Answered: In identifying the amount of liability…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. In identifying the amount of liability for bonus which is based on profit before bonus but after income tax, which of the following represents the correct expression, assuming bonus is 15%, income tax is 25% and profit is 1 million?

A. B = 15% (1M – 0.75(1M))

B. B = 15% (1M – 0.25(1M))

C. B = 15% (1M – 0.25(1M-B))

D. B = 15% (1M – 0.75(1M-B))

2. After the commencement date, the lease liability should be measured by the following EXCEPT:

A. increasing the carrying amount to reflect interest on the lease liability.

B. reducing the carrying amount to reflect the lease payments made.

C. remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect revised in-substance fixed lease payments.

D. cost model at cost less any accumulated depreciation and any accumulated impairment losses.

3. When points are rewarded to customers for their purchases, and can be used as payment for future purchases, the points are recorded as:

A. additional revenue for the period.

B. deferred revenue.

C. included as sales for the period.

D. recognized as selling expense

4. What is the effect of the residual value guarantee in computing for the annual depreciation of the right-of-use asset with a useful life of 10 years and a lease term of 8 years?

A. Deducted from the total cost of the right of use asset at its absolute amount while the right of use asset is depreciated over its useful life

B. Deducted from the total cost of the right of use asset at its present value while the right of use asset is depreciated over the lease-term

C. Deducted from the total cost of the right of use asset at its present value while the right of use asset is depreciated over its useful life

D. Deducted from the total cost of the right of use asset at its absolute amount while the right of use asset is depreciated over the lease term.

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