Scribd
Upload
8 views

IA2THEORIES

Ia2 theories

Uploaded by

RJ 1
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
8 views

IA2THEORIES

Ia2 theories

Uploaded by

RJ 1
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

1.Which of the following is a noncurrent liability?

a. Income tax payable

b. One-year magazine subscription received in advance

c. Unearned interest income related to noninterest bearing long-term note receivable

d. Estimated warranty liability

2. A provision is

a. An event which is not recognized because it is not probable or cannot be measured reliably

b. An event which is probable and measurable

c. An event which is probable, possible or remote and measurable

d. An event which is probable but not measurable

3. Which of the following statements is incorrect concerning a contingent liability?

a. A contingent liability is not recognized in the financial statements

b. A contingent liability is disclosed only

c. If the contingent liability is remote, no disclosure is required

d. A contingent liability is both probable and measurable

4. Which of the following statements is incorrect concerning a contingent asset?

a. A contingent asset is not recognized in the financial statements because this may result to recognition
of income that may never be realized

b. When the realization of income is virtually certain, the related asset is no longer contingent asset and
its recognition is appropriate

c. A contingent asset is only disclosed when the occurrence of the future event is possible or
remote

d. The related gain arising from the contingent asset is recognized usually when it is realized

5. During 2025, Company X filed suit against Company Y seeking damages for patent infringement. On
December 31, 2025, the legal counsel believed that it was probable that Company X would be successful
against Company Y for an estimated amount of P1,500,000. On March 31, 2026, Company X was
awarded P1,000,000 and received full payment thereof. The financial statements were issued March 1,
2026. In Company X’s 2025 financial statements, how should this award be reported?

a. As a receivable and revenue of P1,000,000.

b. As a receivable and deferred revenue of P1,000,000.


c. As a disclosure of a contingent asset of P1,000,000.

d. As a disclosure of a contingent asset of P1,500,000.

6. The “amortized cost” of bonds payable means

a. Face amount plus premium on bonds payable

b. Face amount minus discount on bonds payable

c. Face amount minus bond issue cost

d. Face amount plus premium on bonds payable or minus discount on bonds payable

7. If the bonds are issued at a premium, this indicates that

a. The yield rate of interest exceeds the nominal rate

b. The nominal rate of interest exceeds the yield rate

c. The yield and nominal rates coincide

d. No necessary relationship exists between the two rates

8. Under the effective interest method of amortization, the interest expense is equal to

a. The stated rate of interest multiplied by the face amount of the bonds

b. The market rate of interest multiplied by the face amount of the bonds

c. The stated rate of interest multiplied by the beginning carrying amount of the bonds

d. The market rate of interest multiplied by the beginning carrying amount of the bonds

9. How are the proceeds from issuing a compound instrument allocated between the liability and equity
components?

a. First, the liability component is measured at fair value, and then the remainder of the proceeds
is allocated to the equity component

b. First, the equity component is measured at fair value, and then the remainder of the proceeds is
allocated to the liability component

c. First, the fair values of both the equity component and the liability component are estimated. Then the
proceeds are allocated to the liability and equity components based on the relation between the estimated
fair value

d. The equity component is measured at its intrinsic value. The liability component is measured at the
face amount less the intrinsic value of the equity component
10.Which statement is incorrect where the expenditure required to settle a provision is expected to be
reimbursed by another party?

A. The reimbursement shall be recognized only when it is virtually certain that the reimbursement would
be received if the entity settles the obligation.

B. The amount of the reimbursement shall not exceed the amount of the provision.

C. In the income statement, the expense relating to the provision may be presented net of
reimbursement.

D. The reimbursement shall not be treated as separate asset but netted against the estimated liability for
the provision.

11. Bonds payable not designated at fair value through profit or loss shall be measured initially at

A. Face amount

B. Fair value

C. Fair value plus bond issue cost

D. Fair value minus bond issue cost

12. If bonds are issued initially at a premium and the effective-interest method of amortization is used,
interest expense in the earlier years will be

a. greater than if the straight-line method were used

b. greater than the amount of the interest payments.

c. the same as if the straight-line method were used.

d. less than if the straight-line method were used

13. When bonds are retired prior to maturity with proceeds from a new bond issue, any gain or loss from
the early extinguishment should be

A. Amortized over the remaining original life of the retired bond issue.

B. Amortized over the life of the new bond issue.

C. Recognized in profit or loss.

D. Recognized in other comprehensive income.

14. Unamortized debt discount should be reported as

A. Deferred charge

B. Part of the issue costs

C. Direct deduction from the face amount of the debt.


D. Direct deduction from the present value of the debt.

15. In theory, the proceeds from the sale of a bond would be equal to

a. The face amount of the bond

b. The present value of the principal amount due at the end of the life of the bond plus the present
value of the interest payments 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 face amount of the bond and the periodic interest payments

You might also like