Resa Toa 1205 Preweek

Review School of Accountancy Theory of Accounts
Basic Accounting Concepts A. The debit-credit convention must not be used

1. External decision makers include all of the following, except: B. Only two accounts affected by each transaction recording
A. creditors C. managers C. At least two accounts are affected by each transaction recorded
B. financial press D. owners D. For every asset increased, a revenue or liability must also be increased
2. This accounting objective emphasizes the importance of-the Income Statement as it is 8. Which one of these is not among the criteria to consider an event as accountable? 1
geared toward proper income or performance determination of the enterprise. A. It must have already happened
A. Entity theory C. Proprietary theory B. Its amount, can be measured reliably
B. Fund theory D. Residual equity theory C. It must increase or decrease an element of the financial statements
D. It must be classified as an external event rather than an internal event
3. Preparation of consolidated financial statements is primarily based on the
A. Cost/benefit constraint C. Separate entity assumption 9. External events include all of the following, except
B. Full disclosure principle D. Time period assumption a. Sale of merchandise
b. Borrowing of money from the bank
4. The continuity assumption is the basis for the rule that c. Donation received from shareholder
A. Treasury stock should not be reported in the balance sheet as an asset d. Casually caused by fire, flood, earthquake or others
B. The cost of operating assets should be allocated to expense systematically over their
useful lives 10. Accounts payable and accounts receivable are examples of:
C. The income statement should not include material gains and losses that are both A. Contra accounts C. Permanent accounts
unusual and infrequent B. Mixed balance accounts D. Temporary accounts
D. The cost of installing a machine should not be included in the recorded cost of the
machine but rather expensed immediately 11. An example of a permanent adjunct account is
A. Accumulated depreciation C Premium on bond liability
5. Under the stable monetary unit assumption B. Freight-In D. Sales returns and allowances
A. interest rates are increased for expected inflation.
B. inflation adjustments are incorporated directly into the financial statements. 12. An example of a nominal contra account is
C. all assets and liabilities are translated to pesos of constant purchasing power. A. Accumulated depreciation C. Premium on bond liability
D. the peso is assumed to have constant purchasing power, regardless of the time period. B. Freight-In D. Sales returns and allowances
The Accounting Process 13. The four phases of accounting are recording, classifying, summarizing and interpreting The
6. Which of the following is an application of the science aspect of accounting? phase whereby the liquidity, solvency and profitability of an entity are significantly portrayed is
A. Applying the rules of debit and credit known as
B. Exercise of creative skill and judgment A. Classifying C. Recording
C. Attesting to the fairness of presentation of financial condition and operating results B. Interpreting. D. Summarizing
D. Interpreting the information presented in the financial statements through ratios and
trend analysis 14. To post in accounting means to copy the information about account changes from the
A. ledger and place it into the journal.
7. The double-entry concept in accounting means which of the following? B. journal, and place it into the ledger.
May 2012, Preweek (231, 232, 233, 234, Mock Board) Page 1 of 38
C. source documents, and record it in the ledger. 22. When total debit exceeds total credit in the balance sheet columns of the worksheet this
D. journal, place it into the ledger, and then delete it from the journal. indicates
A. Net income C. Zero profit
15. A control device that helps minimize and localize accounting errors is known as B. Net. Loss D. No meaningful amount
A. Chart of accounts C. Trial balance
B. Subsidiary ledger D. Worksheet 23. Which of the following is an example of a closing entry?
A. Posting the ending inventory balance in a perpetual inventory system
16. What is normal order of accounts in the unadjusted trial balance? B. Transferring the balance in a temporary account, to a contra account
A. Assets, liabilities, equity C. Transferring an amount entered in a wrong account to the appropriate account
B. Assets, equity, income, expenses, and finally liabilities D. Transferring the balance in the bad debt expense account to the income summary
C. Assets, liabilities, equity, income, and finally expenses account
D. All accounts with debit balances, then all accounts with credit balances
24. The last step in the accounting cycle is to
17. In the accounting cycle, a worksheet is prepared: A. Journalize and post adjusting entries C. Prepare financial statements
A. as a substitute for financial statements B. Journalize and post closing entries D. Prepare the post-closing trial balance
B. only for the purpose of preparing reversing entries
C. after adjusting entries are entered in the journal and posted to the ledger 25. An appropriate reversing entry:
D. before adjusting entries are entered in the journal and posted to the ledger A. Is dated the first day of the next accounting period
B. Is usually made for adjusting entries that affect deferred items only
18. Adjusting entries are primarily based on the accounting principles of C. Must be made because they are required by accounting standards
A. Matching and historical cost C. Revenue realization and matching D. Is often used to correct entries which were initially based on estimates
B. Matching and monetary unit D. Revenue realization and materiality
26. As a general rule, which of the following is not subject to reversal? 2
19. Which of the following accounting concepts best justifies the use of accruals and deferrals A. Accrued revenues
A. Continuity assumption C. Materiality constraint B. Accrued expenses
B. Cost/benefit constraint D. Unit-of-measure assumption C. Prepaid expenses recorded as assets upon payment
D. Deferred revenues recorded as revenue upon receipt
20. Adjusting entries are needed because an entity:
A. Has expenses Philippine Standards (Generally Accepted Accounting Principles)
B. Uses the accrual basis of accounting 27. The International Accounting Standards (IAS) are 3
C. Uses (he cash basis of accounting rather than the accrual basis A. focused on quantitative rules
D. Has earned revenue during the period by selling products from its central operations B. based on regulations not concepts
C. principle based rather than rules based
21. The adjusting entry at the end of the accounting year to reflect revenues earned but not yet D. rules based rather than principles based
collected or recorded will:
A. Decrease liabilities C. Not. affect assets 28. The name that is now used for standards issued by the International Accounting Standards
B. Increase assets D. Not affect income for the current period Board is 4
A. International Accounting Standards (IAS)
B. International Financial Repotting Standards (IFRS)

C. International Financial Accounting Interpretations (IFAI) 34. Generally accepted accounting principles
D. International Generally Accepted Accounting Principles (iGAAP) A. derive, their authority from legal court proceedings
B. have been specified in detail in the FRSC conceptual framework
29. Which of the following organizations is responsible for setting International Financial C. are fundamental truths or axioms that can be derived from laws of nature
Reporting Standards? D. derive their credibility and authority from general recognition and acceptance by the
A. Financial Accounting Committee accounting profession
B. Financial Accounting Standards Board
C. International Accounting Standards Board 35. To qualify as generally accepted, accounting principle must
D. International Accounting Standards Committee A. receive substantial authoritative support
B. guide entrepreneur of the choice of an accounting entity like a sole proprietorship,
30. The purpose of the International Financial Reporting Standards (IFRS) is to partnership or corporation
A. arbitrate accounting disputes between auditors and international entities C. usually guide corporate managers.in preparing financial statements, which will be
B. promote uniform accounting standards among the countries of the world understood by widely scattered stockholders
C. issue enforceable standards-which regulate the financial reporting of multinational D. guide corporate managers in preparing financial statements, which will be used for
entities collective bargaining agreements with trade unions
D. develop a uniform currency in which (he financial transactions of entities throughout the
world would be measured 36. Which one of the following is not a source of generally accepted accounting principles in the
Philippines?
31. International Financial Reporting Standards are applicable, to the following entities A. Existing practices in the Philippines
A. Government activities C. Not-for-profit entities B. Available literature on the topic or subject under study
B. Government business enterprises D. Public sector non-profit organizations C. Pronouncements by the Association of CPAs in Public Practice
D. Statements, recommendations, studies, or standards issued by standard-setting bodies
32. The process of establishing financial accounting standards 5 such as the International Accounting Standards Board and the, Financial Accounting
A. is a legislative process based on rules promulgated by government agencies Standards Board
B. is based solely on economic analysis of the effect each standard will have if it is
implemented 37. Proper application of accounting principle is most dependent upon the
C. is a social process which incorporates political actions of various interested user groups A. external audit function C. oversight of regulatory bodies
as well as professional research and logic B. existence of specific guidelines D. professional judgment of the accountant
D. is a democratic process in that a majority of practicing accountants must agree with a
standard before it becomes implemented Conceptual Framework (old)
38. Which of the following is not a qualitative characteristic of financial statements?
33. Once an accounting standard is established, A. Comparability C. Relevance
A. the standard is continually reviewed to see if modification is necessary B. Materiality D. Understandability
B. the task of reviewing the standard to see, if modification is necessary is given to PICPA
C. the principle of consistency slates that no revisions should ever be made to the standard 39. Which is not a requisite of 'reliability' of financial statements?
D. the standard is not reviewed, unless Securities and Exchange-Commission (SEC) makes A. Income lax returns are properly filed
a complaint B. An effective system of internal control is maintained
C. The statements are presented in accordance with GAAP B. SEC rules and regulations D. All of these
D. The statements are examined by independent auditors who prepare adequate
statements 45. The Conceptual Framework is intended to assist
a. the FRSC
40. Which of the following situations violates the concept of reliability'? b. the users of financial statements
A. Financial statements arc issued nine months late c. Code of Ethics for professional accountants
B. FS includes a property with a carrying amount increased to management's estimate of d. concepts of capital and capital maintenance
market value
C. Data on segments having the same expected risks and growth rate, arc reported to 46. The application of Philippine Financial Reporting Standards is presumed to result in financial
analysts estimating future profits statements that achieve
D. Management reports, to stockholders new projects undertaken; out the financial A. Aggregation C. Consistency of presentation
statements never report the project results B. Comparable information D. Fair presentation
41. In respect to information included in financial statements, the accounting concept of prudence 47. Which of the following best states the purpose of general-purpose financial statements?
ensures that A. To identify shareholders.
A. the financial statements report what they purport to report B. To help users make decisions.
B. a degree of caution in the exercise of judgments about estimates is made C. To determine compliance with tax laws.
C. information is provided to users within the time period in which it is most likely to bear on D. To disclose the market value of the firm's assets and liabilities.
their decisions
D. an appropriate balance is achieved between the relevance and the reliability of 48. A primary objective of financial reporting is to:
information that has been included A. Assist investors in analyzing the economy
B. Assist investors in predicting prospective cash flows
42. Accounting traditionally has been influenced by conservatism because of the C. Assist banks to determine an appropriate interest tale for their commercial loans
A. difficulty in measuring net income on the accrual basis D. Assist suppliers in determining an appropriate discount to offer a particular company
B. large number of transactions recorded in any one period
C. probability of undetected errors in the financial statements 49. The primary or fundamental qualitative characteristics of accounting information include
D. inherent uncertainties of many accounting measurements which of the following? 6
A. Comparability C. Relevance
43. According to the Conceptual Framework of Accounting, which of the following is not a B. Materiality D. Understandability
constraint of relevant and reliable information?
A. Neutrality 50. Which term best describes information that influences the economic decision of users?
B. Timeliness A. Relevant C. Reliable
C. Balance between benefit and cost B. Prospective D. Understandable
D. Balance between qualitative characteristics
51. Relevance is a function of 7
Conceptual Framework A. Predictive and confirmatory value C. Timeliness and substance over form
44. The Conceptual Framework of Accounting deals with B. Prudence, predictive and feedback value D. Verifiability and confirmatory value
A. CPAs in public practice C. Tax laws and regulations
52. Financial information that is presented in a balance sheet or income statement is misstated, purchase, the company debit miscellaneous expense.
and it influences the economic decisions of users, that information is described as This scenario is most closely associated with which of the following concepts or principles?
A. Faithful C. Prudent A. Materiality and cost-benefit tradeoff C. Relevance and neutrality
B. Material D. Reliable B. Materiality and going concern D. Reliability and comparability/consistency
53. If an item of income is not material, then the manner of presenting that information, or 59. Which of the following is an essential characteristic of a liability?
whether or not it is disclosed A. The exact amount due must be known
A. Will be included directly in retained earnings B. It may be the result of future transactions
B. Should not affect the economic decisions of users C. The identity of the creditor must be known
C. Will have an impact on the economic decisions of users D. It must be an obligation to transfer assets or provide s if/ices in the future
D. Should not be included in the determination of profit or loss for the period
60. Which of the following is not an essential characteristic for an item to be reported as a liability
54. Which best describes faithful representation in relation to information in financial statements? on the balance sheet?
8 A. The liability arises from past transactions or events
A. Comprehensibility of users B. The liability is payable to a specifically identified payee
B. Freedom from material error C. The liability is the present obligation of a particular entity
C. Inclusion of a degree of caution D. The settlement of the liability requires' an outflow of resources embodying economic
D. Influence on the economic decisions of users benefits
55. Which of the following enhances the usefulness of financial accounting information? 9 61. According to the Conceptual Framework, the financial statement element that is defined as
A. Accounting entity C. Going concern increases in economic, benefits during the accounting period in the form of inflows or
B. Cost-benefit constraint D. Verifiability enhancements' of assets or decreases of liabilities that result in increases in equity, other
than those relating to contributions from equity participants, is:
56. For financial information to be useful, there must be a linkage between the decision makers A. Gains C. Profits
and the decisions they make. This link is B. Income D. Revenue
A. Materiality C. Reliability
B. Relevance D. Understandability 62. According to the Conceptual Framework, the two criteria required for incorporating items into
the income statement or statement of financial position are that:
57. The recognition of periodic depreciation expense on company-owned automobiles requires A. It satisfies the criterion of capital maintenance,
estimating both salvage or residual value, and the useful life of the vehicles. The use of B. It meets the definition of relevance and reliability.
estimates in this case is an example of C. lt meets the requirements of comparability and Consistency.
A. Conservatism D. lt meets the definition of an element and can be measured reliably.
B. Maintaining consistency
C. Providing relevant data at the expense of reliability 63. The valuation basis used in conventional financial statement is
D. Invoking the materiality constraint rather than the cost-benefit constraint A. A mixture of costs and values C. Original cost
B. Market value D. Replacement cost
58. A company, which has total assets of P 100,000,000 and periodic net income of P9,000,000,
purchases staplers with an estimated life of 10 years for P 200. In connection with the 64. The following statements are based on the Conceptual Framework of Accounting:
Statement I: The Conceptual Framework is a reporting standard.

Staieme.nl II: In cases of conflict, the requirements of the Conceptual Framework prevail 70. Which of the following liabilities is a financial liability?
over those of the PFRS'. A. Deferred revenue
Statement III: The Conceptual Framework states that transaction must be accounted for B. A warranty obligation
according to their legal form, C. A constructive obligation
A. B. C. D. D. An obligation to deliver own shares worth a fixed amount of cash
Statement I True True True False
Statement II True False False False 71. Under PAS 1, which of the following is not among the criteria in classifying a liability as
Statement III True True False False current?
A. It is held primarily for the purpose of being traded
Presentation of Financial Statements B. Expected to be settled in the entity's normal operating cycle
65. Which of the following reports is not a component of the financial statements according to C. Due to be settled within twelve months after the balance sheet date
PAS 1? D. The entity has an unconditional right to defer settlement of the liability for at least twelve
A. Balance sheet C. Notes to the financial statements months after the balance sheet date
B. Director's report D. Statement of changes in equity
72. The elements of the equity section of balance sheet of a corporation should be classified
66. The level of rounding used in the financial statements refers to primarily by: 10
A. The abbreviation of words used A. Class of capital C. Maturity
B. The truncation of the amounts presented B. Liquidity D. Source
C. The shortening of the notes by removing comparative numbers
D. The presentation of a concise financial report rather than a full financial report 73. PAS 1 Presentation of Financial Statements requires disclosure in the balance sheet of the
following items
67. The balance sheet of a reporting entity presents a structured summary of the A. A statement of compliance with PFRS
A. assets, liabilities and equity at reporting dale B. The carrying amount of property, plant and equipment
B. receipts and payments of cash during the period C. The measurement basis used for the revaluation of assets
C. profits and losses not reported in income of the period D. Information about the key assumptions used in the depreciation of assets
D. revenue and expenses arising during the reporting period
74. What is the purpose of reporting comprehensive income?
68. A public utility reports noncurrent assets as the first item on its balance sheet. This is an A. To replace, net income with a better measure
example of B. To report a measure of overall enterprise performance
A. Conservatism C. Industry practice C. To report changes in equity due to transactions with owners
B. Improper statement presentation D. Substance over form D. To combine income from continuing operations and extraordinary items
69. The line items in the statement of financial position include all of the following, except 75. Which of the following are acceptable methods for reporting comprehensive income under
A. Biological assets PFRS?
B. Investment property I) One comprehensive income statement.
C. Total of assets held for sale II) Two statements: an income statement and a comprehensive income statement.
D. Properly, plant and equipment analyzed by class III) In the statement of owners' equity.
A. I only. C. I and III only C. Revenues, cost of goods sold, and advertising expense.
B. I and II only D. I, II, and III D. Operating expense, non-operating expenses, and extraordinary items.
76. Which financial statement is superseded by the Statement of Comprehensive Income as a 82. The profit: or loss of a period and the other gains and losses recognized directly in equity are
basic component of general-purpose financial statements? presented in the
A. Balance sheet C. Statement of cash flows A. Balance sheet C. Income statement
B. Income statement D. Statement of changes in equity' B. Cash flow statement D. Statement of changes in equity
77. A company classifies expenses by log sties quality control, manufacturing, plant engineering, 83. Which of the financial statements should an investor primarily use to assess the amounts,
sales and marketing, research and development, finance and administration. The timing, and uncertainty of investing and financing activities of ABC Company?
classification basis is by A. Statement of cash flows C. Statement of comprehensive income
A. Area of responsibility C. Nature of expense B. Statement of changes in equity D. Statement of financial position
B. Function performed D. Object of expenditure
84. Which of the following is not a source of cash?
78. When an entity opts to present the income statement classifying expenses by function, which A. Cash borrowed on a short-term note C. Depreciation expense
of the following is not required to be disclosed as "additional information"? B. Collection of a short-term receivable D. Sale of operational asset for cash
A. Amortization expense C. Director's remuneration
B. Depreciation expense D. Employee benefits expense 85. Which of the following would not represent cash inflow nor outflow?
A. A purchase of treasury shares C. Ordinary shares issued
79. Accounting income is a concept in which B. Cash dividend paid D. Share dividends declared and issued
A. Market values adjusted for the effects of inflation or deflation are used to calculate real
wealth. 86. Glenda Corporation prepares its financial statements in accordance with PFRS. Glenda must
B. Income equals the change in market value of the firm's outstanding common stock for report finance costs on the statement of cash flows:
the period. A. In financing activities.
C. The transactions approach is used to record income and expenses throughout the B. In operating activities.
reporting period. C. In investing activities or financing activities.
D. Income is measured as the amount of "real wealth'" 'that an entity could consume during D. Either in operating activities or financing activities.
a period and be as well off at the end of that period as it was at the beginning.
87. The following statements are based on the PAS 1 (Presentation of Financial Statements):
80. The profit or loss attributable to a minority (non-controlling) interest is required, under PAS 1 Statement I: The number of shares authorized for issue shall be shown in the statement of
Presentation of Financial Statements, to be presented on the face of the financial position or the statement of changes in equity or in the notes to the
A. Balance sheet C. Income statement financial statements.
B. Cash flow statement D. Statement of changes in equity Statement II: An entity presenting a separate income statement and a statement of
comprehensive income shall present a statement of changes in equity.
81. Largo Corporation prepares its financial statements in accordance with PFRS. Which of the Statement III: An income statement is prepared under the "natural presentation" when it
following items is required disclosure on the income statement? presents expenses based on logistics, marketing and production.
A. Finance costs, tax expense, and income. Which of the foregoing statements are true?
B. Gross profit, operating profits, and net profits. A. I only C. I and II
B. II only D. I, II and III D. Before all of the financial statements in a financial report
First-Time Adoption of PFRS 93. Which of the following should be disclosed in the summary of significant accounting policies?
88. Which of the following is the minimum reporting requirement for a company that is preparing A. Guarantees of indebtedness of others
its first PFRS financial statements? B. Refinancing of debt subsequent to the balance sheet dale
A. One statement of cash flows. C. Two statements of financial position. C. Adequacy of pension plan assets relative to vested benefits
B. One statement of comprehensive income. D. Three statements of financial D. Criteria for determining which investments are treated as cash equivalent
position.
94. PAS 1 requires the following note disclosures in relation to dividends of an entity:
89. How should a first-time adopter of PFRS recognize the adjustments required to present in A. Names of the recipients of the dividends
opening PFRS Statement of financial position? B. A schedule of cumulative dividends paid in prior periods
A. All of the adjustments should be recognized in profit or loss. C. Amount of any cumulative preference dividends not recognized
B. All of the adjustments should be recognized directly in retained earnings or, if D. Addresses of all shareholders who are entitled to receive the dividends
appropriate, in another category of equity.
C. Current adjustments should be recognized in profit or loss, and noncurrent adjustments 95. Which of the following information is not specifically a required disclosure of PAS 1?
should be recognized in retained earnings. A. Names of major shareholders of the entity
D. Adjustments that are capital in nature should be recognized in retained earnings, and B. Level of rounding used in presenting the financial statements
adjustments that are revenue in nature should be recognized in profit or loss C. Whether the financial statements cover the individual entity or a group of entities
D. Name of the reporting entity or other means of identification and any change in that
Notes to the Financial Statements information from the previous year
90. The inclusion of footnotes and supporting schedules in the FS reflects application of
A. Relevance quality 96. Which one of the following falls within the definition of 'related parties' as defined by PAS 24?
B. Time period assumption A. Government department and agencies
C. Industry peculiarity constraint B. A supplier with whom the reporting entity has a one-year contract for the supply of raw
D. Completeness quality or full disclosure principle materials
C. Providers of finance in the course of their normal dealings with an enterprise by virtue
91. The normal order of presenting the notes to the financial statement is; only of those dealings
a. Statement of measurement basis and accounting policies applied D. The wife of a key management personnel who has the authority to plan, direct, and
b. Supporting information or computation for line items presented and aggregated in the FS control the activities of the reporting enterprise
c. Statement of compliance with Philippine Financial Reporting Standards (PFRS)
d. Commitments, contingencies, and other required financial and non-financial disclosures. 97. According to PAS 24, which one of the following is not a related party of ABC Company?
A. A, C, B, D C. C, A, D, B A. An associate of ABC Company
B. C, A, B, D D. C, B, A, D B. Key management personnel of ABC Company
C. An entity providing banking facilities to ABC Company
92. The summary of accounting policies is normally presented: D. A shareholder of ABC Company owning 30% of the ordinary share capital
A. Within the auditor's report
B. As the last note in a set of financial statements 98. Which of the following situations will require disclosure as a related party? 11
C. As the first, note, after all the financial statements A. In consolidated financial statements in respect to infra-group transactions
B. In parent FS when they are made available or published with die consolidated IS 102. An accounting policy
C. In FS of state-controlled enterprise of transactions with, other state-control led A. Is a judgment applied in deciding whether to recognize a transaction
enterprises B. Comprises the principles applied in preparing the financial statements
D. In related party relationships where control exists, irrespective of whether there have C. is (lie judgment used in deciding on whether to disclose a particular item
been transactions between related parties D. Is the application of judgment in deciding on the measurement of an item
99. In determining whether a particular operating segment is of significant size (i.e., 10%) to 103. Under PFRS, which of the following is the first step within hierarchy of guidance to which
warrant disclosure, management refers, and whose applicability at considers, when selecting accounting
A. five tests are usually applied but only one must be met policies?
B. Five tests are usually applied and all tests must be met A. Apply the requirements in PFRS dealing with similar and related issues.
C. Three tests are usually applied and all tests must be met B. Apply a standard from PFRS if it specifically relates to the transaction, event, or
D. Three tests are usually applied bat only one must be met condition,
C. Consider the applicability of the definitions, recognition criteria, and measurement
100. The following statements are based on the PFRS 8 (Operating Segments): An entity shall concepts in the Conceptual Framework.
report separately information about an operating segment that meets any of the following D. Consider the most recent pronouncements of other standard-setting bodies to the extent
quantitative thresholds: they do not conflict with PFRS or the Conceptual Framework.
Statement I: Its reported revenue, including both sales Co external customers and
intersegment sales, is 10% or more of the combined revenue, internal and 104. The concept of consistency is sacrificed in the accounting for which of the following items?
external, of all operating segments. A. Extraordinary items
Statement II: The absolute amount of its reported profit or loss is 10% or more of the B. Discontinued operations
greater, in absolute amount, of (1) combined reported profit of all operating C. Effect of change in accounting principle
segments that did not report a loss and (2) combined reported loss of all D. Loss on disposal of a segment of a business
operating segments that reported a loss.
Statement III: Its assets are 10% or more of the combined assets of all operating segments 105. Under PFRS, changes in accounting policies are:
Which of the foregoing statements are true? A. Permitted if the change will result in a more reliable and more relevant presentation of
A. I only C. I and II the financial statements,
B. II only D. I, II and III B. Required if an alternate accounting policy gives rise to a material change in assets,
liabilities, or the current: year net income.
101. Under PAS 10, which of the following is classified as an adjusting event rather than a non- C. Permitted if the entity encounters new transactions, events, or conditions that are
adjusting event? substantively different from existing or previous transactions.
A. Destruction of a major production plant by fire. D. Required on material transactions, if the entity had previously accounted for similar,
B. The entity announced the discontinuance of its assembly operation though immaterial, transactions under an unacceptable accounting method.
C. The entity entered into an agreement to purchase the freehold of its currently leased
office building 106. Under PAS 8, which one of the following terms best describes applying a new accounting
D. A mistake was discovered in the calculation of the allowance for uncollectible trade policy to transactions as if that policy had always been applied?
receivables resulting to understatement of the trade receivables A. Prospective application C. Retrospective application
B. Prospective restatement D. Retrospective restatement
Accounting Changes & Prior Period Errors
107. PFRS requires changes in accounting principles to be reported: B. Correction of an error affecting current year's income
A. On a prospective basis, C. A change from FIFO method to weighted average method
B. On a retrospective basis. D. A change from declining balance, to straight-line depreciation
C. By restating the financial statements.
D. By a cumulative adjustment on the income statement. 113. In 2012, a firm changed from the FIFO method of accounting for inventory to Weighed
Average. The firm's 2011 and 2012 comparative financial statements will reflect which
108. When a public shareholding entity changes an accounting policy voluntarily, the entity should method or methods? 12
A. Account for the change retrospectively A. 2011: FIFO, 2012: FIFO
B. Inform shareholders prior to taking the decision B. 2011: FIFO, 2012: Weighted Average
C. Treat the effect of the change as an extraordinary item C. 2011: Weighted Average, 20.12: FIFO
D. Treat the change prospectively and adjust the effect of the change in (he current md D. 2011; Weighted Average, 2012: Weighted Average
future periods
114. Which type of accounting change should always be accounted for in current and future
109. Retrospective application of a change in accounting policy means: periods?
A. Applying a new accounting policy to transactions, other events and conditions as if that A. Change in accounting estimate. C. Change in reporting entity.
policy had always been applied. B. Change in accounting principle. D. Correction of an error.
B. Applying a new accounting policy to transactions, other events and conditions occurring
after the date as at which the policy is changed. 115. Which of the following is a characteristic of a change in accounting estimate?
C. Applying a new accounting policy to transactions, other events and conditions, identified A. It never needs to he disclosed.
before the date when the financial statements are authorized for issue, as if that policy B. It does not affect the financial statements of prior periods
had always been applied. C. It requires the reporting of pro forma amounts for prior period.
D. Applying a new accounting policy to transactions, other events and conditions occurring D. It should be reported through restatement of the financial statements.
between the date as at which the policy is changed and the date when the financial
statements are authorized for issue. 116. Which of the following changes would be accounted for prospectively?
A. Corrections of prior period errors,
110. The effect of a change in accounting policy should be reported as a(n) B. Change in the expected life of a depreciable asset.
A. Extraordinary item in the year of the change C. First time presentation of consolidated financial statements,
B. Prior period adjustment in the year of the change D. Changing from FIFO to weighted average for merchandise inventory.
C. Adjustment to the opening balance of retained earnings
D. Separate line item on face of the income statement in the year of the change 117. In 2012, a firm changed from straight-line (SL) method of depreciation to double declining
balance (DDB). The firm's 2011 and 2012 comparative financial statements will reflect which
111. Where a business transaction requires a direct adjustment to an equity account, the tax effect method or methods?
is adjusted against: A. 2011 SL, 2012: SL C. 2011 DDB, 2012: DDB
A. cash C. income B. 2011 SL, 2012: DDB D. 2011 SL , 2012: either SL or DDB
B. equity D. tax expense
118. Which of the following could result: in overstatement: of both current assets and
112. Which of the following is treated as a retrospective accounting principle change? shareholders' equity?
A. A change in the residual value A. An understatement of accrued sales commission
B. Annual depreciation on manufacturing machinery is understated

C. Noncurrent note receivable principal is misclassified as current asset Development Stage Enterprise
D. Holiday pay expense for administrative employees is misclassified as factory overhead 124. A development stage enterprise
A. Does not issue an income statement
119. When it is impracticable to determine the effect of an error for all prior periods, the entity B. Issues an income statement that shows only cumulative amounts from the enterprise's
restates comparative information inception
A. prospectively up to the latest: date practicable C. Issues an income statement' that is the same as an established operating enterprise,
B. retrospectively up to the latest due practicable and shows cumulative amounts from the enterprise's inception as additional information.
C. prospectively from the earliest date practicable D. Issues an income statement that is the same as an established operating enterprise, but
D. retrospectively from the earliest dale practicable does not show cumulative amounts from the enterprise's inception as additional
information
Interim Financial Reporting
120. If an entity does not prepare interim financial reports, then Revenue & Expense Recognition
A. The year-end FS compliance with PFRS is not affected 125. Under percentage of completion method, the Progress Billings account is a
B. The year-end FS will not be acceptable under local legislation A. Contra current asset account C. Noncurrent liability account
C. Interim financial reports-should be included in the year-end FS B. Contra noncurrent asset account D. Revenue account
D. The year-end financial statements (FS) are deemed not to comply with PFRS
126. The matching principle is best demonstrated by:
121. As a minimum requirement, interim financial reports should include; A. Associating effort (cost) with accomplishment (revenue)
A. A complete set of financial statements pursuant to PAS 1 B. Allocating advertising expense to several reporting periods
B. A balance sheet and statement of comprehensive income C. Recognizing rent as revenue when the cash was collected
C. A condensed balance sheet and statement of comprehensive income D. Not recognizing any expense unless some revenue is recognized
D. A condensed set of financial statements and selected explanatory notes
Cash & Cash Equivalent
122. Which of the following is usually NOT disclosed in the selected explanatory notes for an 127. Cash control systems are the methods and procedures used to ensure:
interim financial report? A. That current obligations are met C. The safeguarding of cash
A. Nature of entity's operations B. That excess cash does not exist D. That unused cash is invested
B. Events after the interim period
C. Accounting policies and methods 128. A major objective of most cash control systems is to
D. Seasonably or cyclically of interim operations A. Ensure the safeguarding of cash
B. Ensure that unused cash is invested
123. Which of the following is false regarding standards for interim reporting? C. Ensure that current obligations arc met
a. Declines in inventory value shall be deferred to future interim periods D. Ensure that excess cash does not exist
b. Use of the gross margin method for computing cost of goods sold must be disclosed
c. Costs and expenses not directly associated with interim revenue must be allocated to 129. The internal control feature that is specific to petty cash is
interim periods on a reasonable basis A. Assignment of responsibility C. Proper authorization
d. Gains and losses that arise in the interim period shall be recognized in the interim period B. Imprest system D. Separation of duties
in which they arise if they would not. normally be deferred at year-end
130. Which is not a key element of internal control over cash receipts? 13 C. Only if the balance sheet method of estimating uncollectible accounts is used.
A. Cash deposit on a regular basis D. As either current assets or noncurrent assets, depending on whether the allowance
B. Daily entry in a voucher register method or the direct write-off method is used to account for uncollectible accounts.
C. Daily recording of all cash receipts in the accounting records
D. Immediate counting by the person opening the mail or using the cash register 137. Loans and receivables are non-derivative financial assets
A. With fixed or determinable payments that are quoted in an active market
131. In order to be classified as a cash equivalent, an investment must, have a maturity period of: B. Without fixed or determinable payments (hat tire quoted in an active market
A. Less than six months C. Three months or less C. With fixed or determinable payments that are not quoted in an active market
B. Six to twelve months D. Three to six months D. Without fixed or determinable payments (hat are not quoted in an active market
132. All of the following can be classified as cash and cash equivalents, except 138. Accounts receivable are classified as current assets: 15
A. Bank overdraft A. Only if convertible into cash beyond one year
B. Equity investments B. Only if convertible into cash within 60 days or sooner
C. Loan notes held due for repayment in 90 days C. Only if the allowance method is used to estimate the uncollectible accounts
D. Redeemable preference shares acquired and due in 60 days D. Whenever accounts receivable arise from ''normal" sales to customers, regardless of the
credit terms
133. Which of the following statements concerning compensating balance agreements is not true?
A. They increase the effective interest rate lo the borrower 139. When individual customers' account have credit balances of material amounts, these
B. They reduce the amount of cash available, to the borrower amounts:
C. They always involve legal restrictions on the cash received A. Should be omitted from the balance sheet
D. They must be disclosed in the financial Statements footnotes B. Must be reported separately in the liability section of the balance shed;
C. May be shown as "credit balances of customers' accounts" in the current assets section
134. A bank reconciliation is prepared monthly in order for the enterprise to D. May be deducted from the debit balance in other customers' accounts in the asset
A. Arrive at the correct cash balance C. Correct book errors section
B. Correct bank errors D. Unearth any undetected cash fraud
140. Which of the following is an advantage of using the net price method for recording cash
135. In reconciling the bank balance with the book cash balance, which of the following would not discounts on credit sales? 16
cause the bank balance shown in the bank statement to be lower than the unadjusted book, A. It properly reflects current period sales revenue
balance? 14 B. It simplifies recording ofsal.es returns and allowances
A. Deposits in transit C. It eases communication with customers about their balances
B. Cash on hand at the company D. It requires less record-keeping efforts than the gross method
C. Interest credited to the account by the bank
D. NSF checks from a customer, as reported on the bank statement 141. ABC Cycle Shop sells a bicycle to XYZ, a customer who uses Express Charge (a national
credit card, but not issued by a bank). In recording this sale, ABC Cycle Shop should record:
Receivables 17
136. Accounts receivable usually appear in the balance sheet: A. A cash receipt
A. As current assets, combined with cash and cash equivalents. B. An account receivable from XYZ
B. As current assets, immediately after cash and cash equivalents. C. An account receivable from Express Charge
D. A small increase in the allowance for doubtful accounts A. The amount of discount is not material
B. Most receivables can be sold to a bank or factor
142. Which of the following accounting principles primarily support the use of allowance for C. Most short-term receivables are not interest-bearing
doubtful accounts? D. The allowance for uncollectible accounts includes a discount element
A. Continuity principle C. Full-disclosure principle
B. Cost principle D. Matching principle 148. A non-interest-bearing note receivable: 18
A. Causes no interest revenue to be recorded
143. Which of the following methods may not be appropriate for estimating bad debt expense? B. Includes a specified principal amount plus specified interest
A. Percentage of income. C. Includes a specified principal amount-but an unspecified interest amount
B. Aging of accounts receivable D. Includes an unspecified principal amount and an unspecified interest amount
C. Percentage of outstanding accounts receivable
D. Individual or collective assessment of outstanding receivables 149. Short-term non-interest bearing notes receivable are usually recorded at their19
A. Discounted value C. Net realizable value
144. The allowance method of recognizing had debt expense can be applied in more than one B. Maturity value D. Present value
way. What two conditions must be met before the allowance method can be used?
A. Bad debts must be relevant and reliable 150. After being held for 30 days, a 90-day, 15 percent interest-bearing note receivable was
B. Bad debts must be expected and material discounted at a bank at 18 percent. The proceeds received from the bank upon discounting
C. Bad debts must be probable and measurable would be the:
D. Bad debts must be persistent over time and the method used lo estimate them is A. Face value less the discount at 15%
consistently applied B. Face value less the discount at 18%
C. Maturity value less the discount at 15%
145. Winch is a generally accepted method of determining the amount of the adjustment to bad D. Maturity value less the discount at 18 %
debts expense?
A. A percentage of sales adjusted for the balance in the allowance 151. When accounts receivable are factored without recourse, what account does the transferor
B. A percentage of accounts receivable not adjusted for the balance in the allowance credit?
C. An amount derived from aging accounts receivable adjusted for the balance in the A. Accounts receivable C. Liability
allowance B. Accounts receivable assigned D. Sales
D. An amount derived from aging accounts receivable not adjusted for the balance in the
allowance. Loan impairment
152. The carrying value of an impaired note before recognizing a loan impairment:
146. A company, which has an adequate amount in its Allowance for Doubtful Accounts, writes off A. Includes accrued interest.
as uncollectible an account receivable from a bankrupt customer. This action will: B. Excludes accrued interest
A. Have no effect on total current assets C. Reduce the amount of equity C. Is less than the carrying value after recognizing the impairment
B. Reduce net income for the period D. Reduce total current assets D. Is the same as the carrying value after recognizing the impairment
147. Assuming that the ideal measure of short-term receivable in the balance sheet is the 153. The carrying value of an impaired note immediately after the recognition of the impairment
discounted value of the cash to be received in the future, failure to follow this practice usually loss is the
does not make the balance sheet misleading because A. Nominal sum of remaining cash flows to be received.
B. The book value before the impairment is recognized less accrued interest.
C. Present value of remaining cash (lows to be received, discounted at the current market 159. Which may be included as part of the cost, of inventories under PAS 2? 20
rate of interest. A. Selling costs
D. Present value of remaining cash flows to be received, discounted at the original interest B. Administrative costs
rate implicit in the note. C. Costs of designing products for specific customers
D. Abnormal amounts of wasted materials, labor or other production costs
Inventories
154. Which of the following is excluded in the scope of PAS 2 on Inventories? 160. Which of the following conversion costs cannot be included in cost of inventory?
A. Construction in progress C. Manufacturing supplies A. Cost of direct labor
B. Inventories of a service provider D. Raw materials B. Salaries of sales staff
C. Production rent and utilities
155. Which one of the following is included in the scope of PAS 2 but excluded from the D. Factory overhead based on normal capacity
measurement rule?
A. Finished goods produced 161. Under PAS 2, items of inventory that are used by business enterprise as components in a
B. Biological assets held for regular sale self-constructed property asset are required to be:
C. Damaged merchandise inventory of a retailer A. Capitalized and depreciated
D. Land held for resale by subdivision company or real estate developer B. Added to a 'property construction' provision account
C. Expensed directly into equity in the period in which the items are used
156. A manufacturing company has which three basic types of inventory? D. Aggregated into the 'cost of goods sold' expense in the period in which the items are
A. Perpetual, periodic, and estimated. used
B. Specific identification, FIFO, and average cost
C. Raw materials, work-in process, and finished goods 162. In a manufacturing company, the "just-in-time" concept of inventory management is best
D. Finished goods, work-in-process, and ready-to-sell-merchandise. illustrated by:
A. Selling finished products before they go out: of style.
157. Which of the following should be included in inventory? B. Completing the manufacturing process just before the deadline established by the
A. Goods out on consignment customer.
B. Goods held on consignment C. An automated factory which reduces production time below that of other companies in
C. Goods held for pick-up by the buyer the industry.
D. Goods purchased FOB destination, still en route D. Receiving deliveries of materials from suppliers just before the materials are used in the
production process.
158. Which of the following would not be included in the inventory amount reported on a
company's balance sheet? 163. The use of discount lost account implies that cost of a purchased inventory item is the 21
A. Items shipped out on consignment to another company. A. List price of the item
B. Items shipped today FOB shipping point; invoice had been mailed to the customer. B. Invoice price of the item.
C. Items in the receiving department of the company; returned by the customer, invoice has C. Invoice price less the purchase discount taken on the item
been mailed. D. Invoice price less the purchase discount not taken on the item
D. Items purchased from a supplier and en route directly lo a customer of the company; the
term is FOB destination; invoice received but not yet paid. 164. When a periodic inventory system is used:
A. Two entries must, be made when goods are purchased D. Most closely approximates lower of cost and net realizable value for the ending inventory
B. Cost of goods sold is a residual amount, rather than an account
C. Ending inventory is treated as expense and beginning inventory is treated as assets 170. Which of these methods of measuring the cost of sales most likely parallels the actual
D. A 'purchases' account is not used; all inventory purchase entries are debited to the physical flow of the goods?
inventory account A. Average cost C. LIFO
B. FIFO D. Specific identification
165. In a perpetual inventory system, two entries are normally made to record each sales
transaction. 171. The specific identification method can be used only
A. One entry records the purchase of merchandise and the oilier records the sale. A. In income tax returns
B. One entry updates the subsidiary lodger and the other updates the general ledger. B. For financial reporting purposes but not in the income tax returns
C. One entry recognizes sales revenue and the other recognizes cost of the goods sold. C. When the individual items in inventory ate similar in terms of cost, function, and sales
D. Oho entry records the cost of goods and the other reduces the balance in the Inventory value
account. D. When the actual acquisition costs of individual units can be determined from the
accounting records
166. In a perpetual inventory system, an inventory flow assumption is used primarily for
determining which costs to use in: 172. The specific identification method is more appropriate than an inventory cost flow assumption
A. Recording sales revenue. A. If purchase costs are rising 23
B. Recording the cost of goods sold. B. if purchase costs are falling
C. Recording purchases of inventory. C. If each item in the inventory is unique
D. Forecasts of future operating results, that will be used as basis for the production budget D. For a large inventory of identical low-priced items
167. In a perpetual inventory system, recording a sale on account involves debiting which of the 173. The costing of inventory must be deferred until the end of the accounting period under which
following accounts? of (he following method of inventory valuation?
A. Only Accounts Receivable A. FIFO perpetual C. Moving average
B. Accounts Receivable and Inventory B. LIFO perpetual D. Weighted average
C. Accounts Receivable and Cost of Goods Sold
D. Accounts Receivable and Cost of Goods Sold, and Inventory 174. The weighted average inventory costing method is particularly suitable to inventory where:
A. Homogeneous products are mixed together
168. In a perpetual inventory system, recording a sale on account involves crediting which of the B. Dissimilar products are stored in separate locations
following accounts? C. The entity carries stocks of raw materials, work-in-progress and finished goods
A. Only Sales C. Sales and Cost of Goods Sold D. Goods have distinct use-by dates and the goods produced first must be sold earliest
B. Sales and Inventory D. Sales, Inventory, and Cost of Goods Sold
175. During a period of steadily rising prices, which of the following methods of measuring (he
169. Generally accepted accounting principles require the selection of an inventory cost flow costs of goods sold is likely to result in reporting the-highest gross profit!
method which: 22 A. Average cost C. LIFO
A. Most clearly reflects the periodic income B. FIFO D. Specific identification
B. Yields the most conservative amount of reported income
C. Matches the physical flow of goods from, inventory with sales revenue 176. The lower of cost or net realizable value (LCNRV) results in the lowest inventory account if
applied to A. Internal as well as external interim reports

A. Each item of inventories separately C. Total inventory B. Internal as well as external year-end reports
B. Groups of similar inventory items D. Any of these C. Estimate of inventory destroyed by fire or other casualty
D. Rough test of the validity of an inventory cost determined under either periodic or
177. Where the net realizable value of inventory falls below cost, PAS 2 requires that: perpetual system
A. The inventory be written down to net realizable value
B. The difference be added to the carrying amount of the inventory 183. A major advantage of the retail inventory method is that it
C. The inventory continue lo be carried in the balance sheet at cost A. Hides costs from customers and employees-
D. No adjustment be made, but (fie difference between net realizable value and cost be B. Gives a more accurate statement of inventory cost than other methods
disclosed in the notes to the financial statements C. Permits companies which use it to avoid taking tin annual physical inventory
D. Provides a method for inventory control and facilitates determination of the periodic
178. How should sales staff commission be dealt with when valuing inventories at the lower of cost inventory
and net realizable value? 24
A. Added to cost C. Deducted in arriving at NRV 184. Which one of the following would cause a decrease in the cost ratio as used in the retail
B. Deducted from cost D. Ignored inventory method?
A. Higher freight-in charges C. Lower net markups
179. If an item of inventory that was written down to net realizable value in a prior period B. Higher retail prices D. More employee discounts given
subsequently recovers, then:
A. Previous amount of the write-down can be reversed 185. Losses which are expected to arise from firm and non-cancellable commitments for the future
B. Carrying amount of the inventory cannot be adjusted purchase of inventory items, if material should be
C. Value adjustment can be recognized immediately in equity A. Ignored
D. Adjustment must be recognized in a 'provision, for future inventory write-clowns' account B. Disclosed in the notes
C. Charged to retained earnings
180. Inventory estimation will be required for all of the following, except D. Recognized in the accounts by debiting loss on purchase commitments and crediting
A. When interim financial statements are prepared estimated liability for loss on purchase commitments
B. When inventory is destroyed by typhoon or flashfloods
C. As proof of reasonable accuracy of the physical inventory 186. A company discovered a P20,000 overstatement of its 2011 ending inventory after the
D. In the determination of the ending inventory to be shown in the balance sheet financial statements for 2011 were prepared. The effect of this error on the 2011 financial
statements was:
181. Which of the following is not affected by the inventory valuation method used by a business? A. Current assets were overstated and income was overstated
25 B. Current assets were overstated and income was understated
A. Cost, of goods sold C. Current assets were understated and income was overstated
B. Net income of the business D. Current assets were understated and income was understated
C. Amounts owed for income taxes
D. Amounts paid to acquire, merchandise 187. If an entity incorrectly includes consignment items in the ending inventory, the effect on the
next period's cost of goods sold and net income is
182. The gross margin method of estimating ending inventory may be used tor all of the following, A. Overstatement, overstatement C. Understatement, overstatement
except B. Overstatement, understatement D. The next period's account will be correct
D. Historical cost less depreciation less impairment

Agriculture
188 Which of the following is not dealt with by PAS 41 on 'Agriculture'? 26. 194. Regarding the choice of measurement basis used for valuing biological assets, PAS 4 1
A. The accounting for biological assets. A. Recommends the use of current cost
B. The processing of agricultural produce after harvesting. B. Recommends the use of present value
C. The accounting treatment of government grants in respect to biological assets. C. Recommends the use of historical cost
D. The initial measurement of agricultural produce harvested from the. entity's biological D. Sets out several ways of measuring fair value
assets.
195. Which of the following values is unlikely to be used in fair value measurement of a biological
189. Where there is a long aging or maturation process after harvest, the accounting for such asset? 29
products is dealt with by A. Quoted price in a market.
A. PAS 2, Inventory B. External independent valuation.
B. PAS 41, Agriculture C. The most recent market transaction, price.
C. PAS 40, Investment Property D. The present value of the expected net cash flows from the assets.
D. PAS 16, Property, Plant and Equipment
196. Biological assets are measured at
190. Agricultural activity 27 A. Cost C. Lower of cost or net realizable value
A. Is the harvested product of the entity's biological asset B. Fair value less costs to sell D. Net realizable value
B. Is the detachment of agricultural produce from a biological asset or the cessation of a
biological asset's life processes 197. Which of the following values is unlikely to be used in fair value measurement of a biological
C. Is the management by an entity of the biological transformation of biological assets for asset?
sale, into agricultural produce, or into another biological asset A. Quoted price in a market.
D. Relates to the processes of growth, degeneration, production and procreation that can B. External independent valuation.
cause changes of quantitative or qualitative nature in a biological asset C. The most recent market transact ion price.
D. The present value of the expected net cash (lows from the assets.
191. Agricultural activity includes all of the following, except 28
A. Annual perennial cropping C. Ocean fishing 198. Which of the following costs are not included in costs to sell?
B. Floriculture and aquaculture D. Raising livestock A. Transfer taxes and duties.
B. Levies by regulatory agencies,
192. Biological assets are C. Commissions to brokers and dealers.
A. Living animals only C. Both living animals and living plants D. Transport and other costs necessary to get the assets to a market.
B. Living plants only D. Neither living animals nor living plants
199. Where the fair value of the biological asset cannot be determined reliably, the biological asset
193. Generally speaking, biological assets relating to agricultural activity should be measured should be measured, at
using A. Cost.
A. Historical cost B. Net realizable value.
B. Net realizable value C. Cost less accumulated depreciation,
C. A fair value approach D. Cost less accumulated depreciation and accumulated impairment losses.
206. When agricultural produce is harvested, the harvest should be accounted for by using PAS 2,
200. A gain or loss arising on the initial recognition of a biological asset and from a change in the Inventories, or another applicable Philippine Financial Reporting Standard. For the purposes
fair value less estimated costs to sell of a biological asset should be included in of that Standard, the cost at the date of harvest is deemed to be
A. A capital reserve within equity A. Market value
B. A separate revaluation reserve B. The historical cost of the harvest
C. The net profit or loss for the period C. Its fair value less cost to sell at point of harvest
D. The statement of recognized gains and losses D. The historical cost less accumulated impairment: losses
201. Where there is a production cycle of more than one year, PAS 41 encourages separate 207. Land that is related to agricultural activity is valued
disclosure of the A. At fair value
A. Physical change only C. Physical change and price change B. At fair value in combination with the biological asset that is being grown on the land
B. Price change only D. Total change in value C. At the resale value separate from the biological asset that has been grown on the land
D. In accordance with PAS 16, Property, Plant, and Equipment, or PAS 40, Investment
202. An entity had a plantation forest that is likely to be harvested and sold in 30 years. The Property
income should be accounted for in which of the following?
A. No income should be reported annually until first harvest and sale in 30 years 208. An unconditional government grant related to a biological asset that has been measured at
B. The eventual sale proceeds should be estimated and matched to the profit and loss fair value less costs to sell should be recognized as
account over the 30-year period A. Income when the grant becomes receivable
C. Income should be measured annually and reported using a fair value approach that, B. A deferred credit when the grant has been approved
recognizes and measures biological growth C. A deferred credit when the grant becomes receivable.
D. The plantation forest should be valued every 5 years and the increase in value should be D. Income when the grant application has been submitted
shown in the statement of recognized gains and losses
209. If a government grant related to a biological asset is conditional on certain events, then the
203. Which of the following cannot be regarded as an agriculture produce? grant should be recognized as
A. Calves C. Piglets A. Income when the grant has been approved
B. Cheddar cheese D. Racing Pony B. A deferred credit when the grant is approved
C. Income when the conditions attaching to the grant are met
204. At certain stages of production, inventories of agricultural, forest and mineral products are D. A deferred credit when the conditions attached to the government grant arc met
measured at
A. Cost C. Relative sales price Financial instruments & investment in securities
B. Net realizable value D. Standard cost 210. All of the following would be regarded as financial instruments, except:
A. Bank overdraft C. Equipment
205. Agricultural produce is measured at B. Cash D. Notes payable
A. Fair value
B. Net realizable value 211. Financial assets include all of the following, except
C. Net realizable value less normal profit margin A. Cash in bank C. Loans receivable
D. Fair value less costs to sell at the point of harvest B. Inventories and prepaid items D. Trade accounts and notes receivable
212. At what amount is a financial asset or financial liability measured on initial recognition? A. A debt security but not an equity security.
A. Zero B. A security which is currently held for resale.
B. The consideration paid or received for the financial asset or financial liability C. A debt security not intended to be held to maturity.
C. Acquisition costs, which is the consideration paid or received plus any directly D. A security accounted for by the fair value method but is not a trading security.
attributable
D. Fair value. For items that are not measured at fair value through profit or loss, 218. For investment in AFS, which of the following market value changes are recognized in
transaction costs are also included in the initial measurement earnings?
A. Realized gains and losses only C. Unrealized and realized gains and losses
213. The usual factors considered in classifying investments in securities as short term are B. Realized losses only D. Unrealized and realized losses only
A. Type of investment only
B. Ready marketability only 219. A net unrealized loss on a company's AFS portfolio of marketable equity securities should be
C. Ready marketability and type of investment reflected in the current financial statements as
D. Ready marketability and management intentions A. A footnote or parenthetical disclosure only
B. A current loss resulting from holding marketable equity securities
214. A trading security (TS) is C. An extraordinary item shown as a direct, reduction, of retained earnings
A. A security which has been purchased recently D. A valuation allowance and included in the equity section of the statement of financial
B. A security held in the account of a brokerage firm position
C. A security which is held for resale in the near future
D. A security which will be transferred in exchange for another security 220. A firm purchased bonds to be classified as an investment in AFS. The bonds were
purchased at a premium. Assume the market price of the bond is volatile. Therefore, 30
215. For investments in TS, which of the following market value changes are recognized in A. Cash interest received each year is less than the interest revenue recognized.
earnings? B. The premium is ignored because the bonds are not classified as held to maturity.
A. Realized gains only C. The ending valuation allowance account balance will depend on ending market value
B. Realized losses only and original cost,
C. Unrealized losses only D. The ending valuation allowance account, balance will depend on ending market value
D. Realized and unrealized gains and losses and original cost adjusted for amortization of premium.
216. Significant changes in the market value of trading securities occurring after the balance sheet 221. If a reliable measure of fair value is no longer available and it becomes appropriate to
dale should carry a financial asset without a fixed maturity at cost rather than at fair value, the
A. Be treated as a prior period error in next year's financial statements carrying amount (fair value) of the financial asset becomes the new cost basis and any
B. Result in an adjustment of the market value used in (he lower of cost or market valuation previous gain or loss that has been recognized directly in equity shall
at balance sheet date A. Included in retained, earnings
C. Be considered in the valuation of the securities at balance sheet date and disclosed in B. Be recognized in earnings immediately
the notes to financial statements C. Be amortized over a reasonable period to profit or loss
D. Not be considered in the valuation of the securities at balance sheet dale but disclosed in D. Remain in equity until, the financial asset is sold or otherwise disposed of
the notes to financial statements
222. A bond is purchased on January 1. The investor's carrying value at the end of the first year
217. A security available for sale is would be highest if the bond was purchased at a 31
A. Discount and amortized by the straight-line method A. Jointly controlled asset C. Jointly controlled entity
B. Premium and amortized by the straight-line method B. Jointly controlled business D. Jointly controlled operation
C. Premium and amortized by the effective interest method
D. Discount: and. amortized by the effective interest method 230. What is the correct treatment in accounting for an interest in jointly controlled entity?
Benchmark treatment Alternative method
223. Cash dividends declared out of current earnings were distributed to an investor. How would A. Cost method Equity method
the investor's investment account be affected by those dividends under each of the following B. Proportionate consolidation method Cost method
accounting methods? C. Proportionate consolidation method Equity method
A. B. C. D. D. Equity method Cost method
Cost/Fair Value Method Decrease Decrease No effect No effect
Equity Method Decrease No effect Decrease No effect Investment Property
231. Which of the following would not be reported as investment property? 32
Joint arrangements A. Real estate held for an undetermined future use.
224. A relationship that is characterized by the existence of a capacity to share control over an B. Properly held by the entity to be leased out under one or more operating leases,
economic entity is known as C. Property owned by the entity and leased out under one or more operating leases.
A. A joint venture C. A sole proprietorship D. Property owned by the entity and leased out to another entity under a finance lease,
B. A parent-subsidiary relationship D. An investor-associate relationship
232. The initial cost of a property held under a lease and classified as an investment property shall
225. The particular relationship between parties that signifies the existence of a joint venture is: be
A. Significant influence by one party over the other party A. The fair value of the property
B. Joint control by the parties over the activities of an operation B. The present value of the minimum lease payment
C. Control over the operating policies of one party by another party C. The lower of fair value of the property and present value of minimum lease payments
D. Shared influence by two parties over the activities of another party D. The higher of fair value of the property and present value of minimum lease payments
226. The party to a joint, venture who has joint control over that venture. 233. Linden Corporation has investment properly that is held to earn rental income. Linden
A. Investor C. Shareholder prepares its financial statements in accordance with PFRS. Linden uses the fair value model
B. Partner D. Venturer for reporting the investment property. Which of the following is true?
A. Changes in fair value are reported as deferred revenue for the period.
227. The party to a joint venture who does not have joint control for that venture. B. Changes in fair value are reported as profit, or loss in the current period.
A. Investor C. Shareholder C. Changes in fair value are reported as other comprehensive income for the period.
B. Partner D. Venturer D. Changes in fair value are reported as an extraordinary gain on the income statement.
228. Which of following is not one of the forms of joint venture under PAS 31? 234. Which of the following generally provides the best evidence of fair value of an investment
A. Jointly controlled assets C. Jointly controlled management property?
B. Jointly controlled entities D. Jointly controlled operations A. Current prices for properties of a different nature or subject to different conditions.
B. Discounted cash flow projections based on reliable estimates of future cash flows.
229. It is a joint venture that involves establishment of a corporation, a partnership or other entity C. Current prices in an active market for similar property in the same location and condition.
in which each venturer has an interest. D. Recent prices on less active markets with adjustments to reflect changes in economic
conditions, B. Government gift D. Grants related to income
235. A gain or loss arising from a change in the fair value of investment property shall 241. In the case of grants related to an asset, which of these treatments are prescribed by PAS
A. Not be recognized in the accounts 20?
B. Be recognized directly to equity in the period in which it arises A. Take it to the income statement and disclose it as an extraordinary gain
C. Be recognized in the profit or loss for the period in which it arises B. Record the grant at a nominal value in the first year and write it off in the subsequent
D. Be recognized as an adjustment to retained earnings at the beginning of the year year
C. Record the grant at fair value in the first year and take it: to income in the subsequent
236. Transfers from investment property to property, plant and equipment are appropriate year
A. When there is change of use. D. Either set up the grant as deferred income or deduct it in arriving at the carrying amount
B. Based on the entity's discretion. of the asset
C. Only when the entity adopts the fair value model under IAS 38.
D. The entity can never transfer property into another classification on the balance sheet, 242. In the case of grants related to income, which of these treatments is prescribed by PAS 20?
once it is classified as investment property. A. Credit the grant, to 'retained earnings' on the balance sheet
B. Credit, the grant to 'general reserve' under shareholders' equity
237. Derecognition of investment property will not be required when C. Credit the grant to sales or oilier revenue from operations in the income statement
A. it is sold, D. Present the grant in the income statement as 'other income' or as a separate line, item,
B. it becomes the subject of a finance lease. or deduct it from the related expenses
C. it becomes the subject of an operating lease.
D. it becomes the subject of a sale and leaseback deal, 243. In case of non-monetary grant, which of the following is prescribed by PAS 20?
A. Record the grant at a value estimated by management
Other Funds & Investments B. Record the asset at replacement cost and the grant at a nominal value
238. The cash surrender value of an insurance policy on the company president would be C. Record both the grant and the asset at fair value of the nonmonetary asset
presented on the balance sheet as: D. Record only the asset at fair value and not recognize, the lair value of the grant
A. Cash C. Marketable securities
B. Long-term investment D. Prepaid expense Property, Plant & Equipment (PPE)
244. Accounting for tangible operational assets is primarily in conformity with the:
Government Grants & Government Assistance A. Matching principle
239. Which of the following is not specifically excluded from the purview of PAS 20 on government B. Historical cost principle
grants? C. Matching principle and reporting principle
A. Forgivable loan from the government D. Matching principle and historical cost principle
B. Government grant, covered by PAS 41
C. Government participation in ownership of the entity 245. Plant assets may properly include:
D. Government assistance provided in the form of tax benefits A. Idle equipment awaiting sale C. Property held for investment purposes
B. Land-held for undetermined future use D. Self-constructed assets currently in use
240. These are government grants whose primary condition is that an entity qualifying for them
should purchase, construct, or otherwise acquire long-term assets. 246. Under PAS 16, PPE includes all of the following, except
A. Government appropriation C. Grants related to assets A. Property held for administrative purposes
B. Property used for extraction of minerals, oil or natural gas B. A. loss equal to the cash given up
C. Property used in production or supply of goods and services C. A gain determined by the proportion of cash paid to the total transaction value
D. Biological assets related to agricultural activity and mineral rights D. A loss determined by the proportion of cash paid to the total transaction value
247. Apportionment, of the purchase price in a lump-sum acquisition of different assets may be 253. It is permissible to capitalize interest on:
based on all of these, except A. Assets under construction
A. Appraised values. C. Relative market values. B. Inventories that routinely manufactured in large quantities on a repetitive basis
B. Book values of the assets to the seller. D. Tax assessment values. C. Assets that already are in use or are ready for their intended use in the earning activities
on the entity
248. When a closely held corporation issues equity shares in exchange for land, the land should D. Assets that are not being used in earning activities of the entity and that are not
be recorded at die undergoing the activities necessary to get them ready for such use
A. Current market value of the land C. Total book value of the shares issued
B. Current market value of the shares issued D. Total par value of the shares issued 254. Capitalization of construction period interest, is based primarily upon the:
A. Comparability principle C. Matching principle
249. Discounts given for early payment of credit purchases of operational assets should be: B. Full-disclosure principle D. Revenue principle
A. Recorded as interest revenue at purchase date.
B. Recorded as interest expense at purchase date. 255. Which of the following may not be considered a "qualifying asset"?
C. Deducted from, the invoice price when determining the cost of the asset. A. A ship that normally takes one to two years to complete.
D. Capitalized as a cost of the asset acquired and subsequently allocated to depreciation B. A tool bridge that usually takes more than a year to build
expense. C. An expensive private jet that can be purchased from a local vendor
D. A power generation plant that normally takes two years to construct
250. When payment for is deferred beyond normal credit terms, the difference between the cash
price and total payments is 256. Capitalization of borrowing costs shall be suspended
A. Capitalized as cost of PPE A. Only during temporary periods of delay
B. Charged to retained earnings B. At: no insurance at all, as capitalization has already commenced
C. Interest expense over the credit period C. Only upon agreement by management and the construction company
D. Interest expense over the useful life of the asset D. Only during extended periods of delay in which active development is delayed
251. Assets received in donation should 257. A company constructed machinery for its own use. A bank loan specifically financed this
A. Be expensed upon receipt properly both during and after the construction. How much of the interests incurred should be
B. Should not be depreciated reported as interest expense?
C. Be depreciated based in their fair value at the time of the donation A. Zero C. Interests incurred after completion
D. Be depreciated based on their book value al the tune of the donation B. All interests incurred D. Interests incurred before completion
252. In an exchange of assets, an entity received equipment with a fair value equal to the carrying 258. An improvement made to an old machine increased its fair market value and its production
amount of equipment given up. The entity also contributed cash. As a result of the capacity by 25% without extending the machine's useful life. The cost of the improvement
exchange, the entity shall recognize preferably should be:
A. Neither gain nor loss A. Capitalized C. Recorded as a liability
B. Expensed D. Recorded as a loss D. When an asset is revalued, individual assets within a class of property, plant, and
equipment to which that asset belongs can be revalued.
259. Which of the following expenditures subsequent to property acquisition cannot be added to
asset carrying amount? 264. PAS 16 requires that revaluation surplus resulting from initial revaluation of property, plant
A. Costs of modification of an item of property that will extend its useful life and equipment should be treated in one of the following ways. Which of the four options
B. Costs of upgrading parts to achieve substantial improvements in quality of output mirrors the requirements of PAS 16?
C. Costs of material repairs that did not increase the asset life nor productive capacity A. Credited to retained earnings as this is an unrealized gain
D. Costs of adopting new production processes that enabled substantial reduction in B. Deducted from current assets and added to property, plant and equipment
operating costs C. Released lo the income statement an amount equal to the difference between the
depreciation calculated on historical cost vis-a-vis revalued amount
260. An entity installed a new production facility and incurred a number of expenses at the point of D. Debited to the class of property, plant and equipment that is being revalued and credited
installation. The entity's accountant is arguing that most expenses do not qualify for to a reserve captioned "revaluation surplus," which is presented under equity
capitalization, included in those expenses are initial operating losses. These should be
A. Deferred and amortized over a reasonable period of time 265. Technical or commercial obsolescence arises from
B. Expensed and charged profit or loss in the income statement A. Expected usage of the asset
C. Capitalized as part of the cost of the plant as a directly attributable cost B. Expected physical wear and tear
D. Taken lo retained earnings since it is unreasonable to treat it as part of profit or loss C. Expiry date of related lease of the asset
D. Improvement in production or change in market demand for the output of the asset
261. For companies that prepare financial statements in accordance with PFRS, plant, property,
and equipment should be valued using which models? 266. Accumulated depreciation, as used in accounting, represents
A. The cost model or the fair value model. A. Funds set aside to replace assets
B. The cost model or the revaluation model. B. An expense on the income statement
C. The revaluation model or the fair value model. C. The portion of the asset cost written off as an expense since the acquisition elate
D. The cost model or the fair value through profit or loss model, D. Earnings retained in the business that will be used to purchase another operational asset
when the related asset becomes fully depreciated
262. When the revaluation model is used for reporting PPE, the gain or loss should be included in:
A. Income for the period. 267. What is the minimum book value to be shown in the balance sheet for a plant asset which is
B. Gain from revaluation on the income statement. expected to be sold for a reasonable amount at end of its useful life?
C. An extraordinary gain or loss on the income statement. A. Accumulated depreciation C. Salvage value
D. A revaluation surplus account in other comprehensive income,. B. Depreciable cost D. Zero
263. Under PFRS, when an entity chooses the revaluation model as its accounting policy for 268. A principal objection to the straight-line method of depreciation is that it
measuring property, plant, and equipment, which of the following statements is correct? A. Ignores variations in the rate of asset use
A. Revaluation of property, plant, and equipment must be made at least every three years. B. Provides for the declining productivity of an aging asset
B. Increases in an asset's carrying value as a result of the first revaluation must be C. Gives smaller periodic write-offs than decreasing charge methods
recognized as a component of profit or loss. D. Tends to result in a constant rate, of return on a diminishing investment base
C. When an asset is revalued, the entire class of property, plant, and equipment to which
that asset belongs must be revalued. 269. Ignoring tax effects, accelerated depreciation methods
A. Increase funds provided by operations

B. Tend to decrease the fixed assets turnover ratio 275. Which of the following confers exclusive right to conduct business in a particular territory?
C. Provide funds for the earlier replacement of fixed assets A. Franchise C. Patent-copyright
D. Tend to offset steadily increasing repair and maintenance costs B. Leasehold improvement D. Trademark
270. In which of the following situations is the units-of-production method of depreciation most 276. Under PAS 38, intangible assets should be carried at
appropriate? A. Cost less accumulated depreciation
A. An asset is subject to rapid obsolescence B. Revalued amount less accumulated depreciation
B. An asset's service potential decline with use C. Cost less accumulated amortization and/or accumulated impairment
C. An asset incurs increasing repairs and maintenance with use D. Cost plus a notional increase in fair value since the intangible asset is acquired
D. An asset's service potential declines with the passage of time
277. Amortization of specific intangible assets results primarily from application of the
271. An asset has a nine-year useful life and is to be depreciated under the sum of the years' A. Cost principle C. Matching principle
digits method. The annual depreciation expense would be the same as that under the B. Full-disclosure principle D. Revenue principle
straight line method in the
A. Third year C. Seventh year 278. Under PAS 38, which of the following methods of amortization is normally not recommended
B. Fifth year D. Ninth year for intangible assets?
A. Declining balance-method C. Straight-line method
Intangible Assets B. Effective interest method D. Units of production method
272. Under PFRS, which of the following is a criterion that must be met in order for an item to be
recognized as an intangible asset other than goodwill? 279. Under PFRS, an entity that acquires an intangible asset may use the revaluation model for
A. The item's fair value can be measured reliably. subsequent measurement only if:
B. The item is identifiable and lacks physical substance. A. The intangible asset.is a monetary asset.
C. The item is expected to be used in the production or supply of goods or services. B. An active market exists for the intangible asset.
D. The item is part of the entity's activities aimed at gaining new scientific or technical C. The cost of the intangible asset can be measured reliably.
knowledge. D. The useful life if the intangible asset can be reliably determined.
273. Identifiability is seen as the characteristic that conceptually distinguishes other intangible 280. A purchased patent has a remaining legal life of 8 years. It should he
assets from A. Expensed in. the year of acquisition
A. Copyright C. Goodwill B. Amortized over a period of 10 or 20 years
B. Franchise D. Patent C. Amortized over its useful life, if less than 8 years
D. Amortized over 8 years regardless of the useful life
274. Which of the following items qualify as an intangible asset under PAS 38?
A. Operating losses during the initial stages of the project. 281. Which of these is expensed as incurred by the franchisee for a franchise with an estimated
B. Advertising and 'promotion on the launch of a huge product. useful life often years?
C. Legal costs paid to intellectual property lawyers to register a patent. A. Initial amount paid to the franchisor for the franchise
D. College tuition fees paid to employees who decide to enroll in an executive MBA B. Any initial direct costs incurred in obtaining the franchise
program while working with the company. C. Legal fees paid to the franchisee's lawyers to obtain the franchise
D. Periodic payments to the franchisor based on the franchisee's revenues

288. A computer software purchased as an operating system for the hardware or as an integral
282. An intangible asset with an indefinite life is one where part of a computer controlled machine tool that cannot operate without the specific software
A. The length of life is over 20 years. shall be treated as
B. The directors feel that the intangible asset will not lose value in the foreseeable future A. Expense C. Inventory
C. There is a contractual or legal arrangement that lasts for a period in excess of five years B. Intangible assets D. Properly, plant and equipment
D. There is no foreseeable limit on the period over which the asset will generate cash flows
289. A newly set up dot.com entity has engaged you as its financial advisor. The entity has
283. An intangible asset with an indefinite life is accounted for as follows: recently completed one of its highly publicized research and development projects and seeks
A. Amortized and no impairment test your advice on the accuracy of the following statements made by one of its stakeholders.
B. Amortized and impairment tests annually Which of the following statements is accurate?
C. No amortization but tested for impairment annually A. Designing the jigs and tools qualify as research activities.
D. Amortized and tested for impairment if there is a "trigger event' B. Costs incurred during the "research phase" can be capitalized.
C. Training costs of technicians used, in research can be capitalized.
284. Goodwill should properly appear in the statement of financial position of a company which: D. Costs incurred during the ''development phase" can be capitalized if criteria such as
A. Has purchased an entity technical feasibility of the project being established are met.
B. Meets all of the conditions
C. Consistently operates profitably 290. The proper accounting treatment for the costs incurred in creating computer software product
D. Consistently reports above normal profits is
A. To capitalize all costs until the software is sold
285. Costs incurred by a company that may develop its own goodwill internally should be: B. To capitalize all costs as incurred until a detailed program design or working model is
A. Expensed in the period incurred. created
B. Capitalized and amortized as the company profits increased. C. To charge research and development expense only if the computer soft ware has allot
C. Capitalized and amortized over the useful life of the goodwill. native future use
D. Capitalized and amortized over a period not to exceed 40 years. D. To charge research and development expense when incurred until technological
feasibility has been established for the product.
286. Goodwill, when properly recognized, should be written off:
A. When impairment loss occurs 291. Which of the following costs related to computer software is capitalized to an intangible asset,
B. As soon as possible as an ordinary item account?
C. As soon as possible against retained earnings A. Cost of customer service
D. By systematic charges lo expense over the period benefited, but not more than 20 years B. Cost to duplicate discs and manuals for sale
C. Development costs preceding technological feasibility
287. Which of the following is most likely not to be amortized over the periods of estimated D. Coding and testing costs incurred after technological feasibility but before completing the
benefit? product master
A. Patent right purchased from an inventor
B. Costs incurred in organizing a corporation 292. On January 1, 2011, ABC Company capitalized cost for a new computer software product
C. Lease rights paid to owner of properly for the usufruct with an economic life of five years. Sales for 2011 were 30% of expected total sales of the
D. Development costs that resulted in a successful product software and the pattern of future sales can be measured reliably. At December 31, 2011,
the software had a net realizable value equal to 90% of the capitalized cost. What A. Useful lives of the intangible assets.
percentage of the original capitalized cost should be as the net amount on the December B. Fair value of similar intangible assets used by competitors.
31, 2011 balance sheet? C. Contractual commitments for the acquisition of intangible assets,
A. 70% C. 80% D. Reconciliation of carrying amount at the beginning and the end of the year.
B. 72% D. 90%
Impairment of Assets
293. On January 1, 2011, ABC Co. capitalized cost for a new computer software product with an 298. The internal sources of information indicating possible impairment include all of the following,
economic lite of five years. Sales for 2011 were 30% of expected total sales of the software. except:
However, the pattern of future sales cannot be measured reliably. At December 31, 2011, A. Evidence of obsolescence or physical damage of the asset
the software had a net realizable value equal to 90% of the capitalized cost. What B. Significant decrease or decline in the market value of the asset
percentage of the original capitalized cost should be as the net amount on the December 31, C. Evidence that the economic performance of an asset will be worse than expected
2011 balance sheet? D. Significant change in the manner/extent in which the asset is used with an adverse effect
A. 70% C. 80% on the entity
B. 72% D. 90%
299. The external sources of information indicating possible impairment include all of the following,
294. Which of the following is most likely included in research and development expense in 20! 1? except
A. Depreciation in 2011 of the building used for research and development A. The carrying amount of the net assets of the entity is more than its market capitalization
B. The cost incurred in 2011 to ensure quality control for existing production processes B. Significant decline in budgeted net cash flows or significant increase in budgeted loss
C. The cost incurred in 2011 of research activities performed by another firm; the project is flowing from the asset
expected to be completed in 2012 C. Significant value in the technological, market, legal or economic environment of the
D. The total cost of a building (useful life 25 years, completed January 1, 2011) to be used business in which the asset is employed
in various research and development projects D. An increase in the interest rave or market rate of return on investment which will likely
affect the discount rate used in calculating value in use
295. Which of the following is a correct, statement concerning research and development (R&D)
costs? 300. Which of the following is not an indication of possible asset impairment?
A. R&D can only be amortized over a life of 40 years or more A. Evidence of obsolescence or physical damage of an asset
B. Almost any treatment: is acceptable for handling R&D costs B. The use of accelerated method for depreciation of the asset
C. All R&D costs, without exception, must be charged to expense when incurred C. Significant decrease or decline in the market value of the asset
D. Notes to the financial statements must disclose, total R&D costs charged to expense in D. Evidence that the economic performance of an asset will be worse than expected
the period
301. These are group or divisional assets (e.g., head office building, LDP, equipment, or research
296. The following expenditures should be expensed as incurred, except center) that do not generate cash inflows independently front other assets and that are
A. Payments for organization expense usually regarded as part of cash generating unit,
B. Payment in advance of delivery of goods or services A. Corporate assets C. Service departments
C. Expenditures on advertising and promotional activities B. Exclusive cash generating unit D. Subsidiary
D. Expenditures in relocating or reorganizing part or all of the enterprise
302. The estimates of future cash flows in calculating value in use include all of the following,
297. Which of the following note disclosures is not required by PAS 18? except.
A. cash inflows from the continuing use of the asset C. The future sale is more likely than not to occur
B. net cash (lows from the disposal of the asset at the end of its useful life D. The probability of future sale is higher than 'more likely than not'
C. cash outflows necessarily incurred to generate the cash inflows from the continuing use
of the asset. 308. An entity shall classify a noncurrent asset or disposal group as held for sale when
D. future cash outflows that are expected to arise from improving or enhancing the asset's A. The noncurrent asset or disposal group is to be abandoned
performance B. The noncurrent asset or disposal group is idle or retired from active use
C. The carrying amount of the asset or disposal group will be recovered through continuing
303. When calculating estimates of future cash flows for value in use which of these cash flows use
should not be included? 33 D. The carrying amount of the asset or disposal group will be recovered through a sale
A. Income tax payments transaction
B. Cash flows from disposal
C. Cash outflows on the maintenance of the asset 309. An entity shall measure a noncurrent asset or disposal group classified as 'held for sale' at
D. Cash flows from, the sale of assets produced by the asset A. Carrying amount
B. Fair value less cost to sell
304. If an impairment of PPE is indicated, any impairment losses is recorded at an amount equal C. Carrying amount or 'fair value less cost to sell,' whichever is lower
to the D. Carrying amount or 'fair value less cost to sell,' whichever is higher
A. Excess of the carrying amount over the fair value of the asset
B. Excess of the carrying amount over the recoverable amount of the asset 310. A discontinued operation is defined as the disposal of a separate or major line of the
C. Excess of the recoverable amount over the carrying amount of the asset business. Any resulting gain or loss on discontinued operations is reported as a(n)
D. Excess of the carrying amount over the discounted Cash flows from the asset A. Prior period adjustment, after tax
B. Extraordinary gain or loss, after tax
Noncurrent Assets Held for Sale & Discontinued Operation C. Separate item preceding extraordinary items, pretax
305. It is a subsidiary, a major line of business or geographical segment whose operations and D. Separate item from income under continuing operations, after tax
cash flows can be clearly distinguished, operationally and for financial reporting purposes,
from the rest of the entity. 311. The results of discontinued operations should be presented a single amount in the
A. Component of an entity C. Disposal group A. statement of changes in equity
B. Discontinued operation D. Extraordinary activity B. income statement in juxtaposition with income from continuing operations
C. income statement, after tax, separately from income, from continuing operations
306. It is group of assets to be disposed of by sale or otherwise, together as a group in a single D. income statement, before tax, separately from income from continuing operations
transaction, and liabilities directly associated with those assets that will lie transferred in the
transaction. 312. If the 'fair value less cost to sell' is lower than the carrying amount of a noncurrent asset
A. Cash generating unit C. Disposal group classified as held for sale, the difference is treated as a(n)
B. Discontinued operations D. Noncurrent asset A. Depreciation expense C. Note disclosure
B. Impairment loss D. Prior period adjustment
307. A noncurrent asset is classified as held for sale if such sale is highly probable. "Highly
probable" means that Current liabilities, Provisions & Contingencies
A. The sale is certain 313. Which of the following is classified as a current liability on the balance sheet?
B. The future sale is likely to occur A. Bank overdrafts C. Postdated checks
B. Customer NSF checks D. Travel advances B. Premium offer obligations D. Risk of loss from fire
314. Which of the following items would be excluded from current liabilities? 320. On March 22, 2012, Cole Corporation received notification of legal action against the firm.
A. Normal accounts payable which had been assigned by the creditor to a finance company Cole's attorneys determine that it is probable that tin- company will lose the suit, and the loss
B. Long-term debt callable within one year or less because the debtor violated a debt is estimated at P2,000,000. Cole's accountants believe this amount is material and should be
provision disclosed. Cole prepares its financial statements in accordance with PFRS. How should the
C. A Short-term debt which at the discretion of the entity can be rolled over at least twelve estimated loss be disclosed in Cole's financial statements at December 31, 2012?
months after the balance sheet date A. As a loss recorded in other comprehensive income.
D. A long-term liability callable or due on demand by the creditor even though the creditor B. In die footnotes to the financial statements as a contingency,
has given no indication that the debt will be called C. As a provision for loss reported in the balance sheet and a loss on the income statement.
D. As a contingent liability reported in the balance sheet and a loss on the income
315. Which of the following provides the best explanation for why warranty expense should be statement.
estimated and recorded in the year of the related sales?
A. Full disclosure C. Materiality 321. Roland Corp. signed an agreement with Linx, which requires that if Linx does not meet
B. Matching D. Revenue recognition certain contractual obligations, Linx must forfeit land worth P40,000 to Roland. Roland's
accountants believe that Linx will not. meet its contractual obligations, and it is probable
316. Liabilities whose amounts must be estimated are disclosed in financial statements by: Ronald that will receive the land by the end of 2012. Roland uses PFRS for reporting
A. Including details in the footnotes purposes. How should Roland report the land?
B. Including the amounts in the liability totals A. In a footnote disclosure if the economic benefits are probable.
C. An appropriation of the retained earnings B. As investment property in the asset, section of the balance sheet.
D. Describing the estimated liability among the liabilities on the balance sheet, but not C. As a contingent asset and other comprehensive income for the period.
including the amounts in the liability totals D. As a contingent asset in the current asset section of the balance sheet.
317. Under PAS 37, for which of the following should a provision be recognized? 322. Which of the following liabilities is not contingent?
A. A liability to pay pension benefits if a specific employee lives to retirement. A. Future operating losses
B. A liability to pay any adverse judgment for a product liability case currently on appeal B. Obligations under insurance contracts
C. A liability to replace specific defective television set already returned to the manufacturer. C. Obligations for plant decommissioning costs
D. A liability to pay for books received by the college bookstore; terms allow for the return D. Reductions in fair value of financial instruments
for full refund of any books not sold.
Bonds & Notes Payable
318. According to PAS 37, for which of the following should a provision be recognized? 323. The measurement basis often used to report a long-term payable requiring a commitment lo
A. Future operating losses pay money at a determinable future date is
B. Obligations under insurance contracts A. Current cost C. Net realizable value
C. Obligation for plant decommissioning costs B. General price level D. Present value of future cash flows
D. Reduction in fail value of financial instruments
324. Logan Corporation issues convertible bonds for P 500,000. At the dale of issuance, it is
319. Which of the following loss contingencies is usually not accrued? determined that the fair value of the bonds is P480,000. Logan prepares its financial
A. Non-collectibility of receivables C. Product warranty obligations' statements in accordance with PFRS. How should the issuance of the bonds be recognized?
A. As a bond liability for P 500,000. lease.

B. As a bond liability for P 500,000 and a contra liability of P 20,000. D. The land is recorded as a finance lease and the building is recorded as an operating
C. As a bond liability for P 480,000 and an equity component of P 20,000. lease.
D. As a bond liability for P 480,000 and other comprehensive income of P 20,000.
330. Where there is a lease of land and buildings and the title to the land is not transferred,
325. Gains or losses from the early extinguishment of debt, if material, should be generally the lease is treated as if
A. Amortized over the life of the new issue A. Both land and buildings are finance leases
B. Amortized over the remaining life of the extinguished issue B. Both land and buildings are operating leases
C. Recognized in income before taxes in the period of extinguishment C. Land is finance lease; building is operating lease
D. Recognized as an extraordinary item in the period of extinguishment D. Land is operating lease; building is finance lease
Troubled-debt restructuring 331. Solar Company leases a warehouse with adjoining land for a period of 15 years. The fair
326. On the part: of the debtor, debt restructuring generally will result in values of the leasehold interests in the land and of the warehouse are P502,000 and
A. Gain on debt restructuring C. Loss on debt; restructuring P251,000, respectively. The land has an indefinite economic life whereas the warehouse has
B. Gain on exchange D. Loss on exchange a useful life of 15 years. Title to the land is not expected to pass at the end of the lease.
Under PAS 17 Leases, what is the accounting Creamier! I of these leased assets?
Accounting for Leases A. B. C. D.
327. The classification of a lease as either operating or finance lease is based on the Land Finance lease Finance lease Operating lease Operating lease
A. length of the lease Warehouse Finance lease Operating lease Finance lease Operating lease
B. economic life of the asset
C. transfer of the risks and rewards of ownership 332. The basic accounting issue for a lessor is
D. minimum lease payments being at least. 50% of the fair value A. Expense recognition during the lease term
B. Revenue recognition during the lease term
328. Morgan Corp. signs a lease to rent equipment for 10 years. The lease payments of P 10,000 C. Computing depreciation over the lease term
per year are due on January 2 each year. At the end of the lease term, Morgan may D. Determination of the cost of the leased asset
purchase the equipment for P 50. The equipment is estimated to have a useful life of 12
years. Morgan prepares its financial statements in accordance with PFRS. Morgan should 333. If the lessor and lessee use different: interest rates to account, for a finance lease, then
classify this lease as a(n): A. Total expenses and revenues will be equal
A. Capital lease. C. Operating lease. B. Total expenses and revenues will be different
B. Finance lease. D. Sales-type lease. C. The lessee and lessor cannot use different interest rates
D. The lessor will use different account: titles to record the leasing transaction
329. Santiago Corp. signs an agreement to lease land and a building for 20 years. At the end of
(he lease, the property will not transfer to Santiago. The life of the building is estimated to be 334. Lessor shall recognize asset held under a finance lease as a receivable at an amount equal
20 years. Santiago prepares its financial statements in accordance with PFRS. How should to
Santiago account for the lease? A. Cross investment in the lease. C. Net investment in the lease
A. The lease is recorded as a finance lease. B. Gross rentals D. Residua! value, guaranteed or not
B. The lease is recorded as an operating lease.
C. The land is recorded as an operating lease and the building is recorded as a finance 335. The excess of the fair value of leased property at the inception of the lease over its cost or
carrying amount should lie classified by the lessor as

A. Unearned income from a sales-typo lease. 341. Which of the following is not a component of benefit: (pension) expense?
B. Unearned income from a direct-financing lease A. Initial transition asset
C. Manufacturer's or dealer's profit from a sales type lease B. Return on plan assets
D. Manufacturer's or dealer's profit from a direct-financing lease C. Amortization of unrecognized gain or loss
D. Growth (or interest cost) in pension obligation since the beginning of the period
336. One incentive for entering into a sale-and-leaseback arrangement on substantially all of the
market, value of an asset is 342. An entity maintains a defined benefit pension plan for its employees. The service cost
A. Improvement in cash flow for the lessor component: of the net periodic pension cost is measured using the
B. Improvement in cash flow for the lessee A. Projected benefit obligation
C. Entire gain appears on lessee income statement in sale year B. Expected return on plan assets
D. Tax implications are favorable for the lessor, compared with other lending arrangements C. Unfunded vested benefit obligation
D. Unfunded accumulated benefit obligation
337. The lessor must classify a sale-and-leaseback arrangement as a(n)
A. Operating lease or a finance lease 343. Which of the following is reported as interest expense?
B. Operating lease or a sales-type lease A. Pension cost interest
C. Direct financing lease or a sales-type lease B. Post retirement health care benefit interest
D. Direct financing lease or an operating lease. C. Imputed interest on non-interest-bearing note
D. Interest incurred to finance construction of machinery for own use
Employee Benefits
338. If payment, of employees' compensation for future absences is probable and the amount can 344. On July 1, 2011, ABC Company amended its single employee defined benefit pension plan
be reasonably estimated and the obligation relates to rights that vest or accumulate, the by granting increased benefits for services provided prior to 2011. This prior service exist will
compensation should be be reflected in the financial statements for
A. Recognized when paid A. Years before 2011 C. Year 2011 and years before 2011
B. Accrued if attributable to employees' services not yet rendered B. Year 2011 only D. Year 2011 and years after 2011
C. Accrued if attributable to employees' services already rendered
D. Accrued if attributable to employees' services whether or not already rendered 345. Under PAS 19, plan assets include all of the following, except
A. Qualifying insurance policies
339. Under PAS 19, which of the following terms best describes benefits which are payable as a B. Assets held by a long-term employee benefit fund
result of an entity's decision to end an employee's employment before the normal retirement C. Non-transferable financial instruments issued by the reporting enterprise
date? D. Assets that are available to be used only to pay fund employee benefits and are not
A. Defined benefit: plans C. Retrenchment: benefits available for payments to creditors even in bankruptcy
B. Post-employment benefits D. Termination benefits
346. Under PAS 26, investments held by retirement benefit plans should be stated at which of the
340. Which of the following methods is used in PFRS to account for defined benefit pension following values in their statement of net assets?
plans? A. Fair value C. Original cost less impairment
A. Accumulated benefits method. C. Projected-unit-credit method. B. Net realizable value D. Value in use
B. Benefit-years-of-service method. D. Vested years of service method.
Accounting for Income Taxes classification of the related tax basis of the temporary difference
347. Which of the following is the best description of the current PFRS approach to inter-period tax
allocation? 354. Which of the following is true regarding reporting deferred taxes in the financial statements
A. An application of the matching concept C. The asset-liability method prepared in accordance with PFRS?
B. Partial allocation D. The enacted method A. Deferred tax assets and liabilities may be classified only as noncurrent.
B. Deferred taxes of one jurisdiction are offset against another jurisdiction in the netting
348. Which of the following differences would result in future taxable amounts? process.
A. Revenues or gains that are taxable before they are recognized in financial income C. Deferred tax assets and liabilities are classified as current and noncurrent based on their
B. Expenses or losses that are deductible after they are recognized in financial income expiration date.
C. Expenses or losses that are deductible before they are recognized in financial income D. Deferred tax assets are netted with deferred tax liabilities to arrive at one amount
D. Revenues or gains that are recognized in financial income but are never included in presented on the balance sheet.
taxable income
355. Current tax expense plus deferred tax expense is
349. Which could never be subject to inter-period tax allocation? A. A meaningless sum C. Tax deductible expense
A. Depreciation expense on assets C. Interest revenue on municipal bonds B. Income lax expense D. None of these
B. Estimated warranty expense D. Rent revenue
356. Which of the following statements is correct regarding the provision for income taxes in the
350. The deferred tax consequence attributable to a deductible temporary difference and financial statements of a sole proprietorship?
operating loss carry forward is known as A. No provision for income taxes is required
A. current tax C. tax expense B. The provision for income taxes should be based on business income using corporate tax
B. tax asset D. tax liability rates
C. The provision for income taxes should be based on business income using individual tax
351. In computing the change in deferred tax accounts, which tax rates are used? rates
A. Current tax rate C. Estimated future tax rates D. The provision for income taxes should be based on the proprietor's total taxable income,
B. Enacted future tax rates D. Past years' tax rates allocated to the proprietorship at the percentage that business income bears to the
proprietor's total income
352. A deferred tax liability uses
A. Current tax laws, unless enacted future tax laws are different Share-based Payment
B. The current tax laws, regardless of expected or enacted future tax laws 357. Which of the following transactions involving the issuance of shares does not come within the
C. Expected future tax law, regardless of whether those expected laws have been enacted definition of a 'share-based' payment under PFRS 2?
D. Either current or expected future tax laws, regardless of whether those expected laws A. Share appreciation rights
have been enacted B. Employee share option plans
C. Employee share purchase plans
353. Under PAS 12, deferred tax assets and liabilities should be reported in the balance sheet D. Share-based payment relating to an acquisition of a subsidiary
A. As non-current asset and non-current liability
B. Always net non-current asset or net non-current liability 358. When shares are issued for services received, the measure should be the
C. As current and non-current depending on the order of liquidity or maturity A. Book value of shares issued C. Fair value of such services
D. As current and not-current assets and liabilities depending the balance sheet B. Fair value of shares issued D. Par value of shares issued
359. In what circumstances is compensation expense immediately recognized under PFRS 2? 365. The type of share capital that normally carries the most rights is:
A. In all circumstances A. Ordinary shares
B. In no circumstances is compensation expense immediately recognized B. Convertible preference shares (nonvoting)
C. In circumstances when options are granted for prior service, and the options are C. Cumulative preference shares (nonvoting)
immediately exercisable. D. Participating preference shares (nonvoting)
D. In circumstances when options are exercisable within 2 years for services rendered over
the next 2 years 366. Common shares issued would exceed common shares outstanding as a result of
A. Declaration of a stock dividend C. Payment in full of subscribed stock
360. In accounting for share-based compensation under PFRS 2, what interest rate is used to B. Declaration of stock split D. Purchase of treasury stock
discount both the exercise price of the option and the future dividend stream?
A. The risk-free interest rate 367. Capital stock is said to be watered when
B. The firm's known incremental borrowing rate A. Assets are overstated
C. Any rate that firms can justify as being reasonable B. Liabilities are overstated
D. The current: market rate that firms in that particular industry use to discount cash flows C. It is issued for assets other than cash
D. It is sold at: a price in excess of book value
361. Under PFRS 2, a cash-settled share-based payment (e.g., share appreciation rights) will
increase which of the following elements of the financial statement? 368. A gain or loss from one of the following transactions should not be included in determining
A. Asset C. Income income
B. Equity D. Liability A. Receipt: of Interest from bank deposits C. Sale of products.
B. Sale of plant and equipment. D. Sale of treasury shares
Shareholders' Equity
362. Major factors contributing to the growth of corporation business includes all of the following, 369. Which of the following best describes the net effect on retained earnings of the purchase and
except: subsequent sale of treasury stock?
A. The lack of government regulation A. Retained earnings may never be increased or decreased
B. Limited liability of the shareholders B. Retained earnings may never be decreased but sometimes increased
C. Easy transferability of the share of ownership C. Retained earnings may never, be increased but: sometimes decreased
D. The facility to accumulate large amounts of resources D. Retained earnings is always affected unless the reissue price is exactly equal to cost
363. Preference share that has the most restrictive features is: 370. When rights are issued to current shareholders, the number of rights to be issued per existing
A. Fully participating, nonvoting share will
B. Nonparticipating, cumulative, nonvoting A. Usually be only one right per share already held
C. Noncumulative, nonparticipating, nonvoting B. Depend oh the number purchased by existing shareholders
D. Noncumulative, fully participating, nonvoting C. Vary depending on the number per share already held, as determined and announced by
the corporation
364. It is an equity instrument that is subordinate to all other classes of equity instrument. D. Be the number of rights needed to obtain one additional share multiplied by the number
A. Options C. Potential ordinary share of shares already held
B. Ordinary share D. Warrants
371. The peso amount of total shareholders' equity remains the same when there is
A. Declaration of a cash dividend 377. What: is the effect on EPS and shareholders' equity with the reacquisition by an entity of its
B. Declaration of a stock dividend own stock?
C. Issuance of preferred stock in exchange for convertible debentures A. B. C. D.
D. Issuance of nonconvertible bonds with detachable stock purchase warrants Earnings per share Decrease Decrease Increase No effect
Shareholders’ equity Decrease Increase Decrease Increase
372. Companies that carry no insurance against insurable casualty loss sometimes use an
account called reserve for self-insurance. In preparing a balance sheet, this account should Single entry System, Cash Basis & Accrual Basis,
be reported as 378. Incorrect accounting records using only a cash book is a characteristic of
A. Appropriated retained earnings C. Liability A. Accrual basis C. Double entry system
B. Deferred credit D. Unappropriated retained earnings B. Cash basis D. Single entry system
373. What do an appropriation of retained earnings' and a declaration of a cash dividend (for the 379. Accrual basis accounting
same amount) have in common? A. Is not acceptable under GAAP
A. Both have the same consequences for shareholders B. Omits adjusting at the end of the period
B. Both permanently reduce future ability to pay dividends C. Results in higher income than cash basis accounting
C. Both increase the amount of appropriated retained-earnings D. Leads to the reporting of more complete information than does cash-basis accounting
D. Both result in a decrease in unappropriated retained earnings
380. The accrual basis of accounting is most useful for
Earnings per Share A. determining the amount of dividends an entity should pay
374. Which of the following would be most indicative of a simple capital structure? B. predicting the long-term financial performance of an entity
A. Equity represented materially by liquid assets C. predicting the' short-term financial performance of an entity
B. Ownership interests consisting solely common stock D. determining the amount of income tax an entity should pay
C. Earnings derived from one primary line of the business
D. Common stock, preferred stock, and convertible securities outstanding 381. Accrual basis of accounting
A. Is not acceptable under GAAP
375. When EPS is computed, dividends on preferred stock are B. Omits adjusting at the end of the period
A. Reported separately on the income statement C. Results in higher income titan cash basis accounting
B. Ignored because so they do not: pertain to the common stock D. Leads to the reporting of more complete information than does cash basis accounting
C. Added because they represent: earnings to preferred shareholders
D. Subtracted because they represent earnings to preferred shareholders 382. Compared to the accrual basis of accounting, the cash basis of accounting understates
income by net decrease during the accounting period of
376. The weighted average number of shares outstanding during the period for all periods (other A. Accounts receivable but not: of accrued expenses
than conversion of potential common shares) shall be adjusted for B. Accrued expenses but not of accounts receivable
A. Any prior-year adjustment. C. Both accounts receivable and accrued expenses
B. Any new-issue of shares for cash. D. Neither accounts receivable nor of accrued expenses
C. Any convertible instrument settled in cash.
D. Any change in the number of ordinary shares without a change in resources Foreign Currency Transaction & Translation
383. By applying the definition provided in PAS 21, which item will be regarded as a monetary 390. Changes in fair value of a derivative financial instrument that is determined to be an effective
item? cash flow hedge shall
A. Accounts receivable C. Land and buildings A. Be included in retained earnings C. Be recognized in profit or loss
B. Inventory D. Property, plant and equipment B. Be recognized directly in equity D. Not be recognized
384. Under PAS 21, both foreign currency transaction gains and foreign currency translation 391. Which of the following types of information does PFRS 7 not require to be disclosed about
losses can be generally presented in the exposures to risks arising from financial instruments?
A. Statement of cash flows C. Statement of financial position A. Qualitative and quantitative information about credit risk
B. Statement of comprehensive income D. Statement of income B. Qualitative and quantitative information about market risk
C. Qualitative and quantitative information about liquidity risk
385. Exchange differences arising from translation of financial statements of a foreign entity are D. Qualitative and quantitative information about operational risk
A. Recognized directly in retained earnings
B. Recognized as accumulated translation adjustments in profit or loss 392. The risk of an accounting loss from a financial instrument, due to possible failure Of another
C. Recognized as accumulated translation adjustments in the equity section party to perform according to terms of the contract is known as
D. Capitalized if the differences resulted from severe devaluation of a currency A. Credit risk C. Market risk
B. Investment risk D. Off-balance-sheet risk
Derivatives & Hedging Activities
386. A company issued share option is an instrument that gives the holder the right but not the 393. PFRS 7 defines 'liquidity risk' as the risk that
obligation to: A. an entity's cash inflows will not be sufficient to meet the entity's cash outflows
A. Receive a certain dividend declared by the company by a specified date B. an entity will encounter difficulty in meeting cash flow needs due to cash flow problems'
B. Receive a bonus issue of shares in a proportion as notified by the company C. an entity will encounter difficulty in meeting obligations associated with financial liabilities
C. Buy a certain number of shares in the company by a specified date at a slated price D. an entity will encounter difficulty in disposing a financial asset due to lack of market
D. Sell a certain number of shares in the company by a specified date al a staled price liquidity
387. Financial instruments sometimes contain feature that separately meet the definition of a 394. Which of the following types of information does PFRS 7 not require to be disclosed about
derivative instrument. These features are classified as the significance of financial instruments?
A. Embedded derivative instruments C. Swaptions A. Fair values of financial instruments
B. Notional amounts D. Underlyings B. Information about the use of hedge accounting
C. Carrying amounts of categories of financial instruments
388. For hedging purposes, derivative instruments may be broadly designated as either D. Information about financial instruments, contracts, and obligations under share-based
A. Cost hedge or cash flow hedge C. Fair value hedge or cash flow hedge payment transactions
B. Cost hedge or fair value hedge D. Fair value hedge or market hedge
Hyperinflationary Environment
389. Changes in fair value of a derivative financial instrument that is determined to be an effective 395. Under PAS 29, which of the following would indicate that hyperinflation exists?
fair value hedge shall A. Monetary items do not increase in value
A. Be included in retained earnings C. Be recognized in profit or loss B. Inflation is approaching, or exceeds 20% per year
B. Be recognized directly in equity D. Not be recognized C. Sales on credit are at lower prices than cash sales
D. People prefer to keep their wealth in non-monetary assets or a stable foreign currency
A. The cost model

396. The following statements are based on the PAS 29 (Financial Reporting in Hyperinflationary B. The revaluation model
Economies): C. The recoverable amount model
Statement I: The financial statements of an entity whose functional currency is the currency D. Either the cost model or the revaluation model
of a hyperinflationary economy shall be stated in terms of measuring unit
current at the end of the reporting period (balance sheet date). Not-for-Profit Organization
Statement II: The gain or loss on the net monetary position shall be included in profit or loss 401. Which of the following is not necessarily regarded as nonprofit organizations?
and separately disclosed. A. Cooperatives C. Labor unions
Statement III: When an economy ceases to be hyperinflationary, an entity shall treat the B. Country clubs D. Partnerships
amounts expressed in the measuring unit current at the end of the reporting
period as the basis for carry in amounts in the subsequent financial 402. A voluntary health and welfare organization is required to prepare a
statements. A. Statement of changes in equity C. Statement of functional expenses
A. Only statement I is true C. Only statement III is false B. Statement of comprehensive income D. Statement of management responsibility
B. Only statement II is true D. All of the statements are true
Government Accounting
Insurance Contracts (PFRS 4) 403. What is the correct sequence in dealing with the national budget for various government-
397. Which of the following types of Insurance contracts would probably not be covered by PFRS agencies?
4? A. Allocation, appropriation, liquidation, obligation
A. Life insurance C. Motor insurance B. Appropriation, allocation, obligation, liquidation
B. Medical insurance D. Pension plan C. Appropriation, obligation, allocation, liquidation
D. Obligation, appropriation, liquidation, allocation
398. Which of the following accounting practices has been outlawed by PFRS 4?
A. Shadow accounting 404. What are the rules on the use of government funds?
B. Catastrophe provisions A. No allotment shall exceed appropriation C. No obligations shall exceed allotment
C. An impairment test for reinsurance assets B. No liquidation shall exceed obligation D. All of the choices
D. A test for the adequacy of recognized insurance liabilities
405. Which is not an objective of the New Government Accounting System?
Mineral Resources (PFRS 6) A. Simplify government accounting
399. Which of the following expenditures would never qualify as an exploration and evaluation B. Conform to International Financial Reporting Standards
asset? C. Comply with the requirements of International Monetary Board
A. Expenditure for exploratory drilling D. Generate periodic and relevant financial reports for belter monitoring or performance
B. Expenditure for acquisition of rights to explore
C. Expenditures related to the development of mineral resources 406. Once a government agency receives Notice of Cash Allocation (NCA), it shall debit "Cash-
D. Expenditure for activities in relation to evaluating the technical feasibility and commercial National Treasury, Modified Disbursement System" and credit
viability of extracting a mineral resources A. NCA - Local Government C. Subsidy Income - Local Government:
B. NCA - National Government D. Subsidy Income - National Government
400. Which measurement model applies to exploration and evaluation assets subsequent to initial
recognition? 407. The major classification of expenses in government accounting include all of the following,
except B. The statement of cash flows more prominently than the other statements.
A. Financial expenses C. Personal services C. The statement of financial position more prominently than the other statements.'
B. Maintenance and operating expenses D. Selling expenses D. The statement of comprehensive income more prominently than the other statements.
408. Under NGAS, personal services include 413. In accordance with the PFRS for SMEs, the financial statement that presents an entity's
A. Salaries, allowances and bonuses assets, liabilities and equity at: a point in time:
B. Advertising, rent, insurance and gasoline A. Must be titled the balance sheet
C. Bank charges, interest, losses on foreign exchange transactions B. Must be titled the statement of financial position
D. Traveling, training, seminar, telephone, internet, staff development C. Could be titled the statement: of financial position or the balance sheet
D. Could be titled the statement of financial position, the balance sheet or any other title that
Consolidated Financial Statements is not misleading.
409. A parent is not required to present consolidated financial statements
A. When the parent is wholly owned subsidiary 414. In accordance with the PFRS for SMEs, in presenting a statement of financial position, an
B. When the parent and the subsidiary are engaged in dissimilar activities entity:
C. When there is a three-month time lag in the fiscal periods of the parent and its subsidiary A. Must present assets and liabilities in order of liquidity.
D. When the parent is virtually wholly owned provided parent does not obtain approval of B. Must make the current/non-current presentation distinction.
the owners of minority interest C. Must choose either the current/non-current or the liquidity presentation formats (i.e., a
'free' choice of presentation format).
PFRS for SMEs D. Must make the current/non-current presentation distinction except when a presentation
410. Which of the following is not among the qualitative characteristics of information in the FS of based on liquidity provides information that is reliable and more relevant.
SMEs?
A. Balance between benefit and cost C. Materiality 415. Which of these terms cannot be used to describe a line item in the statement of
B. Consistency D. Prudence comprehensive income?
A. Extraordinary item C. Profit before tax
411. Fair presentation requires a faithful representation of the effect of transactions, other events B. Gross profit D. Revenue
and conditions in accordance with the definitions and recognition criteria for assets, liabilities,
income and expenses. 416. An entity that is not publicly accountable must make an explicit and unreserved statement of
Fair presentation, in accordance with the PFRS for SMEs, is presumed to result, from: compliance with the PFRS for SMEs if the entity complies with
A. Compliance with the PFRS (or SMEs by an entity that has public accountability. A. full PFRSs.
B. Compliance with the PFRS for SMEs by an entity that does not have public B. all the requirements of PFRS for SMEs.
accountability, C. the vast majority of the requirements of PFRS for SMEs.
C. Compliance with the PFRS for SMEs, with additional disclosures where necessary, by an D. the national GAAP based on PFRS for SMEs with some specific differences.
entity that has public accountability.
D. Compliance with the PFRS for SMEs, with additional disclosures where necessary, by an 417. In which of the following situations can an entity that does not have public accountability
entity that does not have public accountability. claim compliance with the PFRS for SMEs in its financial statements?
A. The entity prepares its financial statements in accordance with local tax requirements
412. An entity shall present; that are substantially the same as the PFRS for SMEs.
A. Each financial statement with equal prominence. B. The entity prepares its financial statements in accordance with local tax requirements
that are, except: in name, word-for-word the same as full PFRS.

C. The entity prepares its financial statements in accordance with local tax requirements 4. The term "IFRS" covers IFRS, IAS and Interpretations (IAS 1, par. 7).
that are, except in name, word-for-word the same as the PFRS for SMEs.
D. In both cases (B) and (C) above. 5. Usual mistake is choice A. Instead of obtaining majority support from practicing accountants,
standards are prepared by an independent body (FRSC) that facilitates the approval of
418. An entity shall disclose in the summary of significant accounting policies: accounting standards (PFRS). The body is composed of professional members, representing
A. the measurement basis (or bases) used in preparing die financial statements. various interested user groups.
B. all the measurement bases specified in the IFRS for SMEs irrespective of whether they
were used by the entity in preparing its financial statements. 6. Under the Conceptual Framework of Financial Reporting (2010), the two (2) fundamental
C. the measurement basis (or bases) used in preparing the financial statements and the qualitative characteristics of accounting information are relevance and faithful representation.
accounting policies used that are relevant to an understanding of the financial
statements. 7. Under the Conceptual Framework of Financial Reporting (2010), the two (2) ingredients of
D. all of the measurement bases and the accounting policy choices available to the entity relevance are predictive value and confirmatory (feedback) value. Information has predictive
(i.e., specified in the IFRS for SMFs) irrespective of whether they were used by the entity value when it helps user increase the likelihood of correctly predicting or forecasting the
in preparing its financial state me its. outcome of events; financial information has confirmatory value if it provides feedback about
previous evaluations and enables users confirm earlier expectations.
419. Which of the following is not used in accounting for investment in associates and interests in
Jointly controlled entities of SMEs? 8. Under the Conceptual Framework of Financial Reporting (2010), the three (3) ingredients of
A. Cost model C. Fair value model faithful representation are completeness, neutrality and freedom from error.
B. Equity method D. Revaluation model
9. Under the Conceptual Framework of Financial Reporting (2010), the four (4) enhancing
420. Under Section 34 of PFRS for SMEs, which is not a category of SPECIALIZED ACTIVITIES qualitative characteristics of accounting information are comparability, understandability,
for SMEs? verifiability and timeliness.
A. Agriculture C. Insurance
B. Extractive activities D. Service concessions 10. Accounting for corporations is distinctively unique in that the corporation draws sharper
distinction in accounting for sources of capital: contributed capital (share capital and
premium) and earned capital (retained earnings).
1. External events are those that affect the entity and in which other entities participate.. On the 11. PAS 24 does not require disclosure of transactions which are eliminated in the preparation of
other hand, internal events do not involve other entities' participation. Production and casualty consolidated FS.
are the usual examples of internal events.
12. Retrospective application assumes that the new accounting policy had always been applied
2. Prepaid expense recorded under the asset method is not subject to reversing entries; from the beginning.
however, prepaid expense recorded under the expense method may be reversed.
13. Question is about cash receipts; a voucher is a written authorization to pay or disburse cash.
3. IAS and IFRS are considered as principles-based while US FASB standards are considered
as rules-based. 14. The bank statement balance will show a higher amount than cash ledger balance for any
interest credited to the bank account by the bank beyond the knowledge of the depositor.
26. PAS 41 is applied to agricultural produce only at the point of harvest; the processing of
15. Accounts receivable from customers is classified as current if realizable within one year or agricultural produce alter harvesting is covered by PAS 2 or other applicable standards. '
normal operating cycle, whichever is longer.
27. Choice A refers to agricultural produce; choice B refers to harvest; choice D refers to
16. Net price method is preferred in accounting as it properly reflects current period sales biological transformation.
revenue, net of any related cash discount that may be availed by the customer.
28. Under PAS 41, harvesting from unmanaged resources (such ocean fishing and deforestation)
17. For this type of credit card transaction, ABC (seller) collects the amount from Express Charge is not an agricultural activity. Aquaculture (which includes fish farming), on the other hand,
(credit card company); then, Express Charge in turn collects the amount from XYZ (buyer). would fall under the definition of agricultural activity.
18. Emphasizing substance over form, the note's 'unspecified principal amount' is its present or 29. External independent valuation is not among those listed as guidelines in determining the fair
discounted value and the 'unspecified interest amount' is the discount, which is computed value of a biological asset in PAS 41. (See related section of page 14 of the TA Lecture
based on the excess of face value over present value. Notes)
19. Short-term non-interest bearing notes receivable are usually recorded at their face value, 30. The ending valuation allowance for AFS bond investments is based on the difference
which is incidentally equal to the maturity value. between fair value and amortized cost.
20. Under PAS 2 and cost accounting, costs of designing products for specific customers may be 31. Under the effective interest method (scientific method), the periodic amortization of premium
included in the inventoriable cost of a product. is lowest in the first period but it. increases over the subsequent periods.
21. The use of discount lost' account, implies that purchased inventories are recorded at net 32. A property leased in under finance (capital) lease and leased out under operating lease
amount; it also implies that the purchase discount, is not availed by the buyer so that it is qualifies as an investment property. A property leased out under finance lease is not
"lost." considered as an investment properly.
22. Usual mistake is choice C. An entity must choose a cost flow method which most clearly 33. Under PAS 36, the cash flows used to measure the 'value in use' of a property must be
reflects the periodic income and cost of goods sold, expressed before tax.
23. Specific identification is more appropriate if each item in the inventory is unique so that the
actual acquisition costs of individual units can be determined from the accounting records.
24. The net realizable value of inventory is based on estimated selling price less estimated cost
to complete and estimated cost to sell; sales staff commission is a good example of cost to
sell.
25. Inventory valuation method (e.g., FIFO) affects cost of goods sold, net income including
related income taxes.

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Review School of Accountancy Theory of Accounts

Basic Accounting Concepts A. The debit-credit convention must not be used

B. International Financial Repotting Standards (IFRS)

Statement I: The Conceptual Framework is a reporting standard.

B. Annual depreciation on manufacturing machinery is understated

applied to A. Internal as well as external interim reports

D. Historical cost less depreciation less impairment

conditions, B. Government gift D. Grants related to income

A. Increase funds provided by operations

D. Periodic payments to the franchisor based on the franchisee's revenues

A. As a bond liability for P 500,000. lease.

carrying amount should lie classified by the lessor as

A. The cost model

that are, except: in name, word-for-word the same as full PFRS.

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