PROBLEM 2: MULTIPLE CHOICE - THEORY

1. The asset contributions of partners to a partnership are initially measured at

a. fair value.
b. original cost to the partner.
c. tax basis.
d. any of these

2. Mr. I and Mr. M formed a partnership business. Mr. I contributed equipment with fair
value of P2M. However, the partners agreed that Mr. I's capital account should be credited
for P2.2M. Which of the following statements is correct?
a. The P.2M excess credit is treated as a bonus to Mr. M.
b. Mr. M is probably bringing in expertise or special skill to the business.
C Mr. M's capital account will be debited for P.2M.
d. This is unacceptable. Mr. I's capital credit should be P2M.

3. Under the bonus method, any increase or decrease in the capital credit of a partner is
a. deducted from or added to the capital credits of the other partners.
b. recognized as goodwill,
c. recognized as expense.
d. deferred and amortized to profit or loss.

4. Under the bonus method, the asset contributed by a partner receiving a bonus is
a. debited at an amount greater than the asset's fair value.
b. debited at an amount less than the asset's fair value.
c. debited at an amount equal to the asset’s fair value
d. either a or b

5. Mr. X and Mr. Y agreed to form partnership. The fair values of the partners' net
contributions vary; however, the partners agreed to have equal capital credits. Cash
settlement shall be made between them for the difference. Which of the following
statements is correct?
a. The asset contributions of the partners shall be debited for equal amounts.
b. The cash settlement between the partners will either increase or decrease the total
partnership capital.
c. The cash settlement between the partners will not be recorded in the partnership books.
d. Mr.X shall pay Mr. Y to have their capital balances equal.
6. The acquisition method of PFRS 3 does not apply to which of the following?
a. Entity A obtains control of Entity B without transferring any consideration,
b. Entity A obtains control of Entity B through series of acquisitions of voting interests.
C. Entity A exchanges some of its shares for all the shares of Entity B.
d. Entity A acquires a building, three trucks, and one stapler from Entity B. The assets acquired do
not constitute a business.

7. If the initial accounting for a business combination 5 incomplete by the end of the reporting
period in which the combination has occurred, the acquirer
a. shall report in its financial statements provisional amount for the items for which the accounting is
incomplete.
b. shall be exempted from preparing consolidated financial statements until the accounting for the
business combination is completed.
C. shall prepare financial statements as if the business combination did not take place.
d. and the acquiree shall be divorced. The acquiree is entitled to one-half of the acquirer's net assets
and alimony until their children reach the age of eighteen.

8. Provisional amounts recognized in a business combination are adjusted

a. prospectively for information obtained during the measurement period.
b. retrospectively for information obtained during the measurement period.
c. not adjusted for any information obtained during the measurement period.
d. PFRS 3 (revised) outlawed the use of provisional amounts.

9. The consideration transferred in a business combination will most likely include which of the
following? a. The transaction price in an arrangement that is primarily for the benefit of the acquirer
or the combined entity.
b. A contingent liability with an acquisition-date fair value but imposes an improbable outflow that
the acquirer assumes in a business combination.
c The "off-market" value of a reacquired right.
d. The acquisition-date fair value of a contingent consideration that is dependent upon the
occurrence of a possible, but not probable, future event.

10. Entity A obtains control over Entity B in a business combination. As a result, Entity A acquires a
right that it has previously granted to Entity B. Which of the following is correct?
a. Entity A subsumes to goodwill the intangible asset for the reacquired right
b. Entity A recognizes an intangible asset for the reacquired right at the "off-market" value of the
reacquired right.
C. Entity A recognizes a settlement gain or loss depending on whether the terms of the contract is
favorable or unfavorable, determined based on Entity B's perspective when compared with market
terms.
d. Entity A recognizes a settlement gain or loss measured the lower of the settlement amount in the
contract and the "off-market" value of the reacquired right.