Reference no: EM133118380

Questions -

Q1. In 20x1, a lawsuit was filed against Vause Company for patent infringement. The plaintiff is claiming P400M in damages. Vause's legal counsel believes that it is probable that Vause will lose the lawsuit and pay damages of not less than P40M but not more than P400M. The probability of any amount within the range is as likely as any other amount also within the range. The plaintiff has offered to settle the lawsuit out of court for P360M but Vause did not agree to the settlement. How much is the provision to be reported in Vause's year-end financial statements?

a. 360M

b. 220M

c. 400M

d. 40M

Q2. Chapman Inc. operates a retail store and must determine the proper December 31, 20x3, year-end accrual for the following expenses:

The store lease calls for fixed rent of P12,000 per month, payable at the beginning of the month, and additional rent equal to 6% of net sales over P2,500,000 per calendar year, payable on January 31, of the following year. Net sales for 20x3 are P4,500,000.

An electric bill of P8,500 covering the period 12/16/20x3 through 1/15/20x4 was received January 22, 20x4.

A P4,000 telephone bill was received January 7, 20x4, covering:

Service in advance for January 20x4 P1,500

Local and toll calls for December 20x3 2,500

In its December 31, 20x3 balance sheet, Chapman should report accrued liabilities of

a. 150,750

b. 131,000

c. 128,250

d. 126,750

Q3. In November and December 20x7, Litchfield Company received P792,000 for 1,000, 3-year subscriptions at P264 per issue per year, starting with the January 20x8 issue. Litchfield elected to include the entire P792,000 in its 20x7 income statement for tax purposes. What amount should Litchfield report in its 20x7 statement of financial position as unearned subscription revenue?

a. None

b. 44,000

c. 264,000

d. 792,000

Q4. At December 31 20x7, Taystee Company had 10,000 gift certificates outstanding, which had been sold to customers during 20x7 for P100 each. Taystee operates on a gross margin of 60% of its sales. What amount of revenue pertaining to the 10,000 outstanding gift certificates should be deferred at December 31, 20x7?

a. None

b. 400,000

c. 600,000

d. 1,000,000

Q5. Reznikov, Inc. provides an incentive compensation plan under which its president receives a bonus equal to 10% of the corporation's income in excess of P600,000 before income tax but after deduction of the bonus. If income before income tax and bonus is P1,920,000 and the tax rate is 32%, the amount of the bonus would be

a. 120,000

b. 132,000

c. 174,360

d. 192,000