QUIZ-303
accountability claim compliance with
 1. What is the effective date of
application for IFRS for SMEs in the
Philippines? *
a) July 1, 2010
b) January 1, 2010
c) October 13, 2010
d) December 3, 2010
2. Under SEC Rules, which of the
following may qualify as SME? *
a) ABC Life Plans, a life insurance
company
b) ABC Store, a supermarket
operating in Quezon City
c) ABC Waters, a water utility
company
d) ABC Banking Corporation, a
BSP-registered commercial
bank
3. Entities that are holders of secondary
licenses issued by a regulatory agency
are not considered SME. Which of the
following is not among this type of
entities? *
a) Public utility companies
b) Insurance and preneed
companies
c) Securities dealer
d) Commercial banks and
investment houses
4. Full IFRS and IFRS for SMEs are
generally similar in accounting for all of
the following, except: *
a) Leases
b) Borrowing Cost
c) Statement of Cash Flows
d) Provisions and Contingencies
 
5. Which of the following topics is
covered by both full IFRS and IFRS for
SMEs? *
a) Business Combinations
b) Earnings per share
c) Interim and segment reporting
d) Non-current assets held for sale
 
6. There are a number of accounting
standards and disclosures that may not
provide useful information to the users
of SMEs financial statements. Which of
the following topics does the Standard
for SMEs not address? *
a) Earnings per share
b) Provisions and contingencies
c) Transitional arrangements
d) Revenue recognition
7. In which of the following situations
can an entity that does not have public
IFRS for SMEs in its financial
statements? *
a) The entity prepares its financial
statements in accordance with
local tax requirements that are
substantially the same as the
IFRS for SMEs
b) The entity prepares its financial
statements in accordance with
local tax requirements that are,
except in name, word-for-word
the same as the IFRS for SMEs
c) The entity prepares its financial
statements in accordance with
local tax requirements that are,
except in name, word-for-word
the same as full IFRS.
d) All of the above
 
8. Under Section 34, which is not a
category of specialized activities *
a) Agriculture
b) Insurance
c) Extractive activities
d) Service concessions
9. Which of the following is not
considered a basic financial instrument
of SME? *
a) Cash and bank accounts
b) Commercial paper and bills
c) Bonds and loans payable
d) Options and warrants
 
10. Based on Philippine SEC, which
would not qualify as SME? *
2/2
a) Public utility companies or
holders of secondary licenses
issued by regulatory agency
b) Entities that are not in the
process of filing FS for
purposes of issuing any class of
instrument in a public market
c) Entities with total liabilities
between P3M and P250M
d) Entities with total assets
between P3M and P350M
PRELIM EXAM
 consolidated FS? *
Dolomite operates in a hyperinflationary
a) Philippine peso
economy. Its balance sheet accounts at b) Zloty
December 31, 2016 are as follows: (1) c) Euro
d) Entity may use any currency
Property, plant and equipment -
P900,000; (2) Inventory - P2,700,000; An entity is trying to determine which
(3) Cash - P350,000; (4) Share capital assets and which liabilities are
(issued 2012) - P400,000; (5) Retained nonmonetary and monetary. Which of
earnings - P2,350,000; (6) Noncurrent the following are nonmonetary? *
liabilities - P500,000; (7) Current a) Trade receivables
liabilities - P700,000. The general price b) Deferred tax liabilities
c) Accrued expenses and other
index had moved in this way: Dec. 31, payables
2012 - 100; Dec. 31, 2013 - 130; Dec. d) Taxes payable
31, 2014 - 150; Dec. 31, 2015 - 240;
Property was purchased on December
Dec. 31, 2016 - 300. The PPE was
31, 2014 for P20 million. The general
purchased on December 31, 2014, and
price index had risen to 240.4. If the
there is 6 months inventory held. The
entity operates in a hyperinflationary
noncurrent liabilities were a loan raised
economy, what would be the carrying
on March 31, 2016. From the following
amount in the financial statements of
information, determine the balance of
the property after restatement? *
your Retained Earnings after
a) 20 million pesos
adjustments * b) 1,200.2 million pesos
c) 80 million pesos
Php 2,750,000
d) 4,808 million pesos
Based on Dolomite Company, how
For IFRS reporting purposes,
much is the total assets after
currencies are defined as *
adjustments? *
a) International and functional
Php 5,150,000 b) Foreign, functional and
presentation
Based on Dolomite Company, how c) Domestic and international
d) Operating, international and
much is the total liabilities after
presentation
adjustments? *

Php 1,200,000 MIDTERM EXAM

An entity has several subsidiaries that
operate in a hyperinflationary economy
An entity has a subsidiary that operates
which uses the zloty as its local
in a foreign country. The subsidiary
currency. Management wishes to show
issued a legal notice of a dividend to
the financial statements in Philippine
the parent of P2.4 million and this was
peso. Many of the operations of the
recorded in the parent entity's financial
entity are within countries that are not
statements. The exchange rate at that
hyperinflationary, and these
date was P2 = $1 (P1 = $0.5). The
subsidiaries use the euro as their
functional currency of the entity is the
functional currency. What currency
dollar. At the date of receipt of the
should the entity use to present its
dividend, the exchange rate had moved
to P3 = $1. The exchange difference
arising on the dividend would be
treated in which way in the financial
statements? *
a) No exchange difference will
arise as it will be eliminated on
consolidation
b) An exchange difference of
$400,000 will be taken to equity
c) An exchange difference of
$400,000 will be taken to the
parent entity's income
statement and the group
income statement
d) An exchange difference of
$400,000 will be taken to the
parent entity's income
statement only
Foreign operations that are an integral
part of the operations of the entity
would have the same functional
currency as the entity. Where a foreign
operation functions independently from
the parent, the functional currency will
be *
a) that of the parent
b) determined using the guidance
for determining an entity's
functional currency
c) that of the country of
incorporation
d) the same as the presentation
currency
An entity started trading in Country A,
whose currency was the dollar. After
several years the entity expanded and
exported its product to Country B,
whose currency was the euro. The
business was conducted through a
subsidiary in Country B. The subsidiary
is essentially an extension of the
entity's own business, and the directors
of the two entities are common. The
functional currency of the subsidiary is *
a) the dollar
b) the euro
c) the dollar or the euro
d) difficult to determine
 
An entity has a subsidiary that operates
in a country where the exchange rate
fluctuates wildly and there are seasonal
variations in the income and
expenditure patterns. Which of the
following rates of exchange would
probably be used to translate the
foreign subsidiary's income
statement? *
a) year-end spot rate
b) average for the year
c) average of the quarter-end
rates
d) average rates for each
individual month of the year
A foreign subsidiary's functional
currency is its local currency, which has
not experienced significant inflation.
The weighted-average exchange rates
for the current year would be the
appropriate exchange rates for
translating: *
a) Sales to customers - No;
Wages expense - No
b) Sales to customers - Yes;
Wages expense - Yes
c) Sales to customers - No;
Wages expense - Yes
d) Sales to customers - Yes;
Wages expense - No
On December 31, 2020, a foreign
subsidiary in Hong Kong submitted the
following balance sheet stated in
foreign currency: Total Assets -
$500,000; Total liabilities - $100,000;
Common stock - $250,000; Retained
earnings - $150,000. The exchange
rates are: Current rate - P3.4; Historical
rate - P3.1; Weighted average - P3.0.
Assuming the functional currency of the
subsidiary is not the currency of a
hyperinflationary economy was used
and the retained earnings of the
subsidiary on December 31, 2016
translated to peso is P460,000. What
amount of cumulative translation
adjustment is to be reported in the
consolidated balance sheet on
December 31, 2020? *
a) 25,000
b) 10,000
c) 50,000
d) 125,000
 
On July 1, 2020, VL Company lent
P120,000 to a foreign supplier,
evidenced by an interest-bearing note
due on July 1, 2021. The note is
denominated in the currency of the
borrower and was equivalent to
840,000 local currency units (LCU) on
the loan date. The note principal was
appropriately included at P140,000 in
the receivable section of VL's
December 31, 2020 balance sheet. The
note principal was repaid to VL on July
1, 2021 due date when the exchange
rate was 8 LCU to P 1. In its income
statement for the year ended
December 31, 2021, what amount
should VL include as a foreign currency
translation gain or loss? *
a) P -0-
b) P 15,000 loss
c) P 15,000 gain
d) P 35,000 loss
CHT, a Philippine corporation, bought
inventory items from a foreign supplier
in US on November 5, 2016 for US
$100,000, when the spot rate was
P41.00. At CHT's December 31, 2016,
year-end, the spot rate was P40.50. On
January 15, 2017, CHT bought US
$100,000 at the spot rate of P40.90 and
paid the invoice. How much should
CHT report in its income statement for
2017 as foreign exchange transaction
gain or loss? *
a) P 0,000 gain
b) P40,000 loss
c) P -0-
d) P 10,000 gain
Michael Corporation had the following
foreign currency transactions during
2016: 1) Merchandise was purchased
from a foreign supplier on January 20,
2016 for the Philippine peso equivalent
of P90,000. The invoice was paid on
March 20, 2016, at the Philippine peso
equivalent of P96,000. 2) On July 1,
2016, Michael Corporation borrowed
from foreign corporation with a
Philippine peso equivalent of P500,000
evidenced by a note that was payable
in the lender's local currency on July 1,
2016. On December 31, 2016, the
Philippine peso equivalents of the
principal amount and accrued interest
were P520,000 and P26,000
respectively. Interest on the note is
10% per annum. In Michael
Corporation's 2016 income statement,
what amount should be included as
foreign exchange loss? *
a) 0
b) P 6,000
c) P 21,000
d) P 27,000
 
For IFRS reporting purposes,
currencies are defined as *
a) International and functional
b) Foreign, functional, and
presentation
c) Domestic and international
d) Operating, international and
presentation
For IFRS reporting, the functional
currency is *
a) the currency in which the
company reports its earnings
b) the currency in which the
company primarily conducts
banking activities
c) the currency in which the
company primarily operates
 d) the currency in which the
company presents its financial
statements
 
Which of these considerations would
not be relevant in determining the
entity's functional currency? *
a) the currency that influences the
costs of the entity
b) the currency in which finance is
generated
c) the currency in which receipts
from operating activities are
retained
d) the currency that is the most
internationally accepted for
trading
 
An entity started trading in Country A,
whose currency was the dollar. After
several years the entity expanded and
exported its product to Country B,
whose currency was the euro. The
functional currency of the entity was
deemed to be the dollar but by the end
of 2016, 80% of the business was
conducted in Country B by using the
euro. At the end of 2015, 30% of the
business was conducted in the euro.
The functional currency should *
a) remain the dollar
b) change to the euro at the
beginning of 2016
c) change to euro at the end of
2016
d) change to the euro at the end of
2016 if it is considered that the
underlying transactions have
changed
On September 1, 2016, NCL
Corporation received an order for
equipment from a foreign customer for
300,000 local currency units (LCU)
when the Philippine peso equivalent
was P96,000. NCL shipped the
equipment on October 15, 2016 and
billed the customer for 300,000 LCU
when the Philippine peso equivalent
was P100,000. NCL received the
customer's remittance in full on
November 16, 2016, and sold the
300,000 LCU for P105,000. In its
income statement for the year-ended
December 31, 2016, NCL should report
a foreign exchange transaction gain
of: *
a) 0
b) P 4,000
c) P 5,000
d) P 9,000
Park Co.'s wholly-owned subsidiary,
Schnell Corp., maintains its accounting
records in German marks. Because all
of Schnell's branch offices are in
Switzerland, its functional currency is
the Swiss franc. Remeasurement of
Schnell's 2020 financial statements
resulted in a P7,600 gain, and
translation of its financial statements
resulted in an P8,100 gain. What
amount should Park report as a foreign
exchange gain in its income statement
for the year ended December 31,
2020? *
a) 7,600
b) 8,100
c) 15,700
d) 0
Under the temporal method, property,
plant & equipment would be restated at
what rate? *
a) Current rate
b) Composite amount
c) Historical rate
d) Beginning of the year rate
e) Average rate
A firm ships its product to a foreign
subsidiary and charges a price that
may increase import duties but lower
the income taxes paid by the
subsidiary. The most likely reason for
these effects is that the *
a) Transfer price is too low.
b) Price is a cost-plus price.
 c) Transfer price is too high.
d) Price is an arms-length price.
 
When translating into the presentation
currency, all assets and liabilities are
translated using the: *
a) average exchange rate for the
financial period.
b) exchange rate applicable when
the original transaction was
recorded.
c) exchange rate current at the
date of the statement of
financial position.
d) exchange rate as at the start of
the reporting period.
 
Exchange differences arising from
translation of financial statement of a
foreign entity are *
a) Capitalized if the differences
resulted from severe
devaluation of a currency
b) Recognized as accumulated
translation adjustments in profit
or loss
c) Recognized directly in retained
earnings
d) Recognized as accumulated
translation adjustments in the
equity section
 
Which of the following countries is not a
member of the EU? *
a) Netherlands
b) Croatia
c) Great Britain
d) Ireland
 
An entity purchases a plant from a
foreign supplier for 3 million baht on
January 31, 2014, when the exchange
rate was 2 baht = P1. At the entity's
year-end of March 31, 2014, the
amount has not been paid. The closing
rate was 1.5 baht = P1. The entity's
functional currency is the peso. How
much is the trade payable? *
a) 2,100,000
b) 2,200,000
c) 2,250,000
d) 2,000,000
 
A company took out a 12-month, 4%
loan of P10,000 when the spot rate was
P2 to P1. At the end of the loan term,
the spot rate was P2.10 to P1. What

  was the company's effective rate on

On April 1, 2016, Argo Company this loan? *

a) 9.20%
imported 10,000,000 barrels of oil from b) 4.00%
an Indonesian Company at a price of c) 0.95%
d) 5.60%
3,185 per barrel payable in Indonesian
rupiah. The invoice was paid 30 days
later. Indirect exchange rates for the
Indonesian rupiah were: April 1, 2016 -
132 rupiah; April 30, 2016 - 130 rupiah.
What is the cost of the oil in rupiah? *
a) 132,000,000
b) 31,850,000,000
c) 130,000,000
d) 1,320,000,000
 
Which exchange rate is used at the end
of the reporting period? *
a) The ending rate.
b) The closing rate.
c) The spot rate.
d) The indirect rate.