Chapter 22 - Agriculture
Agricultural activity results in
1. Biological assets are living
animals or living plants and
must disclosed as a separate
line item in the statement of
financial position.
2. Which statement is true about
biological assets
a. Biological assets are
measured at fair value less
cost of disposal
b. When fair value cannot be
determined reliably, the
biological asset shall be
measured at cost less
accumulated depreciation
and impairment loss
c. There is a presumption
that the fair value of
biological asset can be
measured reliably
d. All of these statements
are true about biological
assets.
3. It is the management by an entity
of the biological transformation
and harvest of biological assets
for sale or for conversion into
agricultural produce or into
additional biological assets.
Agricultural activity
4. Biological transformation results
from asset changes through all of
the following, except
a. Growth
b. Degeneration
c. Procreation
d. Production of
agricultural produce
5.
which of the following type of
asset? Biological asset and
agricultural produce
6. Agricultural activity includes all of
the following, except Ocean
fishing
7. Agricultural produce is the
harvested product from
biological asset.
8. Agricultural produce as it grows
on bearer plants is measure at
year-end prior to harvest at Fair
value less cost of disposal.
9. Agricultural produce harvested is
measured at fair value less cost
of disposal at the point of
harvest.
10. The harvested agricultural
produce is
a. Accounted for as inventory
b. Initially recognized at fair
value less cost of disposal
c. Recorded as gain from
change in fair value
d. All of these are correct
about harvested
agricultural produce.
1. A bearer plant is a living plant
that
a. Is used in the production
or supply of agricultural
produce.
b. Is used to bear produce for
more than one period
c. Has a remote likelihood of
being sold as agricultural
produce, except for
incidental scrap sales.
 d. Must possess all of
these characteristics
2. All of the following can be
considered a bearer plant, except
grape vine
3. According to IASB, bearer plants
are accounted for as Property,
Plant, and Equipment
4. According to IASB bearer plant
are accounted for as Biological
Assets
5. Animals related to recreational
activities are classified as
Property, Plant, and Equipment
1. Generally speaking, biological
assets relating to agricultural
activity shall be measured using
a fair value approach
2. Which of the following is unlikely
to be used in fair value
measurement of biological asset?
External independent valuation
3. An entity had a plantation forest
that is likely to be harvested and
sold in 30 years. The income
shall be accounted for in which of
the following? Income shall be
measured annually and
reported using a fair value
approach that recognizes and
measures biological growth.
4. Which statement is true regarding
the agricultural produce?
a. In all cases, an entity shall
measure agricultural
produce at fair value less
cost of disposal at the
point of harvest
b. The prevailing view is that
the fair value of
agricultural produce at the
point of harvest can
always be measured
reliably
c. The fair value
measurement of
agricultural produce stops
at the time of harvest
d. All of these statements
are true regarding
agricultural produce.
5. Where the fair value of the
biological asset cannot be
determined reliably, the biological
asset is measured at cost less
accumulated depreciation and
accumulated impairment loss.
6. Which of the following information
shall be disclosed in relation to
biological asset and agricultural
produce? The aggregate gain or
loss arising on the initial
recognition of biological asset
and agricultural produce and
from the change in fair value
less cost of disposal of
biological asset.
7. A gain or loss arising on the initial
recognition of a biological asset
and from a change in the fair
value less cost of disposal of a
biological asset shall be included
in the profit or loss for the
period
8. Where there is a long aging or
maturation process after harvest,
the accounting for such products
 shall be dealt with by PAS 2,
Inventories
9. Which of the following criteria
must not be satisfied before a
biological asset can be
recognized? An active market
for the asset exists.
10. Land that is related to agricultural
activity is measured in
accordance with PAS 16,
Property, Plant, and
Equipment, or PAS 40,
Investment property.
1. All would be classified as
biological assets, except egg
2. Which would be classified as
agricultural produce? apple
3. All are classified as agricultural
produce, except sugar
4. Which would be classified as a
product after harvest? Cheese
5. All would be classified as product
after harvest, except carcass
CHAPTER 23
1. Which is the correct definition of a
provision? B. A liability of
uncertain timing or amount
2. A provision shall be recognized as
liability when an entity has a
present obligation as a result of a
past event, it is probable that an
outflow of resources embodying
economic benefits will be
required to settle the obligation
3. A legal obligation is an obligation
that is derived from all of the
following except: D legislation, a
contract other operation of law, an
established pattern of past
practice
4. A constructive obligation is an
obligation that is derived from an
entity’s action that an entity will
accept certain responsibilities
because of past practice,
published policy or current
statement.
5. It is an event that creates a legal or
constructive obligation because the
entity has no other realistic
alternative but to settle the
obligation. Obligating event
6. An outflow of resources embodying
economic benefits is regarded as
“probable” when the probability
that the event will occur is greater
than the probability that the event
will not occur.
7. Where there is a continuous range
of possible outcomes and each point
in that range is a likely as any other,
the range to be used is the Midpoint
8. When the provision involves a large
population of items the estimate of
the amount reflects the weighting
of all possible outcomes by their
associated probabilities.
9. When the provision arises from a
single obligation, the estimate of the
amount is the individual most
likely outcome
10. Which statement is incorrect where
the expenditure required to settle a
provision is expected to be
reimbursed by another party? The
reimbursement shall not be
treated as separate asset but
“netted” against the estimated
liability for the provision.
11. Which statement is not true in
relation to the measurement of a
provision? Gains from expected
disposal of assets shall be taken
 into account in measuring a
provision.
12. Provisions shall be discounted if the
effect of the time value of money is
material. Which of the following is
incorrect regarding the discount
rate? Is a post-tax discount rate
13. Which statement is incorrect
concerning recognition of a another
provision? Provisions shall be
recognized for future operating
losses.
14. It is a contract in which the
unavoidable costs of meeting the
obligation under the contract exceed
the economic benefits to be received
under the contract. Onerous
contracts
15. The unavoidable costs under an
onerous contract represent the “least
net cost of existing from the
contract” which is equal to lower of
the cost of fulfilling the contract
or the penalty arising from failure
to fulfill the contract.
16. This is defined as a structured
program that is planned and
controlled by the management that
materiality changes either the scope
of a business of an entity or the
manner in which that business is
conducted. Restructuring
17. Examples of events that qualify as
restructuring include all of the
following except:
a. Sale or termination of
business
b. Closure of business location
in a region or relocation of
business from one location to
another
c. Change in management
structure such as elimination
of a layer of management
d. Fundamental
reorganization of an entity
that has an immaterial and
insignificant impact on the
operations
18. Which is a cost of restructuring?
Cost of relocating business
activities from one location to
19. It is the abusive practice of
manipulation and creative
accounting by dumping all kinds of
provisions under the banner of
provision for restructuring Big bath
provision
20. For which of the following should a
provision be recognized?
Obligations for plant
decommissioning costs
21. Provisions shall be recognized for all
of the following, except
a. Cleaning-up costs of
contaminated land when an
oil entity has a published
policy that will undertake to
clean up all contamination
that it causes.
b. Restructuring costs after a
binding sale agreement has
been signed.
c. Rectification costs relating to
defective products already
sold.
d. Future refurbishment costs
due to introduction of a
new computer system.
22. An entity is closing one of its
operating divisions, and the
conditions for making restructuring
provision have been met. The
closure will happen in the first
quarter of the next financial year. At
the current year-end, the entity has
announced the formal plan publicly
 and is calculating the restructuring
provision. Which of the following
costs should be included in the
restructuring provision?
Contractually required costs of
retiring staff being made
redundant from the division-being
closed
23. An entity operates chemical plants.
Its published policies include a
commitment to making good any
damage cause to the environment
by the operations. It has always
honored this commitment. Which of
the following scenarios would give
rise to an environmental provision?
The government has outlined
plans for a new law requiring all
environmental damage to be
rectified.
24. An entity has been served a legal
notice at year-end by the
Department of Environment and
Natural Resources to fit smoke
detectors in its factory on or before
middle of the next year. The cost of
fitting smoke detector can be
measured reliably. How should the
entity treat this at year-end? Ignore
this for purposes of the financial
statements at year-end
25. A provision is an event which is
probable and measurable.
26. Which of the following would not
considered a “provision”? Note
payable
27. In calculating present value in a
situation with a range of possible
outcomes all discounted using the
same interest rate, the expected
present value would be the sum of
probability-weighted present
values
28. An entity received notification of
legal action against the entity. The
attorneys determined that it is
probable the entity will lose the suit
and the loss can be estimated
reliably. How should the estimated
loss be reported? As a loss in the
income statement and a provision
in the statement of financial
position.
29. A contingent liability is an event
which is not recognized because
it is not probable that an outflow
will be required or the amount
cannot be reliably estimated.
30. The likelihood that the future event
will or will not occur can be
expressed by a range of outcome.
Which range means that the future
event occurring is very slight?
Remote
31. Which statement is incorrect
concerning a contingent liability? A
contingent liability is both
probable and measurable.
32. Which statement is incorrect
concerning a contingent asset? A
contingent asset is only disclosed
when the occurrence of the future
event is possible or remote.
33. An entity did not record an accrual
for a present obligation but disclose
the nature of the obligation and the
range of the loss. How likely is the
loss? Reasonably possible
34. A present obligation that is probable
and for which the amount can be
reliably measured should be
accrued by debiting an expense
account and crediting a liability
account
35. An entity has a self-insurance plan.
Each year, the entity appropriated
retained earnings for contingencies
 in an amount equal to insurance
premiums saved less recognized
losses from lawsuits and other
claims. As a result of an accident in
the current year, the entity is a
defendant in a lawsuit in which it
would probably have to pay
measurable amount of damages.
What are the effects of the lawsuit’s
probable outcome on the entity’s
financial statements for the current
year? An increase in both
expenses and liabilities.
36. An appropriation of asset which is
imminent and for which the amount
of loss can be reasonably estimated
should be accrued and disclosed.
37. An entity operates a plant in a
foreign country. It is probable that
the plant will be expropriated.
However, the foreign government
has indicated that the entity will
receive a definite amount of
compensation for the plant. The
amount of compensation is less than
the fair value but exceeds the
carrying amount of the plant. The
contingent asset should be reported
in the notes to the financial
statements.
38. Reserves for contingencies for
general or unspecified risks should
not be accrued in the financial
statements and need not be
disclosed.
39. Contingent assets are usually
recognized when realized.
40. Which of the following is the proper
accounting treatment of a contingent
asset? A disclosure only
41. When the occurrence of a contingent
asset is probable and the amount
can be reliably measured, the
contingent asset should be
disclosed but not recognized in
the statement of financial
position.
42. At the year-end, an entity was suing
a competitor for patent infringement.
The award from the probable
favorable outcome can be reliably
measured. The entity’s financial
statements should report the
expected award as disclosure only.
43. Contingent liabilities will or will not
become actual liabilities depending
on the outcome of the future
event.
44. A contingent liability shall be
recognized when the amount of the
loss can be reliably measured and
it is probable prior to issuance of
financial statements than a
liability has been incurred.
45. How should a contingent liability be
reported in the financial statements
when it is reasonably possible that
the entity will have to pay the liability
at a future date? As a disclosure
only.
46. Disclosure usually is not required for
contingent losses that are remote
and can be reliably measured.
47. Reporting in the financial statements
is required for loss contingencies
that are probable and can be
reliably measured.
48. Gain contingencies that are remote
and can be reliably measured
should not be reported or
disclosed.
49. A contingent liability has a most
probable value of zero but may
require a payment if a given future
event occurs.
50. Which of the following should be
disclosed in the financial statements
as a contingent liability? The entity
 is involved in a legal case which it
may possibly lose.
51. What condition is necessary to
recognize an environmental liability
The entity has an existing legal
obligation and the amount of the
liability can be reliably measured.
52. Which of the following is not
considered when evaluating whether
or not to record a liability for pending
litigation? The type of litigation
involved.
CHAPTER 24
1. What is the principal accounting for
a compound instrument?
- The issuer shall classify
the liability and equity
components of a 1. A bond convertible by the holder into
compound instrument
separately as liability or
equity.
2. How are the proceeds from issuing a
compound instrument allocated
between the liability and equity
components?
- First, the liability
component is measured at
fair value, and then the
remainder of the proceeds
is allocated to the equity
component.
3. When the cash proceeds from bonds
issued with share warrants exceed
the fair value of the bonds without
the warrants. The excess should be
credited to
- Share premium - share
warrants
4. When bonds are issued with share
warrants. The equity component is
equal to
- The excess of the
proceeds over the fair
value of the bonds without
the share warrants
5. When bonds are issued with share
warrants, a portion of the proceeds
should be allocated to equity when
the bonds are issued with
- Both detachable and
nondetachable share
warrants
6. The proceeds from an issue of
bonds with share warrants should
not be allocated between the liability
and equity components when
- The proceeds should be
allocated between liability
and equity under all of
these circumstances
a fixed number of ordinary shares of
the issuer is
- A compound financial
instrument
2. Convertible bonds
- May be exchanged for
equity shares
3. What is the main reason for issuing
convertible bond
- Entities can obtain
financing at lower rate
4. The major difference between
convertible bonds and bonds issued
with share warrants is that upon
exercise of the warrants
- The holder has to pay a
certain amount to obtain
the shares
5. Convertible bonds
- Allow an entity to issue
debt financing at lower rate
6. What is the accounting for issued
convertible bond
 - The instrument should be
recorded as part bond and
part equity
7. Issued convertible bonds are
- Separated into liability and
equity components with
the liability component
recorded at fair value and
the residual assigned to
the equity component
8. Bondholders exchange their
convertible bonds for ordinary
shares. The carrying amount of
these bonds was lower than market
value but greater than the par value
of the ordinary shares issued, if the
book value method is used, which of
the following correctly states an
effect of the conversion
- Shareholders’ equity is
increased
9. The conversion of bonds payable
into ordinary shares in commonly
recorded by
- Book value or carrying
amount method
10. When convertible bond is not
converted but paid at maturity
- The carrying amount of the
bond equal to face amount
is derecognized
1. Bonds payable not designated at fair
value through profit loss shall be
measured initially at
- Fair value minus bonds
issue cost
2. After initial recognition, bonds
payable shall be measured at
- Either amortized cost
using the effective interest
method or fair value
through profit or loss
3. The “amortized cost” of bonds
payable means
- Face amount plus premium
on bonds payable, minus
discount on bonds payable
and minus bond issue cost
4. Which statement is true about the
fair value option measuring bonds
payable
- The fair value of the bond
and the principal obligation
value must be disclosed
1. Bonds that mature on a single date
are called
- Term bonds
2. Bonds issued with scheduled
maturities at various dates
- Serial bonds
3. Costs incurred in connection with the
issuance of ten-year bonds which
sold at a slight premium should be
- Reported as a deduction
from bonds payable and
amortized over the ten-year
bond term
4. Unamortized debt discount should
be reported as
- Direct deduction from the
face amount of the debt
5. The issuer of a 10-year term bond
sold at par three years ago with
interest payable May 1 and
November 1 each year, shall report
at year-end
- Liability for accrued
interest
6. When the interest payment dates of
a bond are May 1 and November 1,
and a bond issue is sold on June 1,
the amount of cash received by the
issuer will be
 - Increased by accrued
interest from May 1 to June
1 rate
7. A bond issued on June 1 has
interest payment dates of April 1 and
October 1. Bond interest expense for
the current year ended december 31
is for a period of
- Seven months
8. A ten-year bond was issued at a
premium with a call provision to
retire the bond. When the bond
issuer exercised the call provision on
an interest date, the call price
exceeded the carrying amount of the
bond. The amount of bond liability
removed fromm the accounts should
have equaled the
- Face amount plus
unamortized premium
9. How would the amortization of
premium on bonds payable affect
each of the following
- Carrying amount of bond -
decrease
- Net income - increase
10. How would the amortization of
discount on bonds payable affect
each of the following
- Carrying amount of bond -
increase
- Net income - decrease
1. Debentures are
- unecured bonds
2. When bonds are sold between
interest dates, any secured interest
is credited to
- INTEREST payable
3. Which statement is true about
accrued interest on bonds sold
between interest dates?
- The accrued interest is
computed at the effective
- The accrued interest will
be paid to the seller when
the bonds mature
- The accrues interest is
extra income to the buyer
- ALL OF THE STATEMENTS
ARE NOT TRUE
4. Which statement is true about a
premium on bonds payable
- The premium on bonds
payable decreases when
amortization entries are
made until the balance
reaches zero at maturity
date
5. The carrying amount of bond liability
is
- Face amount of the bond
plus related premium or
minus related discount
6. The proceeds from the issue of the
bonds payable
- May be equal, more or less
than the face amount
depending on market
interest rate
7. An extinguishment of bonds payable
originally issued at a premium is
made by purchase of the bonds
between interest dates, which
statement is true at the time of
extinguishment
- Any costs of issuing the
bonds must be amortized
up to the purchase date
- The premium must be
amortized up to the
purchase date
- Interest must be accrued
from the last interest date
to the purchase date
 - ALL OF THESE settled deductible temporary
STATEMENTS ARE TRUE differences
8. When bonds are retired prior to 4. When temporary difference will
maturity with proceeds from a new result in taxable amounts in future
bond issue, any gain or loss from the years a deferred tax liability is
early extinguishment should be recognized in the current year
- Recognized in retained 5. A deferred tax liability shall be
earnings recognized for all taxable
9. An entity neglected to amortize the temporary differences
discount on outstanding bonds 6. It is the deferred tax consequences
payable. What is the effect of the attributable to a deductible
failure to record discount temporary difference and operating
amortization on interest expense income loss carryforward deferred
and bond carrying amount, tax asset
respectively? 7. It is the amount of income tax
- Understated and payable in respect of the taxable
understated profit current tax expense
10. An entity neglected to amortize the 8. It is the aggregate amount included
premium on outstanding bonds in the determination of profit for the
payable. What is the effect of the period in respect of current tax and
failure to record premium deferred tax. tax expense
amortization on interest expense 9. The deferred tax expense is equal to
and bond carrying amount, increase in deferred tax liability
respectively? less the increase in deferred tax
- Overstated and overstated asset

Chapter 25 - Income taxes 1. It is the amount attributable to an

1. Accounting for profit is The profit or
loss for a period before deducting
tax expense
2. These are the differences that will
result in future taxable amount in
determining taxable profit of future
periods when the carrying amount of
the asset or liability is recovered or
settled taxable temporary
differences
3. These are differences that results in
future deductible amount in
determining taxable profit in future
periods when the carrying amount of
the asset or liability is recovered or
asset or liability for tax purposes Tax
base
2. A deferred tax asset shall be
recognized for all deductible
temporary differences and operating
loss carryforward when it is
probable that taxable income will
be available against which the
deferred tax asset can be used.
3. In computing deferred tax asset or
liability, which tax rate is used?
Enacted future tax rate
4. An entity shall offset a deferred tax
asset and deferred tax liability when
income taxes are levied by the
same taxing authority and the
entity has a legal enforceable
 right to offset a current tax asset
against a current tax liability
1. Justification for the method of
determining periodic deferred tax
expense is based on the concept of
- Recognition of asset and
liability
2. Which of the following differences
would result in future taxable amount
- Expenses or losses that
are deductible before they
are recognized in
accounting income
3. A temporary difference which would
result in a deferred tax liability is
- Excess of tax depreciation
over accounting
depreciation
4. A temporary difference which would
result in a deferred tax asset is
- Rent received in advance
included in taxable income
at the time of receipt but
deferred for accounting
purposes
5. An entity, cash basis taxpayer,
prepared accrual basis financial
statements. In the year-end
statement of financial position, the
deferred income tax liability
increased compared to the prior
year. Which of the following would
cause the increase in deferred tax
liability?
- An increase in prepaid
insurance and increase in
rent receivable
6. An entity reported deferred tax asset
and deferred tax liability at the end
of the prior year and at the end of
the current year. For the current
year, the entity should report
deferred tax expense or benefit
equal to the
- Sum of the net changes in
deferred tax asset and
deferred tax liability
7. Because an entity uses different
methods to depreciate equipment for
accounting and income tax
purposes, the entity has temporary
differences that will reverse during
the next year and add to taxable
income. Deferred taxes that are
based on these temporary
differences should be classified in
the statement of financial position as
- Noncurrent liability
8. A deferred tax liability is computed
using
- Current tax law unless a
future enacted tax law is
different
9. Which statement is true regarding
reporting deferred income taxes in
the financial statements?
- Deferred tax asset and
liability may only be
classified as noncurrent
10. Which statement is correct about the
presentation of deferred tax asset
and liability?
- Deferred tax asset is netted
against deferred tax
liability if they relate to the
same tax authority
TULOY MO LANG YUNG HULI
1. The purpose of intraperiod tax allocation
is to
- Recognize an asset or liability for
the tax consequences of
temporary differences that exist at
the end of the reporting period.
2. An item that would create a permanent
difference in the pretax financial income and
taxable income would be
- Paying firms for violation of laws
3. Intraperiod tax allocation
- Associates tax effect with
different items in the income
statement
4. All of the following would require
intraperiod tax allocation, except
- Change in accounting estimate
5. Income tax expense should be allowed to
all of the following, except
- Gross profit
6. Which statement is true about intraperiod
tax allocation
- The purpose is to relate the
income tax expense to the items
which affect the amount of tax
7. Recognizing tax benefit in a loss year due
to a loss carryforward requires
- Creating a deferred tax asset
8. Which of the following is the most likely
item to result in a deferred tax asset?
- Unearned revenue
9. A deferred tax liability arising from the
use of an accelerated method of
depreciation for tax purposes and the
straight line method for financial accounting
purposes
- A noncurrent liability
10. Taxable income
- Differs from accounting
income due to differences
in interperiod tax allocation