5 Chapter 3: PIRES fos SHES. Paes, ras EXERCISES sb = FINANCIAL ACCOUNTING AND REPORTING THEORIES ts zed entitles (SMES) are those en ‘Small and mediur it . Publish general purpose financial statement thay = Tk Do not publish general purpose financial stars en, users. ‘ Meme ig UL, Do nothave public accountability, IV. Have pubic eccountabilty. AL Tand UL B. Iand Il] c wand Vv D. Tend IV 2. An entity has public accountability if : A. Its debt and/or equty instruments are traded in a pup, B._Itisin the processof issuing such instruments for racy MMe NOS asst hc ity for abi ae TE holds assets in a fiduclary capacity fora broad 2s one of its primary businesses. STOP Of odes 'D. Allof these statements are correct, : PERS for SMEs cover entities that: ‘AL Have total assets of between P3,000,000 and P350, abies of between P3,000,000 and P2S0,000,009° "7° Have total assets of between P3,000, 000 and P250,000,00 liabilties of between P3,000,000 ancl P250,000,000. oat C. Have total assets and total liabilities between 3,000.00) ay 100,000,000. D. Have’ total assets or total liabilities between P3,000,00) ang ‘P400,000,000. 4. In the Philppines, which of the-following entities is not conse n SME? A. A non-publicly accountable entity with total assets been P3,000,000 and P350,000,000. B. A non-publidy accountable entity with total ibis bee P3,000,000 and P250,000,000. . An entity that is not’a holder of @ secondary license sued b 2 regulatory agency D. A public uty,Chapiter 1: PIRS jon SMEs, PIRS fon Swell Entities, aud Reporting for Ticroenterprlses Which of the following companies Is classified as an SME? ‘ABC Bank with total assets of P200,000,000. ‘ XYZ Insuronce with total liabilities of P150,000,000 C. Philippine Waters Co. (@ public utlty company) with total assets of 101,000,000 , All of these companies are clessified as SMES. None of these are classified as an SME. 5. 6. Entities with total assets between P100,000,001 and P350,000,000 or total liabilities between P100,000,001 and P250,000,000 are known as A. Micro entities. Small entities. Medium-sized entities. : D. Macro-entities, 7. Entities with total assets or total liabilities between P3,600,000 and 100,000,000 are known as A. Micro entities. B. Small entities. Medium-sized entities. D. Macro-entities. 8, Entities with total assets or total liabilities below P3,000,000 are known as Micro entities. Small entities. : C. Medium-sized entities. ~D. Macro-entities, 7 9. What is the date of transition to PFRS for SMEs? A. The beginning of the earliest period for which an entity presents full comparative information under PFRS for SMEs, B, The end of the earliest period for which an entity presents full comparative information under PFRS for SMEs. C. The beginning of the latest period in the most recent annual financial statements under previous financial reporting standards. . D, The end of the latest period in the most recent annual financial statements under previous financial reporting standards. 10. ABC Company presents the first annual financial statements in accordance with PFRS for SMEs on December 31, 2022. Which of the following is considered the company’s date of transition to PERS for ‘SMEs? AL January 1, 2021. B, December 31, 2021. i C. January 1, 2022. D. December 31, 2022.Chapter $1: DIRS fr SMEs. PIRS fn Smal Ben, Rating fo an SHE tat umes the PRS for SMES In he corer fos eon, oe re ote at thee of Be CTE Yr, ec “required to transtion to full PFRS ‘A. Atthe current year-end, B. At the current year-end if the event thet caused the Significant and continuing Soy, C._ Inthe subsequent period. 'D. In the subsequent period if the event that caused the: significant and continuing. Ome, E. At the discretion of management. 12, What quantitative threshold can be ConsISered 3 Sonic cay, requires transition to PFRS for SMEs? o A 10% or more of the total assets or total Kabilites, B, 20% or more of the total assets or total labiities, 25% or more of the total assets oF total lilies. D. 50% or more of the total assets oF total habilties, E._ No quantitative threshold can be made 13. Which method Is required for SMEs reporting change in acme palo? A Cumulative effect approach BL Retrospective aapraach C. Prospechve approach. D. Averaging approach 14. Prior years financial statements of an SME are not restated for ‘Ghange in accounting policy Change in accounting estimate C. Correction of prior peniad errors D. All of these require retrospective restatement PERS for SMEs: Financial Instruments 15. Under PFRS for SMES, financial instruments are classified as: ‘A. Fair value through profit or loss or Fair value through oer ‘comprehensive income. Basic oF non-basic. C Far value through profit or loss, Fair value through ote Comprehensive income, or amortized cost. D, Simple or complex. 16, Under PFRS for SMES, inventories shall be measured at A. Cost The lower of cost and estimated selng price less cost t com and dispose. C. The lower of cost and fair value less cost to complete and dspast D. The lower of cost and market value.Ronerting joe Mescwrmcerareses The most recent purchase price. 17. Under PFRS for SMES, if the selling price less cost to complete and sell is wer than the cost of Inventory, the write-down Is accounted for AAs on impairment loss. As combonent of cost of goods sold, C. Component of other comprehensive income, : DL Directly in retained earnings. PERS for SMEs: Acc 18. Under PFRS for SMEs, an entity shall account for its investments in associate after initial recognition using AL Cost model B. Equity method Fair value modet Either A, B, or C. 19, Which of the following is not permitted if the investment in associate has published price quotation? ‘Cost model. Equity method. C. Fair value model. 0. AorB. 20. Under PFRS for SMEs, goodwill arising from acquisition of investment in associate shall be amortized A. Over 10 years, B. Over its estimated life, C Over the period based on the management's best estimate. 'D. Over its estimated life or management's best estimate but not t exceed 10 years, 21. Which statements are true in relation to the initial measurement of investment in associate under PFRS far SMEs? L Under the cost model, the investment in associate is initially ‘measured at the transaction price plus transaction cost. é a Under the cost model, the investment in associate 's initially ‘measured at the transaction price excluding transaction cost. HL Under the equity method, the investment in associate is initially measured at the transaction price plus transaction cost. Under the equity method, the investment in associate is initially measured at the transaction price excluding transaction cost. Under the fair value model, the investment in associate is initially measured at the transaction price plus transaction cost, ML Under the fair value model, the investment in associate is initially measured at the transaction price exctuding transaction cost. N. v.Chajitin St: PRS for SMEs, PARE for Small Entities. and Reporting for Wieroenterprises 1, andV $ 1, I, and VI 1, 1V, and V. . pog> YN, 11,-1y, and VI. t A. Carrying amount. B. Cost. C. Cost less accumulated impairment losses. ~ Fair value. * . E. Fair value less cost of disposal. . Under the feir value model, the invest ment in associate is subsequently measured at A. Garrying amount, B. Cost C. Cost less accumulated impairment losses. ‘D. Fair value, E. Fair value less cost of disposal. 24, Investments in associates must be tested for impairment if the entity uses z ‘The cost model. Tl The equity method. TL The fair value model. A Tort. B. lori. C. Hori. x D. 1,0, orm PERS for SMEs: Accounting for In es 25, Under PFRS for SMEs, an entity shall measure an investment property after initial recognition using ‘A. The cost model. 1 B. The fair value model. C. Either the cost model or the fair value model. D. The fair velue mode! only if the fair value can be measured reliably without undue cost or effort on an ongoing basis. Otherwise, the investment property shall be accounted for using the cost model. 26, Under PFRS for SMEs, biological assets shall be measured A. Using the cost model. B, Using the current market price model. C._Atits fair value less cost to sell, D. At Its fair value less cost to sell only when fair value Is readily determinable without undue cost or effort:2 Chapter 5H: PIRES for SMEs, PIRS fon Swall Eats, and Resonting fon Wlersoterpriscs unting £¢ 7 27. An SME must meesure fe asset after initial recognitién using the’ ; 1 Cost model Ti, —_ Fair value model Wi, Revaluation model & Tonly. Storm G Iori, P DB. 4.1, orm, 28. What is the useful fife of a trademark acquired an si remaining lego! life of four years ba raronasle eves tar yo os cost? A. 4 years. B. 10 years, C. 14 years. D. Indefinite. |E Based on best estimate of management but not exceeding 10 years intan 29, The useful life of the intangible asset of an SME is A. Finite, Indefinite. Either finite or indefinite. D. “Ten years. . SMEs: Accounting for Research and Develonment Costs . Which of the following Is the correct re 7 development costs incurred by an SME? Se All research and development costs are capitalized. B, All research and development costs are expensed. . ‘All research costs are expensed when incurred and all development costs are capitalized. D; All research costs are expensed when incurred and development costs are capitalized if conditions for capitalization are met. SMEs: inting for Government G: 31. Under PFRS for SMEs, an entity shall measure government grant at A. The amount of cash received. -B,. Fair value of the asset received or receivable, C. Nominal amount plus direct costs incurred. D. Zero. 2. An SME must recognize a government grant that does not impose Future performance condition A. When the grant is received. 'B. When the grant becomes receivable. . Over the periods necessary to match it with the related costs.Chapin Bl: DIRS for SMEs, DIRS for Small Entities, and Reporting for Mierseatingrics D. By applying an approach depending upon the accounting polcy adopted by the entity. ‘an SHE must recognize a government grant that imposes future performance conditions: A. When the grant is received. B, When the grant becomes receivable. Over the periods necessary to match it with the related costs. 'D. Only when the performance conditions are met. 34, Goverment grants received prior to satisfying the revenue recognition criteria are recognized ;s a liability. |. Asan equity. C. Asa component of other comprehensive income, D. Inretained eamings. ‘SMEs: Accounting for in . 35. Under PFRS for SMES, borrowing costs are recognized A. As expense when incurred, B. As cepltalizable when direct attributable to qualifying asset. C._Inretained earnings. . In other comprehensive income, 36. Under PRS for SMEs, acluaral gains and losses resulting from remeasurement of defined benefit plan are ‘A. Recognized in proft or loss. B, Recognized in other comprehensive income. “C._Recognized either in profit or 1685 or other comprehensive Income, depending on the entity's policy choice. D.” Not recognized, 37, AN SME entered, a5 lessee, Into 2 12-month noncancelable lease of 2 motor vehicle that has an economic life of five years and zero residual value. Lease payments are on @ monthly basis. At the end of the lease term, the lessee returns the motor Vehicle to the lessor, The lease IS accounted for A. Asa finance lease. ‘AS an operating lease. Either as a finance lease or an operating lease. D. Neither as a finance lease nor an operating lease.Chapter Ht: PURE for SMEs, PIRS for Small Ercites, and: Resort fon Miraentonprises 38. Depreciation of a leased machine is 1. "Recognized by the lessee where the lessor and the lessee have classified the lease as finance lease. TL —_ Recognized by the lessee where the lessor and the lessee have Classified the lease as operating lease. TI. Recognized by the lessor where the lessor and the lessee have Classified the lease as finance lease. 1V. Recognized by the lessor where the lessor and the lessee have + classified the lease as an operating lease. Torm. Lory, Tor MH, Worlv. [Est Accour 39. Under PRS for SMEs, share options shall be measured at Fair value at grant date, Its Intrinsic value. €. Tis intrinsic value only when the fair value cannot be determined reliably on grant date. D: Nominal amount. z jon and Evaluation Sd 'Tangible exploration and “easton eee eee ‘measured subsequently using L Cost model. I. Fair value model, II "Revaluation model, ‘A. Tonly. Tor IL. © Lori IIT only. 41, Intangible exploration and evaluation asset shall be measured subsequently using L Cost model. T. Fair value model. I. Revaluation model. A. Tonly. x B. Tor Il. es G Lor It. D. Monly.Caste 31: PFRS jon SMEs, PIRS for Small Enttes, aed _ Reporting fox UMcncaterpises “2, Which of the folowing statements are true about Small Entities? A. Small entities are entities with total assets and total liabilities between P3,000,000 and P100,000,000, B, Small entities are entities with total assets or total liabilities between 3,000,000 and F100,000,000, Small enities ae entities that are notin the process of fling financial statements forthe purpose of issuing any class of instruments in 2 public market. Rand ait % BandC 43, ABC Company presents the first annual financial statements’ in accordance with PFRS for Small Entities on December 31, 2022. Which of the folowing is considered the company’s date of transition to PFRS for small Entities? January 2, 2021. B. December 31,2021. ~ : © January 1, 2022, D. December 31, 2022. 44, The statement of income and statement of changes in equity of a small entity can be combined into one financial statement ifthe only changes ‘sjare A. Profitor loss, B, Dividend payment. C. Correction of errors. D. Change in accounting policy. 'E Allof these, PERS for Small Entities: Accounting for Inventories. 48. Inventories of a small entity shall be measured at A. the loner of-cost and estimated selling price less cost to complete and dispose. ' the lower of cost and fair value less cost to complete and dispose. C. the lower of cost and market value. the most recent purchase price. ‘Small fe rent in Associ 46. All investments in associate of a small entity are accounted for using 1, Cost model 1 Equity method TI, Fair value method A Tony 8B Ionly © Either Tort . Any ofthe I Lor HtCette 3 PIRS bn SU, Pops I 5 od Entities: ing fo ets fm Miers ; il entity shall i ind Equi a. ae: a apply which ‘accounting olicy for PPE? 1 ff, Fair value model il. Revaluation model only lor IL c lorll D. Tor it Under PERS for Small Entites, ifthe measurement off : ‘aw nalable without undue cost or eft tee mechan oe the property is accounted for using the ; ‘A. Cost model. B. Fair value model. Current market price model. D. Revaluation model. all Entities: Accoui ro. 49. Under PERS for Small Entities, borrowing costs are recognized As expense when incurred, B. As capitalizable when directly attributable to qualifying asset CC. In retained earnings. D. Th other comprehensive income, 50. A small entity shall measure intangible assets using L Cost model a Fair value model Be TI. Revaluation model Toniy B. orl Lor itt D. Mor ltt PERS for Small Entities: Accounting for Biological Assets 51. A small entity shall account for its biological assets using so The cost model. The current market price model. A. Tonly. Tonly. © Tand th Torn, . T.Cate Ss PPRS fn SMEs, PPRS fe Salt Erte, and Rein or Micretnptas 2 ral ety ops to account fr ts ological ase using the cent rade pee Mace al anges In the curent market price of Bs ea aes ae Recon n prof ross, ecg in ther conoreensve income, Reser in reine comings. Bi. netrecogne, '. We ofthe along s comet regring accounting for leases under ax Snal Ems? eres be scoured 28 operating leases, ‘ass shal be acute a5 anc eases. ‘C A-smalenaty sha account for is leases either operating lease of farce eee , FFRS for Srl Ete doesnot adres lease accounting ies es 5. en of te felowng 1 tue about accountng fr income taxes in } ance wih PRS fx Sal Enaes? ‘Asal ety mayor ay at recognize deferred tax asset billy ‘spending on fs Seaurng boc coe. 7 ‘8 A-small ery isnot alowed to recognize detered tax asset or ‘aot, CA sma entity i nly alowed to recognize cure tx asset ot ‘ory. D. Bond Cae corset 5S. Which e llwng fre re shout nicer? A narmnapes tees Wt hve ase ant ab es bon P9000 8. oceeocs enes at hve less ol bs ew 5,000, ‘gents re rts tat roti he procs of ng nc Steet fore pps of ung by Cas fret ne part o Keie Soe c 4. me aout te teed repo fame of oseury A Moras must sa PRS oS Esa te fed | ‘etn tomer. 2 Meow mat ua cane tx ba 36 a far ‘oy nena (Mcrae te oon us PRS fr Sra Es ‘ane tchaie arr tore pring ae Cette 5 PFS 0 SHEL, FIRS Sma Bet, y Rtg fs Reece prises must use . micoemterpies must Use Full PRS os Cr thea rang . whic ofthe following is nota component of ami moti iroenterpces fancial Bo Saatement of Financial Postion Statement of Managements Responsity ‘Statement of income Statement of Cash Flows Notes to Financial Statements