Earnings per share disclosures are required only for

companies with complex capital structures.

companies that change their capital structures during the reporting period.

public companies.

private companies.

Noncurrent asset or disposal group is classified as “held for sale” when the asset is available for
immediate sale and the sale is highly probable. For the sale to be highly probable, (choose the
incorrect one)

Management must be committed to a plan to sell the asset.

An active program to locate a buyer and complete the plan must have been initiated.

The asset must be actively marketed for sale at a reasonable price in relation to its carrying value.

The sale is expected to qualify for recognition as a completed sale within one year from the date of
classification of the asset as “held for sale”.

An item of property, plant and equipment that is retired from active use and held for disposal is
carried at its:

carrying amount

net realizable value

carrying amount or net realizable value, whichever is lower

carrying amount or net realizable value, whichever is higher

To which type of asset do the measurement provisions of PFRS 5 only?

Financial assets

Non-current assets

Investment property accounted for at fair value

Deferred tax assets

An entity has an asset for that was classified as held for sale. However, the criteria for it to remain as
held for sale no longer apply. The entity shall

Leave the noncurrent asset in the financial statements as its current carrying amount.

Remeasure the noncurrent asset at fair value.

Measure the noncurrent asset at the lower of its carrying amount before the asset was classified as held
for sale and its recoverable amount at the date of the decision not to sell.
Recognize the noncurrent asset at its carrying amount prior to its classification as held for sale adjusted
for subsequent depreciation, amortization or revaluation.

A component of an entity is classified as discontinued operation I. When the entity has actually
disposed of the operation II. When the operation meets the criteria to be classified as “held for sale”.

Either I or II

Neither I or II

I only

II only

An entity classified a noncurrent asset accounted for under the cost model as held for sale on
December 31, 2019. Because no offers were received at an acceptable price, the entity decided on July
1, 2020 not to sell the asset but to continue to use it. In accordance with PFRS 5, the asset shall be
measured on July 1, 2020 at:

The lower of its carrying amount and its recoverable amount

The higher of its carrying amount and its recoverable amount

The higher of its carrying amount on the basis that is had never been classified as held for sale and its
recoverable amount

The lower of its carrying amount on the basis that it had never been classified as held for sale and its
recoverable amount

How should the assets and liabilities of a disposal group classified as held for sale be shown in the
statement of financial position?

The assets and liabilities shall be offset and presented as a single amount.

The assets of the disposal group shall be shown separately from other assets in the statement of
financial position, and the liabilities of the disposal group shall be shown separately from other liabilities
in the statement of financial position.

The assets and liabilities shall be presented as a single amount and as a deduction from equity.

There should be no separate disclosure of assets and liabilities that form part of a disposal group.

These are defined as the specific principles, methods, practices, rules, bases and conventions adopted
by an entity in preparing and presenting financial statements.

Accounting standards

Accounting postulates

Accounting policies

Accounting practices

The following are required to be disclosed, except;

A description of the nature of the entity’s operations and it’s principal activities.

Amount of significant contingent liabilities and contingent assets and their sources.

Measurement basis in preparing the financial statements

The name of the parent and the ultimate parent of the group.

Which of the following information is not specifically a required disclosure of PAS1?

Name of the reporting entity or other means of identification, and any change in that information from
the previous year.

Level of rounding used in presenting the financial statements

Whether the financial statements cover the individual entity or a group of entities

Names of major/significant shareholders of the entity

The presentation currency

If an entity does not prepare interim financial reports, then

The year-end financial statements are deemed not to comply with PFRS

The year-end financial statements’ compliance with PFRS is not affected

The year-end financial statements will not be acceptable under local legislation

Interim financial reports should be included in the year-end financial statements

Adjusting events after reporting period include all of the following, except

The settlement of a court case after the issuance of the financial statements that confirms that the
entity has a present obligation.

The bankruptcy of a customer which occurs after the reporting period and before issuance of
statements resulting to a loss on a trade receivable account.

The discovery of fraud or errors after reporting period and before issuance of statements that show that
the financial statements were incorrect.

Determination after the reporting period and before the issuance of the statements of the cost of assets
purchased before the end of reporting period.

Non-adjusting events after reporting period include all of the following, except

A major business combination after the reporting period.

Expropriation of major assets by government after reporting period.

Destruction of a major production plant by fire on or before the end of reporting period.

Announcing a plan to discontinue an operation after reporting period.

At the balance sheet date, December 31, 2019, ABC Inc. carried a receivable from XYZ, a major
customer, at P10 million. The “authorization date” of the financial statements is on February 16, 2020.
XYZ declared bankruptcy on February 14,2020. ABC Inc. will

Disclose the fact that XYZ has declared bankruptcy in footnotes.

Make a provision for this post-balance sheet event in its FS (as opposed to disclosure in footnotes).

Ignore the event and wait for the outcome of bankruptcy because the events took place after the year-
end.

Reverse the sale pertaining to this receivable in the comparatives for the prior period and treat this as
an “error” under PAS 8.

A related party transaction is a transfer of resources, services or obligations between

2 points

Related parties, regardless of whether a price is charged.

Related parties only when a price is charged.

unrelated parties, regardless of whether a price is charged.

unrelated parties only when a price is charged.

PAS 24 requires disclosure of compensation of key management personnel. Which of the following
would not be considered “compensation” for this purpose?

2 points

Short-term benefits

Share-based payments

Termination benefits

Reimbursement of out-of-pocket expenses

The minimum disclosures prescribed under PAS 24 are to be made separately for certaincategories of
related parties. Which of the following is not among the list of categories specified under the Standard
for the purposes of separate disclosure?

Entities with joint control or significant influence over the entity

The parent company of the entity

An entity that has a common director with the entity

Joint ventures in which the entity is a venturer

For interim financial reporting, an inventory loss from a temporary market decline in the first quarter
which can be reasonably be expected to be restored in the fourth quarter

2 points
Should be recognize as a loss proportionately in each of the first, second, third and fourth quarter

Should be recognize as a loss in the first quarter

Need not be recognize as a loss in the first quarter

Should be recognize as a loss in each of the first, second and third quarter

Conceptually, interim financial statements can be described as emphasizing

2 points

Timeliness over reliability

Reliability over relevance

Relevance over comparability

Comparability over neutrality

Lala Company accounts for noncurrent assets using the cost model. On October 1, 2019, Lala classified
a noncurrent asset held for sale. At that date, the asset’s carrying amount was P1,600,000, its fair
value was estimated at P1,100,000 and the cost to sell at P100,000. On December 15, 2019, the asset
was sold for net proceeds of P925,000. What amount should be included as an impairment loss in
Lala’s statement of comprehensive income for the year ended December 31 ,2019?

2 points

P500,000

P600,000

P675,000

P0

Rose Company accounts for noncurrent assets using the cost model. On October 30, 2020, Rose
classified a noncurrent asset as held for sale. At that date, the asset’s carrying amount was P750,000,
its fair value was estimated at P550,000 and the cost to sell at P75,000. On November 20, 2020, the
asset was sold for net proceeds of P400,000. What amount should be included as loss on disposal in
Rose statement of comprehensive income for the year ended December 31, 2020?

P275,000

P350,000

P 75,000

P0

Big company committed to sell its comic book division (a component of the business) on September 1,
2019. The carrying amount of the division was P2,000,000 and the fair value was P1,750,000. The
disposal date is expected to be June 1, 2020. The division reported an operating loss of P100,000 for
the year ended December 31, 2019. Ignoring income tax, what amount should be reported as loss
from discontinued operation in 2019?

2 points

P250,000

P100,000

P350,000

P0

Fay Company had the following transactions during the quarter ended March 31, 2020. Loss from
typhoon - P350,000 Payment of fire insurance premium for calendar year 2020 - 50,000. What amount
should be included in the income statement for the quarter ended March 31, 2020?

2 points

Casualty loss - P350,000 Insurance expense - P50,000

Casualty loss - P350,000 Insurance expense - P12,500

Casualty loss - P 87,500 Insurance expense - P12,500

Casualty loss - P 0 Insurance expense - P50,000

Happy Company incurred an inventory loss from market decline of P420,000 on June 30, 2020.What
amount of the inventory loss should be recognized in Happy’s quarterly income statement for the
three months ended June 30, 2020?

2 points

P105,000

P240,000

P210,000

P420,000

On June 30, 2020, Moon Company incurred a P500,000 net loss from disposal of a business segment.
Also, on June 30, 2020, Moon paid P200,000 for property taxes assessed for the calendar year 2020.
What amount of the foregoing items should be included in the determination of the net income or
loss for the six-month interim period ended June 30, 2020?

2 points

P700,000

P600,000

P450,000
P350,000

Dagupan Company prepares quarterly interim financial reports. The entity sells electrical goods and
normally 5% of customers claim on their warranty. The provision in the first quarter was calculated at
5% of sales to date which amounted to P10,000,000. However, in the second quarter, a design fault
was found, and warranty claims were expected to be 10% for the whole year. Sales for the second
quarter amounted to P15,000,000. What would be the provision charged in the second quarter’s
interim income statement?

2 points

P2,000,000

P1,250,000

P1,500,000

P750,000

Vilma Company has estimated that total depreciation expense for the year ended December 31, 2019
will amount to P300,000 and that 2019 year-end bonuses to employees will total P600,000. In Vilma’s
interim income statement for the six months ended June 30, 2019, what total amount of expense
relating to these two items should be reported?

2 points

P900,000

P150,000

P450,000

P0

ABC Ltd. decided to operate a new amusement park that will cost P1million to build in the year 2019.
Its financial year-end is December 31, 2019. ABC Ltd. has applied for a letter of guarantee for P700,
000. The letter of guarantee was issued on March 31, 2020. The audited FS have been authorized to be
issued on April 18, 2020. The adjustment required to be made to the FS for the year ended December
31, 2019, should be

2 points

Booking a P700, 000 long-term payable

Disclosing P700, 000 as contingent liability in 2019 FS

Increasing the contingency reserve by P700, 000

Do nothing

A new drug named “EEE” introduced by Genius Inc. in the market on December 1, 2019. Genius Inc.’s
financial year ends on December 31, 2019. It was the only company that is permitted to manufacture
this patented drug. The drug is used by patients suffering from an irregular heartbeat. On March 31,
2020, after the drug was introduced, more than 1000 patients died. After a series of investigation,
authorities discovered that when this drug was simultaneously used with “BBB”, a drug used to
regulate hypertension, the patient’s blood would clot, and the patient suffered stroke. A lawsuit for
P100,000,000 has been filed against Genius Inc. The financial statements were authorized for issuance
on April 30, 2020. Which of the following options is appropriate accounting treatment for this post-
balance sheet event PAS 10?

2 points

The entity should provide P100,000,000 because this is an “adjusting events” and the financial
statements were authorized to be issued after the accident.

The entity should disclose P100,000,000 as a contingent liability because it is an “adjusting event”.

The entity should disclose P100,000,000 as a “contingent liability” because it is a present obligation with
an improbable outflow.

Assuming the probability of law suit being decided is remote, the entity should disclose it in the
footnotes, because it is a non-adjusting material event.

On December 25, 2019, ABC Oil and Tech, Inc. thorough its monitoring team reported an oil spill
happened in the Gulf of Buyacaoan. The news spread fast to all reporting agencies causing the stock
price to decline from P100 to P70. The estimated cost of the damage to biodiversity is P5,000,000 and
the legal counsel of the firm expected that they will likely win at 40% rate. They booked the estimated
cost at full. The reporting period ends December 31, 2019 and the financial statements were approved
for issue on March 31, 2020. On February 20, 2020, lawyers expected not to win at 40% rate with new
information acquired by a team of experts hired by the company. What amount should be booked as
adjustment to the loss of the company?

1 point

Your answer

Hardflex Inc. bought a building for production of XYZ product on June 30, 2017 costing P15,000,000
with an estimated useful life of 10 years and salvage value of P2,000,000. On December 31, 2018, the
entity decided to classify as held for sale. The fair value of the building on that date is P13,000,000 and
the cost of disposal is P300,000. On December 31, 2019, the management of the company reassessed
the use of the building and has decided to use it once again for production. The fair value and cost of
disposal on this date is P12,500,000 and P200,000, respectively. What is the amount of impairment
loss on December 31, 2018?

1 point

Your answer

Hardflex Inc. bought a building for production of XYZ product on June 30, 2017 costing P15,000,000
with an estimated useful life of 10 years and salvage value of P2,000,000. On December 31, 2018, the
entity decided to classify as held for sale. The fair value of the building on that date is P13,000,000 and
the cost of disposal is P300,000. On December 31, 2019, the management of the company reassessed
the use of the building and has decided to use it once again for production. The fair value and cost of
disposal on this date is P12,500,000 and P200,000, respectively. How much is the depreciation
expense for 2019?

1 point

Your answer

Hardflex Inc. bought a building for production of XYZ product on June 30, 2017 costing P15,000,000
with an estimated useful life of 10 years and salvage value of P2,000,000. On December 31, 2018, the
entity decided to classify as held for sale. The fair value of the building on that date is P13,000,000 and
the cost of disposal is P300,000. On December 31, 2019, the management of the company reassessed
the use of the building and has decided to use it once again for production. The fair value and cost of
disposal on this date is P12,500,000 and P200,000, respectively. How much is the gain/loss
reclassification?

1 point

Your answer

Nosher Co. planned to sell its product X division on June 30, 2019. The carrying amount is P5,000,00
and fair value less cost of disposal of the division is P4,500,000. For the year 2019, the company
reported net profit of P10,000,000 and P500,000 loss is attributed to product X division. How much is
the income from discontinued operation in 2019?

1 point

Your answer

A warehouse was bought by Great Co on November 30, 2019 costing P3,400,000 for storage of
product Y. It has an estimated useful life of 15 years and salvage value of P400,000. The company also
bought an insurance for the warehouse with coverage up to P2,500,000. On December 1, 2019, a fire
broke out in the warehouse and consumed it. On the same date, the company booked a claims
receivable from the insurance entity. The insurance entity took an investigation on January 15, 2020
and concluded that cause of the fire was not due to some fortuitous event. The reporting date of the
company is on December 31, 2019 and the financial statements were approved for issue on March 31,
2020. What is the adjusting journal entry should be made?

1 point

Your answer

A warehouse was bought by Great Co on November 30, 2019 costing P3,400,000 for storage of
product Y. It has an estimated useful life of 15 years and salvage value of P400,000. The company also
bought an insurance for the warehouse with coverage up to P2,500,000. On December 1, 2019, a fire
broke out in the warehouse and consumed it. On the same date, the company booked a claims
receivable from the insurance entity. The insurance entity took an investigation on January 15, 2020
and concluded that cause of the fire was not due to some fortuitous event. The reporting date of the
company is on December 31, 2019 and the financial statements were approved for issue on March 31,
2020. How much is the total loss to be recorded by the company?
1 point

Your answer

In 2019, entity A sold goods to its subsidiaries (entities B and C) for P500,000 and P400,000,
respectively. In 2019, entity A sold goods to its associates (entities D and E) for P50,000 and P40,000
respectively. On 31 December 2019 entities B, C, D and E owed entity A P200,000, P100,000, P20,000
and P10,000, respectively. The terms and conditions of the sales to entities B, C, D and E are the same
as for sales to independent third parties, ie list price on 30 days’ interest-free credit. In 2019, entity A
purchased raw materials from its owner (Mr. A) for P125,000. Mr. A supplies raw materials to entity A
at a discount of 20 per cent on the price at which he supplies other customers that purchase similar
quantities of raw materials. In common with other customers, Mr. A supplies entity A with raw
materials on 30 days’ interest-free credit. On 31 December 2019 entity A reported that it had
reimbursed Mr. A’s expenses of P400,000 for leisure trips. How much is the total amount of related
party transactions to be disclosed for 2019 financial statements?

1 point

Your answer

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