(naligic tates) R= MR O Compeqeoe men) oon) B The Review School of Accountancy PREWEEK LECTURE OcToBER 2017- Batch 34 TAPW - 345 Which of the following is not considered cash for financial reporting purposes? a. Petty cash funds and postal money order '. Unrestricted compensating balances Dividend, interest and tax fund d._Postdated and stale checks from customers 2. Which of the following 1s cash for financial reporting purposes assuming the bslance sheet date is December 31, 20167 ‘a. Check payable to a supplier unreleased at the balance sheet date ». Check received from a customer dated January 5, 2017 c. Check received from a customer marked as DAUO/OAIF 4. Undeposited customer's check which is already outstanding for more than 6 months at the balance sheet date The following reconcling items are deducted from the bank balance of cash in order to arrive at the unadjusted book balance of cash except a. Erroneous bank credit Erroneous bank charge . Outstanding checks 4. Credit memo 4. When specific customer's account is written off by a company using the allowance method, the effect on net income, accounts receivable, and allowance for uncollectible accounts are? Netincome Accounts receivable Allowance for uncollectible accounts a No effect No effect Decrease b. Increase No effect No effect ie Increase Decrease Decrease a No effect Decrease Decrease ‘An interest bearing note is recorded at face value when a. The stated rate is greater than the market rate of interest b. The stated rate is less than the market rate of interest c. The stated rate is equal to the market rate of interest d. Allof the above . 6. After being held for 40 days, 2 120-day, 12% interest-bearing note receivable was discounted with. 4 bank at the dlscount rate of 15%. Which of the following statements is Incorrect relating to the discounted notes? ‘Accrued interest computed at 12% for 40 days is recorded in the accounts Discount Is computed based on the maturity value ofthe note at 15% for 80 days Proceeds Is equal to the matunty value less clscount at 15% for 80 days ‘A loss ls recognized equal to the excess of the note and accrued interest over the proceeds from the discounting 5 7. Which ofthe following would not be reported as inventory? '2. Goods out on cansignment i. , Goods in transit sold under FOB Destination ¢. Goods in transit purchased under FOB Seller @, Goods purchased uncer a buyback agreement ‘8. Which ofthe following statements is Incorrect about perpetual inventory system? a. Inventory account Is debited upon purchase 1. One of the entriés made'to make up retum of goods sold on aecount is debit inventory and credit cost ‘of goods sold cA physical inventory count is required to set up cost of goods sold + 4. Allof the statements are correct 9. What is the treatment of inventory normal spoilage under the FIFO retail method? ‘2. Included in the computation of cost ratio. b. Deducted from sales ‘c. Deducted from goods availabe for sale at cost 4d. Dedcted from goods available for sale at retail 10. Which of the following wil resut if the current year’s ending inventory amount is understated? ‘2. Cost of goods sold wil! be understated. ag b. Gross profit willbe understated, ‘c. Net income will be overstated, d. Retained earnings will be overstated.2 18. 19. 20. 2a. ‘Which of the following statements is incorrec} about PAS 41 * Agricultu Animals related to recreational activities and bearer animals are considered biologics! . Living piant that has a remote likelihood of being sold as an agricultural produce except for inekental scrap sales Is Classified as PPE ©. Living plant with duat purpose is classified as biological asset 4G. Blological asset is measured at cost if the fair value less any estimated cost of disposal is 1% determinable Investments in equity secunties that provide neither control nor significant influence over the inves! are measured at the end of the reporting pened at a. Fairvalue b. Cost Carrying value 4d. Net realizable value ‘Which of the following dividends received by an investor holding equity investments valued at fair value Is ‘not recognized as dividend mcome? a. Cash dividena b. Property dividend Shares recelved in Hew oF cash dividend 6. Cash received in leu of share dividend If 2 bond investment is purchased between interest payment dates, the buyer should pay, in addition to the purchase price of the bonds, the amount of accrued interest computed ‘a. From the date of acquisition to the nearest interest payment date 'b. From the last interest payment date to the date of acquisition From the last interest payment date to the next interest payment date J, None of the above . Which of the following is not correct regarding trading securities? ‘a, They are classified as current assets b. Unrealized holding gains and losses are reported in profit or loss © Cash dividend shall be recognized as dividend income d. Share in profit ofthe investee increases carrying of the investment Which of the following is true about fair value model in accounting for investment in associate of a small ‘and medium entity? ‘Investment should be carried at the balance sheet daté at far valué less cost to sell 'b. Impairment loss shall be recognized If recoverable value is lower than carrying amount Transaction cost should be expenised outright at initial recognition 4. Dividend received is considered a deduction from investment account The following statements are based on PAS 28 (Investment in Associates); ‘Statement 1: An investment in an associate shall be accounted for using the equity method (benchmark) ‘or cost method (alternative). ‘Statement It: An investor shall discontinue the use of equity method from the dete when it ceases to have Significant influence over an associate and shall account for the investment in accordance with PAS 39. Statement III: On the loss of significant influence, the investor shali measure at historical cost’ any investment the investor retains in the former associate a. Only statement Iis false b. Only statement 11 is true & Only statement tis true d.. Allofthe statements are false Which ofthe following statements isa proper accounting treatment and measurement of investments? a. Investments at fair value shall be carle at fair valueless cost to sell 'b. Ievestment in associate shalt be carnia wsing the equity method ‘c._DWvidends paid reduce the carrying amount of investment at fair value 4. Share in profit of investee increases the investment at fir value Which ofthe following iters is an exemple of Investment property? Property that is leased to another entity under a finance lease 3 propert tat I elngconsructed or developed on behalf of thie partes c.__ Property that Is being constructed or developed for future use as investment property @. Property held for short-term sale in the ordinary course of business ; tment property that is to be carried at fair value, the TF the oviner-occupied property is transferred to inves ‘excess of carrying amount ofthe property over ts far value shall be 2. Inlvded mE OFS, ome ided in other compre incom roe a eet tie cprngDabNe of rane earings b ra d. Included in equity. When 2 balance is carried in an revaluation surplus’ account in relation to an asset that has been derecognized, itis acceptable under PAS 160: ‘a. transfer the balance to'share capital’ account the balance to retained earnings 4 oe he balance in proft or oss ofthe period in which the asset was derecognized pa 3 for future asset revaluations o. « ‘6. transfer the balance to a provision account ,22. A lessee incurred costs to construct office space in a leased warehouse, The estimated useful ite office is ten years. The remaining term of the renewable lease is fifteen years. Thve cos! should be. 8. Capitalized as leasehold improvements and depreciated over filteen years . Capitalized as leasehold improvements and depreciated over ten years ©. Capitalized as leasehold improvements and expensed in the year in whict the lease expres d.Expensed as incurred 23. Depreciation is computed on the original cost without deducting estimated savage value wide Wis 8. Qutput method only ‘c. Both output and declining balance methits b. Declining balance method only Neither output nor declining balance method 24. Which ofthe folowing is NOTLa qualifying asset under PAS 23 (Borrowing Costs)? ‘Building that wil take tree years to construct . Inventories such as wine and cigars ‘© Machinery that is purchased under a three-year installment period 4. Manufacturing plant and power generation faciities 25. Intangible assets with indefinite useful lives are ‘a. Amortized over 2 period of twenty years. D. Amortized over a period of twenty years and must be tested for impairment at least annually, ©. Not amortized, but must be tested for impairment at least annwally. . Not amortized and need not be tested for impairment. 26, The following statements are based on PAS 38 (Intangible Assets) Statement 1: Expenditure on an intangible asset that was initially recognized as an expense shall be recognized as part of the cost of an intangible asset at a later date ‘Statement If: No intangible asset arising from research and development phase of an internal project shalt bbe recognized in al cases ‘Statement III: Internally generated brands, Mastheads, publishing tities, customer lists and items sitrilar in substance shall be recognized as intangible assets. ‘a. Allof the statements are tome False 'b. Only statement I's true Only statement If is false d. Only statement HIF is false 227. Which of the following is Incorrect about bonds sold at a discount? ‘The carrying amount of the bond increases each year '. The discount on bonds payable account decreases each year At maturity, the face value and carrying amount of the bonds will be equal d. The balance of the bonds payable’ account increases each yeor 28. How would the carrying value of a bond payable be affected by amortization of each of the following? DISCOUNT PREMIUM No effect No effect Increase No effect Increase Decrease d. Decrease nerease 29. Under the effective Interest method of bond discount or premium amortization, the periodic interest expense is equal to ‘a. The stated rate of Interest multiplied by the face value of bonds b. The effective rate of interest multiplied by the face vaive of the bonds The stated rate multiplied by the beginning of the period carrying amount of the bonds J. The effective rate multiplied by the beginning of the period carrying amount of the bonds 0. Bonds witha par value of P 5.0 milion carrying a stated interest rate of 12% payable semiannually on March 1 and’ September 1 were issued on July 1. The total proceeds from the issue amounted to P '5,200,000. The best explanation for the excess amount received over the par is {,_The bonds were sold at a premium. 'b. The bonds were sold ata higher effective interest rate c_The bonds were issued at par value plus accrued interest 1d. No explanation is possible without knowing the maturity date of the bond issue 31, Under PAS 17, @ lease is accounted for as a finance lease it lesaratessee 2 The lease transfers ownership of the property from the lessee to the lessor at the end of the lease term below 'b. The lease provides for a purchase option that allows the lessee to purchase the leased property at keast ‘which is equal to the fair value of the leased asset ‘The fease term Is more than 75% of the useful life ofthe leased property d. The present value of minimum lease payments is at least 90% of fair value of the leased asset at the inception of the lease 32, Which of the following situations may lead to a lease being classified as finance lease? 8. If the lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the lessee. b, The lessee has the ability to continue the lease for a secondary period at a rent that is ‘substantially lower the market rentA Chega) 33. 34, 35, 36, 37, 39. 41. 42, 43. fazed nature such that only the lessee can use them without The leased assets are of a 5 major modifications being made 4, Allof these Lessee Company leased @ machine with an estimated useful fe of 20 years from Lessor Company. The 10-yeer noncancellable lease provides that the tile to the machine transfers to Lessee Company at the fend of the lease term. Lessee Company accounted for the lease as finance lease and recorded an asset an € liability in its records. The leased asset should be depreciated by Lessee Company over a. 10 years b. 20 years 15 years d. 50 years Deductible Temporary difference arises when & revenue item is reported for tax purposes in a period After itis reported Before it 5 reported ‘in financial income infinanciaLincome a Yes Yes b. Yes No c No ves d No No {All of the following situations wil result to a future taxable amount, except 18. Carrying amount of the asset > tax base of the asset 'b. Tax base of the asset> carrying amount of the asset c Carrying amount of the labulty < tax base of the labilty 4, Financial income > taxable incorne For a sales-type lease, ‘2. the sales price includes the present vaiue of the unguaranteed residual value. . the present valve of the guaranteed residual value (s deducted to determine the cost of goods sold, ‘c._the gross profit will be the same whether the residual value Is guaranteed or unguaranteed. 4. none of these. Upon retirement of the bonds, any resulting gain cn retirement of the bonds should be reported in income statement when a. Retirement price is less than the carrying valve of the bonds 'b. Retirement price is greater than the carrying value of the bonds c. Retirement price is equal to the carrving amount of the bonds 4d. None of the above 3. It's the excess ofthe flr value of plan assets over the present value of the defined benefit obligation. 2. Surplus b. Accrued benefit cost Excess of fair value over obligation 4. Unrecognized past service cost Which of the following is a component of amaunt to be recognized in profit or loss under a defined beneftt plan? ere, Statement I: Current service cost | Statement 11: The difference between the actual return on plan asset and interest income on plant asset ‘Statement III: Any settlement loss or settlement gain, ‘Statement IV: Past Service cost a. Land IV Mand mtr 1, Mand Vv d. 1,1 Mandiv ‘options and warrants are diutive if ‘2, The option price is lower than the average market price . The option price is higher than the average market price . The option price is equal to the average market price 4.» The option shares represent 50% af the outstanding shares ‘Assume there are two dilutive convertible securities. The one that should be used fist to recalculate ‘earnings per share is the security with the ‘a. Greater earnings adjustment b. Smaller earnings adjustment c. Greater earnings adjustment per share adjustment, @. Smaller earnings adjustment per share adjustment For cosh:settied. share-based payment transactions, an enty shall measure the goods or services received and the liability incurred et ¥ 2. Fair value ofthe goods and services received Fair value ofthe lability Either the falr value ofthe goods or services received or the fair value of the lability 4G. Neither the fair value of the goods or services received, nor the fair value ofthe laity What is the corporation's LEGAL CAPITAL? 3. Its the portion of the palc-in capital arising from the issuance of capital stock that CANNOT be returned to the stockholders in any form during the ifetime ofthe corporation4 c D A pe In case of par value stock, legal capital is the aggregate par value of all shares issued and subscribed, In case of no-par value stock, legal capital is the aggregate stated valve of shares issued and Subscribed plus any excess over stated value. All of the above statements would describe the concept of legal capital XX This represents that portion that is restricted and hence cannot be declared as dividends. 44. Ibis defined as the issuance by an entity ofits own ordinary shares to its ordinary sharenolders without Consideration and under conditions indicating that such action is prompted mainly by a desire to increase ‘the number of shares outstanding for the purpose of effecting a reduction in their unit market price a. Share split bi. Rights issue Share option d. Share appreciation right 45. When should compensation expense be recorded as a result of share options granted by the enterprise to its employees? 2. During the year of grant . During the year that the options ultimately vest During the years when services are required to be rendered by employees (vesting period) 4. During the year when the option first becomes exercisable. 46. In computing weighted average number of shares outstanding, when @ bonus issue or share split occurs the additional shares are Weighted by the number of days outstanding ‘Weighted by the number of months outstanding ‘Considered outstanding at the beginning of the year Considered outstanding at the beginning of the earliest year or at the date of the issuance of the related shares, whichever comes later. 47. The retained earnings balance is nil after @ company undergoes 2. Corporate reorganization . Modification of term Equity swap d. Asset swap ‘48. Which of the following cash flows does not appear in cash flow statement prepared using indirect method? 2. Amortization expense = . Cash received from customers &_Loss.on sale of lana . Decrease in accrued expenses 49. In a cash flow statement, which of the following would activities using the direct method? 2. Cash received form insurance b. Gain on sale of equipment c. Gain on early retirement of bonds d. Change from straight-line to accelerated depreciation 50. Would the flowing be added back to net income when reporting cash flows from operating actives by the indirect method? , Excess of treasury stock acquisition Cost over sales proceeds Bond discount amortization of the issuer 2. Yes Yee b. No No No Yes Yes No LF INTING Pr What is a basic purpose of the Conceptual Framework of Financial Reporting? a 2 develop a single set of high quaty international Financial Reporting Standards (IFRS) >. To. promulgate rules and regulations affecting the practice of the Phiippine Accountancy Profession Teoecbress accounting issues. with divergent and unacceptable treatments. by {implementation gudasce on existing Philppine Financial Reporting Standards (PFRS) 6. To assist preparers of financial statements in applying accounting standards and in eating with issues that have yet to form the subject of acco ca 1unting standards in the Conceptual Framework for Financial Reporting, what provides “the why" tice Brovides “the why” (i.e., the purpose) of Objective of financial reporting 'b. Elements of financial statements © Qualitative characteristics of accounting information % Recognition, measurement, and disdosure concepts such as. assumtion: ples, ar eh rations, principles, and 3+ Under the Conceptual Framework of Financial Reporting, users of financial \nformation may be classified 2 Maio-users (existing investors, creditors) and incidental users (potential Investors, creditors) be Imerat se ca emblovees, customers) and external users (investors, creditors) leavy users (management) and sight users (public, government 4. Primary users (existing ar 2 ; 6 potential investors and creditors) and other usersoe - ° o S be 4 vat iS a basic underlying assumption under the PFRS Conceptual Framework? vn tne tonal statements are cote, heave ook oe ore The thane statements have pedtable value and confirmatory value € The fan statements oe comable, undertandabe, verialeond timely The tian staterents are normaly prepered on the asl thatthe entty wll continue in pert forte foreseeable ature ic of te folowing has the highest uthex ve support? 4. Conceptual Framework for Financia! ‘c.International Accounting Standards Reporting , International Financial Reporting d. "Interpretations of the IFRIC Standards Munich organization is NOT directty represented in the 15-member Financial Reporting Standards Council (FRSC)? ‘2. Commission on Audit (CoA) © Securities and Exchange Commission (SEC) . Bureau of Internal Revenue (BIR) . Professional Regulations Commission (PRC) Which accounting process is the recognition or non-recognition of business activities as. accountable events? @. Identifying Recording b. Measuring 4. Communicating 8. A voucher system Is usually used for transactions involving Cash receipts Cash receipts and disbursements ©. Cash disbursements d. Purchases on account ° G Su2K the sum ofthe debit column of a firm's unadjusted tral Dalances, and C equals the sum ofthe ‘credit column, Which of the following statements is CORRECT? GIF D equals C, there is no chance that tne company committed a recording error . IF D does not equal , itis possible that no errors were committed SB typicalty does not equal C because the adjusting entries have not yet been recorded ._ does not equal the sum of all account increases during the period 0. Which one ofthe folowing items LEAST. resembles typical adjusting entry? Debit an asset and credit revenue © Debit revenue and credit hbinty b. Debit an expense and credit lability d. Debit an asset and credit lability 11. Which of the following adjusting entries CANNOT be subject to reversing entries? @. Accrual of income Deferral of income under the income method b, Accrual of expense | 4. Deferral of expense under the asset method 12 Recording the adjusting entry Yor depreciation has the some effect as recording the ‘adjusting entry for 8A repaid expense © — Anaccrued revenue b. An unearned reveniié d. An accrued expense FINANCIAL STATEMENTS & REVENUE/EXPENSE RECOGNITION ‘The major financial statements include all ofthe following, EXCEPT a. Statement of nancial position € Statement of comprehensive income . Statement of changes in equity J. Statement of changes in financial position 2+ Assets and lables; and income and expenses inthe Mnancll statements may be offser 2. there is notex effect © required or permitted by a particular standard b. they are financial assets and liabilities they are in respect of borrowing and lending activities 3. Which one of the folowing is an essential characteristic of an avsea 2. The inflow of future economic benefits s controled by the enterprise ©. Te must be exclusively owned and must be exchangeabie © _ Itis result of either past or precictable transactions 4, The cost ofthe asset can be measured accurately 4 Satement I; Provsiots shouldbe recognized inthe statement of financial postion (srr) Statement It: Changes in revaluation surplus during a year sould “be Teported in Statement of Comprehensive Income. 2 True, true © False, true b. Tue, false 4. False, false 5. The single-step income statement emphasizes The gross profit figure ‘b. Total revenues and total expenses ©. _ The Various components of income from continuing operations G__hecoumting changes mere than these are emphasized inthe multgle-step inceme SI expense accounts In the income statement are NOT presented according to functions, they may be presented using ‘Functional presentation © Report form b, Natural presentation 4. Account form 7. Under PAS 1, which ofthe following items is NOT. included io the computation of prot? a. Finance cost b. Post-tax gain or loss on discontinued operations Unrealized gain in change in value of biological assets . Unrealized gain in change in Value of avallable-for-sale securities 8. Which is NOT included in the computation of otter comprehensive Income? 8. Unrealized gain on avallable-for-sale financial asset . Unrealized changes in the balance of revaluation surplus Loss fromtransiating the financial statements of a foreign operation . Unrealized loss from derivative contracts designated as fair value hedgePAS 1 requires the allocation of prot for the period ‘between or among: 1 Profit attributable to owners of the parent Hi Profit attributable to subsidiaries of the parent . WL. Profit attributable to non-controling interests, Ba. tend aie oT > Tang un a. I Mand it 10. Profit + Other Comprehensive income 8 8. No meaningful amount ©. Total net performance . Total comprehensive income 4, Total net equity “1 TRE Pott or loss ofa period andthe otner ais and ists recognized dvecty in equ are presented in ° 2. Statement of financial position Statement of cash flows . Income statement Statement of changes in equity 12 Revenue may, under proper circumstances, be recognized atthe tolling moments tine, EXCEPT: o 2. After the earning process has been completed and an exchange has taken place b. Upon the receipt of cash from the customer AS certain stages of completion of production are attained . When manufactured goods are acquired for resale 15: Which of the folowing is NOT an allowed recognition of revenue under PAS 18? c &_ Revenue from royalties is recognized under accrval basis of accounting D. Dividend revenue is recognized when the right to receive payment is established & _ Revenue from services rendered is recognized under the installment method of accounting G.__Interest revenue is recognized on a time proportionate basis using effective interest method 14 Wen condition does NOT apply to the recognition of revenue for transactions involving the rendering of services? c & [Re amount of revenue and the costs incurred and costs to complete can be measured reliably b._ Its probable that payment for the services shall be received by the entity 2. Sales commissions expense on the basis of relationship with cates . Administrative salaries expense recognized as Incurred © Depreciation expense on the basis of time, 4. Cost oF goods sold expense on a subjective or arbitrary basis, Product processing time Nom G 1. Under PAS 1, which information is normally NOT included in © A statement of compliance with GAAP A statement of measurement basis for the Financia statements and account S _Subporting information for ine items presented and aggregated 4. A statement of cash flows 2. In the notes to the FS, the section on ‘summary of si c 2 The composition of property, plant and equipment rr RI the "notes to financial statements’? ting policies applied tment te composition of propery, pant and equipment nor the deprecation method used > Adlustments of financial statements are requre for those events ote ramen sheet date which ° @. Are unusual and material . Occurred prior to isuance ofthe financial statements G.Penate effector user's evaluation ofthe information presented inthe nano! statements Provide saatonal information for determing amounts relating to condone existing on the BS date‘Ana Company changes its method of valuation of inventories from weighted-average method to first in, first-out (FIFO) method. Ana Comoany should account for this change as c ‘2. A change in estimate and account for t prospectively. 'b. A change in accounting policy and account for it prospectively change in accounting policy and account for It retrospectively, d. Account for it as a correction of an error and account for it retrospectively | 5. When it i& difficult to distinguish between a change in estimate and in accounting policy, then an entity should a ‘2, Treat the entire change as a change in estimate with appropriate disclosure . Treat the entire change as a change in accounting policy Reasonably apportion the relative amounts of change in estimate and the change in accounting Policy {tis best to ignore in the year of change; the entity should then wait for the following year to see how the change develops and treat it accordingly 6. A company has included in its consolidated financial statements this year @ subsidiary acquired severe! years ago that was appropriately excluded from consolidation last year, ‘This results in 8 ‘2, An accounting change that should be reported prospectively 'b. An accounting change that should be repcrted by restating the FS of all prior periods presented & Accorrection of an error Neither an accounting change nor a correction of an error 7. An entity shail report for each reportable operating segment 2 measure ofall of the following, EXCEPT D a. Profit or loss b. Total assets ‘ Liabilities if such amount is regularly provided to the chief operating decision maker d. Net assets 8. PFRS 8 (Operating Segments) requires that a company report all to the following, EXCEPT: c major customers liquidity ratios b. Segment assets and liabilities 3. segment profits and loss and related information| 9. Statement 4: Anvinterim financial report may consist of a complete set of financial statements ‘Statement If: An interim financial report may consist of a condensed set of financial statements, Aa a. True, true False, true >. True, false d. False, false 10. If an entity publishes a complete set of financial statements in its interim financial ceport, the form and: Content of those statements should conform to: co 2. PAS 34 (Interim Financial Reporting) © PAS 1 (Presentation of Financial Statements) Db. PAS 27 (Separate Financial Statements) ¢._PERS 10 (Consolidation of Financial Statements) Which of ae is NOT considered cash for finan | reporting purposes? a ‘.Postdated checks and 1OUs © Coin, currency, and available funds . Petty cash funds and change funds 6. Money orders, certified checks & personal cheeks 2. A bank statement provides information about al ofthe following, EXCEPT D ‘@. Check deared during the period ¢. Bank charges for the period b. NSF checks 4d. Errors made by the company 3. A.compensating balance is best reflected by which of the following? > 2, A'savings account maintained at the bank equal to the amount of all outstanding loans 5. An amount of capital stock held in the company's treasury equal to outstanding loan commitments © Abalance held in a time or demand deposit account that is equal to the interest currently due on . oan 4, The portion of any demand deposi, time deposit, or certificate of deposit maintained by an entity which constitute support for existing borrowing arrangements of the entity with a lending institution 4. _Allof the following are characteristics of financial assets classified as loan and receivables,’ EXCEPT o* 2. They have fixed or determinable payments. b. The holder can recover substantially all of its investment (unless there has been credit deterioration), They are not quoted in an active market 4, The holder has demonstrated positive intention and abilty to hold them to matunty 5. ABC Company uses the alowance method in recognizing uncollecible accounts. Ignoring deferred taxes, the entry to record the write-off of a specific uncollectible account A a. Affects nelther net income nor working capital . _ Decreases both net income and accounts receivable c. Affects neither net income nor accounts receivable d. Decreases both net income and working capital 6. Which of the following costs of conversion CANNOT be included inthe cost of inventory? 8 ‘a. Cost of direct labor Factory rent and utilities b. Salaries of sales staff Factory overheads based on normal capacity 7. According to PAS 41 (Agricuture), which of the following criteria must be satisfied before a biological asset recognized in an entity’ financial statements? car ee entity controls the asset 25 result Of past events II, _ {ts probable that economic benefits relating to the asset will flow to the entity IIL, An active market forthe asset exists IV. The asset comes from 2 homogenous biological group 1, 11, and IV only a a. Land Ionly e b. Hand IIT only 1,11, and IV only‘ABC Company owns a number of herds of cattle. Where should the changes in the fair value of & herd of cattle be recognized in the financial statements, according to PAS 41 (Agriculture)? a In profit or loss only etn profit or loss ar other comprehensive income b.__In other comprehensive income only 3. Inthe statement of cash flows only ABC Company had a plantation forest that's likely to be harvested and soid in 30 years. The come should be accounted for in the following way: 6 ‘2. No income should be reported unti first harvest and sale in 30 years 5. Income should be measured annually and reported using a far valve approach 8 and measures biological growth c. The eventual sale proceeds should be estimated and matched to the the 30-year period 4. The plantation forest should be valued every 5 years and the statement of recognized gain and losses SINANCIAL INSTRUMENTS & INVESTMENT IN ASSOCIATES NOTE: PAS 39 shall stil be followed uness itis Spectically indicated that PFRS 9 shall be used. 1 Which of he foloning i or of nena assets defined in PAS 397 Sa Lee Held-for-sale financial assets hat recognizes profit and loss account over the increase in value should be shown in c @. Loans and receivables c . _Availabie-for-sale financial assets 4. Financial assets et fr value trough profit or oss 2. Which one of the following is NOT classified as 2 financial instrument under PAS 32. (Financia Instruments)? c ‘a. Convertible bond & Warranty provision 'b. Foreign currency contract 4. Loan receivable we 3. Which of the following categories of financial assets is measured at fair value on the balance sheet date: A ‘2. Avallable-for-sale financial assets Loans and receivables b. Held-to-maturity investments Investments in unquoted equity instruments 4, Allof these are characteristics of financial assets classified as "held-to-maturity investments,” EXCEPT 8 3. They have fixed or determinable payments and a fixed maturity, b. The holder can recover substantially all of its investment (unless there has been credit : deterioration): They are quoted in an active market. 6. The holder has demonstrated postive intention and ability to hold them to matunty. 5. Debt investments NOT held for collection are reported at: a a. Fair value Net realizable value | b. Amortized cost d. Loner of amortized cost or fair value 6. Oebt investments that meet the business model and contractual cash flow tests under PFRS 9 are | ‘generally reported at Ba. Fair-vaue Net realizable value j oe a 5 eS apie ane eee re ier vain co 7 UME Ps coc mcuang tansachon costs recy autabe to fs purchase, ongiation or suance ! D._ttventnated vue determined using discounted cash Now eemaues, opten pring modes, et | ts quotes price ifan ative market ext for the franca nstrument 4. The present vl ofthe contractual cash Roms less mparment The scanning method applied to nvestments in aseocats, Kram 25 the equty method, aso known asthe ov 92 nity metros of cansacaten Muti ine consoldation metned D,_Propetary metod of consoldation 4. _ Onerineconsokdaton methos 9. AS 28 does NOT reure the equty methad tobe applied by a ossacate acquired and Ned wth a view tots pou wn cern perod. Per BERS 5, what the tne ped win whic the associate must | be disposed of? 8 a. Six months < Twoyears b. Twelve months 4. Inthe near future 10. 1f the investor ceases to,have significant influence over an associate, how should the related investment be treateg? | 8 2. It should still be treated using equity method | b. It should be treated in accordance with PAS 39 ‘c. The iawestment should be frozen at the date at which the investor ceases to have significant influence | a. Temenos be rtd ct INVESTMENT PROPERTY, PPE & INTANGIBLE ASSETS 51. A gain arising from a change in the fair value of an investment property for which an entity hi Use the fair value model is recognized in Aaa A ‘8. Net profit or loss for the year ©. Valuation reserve in the stockholders’ equity 'b. General reserve in the shareholders’ equity d. None of the above 52. he ng ewig teres est esrb oer ped oper andr PAS 40 (Investment 8: Property held or asem the proton ors ooods and sees ©: roperty held for aanstatwe purposes ea Aan Banc >. BandD a. Cando 53. When an onner-oceupied property is transferred to is tran lavesment property a far vale, decrease in carrying amount ofthe property 0s fava tthe date of Warsies Sees nineD 2. Is recognized profit and JOSS oF Charged ast the PEVMVBHON SUT BO THe eATEAE OF creait balance BL Is recognized in prof an 'oss at a) nes . Is absorbed by retained eamings, 4. Is cared directly to equity 54. Unser PAS 23, whch statement about captalizaton of Rowowing costs the COA OF A gUBHNG AES 2. If funds come from general Dorowings, the amount cApMTalised IS HASE On the WAGHIAL AVEEAE ‘cost of borrowing 1. Capitalization stways continues anti thre asset Broght Meo se Capitalization always commences as SOON 3S EXPENETURE OF ENE BSE IS NCU 4, Capitatzation always commences as $90.7 ag interest On retevant HOTOWINGS HANG 555. What is the best evidence an asset's ir vaive JESS CASTS A Se OF ASANSE (Le., Net SAW PCE)? a, The carrying valve of the asset The best estimate of knomengendie artes 1b. The fair value in an active market 4, The setting price ina Dancing Sate agreement 1p 3& PAS36 (Impairment of assets) should be apie’ in accountng forthe impwwrment of which type of asset? > of ‘8. Non-current assets held for sale 1 _Assets arising from construction contracts 1. Non-current assets measured at cost , Investment properties measured t fOr value 57. Which of the folowing examples és uniikely to meet the definition of an intangible asset? 2. Marketing related, such as trademarks and internet domain names b. Customer related, such as customner lists and contracts c. Technology based, such as computer software and databases: d. Pure research based, such as geneval expenditure on research 58. In relation to the amortization of intangible assets, the basic rule under PAS 38 is that untess demonstrated otherwise: The residual value dees nct enter into the determination of the amortization charge a 1. The residual need not be reviewed at the end of each annual reporting period €_Allintangible assets have a residual value at feast equal to the amount of maintenance costs incurred 4d. The residual value is presumed to be zero ABILITIES Contingent liability will or will not be recognized as. a provision (Wabilty) depending o0 ‘The degree of uncertainty G Whether they are probable and estimabie b. The outcome of a future event 4d. The present condition suggesting & lhanvity Contingent liabity will oF will not become actual Hiabiities depending on ‘a, The outcome of a future event The present condition suggesting a tiabiity b. The degree of uncertainty 4. Whether they are probable and estimabve 3. Which of the following is the most likely canaicate for a contingent Habilty that can be accrued? 8. Potential lability on a product stil in the planning stage (no items have been sol!) b. Potential lability for a lawsuit in which the firm is @ defendant . Property tax payable d. Warranty liability Which of the following is NOT @ relevant consideration when evaluating whether to derecognize a financial 4 ability? ‘2, Whether the obligation has expired . Whether the obligation has been canceled. Whether the obligation has been discharged. {. Whether substantially al the risks and rewards of the obligation have been transferred 55, Which of the following best describes current practice in accounting for leases under PAS 17? ‘Nl fong-term leases are capitalized a. Leases are not capitalizes ‘ b. All leases are capitalized J Leases similar to installment purchases ore capitalized fare required to account for lease receipts fom operating leases as 6. Under PAS 27, tenes i income, on a straight-line basis over the lease term come, on ception date of the lease oar d. revenue, on a reducing balance basis over the lease b. revenue, at the end of the lease term term temporary difference? 7 Hon eae sy Gan tity 5 Deere 11 asset dd. Current tax asset ferred the 8, The deferred tax expense Is PE a. ray auset minus the increase In balance of deferred tax Uobity 2 nae Oita cere tax lability minus the Increase in balance of deferred tax asset Increase in balance 0 the increase in balance of deferred tax habsity ince of deferred tax asset plus the c. Increase in balance of inus the increase in balance of deferred tax Kabvity ‘of deferred tax asset ri d. Decrease In balance 0sed to determine income tox expense? & Asset and iabity proach c. Net of tox approach ®.-ATwitn and without” approech 4. Pecodie expense approach 10. Under current GAAP, which approach is used to bfurcate ‘compound financial ability instruments? 2. Asset and fabilty approach Net of tax approach b. A*with and without” approach 1. Periodic expense approach LL. An employer's for postretirement health benefits that are expected to be provided to an ‘employee must be fully accrued by the date the 2. Employee is fully eigibie for benefits c. Benefits are utiized D. Employee retires, d. Benefits are paid 12. Under revised PAS 19, “service cost” comprises ° 3. Current service cost only D. Current service cost and past service cost © Current service cost and any gain or loss on settlement 5: Current service cost, past service cost and any gain or oss on settlement 5: In relation to measuring the pension expense under a defined benefit plan, which discount rate is used? . &. Market yields at the balance sheet deta on high-quality corporate bonds 5. Risk that future experiences may differ from actuarial assumptions © Specific risk associated with the entity's business 4. Investment or actuarial risk HAR: rATEMENI H Under PAS 32 and PIC rules, any transaction costs attributed to the issuance of new shares shall be o 2. Deducted from equity b. Expensed immediately Charged to retained earnings 9. Deducted from equity, net of any related income tax benefit 2. Under PIC rules, any costs of public offering of shares (i.e., stock market listing of shares) shall be e ‘a. Deducted from equity b. _Expensed immediately Charged to retained earnings 4. Deducted from equity, net of any related income tax benefit 3. A restriction of retained earnings is most likely to be required by the A ‘Purchase of treasury stock ’ b. Amortization of past service cost © Payment of fast maturing series of a serial bond issue . Exhaustion of potential benefits of the investment credit ‘4. Which type of shares whose dividends shall NOT be charged to retained earnings? c Ordinary shares Redeemable preference shares b. Cumulative preference shares 4. Convertible preference shares 5. Under TFRIC 17, an entity shall measure 2 lability to distribute noncash asset as dividend to the owners at a 2. Fair valve of the asset to be distributed . Carrying amount of the asset to be distributed ©. _Netther fair value or carrying amount of the asset to be distributed 4. Fair value or carrying amount of the asset to be distributed, at the option of the entity 6. An entity shall measure a noncurrent asset ciassified as held for distribution to owners at od a. Carrying amount b. Fair value less cost to distribute © Carrying amount or fair valve less cost to distribute, whichever is lower 4. Carrying amount or fair value less cost to distribute, whichever is higher ‘The entity has Issued a range of share options to employees. What type of share-based payment does this represent? > @. Cash settled share-based payment _Lablity settied share-based payment b. Asset settled share-based payment . Equity settied share-based payment 8. How Is compensation expense measured for equity settled share-based payments? 8 2. Use the normal hourly rate of the employees b. Measure the fair value of share options using an option pricing model Measure the difference between the market price and the fair value of the share options 4 Measure the intrinsic value as the difference between market price and exercise price at measurement date 3. How Is it possibie for a firm to be profitable and still go bankrupt? 8 ‘2. Earnings have increased more rapidiy than sales, D. The firm has positive net income but has failed to generate cash from operations Net income has been adjusted for inflation, @. Sales have not improved even though credit policies have been eased. nn13 c 4 c 15. a 16, 8 47) oe 18, A 19. . fe folowing ems shoud be resented ur cash ows fr investing at 1 “erpoyen cone Roden of dentures fopest Cont captaze nthe per on 4. be 1b, Property reval JW the cash flow statement, alternatively, Interest received and dividend received nay be classified as cash flows from 8. Operating activities Financing activives Investing activities, 0. Revenue activities {In computing the basic EPS, the nunrerator used ¥s the 9. Income before interests and taxes 'b. Income available to ordinary shares. Income available to ordinary and preference shares 4, Income after interests and taxes but before preference share dividends In computing the basic EPS, the denominator used is the 4. Ordinary shares outstanding at the end of the year 1b, Ordinary shares outstanding at the beginning of the year © Weighted average ordinary shares outstanding during the year |. Weighted average ordinary and preference shares outstanding during the year To compute basic EPS, the amount of preferred dividends on noncumulative preferred stack should be: 8. Disregardea b. Added to net income, only when declared © Deducted trom net incorne, only when declared 1, Deducted trom net income, whether declared or not 4m computing diluted EPS, dividends on convertible cumulative preferred stack should be a. Ignored. b, Added to net income, net of related tax © Deducted from net income only when dectared 4. Deducted from net income whether declared or not EARNINGS PER SHARE disclosures are strictly required for: 8. Small and medium entities (SMEs) b. Publicly accountable entities © Both SMEs and publicly accountable entities 4. Neither SMES nor publicly accountable entities Under certain conditions, it is permitted for SMES to replace both Statement of Comprehensive Income ‘and Statement of Changes in Equity with a single Statement of Income Statement of Retained Earnings Statement of Transaction with Owners Statement of Income and Retained Earnings Borrowing costs incurred by SMES shail be: 2, Expensed in the period incurred b. _Expensed (benchmark); capitalized (alternative) Capitalized (benchmark); expensed (alternative) 4. Capitalized as part of the cost of the qualifying assets ‘Which of the following statements s TRUE regarding intangible assets for SMES? ‘Statement I: Ail intangible assets including goodwill are considered to have finite life. Statement 11: The useul life ofan intangible asset is presumed tobe 10 years if a relable estimate cannot be made. Statement IT: All research and development costs are expensed immediately under al circumstances, & Tonly b. Wonly © Land It 4.1, thand at * Good things come to those who Believe, Better things come to those who are Patient and the Best things come to those who Don't give up! " GOOD LUCK AND GOD BLESS FUTURE CERTIFIED PUBLIC ACCOUNTANTS!!!