CFAS Midterm Activity

Question 1
1 / 1 pts
Exploration and evaluation assets are initially measured at
Correct!
  
cost.
 

  
revalued amount.
 

  
fair value.
 

  
a or b
 
 
Question 2
1 / 1 pts
Exploration and evaluation assets are exploration and evaluation expenditures
recognized as

  
expenses in accordance with applicable PFRSs
 
Correct!
  
assets in accordance with the entity’s accounting policy.
 

  
assets in accordance with (a) above, subject to the limitations provided under PAS 8
Accounting Policies, Changes in Accounting Estimates and Errors.
 

  
expenses in accordance with applicable PFRS 6
 
 
Question 3
0 / 1 pts
Which of the following is considered a government grant under PAS 20?

  
Award of major government contracts
 
Correct answer
  
Cancellation of an existing loan from the government
 
You Answered
  
Free technical advice
 

  
Public improvements
 
 
Question 4
1 / 1 pts
The main concept used in recognizing income from government grants is

  
capital approach
 

  
historical cost
 
Correct!
  
matching
 

  
materiality
 
 
Question 5
0 / 1 pts
In 20x1, Entity A proposes an environmental clean-up project for a river. The
government supports this project and gives Entity A a ₱1M monetary grant conditioned
that the money will only be spent on the proposed project. The proposed project is
expected to take about 2 years to complete. Entity A starts the clean-up project in 20x2.
How should Entity A recognize income from the government grant?

  
in full when Entity A receives the grant
 

  
over 2 years starting in 20x1
 
Correct answer
  
over the period of the project as expenses are incurred
 
You Answered
  
the grant is not recognized as income
 
 
Question 6
1 / 1 pts
According to PAS 20, a government grant that becomes repayable is accounted for

  
retrospectively.
 
Correct!
  
prospectively.
 

  
a or b
 

  
not accounted for
 
 
Question 7
1 / 1 pts
Which of the following may not be considered a “qualifying asset” under PAS 23?

  
A power generation plant that normally takes two years to construct.
 
Correct!
  
An expensive private jet that can be purchased from a local vendor.
 

  
A toll bridge that usually takes more than a year to build.
 

  
A ship that normally takes one to two years to complete.
 
 
Question 8
1 / 1 pts
An asset is being constructed for an enterprise's own use. The asset has been financed
with a specific new borrowing. The interest cost incurred during the construction period
as a result of expenditures for the asset is
Correct!
  
a part of the historical cost of acquiring the asset to be written off over the estimated
useful life of the asset.
 

  
interest expense in the construction period.
 

  
recorded as a deferred charge and amortized over the term of the borrowing.
 

  
a part of the historical cost of acquiring the asset to be written off over the term of the
borrowing used to finance the construction of the asset.
 
 
Question 9
0 / 1 pts
Capitalization of borrowing costs

  
Shall be suspended during temporary periods of delay.
 
You Answered
  
May be suspended only during extended periods of delays in which active development
is delayed.
 

  
Should never be suspended once capitalization commences.
 
Correct answer
  
Shall be suspended only during extended periods of delays in which active development
is delayed.
 
 
Question 10
1 / 1 pts
Exploration and evaluation expenditures are incurred

  
When searching for an area that may warrant detailed exploration even though the
entity has not yet obtained the legal rights to explore a specific area.
 
Correct!
  
When the legal rights to explore a specific area has been obtained but the technical
feasibility and commercial viability of extracting a mineral resource are not yet
demonstrable.
 

  
When a specific area is being developed and preparations for commercial extraction are
being made.
 

  
In extracting mineral resources and processing the resource to make it marketable or
transportable
 
 
Question 11
1 / 1 pts
When is an entity required to recognize exploration and evaluation expenditure as an
asset?

  
When such expenditure is recoverable in future periods
 

  
When the technical feasibility and the commercial viability of extracting the associated
mineral resource have been demonstrated.
 
Correct!
  
When required by the entity's accounting policy
 

  
Such expenditure is always expensed as incurred
 
 
Question 12
0 / 1 pts
Which of the following expenditures would never qualify as an exploration and
evaluation asset?
Correct answer
  
Expenditure for acquisition of right to explore
 

  
Expenditure for exploratory drilling
 
You Answered
  
Expenditures related to the development of mineral resource
 

  
Expenditures for activities in relation to evaluating the technical feasibility and
commercial viability of extracting a mineral resource
 
 
Question 13
0 / 1 pts
Which measurement model applies to exploration and evaluation assets subsequent to
initial recognition?

  
Cost Model
 
You Answered
  
Revaluation Model
 
Correct answer
  
Cost model and revaluation model
 

  
Recoverable amount model
 
 
Question 14
0 / 1 pts
Which type of expenditure is included in exploration and evaluation of mineral
resources?
You Answered
  
The extraction and processing of mineral resource for transport to market
 

  
The commercial review of possible areas for mineral extraction before bidding for the
legal right to explore a specific area
 

  
The expenditure incurred after the technical feasibility and commercial viability of
extracting a mineral resource are demonstrable
 
Correct answer
  
None of these
 
 
Question 15
1 / 1 pts
This represents assistance by the government in the form of transfer of resources to an
entity in return for past or future compliance with certain conditions.
Correct!
  
Government grant
 

  
Government assistance
 

  
Government donation
 

  
Government aid
 
 
Question 16
1 / 1 pts
Government grant shall be recognized when there is reasonable assurance that

  
The entity will comply with the conditions of the grant
 

  
The grant will be received
 
Correct!
  
The entity will comply with the conditions of the grant and the grant will be received
 

  
The grant must have been received
 
 
Question 17
1 / 1 pts
This is government grant whose primary condition is that an entity shall purchase or
construct asset
Correct!
  
Grant related to asset
 

  
Grant related to income
 

  
Government gift
 

  
Government appropriation
 
 
UnansweredQuestion 18
0 / 1 pts
Government grant in recognition of specific cost is recognized as income
Correct answer
  
Over the same period as the relevant expense
 

  
Immediately
 

  
Over a maximum of 5 years using straight line
 

  
Over a maximum of 10 years using straight line
 
 
Question 19
1 / 1 pts
Borrowing cost is defined as

  
Interest expense using the effective interest method
 

  
Finance Charge in respect of finance lease
 

  
Exchange difference arising from foreign currency borrowing to the extent that this is
regarded as an adjustment to interest cost
 
Correct!
  
Interest and other cost that an entity incurs in connection with borrowing of fund.
 
 
Question 20
0 / 1 pts
Borrowing cost can be capitalized as the cost of the asset when 
You Answered
  
The asset is a qualifying asset
 

  
The asset is qualifying asset and it is not probable that the borrowing cost will result in
future economic benefit to the entity
 

  
The asset is qualifying asset and it is probable that the borrowing cost will result in
future economic benefit to the entity but the cost cannot be measured reliably
 
Correct answer
  
The asset is qualifying asset and it is probable that the borrowing cost will result in
future economic benefit to the entity but the cost can be measured reliably
 
 
Question 21
1 / 1 pts
If the  qualifying asset is financed by specific borrowing the capitalizable borrowing cost
is equal to 

  
Actual borrowing cost incurred
 

  
Actual borrowing cost incurred up to completion of asset
 
Correct!
  
Actual borrowing cost incurred up to completion of asset minus any investment income
from the temporary investment of the borrowing
 

  
Zero
 
 
Question 22
0 / 1 pts
Which of the following could be treated as qualifying asset for the purpose of
capitalizing borrowing cost?
Correct answer
  
Investment property
 

  
Financial Asset at FV
 
You Answered
  
Inventories manufactured in a repetitive basis
 

  
Biological asset
 
 
Question 23
1 / 1 pts
Which of the following is not a condition that must be satisfied before interest
capitalization can begin on a qualifying asset?

  
Interest is being incurred
 

  
Expenditures for the asset have been made
 
Correct!
  
The interest rate is equal to the bank prime rate
 

  
Activities necessary to get the asset ready for the intended use are in progress
 
 
Question 24
1 / 1 pts
Capitalization of borrowing cost

  
Shall be suspended during temporary periods of delay.
 
Correct!
  
May be suspended only during extended period of delay in which active development is
delayed
 

  
Shall never be suspended
 

  
Shall be suspended only during extended period of delay in which actives development
is delayed
 
 
Question 25
1 / 1 pts
The period of time during which interest must be capitalized ends when 
Correct!
  
The asset is ready for intended use
 

  
No further interest is being incurred
 

  
The asset is abandoned, sold or fully depreciated
 

  
The activities that are necessary to get the asset ready for intended use have befun
 
 
Question 26
Not yet graded / 5 pts
In 2001, Mareng Cynthia Inc. leased a 5 story building in Makati for a period of 10 years
to be used by the company for its administrative operation.  In 2003, Mareng Cynthia
Inc. obtain a loan from BPI amounting to P400,000,000 with an annual interest rate of
12% for a period of 25 years the proceeds will be used for the acquisition of the building
in the Makati that they are originally occupying under a lease agreement.  The company
continue to use the building until today. 
If you were the accountant how would you treat in the books of account the interest
expense incurred in the BPI Loan, outright expensed or capitalized? explain your
answer. (Max of 3 sentences only)
Your answer:
48,000,000 is interest income