Accounting Quiz

FIFO provides income tax savings during periods of falling prices.

• True

• False

Inventory write-downs and reversals of write-downs are always recognized in profit or loss.

• True

• False

When using a perpetual inventory system, no Purchases account is used. a Cost of Goods Sold account is used. two entries are required to record a sale. all of these.

• No Purchases account is used.

• Cost of Goods Sold account is used.

• Two entries are required to record a sale.

• All of these.

In 2024 El Corp transferred inventory to How Corp and agreed to repurchase the merchandise early in 2025. How then used the inventory as collateral to borrow from Nor Bank, remitting the proceeds to El. In 2025 when El repurchased the inventory, How used the proceeds to repay its bank loan. On whose books should the cost of the inventory appear at the December 31, 2024 balance sheet date?

• Elw Corp

• How Corp

• Nor Bank

• How Corp, with El making appropriate note disclosure of the transaction

Dane Co. received merchandise on consignment. As of March 31, Dane had recorded the transaction as a purchase and included the goods in inventory. None of the consigned goods have been sold during the period. The effect of this on its financial statements for March 31 would be

• No effect.

• Net income was correct and current assets and current liabilities were overstated.

• Net income, current assets, and current liabilities were overstated.

• Net income and current liabilities were overstated.

A Retailer purchased merchandise with a list price of ₱90,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. The Retailer should record the cost of this merchandise as

• ₱63,000.

• ₱64,800.

• ₱70,200.

• ₱90,000.

On January 1, 20x1, Entity A receives a financial aid from the government amounting to ₱1M as compensation for losses it has incurred on a recent calamity. How much income from government grant will Entity A recognize in 20x1?

• 1,000,000

• 100,000

• 53,334

• 0

Which of the following is a qualifying asset?

• Biological asset measured at fair value less costs to sell

• A multi-million dollar executive jet plane that is ready for its intended use upon purchase

• A second-hand heavy machinery that takes 2 years to refurbish and customize for its intended use

• A long-term note receivable (financial asset)

Which of the following is not considered an item of PPE?

• Land classified as investment property

• Land used in agricultural activity by a farming entity

• Equipment manufactured or acquired primarily to be held for rentals

• All of these

According to PAS 23, borrowing costs that do not directly relate to the acquisition, construction or production of a qualifying asset are

• Capitalized as cost of the qualifying asset.

• Expensed.

• Expensed, except when the borrowing costs relate to other assets.

• Any of these as a matter of accounting policy choice