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  1 FINALS QUIZ  –  FIN3   Multiple Choice   Identify the choice that best completes the statement or answers the question.  1. The accounts and balances shown below were gathered from Paynter Corporation's trial balance on December 31, 2019. All adjusting entries have been made. Wages Payable ........................................... 25,600 Cash .................................................... 17,700 Mortgage Payable ........................................ 151,600 Dividends Payable ....................................... 14,000 Prepaid Rent ............................................ 13,600 Inventory ............................................... 81,800 Sinking Fund Assets ..................................... 52,400 Short-Term Investments .................................. 15,200 Premium on Bonds Payable ................................ 4,600 Stock Investment in Subsidiary .......................... 102,400 Taxes Payable ........................................... 22,800  Accounts Payable ........................................ 24,800  Accounts Receivable ..................................... 36,600 Paynter Corporation's working capital is a. 62,500. b. 73,100. c. 77,700. d. 125,700. 2. Kaila Company carried a provision of P2,000,000 in its draft financial statements on December 31, 2019 in relation to an unresolved court case. On January 31, 2020, when the financial statements on December 31, 2019 had not yet been authorized for issue, the case was settled and the court decided the final total damages payable by Kaila to be P2,800,000. What amount should be the adjustment on December 31, 2019 in relation to this event? a. 2,800,000 b. 2,000,000 c. 800,000 d. 0 3. During 2019, Orton Company earned net income of 384,000 which included depreciation expense of 78,000. In addition, the company experienced the following changes in the account balances listed below: Increases Decreases  Accounts payable 45,000 Accounts receivable 12,000 Inventory 36,000 Accrued liabilities 24,000 Prepaid insurance 33,000 Based upon this information what amount will be shown for net cash provided by operating activities for 2019? a. 492,000 b. 465,000 c. 285,000 d. 267,000 4. For the year ended December 31, 2019, Transformers Inc. reported the following: Net income 60,000 Preference dividends declared 10,000  2 Ordinary share dividends declared 2,000 Unrealized holding loss, net of tax 1,000 Retained earnings, beginning balance 80,000 Share capital  –  Ordinary 40,000  Accumulated Other Comprehensive Income, Beginning Balance 5,000 What would Transformers report as total stockholders' equity? a. 172,000 b. 168,000 c. 128,000 d. 120,000 5. Leonard Corporation reports the following information: Correction of overstatement of depreciation expense in prior years, net of tax 215,000 Dividends declared 160,000 Net income 500,000 Retained earnings, 1/1/2019, as reported 1,000,000 Leonard should report retained earnings, December 31, 2019, at a. 785,000. b. 1,125,000. c. 1,340,000. d. 1,555,000. 6. For the year ended December 31, 2019, Transformers Inc. reported the following: Net income 60,000 Preference dividends declared 10,000 Ordinary share dividends declared 2,000 Unrealized holding loss, net of tax 1,000 Retained earnings 80,000 Share capital  –  Ordinary 40,000  Accumulated Other Comprehensive Income, Beginning Balance 5,000 What would Transformers report as its ending balance of Accumulated Other Comprehensive Income? a. 6,000 b. 5,000 c. 4,000 d. 1,000 7. Kaila Company’s prepaid insurance was P100,000 at Dec. 31, 2019 and P50,000 at Dec. 31, 2018. . Insurance expense was P40,000 for 2019 and P30,000 for 2018. What amount of cash disbursements for insurance would be reported in Kaila’s 2019 net cash flows from operating activities presented on a direct basis? a. 40,000 b. 60,000 c. 90,000 d. 110,000 8. On January 2, 2019 Kaila Co. intends to sell its building with a carrying value of P3,800,000 but with a fair value of P4,200,000 but will continue to use the asset until the construction of a new building is completed. The current building has a remaining useful life of 10 years.  3 On January 2, 2019, Kaila Co. should classify the building as a. Property , plant and equipment valued at P3,800,000 b. Property, plant and equipment valued at P4,200,000 c. Non current asset held for sale and valued at P3,800,000 d. Non current asset held for sale and valued at P4,200,000 9.  Athan Company’s draft financial statements showed the profit before tax for the year ended December 31, 2018 at P9,000,000. The board of directors authorized the financial statements for issue on March 20, 2019. A fire occurred at one of Athan’s site on January 15, 2019 with resulting damage costing P7,000,000, only P4,000,000 of which is covered by insurance. The repairs will take place and be paid for in April 2019. The P4,000,000 claim from the insurance entity will however be received on February 14, 2019. What amount should be reported as profit before tax in Athan’s financial statements? a. 13,000,000 b. 9,000,000 c. 2,000,000 d. 6,000,000 10. On January 1, 2016, Nobel Corporation acquired machinery at a cost of 600,000. Nobel adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2019, a decision was made to change to the double-declining balance method of depreciation for this machine. 1. Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning retained earnings, is a. 67,200. b. 0. c. 78,960. d. 112,800. 2. The amount that Nobel should record as depreciation expense for 2019 is a. 60,000. b. 84,000. c. 120,000. d. none of the above. 11. Use the following information (in thousands): Revenues ¥1,200,000 Income from continuing operations 150,000 Net Income 135,000 Income from operations 330,000 Selling & administrative expenses 750,000 Income before income tax 300,000 Determine the amount of discontinued operations. a. ¥(30,000) b. ¥120,000 c. ¥150,000 d. ¥(15,000)  4 12. On December 31, 2019 Dean Company changed its method of accounting for inventory from the average cost method to the FIFO method. This change caused the 2019 beginning inventory to increase by 420,000. The cumulative effect of this accounting change to be reported for the year ended 12/31/2019, assuming a 40% tax rate, is a. 420,000. b. 252,000. c. 168,000. d. 0. 13. Jerome Corporation acquires copyright from authors, paying advance royalties in some cases and in others, paying royalties within 30 days of year end.Jerome reported royalty expense of P 375,000 for the year ended December 31, 2019. The following data are included in the corporation’s December 31 balance sheet.  2018 2019 Prepaid royalties P60,000 P50,000 Royalties payable 75,000 90,000 How much would be the royalty payments for the year? a) 350,000 b) 370,000 c) 380,000 d) 400,000 14. The following items were among those that were reported on Joseph’s Company’s income statement for the year ended December 31, 2019: Legal and Audit 340,000.00 Rent for the office space 480,000.00 Interest expense 420,000.00 Loss on sale of equipment 70,000.00 Office staff salaries 400,000.00 The office space is used equally by Joseph’s sal es and accounting dept. What amount of the above  – listed items should be classified as general and administrative expenses in Joseph’s income statements?  a. 980,000.00 b. 1,050,000.00 c. 1,220,000.00 d. 1,000,000.00 15. Sunshine Company had total assets of P4,000,000 and shareholders’ equity of P2,080,000 at the beginning of the year. During the year, assets increased by P520,000 and liabilities decreased by P820,000. What was Sunshine’s shareholders’ equity at the end of the year? a. 3,420,000 b. 3,700,000 c. 3,380,000 d. 1,340,000 16. Given the following: Net income 600,000 EPS 4.25 Dividend/ordinary shares 2.00 Weighted average ordinary shares outstanding 120,000 Determine the amount of the preference share dividend.
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