ACC 103 GROUP 6

LEADER: HERAGA, MYLENE NELLAS

CONTRIBUTORS:
NAPONE, CHARLEEN MAE ABESADA
MONG, KAYE LEGONAS
PINGKIAN,CHAREN KAYE BAYLON
JAGANAS , JENNIFER
SUMAPLONG,RUSSEL EÑOLA
UBA,ROSE ANN TALIPAN

TEST 1
Direction: Read carefully and choose the best answer.
1. Consolidated financial statements are the financial statements of a group in which the assets,
liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are
presented __________.
A. As those of a single economic entity
B. In one set of financial statements
C. Separately
D. B and C
CORRECT ANSWER: A
2. Dividends from a subsidiary, a joint venture or an associate are recognised in profit or loss
unless the entity elects to use the __________, in which case the dividend is recognised as a
reduction from the carrying amount of the investment.
A. Present value method
B. Equity method
C. Income method
D. Cost method
CORRECT ANSWER: B
3. At the date of initial application, an investment entity that previously measured its investment
in a subsidiary at __________ through other comprehensive income shall continue to measure
that investment at__________.
A. Fair value; fair value
B. Cost; fair value
C. Fair value; cost
D. Cost; cost
CORRECT ANSWER: A
4. These are those presented in addition to consolidated financial statements or the financial
statements of an entity with an investment in associate or joint venture that is accounted for using
equity method in accordance with PAS 28.
A. Individual financial statements
B. Separate financial statements
C. Consolidate fnancial statements
D. Equity fnancial statements
CORRECT ANSWER: B
5. Significant influence is presumed to exist if investor holds ____ voting power of the investee.
A. Less than 20%
B. 20% - 50%
C. 51%-100%
D. Contractually agreed sharing of control
CORRECT ANSWER: B
6. It prescribes the accounting and disclosure for investments in subsidiaries, associates and joint
ventures when an entity prepares separate financial statements.
A. PAS 26
B. PAS 27
C. PAS 28
D. PAS 29
CORRECT ANSWER: B
7. PAS 27 ____________ which entities should produce separate financial statements.
A. Does mandate
B. It mandates
C. Does not mandates
D. Separate
CORRECT ANSWER: C
8. If there is an excess of the investor’s share of the net fair value of the associate’s identifiable
assets and liabilities over the cost of the investment ,that is, negative goodwill, how should that
excess be treated?
A. It should be written off against retained earnings.
B. It should be included in the carrying amount of the investment.
C. It should be included as income in the determination of the investor’s share of the associate’s
profit or loss for the period.
D. It should be disclosed separately as part of the investor’s equity.
CORRECT ANSWER: C
9. An investor uses the equity method to account for an investment in ordinary shares. After the
date of the acquisition , the investment account of the investor would
A. Be increased by its share of the earnings of the investee , and decreased by its share of the
losses of the investee
B. Be increased by its share of the earnings of the investee , and but not be affected by its share
of the losses of the investee
C. Not be affected by its share of the earnings of the investee ,but be decreased by its share of the
losses of the investee
D. Not be affected by its share of the earnings or losses of the investee
CORRECT ANSWER: A
10. The equity method of accounting for an investment in the common stock of another company
should be used when the investment:
A. It is obtained by an exchange of stock for stock.
B. Is composed of common stock and it is the investor’s intent to vote the common stock.
C. Ensures a source of supply such as raw materials.
D. Enables the investor to exercise significant influence over the investee.
CORRECT ANSWER: D
11. Goodwill arising from an investment in associate is
A. Included in the carrying amount of the investment and not amortized.
B. Included in the carrying amount of the investment and amortized over the useful life.
C. Excluded from the carrying amount of the investment but charged to retained earnings.
D. Excluded from the carrying amount of the investment but charged to expense immediately.
CORRECT ANSWER: A
12. Under the equity method of accounting for investments, an investor recognize it’s share of
the earnings in the period in which the
A. Investor sells the investment
B. Investee pays dividend
C. Investee declares a dividend
D. Earnings are reported by the investee
CORRECT ANSWER: D
13. It is an equity instrument that is subordinate to all other classes of equity instruments.
A. Preference share
B. Earnings per share
C. Ordinary share
D. Outstanding share
CORRECT ANSWER : C
14. This are ordinary shares issuable for little or no cash or other consideration upon the
satisfaction of specifies conditions in a contingent share agreement.
A. Basic Earnings per share
B. Outstanding share
C. Preference share
D. Contingent issuable ordinary shares
CORRECT ANSWER: D
15. A financial instrument or other contract that may entitled its holder to ordinary shares.
A. Outstanding share
B. Preference share
C. Potential ordinary share
D. Contingent issuable ordinary share
CORRECT ANSWER: C

TEST II: TRUE OR FALSE

16. Dividends from investments accounted for using the equity method are not income but are
reductions from the carrying amount of the investment.
o TRUE
o FALSE
CORRECT ANSWER: TRUE
17. Investments in associates are Noncurrent assets.
o TRUE
o FALSE
CORRECT ANSWER: TRUE
18. Dividends have no effect on the investment income of the associate.
o TRUE
o FALSE
CORRECT ANSWER: TRUE
19. If the investee subsequently reports profits, the investor resumes recognizing its share in
those profits only after its share in the profits equals the share in losses not recognized.
o TRUE
o FALSE
CORRECT ANSWER: TRUE
20. An investor is exempt from applying the equity method if it is exempted from preparing
consolidated Financial Statement .
o TRUE
o FALSE
CORRECT ANSWER: TRUE
21. PAS 28 is applied when they have significant influence or have no joint control over an
investee.
o TRUE
 o FALSE

CORRECT ANSWER: FALSE

22. PAS 27 is applied when an entity chooses or is required by law to present separate financial
statements that comply with PFRSs.
o TRUE
o FALSE

CORRECT ANSWER: TRUE

23. When ordinary shares are issued without a corresponding change in resources(assets), the
basic and diluted EPS and the weighted average number of ordinary share outstanding during the
period and for all periods presented are adjusted prospectively.
o TRUE
o FALSE

CORRECT ANSWER: FALSE

24. If the entity does not have dilutive potential ordinary shares, it presents basic earnings per
share only.
o TRUE
o FALSE

CORRECT ANSWER: TRUE

25. If both consolidated and separate financial statements are prepared, EPS is required only for
the consolidated financial statements.
o TRUE
o FALSE

CORRECT ANSWER: TRUE