asx RC-ACE ae The Professional CPA Review School Seer, Main: 3°. Vitaroman Bld. 873 P. Campa St cor Espana, Samal, Mania {@ (02) 735.8901 / 735 9031 / 0922 851 0191 ‘email ac: e1_ace@yahoo.com Rasulo ude dg. V, Lower Mabin cor Diago Slang, Bagulo Cy 3/F GCAM Blog. Monteverde St. Davao Cty ‘a (O74) 442-1440 /0922-8499196 ‘m (082) 285-0005 / 0925-72722. FINANCIAL ACCOUNTING & REPORTING MAY 2018 BATCH, FINAL PRE-BOARD EXAMINATION S33¥7H> £@& APRIL 29, 2018; 11:00AM ~ 2:00PM INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one answer, for cach item by writing a SHADING corresponding to the letter of your choice on the answer sheet, L Which of the following is not a benefit associated with the FASB Conceptual Framework Project? A.» A conceptual framework should increase financial statement users’ understanding of and confidence in financial reporting, 1B. Practical problems should be more quickly solvable by reference to an existing ‘concepiuil framework. C.Neobesent set of accounting standards and rules should result 1D. Business entities will aced far less assistance from accountants because the financial reporting process will be quite easy to apply. Danie Corp. decides to’ establish a large loss and related liability this year because of the possibility that it may lose a pending: patent infringement lawsuit. The possibility of loss is considered remote by its attorneys \. Measurement Principle C. Revenue recognition Principle 1. Matching Principle D. Disclosure Principle 3. . Decision makers vary widely in the types of decisioné they make, the methods of decision making they employ. the information they already possess or can obtain frorn other sources, and their ability t0 process information. Consequently, for information to be useful there must bea linkage berwoen these users and the décisions they make. This link is \. elevance. C. understandability B. celabiy D. materiality 4. ‘The accounting principle of expense recognition is best demonstrated by \. not recognizing any expense unless some revenue is realized. 1B. associating effort (expense) with accomplishment (revenue). . recognizing prepaid rent received as revenue. D, ‘establishing an Appropriation for Contingencies account. 5. Goodson Company is a pasty to a major litigation and the opinion of the legal counsel is that there ia strong possibility chat the company may lose by a material amount of P2,500,000. Management decides not to include the information in the financial statements because it may ‘have a negative impact on the company's stock price. Which of the following principles is being violated? \. Bull discosure C. Histosical cost B. Going concern D. Matching 6. ‘The Iniernational Accounting Standards Board's (IASB) conéeptial framework \. Includes the concept of prudence or conservatism which means when in doubt, choose the solutién that willbe least likely to overstate assets or income and/or understate liabilities or expenses. ‘ 1B, ixcludles'the concept of prudence or conservatism because itis inconsistent with neutrality, which encompasses freedom from bias.S CRCACE/FAR: Final Pre-board Exams (May 2018 batch) PAGE 3 6. Ix Ms. D. Maisip, the accountant of Ala Chamba'Corporation, a publidly accountable entity discovered a purchase invoice'for some small items of office equipment imouating to 215,000 ‘which was omitted from the books. She was already doing the summasiaing stage of the recording process and has prepared the financial statements for submission to management. She ‘cortccted the ctror by charging Office Supplies Expense This situation is A. An application of the materiality principle 1K, \ violation of the materiality principle An application of the recognition principle for accountable evens 1D._.\ violation of the recognition principle for accountable events Caroline, Ine hired 4 new controller in late 2018. “The controller discovered that a material amount Of cash sales was omitted from the accounting records in 2018. Which of the following should Caroline Inc. include in its set of basic financial statements for 2018? A. A statement of Retained Earnings B.A *thied balance sheet” © ninterion balpace sheet 1D. Astatement of recognized guns and losses Which of the following statements on the scope of authority of the PFRSs and the Conceptual Framework is fidse? \. ‘The Philippine Financial Reporting Standards in the Philippines include the PFRSs, the PASs, and the Philippine Interpretations 3, ‘The Conceptual Framework has the highest level of authority in financial accounting and reporting practice in the Philippines ©. The Philippine, Financial Accounting’ Standards applies 10 all reporting. enterprises, whether publicly accountable or sonall and medium-sized entities 1D. The Philippine. Interpretations Committee (PIC) assists the FRSC and the public it sezves by addtessing newly identified Gnancial eportng or controversial issus in the Philippines not specifically covered by thie PFRSs. ‘the Financial .Necounting Standards Board employs 2 "due process" system which .\. wan efficient system for collecting dues from members. BB, enables interested parties to express their views on issues under consideration, . identifies the accounting issues that are the most important, 1D. requires that all accountants must receive a copy of financial standards. Wha isthe relationship between the Securities and Exchange Commission and avcounting stadard serting ia the Philippines 7 |. “The SEC requites all companies listed on an exchange to submit thie financial statements to the SEC. 1B. ‘The SEC coondinates.with the FRSC in establishing accounting standards. (. “The SEC has mandate to establish aécounting standards to be followed by enterprises under its jusisdction, D. The SEC reviews financial statements for complisnce. Which of the following basic accounting assumptions is theeatented by the existence of severe tuilaoa in the econoswy? 1. Monetasy unit assumption. C Going-conceen assumption B. Periodicity assumption DB. Reonomic entity assumption. ‘The International Accounting Standards Boatd’s (IASB) conceptual framework includes a cost: benefit constraint. Which ofthe following is tue regarding this constraint? A. Benefits are more difficult quantify than coxts 1K. ‘The IASB seeks inpat on costs and benefits as part of theie due process (Benefits co preparers may include access to capital at a lower cost. D. lof the choices are correct - SFT ACCRC-ACE/FAR:: Final Pre-board Exams (May 2018 batch) PAGE 5 26, », 30. Which of the following, statements pertaining to Accounting is incomrect? -\. General purpose financial statements were developed primarily because all outside party ‘users have the same information needs B, ‘The double-entry system of accounting has been used for centuries. ©. The practice of accounting requires considerable professional judgment D, The objective of external financial statements is t0 communicate the economic effects of complered transactions and other events in the entity to interested patties In the International Accounting Standards Board's (IASB's) Conceptual Framework, qualitative charaetetstes A. Are considered either fuddamental oc enhancing. 13. Contribute to the decision-usefulness of financial reporting information, C. Distinguish better information from inferior information for decision-making purposes. D. ‘Ate all of (A), (8), and (C) choices above Which of the following statements does not pertain or is not an aspect of “going concern” .\. Immaterial cost of office equipment with a life of theee years is, charged to expense 1B, Assets and liabilities are reported in the Ginancial statements using a “current” and “non- current” classification, Acoruals and deferrals are recognized in accounting for transactions and events 1D, Disclosure of troubled-debt restructuring and dacion en pago in the notes to financial statements ~ When an entity breaches an undertaking under a long-term loan agreement, on or before balance sheet date, such Liability continues to be classified as non-cusrent if the lender has agreed A. after balance sheet date, before the FS ate authorized for issue, nor to demand-payment B._ before balance sheet date, before the FS. ste authosized for issue, not to demand payment by the balance sheet date, before the FS are authorized for issue, to provide a grace period ‘fat least rwelve months after the balance sheet date D. after. the balance sheet date, before the FS are authorized for issue, #0 provide a grace period of st least twelve months after the balance sheet date “The Sure Corporation. has determined that it needs to recognize an impairment loss on two assets with the following relevant amounts: Plant Land Osiginal cost 700,000 1,400,000 Previous revaluation none. 450,000 ising carrying amount 700,000 1,850,000: . Tmpaicment loss for the year 200,000 300,000 According to P.\S36 Jopairment of assets, how should each of the impairment losses be recognized? Land A. in profit or loss In profit or loss B. In profit oF loss In other comprehensive income © In other comprehensive income In profit or loss . Jn other comprehensive income In other comptehensive income Which of the following statements sbout “other comprehensive income” section of the Siarement of Comprehensive income (SCI) is fare fab? 1. ‘The amount of revaluation surplus reported in the other comprehensive income section of the SCI must be the same as the amount of revaluation surplus ending. balance in the general ledger * 1 Foreign exchange gains and losses arising from purchase of property and equipment shoul be reported under the other comprehensive income section of the SCI CETA