prepared for the entity are separate and distinct from the owners according
to the

a. Going concern principle

b. Matching principle

c. Economic entity assumption

d. Accounting period assumption

2. It is a “global phenomenon” intended to bring about transparency and a higher degree of comparability in
financial

reporting, both of which will benefit the investors and are essential to achieve the goal of one uniform and
globally

accepted financial reporting standards.

a. IFRS

b. Borderless accounting

c. World trade

d. Information technology

3. The purpose of the International Financial Reporting Standards is to

a. Issue enforceable standards which regulate the financial accounting and reporting of

multinational entities.

b. Develop a uniform currency in which the financial transactions of entities throughout the

world would be measured.

c. Promote uniform accounting standards among countries of the world.

d. Arbitrate accounting disputes between auditors and international entities.

4. Financial accounting is the area of accounting that emphasizes reporting to

a. Management

b. Regulatory bodies

c. Internal auditors

d. Creditors and investors

5. The theory of accounting which best describes the accounting equation expressed “asset = liabilities +
equity” is

the
a. Entity theory

b. Fund theory

c. Proprietary theory

d. Residual equity theory

6. What is the law regulating the practice of accountancy in th e Philippines?

a. R.A. No. 9298

b. R.A. No. 9198

c. R.A. No. 9928

d. R.A. No. 9892

7. The primary focus of financial accounting has been on meeting the needs of which of the following groups?

a. Managers of an entity

b. Present and potential creditors of an entity

c. National and local taxing authorities

d. Independent auditors

8. Many accountants are employed in entities in various capacity as accounting staff, chief accountant or
controller.

These accountants are said to be engaged in

a. Public accounting

b. Private accounting

c. Government accounting

d. Financial accounting

9. The conceptual framework specifically mentions two underlying assumptions, namely

a. Accrual and going concern

b. Accrual and accounting entity

c. Going concern and time period

d. Time period and monetary unit

10. These users are interested in information about the profitability and stability of an entity in order to assess
the

ability of the entity to provide remuneration, retirement benefits and employment opportunities.
a. Customers

b. The public

c. Government and their agencies

d. Employees

11. These users require information on risk and return on investment and hence an entity’s ability to pay
dividends.

a. Investors

b. Employees

c. Lenders

d. Customers

12. This accounting concept justifies the usage of accruals and deferrals

a. Going concern

b. Materiality

c. Consistency

d. Stable monetary unit

13. Once an accounting standard has been established

a. The standard is continually reviewed to see if modificatio n is necessary.

b. The standard is not reviewed unless the SEC makes a compliant.

c. The task of reviewing the standard to see if modification is necessary is given to the

PICPA.

c. The principle of consistency requires that no revisions ever be made to the standard.

14. As independent or external auditors, CPAs are primarily responsible for

a. Preparing financial statements in conformity with GAAP

b. Certifying the accuracy of financial statements

c. Expressing an opinion as to the fairness of financial statements

d. Filing financial statements with the SEC

15. Which of the following terms best describes financial statements whose basis of accounting recognizes
transactions

and other events when they occur?

a. Accrual basis of accounting

b. Going concern basis of accounting

c. Cash basis of accounting

d. Invoice basis of accounting

16. These users are interested in information that enables them to determine whether amounts owing to them
will be

paid when due.

a. Suppliers and trade creditors

b. Lenders

c. Banks

d. Finance entities

17. The process of establishing financial accounting standards

a. Is a democratic process in that a majority of practicing accountants must agree with a

standard before it becomes implemented.

b. Is a legislative process based on rules promulgated by government agencies.

c. Is based solely on economic analysis of the effects each standard will have if it is

implemented.

d. Is a social process which incorporates political actions of various interested users groups

as well as professional research and logic.

18. It is the accounting standard setting body created by PRC upon recommendations of the Board of
Accountancy to
assist the Board of Accountancy in carrying out its powers and functions under R.A. No. 9298

a. Accounting Standards Council

b. Auditing and Assurance Standard Council

c. Philippine Accounting Standards Board

d. Financial Reporting Standard Council

19. The accrual basis of accounting is based primarily on

a. Conservatism and revenue realization

b. Conservatism and matching

c. Consistency and matching

d. Revenue realization and matching

20. The basic purpose of accounting is

a. To provide the information that the managers of an economic entity need to control its
operation.

b. To provide information that the creditors of an economic entity can use in deciding

whether to make additional loans to the entity.

c. To measure the periodic income of the economic entity.

d. To provide quantitative financial information about an entity that is usef ul in making

rational economic decision.

21. The primary measurement basis currently used to value assets in external financial statements of an entity
is

a. The current market price if the assets currently held by an entity were sold on the open
market.

b. The current market price if the asset held by an entity were purchased on the open market.

c. The present value of the cash flows the assets are expected to generate over their

remaining useful lives.

d. The market price of the assets held by an entity at the date the assets were acquired.

22. Which underlying concept serves as the basis for preparing financial statements at regular intervals?

a. Accounting entity

b. Going concern
c. Accounting period

d. Stable monetary unit

23. Which of the following sta tements best describes the term “going concern”

a. When current liabilities of an entity to continue in operation for assets

b. The ability of the entity to continue in operation for the foreseeable future

c. The potential to contribute to the flow of cash and cash equivalents to the entity

d. The expenses of an entity exceed its income

24. The overall objective of financial reporting is to provide information

a. That is useful for decision making

b. About an entity’s assets, liabilities and owners’ equity

c. About an entity’s financial reporting performance during a period

d. That allows owners to assess management’s performance

25. The International Accounting Standards Board was formed to

a. Enforce IFRS in foreign countries

b. Develop worldwide accounting standards

c. Establish accounting standards for multinational entities

d. Develop accounting standards for countries that do not have their own standard -setting

Bodies

26. Under generally accepted accounting principles

a. Income and expenses, assets and liabilities are measured based on the occurrence of

changes in the economic resources and obligations.

b. Assets and liabilities are measured on the basis of their liquidation value.

c. Income and expenses are recognized on the basis of cash receipts and payments, including

depreciation of property, plant and equipment.

d. Financial position and financial performance are measured on the basis of cash received

and cash paid.

27. Financial accounting is concerned with

a. General- purpose reports on financial position and financial performance.

b. Specialized reports for inventory management and control.

c. Specialized reports for income tax computation and recognition.

d. General- purpose reports on changes in stock prices and future estimates of market

position.

28. These users are interested in information in order to regulate the activities of an entity, determine taxation
policies

and provide a basis for national sta tistics.

a. Government and their agencies

b. Major organization of users

c. Bureau of Internal Revenue

d. Department of Finance

29. Which of the following is listed in the Framework as underlying assumptions regarding financial
statements?

a. The financial statement are reliable.

b. Any changes in accouting policy are neutral.

c. The financial statements are prepared under the accrual basis.

d. The entity can be viewed as a liquidating concern.

30. The conceptual framework is intended to establish

a. Genera lly accepted accounting principles in financial reporting entities.

b. The meaning of “present fairly in accordance with GAAP”

c. The objectives and concepts for use in developing standards of financial accounting and

reporting.

d. The hierarchy of sources of GAAP.

31. A conceptual framework of accounting should

a. Lead to uniformity of financial statements among entities within the same industry.

b. Eliminate alternative accounting principles and methods.

c. Guide the PICPA in developing generally accepted auditing standards.

d. Define the basic objectives, terms, and concepts of accounting.

32. It is the body authorized by law to promulgate rules and regulations affecting the practice of the
accountancy

professions in the Philippines.

a. Board of Accountancy

b. Philippine Institute of Certified Public Accountant

c. Securities and Exchange Commission

d. Financial Reporting Standards Council

33. The principles which constitute the ground rules for financial reporting are termed “generally accepted
accounting

principles”. To qualify as “generally accepted,” an accounting principle must

a. Usually guide corporate managers in preparing financial statements, which will be

understood by widely scattered shareholders.

b. Guide corporate managers in preparing financial statements, which will be used, for

collective bargaining agreement with trade unions

c. Guide an entrepreneur of the choice of an accounting entity like single proprietorship,

partnership or corporation.

D. Receive substantial authoritative support.

34. Managerial accounting is the area of accounting that emphasizes

a. Reporting financial information to external users

b. Reporting to the SEC

c. Combining accounting knowledge with an expertise in data processing

d. Developing accounting information for use within an entity

35. Which of the following best describes “financial performance” of an entity?

a. The revenue, expenses and net income or loss for a period of an entity.

b. The assets, liabilities and equity of an entity

c. The total assets minus total liabilities

d. The total cash inflows minus cash outflows

36. Generally accepted accounting principles

a. Are accounting adaptations based on the laws of economic science.

b. Derive their credibility and authority from legal ruling and court precedents.
c. Derive their credibility and authority from the national government through the SEC.

d. Derive their credibility and authority from general recognition and acceptance by the

accountancy profession.

37. During the lifetime of an entity accountants produce financial statements at arbitrary points in time in
accordance

with which basic accounting concept.

a. Accrual

b. Periodicity

c. Unit of measure

d. Continuity

38. These users are interested in information about the continuance of an entity, especially when they have a
long-

term involvement with or are dependent on the entity.

a. Customers

b. Employees

c. Trade unions

d. Suppliers

39. Continuation of an accounting entity in the absence of evidence to the contrary is the basic concept of

a. Accounting entity

b. Time period

c. Going concern

d. Accrual

40. Proper application of accounting principles is most dependent upon the

a. Existence of specific guidelines

b. Oversight of regulatory bodies

c. External audit function

d. Professional judgment of the accountant

CFAS Quiz 2 - Balance Sheet

Multiple Choice

Identify the choice that best completes the statement or answers the question.

1. Unearned rent would normally appear on the balance sheet as a

a. plant asset.

b. current liability.

c. long-term liability.

d. current asset.

2. The accounts and balances shown below were gathered from Paynter Corporation's trial

balance on December 31, 2021. All adjusting entries have been made.

Wages Payable ........................................... 25,600

Cash .................................................... 17,700

Mortgage Payable ........................................ 151,600

Dividends Payable ....................................... 14,000

Prepaid Rent ............................................ 13,600

Inventory ............................................... 81,800

Sinking Fund Assets ..................................... 52,400

Short-Term Investments .................................. 15,200

Premium on Bonds Paya ble ................................ 4,600

Stock Investment in Subsidiary .......................... 102,400

Taxes Payable ........................................... 22,800

Accounts Payable ........................................ 24,800

Accounts Receivable ..................................... 36,600

The amount that should be reported as current liabilities on Paynter Corporation's balance sheet

is

a. 87,200.

b. 91,800.

c. 73,200.

d. 238,800.

Solution:
Wages payable 25600
Dividends Payable 14000

Taxes Payable 22800

A/P 24800

Current Liabilities 87200

3. Balance sheet analysis is useful in assessing a firm's liquidity, which is the ability to

a. satisfy short-term obligations.

b. main profitable operations.

c. maintain past levels of preferred and common dividends.

d. survive a major economic downturn.

4. Neptune Corporation's trial balance contained the following account balances at December 31,
2021:

Accumulated Depreciation--Equipment ..................... 45,000

Short-Term Investments .................................. 15,000

Prepaid Insurance ....................................... 3,000

Cash .................................................... 33,000

Inventory of Merchandise ................................ 90,000

Equipment and Furniture ................................. 54,000

Patent .................................................. 12,000

Accounts Receivable (net) ............................... 48,000

Land Held for Future Business Site ...................... 75,000

On Neptune's December 31, 2021, balance sheet, the current assets total should be

a. 189,000.

b. 201,000.

c. 219,000.

d. 243,000.

Cash 33000

Short term Investments 15000

Prepaid insurance 3000

Inventory of Merchandise 90000

A/R 48000

Current Assets 189000

5. Baggins Company prepared a draft of its 2021 balance sheet. The draft statement reported total

assets of 437,500. Included in this total assets figure were the following items:

Treasury stock of Baggins Company at cost, which approximates

market value on December 31 ................

12,000

Unamortized patents ..................................... 5,600

Cash surrender value of life insurance on corporate executives

.............................................. 6,850
Unrealized holding losses on available-for-sale

securities ............................................ 4,200

At which amount should Baggins' total assets be correctly reported in the December 31, 2021,

balance sheet?

a. 420,850

b. 421,300

c. 425,050

d. 425,500

Assets 437500

Treasury at cost (13000)

Total asset 424500

6. Which of the following would not be reported in the stockholders' equity section of the balance

sheet?

a. Retained earnings appropriated for future plant expansion

b. Dividends declared on preferred stock

c. Paid-in capital in excess of par value

d. Deficit in retained earnings

7. Blues Corporation's trial balance included the following account balances at December 31,

2021:

Accounts Payable ........................................ 45,000

Bonds Payable, due 2022 ................................. 75,000

Discount on Bonds Payable, due 2022 ..................... 9,000

Dividends Payable January 31, 2022 ...................... 24,000

Notes Payable, due January 31, 2025 ..................... 60,000

What amount should be included in the current liability section of Blues' December 31, 2021,

balance sheet?

a. 135,000

b. 153,000

c. 195,000
d. 234,000

Solution:
A/P 45000

Bonds payable 75000

Discount on bonds payable -9000

Dividends payable 24000

Current Liabilities 135000

8. Which of the following best describes contributed capital?

a. The amount that would be distributed to the stockholders in a liquidation of the

corporation.

b. The amount of capital provided by stockholders' investments.

c. The amount of capital provided by stockholders' investments and undistributed

earnings.

d. The value of the common and preferred stock.

9. Which of the following would not be classified as a current liability on a classified balance

sheet?

a. Unearned revenue.

b. Deferred income tax liability.

c. The currently maturing portion of long-term debt.

d. Accrued salaries payable to management.

10. Seahawk Company's adjusted trial balance at December 31, 2021, includes the following

account balances:

Common Stock, 3 par .................................... 300,000

Additional Paid-In Capital .............................. 400,000

Treasury Stock, at cost ................................. 25,000

Net Unrealized Holding Loss on Available-For-Sale

Securities ............................................ 10,000

Retained Earnings--Appropriated for Uninsured Earthquake

Losses ................................................ 75,000

Retained Earnings--Unappropriated ....................... 100,000

What amount should Seahawk report as total owners' equity in its December 31, 2021, balance

sheet?

a. 840,000

b. 860,000

c. 890,000

d. 910,000

Solution:
Common stock 300000
Addl Paid in capital 400000

Treasury Stock -25000

NUHL on AFS -10000

RE appropriated 75000

RE Unappropriated 100000

Total owners’ equity 840000

11. Martin Corporation was organized on January 3, 2021. Martin was authorized to issue 50,000

shares of common stock with a par value of 10 per share. On January 4, Martin issued 30,000
shares of common stock at 25 per share. On July 15, Martin issued an additional 10,000 shares

at 20 per share. Martin reported income of 33,000 during 2021. In addition, Martin declared a

dividend of .50 per share on December 31, 2021. The

amount reported on Martin Corporation's December 31, 2021, balance sheet as stockholders'

equity was

a. 400,000.

b. 550,000.

c. 950,000.

d. 963,000.

Common stock30000 @25 750000

Addl paid in capital10000 @ 20 200000

Income 33000
Div Declared (20000)

stockholders equity 963000

12. Which of the following is not a long-term investment?

a. Stock held to exert influence on another company.

b. Land held for speculation.

c. Trademarks.

d. Cash surrender value of life insurance.

13. Pending litigation would generally be considered a(n)

a. nonmonetary liability.

b. contingent liability.

c. estimated liability.

d. current liability.

14. The accounts and balances shown below were gathered from Paynter Corporation's trial

balance on December 31, 2021. All adjusting entries have been made.

Wages Payable ........................................... 25,600

Cash .................................................... 17,700

Mortgage Payable ........................................ 151,600

Dividends Payable ....................................... 14,000

Prepaid Rent ............................................ 13,600

Inventory ............................................... 81,800

Sinking Fund Assets ..................................... 52,400

Short-Term Investments .................................. 15,200

Premium on Bonds Payable ................................ 4,600

Stock Investment in Subsidiary .......................... 102,400

Taxes Payable ........................................... 22,800

Accounts Payable ........................................ 24,800

Accounts Receivable ..................................... 36,600

The amount that should be reported as current assets on Paynter Corporation's balance sheet

is

a. 151,300.

b. 164,900.

c. 217,300.

d. 267,300.

Cash 17700

Prepaid rent 13600

Inventory 81800

Short term investments 15200

A/R 36600

Current Assets 164900

15. The December 31, 2021, balance sheet of Madden Inc., reported total assets of 1,050,000 and

total liabilities of 680,000. The following information relates to the year 2022:

• Madden Inc. issued an additional 5,000 shares of common stock at 25 per

share on July 1, 2022.

• Madden Inc. paid dividends totaling 80,000.

• Net income for 2022 was 110,000.

• No other changes occurred in stockholders' equity during 2022.

The stockholders' equity section of the December 31, 2022, balance sheet would report a

balance of

a. 400,000.

b. 525,000.

c. 685,000.

d. 835,000.

Solution:
equity 370000

contributed (addl) 125000

Income 110000

dividends Payable -80000

Stockholders equity 525000

16. Which of the following characteristics may result in the classification of a liability being changed

from current to noncurrent?

a. Violation of a subjective acceleration clause.

b. Violation of an objective acceleration clause.

c. A demand provision for payment.

d. Refinancing on or before the balance sheet date.

17. Eagle Co. prepared a draft of its 2021 balance sheet. The draft statement reported current

liabilities totaling 200,000. However, none of the following items were included in this

preliminary total at December 31, 2021:

Accounts payable ........................................ 30,000

Bonds payable, due 2022 ................................. 50,000

Discount on bonds payable, due 2022 ..................... 6,000

Dividends payable on January 31, 2022 ................... 16,000

Notes payable, due 2023 ................................. 40,000

At which amount should Eagle's current liabilities be correctly reported in the December 31,
2021, balance sheet?

a. 230,000

b. 290,000

c. 296,000

d. 302,000

Solution:
Reported Liab 200000

A/p 30000

Bonds payable 50000

Disocunt on bonds payable (6000)

Dividends Payable 16000

Current Liabilities 290000

18. Accrued revenues would normally appear on the balance sheet as

a. plant assets.

b. current liabilities.

c. long-term liabilities.

d. current assets.

19. Mejarus Co.'s adjusted trial balance at December 31, 2021, includes the following account

balances:

Common Stock, 3 par .................................... 360,000

Additional Paid-In Capital .............................. 480,000

Treasury Stock, at cost ................................. 30,000

Net Unrealized Loss on Available-for-Sale Securities .... 12,000

Retained Earnings: Appropriated for Uninsured Earthquake

Losses ................................................ 90,000

Retained Earnings: Unappropriated ....................... 120,000

What amount should Mejarus report as total stockholders' equity in its December 31, 2021,

balance sheet?

a. 1,008,000
b. 1,032,000

c. 1,068,000

d. 1,092,000

Solution:
Common Stock 360000

Addl paid in capital 480000

Treasury Stock -30000

UL on AFSS -12000

RE: AFUEL 90000

RE: UA 120000

Total stockholders equity 1008000

20. Which of the following would not be classified as a current asset on a classified balance sheet?

a. Investment securities (trading).

b. Short-term investments.

c. Prepaid expenses.

d. Intangible assets.

21. Maryk Electronics Inc. reported the following items on its December 31, 2021, trial balance:

Accounts Payable ........................................ 108,900

Advances to Employees ................................... 4,500

Unearned Rent Revenue ................................... 28,800

Estimated Liability Under Warranties .................... 25,800

Cash Surrender Value of Officers' Life Insurance ........ 7,500

Bonds Payable ........................................... 555,000

Discount on Bonds Payable ............................... 22,500

Trademarks .............................................. 3,900

The amount that should be recorded on Maryk's balance sheet as total liabilities is
a. 696,000.

b. 700,500.

c. 703,500.
Wages Payable -25,600

Dividends Payable -14,000

Taxes Payable -22,800

Accounts Payable -24,800

Working Capital 77,700

23. Which of the following would not be considered an element of working capital?

a. Investment securities (current)

b. Organization costs

c. Accrued interest on notes payable

d. Work in process inventories

24. Daria Company reported the following accounts at year-end;

Inventory, including inventory expected in the

Ordinary course of operations to be sold

Beyond 12 months amounting to P700,000 1,000,000

Accounts receivable 1,200,000

Prepaid insurance 100,000

Financial asset held for trading

200,000

Equity investment at fair value through other

Comprehensive income

800,000

Cash 300,000

Deferred tax asset 150,000

What total amount should be reported as current assets at year-end?

a. 2,800,000

b. 2,550,000

c. 3,600,000

d. 2,100,000
Solution:
Inventory 1,000,000

Trade receivables 1,200,000

Prepaid insurance 100,000

Financial assets held for trading 200,000

Cash 300,000

Total current assets 2,800,000

25. At year-end, the current assets of Hazel Company revealed cash and cash equivalents of

P700,000, accounts receivable of P1,200,000 and inventories of P600,000. The examination of

accounts receivable disclosed the following:

Trade accounts 930,000

Allowance for doubtful accounts ( 20,000)

Claim against shipper for goods lost in transit 30,000

Selling price of unsold goods sent by Hazel

On consignment at 130% of cost and not

Included in ending inventory 260,000

Total accounts receivable 1,200,000

What total amount should be reported as current assets at year-end?

a. 2,412,000

b. 2,440,000

c. 2,240,000
d. 2,500,000

Solution:
Cash and cash equivalent 700,000

Trade and other receivables (1,200,000 minus 260,000) 940,000

Inventories (600,000 + 200,000) 800,000

Total current assets 2,440,000

Adjustments

1. Sales 260,000

Accounts Receivable 260,000

2. Inventory (260,000 / 130%) 200,000

Cost of goods sold 200,000

26. Jewel Company reported the following current assets at year-end:

Cash and cash equivalents 3,200,000

Accounts receivable 1,420,000

Allowance for doubtful accounts ( 120,000)

Inventory 2,800,000

Deferred charges 200,000

Employees’ account – current 240,000

Advances to subsidiary 260,000

Claim against shipper for goods lost in transit 200,000

Total current assets 8,200,000

What total amount should be reported as current assets?

a. 7,740,000

b. 7,780,000

c. 7,940,000

d. 8,200,000

Solution:

Cash 3,200,000

Accounts receivable 1,420,000

Allowance for uncollectible accounts ( 120,000)

Receivable from employees 240,000

Claim receivable 200,000

Inventory 2,800,000

Total current assets 7,740,000

27. Gumamela Company provided the following data at year-end:

Accounts payable, including cost of goods

Received on consignment of P150,000 1,350,000

Accrued taxes payable 125,000

Customers’s deposit 100,000

Manila Company as guarantor 200,000

Bank overdraft 55,000

Accrued electric and power bills 60,000

Reserve for contingencies 150,000

What total amount should be reported as current liabilities?

a. 1,840,000

b. 1,740,000

c. 1,650,000

d. 1,540,000

Solution:
Accounts payable (1,350,000 – 150,000) 1,200,000

Accrued taxes payable 125,000

Customers’ deposit 100,000

Bank overdraft 55,000

Accrued electric and power bills 60,000

Total current liabilities 1,540,000

28. Burma Company disclosed the following liabilities:

Accounts payable, after deducting debit balances

In suppliers’ accounts amounting to P100,000 4,000,000

Accrued expenses 1,500,000

Credit balances of customers’ accounts 500,000

Stock dividend payable 1,000,000

Claims for increase in wages and allowance by

Employees, covered in a pending lawsuit 400,000

Estimated expenses in redeeming prize coupons 600,000

What total amount should be reported as current liabilities?

a. 6,700,000

b. 6,600,000
c. 7,100,000

d. 7,700,000

Solution

Accounts payable (4,000,000 + 100,000) 4,100,000

Accrued expenses 1,500,000

Credit balances in customers’ accounts 500,000

Estimated liability for coupons 600,000

Total current liabilities 6,700,000

29. Gracia Company reported the following current assets at year-end:

Cash including sinking fund of P500,000 with trustees 1,500,000

Accounts receivable 2,500,000

Inventory, including P200,000 cost of goods in transit

Purchased FOB point of destination 2,000,000

Advances to officers collectible currently 400,000

Dividend receivable 100,000

Total current assets 6,500,000

What total amount should be reported as current assets?

a. 5,400,000

b. 5,300,000

c. 5,800,000

d. 5,900,000

Cash (1,500,000-500,000) 1,000,000

Trade and other receivables 3,000,000

Inventory (2,000,000-200,000) 1,800,000

Total current assets 5,800,000

30. Caticlan Company provided the following data on December 31, 2020:
Cash, including sinking fund of P500,000 for bond

Payable due on June 30, 2021

2,000,000

Notes receivable 1,200,000

Note receivable discounted 700,000

Accounts receivable – unassigned 3,000,000

Accounts receivable – assigned 800,000

Equity of assignee in accounts receivable assigned 500,000

Inventory, including P600,000 cost of goods in transit

Purchased FOB destination. The goods were

Receive on January 3, 2021 2,800,000

Allowance for doubtful accounts 100,000

What total amount of current assets should be reported on December 31, 2020?

a. 7,900,000

b. 8,400,000

c. 7,400,000

d. 7,700,000

Solution:
Cash 2,000,000
Notes receivable 1,200,000
Notes receivable discounted ( 700,000)
Accounts receivable – unassigned 3,000,000
Accounts receivable – assigned 800,000
Allowance for doubtful accounts ( 100,000)
Inventory (2,800,000 – 600,000) 2,200,000
Total current assets 8,400,000