CPAR_TOA 07.27.13

CPA REVIEW SCHOOT- OF THE PHII-IPPINES Manila THEORY OF ACCIOUN'I'S First Prebour6 p*spination

Saturday. July 27,2413 8:00 a.m. to 9:30 a,rrr.

SEI'

A

* MARK FULLV ivith

Pencil I'.ic. 2 the ietter of your choice on the provide,J. answer sheet Make the mark DARK but do not use too much pressLlre. IiRASURES

MUI-'I'IP[,EI CHO[{lE

ARE STI1ICTLY NGT ALLOWED. D

1.

Debit alw'eys means Right side of an account

a. b.

c.

d.

Increase Decrease

lllone ol these

D

2.

A trial balance may prove that debits and credits are esual but a. An amount could be e:rtered in rhe wrong accollnt. b. A transaction could have been entered twice. c. A transaction couirJ ha'ze been omitted. d. All of these

C

l.

An adiustirlg er"rirv to rccord an accrued exit€n:-r involles a debit to a. Expense accor-rnt and a credit to a prepaii atcotiiit. b. Expense accour.rt and a credit to cash. c. Expense accoLlnt and a credit to a liabiiit)' account" d. I-iability account and a eredit 1o an expense eccoLlnt.

C

4.

The closing entries a. irlr.rst dehit or credit one income stateixent acr:ount and orre statement of tlnancial position account. b. Include closing tlre dil'idends eccount io inc:xnc SLuri11or,,'. c. Are posted to the al..propriate general ieriger accounts. d. All of the cl,oices i-1"rc ccrrect regarciing clo:sing entries.

D

5.

Reversing entries do not apply to rvhich ot'ti:e tbllowing iterrs?

a. [Jnearned reveuue b, Accmed wages c. Prepaid insurance ci.

Depreciatioll

B

6.

Which of'the folllrwinlr represents a fornr olconrnrunication tiri:ough iliiancial reporting but not through tinanc i r. I stal r:,rrents? a. Statement of ilnancial position b. President's letter c. Income statcrrerit d. Notes to flnancial statenients

C

1,

Which of the following statements rs uof an o.b.iective of tlnancial reporting? a. To provide information that is usei,,rl in in.;estrnent anci credit decisi,ons. b. T'o provide information about resollrces. ciaims against those resources. and changes in thent. c, To provide infbmratiorr on the liqr"ricialion valr:e olan entity,, d. To provide iufbrmatrirn that is usefiil iir ass,:ssing cash tlow prospects.

A

8.

Which olthe fbllowing has ilie highest autliorita"trre sliilporl'/

i'r, lnternational Financial lieporting

Standarcis

h,. International Accounting Standarcls c. Interpretaiions of the IFRI('

d.

Conceptual Frame',,i,orl.. f-cr Financial Reportir.lg

Page A

9.

2

T'he urrcleriS,ing therne r:1'the conceptual tiar:rervork is

il.

Decision usefirlness [Jnderstanclability

b.

c. Iteliability d. (ioniparabilitl, B

10.

A

ll.

'Ihe Conceptr"ral Framework includes a.ll i:,i',".: iellcwing ex*{:pt a. Ob.iective of flnarrcial reporting b. Supplementary infbrmation c. Elenrents of irnancial statements d. Qualitative characteristics of accolllttil1g inI'ornratiolr In the Conceptual Frameu'ork. an ingredi::l-rt rrl'a tirndaneirlul i;u;iiittrtive characteristic is a. Neutrality

b. Vtritiability

c. Tilueliness d. Llnderstandability C

12. Inllatiorr is ignored in accounting di.re to the

l.

b.

c. d. A

Economic entit), assunrption Coing concern assumption Monetary urrii assumption Per iodicity' assunrption

l-1. tiecognitiorr of amoriization of an intarrgihle asset illustrates u,lrich principle of'acct-runting? Expcnse recognition

il.

h). Full disclosure

c. Revenue recognition d. [-iistorical cost B

14. Staterlent of financial position inlbrmatior: is irseful lbraii of tire foilorving" c.r.cept ar. fo compute rate of returu b. 1'o arralyze cash inflows and outt'lows fcr the period

c. l-o elaluate capital strllctllre d. To rissess firture cash ilows

D

15. S'hich of tlie lollowing is a cirrrent asset'J Cash surretidet'r,alue of'a lii'e rnsurance p,llic,v tif which ti;e eniit;,is the berretlciary. b. In,,'estnrettt in equity securities for tire purp.]se of c,rntlclling the rssr-iing entity. C'ash cL:signated lbr the purchase of propertv. plai'r alr,"1 ecpripnterl. '['r'adc' irtstailtt-lent iiccou]rts receivabie nonlally collectiLrl" ii: l8 nrontl:s.

tl.

c. tl.

C

16.

-l'hc

a. h. c. d. A

itictirne stirterrrent infornration wor:id llt-ip irl lvliich olthc f'ollow'ing tasks'7 Eviiluirtc tne liquidity cf an entiti.. Evaluate the solvency of an entit5,. Estimerte future cash florvs. Estirlare fLnure flnarrcial flexiroilitl. Kung mas marami syang creditors, wala ding

kwenta yung income mo sa I/S

17. S'hich of the fbllowing is not a genera.lly praciiced rletlrocl rif preserrting the income statement'l

RE a. lncluding prior period rd.ir"rstrnents in detclnrini:rg net ilicurre. -fhe

b,

c. d. B

condensed inconre statentent. consolidated income statemcnt. lnclrrriing gains and losses l'ronr discontinueri operntions irr rJetr:r'nriningi net income.

-l'he

18. Whicir ot'lhe fbllowing rvould bppear

il.

b.

c. d.

Net income Prior period ariiustnrent Cash Llividends Share di,iiclends

tirsl ::: ir ttat,,.mrni r:1-retr,neii rarni:igs'?

Page B

19. Which of the f,',liowing is irrclUdecl iucoiTrpreltensive lnrreStments i,.1 rrwners tr. iJr-rrealized ;:ai"is on avaiiable for sale secLlrities

3

incotlle?

a,

c. DistriLrutions [c owners d.

C

D

D

D

Changes in ar:':ounting Poiicv

luctes 13 tlre financial stateurelrts 20. Urrder International Financial Reporting Standarcis' a. Must be quantifiable' b, Must qr-ralifY as an element' of tire financial statenients' c. Ampli'fy or explain items presenteci in the mainto body d All of the choices are correct regar:ding notes the tlnancral statements'

21. Significant accounting p,,llicies nla)' not be a. Selected on the basis oijr"tdgrnent' h. Selected ti'om existri'rg acceptable alternatives' c. Utrttsual or inno"'ativ: in applicatiotl' d. Omitted fiotl firta;:rcial statement disclostlre'

all inforntatiot'r sig'riiticant errough to aftbct a 22. Which assur-rtption li' principle reqltires thr',t reportecl i, the finarlcial statet,ents? clecisio, of reasonably infor,recl useis sho,ld be a. It4atchirig b. Coirrg collcern c. Ilistorical cost d. Fr.rll disclosut'i: 2j. _- whicir of

tl-re

following events after tl-re reportirig peri.d

rvouricl reqrtire adjtrstme,t

of the

ac(]otlrrts befbre iss,-rance of tire firrailcial statenrents? Loss of Plant as a result of flre heid as an investment changes in the quoted market prices of secr-rrities resultiug tiorn majcr flood loss

a. b.

c

Loss on ir-rventoiy c-leenlecl ttncet'taiu at year erld' c1. I-oss on a lawsuit tite or-ltcome of ,vliich was

B

B

A

24, Rr)venue of a seglllei-it ii'rcir:cles a. Only sales to unaffiliated customers' b. Sales to r-rnaffiliated custonlers and interseqnrent saies' c. Sales to unaffrliaicd customers and interest revenue' d. sales to ,una{t'iliated cLlstol'llers and other revellLle ancl gains'

when the r:evenue of the segment exceeds 25. A segment of a br:sitress is to tre reported separately teli Percent tl i'1he a. Total corllL;n:d revenue of all segntents rePorti n g Proti t' b. Total rever.rue rf all the entity' s indr"rstlY segtuettts c. Total expoil and foreign sales' Li. Cor-nbined net income of aii segments reportii^rg Protit. :

26.

a. b.

c.

d.

B

reporting. except tire fbllowing statenrents are t,rue regarciing iriterinr interim reportir-rg date' A co,rplete set;f filancial staten.]entsls r.quir.d at the aclvertising expenditures that could Entities are reclr;ired to expense ir-iielinr amollnt like benefit later interinl Periods ettt v i er'r' o i i nteri nl reporti ng' PF'RS cloes not mention the integral and i nclepetrci iluring the year should be reporteci' No accruals or def-errals in anticipati:rg of tiriure events

Ailof

u'hy' accour-rting chiitrges are classified into 27, Which of the lollorviLig is the best explauatlon o ift'erent cate go ri es? a. -[-he materiality'' of'the ciranges involved' clia.ges i, the tl,a'cial statements' tl. Each category i'r,oives diff'erenimetliod olrecognizirlg c. Tire tact that sr-rme treatments are considered GAAP aud some are not'

C1'AsLlrver,ol.maiielgersandtlreirneedlopr"ovirleathvorableprotitpictr-rre.

Page 4

B

28. Which nrethod is required for reporting change:r in nccor-rniing policii:s? .i. Cunruli:tive effect approach

ir.

c.

d.

fi.etrospc.ctive approach Prospective approach Ar c.raging approach

C

29. Which trvpe of accounting change shoLrid a. Cl:ange in accounting pt:iicy h Cirangre iri repor-ting entit.rt c. ['hange in acc.ounting estirlatc d. (-'olrection of an error

A

30. S/h1"is retrospective treatrnent of chang.es in ar:cor-rntirrr t.,stiniate is prnhibiterJ? a. (.'hartg.:s in estimhtes as nornlal recurring correctidrls and ad.iustrrents which h

d. D

11.',.1r,.s

ho tccounte.l

fitr iii current ar.! filture periods?

are the natural result ot'the accounting process. 1'he retrospeciive treatnrent for any type of presentatiorr is not allowed. Retrospective treatnlent o1'clranges in accountirrg estintates ls pr,rhibitecl because PFRS requires i1. FRSC dtles nor prohibit retrospective treatment of changes in accounting estimates but is silent oit tiris issr.re

31. A cash ecluilaient is a shorl-term. highly liqrricl invesiriterrt that is rc--acJily convertitrle into knorvn antoilnls ofc:sh and a. Is accr:ptable as a nteans to pal- current liahilities. b. Has a current nrarket value tl-rat is greater tharr original cost c. Beat's an intefest rate that is at least eiiual to the prit:te rate ol'iirterest ai the date of iir.pri,.larion.

d, B

32.

Is so trear its ntatitrity tirat

it presents irisigniticant risk of'charges irr interc.st

rates.

\\'liich r'tf tlte 1'ollowing is air appropri,rte r',;ionciling item io the hnlirr:c,i pcr h;ink in

a

bauk recr.inci iialian? lJarrk serr ice charge

a.

tr.

c.

d. C

3i. All

Deposit iri rransit Bauk irrlerest (,'hargeback tbr NSF checli o1'the follo.,ving are probiems associateil railh the valurtion

a. IJncollectib!e accor.tnts b. Ii cturns c. Cash discoultts under the net methcd d. Allolval:ces granted

*f aciounts

rec*iva"hle. except

D

14. \\rhich of the ftrllowing nrethods of deternrining bad rlebt e:tperlsc does not properll, match expense and revenuei) il. (,har:gii:g Lratl debts rvith a percentage of sales under tlie allon,ance rrreffuocj. b. C'hargling hrd debts',v.th an anlouni. cleiived ti'trn a perccntage oi'account.: receivable under the al Ic-rr.l,ance nrethod. c. Charging bad debts u'itir an amoLrnt clerii'ec1 flonr agrng accourrt-s receivable r-rn