Pre-week Summary I Oct 2006

Page 1

FINANCIAL ACCOUNTING

Accounting and Financial Accounting Concepts 1.0 Overview of Accounting 1. Which of the following statements about the nature of accounting is not true? a. Accounting is the language of business. b. Accounting identifies, measures and communicates financial information about economic entities for use by both external and internal users in making economic decisions c. Before accounting can render communication services, an economic entity should first be created d. Accounting communication services are available only to publicly accountable, medium-sized and small industries and not to micro entities

Which of the following statements regarding accounting theory is [are} true? I . Accounting concepts are human made II. Accounting Theory can be defined as a coherent set of hypothetical, conceptual and pragmatic principles that form a general frame of reference for a field of inquiry III. Accounting theory has developed primarily in response to government regulations. Statement 1 Statement II Statement III Statement I Statement II Statement III a. true false true c. false true false b. true true false d. true true true 3. Which of the following statements does not properly describe the fact that the Accountancy Profession is a communication profession? a. Financial statements should use terminology within the level of understanding of the statement user. b. Financial statements can be expressed in the Spanish or Chinese language c. Financial statements, as far as possible, should show information that can be verified from documentary evidence in order to gain the confidence of statement users d. Financial statements can be expressed in any dialect of a country Which one of the following is an application of the science aspect of Accounting? a. Exercise of creative skill and judgment b. Interpreting the information presented in the financial statements through ratios and trend analysis c. Use of an accounting equation to express the relationship of accountable events d. Attesting to the fairness of presentation of financial condition and operating results The art aspect of accounting is applied in the following circumstances except when a. The accountant refers to a body of organized knowledge in processing accounting information.

2.

4.

5.

b. A provision is recognized on the basis of the company lawyers professional opinion that there is a strong probability that the company will lose in a lawsuit in the corridor of P 5 M to P 8 M c. The accountant chooses the most appropriate method of inventory valuation for the entity. d.. The external auditor gives an unqualified opinion that the financial statements are fairly presented in conformity with generally accepted accounting principles 6. Which of the following statements is incorrect? a.General purpose financial statements were developed primarily because all outside party users have the same information needs b. The double-entry system of accounting has been used for centuries. c. The practice of accounting requires considerable professional judgment d. The objective of external financial statements is to communicate the economic effects of completed transactions and other events in the entity The branch of accounting that focuses on general purpose reports on financial position and results of operations is known as a. Financial accounting c. Bookkeeping b. Auditing d. Management Accounting Which of the following applies to financial accounting? a. c. d Information meets specific needs of particular statement users no no no Emphasizes objective data no yes no Future-oriented no no yes Basically concerned with income determination and asset valuation yes yes no b.

7.

8.

yes yes no no 9.

The following descriptions pertain to limitations of financial accounting and financial statements except a. Historical in nature c. Centered on quantifiable information b. Use of estimates d. Records information on the basis of business papers

Accounting standard setting (institutions and process) 10. According to the Preface to International Financial Reporting Standards, which of the following are objectives of the IASB? I. To harmonize financial reporting between IFRS and US GAAP and the European II. To work actively with national standard setters III. To promote the use and strict application of financial accounting standards a. I and II b. I and III c. II and III d. I, II and III 11. Which of the following are parts of the due process of the IASB in issuing a new International Financial Reporting Standard? I. Establishing an advisory committee to give advice II. Developing and publishing a discussion document for public comment III Issuance of an interpretation as authoritative guidance IV Reviewing compliance and enforcement procedures V Issuance of the final standard with number and title

a. I II & III only III, IV & V

b. I, II & V only

c. I, II, III & IV only

d. I, II,

12. As an assistance to the IASB and the accountancy profession and the public it serves, which of the following should IFRIC consider issuing an interpretation? I. Newly identified financial reporting issues not specifically addressed in IFRSs II. Issues where unsatisfactory or conflicting interpretations have developed, or seem likely to develop. III. Accounting issues affecting specific industry or specific country jurisdictions. IV. Issues where the IASB members cannot have a common agreement. a. I and II only b. I, II and III c. II, III and IV only d.. I, II, III and IV only 13. Which of the following statements about international accounting standards is true? a. Legal and psychological hurdles to achieving common reporting standards will be fully overcome by the year 2012, the time frame set for convergence between IAS and US GAAP b. Accounting professionals in the USA consider US GAAP superior to IAS and has no intention to adopt International Accounting Standards.. c. The IASB is able to enforce its standards by prohibiting the listing of companies which do not comply on stock exchanges which sell internationally. d. The International Accounting Standards Board (IASB) was established with the purpose of narrowing the range of divergence in accounting standards throughout the world. 14. Which one of the following bodies is responsible for reviewing accounting issues that are likely to receive divergent or unacceptable treatment in the absence of authoritative guidance, whit a view to reaching consensus as to the appropriate accounting treatment? a. International Financial Reporting Interpretations Committee (IFRIC) b. Standards Advisory Council (SAC) c. International Accounting Standards Board (IASB) d. International Accounting Standards Committee Foundation (IASC Foundation) 15. Which of the following statements relating to the FRSC and standard setting process in the Philippines. Which of these is (are) true? I. All members of the FRSC should be CPAs II. The Financial Reporting Standards Council (FRSC) Board of Accountancy (BOA) and Professional Regulation Commission (PRC) are all involved in the standard setting process, with PRC as the final approving authority. a. Only I is true b. Only II is true c. I and II are true d. I and II are false 16. Who among the following may be nominated for membership in Financial Reporting Standards Council? a. A member of FINEX who is a CPA and is a Finance Officer of the company he represents b. The BIR Commissioner who is a LAWYER c. A director of the Securities and Exchange Commission who is not a CPA d. A Deputy governor of the Central Bank who is not a CPA

The Conceptual Framework 17. The objectives of financial reporting for business enterprises are based on a. the need for conservative information b. the needs of the users of the information c. the need to comply with financial accounting standards d. the need to report on managements stewardship 18. Which statement is false concerning users and their information needs? a. Lenders are interested in information that enables them to determine whether their loans and the interest on these loans will be paid when due. b. The providers of risk capital and their advisers are concerned with the risk inherent in and return provided by their investments. c. Government and its agencies have an interest in information about the continuance of an enterprise, especially when they have long-term involvement or are dependent on the enterprise. d. Employees and their representative groups are interested in information about the stability and profitability of their employees. 19. Which of the following statements regarding users of financial information is correct? a. External decision makers can obtain whatever financial data they need and whenever they need it. b. Accounting information is prepared for and useful to only outside decision makers c. The members of the Board of Directors are not internal rather than external users of financial information d. Managers of an entity are considered to be internal decision makers. 20. Which one of the following term best describes the amount of cash or cash equivalents that could currently be obtained by selling an asset in an orderly disposal? a . Fair value b. Realizable value c. Residual value d. Value in use

21. Are the following statements regarding the term 'profit' true or false? (1) Profit is any amount over and above that is required to maintain the capital at the beginning of the period. (2) Profit is the residual amount that remains after expenses have been deducted from income. Statement (1) Statement (2) Statement 1) Statement (2) a. False False c. True False b False True d. True True 22. Which of the following statements best describes the term 'going concern'? a. When current liabilities of an entity exceed current assets b. The ability of the entity to continue in operation for the foreseeable future c. The potential to contribute to the flow of cash and cash equivalents to the entity d. The expenses of an entity exceed its income 23. Which of the following terms best describes the relationship of the assets, liabilities and equity of an entity? a. Financial performance b. Financial position c. Future economic benefit d. Obligation

24.

Which of the following terms best describes assets recorded at the amount that represents the immediate purchase cost of an equivalent asset? a. Historical cost b. Realizable value c. Present value d. Current cost

25. Which of the following is true of the qualitative characteristic of 'understandability' in relation to information in financial statements? a. Users should be willing to study the information with reasonable diligence b. Users are expected to have significant business knowledge c. Financial statements should exclude complex matters d. Financial statements should be fee from material error 26. Which of the following terms describing information in the financial statements are properly matched? a. Understandable and comparable c. Prudent and relevant b. Reliable and verifiable d. Unbiased and neutral 27. Which of the following is the best description of 'reliability' in relation to information in financial statements? a. Influence on the economic decisions of users c. Inclusion of a degree of caution b. Freedom from material error and bias d. Comprehensibility to users 28. This is the quality of information that influences the economic decisions of financial statement users? a. Relevance b. Reliability c. Understandability d. Comparability 29. According to the IASB Framework for the preparation and presentation of financial statements, which TWO of the following are examples of 'expenses'? I. A loss on the disposal of a non-current asset II A decrease in equity arising from a distribution to equity participants III A decrease in economic benefits during the accounting period IV A reduction in income for the accounting period a. I and II b. II and III c. I and III d. III and IV 30. If accounting information is timely, and has predictive as well as feedback value, then it is considered to be a. verifiable b. relevant c. reliable d. understandable 31. Which of the following accounting concepts states that before a transaction is recorded, sufficient evidence must exist to allow two or more knowledgeable individuals to reach essentially the same conclusion about the transaction? a. Continuity assumption c. Reliability quality b. Separate entity assumption d. Materiality constraint 32. Which of the following statements about prudence and conservatism is (are) true? I. Conservatism is not a concept in the IASB Conceptual Framework II. Prudence is the same as conservatism III. Conservatism is intentional bias --- downward bias in recognizing profits and assets and an upward bias in recognizing expenses and liabilities IV. Prudence is the inclusion of a degree of caution in the exercise of judgments needed in making the estimates required under conditions of uncertainty a. I, II and III only c. I, III and IV only

b. II, III and IV only 33.

d.

I, II, III and IV

In the first week of December, 2011, Elisa Company signs a major contract to develop an accounting information system for Edward Inc. No work is begun the current year, yet the notes to the financial statements discusses the nature and peso amount of the contract. This is an example of: a. completeness or full disclosure c. relevance b. historical cost d. conservatism

34. A company reports only its total accounts receivable balance in its balance sheet, as opposed to a complete listing of its individual customer balances. This is an example of a. consistency b. materiality c. cost/benefit d. conservatism 35. Which of the following statements is true with regard to the accountants concept of Materiality? a.Materiality is the threshold of recognition as to what accountable events will be recognized in the balance sheet and which will be recognized in the income statement. b. Materiality judgments generally may be based solely on the magnitude of the item c. Materiality judgments generally may be made without consideration of the magnitude of the item involved. d. Relevant items are always material 36. According to the Conceptual Framework, which of the following is not a primary qualitative characteristic that make the information provided in financial statements useful to users? a. Comparability b. Relevance c Materiality d Understandability 37. Are the following statements in relation to materiality true or false, according to PAS 1 (1) Materiality of items depends on their individual or collective influence on the economic decisions of users (2) Materiality of an item depends on its absolute size and nature (3) Materiality serves as the threshold of recognition in deciding whether a financial information is relevant to be included in the statement of financial position or to the income statement Statement (1) Statement (2) Statement (3) a. true false true b. true true false c. false false fakse d. true false false
38. Comparability of financial information depends on

Consistency Regular reporting periods

A Yes Yes

B Yes No

C No No

D No Yes

39. The recognition of periodic depreciation expense on company-owned automobiles requires estimating both salvage or residual value, and the useful life of the vehicles. The use of estimates in this case is an example of a. providing relevant data at the expense of reliability b. invoking the materiality constraint rather than cost benefit constraint c. conservatism d. maintaining consistency 40. Which of the following situations violates the concept of reliability?

a. Financial statements were issued nine months late b. Report on segments having the same expected risks and growth rates to analysts estimating future periods c. Financial statements included property with a carrying amount increased to managements estimate of market value d. Management reports to stockholders regularly refer to new projects undertaken, but the financial statements never report project results. Which of the following statements about the qualitative characteristics is (are) true? I. Relevance is the capacity of information to make a difference in decision by helping users form predictions about outcome of past, present and future events or confirm /correct prior expectations II. The quality of reliability assures readers that the financial information is free from bias and faithfully represents what it purports to show, including adequate disclosure of significant information III. Under the IASB Framework for the Preparation and presentation of financial statements, conservatism is not a concept that is recognized as a qualitative objective. a. I and II only b. I and III only c. II and III only d. I, II and III 42. Which TWO of the following are listed in the IASB Framework as 'underlying assumptions' regarding financial statements? A The financial statements are prepared under the accrual basis B. The entity can be viewed as a going concern C. The financial statements are reliable D Accounting policies are consistently applied a. A and B b. B and C c. B and D d. C and D Which TWO of the following statements concerning the provisions of the Conceptual Framework are correct? I. The Framework provides that transactions must be accounted for in accordance with their legal form II. The primary responsibility for the preparation and presentation of the financial statements of the entity rests with both its management and its external auditor III. It is not proper that financial statements should exclude complex matters simply in order to achieve understandability IV Where any conflict arises between the Framework and an accounting standard, the requirements of the accounting standards should prevail a. I and II b. I and IV c. II and III d. III and IV Basic Assumptions of Accounting 44. Richard Santos is the owner and manager of Santos Landscaping Services. Santos purchased a new station wagon for personal use and a dump truck to be used in the business. Which of the following assumptions, principles, or constraints would be violated if both station wagon and dump truck are recorded as assets of the business? 43. 41.

a. Materiality constraint b. Conservatism constraint assumption 45. I.

c. Continuity assumption d. Separate entity

Adjusting entries are needed because in reporting financial data an entity Adopts the accrual assumption II Reports on transactions that overlap accounting periods III. Adopts the going concern assumption a. I only b. I and II only c. II and III d. I, II and III 46. Fatima Inc. is a company whose securities are traded on over-the-counter market. It controls Portugal Corp. Consolidated financial statements are prepared in recognition of the accounting concept of a. Economic entity b. Materiality c. Legal entity d. Flexibility 47. Which one of the following statements best describes the term going concern? a. When current liabilities of an entity exceeds current assets b. The ability of the entity to continue in operation for. the foreseeable future c. The potential to contribute to the flow of cash and cash equivalents to the entity d. The expenses of an entity exceed its income Principles of Recognition and Measurement (Assets, Liabilities, Equity, Revenue, Expense) 48. Are the following statements regarding recognition true or false? (1) An accountable item is deemed recognized if it is recorded in the journals and ledgers. (2) Recognition is the process of determining the amounts at which elements of the financial statements are to be recognized, (3) Recognition is the process of incorporating in the financial statements an item that meets the definition of an element and the criteria for recognition Statement (1) Statement (2) Statement (3) a. false false true b. true true false c. true false true d. true true true 49. Which of the following statements about accounting recognition is (are) true? I. In accounting, there are instances when a gain / loss would arise upon initial recognition of an asset. II. No asset can simultaneously be an asset of more than one entity III. At times, two or more entities may share the benefits that an asset provides IV. An appropriate basis for recognizing an asset is when a particular enterprise acquires the right to utilize and control access to the assets benefits a. I and II only c. I, II and III only b. I and IV only d. I, II, III and IV 50. Which of the following is a condition necessary for the recognition of an asset?

a. It is probable that future economic benefits will flow to the enterprise and the cost of the asset can be measured accurately. b. The cost of the asset can be measured reliably c. It is probable that future economic benefits will flow to the enterprise and the cost of the asset can be measured reliably. d. It is probable that future economic benefits will flow to the enterprise and the asset is paid for 51. Which one of the following is not among the essential characteristic of an asset? a. The inflow of future economic benefits is controlled by the enterprise b. It must be exclusively owned and must be exchangeable c. The cost of the asset can be measured reliably d. It is a result of either a past activity Which condition is necessary for the recognition of a liability? a. It is probable that an outflow of economic benefits will be required to settle an obligation b. The amount of the obligation can be measured reliably c. The amount of the obligation must be definite d. It is probable that an outflow of economic benefits will be required to settle an obligation and the amount of obligation can be measured reliably.

52.

53.

The following statements relate to liabilities. Which statement is (are) false? I. Liabilities may be measured by estimates of a definitive character when the amount of the liability cannot be measured precisely II. All monetary liabilities should be stated in the balance sheet at their present (discounted) values III. Under current GAAP, there are instances when an increase in liability is matched with an increase in revenue. a. I and II only b. II and III only c. I and III only d. I, II and III 54. Which of the following statements about Equity is (are) correct? I. Since equity is the excess of assets over liabilities, equity cannot be measured separately from the other elements of the financial position. II. Equity has no specific maturity date except upon liquidation. III. Income-related transactions as well as reserve or other comprehensive income transactions such as revaluation surplus and unrealized holding gains and losses automatically affect equity. a. I and II only b. I and III only c. II and III only d. I, II, III

55. These are gross inflows of economic benefits during the period arising the course of the ordinary activities of an enterprise when those inflows result in increases in equity, other than increases relating to contributions from equity participants. a. Revenue b. Increase in cash flow c. Net income d. Return on net assets 56. In which of the following circumstances can revenue be normally recognized? a. When the customers order is received b.When title to the goods changes c. Only when a transaction creates an account receivable d. When the customers order is accompanied by a check

57.

Under the realization principle, revenue from sale of products is recognized a. At date of delivery to the customers c. When the customers are billed b. When the inventories are readied for shipment d. Upon receipt of cash payment 58. This revenue recognition method is allowed when a sale is assured under a forward contract or government guarantee or when a homogeneous market exists and there is negligible risk of failure to sell. a. Percentage of completion method c. Cash method b. Production method d. Accrual method 59. Which one of the following may be recognized as revenue? a. Cash deposit received for lay-away sales b. Cash received in payment of note receivable c. Cash from advance magazine subscription d. Cash reimbursement from government for calamity losses sustained (per PAS 20 Government Grants) According to the IASB Framework, the following are examples of expenses except a. A decrease in asset due to benefit received b. A decrease in asset arising from distribution to equity participants c. A decline in the recoverable amount of an asset which is lower than its carrying amount d. A sale of a non-current asset below cost

60.

61. According to the Revenue recognition principles, which one of these activities do not generate revenue? a. Permitting others to use enterprise resources c. Adjustment of revenue of prior periods. b. Sale of merchandise d. Disposing of investment in other entities 62. An expiration of cost which is incurred without compensation or return and is not absorbed as cost of revenue is called a. Indirect cost b. Loss c. Deferred credit d. Deferred charge 63. Which of the following is a period cost? a. Factory overhead b. Work in process d. Direct labor c. Selling expense

64. Which of the following statements about measurement in accounting is (are) true? I. All assets must be initially recognized at historical cost, but the final valuation can be a mixture of costs and other values. II. Current selling price and net realizable value differ conceptually III. According to PAS 29. Hyper-inflationary Economy, only non-monetary items are restated to current price level amounts in the balance sheet a. Only I is true c. II and III are true b. Only II is true d. All statements are true 65. Which of the following measurement bases is also currently used in financial accounting?

Current Cost a. yes b. yes c. yes d. no

Present Net settlement discounted value value Historical cost yes yes no no yes yes yes no yes yes no

yes

66. Which of the following statements about accounting measurement is (are) true? I. Measurement in accounting is the assignment of numbers, quantities, and monetary amounts to objects such as property and equipment and events such as purchases or sales II. Under current GAAP, all assets must be initially measured at historical cost. III. There are certain rare instances when price level adjusted amounts may be used in financial reporting to external users a. I and II only b. II and III only c. I and III only d. I, II and III 67. Which of the following assets are initially and subsequently measured at Fair value? I. Biological assets IV. Property and Equipment II. Available for Sale Securities V. Held for Trading Securities III. Inventories VI. Intangible Assets a. I and II only b. I, II, and V only c. I, II, III ad V only d. I, II IV, and V only 68. Which of the following may be optionally measured at Fair value in the Statement of Financial Position? I. Held for Trading Securities IV. Non-current Assets Held for Sale II. Property and Equipment V. Intangible Assets III. Biological Assets, current a. I and II only b. II and V only c. I, II, and III only d. II, IV, and V only 2.0 Presentation of Financial Statements 69. Financial statements include a statement of financial position, a statement of comprehensive income and a statement of changes in equity. According to the Preface to international financial reporting standards, which TWO of the following are also included within the financial statements? I. A statement of cash flows III. An auditors report II Accounting policies IV. A directors' report a. I and II b. I and III c. II and III d. III and IV 70. Which of the following is (are) among the limitations of financial accounting and financial statements? I. Use of estimates II. Historical in nature III. Some information that are not quantifiable but may be significant to statement users in forming economic decisions are not given recognition. a. I only b. I and II only c. II and III only d. I, II and III 71. Which of the following statements about financial statements is incorrect? a. They show the results of the stewardship of management of the resources entrusted to it by the capital providers b. They are the primary responsibility of the external auditor after audit

c. They are prepared at least annually and are directed to the common information needs of a wide range of statement users d. They provide information about the financial position, performance and cash flows of an enterprise that is useful to a wide range of users in making economic decisions 72. Which of the following statements is (are) false? I. Financial accounting is the only source of information needed by those who make economic decisions about the business enterprises. II. Financial accounting is based on the presumption that all statement users have the same information needs III. Financial accounting is procedural a. Only I is false b. Only II is false c. II and III are false d. I, II and III are false 73. Under PAS 1 [2009], which of the following items is not included in the computation of net income? a. Finance cost b. Post-tax Gain [Loss] on discontinued operations c. Unrealized gain in change in value of available for sale securities d. Unrealized gain in change in value of biological assets

74. According to PAS1 Presentation of financial statements, which TWO of the following must be included in an entity's statement of financial position? a. b. c. d yes yes Number of shares authorized yes Provisions yes Shares in an entity owned by that entity no no yes no no no yes yes no no Investment property yes yes

75. According to PAS1 Presentation of financial statements, which TWO of the following must be included in an entity's statement of financial position? A Cash and cash equivalents B Property, plant and equipment analyzed by class C Share capital and reserves analyzed by class D Deferred tax a. A and B b. A and D c. B and C d. B and D 76. In which section of the statement of financial position should cash that is restricted to the settlement of a liability due 18 months after the reporting period be presented, according to PAS1 Presentation of financial statements? (select one answer) a. Current assets b. Equity c. Non-current liabilities d. Non-current assets 77. In which section of the statement of financial position should employment taxes that are due for settlement in 15 months' time be presented, according to PAS1 Presentation of financial statements? (select one answer) a. Current liabilities b. Current assets c. Non-current liabilities d. Non-current assets Notes to Financial Statements

78. What is the purpose of information presented as notes to financial statements? a. To provide disclosures required by generally accepted accounting principles b. To correct improper presentation in the financial statements c. To provide recognition of amounts not included in the totals of the financial statements d. To present managements responses to auditor comments. 79. Which information is normally not included in the notes to financial statements? a. A statement of compliance with GAAP b. A statement of measurement basis for the financial statements and accounting policies applied c. Supporting information for line items presented and aggregated d. A Statement of cash flows 80. Disclosure in the financial statements is not required for which of the following? a. Use of property by lease between a parent company and its subsidiary b. Receipt of services by subsidiary from a principal without charge or without record of receipt of services c. Possibility of strike d. Guarantees for indebtedness of others if the possibility of loss is remote 81. As a significant component of the notes to financial statements, the accounting policies section should describe a. Only the measurement basis used in preparing the financial statements b. Only the specific accounting policies followed by the enterprise c. Both the measurement bases and the accounting policies followed d. The nature of the enterprises operations and its principal activities 82. Part of the notes to financial statements are events after the reporting period which pertain to those events, both favorable and unfavorable that occur a. After balance sheet date b. After issuance of the statements c. Between the balance sheet date and the date when the financial statements are authorized for issue d. After the balance sheet date but prior to issuance of financial statements 83. Adjustments of financial statements are required for those events after balance sheet date which a. Have a material effect on a users evaluation of the information presented in the financial statements b. Occurred prior to issuance of the financial statements c. Are unusual and material d. Provide additional information for determining the amounts relating to conditions existing at balance sheet date 84. Non-adjusting events after balance sheet date should be disclosed if a. Non-disclosure would affect the amounts presented in the financial statements b. Non-disclosure would affect the ability of users of the financial statements to make proper valuations and decisions. c. They relate to conditions existing at the balance sheet date d. They are unusual and material 85. Are the following statements true or false, according to current PFRSs? (1) Biological assets should be shown in the statement of financial position either in current assets or non- current assets or both.

(2) The number of shares authorized for issue should be shown in the statement of financial Position or the statement of changes in equity, or the notes. Statement (1 ) Statement (2) Statement (1) Statement (2) a. false false c. true false b. false true d. true true 86. In which section of the statement of financial position should employment taxes that are due for settlement in fifteen (15) months time be presented according to PAS 1? a. Current liabilities c. Non-current liabilities b. Current assets d. Non-current assets 3.0 The Accounting Process 87. Which of the following statements is / are true? I. The primary distinction between double-entry and single-entry bookkeeping system is the use of duality and equilibrium approach in double-entry while single entry recognizes only the duality principle. II. Single entry bookkeeping recognizes only cash transactions and personal accounts. III. Single entry bookkeeping and cash basis of accounting are one and the same. a. I only b. II only c. I and II only d. II and III only Which of the following accounts is recognized under single-entry bookkeeping? a. Cash b. Merchandise Inventory c. Property and Equipment d. Salaries Expense 89. Which of the following statements about bookkeeping systems is (are) false? I. Net income or loss under single entry bookkeeping is computed using the transactions approach. II. Double-entry bookkeeping uses the direct matching approach of computing net income. III. Double-entry bookkeeping is the generally acceptable method of bookkeeping because it offers a more complete income measurement than single-entry. a. Only I is false b. Only II is false c. II and III are false d. I, II and III are false 90. All of the following are disadvantages of the single-entry bookkeeping system except for the fact that a. Accounting records are incomplete. b. It is simple and less costly to apply. c. Internal control is inadequate d. Financial statements are not likely to be fairly presented in accordance with GAAP. 91. The following books of account are used in single-entry bookkeeping a. Cashbook and subsidiary ledger b. Cash receipts book and general ledger c. Cash receipts book , cash disbursements book, general ledger and subsidiary ledger d. Cashbook and general ledger 92. Which accounting process is the recognition or non-recognition of business activities as accountable events 88.

a. Identifying b. Measuring c. Recording d. Communicating 93. The manner in which the accounting records are organized and employed within a business is known as a. Accounting system b. Business document c. Voucher system d. Special journals 94. An accounting device for accumulating increases and decreases relating to a particular accounting value such as an asset, a liability, etc. a. Account b. Ledger c. Journal d. Book of secondary entry 95. The recording phase of financial accounting covers the following steps, except a. Business documents are received and prepared c. Transactions are posted to the ledger b. Transactions are journalized d. Financial statements are prepared 96. Which of the following statements about the bases of recognition of income and expense is true? a. Under cash basis accounting, only cash and property and equipment accounts are recognized as assets b. In modified cash basis of accounting, prepaid expenses and unearned income are recognized. c. Accrual basis and modified cash basis of accounting for income and expenses will yield the same amount of gross profit for the period. d. Under accrual basis of accounting, accruals and deferrals are recognized in adjusting entries which are subsequently reversed in the immediately succeeding accounting period.

97. Which of the following is not a principal purpose of a trial balance? a. It proves that debits and credits of equal amounts are in the ledger. b. It is the basis for any adjustments to the account balances c. It supplies a listing of open accounts and their balances d. It proves that debits and credits were properly entered in the ledger accounts 98. An error which is disclosed by a trial balance is a. An omission of a journal entry on purchases on account b. Double-posting a credit to Sales amounting to P 210,000 c. A journal entry for salaries paid amounting to P 500,000 was not posted
d. Posting to the correct debit or credit side of a wrong account

99. Which one of the following is a purpose of adjusting entries? I. To apportion the proper amounts of revenue and expense to the current accounting period. II. To establish the proper amounts of assets and liabilities in the balance sheet. III. To accomplish the objective of offsetting the revenue of the period with all the expenses incurred in generating that revenue. IV. To prepare the revenue and expense accounts for recording transactions of the following period. a. I and II only b. II and III only c. I, II and III only d. All of these 100. Adjusting entries are needed a. Whenever revenue is not received in cash b. Whenever expenses are not paid in cash c. Primarily to correct errors in the initial recording of business transactions d. Whenever transactions affect the revenue or expenses of more than one accounting period 101. The entry to record depreciation is an example of an adjusting entry

a. To apportion a recorded cost expense b. To apportion unearned revenue revenue

c . To record unrecorded d. To record unrecorded

102. Which one of the following items least resembles a typical adjusting entry? a. Debit an asset and credit revenue c. Debit revenue and credit liability b. Debit an expense and credit liability d. Debit an asset and credit liability 103. Which one of the following concepts is least related to adjusting entries. a. Accrual b. Approximation c. Materiality d. Matching of cost against revenue 104. Ian Company initially records prepayments in balance sheet accounts and make reversing entries when appropriate. Which of the following yearend adjusting entries should be reversed? a. The entry to record bad debts expense for the period. b. The entry to record service fees earned by year-end but not billed c. The entry to record the portion of service fees received in advance that is earned by year-end d. The entry to record supplies used during the period 105. Which of the following statements is incorrect? a. All of the accounts of a specific business enterprise are referred to as a ledger. b. Every adjusting entry affects both a balance sheet and an income statement c. Transactions often overlap accounting periods d. The fact that an expense is recognized on the income statement indicates that an equivalent outlay of cash has been made in the same period. IV.0 Income Determination Approaches to Income Measurement/Concepts of Capital Maintenance/Comprehensive Income /Bases for recognition of Income 106. The process of identifying, measuring and relating revenue and expenses of an enterprise for an accounting period is known as a. Revenue recognition b. Income determination c. Realization d. Expense recognition 107. Which of the following statements relating to the income determination process is (are) true? I. Revenue for the period is generally determined independently by applying the realization principles. II. Expenses are determined by applying the expense recognition principles on the basis of the relationships between acquisition costs and the independently determined revenue of the accounting period. III. The term matching is used in accounting to describe the entire process of income determination, or in a more limited sense, to the process of expense recognition a. I and II only b. II and III only c. I and III only d. I, II and III 108. The accounting concept of matching is best demonstrated by a. Not recognizing any expense unless some revenue is realized b. Associating effort (cost) with accomplishment (revenue) c. Recognizing prepaid rent received as revenue

d. Establishing a Reserve for Future Decline in Asset Values 109. Which of the following statements is (are) true? I. Net loss is the decrease in net assets of business resulting from profitdirected activities II. Income is a net or partially net concept determined by deducting expenses from revenues. III. The income or loss which is shown as the final amount in the income statement reflects the success or failure of the business in its profitdirected activities. a. Only I is true b. I and II are true c. II and III are true d. I, II and III are true

110. Are the following statements regarding profit true or false? (1) Profit is any amount over and above that required to maintain capital at the beginning of the period. (2) Profit is the residual amount that remains after expenses have been deducted from income Statement (1) Statement (2) a. false false b. false true c. true false d. true true

111. What is the purpose of reporting comprehensive income? a. To report changes in equity due to transactions with owners b. To report a measure of overall enterprise performance c. To replace net income with a better measure d. To combine income from continuing operations and extraordinary items 112. Which is not included in the category of comprehensive income of an accounting entity? a. Net income for the period c. Gain on sale of treasury stock b. Revaluation surplus d. Increase in value of available for sale securities 113. Which of the following transactions will not be recognized in cash basis accounting? a. Collection of account sales b. Payment of salaries c. Purchase of equity shares in XYZ Corporation d. Unsold inventory at the end of the period 114. Modified cash basis (or hybrid basis) differs from the accrual basis in the computation of a. Gross Profit b. Expenses c. Depreciation d. Bad debts expense 115. Which of the following statements is incorrect ? a. Accrual basis financial statements may be prepared from single entry records. b. Single-entry accounting is synonymous with cash basis accounting c. No adjusting entries are necessary when accounting records are kept on pure cash basis d. Over the entire life of the business, there would be no difference between income on cash basis and income on an accrual basis. 116. a. Periodic net earnings are conventionally measured by a Transactions approach

b. c. d. 117. a. b.

Transactions approach including recognition of recognized gains and losses Capital maintenance approach Market value approach The capital maintenance concept followed under present GAAP is Economic capital c. Real capital Financial and physical capital d. Physical capital

118. What concept is critical in distinguishing an enterprises return on investment from return of its investment ? a. Comprehensive income concept c. Capital maintenance concept b. Current operating performance concept d. Return on investment concept Revenue PAS 18 119. One of the conditions that must be satisfied in order to recognize revenue in a transaction involving the rendering of services is that the stage of completion of the transaction at the end of the reporting period can be measured reliably. Which TWO of the following methods for determining the stage of completion of a contract involving the rendering of services are specifically referred to in PAS 18 Revenue, as being acceptable? I Costs incurred to date as a percentage of the estimated total costs of the transaction II Advances received to date as a percentage of the total amount receivable III Survey of work performed IV Revenue to date divided by total contract revenue a. I and II b. I and III c. II and III d. III and IV 120. According to PAS 18 Revenue, which TWO of the following conditions apply to the recognition of revenue for transactions involving the rendering of services? A The amount of revenue can be measured reliably B The entity retains neither continuing managerial involvement nor effective control over the transaction C The significant risks and rewards of ownership have been transferred to the buyer D The costs incurred for the transaction and the costs to complete the transaction can be measured reliably a. A and B b. C and D c. B and D d. A and D 121. According to PAS 18 Revenue, which of the following is not a criterion to be satisfied before revenue from the sale of goods should be recognized in profit or loss? a. Revenue can be reliably measured b. Control over the goods sold has been relinquished but management maintains continuing involvement over the goods sold c. C The risks and rewards of ownership has been transferred to the buyer d. D The outcome of the transaction is probable

122. According to PAS 18 Revenue, which TWO of the following criteria must be satisfied before revenue from the sale of goods should be recognized in profit or loss? A Ownership has been transferred to the buyer B The outcome of the transaction is certain C Revenue can be reliably measured D Managerial control over the goods sold has been relinquished a. A & B b. B & C c. C & D d. A &D 123. According to PAS18 Revenue, which of the following conditions apply to the recognition of revenue for transactions involving the rendering of services? A The significant risks and rewards of ownership have been transferred to the buyer B The amount of revenue can be measured reliably C The entity retains neither continuing managerial involvement nor effective control over the transaction D The costs incurred for the transaction and the costs to complete the transaction can be measured reliably a. A & B b. B & D c. C & D d. B, C & D 124. One of the conditions that must be satisfied in order to recognize revenue in a transaction involving the rendering of services is that the stage of completion of the transaction at the end of the reporting period can be measured reliably. Which of the following methods for determining the stage of completion of a contract involving the rendering of services are specifically referred to in PAS18 Revenue, as acceptable? I - Costs incurred to date as a percentage of the estimated total costs of the transaction II - Advances received to date as a percentage of the total amount receivable III - Surveys of work performed IV - Revenue to date divided by total contract revenue a. I and II b. I & III c. II and III d. III & IV 125. Micrium, a computer chip manufacturing company, sells its products to its distributors for onward sales to the ultimate customers. Due to frequent fluctuations in market price for these goods, Micrium has aprice protection clause in the distributor agreement that entitles it to raise additional billings in case of upward price movement. Another clause in the distributors agreement is that Micrium can at any time, reduce its inventory by buying back goods at the cost at which it sold the goods to the distributor. Distributors pay for the goods within 60 days from the sale of goods to them. When should Micrium recognize revenue on the sale of these goods to the distributors? a. When the distributor sells goods to the ultimate customers and there is no uncertainty with respect to the price protection clause or the buyback of goods. b. When the goods are sold to the distributors c. When the distributors pay to Micrium the cost of goods (i.e., after 60 days of the sale of goods to the distributors d. When the goods are sold to the distributor provided estimated additional revenue is also booked under the protection clause based on past experience. 126. Revenues are considered to have been earned when

a. Goods are shipped , not yet received by buyer, under terms sale on trial b. Goods are sold under lay-away terms, where goods are delivered only when buyer makes the final payment in a series of installments. c. Goods are shipped, not yet received by buyer, where the buyer has the right to rescind the purchase if the goods are not within the specifications in the contract d. The entity ships goods subject to installation which is a significant part of the contract and the entity has completed such installation.

127. Revenue , under proper circumstances may be recognized at all of the following moments in time EXCEPT a. After the earning process has been completed and an exchange has taken place b. Upon the receipt of cash from the customer c. As certain stages of completion of production are attained d. When goods are shipped under terms sale on approval 128. How should earned but unbilled revenues at the balance sheet date on a long-term construction contract be disclosed if the percentage of completion method of revenue recognition is used? a. In a footnote to the financial statements until the customer is formally billed for the portion of the work completed. b. As a receivable in the noncurrent asset section of the balance sheet c. As construction in progress in the noncurrent asset section of the balance sheet d. As construction in progress in the current asset section of the balance sheet 129. Company R is a retailer that offers layaway sales to its customers. Company R retains the merchandise sets it aside in its inventory, and collects a cash deposit from the customer. Company R does not require the customer to enter into an instalment note or other fixed payment commitment or agreement when the initial deposit is received. The merchandise is not released to the customer until the customer pays the full purchase price. In the event that the customer fails to pay the remaining purchase price within two years, the customer forfeits its cash deposit. In the event the merchandise is lost, damaged, or destroyed, Company R either must refund the cash deposit to the customer or provide replacement merchandise. The revenue from layaway sales should be recognized by Company R when a. the goods are delivered to the customer b. 50% of the purchase price is paid by the customer c. a substantial portion of the purchase price is paid by the customer d. the last installment payment is made by the customer 130. a. b. c. d. Expenses may be best described as Costs which have no discernible benefit to future operations The consideration given to acquire goods or services Costs that are associated with revenues of a given period Gross decreases in owners equity

131. Which of the following statements is true? a. Expenses are synonymous with expenditures b. Not all expenses are expired costs c. All expired costs are expenses

d. Expense, in the broadest sense, includes expired costs and losses that are deducted from revenue, in a narrow sense, expense is distinguished from loss 132. An expiration of cost which is incurred without compensation and is not absorbed as costs of revenue is called a. Loss b. Deferred charge c. Indirect costs d. Deferred credit 133. Which of the following transactions would require the recording of an expense? a. Cash paid to a supplier in settlement of a previously recorded promise to pay when some advertising supplies were purchased. b. Cash paid to office employees for services rendered during the month c. Cash paid to acquire a new truck to be used in the business d. Cash paid to settle an unrecorded liability for factory supplies received and already consumed 134. In expense recognition principle, which of the following is not an important class of expense? a. Expenditures to acquire assets b. Expenses from on-reciprocal transfers and casualties c. Cost of asset other than products disposed of d. Declines in market prices of inventories held for sale 135. a. b. Expenses cannot arise from External events other than transfers c. Production Non-reciprocal transfers to owners d. Casualties

136. Which of the following best describes the distinction between expenses and losses? a. Losses are reported net-of-related-tax effect whereas expenses are not reported net-of-tax b. Losses are extraordinary charges whereas expenses are ordinary charges c. Losses are material items whereas expenses are immaterial items d. Losses result from peripheral or incidental transactions whereas expenses result from ongoing major or central operations of the entity. ASSETS, LIABILITIES, EQUITY Cash and Receivables 137. Which of the following cannot be shown as part of cash in the current assets section of the balance sheet? a. Compensating balance not legally restricted b. Regular Payroll account c. Cash deposit with utility company d. Check paid by depositor in payment of past due account 138. Which of the following statements regarding Cash and Cash equivalents is false? a. Petty cash fund of P 8,000 composed of currency and coins of P 2,100 and unreplenished petty cash vouchers of P 5,900 should be shown in the current asset section at P2,100 only. b.. Legally restricted Compensating cash balance for payment of a current liability is shown as part of Cash and Cash Equivalent provided the restriction is disclosed.

c. If a bank or financial institution holding funds of a reporting entity is in bankruptcy or financial difficulty such cash should be written down to estimated realizable value if the amount is lower than face value d. Not all items included in cash constitute legal tender money. 139. Which of the following is a key element of internal control over cash payments? a. Making daily bank deposits for all cash receipts b. Periodically reconciling the cash account balance on the companys books to the bank statement balance. c. Requiring that all petty cash vouchers be approved by two signatories d. Authorizing and verifying that all cash payments are recorded daily
140. LMN

Company issued a note solely in exchange for cash. Assuming that the items below differ in amount the present value of note at issuance is equal to the a. Proceeds received b. Face amount c. Proceeds received, discounted at the prevailing interest rate for similar notes d. Face amount discounted at the prevailing interest rate for similar notes 141. Accounts Receivable and Revenue can be properly recognized when a. Goods are shipped under terms FOB Destination, not yet received by buyer. b. Goods are sold under lay-away terms, where goods are delivered only when buyer makes the final payment in a series of installments. c. The entity ships goods subject to installation which is a significant part of the contract and the entity has completed such installation. d. Goods are shipped, not yet received by buyer, where the buyer has the right to rescind the purchase if the goods are not within the specifications in the contract 142. When a specific customers account is written off by a company using the allowance method, the effect on net income and the net realizable value []NRV] of the accounts receivable is Net income NRV of Accounts Receivable a. Decrease Decrease b. Increase Increase c. Decrease None d. None None 143.Supsup Company received two one-year notes in payment for merchandise sold. One note, was interest bearing, with a face amount of P 3,000 at an annual rate of 18 percent. The other note had a face amount of P 3,540 and was non- interest bearing. Its implied interest rate was 18 percent. Based on the above information, which of the following statements is true? a. The total amount of cash ultimately to be received will be more for the interest bearing note. b. Both notes will cause the same amount of total interest to be recognized. c. The amount of interest revenue which should be recognized is more for the interest-bearing note. d. The amount which should be credited to sales revenue is more for the noninterest-bearing note.

144.Which of the following would indicate that Cecil Companys note receivable or other loan is impaired? a. When the note receivable is written off.. b. When there is an increasing number of default or delinquency in interest or principal payments c. When the market value of the note falls below its book value due to interest rate changes d. When the maker of the note is experiencing financial difficulties. Inventories 145. According to the net method , which of the following items should be included in cost of inventory? a b c d Freight costs yes yes no no Purchase discounts not taken no yes yes no 146.Which TWO of the following should be taken into account when determining the cost of inventories per PAS 2 Inventories? I. Storage costs of part-finished goods III. Recoverable purchase taxes II. Trade discounts IV Administrative costs a. I and II b. II and III c. III and IV d. I and IV 147.According to IAS2 Inventories, which TWO of the following costs should be included in inventory valuations? I Transport costs for raw materials III. Storage costs relating to finished goods II Abnormal material usage IV. Fixed production overheads a. I and II b. II and III c. I and IV d. III and IV 148.How should import duties be dealt with when valuing inventories at the lower of cost and net realisable value (NRV) according to IAS2 Inventories? (select one answer) a. Added to cost b. Deducted in arriving at NRV c. Deducted from cost d. Ignored 149.How should sales staff commission be dealt with when valuing inventories at the lower of cost and net realisable value (NRV), according to PAS2 Inventories? (select one answer) a. Added to cost b. Deducted in arriving at NRV c. Deducted from cost d. Ignored 150.How should trade discounts be dealt with when valuing inventories at the lower of cost and net realizable value (NRV) according to PAS 2 Inventories? a. Added to cost b. Deducted in arriving at NRV c. Deducted from, cost d. Ignored 151.Inventory estimates will be required for the following except a. when interim financial statements are prepared b. when inventory is destroyed by typhoon or lahar flow c. as proof of reasonable accuracy of the physical inventory d. in the determination of the ending inventory to be shown on the balance sheet at year end. 152.Under the retail inventory method of approximating ending inventory, which of the following is included in the computation of the cost to retail percentage? a. Freight-in b. Mark-up c. Mark-down d. All of these Agriculture (PAS 41)

153.According to PAS 41 Agriculture, biological assets and agricultural produce held for regular sale should be valued at a. Cost c. Lower of cost or net realizable value b. Net realizable value d. Fair value less point of sale costs 154.Which one of these is not within the range of activities considered as agricultural activity a. Capability of change c. Production of change b. Management of change d. Measurement of change

Financial Instruments (Basics) PAS 39 155.Which of the following is not a financial asset? a. Cash b. An equity instrument of another entity c. A contractual right to receive cash d. A contractual right exchange financial assets or financial liability with another entity under conditions that are potentially favorable or unfavorable to the entity 156.Which of the following is not among the categories of financial assets? a. Held-to-maturity investments c. Financial assets at fair value through profit or loss b. Loans and receivables d. Non-monetary assets 157.In accordance with IAS39 Financial instruments: recognition and measurement, which ONE of the following terms best describes a compound financial instrument component of a hybrid instrument that also includes a non-derivative host contract? a. An available-for-sale financial asset c. A held-to-maturity investment b. An embedded derivative d. A financial asset held for trading 158.In accordance with IFRS7 Financial instruments: disclosures, which of the following best describes the risk that an entity will encounter if it has difficulty in meeting obligations associated with its financial liabilities? a. Liquidity risk b. Credit risk c. Financial risk d. Payment risk 159.Unrealized gains and losses for available for sale securities are a. Included in the determination of income b. Included in income for unrealized gains and included in equity for unrealized losses c. Included in income fpr unrealized losses and included in equity for unrealized gains d. Included in other comprehensive income and stockholders equity 160.The Rissa Company has entered into a contract on June 1, 20X3 that requires it to issue its own ordinary shares with a value of P 250,000 on 31 May 20X6. In accordance with PAS32, Financial instruments: presentation , Tootakk should classify the contract as (select one answer) a. financial asset b. a financial liability c. an equity instrument d. an embedded derivative 161.Which TWO of the following are types of hedging relationship as defined by PAS39 Financial instruments: recognition and measurement? A Cash flow hedge C. Interest rate hedge B. Credit risk hedge D. Fair value hedge a. A and B b. B and C c. A and D d. C and D

Investments in Associate (PAS 28) 162.An investor uses the equity method of accounting for an investment in the common stock of another company when the investment a. Is composed of common stock and it is the investors intent to vote the common stock b. Ensures a source of supply such as raw materials c. Enables the investor to exercise significant influence over the investee d. Is obtained by an exchange of stock for stock 163.According to PAS 28, which of the following will not fall under the situation of existence of significant influence by an investor in the financial and operating policy decisions of the investee but not control of these decisions a. Participation in policy making process b. Material intercompany transactions c. Power to govern the financial and operating policy decisions of an enterprise so as to obtain benefits from its activities d. Technological dependency Property, Plant and Equipment (PAS 16) 164.According to PAS 16, Property, plant and equipment includes all of the following except a. Property used in production or supply of goods and services b. Property used for extraction of minerals, oil or natural gas c. Biological assets related to agricultural activity and mineral rights d. Property for rental purposes and administrative purposes 165.Which ONE of the following statements best describes 'residual value'? a. The estimated net amount currently obtainable if the asset were at the end of its useful life b. The present value of estimated future cash flows expected to arise from the continuing use of the asset and from its ultimate disposal c. The amount at which the asset could be exchanged between knowledgeable, willing parties in an arm's length transaction d. The amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal 166.Which ONE of the following terms best describes the cost (or an amount substituted for cost) of an asset less its residual value? a. Revalued amount b. Carrying amount c. Recoverable amount d. Depreciable amount 167.Sophia Company purchased heavy equipment from Ana Company on September 30, 2011, with payment due on March 31, 2012. If Sophias 2011 net income included no foreign exchange transaction gain or loss, then the transaction could have a. Resulted in an extraordinary gain b. Been denominated in Philippine pesos c. Caused a foreign currency gain to be reported as a contra account against the heavy equipment d. Caused a foreign currency translation gain to be reported in equity 168.Which of the following statements best describes the carrying amount of an asset? a. The cost (or an amount substituted for cost) of the asset less its residual value

b. The amount at which the asset is recognized in the statement of financial position after deducting any accumulated depreciation and accumulated impairment losses b. The higher of the asset's net selling price and its value in use c. The fair value of the asset at the date of a revaluation less any subsequent accumulated impairment losses 169. Which of the following terms best describes the removal of an asset from an entity's statement of financial position? a. Derecognition b. Impairment c. Write-off d. Depreciation 170.The carrying amount of property, plant and equipment subsequent to acquisition is the a. Historical cost less accumulated depreciation b. Revalued amount less accumulated depreciation and accumulated impairment losses thereon c. Fair value less accumulated impairment losses thereon d. Amount at which an asset is recognized in the balance sheet less accumulated depreciation and accumulated impairment losses thereon 171.According to PAS16 Property, plant and equipment , which of the following items should be capitalized into the cost of property, plant and equipment? A. Cost of preparing the site for installation B. Cost of testing whether the asset works correctly C. Cost of excess materials resulting from a purchasing error D. Initial operating losses while demand builds up a. A and B b. A and C c. A, B and C d. A, B, C and D 172.As a. b. c. d. generally used in accounting, what is depreciation? It is a process of asset valuation for balance sheet purposes. It applies only to long-lived intangible assets. It is used to indicate a decline in market value of long-lived asset It is an accounting process which systematically allocates long-lived asset cost to accounting periods.

173.Which TWO of the following statements are correct per PAS16 Property, plant and equipment? A. Assets are depreciated even if their fair value exceeds their carrying amount B. Land and buildings are accounted for separately, even when acquired together C A non-current asset acquired as the result of an exchange of assets is not recognized D. A gain on disposal of a non-current asset is classified as revenue a. A and B b. A and C c. A and D d. B and D PAS 38 Intangibles: 174.Which of the following should be amortized over the periods of estimated benefit? a. Patent registration cost for a successfully developed product for commercial sale b. Goodwill arising from the purchase of an existing business c. Costs incurred in organizing a corporation d. Legal cost in successful defense of a patent infringement suit. 175.Which of the following factors should not be considered in determining the useful life of an intangible

asset? a. Effects of obsolescence, changes in market demand for the product b. Expected actions of competitors and potential competitors c. The period of control over the asset and legal or similar limits on the use of the asset, such as expiry dates of related leases or contractual or regulatory provisions 176.Which of the following should not be amortized over the periods of estimated benefit? a. Trademarks b.. Computer software costs c. Costs incurred in organizing a corporation d.. Patent right purchased from an inventor 177.Under PAS 38, Intangible Assets, legal fees incurred by a company in defending its patent rights should be capitalized when the outcome of the litigation is Successful Unsuccessful Successful Unsuccessful a. Yes Yes c. No No b. Yes No d. No Yes 178. Are each of the following factors relevant, according to PAS38 Intangible assets, in determining the annual amortization expense on an intangible asset? (1) The cost. (2) The amortization method. Factor (1) Factor (2) Factor (1) Factor (2) a. Not relevant Not relevant c. Relevant Not relevant b. Not relevant Relevant d. Relevant Relevant Liabilities Provisions, Contingent Liabilities and Contingent Assets 179.Which of the following is not an essential characteristic for an item to be reported as a liability on the balance sheet? a. The liability is the present obligation of a particular enterprise b. The liability arises from past transactions or events c. The liability is payable to a specifically identified payee d. The settlement of the liability requires an outflow of resources embodying economic benefits 180.Current liabilities include a. Only obligations which are expected to be settled within the normal operating cycle b. Only obligations which are to be settled within one year from balance sheet date c. Obligations which are expected to be settled within the normal operating cycle and obligations which are due to be settled within one year from balance sheet date d. Refinanced long-term debt falling within one year from balance sheet date for which the entity has the discretion to refinance 181.According to PAS 37, Provisions, Contingent Liabilities and Contingent Assets , a liability of uncertain timing or amount is known as a. Provision c. Constructive obligation b. Obligating event d. Contingent liability 182.This creates a legal or constructive obligation that results in an enterprise having no realistic alternative to settling the obligation is known as a. Obligating event b. Restructuring c. Onerous contract d. Provision Stockholders Equity 183.This is the residual interest in the economic resources of a company that remains after deducting economic obligations:

a. Productive resources c. Net income b. Owners interest d. Net cash balance 184.A companys plan to raise the unit market price of its shares and reduce the number of shares outstanding may be accomplished by means of a a. Reverse split b. Property dividend declaration c. Stock split d. Purchase of treasury stock 185.Sagana Corp.. declared and paid a liquidating dividend of P100,000. This distribution resulted in a decrease in Saganas Paid-in Capital Retained Earnings Paid-in Capital Retained Earnings a. No Yes c. Yes No b. Yes Yes d. No Yes 186.Allied Corporation declared a 10% stock dividend. The declaration a. Would decrease both retained earnings and total stockholders equity b. Would decrease retained earnings but would have no effect on total stockholders equity c. Would have no effect on retained earnings but would decrease total stockholders equity d. Would have no effect on retained earnings and total stockholders equity. 187.How would the declaration and subsequent issuance of a 30% stock dividend by the issuer affect each of the following when the market value of the share exceeds the par value of the stock? Common Stock Additional paid-in capital Retained Earnings Stockholders Equity a. No effect No effect No effect No effect b. No effect Increase Decrease No effect c. Increase No effect Decrease Decrease d. Increase No effect Decrease No effect 188.This is a procedure of eliminating a deficit without going through a formal liquidation and re-incorporation proceedings. a. Quasi-reorganization c. Recapitalization b. Conversion d. Retirement 189.The following relate to revaluation of plant assets and quasi-reorganization. Which statement is false? a. The difference between historical cost net book value and sound value is credited to Revaluation Surplus b. Under Philippine GAAP, quasi-reorganization can be effected through revaluation of assets c. After a quasi-reorganization, the balance of Retained Earnings will increase. d. Any remaining balance of revaluation surplus (or appraisal capital)in the ledger after wiping out a deficit may be used to wipe out losses that may be incurred in the future. 190.A company acquired some of its own common shares at a price greater than both their par value and original issue price but less than their book value. The company uses the cost method of accounting

for treasury stock. What is the impact of this acquisition on total stockholders equity (TSE), and the net book value (NBV) per common share? a. SE decrease ; NBV increase c. SE decrease; NBV decrease b. SE increase ; NBV decrease d. SE increase; NBV increase 191.How would a stock split affect each of the following? Asset Total stockholders equity Additional paid in capital a. Increase Increase No effect b. No effect No effect No effect c. No effect No effect Increase d. Decrease Decrease Decrease Cost Accounting Concepts 192.Which of the following is a period cost? a. Selling expense b. Materials inventory d. Direct labor

c. Manufacturing overhead

193.The overstatement of the work in process inventory at the end of the period will result in the: a. Overstatement o the cost of goods manufactured in that period. b. Understatement of the net income for that period. c. Understatement of the gross profit from sales in that period. d. Overstatement of the net income for that period. 194.The fixed portion of the semivariable cost of electricity for a manufacturing plant is a Period cost Product cost Period cost Product cost a. Yes No c. No Yes b. Yes Yes d. No No 195.The term conversion costs refers to: a. Manufacturing costs incurred to produce units of output. b. All costs associated with manufacturing other than direct labor costs and raw materials costs. c. Costs which are associated with marketing, shipping, warehousing, and billing activities. d. The sum of direct labor costs and all factory overhead costs. 196.The term prime costs refers to: a. Manufacturing costs incurred to produce units of output. b. All costs associated with manufacturing other than direct labor costs and raw material costs. c. Costs which are predetermined and should be attained. d. The sum of raw materials costs and direct labor costs. 197.The term variable costs refer to: a. All costs which are likely to respond to the amount of attention devoted to them by a specified manager b. All costs which do not change in total for a given period of time and relevant range but which becomes progressively smaller on a per unit basis as volume increases. c. All manufacturing costs incurred to produce units of output. d. All costs which fluctuate in total in response to small changes in the rate of utilization of capacity. 198.Which one of the following costs would be most representative of a semivariable cost? a. Equipment rentals c. Supervisor salaries. b. Electricity for machinery. d. Plant insurance. 199.Which type of cost is not recorded in the accounting records?

a. Irrelevant costs. b. Sunk costs c. Opportunity costs. Noncontrollable costs. 200.Which statement is incorrect? a. Within the relevant range, variable costs change on a per unit basis. b. Middle-level management is primarily responsible for fixed costs. c. Direct labor is an element of both prime costs and conversion costs. d. The work of a plant supervisor would be considered direct labor.

d.

JOB ORDER COSTING 201.Joanne, Corp. uses a job order cost system. It should record the use of direct materials previously purchased as a increase in: a. Stores control. c. Factory overhead control. b. Factory overhead applied. d. Work in process control. 202.Prize, Inc. uses the job order cost system. It shall record the use of indirect materials previously purchased as a decrease in: a. Factory overhead applied. c. Stores control b. Factory overhead control d. Work-in-process control 203.In a job cost system, manufacturing overhead is An indirect A necessary element An indirect A necessary element cost of jobs in production cost of jobs in production a. No Yes c. Yes Yes b. No No d. Yes No 204.A direct manufacturing labor overtime premium should be charged to a specific job when the overtime is caused by the a. Increased overall level of activity. b. Customers requirement for early completion of job. c. Managements failure to include the job in the production schedule. d. Managements requirement that the job be completed before the annual factory vacation closure. 205.Angela Decor Inc. incurred direct labor overtime premium of P250,000 during October, 2010. As Angelas cost accountant, you are charging the overtime premium to specific jobs because it was precipitated by: a. Customer wanted the job completed earlier. b. Increased production activity leading to the Christmas season. c. Factory managers failure to include the job in the preceding months production schedule. d. Factory managers decision to complete all jobs before the annual machinery maintenance in December. 206.Using direct materials in production and charging direct labor costs to a job results in debits to a. Finished goods inventory c. Work in process inventory b. Direct materials and direct labor d. Materials inventory and manufacturing wages. 207.Costs are accumulated by responsibility center for control purposes when using Job order costing Process costing Job order costing Process costing a. Yes Yes c. No No b. Yes No d. No Yes PROCESS COSTING 208.April Corp. is a semi-conductor manufacturer where the materials are successively run through the Front-of-Line, Bonding and End-of-Line departments. For purposes of product-costing, the bonding department should treat the materials received from the Front-of-Line department as: a. Work-in process b. Equivalent units c. Raw materials d. Finished goods 209.In computing the current periods manufacturing cost per equivalent unit, the FIFO method of process costing considers current period costs a. Only. b. Less cost of beginning work in process inventory

c. Plus cost of beginning work in process inventory. d. Plus cost of ending work in process inventory 210.The units transferred in from the first department to the second department should be included in the computation of the equivalent units for the second department for which of the following methods of process costing? FIFO Weighted average FIFO Weighted average a. Yes Yes c. No Yes b. Yes No d. No No 211. A process costing system was used for a department that began operations in January 2010. Approximately the same number of physical units, at the same degree of completion, were in work in process at the end of both January and February. Monthly conversion costs are allocated between ending work in process and units completed. Compared to the FIFO method, would the weightedaverage method use the same or a greater number of equivalent units to calculate the monthly allocations? Equivalent units for weighted Equivalent units for weighted to average compared FIFO average compared to FIFO January February January February a. Same Same c. Greater number Same b. Greater number Greater number d. Same Greater number 212.The economic order quantity formula assumes that a. Periodic demand for the good is known. b. Carrying costs per unit vary with quantity ordered. c. Costs of placing an order vary with quantity ordered. d. Purchase costs per unit differ due to quantity discounts. 213.NYKs shipbuilding company construct huge sailing vessels. NYKs accountant would consider the inexpensive stain used only on the wood of the wheel of a vessel to be: a. A direct material. c. A prime cost. b. A direct material as well as a prime cost. d. A conversion cost. 214.The variable factory overhead application rate under the normal, practical, and expected activity levels would be the same : a. Except for normal volume. c. Except for expected activity. b. Except for practical capacity. d. For all three activity levels. 215.Rhea, Inc. a manufacturing concern engages your services to develop a factory overhead application for use in a process costing system. Which of the following could be used as a denominator? a. Actual factory overhead. c. Estimated factory overhead. b. Actual direct labor hours d. Estimated direct labor hours. 216.In process cost system, application of factory overhead usually would be recorded as an increase in a. Finished goods inventory control. c. Cost of goods sold b. Factory overhead control d. Work in process inventory control Standard Costing 217.The management of Baby Queen Pickle Factory budgeted production of 700,000 units at a cost of P1,450,000. If actual production was 700,000 units at a cost of P1,490,000, then Baby Queens production supervisor was: a. Effective c. Both effective and efficient b. Efficient d. Neither effective nor efficient. 218. What standard cost variance represents the difference between actual factory overhead incurred and budgeted factory overhead based on actual hours worked? a. Volume variance b. Spending variance c. Efficiency variance d. Quantity variance

Activity- based Cost System 219.Investments in activity-based costing systems are justified only if they lead to a. More accurate inventory values c. Better cost-driver analysis b. Better management decisions d. More accurate product costs 220.Leni Co. develops computer programs to meet customers special requirements. How should Gram categorize payments to employees who develop these programs? Direct costs Value-adding costs Direct costs Value-adding costs a. Yes Yes c. No No b. Yes No d. No Yes Spoiled Goods Normal & Abnormal Scrap Materials 221.Normal spoilage and abnormal spoilage should be classified as Normal Abnormal Normal Abnormal a. Period cost Period cost c. Period cost Product cost b. Product cost Period cost d. Product cost Product cost 222.In a quality control program, which of the following is(are) categorized as internal failure costs? I. Rework. II. Responding to customer complaints. III. Statistical quality control procedures. a. I only b. II only c. III only d. I, II, and III Joint & By-product Costing 223. For purposes of allocating joint costs to joint products, the sales at point of sale, reduced by cost to complete after split-off, is assumed to equal to the a. Joint costs. c. Net sales value at split-off b. Total costs d. Sales price less a normal profit margin at point of sale 224.In accounting for by-products, the value of the by-product may be recognized at the time of Production Sale Production Sale a. Yes Yes c. No No b. Yes No d. No Yes PAS 33 - EARNINGS PER SHARE 225.Are the following statements in relation to the term 'dilution' true or false, according to PAS 33 Earnings per share? (1) A reduction in earnings per share is an example of dilution. (2) A reduction in loss per share is an example of dilution. Statement (1) Statement (2) Statement (1) Statement (2) a. False False c. True False b. False True d. True True 226.Are the following statements true or false, according to IAS33 Earnings per share? (1) Earnings per share amounts should not be presented if they are negative, i.e. losses per share. (2) Earnings per share amounts calculated for discontinued operations should be presented. Statement (1) Statement (2) Statement (1) Statement (2) a. False False c. True False b. False True d True True 227.The Peabody Company is calculating its weighted average number of ordinary shares in issue during the year ended December 31, 20X7. During the year it issued new ordinary shares for cash at full market price and made a 1 for 8

bonus issue. Are the following statements true or false, according to PAS33 Earnings per share? (1) New shares issued as a result of bonus issue should be time apportioned from their date of issue (2) New shares issued for cash at full market price should be time apportioned from their date of issue. Statement (1) Statement (2) Statement (1) Statement (2) a. b. False False False True c. d. True True False True

PFRS for Small and Medium Sized Entities 228.Which of the following will meet the definition of a small and medium-sized entity? a. CJ Foodhaus retails food. It is in the process of issuing securities in a domestic stock exchange. b. A small, private, unlisted manufacturer c. A large private unlisted commercial bank d. A manufacturing company with total assets of P600 million and total liabilities of P 200 million 229. Which of the following entities must not describe its financial statements as being in compliance with the PFRS for SMEs even if it is allowed by law to prepare its financial statements in accordance with the PFRS for SMEs? I. An entity whose shares are traded in a public market II. An entity whose debt instruments (but not its shares) are traded in a public market III. An entity that is in the process of issuing its debt instruments (but not its shares) for trading in a public market (eg a local securities exchange). a. I and II only b. II and III only c. I and III only d. I, II and III End of Summary I

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