Group 7 Quiz on Accounting Principles
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charinarhoannegultianoGroup 7 Quiz on Accounting Principles
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Powered by AIIf Crescendo Company’s errors are left uncorrected, the net effect on retained earnings on December 31, 2024, will be a ₱250,000 understatement. This results from the net effect of errors such as overstated and understated ending inventories and rent expenses over two years .
To meet the P4 per share dividend goal for ordinary shareholders, Lora Company must declare a total dividend of ₱1,000,000. This involves distributing dividends according to the share types and taking into account the par values and issued shares .
The error of recording equipment as a Repairs & Maintenance Expense instead of as an asset is a noncounterbalancing error because it does not automatically cancel out over time. It should be corrected by adjusting retained earnings and accounting for the asset and its depreciation prospectively, rather than allowing the error to correct itself over time .
Victoria Company should adjust retained earnings by decreasing it by ₱250,000 on January 1, 2025. This reflects the cumulative effect of an understated ending inventory and depreciation in one year and overstated figures in the next .
Preference shares often enhance the right of the shareholder to receive a full cash dividend before dividends are paid to other classes of share capital. This right is more commonly prioritized over voting rights for the board of directors or on major corporate issues .
Lanao Company's net income for the current year should be reported as ₱2,000,000. This is calculated by determining the changes in assets and liabilities, leading to a net increase of ₱1,750,000, and accounting for equity changes excluding retained earnings. The equation 750,000 = NI - 1,250,000 (considering dividends and prior adjustments) gives the net income .
The book value per ordinary share is calculated by considering total equity minus preference share capital and dividends, then dividing by the number of ordinary shares. For example, with a total ordinary share capital of ₱3,000,000, the preference share capital of ₱1,000,000, and retained earnings, provided dividends are paid up to date, the book value can be evaluated at the stated alternatives .
The primary record kept under a single entry accounting system is the Cashbook. This system differs from a double entry system as transactions are not analyzed and recorded using the double entry framework, where every transaction affects at least two accounts to keep the accounting equation balanced .
If an accrued expense is not recorded, the net income in the current year will be overstated because the expense is omitted, and the following year's net income will be understated because the expense will eventually have to be recorded or corrected .