The document contains questions about accounting principles and guidelines. It asks about accounting for interest expense, separating personal and business assets/expenses, the accrual principle, materiality, revenue recognition, going concern assumption, frequency of financial reporting, reporting currency, measuring assets at historical cost, and separating related but distinct business entities.

1. FABM 1TEST

2. 1.
A company borrowed $100,000 on December 1, 2010,
and will make its only payment for interest when the note
is paid off on June 1, 2011. The total interest for the six
months will be $3,600. On the December 2010 income
statement, the accountant reported an Interest Expense of
$600. This action was the result of which accounting
principle/guideline?

3. 2.
The personal assets of the owner of a
company will not appear on the company's
balance sheet because of which
principle/guideline?

4. 3.
The owner had a business meeting with a
prospective client. The expenses that come with that
meeting should be part of the company’s expenses.
If the owner paid for gas for his personal use, it
should not be included as part of the company’s
expenses.

5. 4.
Which principle/guideline directs a
company to show all the expenses related
to its revenues of a specified period even
if the expenses were not paid in that
period?

6. 5.
A large company purchases a $250 digital
camera and expenses it immediately
instead of recording it as an asset and
depreciating it over its useful life.This
practice may be acceptable because of
which principle/guideline?

7. 6.
The John Marketing Company provides
advertising services to an investment
company in year A but receives advertising
fee in year B. The John Marketing
Company recognizes this revenue in year
A. This action of John Marketing Company
is justified by:

8. 7.
When preparing financial statements, you
should assume that the entity will
continue indefinitely.

9. 8.
Philippine companies are required to
report financial statements annually.

10. 9.
Jollibee should report financial
statements in pesos even if they have a
store in the United States.

11. 10.
When Jollibee buys a cash register, it
should record the cash register at its price
when they bought it.

12. 11.
Mario purchased a laptop at 43,657
,however, the inflation hits the country by
which prices increase severely, the price of
the said laptop increase by almost 5% ,
Mario then recorded the current price in
anticipation that the company will
reimburse him for that.

13. 12.
A school purchased an eraser with an
estimated useful life of three years. Since
an eraser is immaterial relative to assets,
it should be recorded as an expense.

14. 13.
John Dalton III, the owner of ABM
Business, purchase a Honda Civic 2020
Model for personal use. It is recorded as
asset of the company.

15. 14.
The company failed to report the
Statement of Comprehensive Income due
to the company’s economic status.

16. 15.
Aside from owning a shoe store, Albert
operates a canteen. The assets of the
canteen are reported in the statement of
financial position of the shoe store.

17. 16.
Rony, a barbershop owner, opted not
record the cash received from the service
he rendered to a customer who is his
brother.

18. 17.
Johnny forgot the price of his
expenditures for the day, therefore he
estimates and recorded that the total
expenses will be PHP 5,000, however, the
exact amount reached PHP 8,000.