1. In analyzing an entity's financial statements, which financial statement would a potential investor primarily use to assess b.

Financial flexibility
liquidity and financial flexibility? c. Liquidity
a. Statement of financial position d. Exchangeability
b. Income statement
c. Statement of retained earnings 9. Which of the following is NOT a current liability?
d. Statement of cash flows a. Unearned revenue
b. Stock dividend payable
2. When classifying assets as current and non current which should be considered? c. The currently maturing portion of long-term debt
a. The amounts at which current assets are carried reported must reflect realizable cash value d. Trade accounts payable
b. Prepayments for items such as insurance or rent are included in "other assets"
c. Current assets are determined by the seasonal nature of the business. 10. Non current liabilities include/s?
d. Assets are classified as current if the assets are reasonably expected to be realized in cash or consumed during a. Obligations not expected to be liquidated within the operating cycle
the normal operating cycle. b. Obligations payable at some date beyond the operating cycle
c. Deferred tax liability
3. The major financial statements include all of the following EXCEPT d. All of these are non current liabilities
a. Statement of financial position
b. Statement of changes in financial position 11. Which of the following is usually classified as a non current asset?
c. Statement of comprehensive income a. Plant expansion fund
d. Statement of changes in equity b. Prepaid rent
c. Supplies
4. Accrued revenue would normally appear in the statement of financial d. Goods that are in the process of being completed for another entity
position under which of the following?
a. Non current assets 12. Which of the following best describes the term "liability"?
b. Current liabilities a. An excess of equity over current assets
c. Non current liabilities b. Resources to meet financial commitments when due
d. Current assets c. The residual interest in the assets of the entity after deducting all of the liabilities
d. A present obligation arising from past event
5. The essential characteristics of an asset include all of the following, EXCEPT
a. The asset is the result of past event. 13. Equity securities held to finance future construction should be classified as:
b. The asset provides future economic benefit a. Current assets
c. The cost of the asset can be measured reliably. b. Property, plant and equipment
d. The asset is tangible c. Intangible assets
d. Non current investments
6. It is the statement of financial position.
a. Omits many items that are of financial value. 14. An entity would be more likely to know the amount of inventory on hand if it used the periodic inventory system rather
b. Makes very limited use of judgement and estimate. than the perpetual inventory system.
c. Uses fair value for most assets and liabilities. False
d. All of the choices are correct
15. The term "deficit" refers to:
7. The statement of financial position is useful for analyzing all of the a. An excess of current assets over current liabilities
following, EXCEPT b. An excess of current liabilities over current assets.
a. Liquidity c. A debit balance in retained earnings.
b. Solvency d. A prior period error
c. Profitability
d. Financial flexibility or need for additional financing 16. The perpetual inventory system requires recording the cost of each sale as it occurs
True
8. The amount of time that is expected to elapse until an asset is realized or
otherwise converted into cash is referred to as: 17. Ending merchandise inventory is included in the calculation of cost of goods sold.
a. Solvency True
18. Transportation In is treated as a deduction of in the cost of goods sold section of the income statement 28. It is the charge imposed on the borrower of funds for the use of money.
False a. Principal
b. Rate
19. Summing ending merchandise inventory and cost of goods sold gives the cost of goods available for sale. c. Interest
True d. Creditor

20. Ending merchandise inventory is included in the calculation of cost of goods sold 29. Checks that have been issued by the company to creditors but the payments have not yet been processed.
True a. Deposit in transit
b. Outstanding check
21. FOB shipping point means that the seller incurs the shipping costs. c. NSF Checks
False d. Bank service fee

22. Banks deduct charges for services they provide to customers but these amounts are usually not noticeable. 30. When a customer deposits a check into an account but the account of the issuer of the check has insufficient amount
a. Interest income to pay the check, the bank reduces from the customer’s account the check that was previously credited.
b. NSF Check a. Deposit in transit
c. Outstanding check b. Outstanding check
d. Bank service fee c. NSF Checks
d. Bank service fee
23. It is a document that matches the cash balance on a company’s balance sheet to the corresponding amount on its bank
statement. 31. Treasury shares should be reported as
a. Share certificate a. Current asset
b. Promissory note b. Investment
c. Bank reconciliation statement c. Other asset
d. Official receipt d. Reduction of shareholders' equity

24. The following are the reconciling items to adjust the book balance, EXCEPT: 32. Which should be classified as current asset?
a. Outstanding checks a. Trade installment accounts receivable normally collectible in 18 months
b. NSF Check b. Cash designated for the redemption of callable preference shares
c. Interest Income c. Cash surrender value of a life insurance policy.
d. Bank service fee
33. The statement of financial position provides a basis for all of the following,
25. The following are the reconciling items to adjust the bank balance, EXCEPT: EXCEPT
a. Outstanding checks a. Computing rate of return.
b. NSF Checks b. Evaluating capital structure.
c. Deposit in Transit c. Determining the increase in cash due to operations.
d. All of the above d. Assessing liquidity and financial flexibility.

26. Banks pay interest on some bank accounts 34. On July 1, 2018, Joel Reyes Tours, issued check against Bulacan Savings Bank
a. Interest income account to established an imp rest petty cash fund, P3,000.00 The proper entry for
b. NSF Check the establishment of fund is
c. Outstanding check a. Cash in bank 3,000.00
d. Bank service fee Petty cash fund 3,000.00
b. Cash 3,000.00
27. Cash and checks that have been received and recorded but have not yet been recorded on the bank statement. Cash in bank 3,000.00
a. Deposit in transit c. Petty cash fund 3,000.00
b. Outstanding check Cash in bank 3,000.00
c. NSF Checks d. Cash in bank 3,000.00
d. Bank service fee Cash on hand 3,000.00