FINAL EXAM SIMULATION 1 (Midterm topics)

It is an entity-specific aspect of relevance based on the nature or magnitude, or both, of

the items to which the information relates inthe context of an individual entity's financial
report. Materiality

It is
the exercise of caution when making judgements under conditions of uncertainty.
Prudence
It means that different knowledgeable and independent observers could reach
consensus, although not necessarily complete agreement, thata particular depiction is a
faithful representation. Verifiability

The Conceptual Framework provides the foundation for Standards that: (choose the
incorrect one)
contribute to transparency by enhancing the international comparability and
quality of financial information, enabling investors and other market participants
to make informed economic decisions
provide all of the information that existing and potential investors, lenders
and other creditors need and show the value of a reporting entity.
strengthen accountability by reducing the information gap between the providers
of capital and the people to whom they have entrusted their money.
contribute to economic efficiency by helping investors to identify opportunities
and risks across the world, thus improving capital allocation

Based on the latest Framework, what are the fundamental qualitative characteristics of
financial information?
Reliability and Faithful representation
Relevance and Reliability
Relevance, Reliability, and Faithful representation
Relevance and Faithful representation
Which of the following statements is false?
One enhancing qualitative characteristic may have to be diminished to maximize
another qualitative characteristic.
The enhancing qualitative characteristics, either individually or as a group,
can make information useful even if that information is irrelevant or does
not provide a faithful representation of what it purports to represent.
Trade-off between the fundamental qualitative characteristics may need to be
made in order to meet the objective of financial reporting, which is to provide
useful information about economic phenomena.
A relevant financial information that is a highly uncertain estimate can still be
considered useful.

It describes the objective of, and the concepts for, general purpose financial reporting.
o Conceptual Framework for Financial Reporting
Conceptual Framework for Financial Statements
Conceptual framework in Financial Statement Preparation
Conceptual Framework for Financial Reports

Which of the following statements is true?

 The Framework prevents the reporting entity from including additional information
that is most usefulto a particular subset of primary users.
The management of a reporting entity is also interested in financial information
about the entity and is considered as a primary user.
General purpose financial reports are primarily directed to regulators and
members of the public other than investors, lenders and other creditors.
General purpose financial reports do not and cannot provide all of the
information that existing and potential investors, lenders and other
creditors need.
Which is not a purpose of the Conceptual Framework?
assist all parties to understand and interpret the Standards
assist preparers to develop consistent accounting policies when no Standard
applies to a particular transaction or other event, or when a Standard allows a
choice of accounting policy
prescribe the basis for presentation of general purpose financial reports to
ensure comparability both with the entity's financial reports of previous
periods and with the financial reports of other entities.
assist the International Accounting Standards Board (Board) to develop IFRS
Standards (Standards) that are based on consistent concepts
C What are the elements of faithful representation?
o Completeness, neutrality, freedom from bias, and freedom from error
Completeness, neutrality, and freedom from error
Neutrality. prudence and freedom from bias
o Completeness, neutrality, and freedom from bias

Which of the following statements is not true?

o Nothing in the Conceptual Framework overrides any Standard or any
requirement in a Standard.
The Conceptual Framework is not a Standard.
To meet the objective of general purpose financial reporting, the Board may
sometimes specify requirements that depart from aspects of the Conceptual
Framework.
Revisions of the Conceptual Framework will automatically lead to changes
to the Standards.
What do you call the guideline followed by IASB and IFRS Interpretation Committee in
developing an accounting standard?
Accounting Standards
IFRS
Generally Accepted Accounting Principles
Due Process Handbook

An entity shall classify an asset as non-current when:

o the asset is cash or a cash equivalent (as defined in PAS 7) unless the asset is
restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period
it holds the asset primarily for the purpose of trading
o it expects to realize the asset beyond twelve months after the reporting
period
 it expects to realize the asset, or intends to sell or consume it. in its normal
operating cycle

According to the IASB Conceptual Framework the concept of faithful representation

includes
o Verifiability
Substance over form
Estimates
o Materiality

How should research and development costs be accounted for?

May be either capitalized or expensed when incurred depending upon the
materiality
Must be expensed in the period incurred unless it can be clearly
demonstrated that the expenditure will have alternative future use or unless
contractually reimbursable.
Must be capitalized when incurred and then amortized over the useful life.
Must be expensed in the period incurred

An owner-occupied property is held by an owner

o For use in production of goods and services and for administrative
purposes.
For administrative purposes
For use in the production of goods or services.
For sale in the ordinary course of business.

An entity shallclassify a liability as non-current when

the liability is due to be settled within twelve months after the reporting period
the entity has an unconditional right to defer settlement of the liability for at
least twelve months after the reporting period.
itexpects to settle the liability in its normal operating cycle
it holds the liability primarily for the purpose of trading
Itis a not-for-profit international organization responsible for overseeing the work of the
IASB, the structure and strategy
IFRS Interpretation Committee
oo IFRS Foundation
Monitoring Board
o IFRS Advisory Council

This means that specific costs are attributed to identified items of inventory.
First-in-First-out
Perpetual Inventory method
oo
Periodic Inventory method
o Specific identification of cost

Which of the following would be considered research and development?

o Construction of prototype
o Marketing research to promote a new product
Routine effort to refine an existing product
Periodic alteration to existing production line
They are the specific principles, bases, conventions, rules and practices applied by an
entity in preparing and presenting financial statements.
o Accounting estimates
oo Accounting policies
Prior-period errors
o Generally accepted accountingprinciples (GAAP)

It narrative descriptions or disaggregation of items presented in the statement

provides
of financial position, statement(s) of profit or loss and other comprehensive income,
statement of changes in equity and statement of cash flows and information about items
that do not qualify for recognition in those statements.
o Framework for the Preparation and Presentation of Financial Statements
Notes
General purpose financial reports
Conceptual Framework for Financial Reporting

Which of the following is not a component of other comprehensive income?

oo changes in revaluation surplus
net interest cost of defined benefit plan
o gains and losses from investments in equity instruments designated at fair value
through other comprehensive income
translation gains and losses

Which
5oo
of the following will not form part of the cost of an inventory?
Transport and handling costs
Costs directly costs directly attributable to the acquisition of finished goods,
materials and servicesS
Recoverable purchase taxes
Import taxes

Recognition is the process of

o Incorporating an item in the financial statements
Determining the amount at which an item should be shown in the financial
statements
Determining where an item should be presented in the financial statements
Disclosing information in the notes to the financial statements

Which of the following is an enhancing qualitative characteristic' according to the IASB

Conceptual Framework?
Materiality
Timeliness
Relevance
Faithful Representation

Property, plant and equipment acquired by way of donation are usually recorded at
oc Recorded value of the asset
Fair value of the donated asset
Appraised value as determined by the board of directors
Nil amount - memorandum entry is necessary
Which is false?
o An entity shall begin capitalizing borrowing costs as part of the cost of a
qualifying asset on the completion date.
o Capitalizable borrowing costs from a specific-type of borrowing shall be the
actual borrowing costs less any investment inCome on the temporary investment
of the specific-type borrowings.
borrowing costs incurred while land acquired for building purposes is held without
any associated development activity do not qualify for capitalization
A qualifying asset is an asset that necessarily takes a substantial period of time
to get ready for its intended use or sale

Which of the following statements is false?

An entity shall prepare financial statements on a going concern basis unless
management either intends to liquidate the entity or to cease trading, or has no
realistic alternative but to do so.
When an entity has a history of profitable operations and ready access to
financial resources, the entity may reach a conclusion that the going concern
basis of accounting is appropriate without detailed analysis.
When an entity does not prepare financial statements on a going concern basis,
it shall disclose that fact, together with the basis on which it prepared the

financial statements and the reason why the entity is not regarded as a going
Concern
An entity shall prepare all its financial statements using the accrual basis
of accounting.

A depreciable asset was originally acquired for 5 million. Its carrying amount at the end
of the current year is 3 million. The asset's fair value less cost to sell is 2 million while it's
value in use is 4 million. Is the asset impaired
No, because the fair value less cost to sell is lower than the carrying amount.
o No, because the value in use is higher than the carrying amount.
Yes, because the fair value less cost to sell is lower than the carrying amount
Yes, because the value in use is higher than the carrying amount.

Which of the following is to be capitalized as part of the cost of a PPE in accordance with
PAS 16?
oo Refundable taxes related to the acquisition of the asset.
o Installation and assembly costs
o Costs of opening a new facility
o Costs of relocating or reorganizing part or all of an entity's operations

The cost of property acquired by installment is equal to

Present value of installment payments
o Cash price equivalent
o Invoice price
o Installment price

Which statement is true in relation to internally generated intangible asset?

The cost of internally generated intangible asset comprises all directly
attributable costs necessary to produce and prepare the asset for the intended
use.
o Allof other statements are true.
 Internally generated goodwill shall not be recognized as an intangible asset.
Internally generated brand, masthead, publishing title. and customer list shall not
be recognized as an intangible asset.

Which is true?
Intangible assets are unidentifiable non-monetary asset without physical
substance.
PAS 38 shall apply to all intangible assets.
Expenditure on an intangible item that was initially recognized as an expense
shall be recognized as part of the cost of an intangible asset at a later date.
Development is original and planned investigation undertaken with the prospect
of gaining new scientific or technical knowledge and understanding.
o Monetary assets are money held and assets to be received in fixed or
determinable amounts of money.
For entities other than financial institutions, how are 'dividends paid' classified in the
statement of cash flows?
Either operating or investing cash flow
Operating cash flow
Financing cash flow
Investing cash floW
Either operating or financing cash flow
Which is true?
o An asset is considered not yet ready for its intended use or sale when routine
administrative work might still continue even when the physical construction of
the asset is complete
An entity shall cease capitalizing borrowing costs when substantially all
the activities necessary to prepare the qualifying asset for its intended use
or sale are complete.
An entity shall continue capitalization of borrowing costs during extended periods
in which it suspends active development of a qualifying asset.
An entity also suspends capitalizing borowing costs when a temporary delay is a
necessary part of the process of getting an asset ready for its intended use or
sale.

An entity purchases a building and the seller accepts payment partly in equity shares
and partly in debentures of the entity. This transaction should be treated in the statement
of cash flows as follows:
o The purchase of the building should be investing cash outflow and the issuance
of shares and the debentures as financing cash outflows.
This does not belong in a cash flow statement and should be disclosed
only in the notes to the financial statements.
The purchase of the building should be investing cash outflow and the issuance
of debentures as financing cash outflows while the issuance of shares as
investing cash outflow.
lgnore the transaction totally since it is a noncash transaction. No mention is
required in either the cash floW statement or anywhere else in the financial
statements.
In using judgement to develop and apply an accounting policy for a transaction or event
where no specific standard applies, which of the following should management give
foremost consideration?
The Conceptual Framework for financial reporting
oo
the requirements in PFRSs dealing with similar and related issues
the requirements in PFRSSs dealing with dissimilar and unrelated issues
the most recent pronouncements of other standard-setting bodies that use a
similar conceptual framework to develop accounting standards

Two items remained in the ending inventory. Item A had an original cost of 100,000 while
Item B had an original cost of 200,000. The combined cost of the two items then is
300,000. Item A's net realizable value is 150,000 while Item B's net realizable value is
also 150,000. The combined net realizable value of the two items then is also 300,000.
What amount should be presented in the statement of financial position for the two items
of inventory?
200,000
300,000
oo
350.000
o 250,000

Which of the following cost should be capitalized?

Cost of research to determine whether a market for the product exists
o Engineering cost incurred to advance the project to the ful production
stage
Acquisition cost of equipment to be used on current research project only.
Salaries of research staff

Which of the following choices best describes the following statements?

PPE acquired by paying cash shall be recorded at acquisition price plus costs directly
A

attributable to the acquisition less trade discounts

PPE acquired by giving another PPE is recorded at the carrying value of the asset
A

given up if the exchange transaction lacks commercial substance

A PPE acquired by giving another PPE is recorded at the carrying value of the asset
given up if the exchange transaction has commercial substance.

All of the statements are true

oo All of
the statements are false
Only one of the statements is true
o Only one of the statements is false

Itis the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets.
Operating segments
Corporate assets
o Cash-generating unit
Component of an entity

Which is false?
An intangible asset is to be measured subsequently using either the cost model
or the revaluation model.
 No intangible asset arising from research or from the research phase of an
internal project shall be recognized.
An intangible asset shall be measured initially at cost.
The income and related expenses of incidental operations of the
development of an intangible asset are usually not recognized as part of
the cost of the intangible asset.
According to the IASB Conceptual Framework, the objective of general purpose financial
reporting is to

Disclose all material information relevant to stakeholders

Provide financial information that is useful to users
o Comply with generally accepted accounting principles (GAAP)
Satisfy legal requirements

Financial statements must be prepared at least

Quarterly
Semi Annually
Annually
o Every Two Years

International Financial Reporting Standards (|FRSs), as referred to in the Standards,

pertain to:

1. IFRS to IFRS 17
1

2. IAS to IAS 41
1

3. IFRIC and SIC Interpretations

1
and 3 only
1, 2 and 3
1
only
1 and 2 only

Parent Company has a lot of subsidiaries. Currently, Parent Company is preparing its
separate statement of financial position. Which of the following properties should not be
reported by Parent Company in its separate statement of financial position as investment
property
o A vacant building owned by Parent Company and to be leased out under an
operating lease
Land leased by Parent Company to one of its subsidiaries under an operating
lease
Property still under construction for use as investment property.
o Machinery leased out by Parent Company to an unrelated party under an
operating lease

Which of the following statements is false?

A prior period error shall be corrected by retrospective restatement except to the
extent that it is impracticable to determine either the period-specific effects or the
Cumulative effect of the error.
When it is impracticable to determine the period-specific effects of an error on
Comparative information for one or more prior periods presented, the entity shall
 restate the opening balances of assets, liabilities and equity for the earliest
period for which retrospective restatement is practicable.
When it is impracticable to determine the cumulative effect, at the beginning of
the current period, of an error on all prior periods, the entity shall restate the
comparative information to correct the error prospectively from the earliest date
practicable.
The correction of a prior period error is included from profit or loss for the
period in which the error is discovered.

Which is true?
Depreciation and maintenance of factory buildings, equipment and right-of use
assets used in the production process, and the cost of factory management and
administration are examples of variable production overheads.
Indirect materials and indirect labor are examples of fixed production overheads.
Fixed production overheads are those indirect costs of production that vary
directly,or nearly directly, with the volume of production.
The costs of purchase of inventories comprise the purchase price, import duties
and other taxes, including those subsequently recoverable by the entity from the
taxing authorities, and transport, handling and other costs directly attributable to
the acquisition of finished goods, materials and services.
The cost of inventories shall comprise all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their
present location and condition.
When payment for property, plant and equipment is deferred beyond normal credit
terms, the difference between the cash price equivalent and the total payments is
recognized as
Interest expense over the life of the asset
ooo
Interest expense over the credit period
o Component of cost of the property, plant and equipment
Interest expense of the current year

Investment property includes all of the following, except

Building owned by the reporting entity or held by a finance lessee leased out
under an operating lease
Land held for currently undetermined use
Land held for long-term capital appreciation
o Property held for sale in the ordinary course of business

Subsequent to initial recognition, the investment property shall be measured using

Cost model or fair value model
Fair value through profit or loss model
Cost model or revaluation model
Fair value model or revaluation model

Which of the following will form part of the cost of inventory?

selling costs
administrative overheads that do not contribute to bringing inventories to their
present location and condition
storage costs necessary in the production process before a further
production stage
 abnormal amounts of wasted materials, labour or other production costs

Which of the following statements is true?

An entity must provide all specific disclosures required by an PFRS
If a line item is not individually material, it is aggregated with other items
either in the financial statements or in the notes.
An entity cannot go beyond the minimum requirements for disclosures as
provided by an IFRS.
An item that is not sufficiently material to warrant separate presentation in the
financial statements will also not warrant separate presentation in the notes

Which is true?
Fair value the estimated selling price the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make
the sale.
o Net realizable value for inventories may not equal its fair value less costs to
sell.
Both net realizable value and fair value are entity-specific values.
Net realizable value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date

When is an asset considered impaired?

When the fair value less cost of disposal exceeds it value in use
When the value-in-use exceeds its Fair Value less cost of disposal
When the carrying value of an asset exceeds its recoverable amount
When the recoverable amount of an asset exceeds its carrying value.

Which of the following statements is not true?

o PAS 2 applies to financial instruments and biological assets related to
agricultural activity and agricultural produce at the point of harvest
Inventories held by producers of agricultural and forest products, agricultural
produce after harvest, and minerals and mineral products, to the extent that they
are measured at net realizable value
Inventories are generally measured at the lower of cost and net realizable value
PAS 2 does not apply to the measurement of inventories held by commodity
broker-traders who measure their inventories at fair value less costs to sell.

The successor of the Accounting Standards Council (ASC) whose main function is to
establish GAAP in the Philippines.
Philippine Interpretations Committee
o Auditing and Assurance Council
Financial Reporting Standards Council
PRC - BOA

Which of the following is true?

If the refinancing or rolling over is not at the discretion of the entity, the obligation
is classified as a noncurrent liability.
o If the refinancing on a long-term basis is completed on or before the end of
the reporting period, the obligation is going to be classified as noncurrent
liability.
 If the refinancing on a long-term basis is completed on or before the end of the
reporting period, the obligation is going to be classified as a current liability.
If the entity has the discretion to refinance the obligation for at least 12 months
after the reporting period under an existing loan facility, the obligation is classified
as current liability.

The following are Other Comprehensive Income that will be reclassified subsequently to
profit or loss, except
Gain or loss from translating financial statements of a foreign operation
Unrealized gain or loss on debt investment measured at fair value through other
comprehensive income
Unrealized gain or loss on equity investments measured at fair value
through other comprehensive income.
Unrealized gain or loss on derivative contracts designated as cash flow hedge

Which is true?
PAS 16 applies to both bearer plants and its produce.
A biological asset is a living plant that is used in the production or supply of
agricultural produce, is expected to bear produce for more than one period and
has a remote likelihood of being sold as agricultural produce, except for
incidental scrap sales.
PAS 16 applies to property, plant and equipment used to develop or
maintain exploration and evaluation assets.
PAS 16 applies to mineral rights and mineral reserves such as oil and natural
gas.

It means applying a new accounting policy to transactions, other events and conditions
as if that policy had always been applied.
o Early adoption of new standard
o Prospective application
o Retrospective application
Retrospective restatement

asset as current under the following conditions, except:

An entity shall classify an
The entity holds the asset primarily for the purpose of collecting
contractual cash flows
The entity expects to realize the asset within twelve months after the reporting
period.
The asset is cash or cash equivalent unless the asset is restricted to settle a
liability for more than twelve months
The entity expects to realize the asset or intends to sell or consume it within the
entity's normal operating cycle

An entity shall no longer prepare financial statements on a going concern basis if:
o Going concern assumption is no longer applicable in all the given choices.
o The entity intends to liquidate
oo

The entity's shares of stock have been suspended from trading

The entity has suffered losses in the past two reporting periods

After initial recognition, an intangible asset shall be measured using

Cost model or revaluation model
 Cost model or fair value model
Revaluation model
Cost model
It is the production capacity expected to be achieved on average over a number of
periods or seasons under normal circumstances, taking into account the loss of capacity
resulting from planned maintenance.
ldeal capacity
Budgeted capacity
o Normal capacity
Theoretical capacity

In order for the IFRS Foundation to carry its mission as the standard setting body, the
IASB was created. What is the meaning of IASB?
International Accounting Standards Body
International Accounting Setting Body
International Accounting Standards Board
International Accounting Setting Board

An intangible asset is identifiable when

It is separable
It arises from contractual and other legal right
It is either separable or it arises from contractual and other legal right
It is neither separable nor it arises from contractual and other legal right

Which of the following is not one of the criteria which must be met before development
costs can be capitalized?
The entity intends to complete the project and either use or sell the intangible
asset
o The entity can reliably identify the research costs incurred to bring the
project to economic feasibility.
The entity has sufficient financial resources to complete the project
The project has achieved technical feasibility

Which of the following choices best describes the following statements?

Carrying Value under cost model is computed as cost less any accumulated
depreciation and any accumulated impairment losses
• Carrying Value
under the revaluation model is computed as fair value at the date of
revaluation less any subsequent accumulated depreciation and subsequent
accumulated impairment losses
•
PAS 16 provides that cost model is preferred more than revaluation model.

Allof the statements are false

Only one of the statements is false
All of the statements are true
Only one of the statements is true

Which of the following statements is correct

 An increase in the carrying amount as a result of revaluation shall be recognized
as a gain from revaluation to be presented as part of the computation of profit or
loss.
A decrease in the carrying amount as a result of revaluation shall be
recognized as a loss from revaluation to be presented as part of the
computation of profit or loss.
An increase in the carrying amount as a result of revaluation shall be recognized
as a revaluation surplus to be presented as part of the computation of profit or
loss
A decrease in the carrying amount as a result of revaluation shall be recognized
as a loss to be presented as part of other comprehensive under the heading of
revaluation loss

Which of the following statements is not true?

Land that can potentially be used as a plant site shall be classified as investment
property
If an inventory is transferred to investment property that is to be carried at fair
value, the re-measurement to fair value shall be included in profit or loss.
If owner-occupied property is transferred to investment property that is to be
carried at fair value, the difference between the fair value and the carrying
amount of the property shall be accounted for as revaluation of property, plant
and equipment.
When an entity uses the cost model, a transfer from owner occupied
property to investment property may result to a gain or loss from
reclassification.

Which of the following shall be classified as a current asset?

Intangible asset
Investment property
o Property, plant, and equipment
ooo

Land held primarily for sale

Deferred tax asset

Which is false?
The cost of an item of property, plant and equipment can include the initial
estimate of the costs of dismantling and removing the item and restoring the site
on which it is located
income earned through using a building site as car park until
construction starts will be treated as a reduction to the cost of the
to-be-constructed building.
An entity shall choose either the cost model or the revaluation model as its
accounting policy and shall apply that policy to an entire class of property, plant
and equipment.
An item of property, plant and equipment that qualifies for recognition as an asset
shall be measured at its cost.
If an item of property, plant and equipment is revalued, the entire class of
property, plant and equipment to which that asset belongs shall be revalued

A complete set of financial statements includes the followingcomponents, except:

o Statement of financial position, statement of comprehensive income and
statement of cash flows.
 Statement of changes in equity
Notes, comprising a summary of significant accounting policies and other
explanatory information
o Reports and statements such as environmental reports and value added
statements
Which of the following statements incorrect regarding the frequency of the testing an
asset for impairment?
Tangible assets are tested for impairment only when there are any indications
that an asset is impaired
All of the choices are correct
Specific intangibles, like trademarks, patents, and copyrights, whose legal life are
provided for by a law, are tested for impairment only when there are indication
that they have been impaired
o Intangible assets with indefinite life, like goodwill, are tested for impairment
if there are indications that the asset is impaired

Which is true?
a building that is vacant but is held to be leased out under one or more operating
leases is an owner occupied property:
An owner-managed hotel is an investment property.
land held for a currently undetermined future use is an investment
property.
Investment property Is land, building or machinery held by the owner or by the
lessee as a right-of-use asset to earn rentals or for capital appreciation or both.
Factors in determining the useful life of an intangible asset include all, except
Any provision for renewal or extension of the legal life
The expected use of the asset
The amortization method
Any legal or contractual provision

An entity (other than a financial institution) receives dividends from its investment in
shares. How should it disclose the dividends received in the statement of cash flows
prepared under PAS 7?
Either as operating cash inflow or as investing cash inflow
Operating cash inflow
o As an adjustment in the operating activities section of the cash flow because it is
included in the net income for the year and as a cash inflow in the financing
activities section of the cash flow statement.
Either as operating cash inflow or as financing cash inflow

When a change accounting policy is applied retrospectively, the entity shall adjust the
in
balance of each affected component of for the earliest prior period
presented and the other comparative amounts disclosed for each prior period presented
as if the new accounting policy had always been applied.
closing, equity
closing, assets
opening, equity
opening, assets
Which of the following statements is true?

Statement I: There is a provision in PAS 38 that prescribes the use of the straight-line
method of amortization in case it is difficult to come-up with an amortization method that
closely reflects the pattern of use or consumption of the asset.
Statement II: There is a provision in PAS 16 that prescribes the use of the straight-line
method of depreciation in case it is difficult to come-up with a depreciation method that
closely reflects the pattern of use or consumption of the asset.

o
Ilonly
lonly
NeitherI nor Il
Both I and II

Which of the following statements is not true?

o Fair value is entity-specific while net realizable value is market-based.
Broker-traders are those who buy or sell commodities for others or on their own
account which are principally acquired with the purpose of selling in the near
future and generating a profit from fluctuations in price or broker-traders' margin.
Inventories are assets held for sale in the ordinary course of business; in the
process of production for such sale; or in the form of materials or supplies to be
consumed in the production process or in the rendering of services
agricultural crops that have been harvested or minerals that have been extracted
and where sale is assured under a forward contract or a government guarantee.,
or when an active market exists and there is a negligible risk of failure to sell are
to be measured at net realizable value

If the qualifying asset is financed by general borrowing, the capitalizable borrowing cost
is equal to
o Average expenditures on the asset multiplied by a capitalization rate or actual
borrowing cost incurred, whichever is higher.
Average expenditures on the asset multiplied by a capitalization rate or
actual borrowing cost incurred, whichever is lower.
Actual borrowing cost incurred
Total expenditures on the asset multiplied by a capitalization rate

For financial institutions, how are interest paid usually classified in the statement of cash
flows?
o Operating cash flow
Either operating or financing cash flow
Investing cash flow
Financing cash flow
Either operating or investing cash flow

What is the law governing the practice of Accountancy in the Philippines? RA 9298

Which of the following is not represented in the FRSC?

Bangko Sentral ng Pilipinas
Commission on Audit
Securities and Exchange Commission
Department of Budget and Management
It is the present value of the cash flows, or other economic benefits, that an entity
expects to derive from the use of an asset and from its ultimate disposal.
o
ooo Fulfillment Value
Value in Use
Current Cost
o Current Value

Which of the following is not a mandatory part of a Standard?

A table of Contents
The principles and the related application guidance
the defined terms
The effective date and transition paragraphs

Which is false?
o Storage costs and selling costs form part of the cost of inventories
The practice of writing inventories down below cost to net realizable value is
Consistent with the view that assets should not be carried in excess of amounts
expected to be realized from their sale or use.
The amount of any write-down of inventories to net realizable value and all
losses of inventories shall be recognized as an expense in the period the write
down or loss OCcurs.
o Specific identification of assigning cost shall be used for the cost of inventories of
items that are not ordinarily interchangeable and goods or services produced and
segregated for specific projects.
Inventories are usually written down to net realizable value item by item.

Which is true?
Fair 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.
Both net realizable value and fair value are entity-specific values.
Net realizable value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date
Net realizable value for inventories may not equal its fair value less costs to
sell.

Oo of the following is an enhancing qualitative characteristic?

Which
Consistency
o Prudence
oo Comparability
o Completeness

the items below, except one, give rise to reclassification adjustment. Which is the
All of

exception?
When a hedged forecast transaction affects profit or loss
Changes in revaluation surplus
Disposal of foreign operation
 Derecognition of investments measure at fair value through Other
Comprehensive Incor

Depreciation is the systematic allocation of the depreciable of an intangible asset over its
useful life.
True
False