QVESTION.

7-17 M ltiple choice (IAA)

t:.. 1 The statement f finnncial isoful for all of the
po. et 't' ion
·

is
v
.

following, ex?ept

a. To cornpute rate of return

b. To
'!111lyze
To evaluate
cash. inflows and
capital structure
outflows for the period
c.
d. To assess future cash flows

2. The statement of financial position provides· a basis for

all of the following, except .

a. Computing rate of return

b. Evaluating capital structure
c. Determining increase in cash due to operations
d. Assessing liquidity and financial flexibility ·

normally aimed statemen·t of

:,;3. Which.criticism is not at a

'financial position? .

a. Failure to reflect current value information

b. The extensive use of separate classification
c. An extensive use of estimate
Failure to include items of financial value
d.

/i, 4. The statement of financial position

items that are ·of financial value
a. Omits many
limited use of judgment and. estimate
.

b. Makes very
fair value for most assets and liabilities
c. Uses
correct
d. All of the choices are-

is limitation ·of the statement orfinancialposition?

5. Which a

value omitted.
a. Many [terns that are of
financia1 are

:i:?:1?:t\:??-
?..???!?tf %?.!?!i
of the statement of
d. All of these are a hm.1tat1on
financial position.
ANSWER 7-17

1.. b
2. C
·3. b
4. a
li. d

147
 Multiple choice (PAS l)
QUESTION 7-18

variability, the operating cycle 18

) 1. When there is much
\
....
measured at ·

a. The mean value

b. The median value
C. Twelve months
d. Three years
entity
.

2. The operating cycle of an

a. Is the time betwe.en the acq?isitio?.0?m?terials

entering into R process. and
their realizationm cash.
elapsed n?rmally
converting m
b. Is the period of time .

cash. ·

trade .receivables back into

c. Is a period of one year. .

experienced by
. .

to the ·seasonal
var1at1on
.

d. Refers
entities.
asset as current under all of
·
3. An entity shall classify an

-
j the following eonditions.: except· .

to realize, the asset or· intends to

a. The entity expects
consume it within the entity's normal op'erating
sell or
cycle. .
.

holds the asset for. the purpose of trading.

b. The entity
The entity expects to realize the asset within twelve
c.
.
months after the reporting period ..

d. The asset is cash or a cash equivalent that is restricted

to settle a liability for more· than twelve months after
the reporting period,
(; 4 .. An entity shall .classify a liability as current when
·
urider
all of the· following conditions, except
-
·

. .
.
.
-

a ..
The entity expects to settle the liability within the
entity's normal operating cycle.
·
·

b. The en?ityholds the liability primarilyfor the purpose · · ·

·

of trading. .

c. The liability is due to be· settled within

·
twelve months ·

af?er the reporting period. ·

d. The entity has.

a.n ??conditional right to defer
settlement of the liability for· at least twelve months
after the reporting period.

148
 , 6. Which obligations are cl
afte!8?1fied
_.

are d?e to be &ettl

d aa current if these even
the end of the 10.rethan twelve months from
t·eporti ng
Ponod? ·

a. Trade pay?bles
·

d acer
.

8 n
opera t.1ng cost ua ls e
employee and other
.

tor
b. Current portion of
·

c. Bank overdrafts interest-bearing

liabilities
d. Dividends payable

6. Current and noncurr

t
liabilities provides useMn·f re_se??ationof
In10nnation
.

assets and
·
-··

w:hen the entity

Supplies goods or
.
.

a.
·
·

se
.

rvices w?thin a clearly identifiable

.
. .

operating cycle .

b? Is a
fina1?cial
institution
c. Is a public utility
d. Is a nonprofit organization
.

k 7. A ·pres?ntationof ass?ts .·
and li a bill .

tie? mc?ea?nng
. .

f' decreasing order of Ii qui d in

. . ..
, .

?r
ity provides information that ...

.is
liabl e d more relevant
·

:re ? _than.a. current and noncurrent

p?sen?t1on for .
.,
· ·

a. Financial.
institution
Puplic utility
·

b: .

c. Manufacturing entity .

d. Service provider .

8. In the Philippines, the common practiceis to present in the

of financial
·

statement position
·

a. Current assets· before noncurrent assets, current

liabilities before· noncurrent liabilities and equity· after·
·

liabilities. ·

b. Noncurrent assets before current assete, noncurrent

liabilities before current liabilities and equity after
liabilities. .
' ·

C. Current assets before noncurrent assets, nonc?ent,'

liabilities and. equity ·a?r
·

liabilities before current

· ·

liabilitie.s. .

d. 'Noncurrerit before current

aseets a1aets, current.
liabilities before noncurrent liabilities and equity ?r
liabilities.

148
 ?.,·lve months af"-"Ul"
wit bi n ? .. ·
· " ·
·
· .
th e
·

b lit)' due 11• noncurrent

.

c1ass!tied
·

9. A fin
·

l li
re????1
·

\ shall .be
basis before
a
lonf-!:81'1X1 the
When it is
refinancedon
al state ll'lents.
a,
to re ti nance £or ·

issue of. ov.anCJ..

.
.·
..l? arretJ.OD.
·

at
bas no uu,v X .
.
..

b. When the entity .

months. b88l8 after the ?

.
. _

least twelve long-terin

When it is refinanced
on a ·

c.
of reporting period.
.
.

.ba8,18on or before
.
. .
.
.

,tong-terID
.
.

d. When it is
refinanced on ·

the end Of reporting

period-
under a
agreement ?
lop.g;ter:111
10. When an entity
breaches with the efl'ect
reportini penod. ·

the end of the

,

'- on or before demand, the· liability

that the liaqilio/ becomes payableon
·

is classified as .

.·. ·

Current Under all circumstances

a.
Noncilrrent under: all circuuistalices .

b.
h? agleed after the reporting
if ihe-lerider
c., Cu?ent of the statements not to
and before the issuance
penod
·

conseqUElnce .of the breach.

demand payment as a
after' the reporting
·

d.
·

if ?he .Iender
No?current a?ed
period to proVIde a ,grace
period for at least twelve ·

months after the reporting period.

.

ANSWER 7-18

1. C 6 ..
-
a

2·? .a 7. a

: 3? a .8. a
·

_4.· a 9: ..
_
·d· ·

5. a 10.. C
' ,-•
I

I ' ·,

·,. (
·,'

•
: <
?. -

•• -

\ '
 QUESTION7-l9 Multiple
choice (IFRS)
r. In presenting
[)
a
atat.ementof
financial position,
b.
a. Must
Must
m8;kethe
present
CUrrent and
noncurrent
an
en?ty
a&!ets and presentation.
c. choose either
Must. liabilitiesin order of liquidity.
the ci.1rrent
liquidity.
presentation, and nonourrent or the
presentation.- ·meaning free choice of ·

d. Must make the

current and .
.

except when a noncurrent presentation,

Presentation
information that is based on liquidityprovides
·reliable and more relevant. ·

2.· Assets to be sold, consumed

operating cycle
or realfaed as part of the.normal
are

a. Current assets
b. Noncurrent assets
c: Classified as current or ·noncurrent in aceor d ance with
other criteria
d. Noncurrent investments
3· Li bilities that
o:rating
cycle
an

are
entity expects
cla88i.fied as
to set tl e WI 'thin the normal

a. Noncurrent liabilities
b. Current or noncurrent liabilities .

m accordance with
other criteria
C. Current liabilities
d. Equity

In which of the statement

.

4 of financial position
..

·
section
shoul d cas h that is restnc t e d for the settlement
. .

of a
liability due 18 mon th s. after the reporting perio d be .
.

presented?

a. Current assets
b. Equity
C. Noncurrent 1·ta bilitiee
1

d. Noncurrent asse ts

t51·
 of fmancialPoaiti(I
,tateineni
Ii, In which section !II
' of the due for aettleinent
tue• t,bat ,,.re bi
ehould employment
16 montha' time be presented?
.

a. Curre·nt liabilitiea
b. Curren.t asaeta
e. Noncurrent liabilitiee
d. Noncurrent aaaeta
in ix
for rtP1118 n inonthe
6. ? entity haa a Joan
.due to. r fi
da• o?o• o to'
C time but the entity
h&I
'l'be .atitf pla
to
·

lat.-r. of
repaym Ill, two yell'l of i etat.em t ?
thia loan. In ...lrldh
o ·

1l 1
tbi loan bl p
position bould
Cu
a.. nt Uabiliti
b. Curren a .ta .

c, Noncu nt liabiliti •

d. Noncurrent aa,eta

I ,. Which th to.11ow1
th etatemeot of fi.DtUICJIAIocmam

a. In· ••went property

w1
b. Number ot ,bare 1ut""_.. ..

c. Contm,ent a i
·
nllfftM 1'v l- •QltlCY
d, Sbarea in an .
n ty v7 .·

ofth ii
8. ??b .

m1rumum info.nutio.n O .

?ocial poeitioD?

L Inve tment property

b. In .

tmetit accounted \IDdU the ? metald

,

. C? Biolotical t
d?. Contingent. liability
 9, Which of th
followin ·

rnu th
l'n th .

tem nt t fin Includ s 1t line Itern

n i11JPO itlon?
8. Con tin ne a· t
b, rop rty, plant nd quipm nt nalyz d by clas
·

h r
·

c, apit I nn'd
d. D f rr d tax rvee analyzed by clae

{) 1o. isWhich
not
etatemeiit
true?
about the
statement of financial position

a. Biological assets should be reported

of financial in the statement
position.
b. The number of
shares authorize·d forissue should be
reported in the statemen't
of financial. position or the
statement of changes in
equity or in the notes.
c. Provisions should: be recognized in the statement of
financial position. .

d. A revaluation .slirrlus on a concurrent .?ssetin the .

current year should be recognized in the income .

statement. ·
-----

ANSWER 7-191

l. d 6. C

2. a 7. a.

3. c· 8. d
4. d 9. .d
5. a 10. d

.
.

113
 ch ·? Ad p d)
U Tl
.

.i,

1. In un

,nt f in nci l p iti n

l.
m

In t t m nt
b. .otn

""t t rn nt of retained earnings

d. St t m nt of cash flows

essential characteristic of an asset?

Whi h i an

a. The claims to the benefits are legally enforceable

b. An asset is tangible
1

c. An asset is obtained at a coat ,

d. An asset provides future benefits

3. Conceptually, asset valuation accounts ?re

a. Assets
b. Neither assets nor liabilities
c. Part of shareholders' equity
d. Liabilities .

. 4. Working capital· is

a. Assets enable the entity to operate profitably

which .

. b. Capita}'whichhas been reinvested in the business. ·

c. Unappropriated retained earnings.·

d. Current assets less current liabilities. ·

The term "net assets" represents

a. Retained earnings .

b. Current assets less current liabilities

c. Total contributed capital .

d. Total assets less total liabilities

164
 'ln nti OtlC\lff n
nt 1
r/
·
·
....
..

"· ·r 1
·

C' ried and

.. ,

iz. hl C h valu , ·

b. ich in ur n , or r nt ar)
, n Iu th r 8
.
. .

in th r h 11 cur r n t f..i t ·1 '-

• ,

· h_ i
? riod by which current t a r

is detc.rmin d
.

di uish d from noncurrent

..

n
·

··

a s
h sonal nature of the busine s.
d. \?H-1:n? ere cla sified as current if these are reasonably
e pccted lo be realized in cash or consumed during
the normal operating cycle.

7. The operating cycle concept

a. Causes the distinction between current and

noncurrent to depend on cash realization within one

year.
b. Permits some assets to be classified as curtent even,
though these are than removed from
more one year
becoming cash. ·

c. Has become obsolete.

d. Affects the income statement but not the statement
of financial position.

D 8. !he b?sis.f?r cla?sifying.assets curre_nt thenon?urrent

the
as or

is the period of time normally elapsed from time

entity expends cash to the time it converts

whichever is
a. Inventory back into cash or 12_months,
shorter. .
.

back into cash 12 months, whichever

b. Receivables or

is longer. ·.
12· months,
.
.

back into 'cash

_c. Tangible fixed assets or

whichever is longer. ·

12 months,. whichever
. .

is
d. Inventory back into cash or

longer.

ANSWER 7-20

I. a ·
5 ..
d
2. d 6. d
3. b ·1. b
4. d 8. d

155
 Multiple choice
(AICPAAdapted)
QUESTION7-21
classified as current as$1lt1
1- Which shoi.ild be
; receivablenormally
a. Trade installment ,accounts of callable ·
·

months .redemption
collectible in 18
for 'the
designated ·

Cash
·

b. policy ·

Jife i.Jlsura?ce of which

.

preference sharesvalue of a
.

Cash surrender ordered, dehvel"Y

c.
machinery ·

d. A deposit on
siJC months·
within
will be made
a
current asset?
should not
beconsideted
as

2. Which 18 months in
due over
receivable
a.
Installment notesnormal trade practice
aceordance with
b. Prepaid taxes held:for trading·
Financial asset inSutance policy
c. value of life
·

d. Cash surrender
i.nclude ··
·

assets sh,ould,never,
C 3; Current
within. one year
not coliectible .· .
.

A receivable
.
.

a.
•
-1,.._eurrent tax
.

asset COJllbination '

a .busiJle88
(loodwill? in ·.

e. bond ;nvestmerit
d. Premium
paid on a .

consttllcticin
.
.
of
'to ·finance· held · ··
·
·

investments
· ·

Eq?i?.Y plant should be clasSifiedas

.

4. .

additwnal
.

,
.

1
.
.
.
.
,

I
.

current assets '

a.
and
.
I
equipment·· \

b. Property, plant. ·
·
·

Jnt;angil-leassets
Noncdnt investments
c .. ·

d,
noncunent inve,stinent?
.
.

is not a ,

Which of the following

. .

6.
of life
.

' insurancepo licy

Cash surreridei' value.
·

a. ' .

Franchise
.

b.
c ..held for ·? speculation ·

,d. A mnJring fund

.

/ ·

,.