ACCA110 Prelims Examination PDF

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ACCA101 FINANCIAL MANAGEMENT - PRELIMINARY EXAMMultiple Choice Identify the choice that best completes the statement or answers the question. Which statement is correct concerning presentation of information on the face of the balance sheet? I. Additional line items, headings and subtotals shall be ...

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ACCA101 FINANCIAL MANAGEMENT - PRELIMINARY EXAM Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Which statement is correct concerning presentation of information on the face of the balance sheet? I. Additional line items, headings and subtotals shall be presented on the face of the balance sheet when such presentation is relevant to an understanding of the entity’s financial position. II. The standard does not prescribe the order or format in each items are to be presented. a. I only c. Both I and II b. II only d. Neither I and II 2. The basic components of financial statements include all of the following, except a. Statement of changes in equity c. Statement of retained earnings b. Statement of recognized gains and losses d. Cash flow statement 3. Income does not arise from a. Sale of merchandise to customers b. Rendering of services

c. Use of enterprise resources by others d. Issuance of common stock at an amount in excess of par value

4. The balance sheet is useful for analyzing all of the following except a. Solvency c. Financial flexibility b. Financial structure d. Performance 5. Where financial statements for a single year are being presented, a prior period error recognized in the current year ordinarily would a. Be shown as an adjustment of the balance c. Be shown as an extraordinary item on the of retained earnings at the start of the current year’s income statement current year b. Affect net income of the current year d. Be included in the statement of recognized gains and losses 6. Current assets include I. Inventories and trade receivables that are sold, consumed and realized as part of the normal operating cycle even when they are not expected to be realized within twelve months from the balance sheet date. II. Financial assets that are classified as held for trading. a. I only c. Both I and II b. II only d. Neither I and II 7. The expenses are classified according to their function, as part of cost of sales, selling activities, administrative activities and other operating activities. a. Cost of sales method c. Account form b. Nature of expense method d. Report form 8. The elements directly related to the measurement of financial position are a. Assets, liabilities, equity, income and expenses b. Assets, liabilities, and equity c. Income and expenses d. Assets and liabilities 9. An asset shall be classified as current asset when it satisfies any of the following criteria, except

a. It is expected to be realized or held for sale or consumption in the normal course of the entity’s normal operating cycle. b. It is held primarily for the purpose of being traded. c. It is expected to be realized within twelve months after the balance sheet date. d. It is cash or a cash equivalent that is restricted from being exchanged or used to settle a liability for at least twelve months after the balance sheet date. 10. The sum of all obligations that must be met within a year is called a. Total current liabilities c. Equity and other investments b. Investment Capital d. None of the above 11. ABC Co. has current assets of $50,000 and total assets of $150,000. ABC has current liabilities of $30,000 and total liabilities of $80,000. What is the amount of ABC's owner's equity? a. $20,000 c. $70,000 b. $30,000 d. $120,000 12. The following information is available from Ramon Company’s accounting records for the current year: Purchases 5,300,000 Purchase discounts 100,000 Beginning inventory 1,600,000 Ending inventory 2,150,000 Freight out 400,000 Ramon’s cost of goods sold for the current year is a. 4,650,000 c. 5,050,000 b. 4,750,000 d. 5,850,000 13. The following costs were incurred by Tess Company, a manufacturer, during 2014: Accounting and legal fees 250,000 Freight in 1,750,000 Freight out 1,600,000 Officers’ salaries 1,500,000 Insurance 850,000 Sales representative salaries 2,150,000 What amount of these costs should be reported as general and administrative expenses for 2006? a. 2,600,000 c. 6,350,000 b. 5,500,000 d. 8,100,000 14. Sarah Company reports operating expenses in two categories: selling, and general and administrative expense. The adjusted trial balance at December 31, 2014 included the following expense and loss accounts: Accounting and legal fees 1,200,000 Advertising 1,500,000 Freight out 800,000 Interest 700,000 Loss on sale of long-term investment 300,000 Officers’ salaries 2,250,000 Rent for office space 2,200,000 Sales salaries and commissions 1,400,000 One-half of the rented premises is occupied by the sales department. Sarah’s total selling expenses for 2014 should be a. 4,800,000 c. 3,700,000 b. 4,000,000 d. 3,600,000

15. Ramonito Company’s December 31, 2014 balance sheet reported the following current assets: Cash 4,000,000 Accounts Receivable 7,500,000 Inventory 4,000,000 Deferred tax asset 1,200,000 Equipment used and held for resale 300,000 An analysis of the accounts receivable disclosed that accounts receivable comprised the following: Trade accounts receivable 8,000,000 Allowance for doubtful accounts (500,000) 7,500,000 At December 31, 2014, the total current assets should be a. 16,000 c. 17,000 b. 17,200 d. 15,500 16. The following information pertains to KAL Company during 2014.

What is the net cash provided by operating activities for the year ended December 31, 2014 using the direct method? a. 3,000,000 c. 2,700,000 b. 3,300,000 d. 2,000,000 17. The net income for the year ended December 31 for Roger Corporation was P3,520,000. Additional data are as follows:

What should be the cash provided by operating activities in Roger’s cash flow statement for the year ended December 31 using the indirect method? a. 5,420,000 c. 7,250,000 b. 5,130,000 d. 5,290,000 18. A summary of revenue and expenses for Butuan Company for 2014 follows:

Net changes in working capital accounts for 2014 were as follows:

The net cash provided by operating activities for the year 2014 should be a. 1,100,000 c. 860,000 b. 780,000 d. 600,000 19. Cash receipts from royalties, fees, commissions, and other revenue are a. Cash outflow for operating activities c. Cash inflow from investing activities b. Cash inflows from operating activities d. Cash outflows for financing activities 20. Cash payment to acquire equity or debt instruments of other enterprises and interests in joint venture are a. Cash outflow for financing activities c. Cash outflow for investing activities b. Cash inflow from investing activities d. Cash inflow from financing activities 21. Which of the following should be reported when reporting cash flow statement? I. Conversion of long-term debt to common stock. II. Conversion of preferred stock to common stock. a. I only c. Both I and II b. II only d. Neither I and II 22. The following selected information is provided by Albay Company. All sales credit sales and all receivables are trade receivables. (in thousands) Accounts receivable, Jan. 1, net of allowance P100,000 P1,200 Accounts receivable, Dec. 31, net of allowance P300,000 1,600 Sales of the year 8,000 Uncollectible accounts written off during the year 50 Bad debts expense for the year 250 Cash expense for the year 5,250 Net income for the year 2,500 a. 2,100,000 b. 2,350,000

c. 2,900,000 d. 2,150,000

23. Alpha Company had the following activities during 2014: a. Acquired 2,000 shares of stock in Maybel Company for P2,600,000. b. Sold an investment in Rate Motors for P3,500,000 when the carrying value was P3,300,000 c. Acquired a P5,000,000, 4-year certificate of deposit from a bank. (During the year, interest of P375,000 was paid to Alpha.) d. Collected dividends of P120,000 on stock investments. In the cash flow statement, net cash used in investing activities should be a. 3,725,000 c. 3,980,000 b. 3,805,000 d. 4,100,000 24. The following are excerpts from Burce’s SFP: December 31, 20X1 Inventory P 4,800 Accounts Payable 1,090

December 31, 20X0 P 5,000 2,300

December 31, 20X1 Income Statement revealed the following: Cost of Goods Sold P 37,690 How much is the amount paid to suppliers? a. 37,490 b. 39,790

c. 38,700 d. 36,250

25. Gain on sale of property and equipment is part of what activity in the CFS? a. Operating activity in indirect method c. Financing activities b. Investing activities d. Operating activity in direct method 26. Net income is part of which Approach in preparing the CFS? a. Direct c. Both Approaches b. Indirect d. Neither of the two Approaches 27. Cash flows in the statement of cash flows are a. Inflows of cash and cash equivalents b. Outflows of cash and cash equivalents

c. Inflows and outflows of cash d. Inflows and outflows of cash and cash equivalents

28. Which of the following is not considered as an operating cash flow? a. Interest received c. Dividend received b. Interest paid d. Dividend paid Multiple Response Identify one or more choices that best complete the statement or answer the question. For each of the following items, which activity of the cash flows will be affected and what will be the effect on the cash flow statement? A “ ” mark represents a positive effect while “-“ mark represents a negative effect on cash flow statement. 29. Proceeds from the sale of equipment used in the business. a. Operating b. Investing c. Financing d.

+

e.

-

30. The Gain on the Sale of Equipment in Question #2 a. Operating b. Investing c. Financing

d.

+

e.

-

Problem 31. Presented below are the accounts from the trial balance for Jessica Company for December 31, 2014.

Required: a. What is the amount of total current assets? 2,250,000 b. What is the amount of total non-current assets? 7,250,000 c. What is the amount of total assets? 9,500,000 d. What is the amount of total current liabilities? 2,250,000 e. What is the amount of total non-current liabilities? 1,600,000 f. What is the amount of total liabilities? 3,850,000 g. What is the amount of total stockholder’s equity? 5,650,000 h. What is the firm’s net working capital? 0 32. Albay Company provided the following information: Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Property, plant and equipment Accumulated depreciation Accounts payable Accrued expenses Note payable - bank (current) Note payable - bank (noncurrent) Ordinary share capital Retained earnings

2017 5,600,000 3,000,000 8,000,000 400,000 55,000,000

2018 7,400,000 3,500,000 6,500,000 600,000 42,000,000

(20,000,000) 6,000,000 1,500,000 2,000,000 10,000,000

(16,000,000) 9,500,000 500,000 5,000,000 -

30,000,000 2,500,000

30,000,000 (1,000,000)

Cash needed to purchases new equipment was raised by borrowing from the bank with a long-term note.

Equipment costing P2,000,000 and carrying amount of P1,500,000 was sold for P1,800,000. The entity paid cash dividend of P3,000,000 in 2017. Required: Prepare a cash flow statement either the direct method or indirect method.

Net income

6 500 000

Depreciation

4 500 000

Gain on sale – PPE

(300 000)

Decrease in A/R

500 000

Increase in inventory

(1 500 000)

Decrease in Prepaid Exp.

200 000

Decrease in A/P

(3 500 000)

Increase in Accrued Exp.

1 000 000

Net Cash flow from Operating Activities

7 400 000

Cash receipts from sale of PPE

1 800 000

Add: PPE

(15 000 000)

Net Cash Flow from Investing Activities

(13 200 000)

Cash receipts from issuance

15 000 000

Cash payments to: Notes payable – Non current

(5 000 000)

Notes payable – Current

(3 000 000)

Cash dividends

(3 000 000)

Net Cash Flow from Financing Activities

4 000 000

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