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Lecture 5 Events After The Reporting Period Multiple Choice

The document contains multiple choice and problem questions regarding accounting for events after the reporting period in accordance with PAS 10. Key points include: - Events after the reporting period are those occurring between the end of the reporting period and the date the financial statements are authorized for issue. - Adjusting events provide evidence of conditions that existed at the end of the reporting period and require adjustment, while non-adjusting events relate to conditions that arose after the reporting period. - Questions assess the proper accounting treatment for items like settlements of legal cases, asset impairments, and insurance recoveries that occur after the reporting period.

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Jeane Mae Boo
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1K views

Lecture 5 Events After The Reporting Period Multiple Choice

The document contains multiple choice and problem questions regarding accounting for events after the reporting period in accordance with PAS 10. Key points include: - Events after the reporting period are those occurring between the end of the reporting period and the date the financial statements are authorized for issue. - Adjusting events provide evidence of conditions that existed at the end of the reporting period and require adjustment, while non-adjusting events relate to conditions that arose after the reporting period. - Questions assess the proper accounting treatment for items like settlements of legal cases, asset impairments, and insurance recoveries that occur after the reporting period.

Uploaded by

Jeane Mae Boo
Copyright
© © All Rights Reserved
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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LECTURE 5 EVENTS AFTER THE REPORTING PERIOD

MULTIPLE CHOICE
1. Pas 10, paragraph 3, defines events after the reporting period as those events,
A. Whether favorable or unfavorable, that occur between the end of reporting period
and the date on which the financial statements are authorized for issue
B. Whether favorable or unfavorable, that occur between the beginning of reporting
period and the date on which the financial statements are authorized for issue
C. Whether favorable, that occur between the end of reporting period and the date on
which the financial statements are authorized for issue
D. Whether favorable, that occur between the beginning of reporting period and the date
on which the financial statements are authorized for issue

2. Which of the following is not related to adjusting events


A. Settlement After the reporting period of a court case
B. Bankruptcy of a customer
C. Sale of inventories after the reporting period
D. Plan to discontinue an operation

3. Which of the following should NOT be included in nonadjusting events?


A. Change in tax rate enacted or announced after the end of reporting period
B. Entering into significant commitments or contingent liabilities
C. Announcing and commencing the implementation of a major restructuring
D. None of these

4. Adjusting entries include which of the following


A. The determination after the reporting period of the cost of assets purchased or the
proceeds from assets sold before the end of reporting period.
B. The determination after the reporting period of the profit sharing or bonus payment if
the entity has the present obligation at the end of reporting period to make such
payment.
C. Sale of inventories after the reporting period may give evidence about the net
realizable value at reporting date.
D. All of these are adjusting entries

5. The financial statements are authorized for issue


A. On the date of issue by the board of directors and not on the date when shareholders
approve the financial statements
B. On the date of issue by the majority of board of directors and not on the date when
shareholders approve the financial statements.
C. On the date of issue by the majority of board of directors and not on the date when
shareholders approve the financial statements.
D. On the date of issue by the board of directors and not on the date when shareholders
disapprove the financial statements.

6. Which statement is correct?


A. It is important for users to know when the financial statements are authorized for
issue because the financial statements do not reflect events after this date.
B. PAS 12, paragraph 17, provides that an entity shall disclose the date when the
financial statements are authorized for issue and who gave the authorization
C. Financial statements are authorized for issue when the management review the
financial statements and authorizes them issue
D. Change in tax rate enacted or announced after the end of reporting period that has a
significant effect only to deferred tax asset and liability.

PROBLEM 5-1
Rejoice Company carried a provision of 2,000,000 in its draft financial statements
on12/31/2013 in relation to an unresolved court case. On 1/31/2014 , when the financial
statements on 12/31/2013 had not yet been authorized for issue, the case was settled
and the court decided the final total damages payable by Careless to be 2,800,000.

What amount should be adjusted on12/31/2013 . In relation to this event?

PROBLEM 5-2
Elaine Company draft financial statements showed the profit before tax for the year
ended 12/31/2013 at 9,000,000. The board of directors authorized the financial
statements for issue on March 20, 2014. A fire occurred at one of Believe sites on
1/15/2014 with resulting damage costing 7,000,000, only 4,000,000 of which is covered
by insurance. The repairs will take place and be paid for in April 2014. The 4,000,000
claim from the insurance entity will however be received on February 14, 2014.

What amount should be reported as profit before tax in Believe financial statements?

PROBLEM 5-3
Ilonggo Company provided the following information for the current year:

Inventory, January 1 2,000,000


Purchases 7,500,000
Purchase returns and allowances 500,000
Sales returns and allowances 750,000
Inventory, December 31 2,800,000
Gross profit rate on Net sales 20%
What is the amount of gross sale for the current year?

PROBLEM 5-4
Lite Company carried a provision of 12,000,000 in its draft financial statements
on12/31/2013 in relation to an unresolved court case. On 1/31/2014, when the financial
statements on 12/31/2013 had not yet been authorized for issue, the case was settled
and the court decided the final total damages payable by Careless to be 22,700,000.

What amount should be adjusted on12/31/2013 . In relation to this event?

PROBLEM 5-5
.Halagayon Company provided the following information for the current year:

Beg. Inventory 400,000


Freight in 300,000
Purchase Return 900,000
End. Inventory 500,000
Selling Expense 1,250,000
Sales Discount 250,000

The cost of goods sold is six times the Selling Expense.

What is the amount of gross purchases?

PROBLEM 5-6
In reviewing Bituin Company’s draft financial statements for the year ended December
31, 2010, management decided that market conditions were such that the provision for
inventory obsolescence on December 31, 2010 should be increased by P 3,000,000. If
the same basis of calculating inventory obsolescence had been applied on December
31, 2009, the provision would have been P 1,800,000 higher than the amount
recognized in the statement of financial position.

What adjustment should be made to the draft profit for the year ended December 31,
2009 presented as a comparative figure in the 2010 financial statements?

Draft profit for 2010 Profit for 2009


PROBLEM 5-7
Intra from the statement of financial position of Adam Company showed the following:
December 31, 2010 December 31, 2009
Development costs 8,160,000 5,840,000
Amortization (1,800,000) (1,200,000)

The capitalized development costs relate to a single project that commenced in 2007. It
has now been discovered that one of the criteria for capitalization has never been met.
What adjustment is required to restate retained earnings on January 1, 2010?
PROBLEM 5-8
Rvan Company draft financial statements showed the profit before tax for the year
ended 12/31/2019 at 7,000,000. The board of directors authorized the financial
statements for issue on March 20, 2020. A fire occurred at one of Rvan sites on
1/15/2020 with resulting damage costing 5,000,000, only 4,000,000 of which is covered
by insurance. The repairs will take place and be paid for in April 2020.

What amount should be reported as profit before tax in Rvan financial statements?

PROBLEM 5-9
Blanko from the statement of financial position of Ano Company showed the following:

December 31, 2020 December 31, 2019


Development costs 860,000 840,000
Amortization - (600,000)

The capitalized development costs relate to a single project that commenced in 2017. It
has now been discovered that one of the criteria for capitalization has never been met.
What adjustment is required to restate retained earnings on January 1, 2020?
Rvan Company draft financial statements showed the profit before tax for the year
ended 12/31/2019 at 7,000,000. The board of directors authorized the financial
statements for issue on March 20, 2020. A fire occurred at one of Rvan sites on
1/15/2020 with resulting damage costing 5,000,000, only 4,000,000 of which is covered
by insurance. The repairs will take place and be paid for in April 2020.

What amount should be reported as profit before tax in Rvan financial statements?

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