ADVANCED FINANCIAL ACCOUNTING 3 (ACYAVA3)

GOVERNMENT ACCOUNTING

Overview of Government Accounting

1. It encompasses the processes of analyzing, recording, classifying, summarizing and
communicating all transactions involving the receipt and disposition of government funds and
property, and interpreting the results thereof.
a. Government accounting
b. Government reporting
c. Government auditing
d. Tax accounting

2. The Commission on Audit (COA) is responsible for

a. the formulation and implementation of the national budget with the goal of attaining the nation’s
socio-economic objectives.
b. receiving and keeping national funds and managing and controlling the disbursements thereof.
c. directly implementing the projects of the government.
d. promulgating accounting and auditing rules and regulations.

3. Which of the following qualitative characteristics may be sacrificed when reporting information on

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a timely basis?

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a. Relevance

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b. Reliability

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c. Substance over form
d. Faithful representation

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4. This refers to the comparability between the financial statements of different entities?
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a. Inter-comparability
b. Intra-comparability
c. Horizontal comparability
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d. Vertical comparability
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5. The implication that users must be informed of the entity’s policies, changes to those policies, and
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the effects of those changes refers to

a. Comparability
b. Completeness
c. Understandability
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d. Reliability
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The Budget Process

6. This approach to budgeting requires the justification of items in the budget irrespective of whether
they are new or carried over from the previous year.
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a. Zero-based budgeting
b. Bottoms-up budgeting
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c. Incremental budgeting
d. Bottoms-down budgeting

7. Which of the following would most likely comes first in the budget process?
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a. Budget accountability report

b. President’s enactment of the budget
c. Presentation to the Office of the President
d. Budget Call from the DBM

8. Entity A, a government entity, receives authorization to disburse funds not to exceed ₱1B in a
specified period. This event can be described as
a. Notice of Cash Allocation
b. Allotment

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 c. Appropriation

9. Entity A, a government entity, receives notice that for the current year, the maximum amount it
can spend on maintenance and other operating expenses is ₱10B. This event can be described
as
a. Notice of Cash Allocation
b. Allotment
c. Appropriation
d. Budgetication

10. It is a part, segment, unit or function of a government agency, headed by a manager, who is
accountable for a specified set of activities.
a. Responsibility Accounting
b. Responsibility Center
c. Budget Center
d. Call Center

The Government Accounting Process

11. Which of the following records is technically not considered an accounting book?
a. General Journal
b. Subsidiary Ledger

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c. Cash Disbursements Journal

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d. Registry of Appropriations and Allotments

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12. Which of the following is (are) affected when a government entity makes disbursements to settle
recorded obligations?

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a. ORS
b. RAOD rs e
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c. Journal and Ledger
d. All of these
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13. This event is recorded in the books of accounts.

a. Notice of Appropriation
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b. Notice of Allotment
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c. Notice of Cash Appropriation

d. Closing entries

14. According to the GAM for NGAs, the Registries are (choose the incorrect statement)
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a. maintained by the accounting unit of a government entity

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b. maintained by fund cluster

c. maintained for each object of expenditure, whenever the registry is used for monitoring
obligations and disbursements
d. maintained by the budget division of a government entity
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15. Which of the following is not a form of disbursement authority?

a. Allotment
b. Notice of Cash Allocation
c. Non-Cash Availment Authority
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d. Cash Disbursement Ceiling

Revenues and other receipts

16. A government entity recognizes revenue from exchange or non-exchange transactions. Which of
the following may not give rise to revenue by a government entity?
a. Receipt of military equipment as donation from a foreign government.
b. Receipt of cash donation from an international organization.
c. Receipt of free trainings and seminars regarding process technology on farming from an
international organization.
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 d. Receipt of a bequest from the king of a foreign realm

17. According to P.D. 1445, all revenues of an entity shall be remitted to the National Treasury and
included in the
a. General Fund c. National Fund
b. Special Fund d. Official Fund

18. The national government received a foreign grant conditioned on the construction of a public
infrastructure. Entity A was chosen as the implementing agency. When the national government
received the grant, the entry in the BTr’s books included a
a. credit to the “Subsidy from National Government” account.
b. debit to the “Cash – Modified Disbursement System (MDS), Regular” account.
c. credit to the “Cash in Bank-Local Currency, Bangko Sentral ng Pilipinas” account.
d. credit to the “Other Deferred Credits” account.

19. Which of the following does not give rise to revenue from assistance or subsidy?
a. Inter-agency Fund Transfer
b. Notice of Cash Allocation
c. Tax Remittance Advice
d. Non-Cash Availment Authority

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20. According to the GAM for NGAs, revenue includes only those that are received or receivable by

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the entity in its own account. Accordingly, receipts on behalf of another entity are

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a. recorded as liability.

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b. recognized as revenue.
c. recorded only in the registries but not in the books of accounts.

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d. remitted only through the use of the TRA.
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Disbursements
21. Which of the following shall certify the availability of allotment before obligations can be incurred
and disbursements are made?
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a. Budget Officer
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b. Head of Agency
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c. Chief Accountant
d. COA Auditor

22. All Disbursement Vouchers (DVs) or Payroll shall be approved by the

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a. Budget Officer
b. Head of Agency
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c. Chief Accountant
d. COA Auditor
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23. Payments of checks that are chargeable against the Treasury Account are credited to the
a. Modified Disbursement System Checks
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b. Commercial Checks
c. Advice to Debit Account
d. Cash-Modified Disbursement System (MDS) account
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24. Which of the following statements regarding the disbursement of government funds is incorrect?
a. No additional cash advance shall be given to any official or employee unless the previous cash
advance given to him is first liquidated.
b. Transfer of cash advance from one officer to another is prohibited.
c. A cash advance shall not be used to encash checks or to liquidate a previous cash advance.
d. Officials and employees authorized to travel shall be granted cash advance to cover traveling
expenses. The amount granted shall be accounted for as “Due to Officers and Employees.”

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 25. Which of the following reflects a Non-Cash Availment Authority (NCAA) mode of disbursement?
a. Accounts Payable xxx
Cash-Constructive Income
Remittance xxx
b. Accounts Payable xxx
Cash – Modified Disbursement
System (MDS), Regular xxx
c. Accounts Payable xxx
Subsidy from National Government xxx
d. None of these.

Financial assets
26. If the unadjusted balance of cash per bank statement is greater than the adjusted balance and
there no other reconciling items or errors, the difference would most certainly be caused by a
a. Credit memo c. Deposits in transit
b. Debit memo d. Outstanding checks

27. Entity A estimates a risk of loss on a recognized asset at 20%. However, Entity A can only accept
a risk of 5%. Entity A then enters into a forward contract to offset the excess risk of 15%. This
process is best described as
a. Risk management

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b. Forward hedging
c. Hedge accounting

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d. Process risk hedge

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28. The entry to record a disbursement from the petty cash fund is
a. Expense accounts
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Cash-Modified Disbursement System
(MDS), Regular xxx
b. Expense accounts xxx
Petty Cash xxx
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c. Expense accounts xxx

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Cash-Collecting Officers xxx

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d. Expense accounts xxx

Cash-Treasury/Agency Deposit, Regular xxx
e. None of these.
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29. Which of the following statements is incorrect regarding the accounting for unreleased checks by
a government entity?
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a. Unreleased checks are reverted back to cash.

b. Unreleased checks are physically cancelled.
c. The accounting procedures for unreleased checks prescribed under the GAM for NGAs apply
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only to commercial checks.

d. At the start of the year, a reversing entry is made for the unreleased checks in the previous
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year.

30. It is a hedge of the exposure to changes in fair value of a recognized asset or liability or an
unrecognized firm commitment, or an identified portion of such an asset, liability or firm
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commitment, that is attributable to a particular risk and could affect surplus or deficit.
a. Fair value hedge
b. Hedge of a recognized asset or liability
c. Cash flow hedge
d. Hedge of a net investment in a foreign operation

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 Inventories
31. Entity A, a government entity, purchases office supplies. Entity A would most likely record the
purchase
a. by debiting the Purchases account
b. as Inventory Held for Consumption
c. as Inventory Held for Distribution
d. by debiting the Office Supplies Expense account

32. Which of the following documents is prepared when issuing semi-expendable property to end-
users?
a. Requisition and Issue Slip (RIS)
b. Inventory Custodian Slip
c. Supplies Ledger Card (SLC)
d. Waste Materials Report

33. Which of the following is subsequently measured at the lower of cost and current replacement
cost?
a. Inventories held for sale
b. Inventories held for distribution
c. Inventories that are undergoing manufacturing process for completion as finished goods for

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sale.

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d. None of these

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34. The following information is available from Entity A’s (a government entity) accounting records:
Purchases ............................................ ₱530,000

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Purchase discounts ...................................
Beginning inventory ..................................
10,000
160,000
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Ending inventory ..................................... 215,000
Freight-out .......................................... 40,000
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Entity A’s cost of sales is

a. 465,000
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b. 475,000
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c. 505,000
d. 585,000

35. Entity A, a government entity, is a wholesaler of Product A, a non-unique good. The activity for
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Product A during July is shown below:

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Balance/
Date Transaction Units Cost
July 1 Inventory 2,000 ₱36.00
7 Purchase 3,000 37.00
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12 Sales 3,600
21 Purchase 5,000 37.88
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22 Sales 3,800
29 Purchase 1,600 38.11

How much is the ending inventory on July 31?

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a. 153,400
b. 156,912
c. 158,736
d. Answer cannot be determined due to insufficient information

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 Agriculture
36. Which of the following is most likely an acceptable measurement for agricultural produce
Initial measurement Subsequent measurement
a. fair value less costs to sell cost
b. fair value less costs to sell lower of cost and NRV
c. fair value lower of cost and FV less costs to sell
d. fair value less costs to sell fair value less costs to sell

37. Which of the following statements is incorrect regarding the accounting for biological assets?
a. Agricultural land used in growing agricultural produce can never qualify for recognition as
biological asset.
b. Biological asset is living animal or plant.
c. Agricultural produce is harvested product from a biological asset before any processing.
d. PAS 41 and the GAM for NGAs have the same accounting treatment for consumable and
bearer plants.

Use the following information for the next two questions:

On January 1, 20x1, the biological assets of Entity A consist of two 1-year old animals with fair value
less costs to sell of ₱1,000 each.

The following transactions occurred during the period:

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a. On July 1, 20x1, two 1-year old animals are acquired for ₱1,100 each, equal to the FVLCS on this
date.

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b. On October 1, 20x1, two animals are born. The FVLCS of a newborn on this date is ₱500.

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The FVLCS on December 31, 20x1 are as follows:
Age FVLCS
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new born ₱600
3 mos. old ₱800
1 yr. old ₱1,200
1.5 yr. old ₱1,500
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2 yrs. old ₱2,000

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38. How much is change in FVLCS due to price change?

a. 400
b. 1,200
c. 800
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d. 3,600
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39. Which of the following is most likely an acceptable measurement for agricultural produce
Initial measurement Subsequent measurement
a. fair value less costs to sell cost
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b. fair value less costs to sell lower of cost and NRV

c. fair value lower of cost and FV less costs to sell
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d. fair value less costs to sell fair value less costs to sell
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 40. Which of the following statements is incorrect regarding the accounting for biological assets?
a. Agricultural land used in growing agricultural produce can never qualify for recognition as
biological asset.
b. Biological asset is living animal or plant.
c. Agricultural produce is harvested product from a biological asset before any processing.
d. PAS 41 and the GAM for NGAs have the same accounting treatment for consumable and
bearer plants.

Use the following information for the next two questions:

On January 1, 20x1, the biological assets of Entity A consist of two 1-year old animals with fair value
less costs to sell of ₱1,000 each.

The following transactions occurred during the period:

a. On July 1, 20x1, two 1-year old animals are acquired for ₱1,100 each, equal to the FVLCS on this
date.
b. On October 1, 20x1, two animals are born. The FVLCS of a newborn on this date is ₱500.

The FVLCS on December 31, 20x1 are as follows:

Age FVLCS
new born ₱600

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3 mos. old ₱800

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1 yr. old ₱1,200

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1.5 yr. old ₱1,500

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2 yrs. old ₱2,000

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41. How much is change in FVLCS due to price change?
a. 400 rs e
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b. 1,200
c. 800
d. 3,600
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42. How much is change in FVLCS due to physical change?

a. 1,200
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b. 2,000
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c. 800
d. 3,600

Investment property
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43. Select the correct statement.

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a. A leasing company should treat all assets used in providing lease services as investment
property.
b. Investment properties that are to be disposed of without further development are treated as
investment property until they are derecognized.
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c. All investment properties held for capital appreciation will be classified as held for sale in the
long run.
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d. Investment properties being redeveloped as investment properties on behalf of third parties

are investment properties.

44. Derecognition of investment property is not required when

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a. it becomes the subject of an operating lease.

b. it is sold.
c. the property is assessed to have no future economic benefits.
d. it becomes the subject of a finance lease.

45. Which of the following properties falls under the definition of investment property?
I. Land held for long-term capital appreciation
II. Property occupied by an employee paying market rent
III. Property being constructed on behalf of third parties
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 IV. A building owned by an entity and leased out under an operating lease
a. I, II
b. II, IV
c. I, IV
d. II, III, IV

46. The distinguishing characteristic that identifies an investment property from the other assets of an
entity is?
a. Changes in fair value of the asset is recognized in surplus or deficit.
b. The property does not derive cash flows separate from the other assets of the entity.
c. Generates separately identifiable cash flows from the other assets of the entity.
d. Earns rental as part of the ordinary operations of the entity.
47. Under this model, investment properties are measured at cost less accumulated depreciation and
accumulated impairment losses.
a. Impairment loss model
b. Cost model
c. Fair value model
d. Gorgeous model

Financial statements and miscellaneous topics

48. The GAM for NGAs requires all of the following information to be displayed prominently and

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repeatedly on the face of the financial statements, except
a. Name of the related Registries used

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b. The reporting currency
c. The level of rounding-off of amounts

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d. Name of fund cluster
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49. A government entity presents payments for purchases of items of PPE in the statement of cash
flows
a. under financing activities.
b. net of withholding taxes.
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c. gross of withholding taxes.

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d. as footnote disclosure only.

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50. According to the GAM for NGAs, government entities shall present expenses in the statement of
financial performance according to the
a. function of those expenses
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b. nature of those expenses

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c. a or b, as a matter of accounting policy choice

d. neither a nor b

51. A government entity recognizes the effect of this item in surplus or deficit rather than directly in
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equity.
a. Receipt of Notice of Cash Allocation
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b. Correction of a prior period fraudulent transaction that is discovered in the current year
c. Change in accounting policy
d. The increase in the fair value of an investment that is classified as available-for-sale financial
asset
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52. Changes in accounting policies are accounted for

a. using the transitional provision, if any.
b. by retrospective application.
c. by prospective application
d. any of these

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 53. The grantor in a service concession arrangement is a
a. government entity c. controlled entity
b. private entity d. a or b

54. Which of the following is a joint venture that is classified as ‘jointly controlled assets’?
a. Two parties agree to contribute money to acquire a piece of land and subdivide it after the
acquisition. Each party will get title to its share in the subdivided lot.
b. Two parties agree to contribute capital in incorporating a new entity. The new entity will issue
shares of stocks to both parties, representing each party’s interest in the new entity.
c. Two parties agree to coproduce a product using their existing facilities. Each party bears its
own costs but share in the revenue from sales of the coproduced product.
d. Two parties agree to contribute resources to acquire a warehouse. Each of the parties shall
have equal rights over the use of the warehouse but shall share in the maintenance costs.

55. A separate set of books of accounts would most likely be established in this type of joint venture.
a. Jointly controlled operations
b. Jointly controlled journals and ledgers
c. Jointly controlled assets
d. Jointly controlled entities

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56. According to the PPSAS, a service concession asset is an asset used to provide public services

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in a service concession arrangement that

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a. the operator constructs, develops, or acquires from a third party
b. is an existing asset of the operator

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c. is an existing asset of the grantor
d. any of these
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57. According to the GAM for NGAs, exchange differences on nonmonetary items are recognized in
a. surplus or deficit c. a or b
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b. equity d. not recognized

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ed d
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