CHAPTER 37_PRESENTATION OF FS.pdf - Chapter 37 –...

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1 Chapter 37 – Presentation of Financial Statements Multiple Choice - Theory 1. D 6. D 11. B 16. C 21. C 2. C 7. B 12. B 17. C 22. B 3. D 8. B 13. D 18. A 23. D 4. C 9. D 14. A 19. D 24. D 5. C 10. A 15. B 20. B 25. D Multiple choice – Computational (SET A) Answers at a glance: 1. A 6. A 11. A 16. A 2. C 7. C 12. C 17. A 3. C 8. A 13. A 4. A 9. D 14. A 5. B 10. A 15. A Solutions: 1. A Solution: Revenues 3,600,000 Expenses (2,600,000) Profit before tax 1,000,000 Multiply by: Tax rate 30% Income tax expense 300,000 The year-end adjustment to record income tax expense is as follows: Dec. 31, 20x1 Income tax expense Prepaid taxes 300,000 300,000 Cash 550,000 Accounts receivable, net (1.65M - 250K) 1,400,000 Prepaid taxes - Total current assets 1,950,000 2. C Solution: Retained earnings - Jan. 1 630,000 Profit after tax (3.6M - 2.6M - 300K) 700,000 Retained earnings - Dec. 31 1,330,000
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