Finance Questions
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If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments issued to extinguish a financial liability shall be measured at a. fair value of the liability extinguished b. par value of the equity instruments issued c. carrying value of the liability extinguished d. book value of the equity instruments issued
On January 2, 2021, BAGITO Co. issued 8% bonds with a face amount of P 1,000,000 that mature on January 2, 2027. The bonds were issued to yield 12%, resulting in a discount of P150,000. BAGITO incorrectly used the straightline method instead of the effective interest method to amortize the discount. BAGITO does not elect the fair value option for reporting financial liabilities. How is the carrying amount of the bonds affected by the error? I. At December 31, 2021 II. At January 2, 2027 a. O
Which is true when the effective interest method of amortizing bond discount is used? a. Interest expense varies from period to period b. Interest expense remains constant for each period c. Interest expense increases each period d. The interest rate decreases each period.
What measures the creditworthiness of the counterparty?
Conversion of inputs to outputs is recorded in the a. Work in Process Inventory account. b. Finished Goods Inventory account. c. Raw Material Inventory account. d. both a and b
An entity has been served a legal notice at year end by the DENR to fit smoke detectors in its factory on or before middle of next year. The cost of fitting smoke detector can be measured reliably. How should the entity treat this in the financial statements at year-end? a. Recognize a provision for the current year equal to the estimated amount. b. Recognize a provision for the current year equal to one-half only of the estimated amount. c. No provision is recognized at year-end because t
The market price of a bond issued at a discount is the present value of its principal amount at the market (effective) rate of interest a. Less the present value of all future interest payments at the market (effective) rate of interest. b. Less the present value of all future interest payments at the rate of interest stated on the bond. c. Plus the present value of all future interest payments at the market (effective) rate of interest. d. Plus the present value of all future interest p
Interest expense is calculated as a. The stated rate of interest multiplied by the face value of the bonds b. The market rate of interest multiplied by the face value of the bondsc. The stated rate multiplied by the beginning carrying amount of bonds payable d. The market rate multiplied by the beginning carrying amount of bonds payable
Which of the following is the most likely candidate for a contingent liability that can be accrued? a. potential liability for a lawsuit in which the firm is a defendant b. property tax payable c. potential liability on a product still in the planning stage ( no items have been sold) d. warranty liability
When the provision arises from a single obligation, the estimate of the amount a. Reflects the weighting of all possible outcomes by their associated probabilities. b. Is determined as the individual most likely outcome. c. Is the individual most likely outcome adjusted for the effect of other possible outcomes. d. Midpoint of the possible outcomes.
An entity operates chemical plants. The published policies include a commitment to making good any damage caused to the environment by the operations. The entity has always honored this commitment. which of the following scenarios would give rise to an environmental provision? a. On past experience it is likely that a chemical spill which would result in having to pay lines and peralties wil occur in the next year. b. Recent research suggests there is a possibility that the entity's actions
Junk bonds are a. Bonds for which the owners' names are not registered with the issuer. b. Bonds that are unsecured c. Bonds that pay no interest unless the issued is profitable d. High-risk and high-yield bonds issued by heavily indebted weak entities.
Where the provision being measured involves a large population of items, the obligation is estimated by 'weighting' all possible outcomes by their associated probabilities a. expected valueb. present value c. current value d. extrapolation
Which of the following is not a relevant consideration when evaluating whether to derecognize a financial liability?a. whether the obligation has been discharged b. whether the obligation has been cancelled c. whether the obligation has expired d. whether substantially all the risks and rewards of the obligation have been transferred
Failure to accrue wages payable to office personnel will a. overstate liability b. overstate loss c. understate distribution cost d. understate admin cost
Which of the following is not an essential characteristic for an item to be reported as a liability on the balance sheet? a. The liability is a present obligation of a particular enterprise b. The liability arises from past transactions or event c. The liability is payable to a specifically identified payee d. The settlement of the liability requires an outflow of resources embodying economic benefits
A compound financial instrument shall be classified as a. Financial liability b. Equity c. Either financial liability or equity based on predominant characteristics d. Separately as financial liability and equity
Contingent liability will or will not be recognized as a provision (liability) depending on a. the outcome of a future event b. the degree of uncertainty c. the present condition suggesting a liability d. whether they are probable and estimable
The proceeds from the sale of a bond will be equal to a. The face amount of the bond b. The present value of the face amount of the bond plus the present value of the interest payments to be made during the life of the bond c. The face amount of the bond plus the present value of the interest payments d. The sum of the amount of the bond and the periodic interest payments
Which of the following statement is not correct? a. If a note payable is secured, disclosures must specify what assets are pledged. b. Long term debts should be reported at their present values computed on the basis of both principal and interest. c. All liabilities must have definite amount owed and must not be contingent on a future event. d. Conceptually, liabilities should be valued at the present value of all cash to be paid in the future