FAR

Conservatism is best describe as selecting an alternative that 

Understates assets and net income

Has the least favorable impact on owner’s equity
Overstates liabilities
Is least likely to mislead users of financial information

An implicit assumption of qualitative characteristic of understability is that 

Information must be decision-useful to all potential users of financial statements.
General-purpose financial reporting is the primary source of information for users of financial
statements
Users need reasonable knowledge of business and financial accounting matters to understand
the information in the financial statements.
All of the Above

Qualitative characteristic 
Are considered either fundamental or enhancing
Contribute to the decision-usefulness of financial reporting information
Distinguish better information from inferior information for decision-making purpose.
All of the choices are correct.

The overriding criterion by which accounting information can be judge is that of 
Usefulness for decision-making
Freedom from bias
Timeliness
Comparability

The total cost of treasury shares shall be reported as 

Deduction from shareholders’ equity
Deduction from retained earnings
Asset
Deduction from share premium

Which is not a characteristic of liability? 

It represents a probable future sacrifice of economic benefit.
It must be payable in cash.
It arises from present obligation to other entity.
It results from past transaction or events.

A provision is 
An event which is not recognized because it is not probable or cannot be measured reliably.
An event which is probable and measurable.
An event which is probable, possible or remote and measurable.
An event which is probable but not measurable.
After initial recognition, an equity shall measure a note payable at 
Amortized cost
Fair value through profit or loss
Either amortized cost or fair value through profit or loss
Either amortized cost or fair value through other comprehensive income

When an entity failed to recognize amortization of discount on bond payable for the
current year, what is the effect of the error on liabilities and equity, respectively? 

Overstated and Overstated

Overstated and Understated
Understated and Understated
Understated and Overstated

Magazine subscriptions collected in advance are treated as 

A contra account to magazine subscriptions receivable
Deferred revenue in the liability section
Deferred revenue in the shareholders’ equity section
Magazine subscription refund in the income statement in the period collected

After initial recognition, bonds payable shall be measured at 

Amortized cost using the effective interest method

Fair value through profit or loss
Either amortized cost using the effective interest method of fair value through other
comprehensive income
Either amortized cost using the effective interest method or fair value through profit or loss

In the perpetual inventory system, two entries are normally made to record each sales
transaction. The purpose of these entries is best described as follows: 
One entry updates the subsidiary ledger and the other updates the general ledger.
One inventory records the cost of goods sold and the other reduces the balance in the inventory
account.
One entry records the purchases of merchandise and the other records the sale.
One entry recognizes the sales revenue and the other recognizes the costs of goods sold.

Which is false regarding inventory measurement? 

Inventories should be measured at lower of cost or net realizable value, item by item.
Net realizable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
The cost of inventories shall be determined by using either FIFO method, LIFO method or
Weighted Average method.
The cost method for inventories that are not ordinarily interchangeable and goods or services
produced and segregated for specific projects is the specific identification.

When a petty cash fund is used, which of the following is true? 

The balance of the petty cash fund should be reported on the balance sheet as a long-
investment.
The petty cashier’s summary of petty cash payments serves as a journal entry that is posted to
the appropriate general ledger account.
The reimbursement of the petty cash fund should be credited to the cash account.
Entries that include a credit to the cash account should be recorded at the time the payments
from the petty cash fund are made.

Accounts receivable are initially measured at and subsequent valued at . 

Face Value : Face Value
Face Value : Net Realizable Value
Face Value : Maturity Value
Market Value : Net Realizable Value

1,680,000
1,920,000
2,400,000
2,440,000

A fire destroyed Wet Company’s inventory on October 31. On January 1, the inventory
has a cost of 2,500,000. During the period January 1 to October 31, entity had net
purchases of 7,500,000 and net sales of 15,000,000. Undamaged inventory at the
date of fire had a cost of 150,000. The markup cost is 66 2/3%. What was the cost of
inventory destroyed by fire? 
1 point

3,850,000
4,000,000
1,000,000
850,000
1,825,000
1,850,000
1,950,000
1,990,000

200,000
100,000
500,000
0

Faith Company leased office space to another entity for a three-year period beginning
January 1, 2019. Under the terms of the operating lease, rent for the first year is
P1,000,000 and rent for the next two years is P1,250,000 annually. However, as an
inducement to enter the lease, Faith granted the lessee the first six months of the
lease rent free. What amount of rental income should be recognized in the 2019? *
1,000,000
1,166,667
500,000
583,333
3,306,470
4,000,000
2,637,117
None of the Above

3,685,000
3,645,000
3,600,000
3,605,000

3,515,000
3,557,000
3,455,000
3,497,000
139,500
199,500
214,500
274,500

6,000
9,000
7,000
10,000
560,000
660,000
260,000
360,000

ThinkPositive Company has an agreement to pay its sales manager a bonus of 5% of

the income after bonus and after tax. The income for the current year before bonus
and tax is P5, 250,000. The income tax rate is 30% of income after bonus. What is the
bonus of the sales manager for the current year? 
262,500
177,536
250,000
186,548

KayaMoYan Company had outstanding 7%, 10-year bond payable with face amount of
P5, 000,000. The bond was originally sold to yield 6% annual interest. The entity used
the scientific method to amortize bond premium. On January 1, 2018, the carrying
amount of the bond payable was P5, 250,000.What amount of unamortized premium
on bond payable should be reported on December 31, 2018?
225,000
215,000
172,500
52,500
P75,000 and P75,000
P135,000 and P210,000
P135,000 and P135,000
P210,000 and P75,000

195,000
150,000
120,000
155,000