Professional Documents
Culture Documents
Accounting Concepts
The branch of accounting concerned with the presentation of financial information primarily for
use of third person outside of business enterprise. (CPA Diary)
a. Financial Accounting
b. Management Accounting
c. Government Accounting
d. All of the above
The normative attitudes or ideas of the accounting profession as to what ought to represent good
accounting practice and which modify the application of accounting principles are known as
(CPA Diary)
a. accounting postulates
c. accounting procedures
b. accounting conventions
d. accounting principles
Conceptual Framework
On December 31, year 1, Brooks Co. decided to end operations and dispose of its assets within 3
months. At December 31, year 1, the net realizable value of the equipment was below historical
cost. What appropriate measurement basis for equipment included in Brookss December 31,
year 1 balance sheet? (CPAR)
a) Historical cost
b) Current reproduction cost
c) Net realizable value
d) Current replacement cost
The expected cash flow approach to measuring present value (CPAR)
a) Uses a single set of estimated cash flows
b) Is limited to assets and liabilities with contractual cash flows
c) Encompasses all expectations about possible cash flows
d) Determines the single most likely amount or best estimate
Balance Sheet
In analyzing a companys financial statements, which financial statement would a potential
investor primarily use to assess the companys liquidity and financial flexibility? (CPAR)
a) Balance sheet
b) Income statement
c) Statement of retained earnings
d) Statement of cash flows
Current assets are reasonably expected to be realized in cash or sold or consumed during the
normal operating cycle of the business. Current assets most likely include. (CPAR)
a) Intangible assets
b) Purchased goodwill
c) Organization costs
d) Trading securities
Inventories
According to the net method, which of the following items should be included in the cost of
inventory? (CPAR)
Freight Costs
Purchase Discounts not taken
a)
Yes
No
b)
Yes
Yes
c)
No
Yes
d)
No
No
The following information applied to Fenn, Inc. for 2015:
Merchandise purchased for resale
Freight-in
Freight-out
Purchase returns
P400,000
10,000
5,000
2,000
Income Statement
The effect of a material transaction that is infrequent in occurrence but not unusual in nature
should be presented separately as a component of income from continuing operations when the
transaction results in a (CPAR)
a)
b)
c)
d)
Gain
Yes
Yes
No
No
Loss
Yes
No
No
Yes
The correction of an error in the financial statements of a prior period should be reported, net of
applicable income taxes, in the current (CPAR)
a) Retained earnings statement after net income but before dividends
b) Retained earnings statement as an adjustment of the opening balance
c) Income statement after income from continuing operations and before extraordinary
items
d) Income statement after income from continuing operations and after extraordinary items
Discontinued operations
A non-current asset held for sale should be measured at:
a) The higher of the asset's carrying amount when originally classified as held for sale and
its fair value less costs to sell
b) The asset's carrying amount when originally classified as held for sale, less any
accumulated depreciation since that date
c) Fair value less costs to sell
d) The lower of the asset's carrying amount when originally classified as held for sale
and its fair value less costs to sell
A non-current asset should be classified as held for sale only if:
a) Its carrying amount will be recovered principally through a sale transaction rather
than through continuing use
b) Its carrying amount will be recovered wholly through a sale transaction rather than
through continuing use
c) Its carrying amount will be recovered principally through continuing use rather than
through a sale transaction
d) Its carrying amount will be recovered wholly through continuing use rather than through
a sale transaction
Extraordinary items
A material loss should be presented separately as a component of income from continuing
operations when it is (CPAR)
a)
b)
c)
d)
An extraordinary item
The cumulative effect of a change in accounting principle
Unusual in nature and infrequent in occurrence
Not unusual in nature but infrequent in occurrence
A transaction that is unusual in nature and infrequent in occurrence should be reported separately
as a component of income (CPAR)
a) After cumulative effect of accounting changes and before discontinued operations of a
component unit
b) After cumulative effect of accounting changes and after discontinued operations of a
component unit
c) Before cumulative effect of accounting changes and before discontinued operations of a
component unit
d) Before cumulative effect of accounting changes and after discontinued operations of
a component unit.
Accounting changes
How should the effect of a change in accounting estimate be accounted for? (CPAR)
a)
b)
c)
d)
The effect of a change in accounting principle that is inseparable from the effect of a change in
accounting estimate should be reported (CPAR)
a)
b)
c)
d)
Segment reporting
In financial reporting for operating segments of a public business enterprise, the revenue of an
operating segment must include (CPAR)
a)
b)
c)
d)
What information should a public company present about geographic areas, if practicable?
(CPAR)
a) Disclose the revenues from external customers attributed to all foreign countries in
total
b) Disclose as a combined amount sales to external customers and intersegment sales
c) Disclose separately the amount of sales to each external customer in a foreign country
d) No disclosure of revenues from foreign operations needs to be reported.
Interim reporting
Conceptually, interim financial statements can be described as emphasizing (CPAR)
a)
b)
c)
d)
For interim financial reporting an extraordinary gain occurring in the second quarter should be
(CPAR)
a)
b)
c)
d)
Investments
Kale Co. purchased bonds at a discount on the open market as an investment and intends to hold
these bonds to maturity. Kale should account for these bonds at (CPAR)
a)
b)
c)
d)
cost
amortized cost
fair value
lower of cost or market
A company should report the marketable equity securities that it has classified as trading at
a) lower of cost or market with holding gains and losses included in earnings
b) lower of cost or market with holding gains included in earnings only to the extent of
previously recognized holding losses
c) fair value with holdings gains included in earnings only to the extent of previously
recognized holding losses
d) fair value with holding gains and losses included in earnings