Item 1
 Byner Corporation accounts for its investment
in the common stock of Yount Company under
the equity method. Byner Corporation should
ordinarily record a cash dividend received from
Yount as
Correct answer: a reduction of the carrying
value of the investment.
Item 2
 If credit risk has not increased significantly
since initial recognition, an entity may
recognize a loss allowance equal to 12-month
expected credit losses.
Correct answer: True
Item 3
 Liquidating dividends are credited to
Correct answer: investment account
Item 4
 When a financial asset at fair value through
other comprehensive income is derecognized,
any cumulative unrealized gains or losses is
Correct answer: transferred directly in
equity
Item 5
 Subsequent changes in fair values of a
financial asset classified as fair value through
other comprehensive income are recognized in
Correct answer: recognized in other
comprehensive income and accumulated in
equity
Item 6
 Which statement is correct concerning
recognition of unrealized gains and losses on
financial assets?
I. Unrealized gains and losses on financial
assets held for trading shall be included in
profit or loss
II. Unrealized gains and losses on financial
assets measured at amortized cost shall be
included as component of other comprehensive
income
Correct answer: I only
Item 7
 In accounting for investments in debt
securities that are classified as held for trading
securities,
Correct answer: any discount or premium is
not amortized.
Item 8
 When stock rights are not exercised but
expired, the carrying value of the stock rights is
Correct answer: treated as loss
Item 9
 The recoverable amount of a credit-impaired
financial asset (but not purchased or originated
credit-impaired or variable rate loan) is
computed at the present value of the remaining
cash flows from the instrument discounted at
the current rate at the reporting date.
Correct answer: False
Item 10
 Pippen Co. purchased ten-year, 10% bonds
that pay interest semiannually. The bonds are
sold to yield 8%. One step in calculating the
issue price of the bonds is to multiply the
principal by the table value for.
Correct answer: 20 periods and 4% from the
present value of 1 table.
Item 11
 When an investor uses fair value accounting to
account for investments in common stock, cash
dividends received by the investor from the
investee should normally be recorded as
Correct answer: dividend revenue.
Item 12
 When an investment in a debt security
measured at amortized cost is transferred to
held for trading security, the carrying amount
assigned to the held for trading security should
be
Correct answer: its fair value at the date of
the transfer.
Item 13
 When an investor uses the equity method to
account for investments in common stock, the
investment account will be increased when the
investor recognizes
Correct answer: a proportionate share of the
net income of the investee.
Item 14
 A 180-day, 12 percent interest-bearing note
receivable is sold to a bank after being held for
45 days. The proceeds are calculated using a
15 percent interest rate. The note receivable
has been
Correct answer: Discounted (Yes); Pledged
(No)
Item 15
 Under PFRS 9,A financial asset shall be
measured subsequently at amortized cost
when
I. The business model of the entity is to hold
the financial asset in order to collect the
contractual cash flows on specified dates
II. The contractual cash flows are solely
payments of principal and interest on the
principal amount outstanding.
Correct answer: Both I and II
Item 16
 An issuer of bonds uses a sinking fund for the
retirement of the bonds. Cash was transferred
to the sinking fund and subsequently used to
purchase investments. The sinking fund
I. Increases by revenue earned on the
investments.
II. Is not affected by revenue earned on the
investments.
III. Decreases when the investments are
purchased.
Correct answer: I only.
Item 17
 According to PFRS, expected credit losses are
the weighted average of credit losses with the
respective risks of a default occurring as the
weights.
Correct answer: True
Item 18
 The effect of direct origination cost is a
decrease in the effective interest rate of a loan
receivable.
Correct answer: True
Item 19
 Transaction costs that are directly attributable
to the acquisition of financial asset shall be
Correct answer: Capitalized as cost of the
financial asset
Item 20
 The impairment requirements of PFRS 9 are
applicable to all debt instruments including
those that are measured at fair value through
profit or loss.
Correct answer: False
Item 21
 Which statement is correct concerning the
subsequent measurement of financial asset at
fair value?
I. The financial asset shall be measured at fair
value if the business model is not to collect
contractual cash flows on specified dates and
the contractual cash flows are not solely
payments of interest and principal.
II. An entity may designate a financial asset as
measured at fair value through profit or loss
even if the financial asset satisfies the
amortized cost measurement.
Correct answer: Both I and II
Item 22
 Subsequent changes in fair values of a
financial asset classified as fair value through
profit or loss are
Correct answer: recognized in profit or loss
Item 23
 Entities may apply a simplified approach when
recognizing impairment losses on trade
receivables.
Correct answer: True
Item 24
 It is the date on which the stock and transfer
book of the corporation is closed for
registration. Only those stockholders registered
as of this date are entitled to receive dividends.
Response: date of record
Item 25
 An entity recognizes impairment gain when
there is an improvement in the credit quality of
a previously impaired financial asset.
Correct answer: True
Item 26
 When an investment in equity securities
irrevocably elected on initial recognition to be
subsequently measured at FVOCI is
transferred to held for trading because the
company anticipates selling the stock in the
near future, the carrying amount assigned to
the investment upon entering it in the trading
portfolio should be
Correct answer: None of these
Item 27
 The balance in Accounts Receivable is not
reduced in recording which of the following
types of financing arrangements?
Correct answer: General assignment
(pledge) of accounts receivable
Item 28
 When there is a significant increase in the
credit risk of a financial asset since its initial
recognition but there is no objective evidence
of impairment, interest revenue is computed on
the net carrying amount of the financial asset
(i.e., gross carrying amount less loss
allowance).
Correct answer: False
Item 29
 Property dividends are recorded as
Correct answer: Dividend income at market
value of the property
Item 30
 Cash dividends are recognized as income on
the
Correct answer: date of declaration
Item 31
 The entry to record a note receivable
discounted with a bank most likely includes
Correct answer: Crediting note receivable
equal to the face amount of the note
Item 32
 A 90-day, 15 percent interest-bearing note
receivable was immediately discounted at a
bank at 12 percent. The proceeds received
from the bank upon discounting would be the
Response: face value less the discount at 12
percent.
Correct answer: maturity value less the
discount at 12 percent.
Score: 0 out of 1 No
Item 33
 Depending on the business model for
managing financial assets, an entity shall
classify financial assets subsequent to initial
recognition at
Response: Fair value
Correct answer: Either fair value or amortized
cost
Score: 0 out of 1 No
Item 34
 Under the equity method in PAS 28, goodwill
amortization
Response: reduces the investment account.
Correct answer: is not recorded.
Score: 0 out of 1 No
Item 35
 Under the equity method of accounting for
investments, an investor recognizes its share
of the earnings in the period in which the
Correct answer: earnings are reported by
the investee in its financial statements.
Item 36
 A financial asset is credit-impaired when one
or more events that have detrimental impact on
the estimated future cash flows of the financial
asset have occurred.
Response: True
Correct answer: True
Score: 1 out of 1 Yes
Item 37
 The equity method of accounting for an
investment in the common stock of another
company should be used when the investment
Response: gives the investor voting control
over the investee.
Correct answer: enables the investor to
exercise significant influence over the investee.
Score: 0 out of 1 No
Item 38
 Which of the following is true when accounts
receivable are factored without recourse?
Response: The factor assumes the risk of
collectability and absorbs any credit losses in
collecting the receivables.
Correct answer: The factor assumes the risk of
collectability and absorbs any credit losses in
collecting the receivables.
Score: 1 out of 1 Yes
Item 39
 When a company holds between 20% and
50% of the outstanding stock of an investee,
which of the following statements applies?
Response: The investor should always use the
equity method to account for its investment.
Correct answer: The investor should use the
equity method to account for its investment
unless circum-stances indicate that it is unable
to exercise "significant influence" over the
investee.
Score: 0 out of 1 No
Item 40
 Shares received in lieu of cash dividend are
recorded as
Response: Income at market value of the
shares received.
Correct answer: Income at market value of the
shares received.
Score: 1 out of 1 Yes
Item 41
 The impairment model under PFRS 9 is
referred to as the expected credit loss model.
Response: True
Correct answer: True
Score: 1 out of 1 Yes
Item 42
 Solo Co. purchased ₱300,000 of bonds for
₱315,000. The securities are to be held until
maturity to collect the contractual cash flows.
The entry to record the investment includes
Response: a debit to Held-for-Trading
Securities at ₱300,000.
Correct answer: a debit to Investment in bonds
measured at amortized cost for ₱315,000.
Score: 0 out of 1 No
Item 43
 Which of the following is most likely not a
condition before a transfer of receivables is
accounted for as a sale?
Response: The transferor does not maintain
effective control over the assets through an
agreement to repurchase the assets before
their maturity.
Correct answer: The transferor's obligation
under the recourse provisions can be
reasonably estimated.
Score: 0 out of 1 No
Item 44
 When stock rights are exercised, the initial
carrying amount of the new fair value through
other comprehensive securities includes
Response: subscription price plus the carrying
value of the rights exercised.
Correct answer: subscription price
Score: 0 out of 1 No
Item 45
 PAS 28 generally applies when the level of
ownership of another company is at what
percentage?
Response: 20%-50%
Correct answer: 20%-50%
Score: 1 out of 1 Yes
Item 46
 Transaction costs include
Response: Debt premiums or discounts
Correct answer: Fees and commission paid to
agent, levies by regulatory authorities, transfer
taxes and duties
Score: 0 out of 1 No
Item 47
 When an investor uses the equity method to
account for investments in common stock, cash
dividends received by the investor from the
investee should be recorded as
Response: dividend revenue.
Correct answer: a deduction from the
investment account.
Score: 0 out of 1 No
Item 48
 According to PFRS 9 Financial Instruments,
investments in debt securities that are
classified at amortized cost are generally
recorded at
Response: maturity value.
Correct answer: fair value at initial recognition
plus brokerage and other fees.
Score: 0 out of 1 No
Item 49
 If the financial asset is held for trading or the
financial asset is measured at fair value
through profit or loss, transaction costs directly
attributable to the acquisition shall be
Response: Capitalized as cost of the financial
asset
Correct answer: Expensed immediately when
incurred
Score: 0 out of 1 No
Item 50
 Which of the following may be used to
compute for the net proceeds from the
discounting of a note receivable?
Response: Maturity value multiplied by the
Discount
Correct answer: Maturity value less the
Discount
Score: 0 out of 1 No
Item 51
 All of the following financial assets shall be
measured at fair value through profit or loss
except
Response: Financial assets at amortized cost
Correct answer: Financial assets at amortized
cost
Score: 1 out of 1 Yes
Item 52
 What is the effect of split up?
. earnings of ₱300,000 and paid dividends of
Response: increase in number of shares and
decrease in carrying value per share.
Correct answer: increase in number of shares
and decrease in carrying value per share.
Score: 1 out of 1 Yes
Item 53
 Which of the following is a method to generate
cash from accounts receivable?
Response: Assignment (Yes); Factoring (No)
Correct answer: Assignment (Yes); Factoring
(Yes)
Score: 0 out of 1 No
Item 54
 A financial asset is held for trading(choose the
incorrect one)
Response: It is derivative that is designated as
an effective hedging instrument.
Correct answer: It is derivative that is
designated as an effective hedging instrument.
Score: 1 out of 1 Yes
Item 55
 Under PFRS, which of the following is not a
category of financial assets?
Response: Financial assets held for sale
Correct answer: Financial assets held for sale
Score: 1 out of 1 Yes
Item 56
 Securities classified as financial asset
measured at amortized cost are reported at
Response: acquisition cost plus amortization of
a discount.
Correct answer: acquisition cost plus
amortization of a discount.
Score: 1 out of 1 Yes
Item 57
 Dane, Inc., owns 35% of Marin Corporation.
During the calendar year 2020, Marin had net
₱30,000. Dane mistakenly recorded these
transactions using the fair value method rather
than the equity method of accounting. What
effect would this have on the investment
account, net income, and retained earnings,
respectively?
Response: Understate, overstate, overstate
Correct answer: Understate, understate, Score: 1 out of 1 
understate
Score: 0 out of 1 No

Item 58
 Which of the following may result to the
derecognition of a receivable?
Response: The receivable is transferred and
the transferor retains control over the
transferred receivable.
Correct answer: The contractual rights to the
cash flows from the receivable expire and the
receivable is impaired.
Score: 0 out of 1 No

Item 59
 When the accounts receivable of a company
are sold outright to a company that normally
buys accounts receivable of other companies
without recourse, the accounts receivable have
been
Response: factored.
Correct answer: factored.
Score: 1 out of 1 Yes

Item 60
 Cash received in lieu of stock dividends is
accounted for as
Response: dividend income
Correct answer: If the stock dividends are
received and subsequently sold and gain or
loss is recognized.
Score: 0 out of 1 No

Item 61
 According to PFRS 9 Financial Instruments,
investments in debt securities classified under
the amortized cost measurement category
should be recorded on the date of acquisition
at
Response: fair value plus brokerage fees and
other costs incident to the purchase.
Correct answer: fair value plus brokerage fees
and other costs incident to the purchase.