18 Questions
What will happen if the current ratio of a Company falls below the bank's requirement?
The bank will demand immediate payment of the loan.
How was the Company's current ratio on December 31, 2018?
1.5:1
When were the financial statements of the Company for the year ended December 31, 2018, authorized for issue?
March 30, 2019
What category will a long-term loan fall under in the statement of financial position if a breach in agreement is rectified within the next 12 months and immediate payment is not demanded?
Non-current liability
What are loan covenants in a commercial loan?
Restrictions on certain actions by the borrower to protect the lender's interest.
What would be the classification of a long-term loan in the statement of financial position if a breach in agreement is not rectified within the next 12 months and immediate payment is demanded?
Current liability
What is the main reason why the liability for damages cannot be recognized in the financial statements as of December 31, 2018?
The estimate of the liability cannot be determined with reasonable certainty
What type of event is the court’s decision on January 15, 2019, requiring the company to pay damages of P600,000?
Adjusting event
How should the initial recognition of the estimated liability for damages be recorded in the company's financial statements as of December 31, 2018?
Recognize a loss on litigation in the income statement
What is the significance of an adjusting event in financial reporting?
It impacts financial statements by requiring adjustments
What is the main reason SCAR Company's serious financial deterioration is mentioned in the text?
To highlight potential credit risk for MUFASA Company
Why does the text mention that SCAR Company has not yet filed for bankruptcy?
To highlight that bankruptcy is not yet a formal condition
Based on PAS 10, an event that happens after the reporting period but requires the financial statements to be adjusted is known as a(n) ____________.
Subsequent event
In the context of the text, which of the following is NOT a reason for the time lag between preparing and issuing financial statements?
Event after reporting period
What criteria should be considered to determine if an event after the reporting period is an adjusting event or not?
If it requires adjustments to the financial statements
According to PAS 10, an event after the reporting period that only requires disclosure in the notes to the financial statements is referred to as a ____________ event.
Non-adjusting event
What type of event would SIMBA Company taking a 10-year loan from a bank in 2015 be classified as?
Non-adjusting event
If an event occurred after the reporting period that impacts the net profit margin of a company, but does not require adjustments to the financial statements, how is this event classified?
Non-adjusting event
Learn about PAS 10 which defines events after the reporting period as any event that occurs after the end of the reporting period and before the financial statements are issued. Understand the reasons for the time lag between preparation and issuance of financial statements.
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