ACC309 02 Current Liabilities_Self Test Total points Qe ‘+ This assessment is not graded. You may take this at your most convenient time. ‘+ Try your best to answer in 60 minutes. ‘This form will return your answers with the answer key. The respondent's email (20-56387@[Link]) was recorded on submission of this form, Block * BSMA3103 ¥ Name- BSMA3101 * Choose . Name- BSMA3102 * Choose ¥Name- BSMA3103 * PETRACHE, KATRINA G. BSMA3104 Name- BSMA3104 * Choose BSMA3105 Name- BSMA3105 * Choose BSMA3106 Name-BSMA 3106 * Choose BSMA3107 0 of 0 points 0 of 0 points 0 of 0 points 0 of 0 pointsName- BSMA3107 * Choose ¥ Name- BSMA3108 * Choose . Inan effort to increase sales, Mill Company inaugurated a sales promotional campaign on June 20, 2021. The entity placed a coupon redeemable for a premium in each package of cereal sald. Each premium cost P20 and five coupons must be presented by a customer to receive a premium. The entity estimated that only 60% of the coupons issued would be redeemed. For the six months ended December 31, 2021, the following information is available: Packages of cereal sold 160,000 Premium purchased 12,000 Coupons redeemed 40,000 Y_ Whatis the premium expense for 2021? Ww © 240,000 © 160,000 © 384,000 v © 640,000Y Whatis the estimated liability for premiums on December 31, 2021? " © 160,000 © 224,000 v © 384,000 © 288,000 Problems-Baker 1 of 2 points Baker Company sold consumer products that are packaged in boxes. The entity offered an unbreakable glass in exchange for two box tops and P50 as a promotion during the current year. The cost of the glass was P200. The entity estimated at the end the year that it would be probable that 50% of the box tops will be redeemed. The entity sold 100,000 boxes of the product during the current year and 40,000 box tops were redeemed during the year. Y_ Whatis the premium expense for the current year? WW © 3,000,000 © 3,750,000 v © 5,000,000 © 4,000,000X What amount should be reported as estimated liability at year-end? on © 3,000,000 Oo © 750,000 © 1,500,000 x Correct answer © 750,000 Aranne Company, a grocery retailer, operates a customer loyalty program. The entity grants program members loyalty points when they spend a specrfied amount on groceries. Program members can redeem the points for further groceries. The points have no expiry date. During 2020, the sales amounted to F7,000,000 based on stand-alone selling price. During the year, the entity granted 10,000 points. But management expected that only 80% or 8,000 points will be redeemed. The stand-alone seling price of each loyalty point is P100. ‘On December 31, 2020, 4,800 points have been redeemed. In 2021, managemert revised its expectations and now expected that 90% or 9,000 points will be redeemed altogether. During 2021, the entity redeemed 2,400 points.What amount should be reported as sales revenue including the revenue 1/1 earned from points for 2020? © 7,000,000 © 6,650,000 v O 6,125,000 © 8,000,000 X__ What is the revenue earned from loyalty points for 2021? on © 200,000 @ 210,000 x © 700,000 O 175,000 Correct answer @ 175,000 Problems-Dubious 4 of 4 pointsIn 2020, Dubious Company began selling new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the entity estimated Warranty costs as a percentage of peso sales. First year of warranty 2% Second year of warranty 5% 2020 Sales 5,000,000 ‘Actual warranty cost 100,000 Y Whatis the warranty expense for 2020? © 175,000 © 100,000 © 350,000 © 150,000 What is the warranty liability on December 31, 20207 Oo © 125,000 © 150,000 © 250,000 2024 7,000,000 wm "Y Whatis the warranty expense for 2021? ©@ 490,000 © 140,000 © 300,000 © 350,000 What is the warranty liability on December 31, 20217 © 490,000 ©@ 440,000 © 390,000 © 840,000 Problems: Ww Ww 0 of 1 points Regal Department Store sells aift certificates, redeemable for store merchandise and with no expiration date. ‘The entity provided the following information pertaining to the oift certificate sales ‘and redemptions: Unearned revenue on January 1, 2021 2021 sales 2021 redemptions of prior year sales 2021 redemptions of current year sales 750,000 2,500,000 375,000 1,750,000X On December 31, 2021, what amount should be reported as unearned of revenue? @ 1,250,000 x CO 1,000,000 © 500,000 © 1,125,000 Correct answer © 1,125,000 Dunne Company sells equipment service contracts that cover a two-year period. The sale price of each contract is P600. The past experience Is 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. The entity sold 1,500 contracts evenly throughout 2020, Whatis the contract revenue for 2020? Ww © 180,000 v © 240,000 O 120,000 © 300,000What amount should be reported as deferred contract revenue on wy December 31, 20207 © 540,000 © 360,000 © 480,000 © 720,000 Whatis the contract revenue for 2021? © 120,000 ©@ 450,000 © 180,000 © 300,000 Whats the contract revenue for 2022? Oo © 180,000 © 360,000 © 270,000 Multiple Choice- Theories wn WW 30 of 35 pointsYY Which is not considered a characteristic of a liability? CO Arises from past event © Present obligation © Results in an outflow of resources © Liduidation is reasonably expected to require use of existing resources classified as current assets Y Fora liability to exist © The identity of the party owed must be known. © An obligation to pay dish in the future must exist. © The exact amount must be known. ©@ Apast transaction or event must have occurred, " "© oo 00 K @ooo Which of the following represents a liability? ” Option 2 The obligation to pay for goods that an entity expects to order from suppliers next year. The obligation to pay interest on a five-year note payable that was issued at year- end. The obligation to distribute an entity's own shares next year as a result of share dividend, The obligation to provide goods that customers have ordered and paid for. = 7 during the current year. Which does not meet the definition of a liability? 1 ‘An obligation that is estimated in amount ‘An obligation to provide goods or services in the future Anote payable with no specified maturity date ‘The signing of a three-year employment contract at fixed annual salary vWhatis the relationship between present value and the concept of a WwW liability? @ Present value is used to measure certain liabilities v © Present value is used to measure non current liabilities only. © Present value is used to measure all liabilities © Present value is not used to measure liabilities Y Which is a characteristic of a current liability but not anon current liability? 1/1 © The obligating event creating the liability has already occurred @ Setlement is expected within the normal operating eyele of within 12-months, 7 whichever is longer CO Present obligation that entails settlement by probable future transfer of cash, goods or services © Unavoidable obligation Which statement is NOT true regarding the presentation of current ” liabilities in accordance with IFRS? Curent abilities may be listed inthe order of maturity in descending order of magnitude or in the order of liquidity preference ©® The noncurrent liabilities follow the current liabilities. v © Current liabilities should not be offset against the assets used for liquidation, © Current liabilities are generally recorded at face amountWhich of the following should be included in current liabilities? wy © Unearned revenue CO Short-term zero-interest bring note payable ©@ Allofthese are included in current liabilities v © Trade notes payable _Iflong-term debt becomes callable due to the violation of a loan covenant 1/1 © The debt must be reclassified as current. v EO The debt may continue to be classified as long term i the entity believes the covenant can be renegotiated. © Cash must be reserved to pay the debt © Retained earnings must be restricted equal to the amount of the debt. The award credits granted to customers under a customer loyalty program 1/1 is often described as O Royalty O Credits © Points v © AwardsX_ The consideration allocated to the points is measured at on The proportion of the stand-alone selling price of the points relative to the total of © the stand-alone selling price of the points and the stand-alone selling price of the goods. © Fair value of the goods to be received in exchange x © Carrying amount of goods to be received in exchange CO ‘Stand-alone selling price of the points. Correct answer ‘The proportion of the stand-alone selling price of the points relative to the total of ©@ the stand-alone selling price of the points and the stand-alone selling price of the goods. Y Aretail store received cash and issued a gift certificate that is redeemable 1/1 in merchandise. When the gift certificate was in issued Revenue account should be decreased Deferred revenue account should be decreased Deferred revenue account should be increased v Revenue account should be increased Oo@O00Magazine subscriptions collected in advance are treated as Ww © Deferred revenue in the liability section v © Deferred revenue in the shareholders’ equity section © Magazine subscription refund in the income statement in the period collected © Acontra account to magazine subscriptions receivable In June of the current year, an entity sold refundable merchandise coupons.1/1 The entity received a certain amount for each coupon redeemable from July | to December 31 of the current year, for merchandise with certain retail price. At June 30 of the current year, how should the entity report these coupon transactions? © Revenue at the merchandise's retail price © Revenue at the cash received @ Unearned revenue at the cash received v © Unearned revenue at the merchandise retail price Y_ Which is the correct definition of a provision? Ww © A liability of uncertain timing or amount v CO Anobiigati © Apossible obligation arising from past event nn to transfer funds to an entity © Ailiability which cannot be easily measuredv S CoO0@°0 S o@o°0 008 0 A legal obligation is an obligation that is derived from all of the following, 1/1 except Other operation of law Legislation An established pattem of past practice v contract Itis an event that creates a legal or constructive obligation because the 1/1 entity has no other realistic alternative but to settle the obligation. Current event Obligating event v ‘Subsequent event Past event An outflow of resources embodying economic benefits is regardedas_ 1/1 “probable” when ‘The probability that the event will occur is the same as the probability that the event will not occur. ‘The probability that the event will occur is greater than the probability that the event will not occur. ‘The probability that the event will occur is 90% likely. ‘The probability that the event will not occur is greater than the probability that the event will occur.4K S oOoO@°O CoO0O © CoO@°0 Where there is a continuous range of possible outcomes and each point in 1/1 that range is as likely as any other, the range to be used is the Midpoint v Minimum Maximum: ‘Sum of the minimum and maximum. Which statement is incorrect concerning recognition of a provision? wi Ifan entity has an onerous contract, the present obligation under the contract shall be recognized and measured as a provision. Provisions shall be recognized for future operating losses v Provisions shall be reviewed at the end of each reporting period and adjusted to reflect the current best estimate. A provision shall be used only for expenditures for which the provision was originally recognized. This is defined as a structured program that is planned and controlled by 1/1 the management that materially changes either the scope of a business of an entity or the manner in which that business is conducted Recapitalization Restructuring v Liquidation Corporate revampFor which of the following should a provision be recognized? ” © Obligations for plant decommissioning costs v © Reductions in fair value of financial instruments © Future operating losses © Obligations under insurance contracts Y Aprovision is m © Aevent which snot recognized because isnot probable or cannot be measured reliably. © Anevent which is possible and measurable. © Anevent which is probable but not measurable. ©@ Anevent which is probable and measurable. v X_ Which of the following would not considered a "provision"? on O Note payable © Warranty liability x O Tax payable CO Bad debt Correct answer ©@ Note payableS CoO@°0 S Oo@O0°0 S OoO0@°0 In calculating present value in a situation with a range of possible ww ‘outcomes all discounted using the same interest rate, the expected present value would be The minimum outcome The maximum outcome The sum of probability-weighted present values v The most likely outcome The likelihood that the future event will or will not occur can be expressed 1/1 by a range of outcome. Which range means that the future event occurring is very slight? Certain Remote v Reasonably possible Probable An entity did not record an accrual for a present obligation but disclose the 1/1 nature of the obligation and the range of the loss. How likely is the loss? Probable Reasonably possible v Certain Remotex A present obligation that is probable and for which the amount canbe 0/1 reliably measured should Be accrued by debiting an expense account and crediting a liability account @ Be accrued by debiting an expense account and crediting an appropriated x retained earnings account Be accrued by debiting an appropriated retained earnings account and crediting a liability account. © Not be accrued but disclosed in the notes to the financial statements Correct answer ©@ Be accrued by debiting an expense account and crediting a liability account Y Anentity has a self-insurance plan. Each year, the entity appropriated Mm retained earnings for contingencies in an amount equal to insurance premiums saved less recognized losses from lawsuits and other claims. As a result of an accident in the current year, the entity is a defendant in a lawsuit in which it would probably have to pay measurable amount of damages. What are the effects of the lawsuit's probable outcome on the entity's financial statements for the current year? © Noeffect on either expenses or liabilities © Arnincrease in both expenses and liabilities v © Arincrease in expenses and no effect on liabilities © No effect on expenses and an increase in liabilitiesY_ Contingent assets are usually recognized when Ww © Occurrence is reasonably possible and the amount can be reliably measured © The amount can be reliably measured @ Realized v © Occurrence is probable and the amount can be reliably measured X Acontingent liability shall be recognized when on © Ary lawsuit is actually filed against an entity. @ [is probable that afb has been incurred even though the amount ofthe loss cannot be reliably measured. CO tis certain that funds are available to pay the amount of the claim, © The amount ofthe loss can be reliably measured and its probable prior to issuance of financial statements than a liability has been incurred Correct answer @© The amount of the loss can be reliably measured and itis probable prior to issuance of financial statements than a liability has been incurredOOO ® S KM COO © How should a contingent liability be reported in the financial statements 1/1 when it is reasonably possible that the entity will have to pay the liability at a future date? ‘Asa disclosure only v As a deferred liability As an accrued liability As an account payable with an additional disclosure explaining the nature of the transaction Disclosure usually is not required for wn Contingent losses that are remote and can be reliably measured, v Contingent losses that are probable and cannot be reliably measured. Contingent gains that are probable and can be reliably measured. Contingent losses that are reasonably possible and cannot be reliably measured.X_ Reporting in the financial statements is required for on © Gain contingencies that are probable and can be reliably measured. © Loss contingencies that are probable and can be reliably measured. © Loss contingencies that are possible and can be reliably measured, x © Allloss contingencies. Correct answer ®@ Loss contingencies that are probable and can be reliably measured. Y Gain contingencies that are remote and can be reliably measured " © Must be reported in the body of the financial statements. © Should not be reported or disclosed. v © May be disclosed in a note to the financial statements. © Must be disclosed in a note to the financial statements. Please check if all sections/questions were answered You will no longer be able to change your answers once you click submit.ARE YOU SURE This form was created inside of Batangas State University, Google Forms