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    CFAS

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    © All Rights Reserved
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    11 views12 pages

    AccountingClinic CFAS

    Uploaded by

    Chris Jackson
    CFAS

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 12
    2. Under the Conceptual Framework for Financial Reporting, which of the following Is the “threshold quality” of useful information? 8. Relabilty €. Matenatty D. Understaridabilty 2. According to The Conceptual Framework for Financial Reporting, which ofthe following Is the underlying assumption ofa set of A Going Concern 8. Prudence accruals 1. Comparabinty 3. Link the terms below to whether they relate to the principle of relevance or faithful representation. __[ Faithful Representation “Free from bias 4. Which TWO of the following critena need to be satisfied in order for an item to be recognized in the financial statements? It meets the definition of an element of the financial statements 1. 10s probable that future economic benefits will to or from the enterprise . Its certain that future economic benefits wil ow to OF from the enterprise 4. The entity has paid for the item 8 aandb Sande C banda D. “all of the above 5: The Board's Framework identines qualitative characteristics (. Relevance Gi) Comparabiity Gimp Verinabitity Gv) Understandabitty (Y) Faltnful representation ‘Which of the above are not listed as an enhancing characteristic? An IV, andV 8. ti, tttana Iv tang tt ©. Tangy CONCEPTUAL FRAMEWORK: MEASUREMENT ITEMS. ‘Test your understanding 1. A.company owns a machine which It purchased four years ago for P100,000._ The accumulated depreciation on the machine to Gate ls P40,000. ‘The machine could be Sold to another manufacturer for P50,000 but there would be dismanting costs oF 5,000. "To’replace the machine a new version would cost P110,000. The cash flows from the existing machine are estimated to be P25,000 for the next two years followed by P20,000 per year for the remaining four years of the machine's life. “The relevant discount rate for this company is 10% and the discount factors are: _ 2.619 (annul wale) Calculate the following values for the machine: 5. istortcal east BL Net realizable value € Replacement cost 9. Economic value 2. Which of the following measurement bases are referred to In the Board's Conceptual Framework? . Mistorical cost i, "Current value A. Langit 8! Yonly €. only 5) Neither 1 nor 2. Current value, includes the following 1 Fair value Ii, ‘Value in use for assets and fulfilment value for Habiities 1, Current cost ALL, Mand 11 _ Conceptual Framework-Batch Oct. 2019 Page 1 of 20 *e. Lonly . Wonly ©. fand'it Which of the measurement bases below can _Whlen ofthe measurement bases below can be used by an entity for measuring assets and ables shown ints statement of {Historical cost Present value Realizabie valu 5. Which of the following concepts aims to ensure that excess dividends are not ald in tm - Which of the foto o that excess dvi ald In times of changes prices 8. Amortized cost . Fattful representation ©. Capital maintenance 6. Rosas Co. mage a profit of P350,000 for 20x9 based on historcal cost accounting principles. Rosas Co. had opening capital of 1,000,000: Specie price indices increase during the year by 20% and general price Indices by Sve. ns OP=NINS CAP om much pro shoul Rosas Co: record for 20%9 under he hee ferent captl maintenance concepts? \'P350,000 under real financial capital maintenance, 300,000 under money fnanclal captal Mamtenance, and P150,000 - Cont physical capital maintenance, _ 7 : 350,000 under reat nancial capital maintenance, P1S0,000 under money fnanclal capital maintenance, and 300,000 é under physical capital maintenance. ve) - 'P300,000 under real financial capital maintenance, P350,000 under money financial capital maintenance, and P1S0,000 under physical capital maintenance, 7 C , 'F350,000 under real financial capital maintenance, P300,000 under money financial captal maintenance, and P150,000 under physieal capital maintenance 7. Which of the following concepts measure profit in terms ofan Increase Inthe productive capacty of an entity? ‘A. Physical capital maintenance " 4 ™ 8. Historical cost accounting . Financial capital maintenance ©. Going Concern concept 8. ‘Which one of the following statements Is true about historical cost accounts in times of rising prices? ‘A. Profits will be overstated and assets wil be understated BL Asset values will be overstated C. Unrecognized gains will be recorded incorrectiy 1D. Depreciation will be overstated — ‘ReEOUNTING CONCEPTS } Entity Concept ~ Ar sccantng-eaity on organsaton ors secion OT an OGanzation Tat Sands part Om OST Srovtpsaons and inewicuns na separ cestenc ta. From sonsennng’ apes, thay baunestcn are rom arBana auch ent 2s ms nt to sonkns i eters ties feet ention «Railay princpteaSceuncnp recuse satemerss 5 Saved om the most relale data aval so tha hey wil be eset as pombe sites hot ooqlfed assets and services shouldbe recorded at thelr actual cost, The cost ofan aset iced inthe sccoulingsecods foros ana the uses hase saat, ‘Sing-concorn principle Holds tet the sry wil reas m proton forthe oresesble ture, saometany ani concept hasures wh he ess purchasing poms fleovey sale a thus ignores the effet setatous teu sccmnsng reeds Meneckcy ame pened Resuroton) imples that a company can dive ts economic aces int acl ine periods, Fassett ee Gary wat the noe creer are monty aaatery an year” te sorter the km pero, he more Fae Fore yu Ee, cere ar pedi able Peanettertim praviaes an warawtng auaimple ot seer Sateen elevarte and fat representation in proparing nancil data, ex Gualitative characteristic, or constraint that is most applicable in the following cases. ise: (Application of the Basic Accounting concepts) —identification. State the accounting assumption, principl 1. During the year, you started a business of selling personalized mugs and T-shirts. You opened a separate bank account for the business and deposited your intial investment of 250,000 to this account. “The business acquired a printing machine, The regular selling price is P100,000; however, you were able to acquire it at 2 Fiscstmnea pice of $50,000. You wil tacrd the machine atts sequstlon cost of P80, 000 rather than atthe regular seling price 3, ‘The business acquired initial inventory of mugs and T-shirts for a total cost of PS0,000. You will record the cost as an asset (Le. inventory) rather than as expense. 4. Allthe inventory was sold on credit for P300,000. You will immediately record the credit sales as accounts receivable rather than ‘waiting for them to be collected. 5. Also, you will now record the P50,000 cost of the inventory as expense. 6. Of the total credit sales of P300,000, 290,000 was col rather than to your personal account ted. You will deposit the collections to the bank account of the business, 7. The debtor for the remaining P10,000 is in financial dificulty. This has raised doubt whether he can pay his account. You wil Tmmediately recognize the doubtful account as expense. ‘8, You withdrew cash of P80,000 from the business of your personal use. You will record this transaction as a withdrawal of your frivestment from the business rather than @ business expense. jage 2 of 20 atthe end of the year, you prepared the financial fetes statements of your business, This is, among other things, to determine whether 10. When preparing the financial statements you discovered that the bi usiness has $10 (dollars). You will translate this to Philippine beso using the current exchange rate, The amount that you will report inthe financial statements i the translated amount, oe ei bey ‘ut thatthe regular selling price of a new printing machine increased from P100,000 to P120,000. You will ignore ths Information (Stable monetary unit) and wil report the pring machine atts acquston cost of P00 in the ‘ements (Historical cost). This is because you don’t intend or expect to close your business inthe foreseeable time 12. During the year, the business bou 5 ight @ trash bin for PBO. You expect to use this over several years. However, because you deemed the cost as immaterial, you wil record this as an expense rather than an asset. 413. Moreover, when you prepared the financial statements, you decided to include the cost of the trash bin in “Miscellaneous Expenses" account together with other immaterial expenses. You don't expect users of the financial statements to benefit from reporting the immaterial cost separately. 14, You will make a brief description of the "Miscellaneous Expenses” account in the notes to financial statements, sufficient for Users to understand the nature of this account 15. You then adopted an accounting policy of expensing outright all acquisitions of equipment costing 5,000 and below. You will ‘apply this policy consistently in the future periods, ( PAS 4 = Presentation of Financial Statements QUIZZER 1 -BASIC FINANCIAL STATEMENTS 1. These area structured financial representation of the financial position of and the transactions undertaken by enterprise a. books of accounts. financial statements —_c. working papers _d. business documents 2. Which of the following are among the basic components of the basic financial statements? (1) Statement of Retained Earnings (4) Notes, and other explanatory material (2) Statement of Comprehensive Income _(5) Statement of Cost of Goods Manufactured (3) Statement of Assets and Liabilities _(6) Statement of Changes in Equity a. (1), (2) and (3) . (2), (3), (4) and (6) 'b. (2), (4), and (6) 4. (1), (2), (3), (5) and (6) 3.. Which of the following statements is false? ‘a. The financial statements of a business enterprise are primarily the representations of its management b. General-purpose financial statements are those intended to meet the needs of users who are not in a position to demand reports that would meet their specific information needs. ¢. PAS 1, Presentation of Financial Statements applies to all types of business enterprises except banks and insurance enterprises d. PAS 1, applies equally to the financial statements of the individual enterprise and to consolidated financial statements for a group of enterprises 4, The objective of financial statements is Page 5 of 20 To summarize cash receipts and cash payments ‘To provide information that can be used in evaluating management performance. ‘To provide information about the financial position, performance and cash flows of an enterprise that is useful to a wide range of users in making economic decisions. 4. To support the application for a bank loan 5 According to PAS 1, financial statements must be prepared: a, Monthly b. Quarterly Semiannually Yearly 6. The overall principles of statement presentation do not include 2. The financial statements should present fairly the financial position, performance and cash flows of the enterprise. . Each material item should be presented separately and immaterial items should be aggregated with statements of similar nature or function and need not be presented separately . Financial statements should be prepared in accordance with the accrual basis of accounting 4d. Management should select and apply an enterprise's accounting policies so that the financial statements comply with all the requirements of each applicable IFRS and Interpretations 7 Which of the following statements regarding fair presentation and compliance with generally ‘accepted accounting principles is false? * |. The application of IFRS, with additional disclosures when necessary, is presumed to result in financial statements that achieve fair presentation, 1. An entity whose financial statements comply with IFRSs shall make an explicit and unreserved Statement of such compliance in the notes. {Ml appropriate accounting treatment may be rectified either by disclosure of accounting, Policies or by notes or explanatory material a. Statement | only 'b. Statements | and I! only Statement Il only d. Statements 1,11 it statetements: a. Fair presentation and consistency . Comparative information 8 One of the following is not among the overall considerations in the presentation of financial «Going concern and accrual basis. 4. Uses and users of financial information 9... The overall principles of statement presentation do not include a. The financial statements shoul present fairly the financial position, performance and cash flows of the enterprise. b. Each material item should be presented separately and immaterial items should be ‘aggregated with amounts of similar nature or function and need not be presented separately .An enterprise should prepare its financial statements in accordance with the cash basis of accounting, d. Financial statements should be prepared on a going concern basis, 110. Which of the following statements is (are) true? |.When preparing financial statements, management is required to make an assessment of an enterprise's ability to continue as a going concern, Il When an enterprise has a history of profitable operations and ready access to financial resources. a conclusion may be reached as to its ability to operate as @ going concern without the necessity to make detailed analysis. Ill, When the financial statements are not prepared on a going-concern basis, this fact should be disclosed. 2. Lonly b. HNonly «. Vand lt only dit lland i 11, Immaterial amounts of si ilar nature and function should be grouped or condensed as one line item in the financial statements in conformity with the concept of a. Consistency Aggregation Offsetting __d. Comparability Page 6 of 20, 4. Itis the presentation and classification of financial statement items on a uniform basis from one accounting period to the next. ‘a. Comparable information cc. Aggregation bb. Consistency of presentation d. Accrual basis 13. If narrative information provided in the financial statements for the previous period(s) continues to be relevant in the current period, this should be disclosed, in accordance with the concept of ‘a. Consistency c. Materiality b. Comparable information d. Substance over form 14. Which of the following statements is true? ‘a. The information contained in financial statements i accounting records. b. Financial statements have the same basic purpose as financial accounting c. Financial statements are the only source of information needed by users to make rational economic — decisions. d. Since financial statements are historical, they are of little use in making decisions about the future, obtained exclusively from the firm's 15. The basic assumption which is the best basis for the classification of assets and liabiliti ‘Statement of Financial Position as current or non-current is a. materiality . accounting period . going-concern inthe d. judgment 16. Which one of the following is not included in the definition of “notes” to financial statements?* a. Information about items that do not qualify for recog b. Narrative description of ¢._ Information presented cash flow statement. Information on disaggregations of items disclosed in the financial statements jon in the financial statements items disclosed in the financial statements the balance sheet, income statement, statement of changes in equity and 4. ‘STATEMENT OF FINANCIAL POSITION 117 The basis for classifying assets as current or concurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts ‘a. Inventory back into cash, or 12 months, whichever Is shorter. bb. Receivables back into cash, or 12 months, whichever is longer. . Tangible fixed assets back into cash, or 12 months, whichever is longer d. Inventory back into cash or 12 months whichever is longer 18. The Statement of Financial Position helps statement users analyze and evaluate the follo\ factors except: a. Liquidity _b. Financial structure. Financial flexibility d. Profitability 19. In Philippine practice, assets and liabilities are preferably reported in the Statement of Financial position in which of the following order? a. Current and non-current c. Increasing or decreasing order of liquidity b. Non-current and current d. Any of these, provided justifiable . Which one of the following is a nota line item in the balance sheet? 2. Provision ¢. Deferred Tax Liability b. Biological Assets d. Petty Cash Fund 2. Katrina Corporation with a calendar-year accounting period issued a 10%, 3-year installment note to Vicky with a maturity value of P6,000,000. The last installment is due on June 30, 2009._Under the terms of the loan agreement, Katrina Corporation has the discretion to roll Page 7 of 20 over the obligation. In December, 2008, because of financial difficulties, management feels it cannot meet its last installment obligation and decides to exercise its discretion to roll over its remaining liability to June 30, 2010.. The agreement to roll- over was signed on January 18, 2009. The financial statements of 2008 were authorized for issue on April, 2009. How should Katrina report its remaining liability in the December 2008 balance sheet? a. Interest and remaining liability are reported as current bb, Interest as current liability, remaining liability as non-current ¢.. Interest as non-current, remaining liability as current 4d. Both interest and remaining liability are reported as non-current 22. Assume the same facts as in No. 2, except that Katrina has no discretion to roll-over its obligation. How should Alwina report its remaining liability on its December 31, 2009 balance sheet? a. Interest and remaining liability are reported as current b.. Interest as current liability, remaining liability as non-current .. Interest as non-current, remaining liability as current d.. Both interest and remaining liability are reported as non-current 23. On December 31, 2005, Nicole Corporation signed a S-year, P5M 10% installment note to Kenneth, Inc. payable in equal annual installments starting December 31, 2006. In 2008, Nicole experienced financial difficulty and was unable to pay the interest and installment due. On December 31, 2008, Kenneth signed an agreement to provide Nicole a grace period of 12 months from the balance sheet date within which to rectify the breach... The 2008 financial statements were authorized for issue on March 20, 2009. How should these facts be presented in the liability section of Nicole's Dec. 31, 2008 balance shhet? Interest obligation Installment obligation Remainder of principal obligation a current current current b. current current non-current © current non-current non-current, d.— non-current ——_non-current non-current 24, Refer to No. 23. Assume the same facts in the Nicole problem, except that no grace period is given by Kenneth. However, on December 31, 2008, Kenneth has agreed not to demand payment as a consequence of the breach of payment on the interest and on the principal of, the loan.. The financial statements of 2008 were authorized for issue on March 20, 2009. How should these facts be presented in the liability section of Nicole’s Dec. 31, 2005 balance sheet? Interest obligation Installment obligation Remainder of principal obligation a. current current current b. current current non-current, © current non-current non-current d.— mon-current ——_non-current non-current 25, This is the broad title representing amounts received in excess of par or stated value of the shares issued and subscribed. ‘a. Share Capial . Share premium b. Subscribed Capital Stock d. Retained Earnings not embraced in the term “reserves” as currently understood? a. Additional paid in capital b. Accumulated translation adjustment of foreign currency . Revaluation increment in property d. Net unrealized loss on market decline of non-current available for sale securities 26. Which information is not shown in the “notes to financial statements a. Information on accounting policies ‘>. Information on subsequent events c. Information on contingencies d. information on financial position & results of operations 27. The “accounting policies section” of the notes to financial statements should describe a. Only the measurement basis used in preparing the financial statements. b. Only the specific accounting policies followed by the enterprise . Both the measurement basis and accounting policies followed d._ Nature of the enterprise’s operations and its principal activities 28. Which of the following should be disclosed in the summary of significant accounting policies? 2 Refinoncing of debt subsequent tothe balonce sheet date. b. Guarantee of indebtedness of others e. itera for determining which investments are classified aseash equivalents Gi. Casualty loss occurring between the balance sheet date and date ef lnsuance of statements. [uizzen 2 - INCOME STATEMENT QUIZZER a 7 29. According to the currently amended PAS 1, Presentation of Financial Statements. the performance of an enterprise is shown in the a. Statement of Financial Position ¢. Statement of Comprehensive Income b. Income statement 4. Statement of Cash flows 30. Which of the following is not included in the computation of net income for the period? a. Other income ¢. Extraordinary items . Finance cost . Gain on sale of discontinued operations 31. According to PAS 1, effective 2009, which of the following is (are) proper inclusion(s) in the ‘Statement of Comprehensive Income? Cost of Operating Revaluation _Effect of Change in Sales Expenses Surplus Accounting Policy a yes yes, yes yes b. yes yes yes no © no no no no dno no yes yes 32. An income statement reveals a. The revenues and expenses of a firm at a point in time. b. The resources and equities of a firm for a period of time. ‘c. The extent to which, and the ways in which the owners’ equity of an entity increased or ‘decreased during a period from all sources other than transactions with owners and prior period adjustments. 4d. The net earnings of an enterpr for a given date. 33. Which of the following statements about the income statement is (are) true? The “function of expense” method of expense classification is prescribed for use under TAS / PAS No. 1 Il.. Entities classifying expenses by function shall disclose additional information on the nature of expenses, including depreciation and amortization expense and employee benefit expense. Loss on expropriation of property and other calamity losses should be shown as other operating items in the income statement a. Only 1 is true c. Mand ill are true b. land tare true . |, Wand ill are true Paged of 20 ‘Which of the following would appear on the income statement of a corporation but not that of a single proprietorship? a. Unusual gains and losses ¢. Other revenues and expenses b. General and administrative expenses. Income tax expense 35. Utilities expense should be classified as a. Manufacturing costs c. General and administrative expenses b. Selling expenses 4d. Any or all of the above, depending on the circumstances 36. Other operating expenses include a. Income tax expense ‘c. Amortization of intangibles b. Loss on sale of property, plant and equipment d. Marketing costs 37. Under PAS No. 1 which one of the following is not a line item in the income statement. a. Revenue —_b.Interestrevenue —_—c. Finance costs. d. Selling expense 38. The income statement format which shows expenses aggregated according to their nature, such as depreciation, personnel costs, delivery costs, etc., and not allocated among the various functions. within the enterprise is referred to as a. Nature of expense method . Aggregate method b. Cost of sales method 4d. Departmental method 39. The income statement format which shows expenses classified according to whether they are part of cost of sales, selling activities, administrative activities and operating activities. 2. Nature of expense method c. Aggregate method bb. Function of expense method d. Departmental method 40 . According to PAS 1,,, in what sequence would the following items be reported in a Statement of Comprehensive Income? |. Income before tax I. Other Income. MI Sales IV Finance costs V Unrealized Loss on Change in Value of Held for Trading Securities VI Unrealized Gain on Change in Value of Available for Sale Securities at VLV,Iy, Ih Ill INV, 1V, 1, VL b. MH, LV, VL IV MLV, HIV QUIZZER 3 STATEMENT OF CHANGES IN EQUITY and PAS 8 41. Which one of the following is not 3 component of the Statement of Changes in Equity a.. Profit or loss for the period Cc. Effect of changes in accounting policy b. Correction of prior period errors d. Effect of change in accounting estimate 42. Accounting changes are often made and the monetary impact is reflected in the financial statements of a ‘company even though, in theory, this may be a violation of the accounting concept of 2. Materiality bb. Consistency ¢. Conservatism 'b. Objectivity 4.3 Which of the following is a characteristic of a change in accounting estimate? a. It does not affect the financial statements of prior period b. Itusually need not be disclosed. . Itshould be reported through the restatement of the financial statements. d. It makes necessary the reporting of proforma amounts for prior periods. "Page 10 oF 20 A-The effect of a change in accounting estimate should be a. Accounted for in the period of change only. b. Accounted for in the period of change and future periods if the change affects both. ¢. Treated as an extraordinary item 4d. Shown as correction of retained earnings. 45. When the company changes the remaining useful life of an equipment because of changes in ‘management plans during the period, which of the following should be reported? Cumulative effect of change Retroactive effect of change in Accounting estimate in Accounting policy a yes no b. yes yes & no yes 4 no no 46. For 2008, Pacman Co. estimated its two-year equipment warranty costs based on P100 per unit sold in 2008. Experience in 2003 indicated that the estimate should have been based on P110 per unit. The effect of this P10 difference from the estimate is reported ‘a. In 2009 income from continuing operations. b. As an accounting change, net of tax, below 2009 income from continuing operations. c. As an accounting change requiring 2009 financial statements to be restated. d. Asa correction of an error requiring 2009. financial statements to be restated 47. The effect of a change in accounting policy which is inseparable from the effect of a change in accounting estimate should be reported 2. In the period of change and future periods if the change affects both bb. By restating the financial statements of all prior periods presented. c. By showing the pro forma effects of retroactive application. d. Asa correction of error. 48, Which of the following changes in accounting methods would be reported prospectively and not by restatement of prior periods. ‘a. Change from the straight line method of depreciation to the sum-of-years digits method. b. Change from the cost method to the appraisal method of valuing property and equipment c. Change from FIFO method of inventory pricing to the moving average method. 4. Change from capitalizing to expensing borrowing costs. 49. In which of the following situations should a change in accounting policy be made? (1) the change will result in more appropriate presentation of events and transactions (2) itis required by an accounting standard (3) itis required by the Association of CPAS in Public Accounting Practice a. (1) and (2) only . (2) and (3) only bb. (2) and (3) only 4. (1), (2) and (3) 50. A change in accounting policy should be applied ; ‘a, Retrospectively only . Prospectively only b. Retrospectively and prospectively

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