1.

IASB requires companies to use which method for reporting changes in

accounting policies?
A. Cumulative effect approach
B. Retrospective approach
C. Prospective approach
D. Averaging approach

2. Peralta Company showed the following at year end:

Allowance for doubtful accounts (debit balance) ( 16,000 )
Net Sales 7,100,000

The entity estimated its uncollectible receivables at 2% of net sales.

What is the allowance for doubtful accounts at year end?
A. 158,000 B. 144,500 C.142,000 D.126,000

3. A company using a perpetual inventory system neglected to record a

purchase of merchandise on account at year end. This merchandise was
omitted from the year-end physical count. How will these errors affect assets,
liabilities and equity at year end and net income for the year?
ASSET LIABILITIES EQUITY NET INCOME
A. No effect Understate Overstate Overstate
B. No effect Overstate Understate Understate
C. Understate Understate No effect No effect
D. Understate No effect Understate Understate

4. Novelita Company is a dealer of equipment. On December 31,2014, the

entity sold an equipment in exchange for a noninterest-bearing note requiring
five annual payments of P500,000. The first payment was made on December
31,2015. The market interest for similar notes was 8%. The PV of 1 at 8% for
five periods is .68 and the PV of an ordinary annuity of 1 at 8% for five periods
is 3.99. What is the carrying amount of note receivable on December 31,2015?
A. 2,000,000 C. 2,154,600
B.1,995,000 D. 1,654,600

5. Aiza Company purchased 10% of Issa Companys 100,000 outstanding

shares on January 1,2013 for P500,000. On December 31,2013, Aiza
purchased additional 20,000 shares during 2013. The investee reported
earnings of P3,000,000 for 2013. The fair value of the 10% interest is
P900,000 on December 31,2013. What is the carrying amount of the
investment on December 31,2013?
A.2,300,000 C.2,400,000
B.2,000,000 D.2,900,000
6. On June 30,2016, Pamela Company discounted at the bank a customers
P6,000,000 , 6-month, 10% note receivable dated April 30,2016. The bank
discounted the note at 12% without recourse. What is the amount received
from the note receivable discounting ?
A.5,640,000 C.6,048,000
B.5,760,000 D.6,174,000

7. Faith Company provided the following information relating to current

operations:

Accounts receivable, January 1 4,000,000

Accounts receivable collected 8,400,000
Cash Sales 2,000,000
Inventory, January 1 4,800,000
Inventory, December 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000
What is the balance of accounts receivable n December 31?
A.8,200,000 C.2,000,000
B.6,200,000 D.4,200,000

8. Goodwill arising from an investment in associate is

A. Included in the carrying amount of the investment and amortized over
the useful life.
B. Included in the carrying amount of the investment and not amortized.
C. Charged to retained earnings.
D. Charged to expense immediately.