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WorksheetsAudit Test
Total questions: 25
Worksheet time: 34mins
Under this assumption, the effects of transactions and other events are recognized when they occur and not as cash or its equivalent is received or paid, and they are recorded in the accounting records and reported in the financial statements of the period to which they relate.
Accrual basis
Going concern
Monetary unit
Time period
Which statement is incorrect concerning the qualitative characterictic of relevance?
The relevance of information is affected by its nature and materiality.
To be useful, information must be relevant to the decision making needs of users
Information about financial position and past performance is frequently used as basis for predicting future financial position and performance and other matters such as dividend and wage payments and ability of the entity to meet its financial commitments as they fall due.
The predictive and confirmatory roles of information are not interrelated.
When economic benefits are expected to arise over several accounting periods and the association with income can only be broadly or indirectly determined, expenses are recognized in the income statement on the basis of
Cause and effect association
Immediate recognition
Systematic and rational allocation
Profit maximization
Which of the following statements is incorrect?
The accrual method, which builds directly on the revenue and matching principles, ignores the timing of cash receipts or payments in determining when to recognize revenue or expenses.
Expenses are matched with revenues, not the reverse
In accordance with the unit of measure assumption, accountants normally revise the amounts to reflect the changing purchasing power of money due to inflation or deflation.
In accordance with the going concern assumption, the life of a business is presumed to be indefinite.
An expense is recognized immediately in the statement of comprehensive income:
I. When an expenditure produces no future economic benefits
II. When cost incurred ceases to qualify for recognition as an asset in the statement of financial position
I only
II only
Both I and II
Neither I nor II
The measurement basis most commonly adopted by entities in preparing their financial statements is
Historical cost
Current cost
Realizable value
Present value
Suppliers and other trade creditors are interested in information
That enables them to determine whether amounts owing to them will be paid when due
About the continuance of an entity, especially when they have long-term involvement with or are dependent on the entity.
In order to regulate the activities of the entity, determine taxation policies and as the basis for national income and similar statistics.
About the stability and profitability of the entity.
The elements directly related to the measurement of performance are
Income and expenses
Assets, liabilities and equity
Assets and liabilities
Income, expenses and equity
An equity is
A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
The residual interest in the assets of the entity after deducting all of its liabilities
The excess of revenue over expenses
An income is recognized when
It is probable that future economic benefit will flow to the entity and the economic benefit can be measured reliably.
It is possible that future economic benefit will flow to the entity and the economic benefit can be measured reliably.
The entity obtains control of the future economic benefit.
The future economic benefit can be measured reliably.
Technically, offsetting in financial statements is accomplished when
The allowance for doubtful accounts is deducted from accounts receivable
The accumulated depreciation is deducted from fixed assets.
The total liabilities are deducted from total assets to arrive at net assets
Gains or losses from disposal of noncurrent assets are reported by deducting from the proceeds the carrying amount of the assets and the related selling costs.
An asset shall be classified as current when it satisfies any of the following criteria, except
It is expected to be realized or intended for sale or consumption in the normal course of the entity’s operating cycle.
It is expected to be realized within twelve months after the balance sheet date
It is cash or a cash equivalent asset which is restricted in use.
It is held primarily for the purpose of being traded.
Which information is not included in the “notes to financial statements”?
Statement of compliance with GAAP
Statement of measurement basis and accounting policies applied
Supporting computation for line items presented and aggregated
Cash flows
What is the treatment of a change in accounting policy?
Retrospectively, meaning, any resulting adjustment is reported as an adjustment to the opening balance of retained earnings.
Currently, meaning, any resulting adjustment is included in recognized gains or losses.
Currently, meaning, any resulting adjustment is included in income or loss of the current period.
Prospectively, meaning, no adjustment to prior periods are made either to the opening balance of retained earnings or in reporting the net income or loss for the current period because existing balances are not recalculated.
Which of the following is a characteristic of a change in accounting estimate?
It usually need not be disclosed.
It does not affect the financial statements of prior period.
It should be reported through the restatement of financial statements.
It makes necessary the reporting of proforma amounts for prior periods.
What is the correct amount of current assets on December 31, 2019?
2,412,000
2,440,000
2,240,000
2,500,000
The following trial balance of PT XYZ Company at December 31, 2018 has been adjusted except for income tax expense.
During 2018, estimated tax payments of Rp1,750,000 were charged to prepaid taxes. XYZ has not recorded yet income tax expense. The tax rate is 35%. Included in accounts receivable is Rp3,000,000 due from a customer. Special terms granted to this customer require payment in equal semiannual installments of Rp500,000 every April 1 and October 1.
In XYZ’s December 31, 2018 statement of financial position, what amount should be reported as total current assets?
20,750,000
18,750,000
17,000,000
19,000,000
The following trial balance of PT XYZ Company at December 31, 2018 has been adjusted except for income tax expense.
During 2018, estimated tax payments of Rp1,750,000 were charged to prepaid taxes. XYZ has not recorded yet income tax expense. The tax rate is 35%. Included in accounts receivable is Rp3,000,000 due from a customer. Special terms granted to this customer require payment in equal semiannual installments of Rp500,000 every April 1 and October 1.
In XYZ’s December 31, 2018 statement of financial position, what amount should be reported as retained earnings?
10,000,000
8,250,000
7,750,000
6,000,000
PT LDG Company maintains a markup of 60% based on cost. The Company’s selling and administrative expenses average of 30% of sales. For the current year, sales amounted to Rp9 ,600,000. LDG’s cost of goods sold and net income are
Cost of goods sold 5,700,000
Net income 960,000
Cost of goods sold 5,760,000
Net income 2,880,000
Cost of goods sold 6,000,000
Net income 720,000
Cost of goods sold 6,000,000
Net income2,880,000
The following data were available from PT LTA Company’s record on December 31, 2019:
Finished goods inventory, January 1 1,000,000
Finished goods inventory, December 31 1,200,000
Cost of goods manufactured 5,000,000
Loss on sale of fixed assets 100,000
The cost of goods sold for the year was
4,800,000
5,200,000
4,900,000
5,300,000
PT JSL Company during its first year of operations issued 15,000 shares with Rp100 par value at Rp150 per share. Two thousand shares were issued in payment of current obligations of Rp250,000. Dividends of Rp500,000 were paid during the year. Total liabilities at the end of the year amounted to Rp200,000 and total assets of the Company at the end of the year equaled Rp3,000,000. What was the net income for the first year of operations?
1,500,000
800,000
500,000
300,000
PT AKR Company purchased a machine on January 1, 2011 for Rp3,000,000. At the date of acquisition, the machine had a life of six years with no residual value. The machine is being depreciated on a straight line basis. On January 1, 2014 AKR determined that the machine had a useful life of eight years from the date of acquisition with no residual value. What should be the depreciation for the year 2014?
300,000
500,000
187,500
250,000
In the current assets section of SG’s December 31, 2014 statement of financial position, what total amount should be reported as “cash and cash equivalents”?
12,000,000
14,000,000
11,000,000
13,000,000
PT EC Company’s allowance for doubtful accounts was Rp200,000 at the end of 2014 and Rp180,000 at the end of 2013. For the year ended December 31, 2014, EC reported doubtful accounts expense of Rp50,000. What amount did EC debit to the appropriate account in 2014 to write off actual bad debts?
30,000
20,000
50,000
70,000
On December 31, 2014, PT DEF Company was a defendant in a pending lawsuit. The suit arose from the alleged defect of a product that DEF sold in 2013. In the opinion of DEF’s attorney, it is probable that DEF will have to pay Rp500,000 and it is reasonably possible that DEF will have to pay Rp600,000 as a result of this lawsuit. In its 2014 financial statements, DEF would report
An accrued liability of Rp500,000 only
An accrued liability of Rp500,000 and would disclose a contingent liability of an additional Rp100,000
An accrued liability of Rp600,000 only
No information about this lawsuit
