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    Liability Quiz 3

    Uploaded by

    Hannah Pauleen G. Labasa

    Copyright:

    © All Rights Reserved
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    Liability Quiz 3

    Uploaded by

    Hannah Pauleen G. Labasa
    12 views2 pages

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    Liability quiz 3

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    12 views2 pages

    Liability Quiz 3

    Uploaded by

    Hannah Pauleen G. Labasa

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    AFFLUENT RICH Co. sells service contracts that cover a 2-year period.

    The
    sale price of each
    contract is ₱2,000. AFFLUENT sold 1,000 contracts evenly throughout 20x1.
    AFFLUENT’s past
    experience shows that of the total pesos spent for repairs on service
    contracts, 40% is incurred
    evenly during the first contract year and 60% evenly during the second contract
    year. How much
    are the (1) current and (2) noncurrent portions of the deferred revenue to
    be presented in
    AFFLUENT’s December 31, 20x1 statement of financial position?
    a. 400,000; 1,000,000 c. 1,000,000; 600,000
    b. 1,000,000; 400,000 d. 600,000; 1,000,000
    11. Which of the following is not true about the discount on short-term notes
    payable?
    a. The Discount on Notes Payable account has a debit balance.
    b. The Discount on Notes Payable account should be reported as an asset on the
    balance sheet.
    c. When there is a discount on a note payable, the effective interest rate is higher
    than the stated
    rate.
    d. All of these are true.
    12. Interest expenses are incurred
    a. only on interest-bearing liabilities.
    b. only on liabilities that are discounted to their present values.
    c. only on liabilities that are initially and subsequently measured at amortized cost
    d. due to passage of time.
    13. On January 1, 20x1 WRECK RUIN Co. acquired land by issuing a three-
    year, 12%, ₱4,000,000
    note payable. Principal and all accrued interests are due on December 31, 20x3.
    How much is the
    interest expense in 20x2?
    a. 1,017,600 c. 537,600
    b. 960,000 d. 764,213
    14. On July 1, 2002, Riviera Manufacturing Co. issued a five-year note payable with
    a face amount of
    ₱250,000 and an interest rate of 10 percent. The terms of the note require
    Riviera to make five
    annual payments of ₱50,000 plus accrued interest, with the first payment due June
    30, 2003. With
    respect to the note, the current liabilities section of Riviera's December 31,
    2002, balance sheet
    should include
    a. 12,500 c. 62,500
    b. 50,000 d. 75,000
    15. On January 1, 20x1, Line Co. obtains a ₱4,000,000 bank loan due on December
    31, 20x4. Interest
    of 12% is due annually. The bank charges Line Co. an 11.19% nonrefundable loan
    origination fee.
    The carrying amount of loan on December 31, 20x1 is most approximately equal to
    a. 3,640,784 c. 3,436,792
    b. 3,579,235 d. 3,302,895
    (Hint: Trial and error)

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