Dry Run Questions

On January 1, 2021, Dawn Co. obtained a 5-year, P600,000, non-interest bearing note that requires payment in installment every December 31. Dawn determined that the effective interest rate on the note is 12%. Which of the following statements is correct?

• Dawn Co. will most likely measure the note on initial recognition by multiplying the face amount of the note by PV of 1 @12%, n=5.

• Dawn Co. will most likely measure the note on initial recognition by multiplying the face amount of the note by PV of Ordinary Annuity of 1 @12%, n=5.

• Dawn Co. will most likely measure the note on initial recognition by multiplying the face amount of the note by PV of an Annuity due of 1 @12%, n=5.

• None of the foregoing choices are correct

A company’s break-even point would be decreased by

• An increase in fixed costs

• A decrease in contribution margin ratio

• A decrease in selling price

• A decrease in variable cost per unit

Adams Company has manufactured 100,000 units of compound Z in 2021 at the following costs. Labor of P242,500 of which 93% represents direct labor. Materials of P182,500 of which 90% represents direct materials. Opening work in process is P88,125. Closing work in process inventory is P67,500. Overhead is applied at 125% of direct labor cost. The cost of goods manufactured is

 

• 671,150

• 692,306

• 651,036

• 629,900

Hulk Company purchased 10,000, P1,000 face amount, 9% bonds to yield 10%. The carrying amount of the bonds on January 1, 2021 was P9,800,000. The bonds mature on June 30, 2024 and pay interest semiannually on June 30 and December 31. The entity sold 5,000 bonds on March 1, 2021 for P4,910,000 after the interest has been received. What amount should be recognized as gain on sale of bonds?

• 15,000

• 10,000

• 5,000

• 0

Which statement is true about reporting bank overdraft under IFRS?

• Overdraft typically cannot be offset against positive balance in other cash account but reported as current liability.

• Generally, cash overdraft is not allowed.

• Overdraft can be offset against other bank account when payable on demand and often fluctuates from positive to overdrawn as an integral part of cash management.

• All of these statements are true about bank overdraft.