KALINGA STATE UNIVERSITY Doc. Ref.

No: CBEA-TQ-05
COLLEGE OF BUSINESS, ENTREPRENEURSHIP & Effectivity Date:
ACCOUNTANCY Revision No. 1.0
TEST QUESTIONS Page No. Page 1 of 10

MOCKBORD
THEORY OF ACCOUNTS
Midterm Examination

Name: Score: Date:

Directions: Choose only one answer for each item that follow and write, in CAPITAL LETTER, the letter of
your choice on the space provided below. Strictly NO ERASURES ALLOWED.
1. 21. 41. 61. 81.
2. 22. 42. 62. 82.
3. 23. 43. 63. 83.
4. 24. 44. 64. 84.
5. 25. 45. 65. 85.
6. 26. 46. 66. 86.
7. 27. 47. 67. 87.
8. 28. 48. 68. 88.
9. 29. 49. 69. 89.
10. 30. 50. 70. 90.
11. 31. 51. 71. 91.
12. 32. 52. 72. 92.
13. 33. 53. 73. 93.
14. 34. 54. 74. 94.
15. 35. 55. 75. 95.
16. 36. 56. 76. 96.
17. 37. 57. 77. 97.
18. 38. 58. 78. 98.
19. 39. 59. 79. 99.
20. 40. 60. 80. 100.

1. An entity shall present

a. the statement of financial position more prominently than other statements.
b. the statement of comprehensive income more prominently than the other statements.
c. each financial statement with equal prominence
d. the statement of cash flows more prominently than the other statements.
2. An entity shall disclose
a. all of the measurement bases and the accounting policy choices available to the entity (i.e.
specified in the PFRS for SMEs) irrespective whether they were used by the entity in preparing
its financial statements.
b. the measurement bases used in preparing the financial statements and the accounting policies
used that are relevant to an understanding of the financial statements.
c. the measurement basis used on preparing the financial statements.
d. all the measurement bases and the accounting policy choices available to the entity irrespective
of whether they were used by the entity in preparing its financial statements.
3. Which of these terms cannot be used to describe a line item in the statement of comprehensive income?
a. revenue
b. gross profit
c. profit before tax
d. extraordinary gain
e. none of the above
4. Which of the following is not considered a basic financial instrument for SMEs?
a. cash and bank accounts
b. commercial paper and bills
c. bonds and loans payable
d. options and warrants
5. Which is an incorrect part of the due process of approving PFRS?
a. consideration of the pronouncement of the IASB
b. formation of a task force, when deemed necessary, to give advice to FRSC
c. issuing an exposure draft for comment within a period of at least 60 days
d. approval of a standard by at least five of the FRSC members
6. Under PFRS. which of the following is the first step within the hierarchy of guidance to which management
refers, and whose applicability at considers, when selecting accounting policies?
 KALINGA STATE UNIVERSITY Doc. Ref. No: CBEA-TQ-05
COLLEGE OF BUSINESS, ENTREPRENEURSHIP & Effectivity Date:
ACCOUNTANCY Revision No. 1.0
TEST QUESTIONS Page No. Page 2 of 10

a. consider the most recent pronouncements of other standard-setting bodies to the extent they do
not conflict with PFRS or Conceptual Framework.
b. apply a standard from PFRS if it specifically relates to the transaction, other event, or condition.
c. consider the applicability of the definitions, recognition criteria, and measurement concepts in
the Conceptual Framework
d. Apply the requirements in PFRS dealing with similar and related issues.
7. Under the percentage of completion method, the Progress Billings account is a
a. contra asset account
b. contra noncurrent asset account
c. noncurrent liability account
d. revenue account
8. A construction company signed a contract to build over a period of two years, and with this contract also
signed a maintenance contract for five years. Both contracts are negotiated as a single package and are
closely interrelated to each other. The two contracts should be
a. combined and treated as a single contract
b. segmented and considered two separate contracts
c. recognized under the full cost recovery method
d. treated differently, the building contract under the full cost recovery method and the
maintenance cost under the percentage of completion method.
9. Disclosures of accounting policies include
a. leases-operating lease and finance lease method
b. equity capital analyzed as paid in capital, additional paid in capital and reserves
c. composition of property, plant and equity
d. classification of inventories such as merchandise, production supplies, materials, work in
progress and nonfinancial disclosures.
10. Which of these classifications is required or reporting of expenses by all not-for-profit organizations?
a. natural classification in the statement of activities or notes to the FS
b. Functional classification in the statement of activities or notes to the FS
c. functional classification in the statement of activities and natural classification in a matrix format
in a separate statement
d. functional classification in the statement of activities and natural classification in the notes to FS.
11. Which of these describe the behavior of (1) annuity and (2) life income fund?
a. (1) fixed fund (2) variable fund
b. (1) variable fund (2) fixed fund
c. Both are fixes
d. both are variable
12. For a private NPO, when a donor’s conditional promise to give considered unconditional?
a. only when the condition is substantially met
b. when the probability that the condition will not be met is remote
c. when the conditional promise is made
d. when the cash or other asset promised is received
13. An entity had a plantation forest that is likely to be harvested and sold in 30 years. The income should be
accounted for in which of the following?
a. no income should be reported annually until the first harvest and sale in 30 years.
b. income should be measured annually and reported using a fair value approach that recognizes
and measures biological growth
c. income should be measured in accordance with the accounting method used regarding
property, plant and equipment
d. the plantation forest should be valued every 5 years and the increase in value should be shown
in the statement of recognized gains and losses
14. In a troubled debt restructuring in which the debt is continued with modified terms and the carrying amount
of the debt is less than the total future cash flows,
a. a loss should be recognized by the debtor
b. a gain should be recognized by the debtor
c. a new effective interest rate must be computed
d. no interest expense or revenue should be recognized in the future
15. Toto Corporation prepares its financial statements in accordance with the PFRSs. Which of the following
items is required disclosure on the income statement?
a. revenues, cost of goods sold, and advertising expense
b. finance costs, tax expense, and income
c. operating expense, non-operating expense, and extraordinary items
d. gross profits, operating profits, and net profits
16. Separate line items in an analysis of expenses by nature include
a. purchases of materials, transport costs, employee benefits, depreciation, extraordinary items
b. purchases of materials, distribution costs, administrative costs, employee benefits, depreciation,
taxes
c. depreciation, purchases of materials, transport costs, employee benefits and advertising costs
d. cost of sales, administrative costs, transport costs and distribution costs
17. Expected results in government budgeting
a. refer to the services, products or benefits accruing to the public estimated in terms of
performance target.
b. functions and activities necessary for the performance of a major purpose for which a
government agency is established.
c. component of a program covering homogenous group of activities that result in the
accomplishment of an identifiable output
d. actual assets of any government agency such as cash, receivables, land and building
18. government assistance includes all of the following, except
a. free technical advice
b. provision for guarantee
c. government procurement policy that is responsible for a portion of the entity’s sales
19. It is a continuing appropriation for an indefinite period in excess of one fiscal year
a. Annual appropriation
b. Continuing appropriation
c. Multi-year appropriation
d. No-year appropriation
20. It is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
assets and obligations for the liabilities relating to the arrangement.
a. joint operation
b. joint venture
c. joint asset
d. joint entity
21. What is the method of accounting for investment in joint venture?
a. cost method
b. equity method
c. consolidation method
d. fair value method
22. The installment method of accounting may be used if the
a. installments are due in different years
b. percentage of completion method is inappropriate
c. collection period extends over more than 12 months
d. ultimate amount collectible is indeterminate so that collection is not reasonably assured
23. Dividends received from a life insurance policy of a director where the entity is the beneficiary should be
recognized as
 a. income
b. realized gain
c. reimbursement asset
d. deduction from insurance expense
24. The criteria for recognition of revenue at the completion of production of precious metals and farm products
include
a. an established market with quoted prices
b. low additional costs of completion and selling
c. units are interchangeable
d. all of these
25. Occasionally, a franchise agreement grants the franchisee the right to make future bargain purchases of
equipment or supplies. When recording the initial franchise fee, the franchisor
a. increase revenue recognized from the initial
b. franchise fee by the amount of the expected future purchases
c. record a portion of the initial franchise fee as unearned revenue which will increase the selling
price when the franchisee subsequently makes the bargain purchases.
d. defer recognition of any revenue from the initial franchise fee until the bargain purchases are
made
e. none of these
26. Alternative methods exist for the measurement of pension obligation. Which measure requires the use of
future salaries in computation?
a. vested benefit obligation
b. accumulated benefit obligation
c. projected benefit obligation
d. restructured benefit obligation
27. A corporation has a defined-benefit plan. A pension liability will result at the end of the year if the
a. projected benefit obligation exceeds the fair value of the plan assets
b. fair value of the plan assets exceeds the projected benefit obligation
c. amount of employer contributions exceeds the pension expense
d. amount of pension expense exceeds the amount of employer contributions
28. All of the following are characteristics of a derivative, except
a. it is acquired for the purpose of generating a profit form short-term fluctuations in market factors
b. its value changes in response to the change in a specified underlying
c. it requires no initial investment or an initial investment
d. it is settled at a future date
29. In translating foreign subsidiary’s financial statements, the weighted average exchange rate for the current
year would be appropriate exchange rate for translating which of the following?
a. sales to customers
b. wages expense
c. both sales to customers and wages expense
d. neither sales to customers nor wages expense
30. In accounting for share-based compensation, what interest rate is used to discount both the exercise price
of the option and the future dividend stream
a. the entity’s known incremental borrowing rate
b. the current market rate that entities particular industry use to discount cash flows
c. the risk-free interest rate
d. any rate that entities can justify as being reasonable
31. All of the following are counterbalancing errors, except
a. understatement of prepaid rent
b. overstatement of sales
c. understatement of interest expense due to discount amortization
d. understatement of direct labor
32. Which of the following is not a notional of a derivative contract?
a. principal amount of bank loan
b. number of kilos
c. total amount of foreign currency
d. commodity price
33. Prior period errors
a. are corrected through current profit or loss
b. are corrected through accumulated profit or loss
c. do not cause misstatements in current period FS
d. do not reverse themselves in the future in all circumstances
34. The factors that determine whether the functional currency of the foreign operations is the same as that of
the reporting entity include all of the following, except
a. whether the foreign operation is an extension of the reporting entity’s business
b. the proportion of the foreign operation’s transactions with the reporting entity
c. the nature of cash flows of the foreign operation
 d. the legal structure of foreign operation, whether associate, subsidiary, joint venture or branch
35. What is the common measurement bases used to measure FS elements of SMEs?
a. historical cost and fair value
b. historical cost, current cost and fair value
c. historical cost, present value and fair value
d. historical cost, current cost, present value and fair value
36. Which method is used by SMEs in recognizing revenue from rendering services?
a. installment method
b. cost recovery method
c. percentage of completion method
d. accrual method
37. Which model is required in accounting for basic financial instruments of SMEs?
a. Cost Model
b. Amortized Cost Model
c. Revaluation Model
d. Fair Value Model
38. Entities considered as holders of secondary licenses issued by a regulatory agency are not considered
SMEs. Which of the following is not among this type of entities?
a. public utility companies
b. insurance and pre need companies
c. security dealer or broker and mutual fund companies
d. commercial banks, investment house and financing companies
39. All of the following could be valid reasons why the expected revenue from a fixed price construction
contract has increased from the original contract price, except
a. the costs in the contract have increased and the contract includes cost escalation clauses
b. the contractor has incurred additional costs due to errors made by its employees
c. the contractor has agreed variations to the contract with the client
d. the contractor would receive incentive payment if work continues ahead of schedule and it is
probable that specified performance standard are met or exceeded.
40. Which of the first item in the notes to financial statements?
a. summary of significant accounting policies
b. statement of compliance with the standards
c. supporting information for items presented in the financial statements
d. other disclosures, including contingent liabilities, unrecognized contractual commitments and
nonfinancial disclosures.
41. Which is the correct order of the following stops in the accounting cycle?
Step 1: Preparation of financial statements
Step 2: Making closing entries in the general journal
Step 3: Posting transaction entries in the general ledger
Step 4: Making reversing entries in the general journal
A. 2,3,4,1 c. 2,4,3,1
b. 3,1,2,4 d. 3,1,4,2
42. Which of the following shall be treated as part of PPE according to PAS 38 on intangible assets?
a. Operating system c. digitally stored database
b. Application software d. Outsource online program
43. Based on PIC rules (June 2013), the cost of demolition of unwanted building purchased as part of a parcel
of land shall be charged to
a. Profit or loss
b. Profit or loss (preferred treatment); cost of land (alternative treatment)
c. Cost of land (preferred treatment); cost of new building (alternative treatment)
d. Cost of new building (preferred treatment); cost of land (alternative treatment)
44. Which of the following is the proper way to report a contingent asset when its realization is virtually certain?
a. As an asset c. As unearned revenue
b. Disclose only d. Research and development
45. PFRS 13 on “Fair Value Measurement” sets the rules on
I) How to measure fair value
II) What to measure at fair value
III) When to measure fair value
IV) How to account for subsequent changes in fair value
46. What item appears first on the statement of cash flows prepared using the direct method?
a. Net income c. Retained earnings
b. Depreciation d. Cash receipts from customers
47. Which of the following is not listed under the “faithful representation” characteristics of financial information
based on the Conceptual Framework of Financial Reporting?
a. Prudence c. Completeness
b. Neutrality d. Freedom from error
48. Determine the true statement regarding IFRS when referred collectively.
 a. The term “IAS” generally covers “IFRS”
b. The term “IFRS” generally covers “IAS”
c. The term “IAS” generally covers “IFRIC”
d. The term “IFRIC” generally covers “IFRS”
49. Dividends in the form of noncash assets are measured at
a. Fair value of the assets distributed
b. Carrying amount of the assets distributed
c. Either the carrying amount or fair value of the assets distributed
d. Neither the carrying amount nor fair value of the assets distributed
50. The investor’s interest income for a period would be lowest if the bond is purchased at
a. in between interest payment dates
b. At the face value of the bonds
c. A discount
d. A premium
51. In partnership
a. Management consists of the board of directors
b. Profits are always divided equally among partners
c. Dissolution results when a partner leaves the partnership
d. No partner is liable for more than a proportion of the company’s debts
52. Under PFRS 11, joint arrangements that are joint ventures (which were ‘jointly controlled entities’ under the
PAS 31) are accounted for under
a. Cost method in accordance with PAS 39
b. Equity method in accordance with PAS 28
c. Fair value method in accordance with PFRS 9
d. Proportionate consolidation method in accordance with PAS 31
53. Under Section 5 of RA 9298, who shall appoint the members of the Professional Regulatory Board of
Accountancy?
a. The chairmen of the Board of Accountancy
b. The president of the Republic of the Philippines
c. The chairperson of Professional Regulations Commission
d. The president of Philippine Institute of Certified public Accountants
54. The following statements are based on PFRS (Non-current Assets Held for Sale and Discontinued
Operations):
Statement I: An entity shall classify a non-current asset or disposal group as held for sale of its carrying
amount will be recovered principally through a sale transaction rather than though continuing use.
Statement II: an extension of the period required to complete a sale does not preclude an asset or
disposal group from being classified as held for sale if the delay is caused by events or circumstances
beyond the entity’s control and there is sufficient evidence that the entity remains committed to tis plan
to sell the asset (or disposal group).
Statement III. An entity shall measure a non-current asset or disposal group classified as held for sale
at the lower of its carrying amount and fair value less costs to sell.
a. Only statement I is false c. Only statement III is true
b. Only statement II is false d. All of the statements are true
55. Which of the following is least likely to be included in the cost of inventory?
a. Freight In c. Purchase cost of goods
b. Cost to store goods d. Excise tax on goods purchased
56. Which of the following statements are correct according to PAS 41 (Agriculture)?
Statement I: A biological asset shall be measured on initial recognition and at the end of each reporting
period at its fair value less costs to sell without exception.
Statement II: Agricultural produce harvested from an entity’s biological assets shall be measured at its
fair value less costs to sell at the point of harvest.
a. I only c. Both I and II
b. II only d. Neither I nor II
57. Which of the following components of other comprehensive income should not be recycled to profit or loss?
I. Changes in revaluation surplus
II. Changes in the fair value of “AFS” financial assets
III. Actuarial gains and losses on defined benefit plans
IV. Gains and losses arising from translating the financial statements of foreign
a. I and II only c. I, II and III only
b. I and III only d. I, II, III and IV
58. What financial statement does not involve a distinct period of time?
a. Statement of cash flows
b. Statement of changes in equity
c. Statement of financial position
d. Statement of comprehensive income
59. Which of the following is not a function of the PFRS Conceptual Framework (2010)?
a. To provide a basis for the use of judgment in resolving accounting issues
 b. To facilitate the consistent and logical formulation of Philippine Financial Reporting Standards
c. To address the concepts underlying the information presented in general purpose financial
statements
d. To set out recognition, measurement, presentation and disclosure requirements dealing with
transactions and other events and conditions that are important in general purpose financial
statements.
60. The component of defined benefit cost include all of the following, except
a. Service cost c. Remeasurements
b. Net interest d. Plan contributions
61. The following are based on PAS 16 (Property, plant and equipment):
Statement I: An entity is required to measure the residual value of an item of property, plant and
equipment as the amount it estimates it would receive currently for the asset of the asset were already
of the age and in the condition expected at the end of its useful life.
Statement II: An entity is required to determine the depreciation charge separately for each significant
part of an item of property, plant and equipment.
Statement III: If fair value can be measured reliably, an entity should carry all items of property, plant
and equipment of a class at a revalued amount, which is the fair value of the items at the date of the
revaluation less any subsequent accumulated depreciation and accumulated impairment losses.
a. Only statement I is true
b. Only statements I and II are true
c. Only statements II and III are true
d. All of the above statements are true
62. The failure to record an accrued expense at year-end will result in overstatement errors of
Net income Working capital Cash
a. No No Yes
b. No Yes No
c. Yes No No
d. Yes Yes No
63. The modified accrual basis in accounting for government transactions means
a. Income is recognize when received while expenses are recognized when incurred
b. Income is recognize when earned while expenses are recognized when paid
c. Income is recognize when received while expenses are recognized when paid, except for
transactions that are required by law to be accounted for under another basis
d. Income is recognized when earned while expenses are recognized when incurred, except for
transactions that are required by law to be accounted for under cash or another basis.
64. In the context of PFRS 13, the term “fair value” is essentially considered as an:
a. Exit price c. Re-entry price
b. Entry price d. Transaction price
65. Under the PFRS Conceptual Framework (2010), which of the following is considered fundamental
characteristic rather than enhancing characteristics of financial information?
a. Timeliness c. Understandability
b. Verifiability d. Faithful representation
66. Which of the following items shall be excluded in estimating futures cash flows in determining the value in
use of an asset?
a. Cash inflows or outflows from financing activities or income tax receipts or payments
b. Projections of cash inflows from the continuing use of the asset
c. Projections of cash inflows that are necessarily incurred to generate the cash inflows from continuing
use of the asset
d. Net cash flows to be received (or paid) for the disposal of the asset at the end of its useful life
67. An entity received an advanced payment for special order goods that are to be manufactured and delivered
within six months. The advanced payment is presorted in the statement of financial position as
a. Deferred charges c. Contra asset account
b. Current liability d. Noncurrent liability

68. The following statements are based on PAS 28 (Investment in Associates):\

Statement I: An investment in an associate shall be accounted for using the equity method (benchmark)
or cost method (alternative).
Statement II: An investor shall discontinue the use of equity method from the date when it ceases to
have significant influence over an associate and shall account for the investment in accordance with
PAS 39.
Statement III. On the loss of significant influence, the investor shall measure at historical cost any
investment the investor retains in the former associate.
a. Only statement I is false c. Only statement III is true
b. Only statement II is true d. All of the statements are false
69. Which of the following items is an example of investment property?
a. Property that is leased to another entity under a finance lease
b. Property that is being constructed or developed on behalf of third parties
 c. Property that is being constructed or developed for future use as investment property
d. Property held for short-term sale in the ordinary course of business
70. What is the authoritative status of the Conceptual Framework?
a. It has the highest level of authority. In case of a conflict between the Framework and as Standard
Interpretation, the Framework overrides the Standard or Interpretation.
b. If there is as Standard or Interpretation that specifically applies to a transaction, it overrides the
Framework. In the absence of a Standard or an Interpretation that specifically applies, the Framework
should be followed.
c. If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the
Framework. In the absence of a Standard or an Interpretation that specifically applies to a transaction,
management should consider the applicability of the Framework in developing and applying and
accounting policy which results in information that is relevant and reliable.
d. The Framework applies when FRSC developers new or revised Standards. An enterprise is never
required to consider the framework.
71. Ordinary shares issued as part of a business combination are included in the EPS calculation from
a. The beginning of the accounting period
b. The date of acquisition
c. The end of the accounting period
d. The midpoint of the accounting year
72. When an enterprise makes a bonus issue/stock split/stock dividend or a right issue then
a. The previous year’s EPS is not adjusted for the issue
b. The previous year’s EPS is adjusted for the issue
c. Only a note of the effect on the previous year’s EPS is made
d. Only the diluted EPS for the previous year is adjusted
73. In calculating whether potential ordinary shares are dilutive, the profit figure used as the “control number” is
a. Net profit after taxation (including discontinued operations)
b. Net profit from continuing operations
c. Net profit before tax (including discontinued operations)
d. Retained profit for the year after dividends
74. The process of allocating shareholders equity to various classes of share capital for purposes of book
value per share computation is most simplified by which of the following?
a. Total SHE-Preference SHE=Ordinary SHE
b. Total SHE-Ordinary SHE=Preference SHE
c. Ordinary SHE + Preference SHE= Total SHE
d. Total SHE + Preference SHE= Ordinary SHE
75. For purposes of book value per share computation, if preference shares are participating, ordinary shares
shall be given one year dividends using the
a. Lowest preference dividend rate c. Average preference dividend rate
b. Highest preference dividend rate d. Not given any dividend
76. Equity-settled share-based payments are recognized as
a. Increase in equity c. Expense
b. Liability d. A and B
77. When share options issued to employees are forfeited, the entity shall
a. Recognize loss for the unamortized balance of the share options
b. Recognize gain for the unamortized balance of the share options
c. Make a transfer from one component of equity to another
d. Do nothing
78. Modifications of terms or conditions on which the equity instruments were granted are accounted for
a. Retrospectively
b. Only in the period of modification
c. Only if they are beneficial to the employee
d. Only if they are beneficial to the entity
79. The incremental fair value resulting from a modification of terms or conditions is recognized
a. As loss in the period of modification
b. As additional expense over the remainder of the vesting period
c. Directly in equity as a transfer form one equity component to another
d. Not recognized
80. Legal capital is the portion of contributed capital that cannot be distributed to the owners during the lifetime
of the corporation unless the corporation is dissolved and all of its liabilities are settled first. For no-par
value shares legal capital is
a. The aggregate par value of shares issued and subscribed
b. The total consideration received or receivable from shares issued or subscribed
c. The aggregate stated value of shares issued and subscribed
d. The aggregate stated market of shares issued and subscribed
81. Treasury shares are accounted for at
a. Cost c. Market value
b. Par value d. Fair value
82. Redeemable preference shares are classified by the issuer as
a. Financial liability
b. Own equity, presented in shareholders’ equity
c. A or B
d. Reduction of share capital in shareholders’ equity
83. According to the PFRSs, the date of declaration of a dividend is
a. The date the dividends are declared by management
b. The date the dividends are declared by management is approved by a relevant authority
c. The earlier of A and B
d. A or B
84. Non-current assets declared as property dividends are
a. Reclassified as “non-current assets held for distribution to owners” if the conditions in PFRS 5 are
met
b. Reclassified as currents assets
c. Not reclassified but presented separately from other assets
d. Not reclassified but disclosed only
85. This causes the profit determined under PFRSs to be greater than the taxable profit determined under tax
laws
a. Deductible temporary difference c. Deferred tax asset
b. Taxable temporary difference d. Deferred tax liability
86. It is the sum of the net changes in deferred tax liabilities and deferred tax assets during the period
a. Income tax expense c. Deferred tax expense
b. Current tax expense d. Deferred tax expense
87. If the current tax expense is greater than the income tax expense during the period, there must be a
a. Deferred tax benefit c. Income tax expense
b. Deferred tax expense d. Prepaid income tax
88. When the lease qualifies under the “major part of the economic life” criterion, the leased asset is
depreciated
a. Over its useful life c. Over the shorter of a and b
b. Over the lease term d. Not depreciated
89. A lessor’s gross investment in as finance lease is computed as
a. Minimum lease payments plus unguaranteed residual value
b. Present value of (a)
c. Difference between (a) and (b)
d. Sum of (a) and (b)
90. If the lessor recognizes rent income, then late the lease must have been
a. Finance lease c. A or B
b. Operating lease d. None of these
91. When sale and leaseback results to finance lease,
a. Any gain or loss is recognized immediately
b. Any gain or loss is deferred
c. Any loss is deferred while any gain is recognized immediately
d. Any gain is deferred while any gain is recognized immediately
92. All of the following are components of the defined benefit cost, except:
a. Unvested past service cost c. Loss on settlement
b. Interest on the effect of the asset ceiling d. Return on plan assets
93. According to PAS 19, contributions to a defined benefit plan are recognized
a. At each year-end
b. When an employer makes those contributions
c. When an employee has rendered service in exchange for those contributions
d. At the beginning of each reporting period
94. Under PAS 37, a liability of uncertain timing or amount is the best described as
a. A provision
b. An obligating event
c. An accrual
d. A contingent liability
95. All of the following are estimated liabilities except
a. liability for vacation pay c. product warranty liability
b. payroll liabilities d. property tax liability
96. Purchase agreements are
a. estimates c. liabilities
b. commitments d. contingencies
97. A customer is injured using a company’s product. The potential liability that may result is called a (n)
a. contingent liability c. definitely determinable liability
b. estimated liability d. estimated warranty liability
58. A contingent liability is recorded in the accounting records
a. if the contingency has not been described already in the notes to the financial statements.
 b. if it possibly will become an actual liability and the exact amount is known
c. under no circumstances
d. if it probably will become an actual liability and the amount can be reasonably estimated.
98. Liabilities that might arise from which of the following probably would be disclosed only in the notes to the
financial statements?
a. possible warranty claims
b. Guarantees of the debt of other companies
c. Possible bankruptcy of an important customer
d. Estimated income taxes for the current year
99. Which of the following is a contingent liability?
a. Note payable with interest included in face amount
b. Excise tax payable
c. Property tax liability
d. Disputed additional tax assessment
100. The ceiling of the threshold for total assets of an SME qualifier is
a. 400 million c. 250 million
b. 3 million d. 250 million

Prepared by: Noted by:

JAYMEE A. OS-AG, CPA RUTH ANN MARIE A. AQUINO, MPA

CBEA Faculty CBEA Dean