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Pre-week Summary I – Oct 2006

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FINANCIAL ACCOUNTING

 Accounting and and Financial Accounting Accounting Concepts Concepts 1.0 Overview of Accounting 1.

Which Which of the following following statement statements s about the nature nature of accountin accounting g is not  true? a. Accountin Accounting g is the language language of business. business. b. Accounting identifies, measures and communicates financial information about economic entities for use by both external and internal users in making economic decisions c. Before Before accounting accounting can rende renderr communi communicatio cation n services services,, an econom economic ic entity should first be created d. Accounting communic communication ation services are available only to publicly  accountable, accountabl e, medium-sized medium-sized and small industries and not to micro entities

2.

Which Which of of the following following statement statements s regarding regarding accounting accounting theory theory is [are} [are} true? true? I . Accounting concepts concepts are human made II. Accounting Theory can be defined as a coherent coherent set of hypothetical, hypothetical, conceptual and pragmatic principles that form a general frame of reference for a field of inquiry III. Accounting theory has developed developed primarily primarily in response response to government government regulations. Statement 1 Statement II Statement III Statement I Statement II Statement III a. true false true c. false true false b. true true false d. true true true 3.

Whic Which h of the the foll follow owin ing g stat statem emen ents ts does not properly describe the fact that the Accountancy Profession is a communication communication profession? a. Fina Financ ncia iall sta state teme ment nts s sho shoul uld d use use term termin inol olog ogy y wit withi hin n the the leve levell of  of  understanding of the statement user. b. Fina Financ ncia iall sta state teme ment nts sc can an be expr expres esse sed d iin n the the Span Spanis ish h or or Chin Chines ese e language c. Fina Financ ncia iall stat statem emen ents ts,, as far far as poss possib ible le,, sh shou ould ld sh show ow info inform rmat atio ion n that that can be verified from documentary evidence in order to gain the confidence of statement users d. Fina Financia nciall statem statements ents can be be expres expressed sed in in any any dialect dialect of a coun country  try 

4.

Which Which one one of the the following following is an appli applicatio cation n of the science science aspect of  Accounting? a. Exercise of creative creative skill and judgment b. Interpreting the information information presented in the financial statements statements through ratios and trend analysis c. Use of an an accounting equation to to express express the relationship of  accountable events d. Attesting to the fairness of presentation presentation of financial condition and operating results

5.

The art art aspect aspect of account accounting ing is is applied applied in the the followi following ng circum circumstance stances s except  when a. The accountant refers to a body of organized knowledge in  processing accounting accounting information. information.

b. A provision is recognized recognized on the basis basis of the company lawyer’s professional opinion that there is a strong probability that the company will lose in a lawsuit in the corridor of  P 5 M to P 8 M c. The accountant chooses the most appropriate method method of inventory inventory valuation for the entity. d.. The external auditor gives an unqualified opinion that the financial statements are fairly presented in conformity with generally accepted accounting principles 6.

Whic Which h of the the foll follow owin ing g stat statem emen ents ts is is incorrect ? a.General purpose financial statements were developed primarily  because all outside outside party users users have the same information information needs needs b. The double-entry double-entry system of accounting has been used for centuries. centuries. c. The practice of accounting accounting requires considerable professional judgment d. The objective of external external financial statements is to communicate communicate the economic effects of completed transactions and other events in the entity

7.

The branch branch of account accounting ing that that focuse focuses s on general general purpose purpose reports reports on financial position and results of of operations is known as a. Financial accounting c. Bookkeeping b. Au Audi diti ting ng d. Mana Manage geme ment nt Accounting

8.

Which Which of the the follo followi wing ng applie applies s to finan financia ciall accoun accountin ting? g? a.

yes yes no no 9.

b.

c. d Information meets specific needs of particular statement users no no no Emphasizes objective data yes no no Future-oriented no no yes Basically concerned with income determination and asset valuation yes yes no The following following descript descriptions ions pertain pertain to limitatio limitations ns of of financi financial al accounting accounting and financial statements except  a. Historica Historicall in nature nature c. Centered Centered on quantifiabl quantifiable e informatio information n d. Records informatio information n on the b. Use Use of esti estima mate tes s basis of business papers

 Accounting standard standard setting setting (institutions (institutions and process) process) 10. According to the Preface to International Financial Reporting Reporting Standards, which of the following are objectives of the IASB? I. To harm harmoni onize ze fina financi ncial al repo reporti rting ng betwe between en IFRS IFRS and and US GAA GAAP P and the European II. To work work activ actively ely with with nati nationa onall standar standard d setter setters s III. To promote promote the use use and strict strict applicat application ion of financial financial accoun accounting ting standards c. II and III a. I and II b. I and III d. I, II and III 11. Which of the following are parts of the “due process” process” of the IASB in in iissuing ssuing a new International Financial Reporting Standard? I. Establ Establish ishing ing an adviso advisory ry comm committ ittee ee to give give advice advice II. Developi Developing ng and publishing publishing a discussion discussion document document for public commen commentt III Issuance of an interpretation as authoritative guidance IV Reviewing compliance and enforcement procedures V Issuance of the final standard with number and title

a. I II & III only III, IV & V

b. I, II & V only 

c. I, II, III & IV only

d. I, II,

12. As an assistance to to the IASB and the accountancy accountancy profession profession and the public public it serves, which which of the following should should IFRIC consider issuing issuing an interpretation? I. Newly Newly ident identifi ified ed financ financial ial repor reportin ting g issues issues not specif specifica ically lly addre addresse ssed d in IFRSs II. Issues Issues where where unsatisfact unsatisfactory ory or conflictin conflicting g interpret interpretation ations s have devel developed, oped, or seem likely to develop. III. Accountin Accounting g issues issues affect affecting ing speci specific fic industr industry y or specific specific country country  jurisdictions. IV. Issues Issues where the the IASB member members s cannot have have a common common agreement. agreement. a. I and II only  b. I, II and III c. II, III and IV only d.. I, II, III and IV only 13. Which of the following following statements about international international accounting standards is true? a. Legal and psycholo psychological gical hurdles hurdles to achiev achieving ing common common reportin reporting g standards standards will will be full fully y overc overcom ome e by the the year ear 20 2012 12,, the the time time frame frame set set for convergence between IAS and US GAAP b. Accountin Accounting g profession professionals als in in the USA USA conside considerr US GAAP GAAP superi superior or to IAS IAS and has no intention to adopt International Accounting Standards.. c. The The IASB IASB is able able to enfor enforce ce its stan standa dard rds s by prohi prohibi biti ting ng the the list listin ing g of  companies which do not comply on stock exchanges which sell internationally. The e In Inte tern rnat atio iona nall Ac Acco coun unti ting ng St Stan anda dard rds s Bo Boar ard d (I (IAS ASB) B) wa was s d. Th esta es tabl blis ishe hed d with with the the purp pu rpos ose e of narr narrow owin ing g the the rang range e of  divergence in accounting standards throughout the world . 14. Which one of the following bodies bodies is responsible for reviewing reviewing accounting issues that are likely to receive receive divergent divergent or unacceptable treatment treatment in the absence of authoritative authoritative guidance, whit a view to reaching reaching consensus as to the appropriate accounting treatment? Interpretations ons Committee a. International Financial Reporting Interpretati (IFRIC) b. Stand Standar ards ds Advi Adviso sory ry Coun Counci cill (SAC) (SAC) c. Intern Internati ationa onall Accoun Accountin ting g Standar Standards ds Board Board (IAS (IASB) B) d. Internatio International nal Accoun Accounting ting Standards Standards Committe Committee e Foundat Foundation ion (IASC Foundation) 15. Which of the following statements statements relating relating to the FRSC and standard setting process in the Philippines. Which of these is (are) true? I. All members of the FRSC should be CPAs II. The Financial Reporting Standards Council (FRSC) Board of Accountancy (BOA) and Professional Regulation Commission (PRC) are all involved in the standard setting process, with PRC as the final approving authority. authority. a. Only I is true b. Only II is true c. I and II are true d. I and II are false 16. Who among the following may be nominated for membership membership in Financial Financial Reporting Standards Council? a. A member of FINEX who is a CPA CPA and is a Finance Officer of the company he represents b. The BIR Commissioner who is a LAWYER c. A director of the Securities and Exchange Commission who is not a CPA d. A Deputy governor of the Central Bank who is not a CPA

The Conceptual Framework  17. The objectives objectives of financial reporting for business enterprises enterprises are based on a. the need need for for conserv conservative ative informatio information n the needs of the users of the informati information on b. c. the need to comply comply with financial financial accounting accounting standards standards d. the need to report report on managemen management’s t’s stewardshi stewardship p 18. Which 18. Which statem statement ent is false concerning users and their information needs? a. Lenders Lenders are are interested interested in informati information on that enables enables them to determine determine whether their loans and the interest on these loans will be paid when due. b. The provide providers rs of risk risk capital capital and their advisers advisers are are concerne concerned d with the risk risk inherent in and return provided by their investments. investments. c. Gover Government nment and its agen agencies cies have an inte interest rest in info informat rmation ion about the continuance of an enterprise, especially when they  have long-term involvement or or are dependent dependent on the enterprise. enterprise. d. Employees Employees and their their represent representative ative groups groups are intereste interested d in informatio information n about the stability and profitability of their employees. 19. Which of the following statements regarding users of financial financial information information is correct? a. External External decisio decision n makers makers can obtain obtain whateve whateverr financial financial data they they need need and whenever they need it. b. Accounting Accounting inform information ation is is prepared prepared for for and useful useful to to only only outside outside decision decision makers c. The membe members rs of the Board Board of of Directo Directors rs are not inter internal nal rather rather than external users of financial information considered to be internal internal decision decision d. Managers of an entity are considered makers. 20.

Which one of the following following term best describes the amount amount of cash or cash equivalents that could could currently be obtained by selling an asset in an orderly disposal? Realizable e value a . Fair value b. Realizabl c. Residual value d. Value in use

21. Are the following statements statements regarding the term 'profit' true or false? (1) (1) Profit Profit is any any amount amount over over and above above that that is is requir required ed to mainta maintain in the the capital at the beginning beginning of the period. (2) (2) Profi Profitt is the residual residual amount amount that remain remains s after after expense expenses s have have been deducted from income. Statement (1) Statement (2) Statement 1) Statement (2) a. False False c. True False d. True Tru e b False True True 22. Which of the following statements best describes the term 'going concern'? a. When current current liabil liabilitie ities s of an entity entity exceed exceed curre current nt assets assets b. The ability of the entity to continue in operation for the foreseeable future c. The poten potentia tiall to contrib contribute ute to the the flow of cash cash and cash cash equiv equivale alents nts to the the entity d. The expe expense nses s of an entity entity exceed exceed its its inco income me 23.

Which of the the following terms best describes the relationship of the assets, liabilities and equity of an entity? a. Fina Financ ncia iall perf perfor orma manc nce e b. Financial position c. Future economic benefit d. Obligation

24.

Which of the the following terms best describes assets recorded at the amount that represents the immediate purchase cost of an equivalent asset ? a. Historical Historical cost b. Realizabl Realizable e value value c. Present Present value d. Current cost 

25. Which of the following is true of the qualitative characteristic of  'understandability' in relation to information in financial statements? statements? a. Use Users rs should should be wil willin ling g to study study the inform informati ation on with reasona reasonable ble diligence b. Users Users are expected expected to have have signi significant ficant business business knowle knowledge dge c. Financ Financial ial state stateme ments nts should should exclu exclude de comple complex x matter matters s d. Financial Financial statement statements s should should be fee fee from material material error error 26. Which of the following terms terms describing describing information in in the financial statements are properly matched? a. Understandable and comparable c. Prudent and relevant d. Unbiased and neutral  b. Reliable and verifiable 27. Which of the following is the best description description of 'reliability' in relation relation to information in financial statements? a. Influence on the economic decisions of users c. Inclusion of a degree of caution b. Fr Freed eedom om from from materi material al error error and bias bias d. Comprehensibility Comprehensibility to users 28. This is the quality of information that influences the economic decisions of financial statement users? a. Relevance b. Reliability c. Understandability d. Comparability 29.. Accor 29 Accordin ding g to the IASB IASB Framework for the preparation and presentation of  financial statements, statements, which TWO of the following are examples of  'expenses'? I. A loss on the disposal of a non-current asset II A decrease in equity arising from a distribution to equity participants III A decrease decrease in economic benefits during the accounting period IV A reduction reduction in income income for the accounting period c. I and III a. I and II b. II and III d. III and IV 30. If accounting information information is timely, and has predictive as well as feedback value, then it is considered to be b. relevant  a. verifiable c. reliable d. understandable 31. Which of the following accounting accounting concepts states states that before before a transaction is recorded, sufficient sufficient evidence must exist to allow two or more more knowledgeable individuals to reach essentially the same conclusion about the transaction? c. Reliability quality  a. Continuity assumption b. Separate entity assumption d. Materiality constraint 32. Which of the following statements about prudence prudence and conservatism conservatism is (are) true? I. Conservatism is not a concept in the IASB Conceptual Framework II. Prudence is the same as conservatism III. III. Conser Conservat vatism ism is intenti intentiona onall bias --- downward downward bias in recogn recogniz izing ing profits profits and assets and an upward bias in recognizing expenses and liabilities IV. Prud Prude ence nce is the the incl nclus usio ion n of a degr degree ee of caut cautiion in the the exer exerc cise ise of   judgments needed in making the estimates required under conditions of  uncertainty c. I, III and IV only  a. I, II and III only

b. II, III and IV only 33.

d.

I, II, III and IV

In the first week of December, 2011, Elisa Company signs a major contract to develop an accounting accounting information information system for Edward Edward Inc. No work work is begun the current year, yet the notes to the financial statements discusses the nature and peso amount of the contract. contract. This is an example example of: full disclosure disclosure a. completeness or full c. relevance b. historical cost d. conservatism

34. A company reports reports only its total accounts receivable receivable balance in its its balance sheet, as opposed to a complete listing of its individual customer balances.  This is an example of  c. cost/benefit  a. consistency b. materiality d. conservatism 35. Which of the following statements statements is true with regard regard to the accountant’s concept of Materiality? a.Materiality is the threshold of recognition as to what accountable events will be recognized in the balance sheet and which will be recognized recognized in the the income income statement. b. Materiality judgments judgments generally may be based solely on the magnitude of  the item c. Materiality judgments judgments generally may be made made without consideration of the magnitude of the item involved. d. Relevant items items are always material 36. According According to the Conceptual Conceptual Framework , which of the following is not a primary qualitative qualitative characteristic characteristic that make the information information provided in financial statements useful to users? c Materiality  a. Comparability b. Relevance d Understandability 37. Are the following following statements in relation to materiality materiality true or false, according to PAS 1 (1) Materiality of items items depends on their individual or collective collective influence influence on the economic decisions of users (2) Materiality of an item depends depends on its absolute size size and nature (3) Materiality serves as the threshold of recognition in deciding whether a financial information is relevant relevant to be included in the statement of financial position or to the income statement statement Statement (1) Statement (2) Statement (3) a. true false true b. true true false c. false false fakse d. true false false 38.

Comparab Comparability ility of financia financiall inform informatio ation n depend dependss on on

Consistency Regular reporting periods

 A Yes Yes

B  Yes No

C No No

D No Yes

39. The recognition recognition of periodic periodic depreciation depreciation expense expense on company-owned automobiles requires estimating both salvage or residual value, and the useful life of the vehicles. vehicles. The use of estimates in this case case is an example of  a. prov providi iding ng relevant relevant data at the the expense expense of of reliabi reliabilit lity  y  b. invoking invoking the the material materiality ity constr constraint aint rather rather than cost cost benefit benefit constrai constraint nt c. conservatism d. main mainta tain inin ing g consi consist sten ency cy 40. Which of the following situations situations violates the concept of reliability?

a. Financial Financial statement statements s were were issued issued nine months months late late b. Report Report on segment segments s having the the same expec expected ted risks risks and growth growth rates rates to analysts estimating future periods c. Fina Financia nciall statement statements s included included propert property y with a carrying carrying amount  amount  increased to management management’s ’s estimate of market value d. Managemen Managementt reports reports to stockholde stockholders rs regularly regularly refer refer to new projec projects ts undertaken, but the financial statements never report project results. 41.

Which of the following statements about the qualitative characteristics is (are) true? I. Releva Relevance nce is the capacit capacity y of inform informati ation on to make make a differ differenc ence e in decisi decision on by helping users form predictions about outcome of past, present and future events or confirm /correct prior expectations II. The qualit quality y of reliabili reliability ty assures assures readers readers that that the the financi financial al inform information ation is free from bias and faithfully represents what it purports to show, including adequate disclosure of significant information III. III. Unde Underr the the IASB IASB Fram Framew ewor ork k for for the the Prep Prepar arat atio ion n and and pres presen enta tati tion on of  financial statements, conser conservat vatism ism is not a concep conceptt that that is recog recogniz nized ed as a qualitat qualitativ ive e objective. d. I, II a. I and II only b. I and III only c. II II and III only and III 42. Which Which TWO of the following following are are listed listed in the IASB Framework as Framework  as 'underlying assumptions' regarding financial statements? A The financial financial statements statements are prepared under under the accrual basis B. The entity can be viewed viewed as a going concern C. The financial financial statements statements are are reliable reliable D Accounting policies are consistently applied a. A and B b. B and C c. B and D d. C and D 43.

Which TWO of the following following statements statements concerning concerning the provisions provisions of the Conceptual Framework are Framework are correct? I. The Framework provides Framework provides that transactions must be accounted for in accordance with their legal form II. The primary primary responsibi responsibility lity for for the preparatio preparation n and present presentation ation of of the fina financ ncia iall stat statem emen ents ts of the the enti entity ty rest rests s with with both both its its mana manage geme ment nt and its its external auditor III. It is not proper proper that financial statements should exclude exclude complex complex matters simply in order to achieve understandability IV Where any conflict arises between the Framework and Framework and an accounting standard, the requirements requirements of the accounting standards should prevail d. III a. I and II b. I and IV c. II and III and IV  Basic Assumptions of Accounting 44.. Richar 44 Richard d Santos Santos is the the owner owner and and manag manager er of Santo Santos s Landsca Landscapin ping g Servi Services ces.. Santos purchased a new station wagon for personal use and a dump truck to be used in the business. Which of the following assumptions, principles, or constraints would be violated if both station wagon and dump truck are recorded as assets of the business?

a. Materiality constraint b. Conservatism constraint assumption

c. Continuity assumption d. Separate entity 

45.. 45

Adjust Adj usting ing entri entries es are are neede needed d becaus because e in report reporting ing fina financi ncial al data data an an entit entity y I. Adopts the accrual assumption II Reports on transactions that overlap accounting periods III. Adopts the going concern assumption b. I and II only  a. I only c. II and III d. I, II and III 46.. 46

Fatim Fatima a Inc. Inc. is a comp company any whose whose securi securitie ties s are are traded traded on over-t over-thehe-cou counte nterr market. It controls Portugal Corp. Consolidated financial statements statements are prepared prepared in recognition recognition of the accounting concept of  a. Economic entity  b. Materiality c. Legal entity d. Flexibility 47.. 47

Which Which one one of the the follow following ing stat stateme ements nts best best desc describ ribes es the the term term “going “going concern”? a. When current liabilities of an entity exceeds current assets b. The ability ability of the entity entity to continue continue in operation for. for. the foreseeable future c. The potential to contribute to the flow of cash and cash equivalents to the entity d. The expenses of an entity exceed its income

Principles of Recognition and Measurement (Assets, Liabilities, Liabilities, Equity, Revenue, Expense) 48.. Are 48 Are the foll followi owing ng statem statement ents s regard regarding ing “rec “recogn ogniti ition” on” true true or or false? false? (1) An accountable item is deemed “recognized” if it is recorded in the  journals and ledgers. (2) Recognition is the process of determining the amounts amounts at which elements of the financial statements are to be recognized, (3) Recognition is the process of incorporating in the financial statements an item that meets the definition of an element and the criteria for recognition Statement (1) Statement (2) Statement (3) a. false false true b. true true false c. true false true d. true true true 49.. 49

Which Which of the follow following ing statem statement ents s about about accoun accountin ting g recogn recogniti ition on is (are) (are) true? I. In accou accounti nting, ng, there there are are inst instanc ances es when when a gain gain / loss loss would would ari arise se upon upon initial recognition of an asset. II. No asset can simultaneously simultaneously be an asset of more more than one entity entity III. At times, times, two or more entities entities may share share the benefits benefits that an asset provides IV. An appropr appropriate iate basis for recogn recognizin izing g an asset asset is is when when a partic particular ular enterprise acquires the right to utilize and control access to the asset’s benefits a. I and II only c. I, II and III only d. I, II, III and and IV  b. I and IV only 50.. 50

Which Which of of the the follo followi wing ng is is a cond conditi ition on necess necessary ary for the recog recognit nition ion of an asset?

a. It is probable probable that future future econom economic ic benefits benefits will flow flow to to the enter enterprise prise and the cost of the asset can be measured accurately. b. The cost cost of of the asset asset can can be measu measured red rel reliab iably ly c. It is prob probable able that that futur future e economic economic bene benefits fits will flow to the the enterprise and the cost of the asset can be measured reliably. d. It is probable probable that future future econom economic ic benefits benefits will flow flow to to the enter enterprise prise and the asset is paid for 51.. 51

Whic Which h one one of of the the foll follow owin ing g is is not among the essential characteristic of an asset? a. The inflow inflow of future future economic economic benefits benefits is controlle controlled d by the enterpri enterprise se b. It must must be exclusi exclusively vely owned owned and and must must be exchan exchangeabl geable e c. The cost cost of of the asset asset can can be measur measured ed relia reliably bly d. It is is a resu result lt of of eithe eitherr a past activ activity ity

52.. 52

Which Which condi conditio tion n is nece necessar ssary y for for the recog recognit nition ion of of a liabi liabilit lity? y? a. It is probable probable that an outflow outflow of economi economic c benefits benefits will will be required required to to settle settle an obligation b. The amoun amountt of the obli obligat gation ion can can be measur measured ed relia reliably bly c. The amount amount of the the obli obligat gation ion must must be defi definit nite e d. It is proba probable ble that that an outfl outflow ow of econom economic ic benefit benefits s will be required to settle an obligation and the amount of obligation obligation can can be measured measured reliably. reliably.

53.. 53

The follow following ing stat stateme ements nts relate relate to liab liabili ilitie ties. s. Which Which stat statem ement ent is (are (are)) false? false? I. Liabilities may be measured by estimates of a definitive character when the amount of the liability cannot be measured precisely II. All monetary monetary liabilit liabilities ies should be stated stated in the balance sheet at their their present (discounted) values III. Under current GAAP, there are instances when an increase in liability is matched with with an increase in revenue. b. II and III only  a. I and II only c. I and III only d. I, II and III 54.. 54

Which Which of of the follow following ing stat stateme ements nts abou aboutt Equity Equity is (are (are)) corr correct ect? ? I. Since equity equity is the excess excess of assets assets over liabiliti liabilities, es, equity equity cannot cannot be measured separately from the other elements of the financial position. II. Equity has no specific maturity date except upon liquidation. liquidation. III. Income-related transactions as well as “reserve” or other comprehensive income transactions such as revaluation revaluation surplus surplus and unrealize unrealized d holding gains and losses losses automatically affect equity. d. I, a. I and II only b. I and III only c. II and III only II, III

55.. These 55 These are are gross gross infl inflows ows of of econom economic ic benef benefits its d duri uring ng the period period ari arisin sing g the course of the ordinary ordinary activities activities of an enterprise enterprise when those inflows inflows result in increases in equity, other than increases relating to contributions from equity participants. a. Revenue b. Increase in cash flow c. Net income d. Return on net assets 56.. 56

In which which of the the follow following ing circu circumst mstanc ances es can revenu revenue e be be nor normal mally ly recognized? a. When the customer’s customer’s order is received received b.When title to the goods changes c. Only when a transaction creates creates an account account receivable receivable d. When the customer’s order order is accompanied accompanied by a check

57.. 57

Under Under the real realiz izati ation on princi principle ple,, revenue revenue from from sale sale of product products s is recogni recognized zed a. At date date of delivery delivery to to the customers c. When the customers are billed b. When the inventories are readied for shipment d. Upon receipt of  cash payment 58.. 58

This This revenu revenue e recogn recogniti ition on metho method d iis s allo allowe wed d when when a sale sale is assure assured d unde underr a forward contract or government guarantee or when a homogeneous market exists and there is negligible risk of  failure to sell. a. Percentage of completion method c. Cash method b. Production method  d. Accrual method 59.. 59

Which Which one of the follow following ing may be recogn recognize ized d as reven revenue? ue? a. Cash deposi depositt receive received d for lay-away lay-away sales sales b. Cash receiv received ed in payment payment of note note receiv receivable able c. Cash from advance advance magazin magazine e subscr subscriptio iption n d. Cash reimbursement from government for calamity losses sustained  (per PAS 20 – Government Grants)

60.. 60

Accor Accordin ding g to the the IASB IASB Framew Framework ork,, the follow following ing are exampl examples es of of expen expenses ses except  a. A decrease decrease in in asset due to benefi benefitt received received b. A decrease in asset asset arising from from distribution distribution to equity equity participants participants c. A decline decline in the recov recoverabl erable e amount amount of an asset which which is lower lower than than its its carrying amount d. A sale of a non-curre non-current nt asset below below cost

61. According to the Revenue recognition principles, which one of these activities do not generate revenue? c. Adjustment of  a. Permitting Permitting others to use enterprise resources revenue of prior periods. b. Sale of merchandise d. Disposing of  investment in other entities

62. An expiration of cost which is incurred incurred without compensation compensation or return return and is not absorbed as cost of revenue is called b. Loss a. Indirect cost c. Deferred credit d. Deferred charge 63. Which Which of the followi following ng is a period period cost? a. Factory overhead b. Work in process d. Direct labor

c. Selling expense

64. Which Which of the following following statements statements about measurement in measurement in accounting is (are) true? I. All assets assets must be initially initially recogniz recognized ed at historical historical cost, but the final final valuation can be a mixture of  costs and other values. II. Current selling price price and net realizable value differ conceptually III. According According to PAS 29. Hyper-infl Hyper-inflation ationary ary Economy, Economy, only non-monetary non-monetary items are restated to current price – level amounts in the balance sheet c. II and III are true a. Only I is true b. Only II is true d. All statements are true 65. Which of the following measurement bases is also currently used in financial accounting?

Current Cost a. yes b. yes c. yes d. no

Present Net settlement discounted discoun ted value value Historical Historica l cost yes yes no no yes yes yes no yes yes no

yes

66. Which of the following statements statements about accounting accounting measurement measurement is (are) (are) true? I. Measurem Measurement ent in accountin accounting g is the assignment assignment of numbers, numbers, quantities, quantities, and monetary amounts amounts to objects such as property and equipment and events such as purchases or sales II. Under curren currentt GAAP, all assets assets must be initial initially ly measured measured at historical historical cost. III. There are certain certain rare instances instances when price level adjusted amounts amounts may be used in financial reporting to external users c. I and III only  a. I and II only b. II and III only d. I, II and III 67. Which of the following following assets are initially initially and subsequently measured at Fair value? I. Biological assets IV. Property and Equipment II. Available for Sale Securities V. Held for Trading Securities III. Inventories VI. Intangible Assets b. I, II, and V only  a. I and II only c. I, II, III ad V only d. I, II IV, and V only 68. Which of the following following may be optionally optionally measured at Fair value in in the Statement of Financial Position? I. Held for Trading Securities IV. Non-current Assets Held for Sale II. Property and Equipment V. Intangible Assets III. Biological Assets, current b. II and V only  a. I and II only c. I, II, and III only d. II, IV, and V only

2.0 Presentation of Financial Statements 69. Financial statements include a statement statement of financial financial position, position, a statement of comprehensive income and a statement of changes in equity. According to the Preface to international financial reporting standards, standards , which TWO of the following are also included within the financial statements? I. A statement of cash flows III. An auditor’s report II Accounting policies IV. A directors' report a. I and II b. I and III c. II a nd III d. III and IV 70. Which of the following following is (are) among the limitations of financial accounting and financial statements? I. Use of estimates II. Historical in nature III. Some information information that are are not quantifiable but but may be significant significant to statement users in forming economic decisions are not given recognition. d. a. I only b. I and II only c. II and III only I, II and III 71. Which of the following statements about financial statements is incorrect ? a. They show the results results of the stewardshi stewardship p of managemen managementt of the resources entrusted to it by the capital providers b. They Th ey ar are e th the e pr prim imar ary y re resp spon onsi sibi bili lity ty of th the e ex exte tern rnal al au audi dito tor  r  after audit 

c. They They are are prep prepar ared ed at leas leastt annu annual ally ly and and are are dire direct cted ed to the the comm common on information needs of a wide range of statement users d. They provide provide informatio information n about the financial financial position, position, performa performance nce and cash flows flows of an enterprise that is is useful useful to a wide range of users users in making economic decisions 72. Which Which of the following following stateme statements nts is (are) (are) false? false? I. Financial accounting is the only source of information needed by those who make economic decisions about the business enterprises. II. Financial accounting is based on the presumption presumption that all statement statement users have the same information needs III. Financial accounting is procedural d. I, a. Only I is false b. Only II is false c. II and III are false II and III are false 73.

Under PAS PAS 1 [2009], which of the following following items is not included in in the computation of net income? a. Finance cost b. Post Post-t -tax ax Gai Gain n [Lo [Loss ss]] on disc discon onti tinu nued ed ope opera rati tion ons s c. Unreal Unr ealiz ized ed gain gain in cha change nge in in value value of avai availab lable le for for sale sale securi securitie ties s d. Unre Unreal aliz ized ed gai gain n in chan change ge in in valu value e of bio biolo logi gica call asset assets s

74.. Accord 74 According ing to to PAS1 PAS1 Presentation of financial statements, statements , which TWO of the following must be included in an entity's statement of financial position? a. b. c. d 

yes

Investment property

yes

yes

no

yes

yes 

Number of shares authorized

no

Provisions

yes

no

no

Shares in an entity owned by that entity

no

yes

no

yes 

yes 

no 75.. Accord 75 According ing to to PAS1 PAS1 Presentation of financial statements, statements , which TWO of the following must be included in an entity's statement of financial position? A Cash and cash equivalents B Property, plant and equipment analyzed by class C Share capital and reserves analyzed by class D Deferred tax b. A and D a. A and B c. B and C d. B and D 76. In which section section of the statement of financial position should cash that is restricted to the settlement of a liability due 18 months after the reporting period be presented, according to PAS1 Presentation of financial statements? statements ? (select one answer) a. Curre Current nt assets assets b. Equity Equity c. Non-cu Non-curr rrent ent liabil liabiliti ities es d. Non-current assets 77. In which section section of the statement of financial position should employment employment taxes that are due for settlement in 15 months' time be presented, according to PAS1 Presentation of financial statements s tatements? ? (select one answer) a. Current liabilit liabilities ies b. Current assets c. Non-current liabilities d. Non-current assets

Notes to Financial Statements

78. What is the purpose of information information presented presented as notes to financial statements? a. To pro rovi vid de di discl clo osu sure res s req equi uire red d by gen ene era rall lly y ac acce cept pte ed  accounting principles b. To corr orrect ect im improp prope er pr present sentat atiion in tthe he fina financ ncia iall st statem atemen entts c. To pro provide vide recogn cogniition tion of amou amount nts s not not incl includ uded ed in the total otals s of of the the financial statements d. To pr present ma manage agement’s re responses tto o au auditor co comments. 79. Which information information is normally normally not included included in the “notes to financial financial statements”? a. A statement of compliance with GAAP b. A sta state tem ment of mea measu surreme ement basi basis s for for the fina financ nciial stat statem emen ents ts and and accounting policies applied c. Supp Suppor orti ting ng info inforrmati matio on ffor or line line item items s pr presen esentted and and agg aggrregat gated d. A Statement of cash flows 80. Disclosure in the financial statements is is not required required for which which of the following? a. Use of property property by lease between between a parent company company and its subsidiary subsidiary b. Receipt of services services by subsidiary subsidiary from a principal principal without charge or without record of receipt of services c. Possibilit Possibility y of strike d. Guarantees for indebtedness of others if if the possibility of of loss is is remote 81. As a significant component component of of the notes to financial statements, statements, the “accounting policies section” should describe describe a. Only the the measure measurement ment basis basis used used in prepari preparing ng the financi financial al statemen statements ts b. Only the specif specific ic account accounting ing polici policies es followe followed d by the the enterpr enterprise ise c. Both the the measure measurement ment bases bases and and the accou accountin nting g policies policies foll followed  owed  d. The nature nature of the enterp enterprise rise’s ’s operation operations s and its principal principal activ activitie ities s 82. Part of the notes notes to financial statements statements are events events after the reporting reporting period which pertain to those events, both favorable and unfavorable that occur a. Afte Afterr bala balanc nce e shee sheett dat date e b. Afte Afterr issu issuan ance ce of of the sta state teme ment nts s c. Between Between the the balance balance sheet date and the the date date when the financial financial statements are authorized for issue d. After the balance balance sheet date but but prior prior to issuance issuance of financial financial statement statements s 83. Adjustments of financial statements statements are required required for those events after balance sheet date which a. Have a material material effect effect on a user’s user’s evaluati evaluation on of the informatio information n presented presented in the financial statements b. Occurred Occurred prior prior to issuance issuance of the financial financial statem statements ents c. Are unusual unusual and materi material al d. Provide Provide additional additional informatio information n for determining determining the amounts amounts relating relating to conditions existing at balance sheet date 84. Non-adjusting events after balance sheet sheet date should be disclosed if  a. NonNon-di disc sclo losu sure re woul would d affe affect ct the the amou amount nts s pres presen ente ted d in the the fina financ ncia iall statements b. NonNon-di disc sclo losu sure re woul would d affe affect ct the the abil abilit ity y of us user ers s of the the fina financ ncia iall statements to make proper valuations and decisions. c. The They relate late to cond condiitio tions exi existi sting at the the bala balanc nce e sh she eet date date d. They are unusual an and ma material 85. Are the following following statements true true or false, according according to current PFRSs? PFRSs? (1) Biological assets should should be shown in the statement of financial financial position either in current assets assets or non- current current assets or both.

(2) The number of shares authorized authorized for issue should be shown in the statement of financial Position or the statement of changes in equity, or the notes. Statement (1 ) Statement (2) Statement (1) Statement (2) a. false false c. true false b. false true d. true true 86. In which section section of the statement of financial position should employment employment taxes that are due for settlement settlement in fifteen (15) months’ months’ time be presented presented according to PAS 1? a. Current liabilities c. Non-current liabilities b. Current assets d. Non-current assets

3.0 The Accounting Process 87. Which Which of the the followi following ng statemen statements ts is / are true? I. The primary distinction between double-entry and single-entry bookkeeping system is the use of duality duality and equilibrium approach in double-entry while single entry recognizes only the duality principle. II. Single – entry entry bookkeeping bookkeeping recognizes recognizes only cash transactions transactions and personal accounts. III. Single – entry bookkeeping bookkeeping and cash basis of accounting are one and the same. a. I only b. II only c. I and II only d. II and III only 88.

Which of the following accounts is recognized under single-entry bookkeeping? a. Cash b. Merchandise Inventory c. Property and Equipment d. Salaries Expense 89. Which of the following statements about bookkeeping bookkeeping systems systems is (are) (are) false? false? I. Net income or loss under single entry bookkeeping is computed using the transactions approach. II. Double-entry bookkeeping bookkeeping uses the direct matching matching approach of  computing net income. III. Double-entry bookkeeping is the generally acceptable method of  bookkeeping because it offers a more complete complete income measurement measurement than single-entry. single-entry. a. Only I is false b. Only II is false c. II and III are false d. I, II and III are false 90. All of the following are disadvantages of the single-entry bookkeeping system except for the fact that a. Accounting Accounting records records are incomplete incomplete.. b. It is simple simple and less costly costly to apply apply.. c. Intern Internal al contr control ol is inad inadequ equate ate d. Financial statements statements are not likely to be fairly presented presented in accordance with GAAP. 91. The following books of account are used in single-entry bookkeeping a. Cashbook and subsidiary ledger b. Cash receipts receipts book and and general ledger c. Cash receipts receipts book , cash disbursements book, general ledger and subsidiary ledger d. Cashbook and general ledger 92. Which accounting process is the recognition recognition or non-recognition non-recognition of business business activities as accountable events

a. Identifying b. Measuring c. Recording d. Communicating 93. The manner in which the accounting records are organized and employed employed within a business is known as a. Accounting system b. Business document c. Voucher system d. Special journals 94. An accounting device device for accumulating increases increases and decreases decreases relating relating to a particular accounting value such as an asset, a liability, etc. a. Account b. Ledger c. Journal d. Book of secondary entry 95. The recording recording phase of financial financial accounting covers covers the following steps, except  a. Business documents are received and prepared c. Transactions are posted to the ledger b. Transactions are journalized d. Financial statements are prepared 96.

Which of the following statements about the bases of recognition of income income and expense is true? a. Under cash basis basis accounting, accounting, only cash and and propert property y and equipment equipment accounts are recognized as assets b. In modified modified cash basis of accoun accounting, ting, prepaid prepaid expenses expenses and unearned unearned income are recognized. c. Accrual Accrual basis and modifi modified ed cash cash basis basis of account accounting ing for income income and and expenses will yield yield the same amount of gross profit for the period. period. d. Under accrual accrual basis basis of account accounting, ing, accrual accruals s and deferr deferrals als are recognize recognized d in adjusting adjusting entries entries which which are subsequently reversed in the immediately succeeding accounting period.

97. Which of the the follow following ing is is not a not a principal purpose of a trial balance? a. It proves proves that debits debits and credits credits of equal equal amounts amounts are in the ledger. ledger. b. It is the basis basis for any any adjustmen adjustments ts to the account account balances balances c. It supplies supplies a listin listing g of open open accounts accounts and their their balances balances d. It proves proves that debits and credits credits were were properly properly entered entered in the ledger ledger accounts 98. An error error which is disclos disclosed ed by a trial balance balance is a. An omission of a journal entry on purchases on account b. Double-posting a credit to Sales amounting to P 210,000 c. A journal journal entry for salaries salaries paid amounting to P 500,000 was not posted d. Posting to the correct correct debit or credit side of a wrong wrong account

99. Which one of the following is a purpose of adjusting entries? I. To appor apportio tion n the proper proper amount amounts s of rev revenu enue e and and expen expense se to to the the curr current ent accounting period. II. To establ establish ish the proper proper amount amounts s of assets assets and liabi liabilit lities ies in the balanc balance e sheet. III. III. To accom accompli plish sh the the objec objectiv tive e of offs offsett etting ing the the reve revenue nue of of the period period with with all the expenses incurred in generating that revenue. IV. To prepar prepare e the the revenu revenue e and and expen expense se accoun accounts ts for recor recordin ding g ttran ransac sactio tions ns of the following period. a. I and II only b. II and III only c. I, II and III only d. All of these 100. Adjusting entries are needed a. Whenever revenue is not received in cash b. Whenever expenses are not paid in cash c. Primarily Primarily to correct errors in the initial recording of business transactions d. Whenever transactions affect the revenue or expenses of more than one accounting period 101. 10 1.

The The ent entry ry to reco record rd depr deprec ecia iati tion on is an exam exampl ple e of of an an adj adjus usti ting ng entr entry y

a. To apportion a recorded cost expense b. To apportion unearned revenue revenue

c . To record unrecorded d. To record unrecorded

102. Which one of the following items least resembles least resembles a typical adjusting entry? a. Debit an asset and credit revenue c. Debit revenue and credit liability b. Debit an expense and credit liability d. Debit an asset and credit liability 103. 10 3. Whic Which h one one of the the fol follo lowi wing ng conc concep epts ts is leas leastt rel relat ated ed to adju adjust stin ing g entries. a. Accrual b. Approximation c. Materiality d. Matching of  cost against revenue 104. 10 4. Ian Ian Comp Compan any y ini initi tial ally ly reco record rds s pre prepa paym ymen ents ts in bala balanc nce e she sheet et acco accoun unts ts and make reversing entries when appropriate. Which of the following yearend adjusting entries should be reversed? a. The entry to record bad debts expense for the period. b. The entry to record service fees earned by year-end but not billed c. The entry to record the portion of service fees received in advance that is earned by year-end d. The entry to record supplies used during the period 105. Which of the following st statements is incorrect ? a. All of the account accounts s of a specific specific business business enterprise enterprise are are referred referred to as a ledger. b. Every Every adjusting adjusting entry entry affects affects both a balance balance sheet and and an income income statement c. Transactions often overlap accounting periods d. The fact that an an expense expense is recognized recognized on the income statement indicates that an equivalent outlay of cash has been made in the same period.

IV.0 Income Determination –  Approaches to Income Measurement/Concepts Measurement/Concepts of Capital  Capital  Maintenance/Comprehensive Maintenance/Comprehensive Income /Bases for recognition of Income 106. 10 6. The The pro proce cess ss of iden identi tify fyin ing, g, measu easuri ring ng and and rel relat atin ing g rev reven enue ue and and expenses of an enterprise for an accounting period is known as a. Revenue recognition b. Income determination c. Realization d. Expense recognition 107. Whi Which of the the fol folllowin owing g st statem ateme ents nts re relatin ating g to to the the inco ncome determination process is (are) true? the period is generally determined determined independently independently by I. Revenue for the applying the realization principles. II. Expenses are determined by applying the expense recognition principles on the basis of the relationships between acquisition costs and the independently determined revenue of the accounting period. III. The term “matching” is used in accounting to describe the entire process of income determination, or in a more limited sense, to the process of  expense recognition a. I and II only b. II and III only c. I and III only d. I, II and III 108. 108. The The acco accoun unti ting ng conc concep eptt of matc matchi hing ng is best best demo demons nstr trat ated ed by a. Not recognizi recognizing ng any expense expense unless some some revenue revenue is realized realized b. Associatin Associating g effort (cost) (cost) with accomplishm accomplishment ent (revenue (revenue)) c. Recognizi Recognizing ng prepaid prepaid rent rent receiv received ed as revenu revenue e

d. Establishin Establishing g a Reserve Reserve for Future Future Decline Decline in Asset Values Values 109.

Whi Which of the the fol followin owing g st statem ateme ents nts is (are are) true? ue? I. Net loss is the decrease in net assets of business resulting from profitdirected activities II. Income is a net or partially net concept determined by deducting expenses from revenues. III. The income or loss which is shown as the final amount in the income statement reflects reflects the success or failure of the business in its profitprofitdirected activities. a. Only I is true b. I and II are true c. II and III are true d. I, II and III are true

110. 11 0. Are Are the the foll follow owin ing g stat statem emen ents ts rega regard rdin ing g prof profit it true true or fals false? e? (1) Profit is is any amount over and above that required required to maintain capital capital at the beginning of the period. (2) Profit is the residual amount amount that remains after after expenses expenses have been deducted from income Statement (1) Statement (2) a. false false b. false true c. true false d. true true

111. What What is the the pur purpose pose of repor porting ting compr ompreh ehe ens nsiv ive e inc incom ome e? a. To report changes in equity due to transactions with owners b. To report report a measure measure of overall overall enterprise performance c. To replace replace net income with a better better measure d. To combine income from continuing operations and extraordinary items 112. 11 2. Whic Which h is is not not incl includ uded ed in the the cat categ egor ory y of of com compr preh ehen ensi sive ve inco income me of an accounting entity? a. Net income for the period c. Gain on sale of treasury stock b. Revaluation surplus d. Increase in value of  available for sale securities s ecurities 113. 11 3. Whic Which h of the the foll follow owin ing g tran transa sact ctio ions ns wil willl not not be reco recogn gniz ized ed in in cash cash bas basis is accounting? a. Collection of account sales b. Payment of salaries c. Purchase of equity shares in XYZ Corporati ation d. Unsold in inventory at the end of th the period 114. 11 4. Modi Modifi fied ed cash cash bas basis is (or (or hyb hybri rid d basi basis) s) diff differ ers s from from the the acc accru rual al basi basis s in in the computation of  a. Gross Profit b. Expenses c. Depreciation d. Bad debts expense 115. Whi Which of the the fol followin owing g st statem ateme ents nts is incor ncorrrect ? a. Accrual Accrual basis basis financi financial al stateme statements nts may may be prepared prepared from single single entry entry records. b. Single-ent Single-entry ry account accounting ing is is synonym synonymous ous with with cash cash basis basis account accounting ing c. No adjusting adjusting entries entries are are necessar necessary y when when accounti accounting ng records records are kept kept on on pure cash basis d. Over the entire entire life of of the busine business, ss, there there would would be no differenc difference e between between income on cash basis and income on an accrual basis. 116. a.

Peri eriodi odic net net ear earning nings s ar are co conve nventi ntional onallly me measur asured ed by a Transa ansac ction tions s appr approa oach ch

b. c. d.

Transa Transacti ctions ons appro approach ach incl includi uding ng recogn recogniti ition on of recog recogniz nized ed gains gains and losses Capi Capita tall main mainte tena nanc nce e appr approa oach ch Marke arkett va value ap approach

117. 117. a. b.

The The cap capit ital al main mainte tena nanc nce e con conce cept pt foll follow owed ed unde underr pre prese sent nt GAAP GAAP is Economic capital c. Real capital Fina Financ ncia iall and and phy physic sical capi capita tall d. Physi hysic cal capi capita tall

118. 11 8. What What conc concep eptt is is crit critic ical al in dist distin ingu guis ishi hing ng an an ent enter erpr pris ise’ e’s s ret retur urn n on on investment from return of its investment ? a. Comprehensive income concept c. Capital maintenance concept b. Current operating performance concept d. Return on investment concept

Revenue – PAS 18 119. 11 9. One One of of the the cond condit itio ions ns that that must must be sati satisf sfie ied d iin n ord order er to reco recogn gniz ize e revenue in a transaction involving the rendering of services is that the stage of completion of the transaction at the end of the reporting period can be measured reliably. Which TWO of the following methods for determining the stage of completion of a contract involving the rendering of services are specifically referred referred to in PAS 18 Revenue, Revenue, as being acceptable? I Costs incurred to date as a percentage of the estimated total costs of the transaction II Advances received to date as a percentage of the total amount receivable III Survey of work performed IV Revenue to date divided by total contract revenue a. I and II b. I and III c. II and III d. III and IV 120. According to PAS 18 Revenue, Revenue, which TWO of the following conditions apply to the recognition of revenue for transactions involving the rendering of services? A The amount of revenue can be measured measured reliably B  The entity retains neither continuing managerial involvement nor effective control over the transaction C  The significant risks and rewards of ownership have been transferred to the buyer D  The costs incurred for the transaction and the costs to complete the transaction can be measured reliably a. A and B b. C and D c. B and D d. A and D

121. According to PAS 18 Revenue, Revenue, which which of the following following is not a criterion to be satisfied before revenue from the sale of goods should be recognized in profit or loss? a. Revenue can can be reliably reliably measured b. Co Cont ntro roll ov over er th the e go good ods s so sold ld ha has s be been en re reli linq nqui uish shed ed bu butt ma mana nage geme ment nt maintains continuing involvement over the goods sold c. C The risks and rewards of ownership has been transferred transferred to the buyer d. D The outcome of the transaction is probable

122. According to PAS 18 Revenue, Revenue, which TWO of the following criteria must be satisfied before revenue from from the sale of goods should be recognized recognized in profit or loss? A Ownership has been transferred to the buyer B The outcome of the transaction is certain C Revenue can be reliably measured D Managerial control over the goods sold has been been relinquished relinquished a. A & B b. B & C c. C & D d. A &D 123. According to PAS18 Revenue, Revenue, which of the following conditions apply to the recognition of revenue revenue for for transactions involving the rendering rendering of  services? A The significant significant risks and rewards rewards of ownership have been been transferred transferred to the buyer B The amount amount of revenue can be measured reliably C The entity entity retains retains neither neither continuing continuing managerial managerial involvem involvement ent nor nor effective control over the transaction D The costs costs incurred incurred for the transactio transaction n and the costs to complete complete the transaction can be measured reliably a. A & B b. B & D c. C & D d. B, C & D 124. One of the the con conditions that that mu must be sat satisfied in ord order to rec recognize revenue in a transaction involving the rendering of services is that the stage of completion of the transaction at the end of the reporting period can be measured reliably. reliably. Which of the following methods methods for determining determining the stage of comp comple leti tion on of a cont contra ract ct invo involv lvin ing g the the rend render erin ing g of serv servic ices es are are specifically referred to in PAS18 Revenue, Revenue, as acceptable? I - Costs incurred to date as a percentage of the estimated total costs costs of  the transaction II - Advance Advances s received received to date as a percen percentag tage e of the total total amount amount receivable III - Surveys of work performed IV - Revenue to date divided by total contract revenue a. I and II b. I & III c. II and III d. III & IV 125. 12 5. Micr Micriu ium, m, a com compu pute terr chi chip p man manuf ufac actu turi ring ng com compa pany ny,, sell sells s its its prod produc ucts ts tto o its distributors distributors for onward sales to the ultimate ultimate customers. customers. Due to frequent fluctuations in market price for these goods, Micrium has a“price protection” clause in the distributor agreement that entitles it to raise additional billings in case of upward upward price price movemen movement. t. Anothe Anotherr clause clause in the distri distribut butor or’s ’s agreement is that Micrium can at any time, reduce its inventory by buying back back good goods s at the the cost cost at whic which h it sold sold the the good goods s to the the dist distri ribu buto tor. r. Distri Distribut butors ors pay for the the goods within within 60 days days from the sale sale of goods goods to them. When should Micrium Micrium recognize revenue revenue on the sale of these goods to the distributors? a. When the distributor sells goods to the ultimate customers and there is no uncertainty with with respect to the the “price protection” clause or the buyback of goods. goods. b. When the the goods goods are sold sold to the the distrib distributors utors c. When the the distributor distributors s pay to Micrium Micrium the cost cost of goods (i.e., (i.e., after after 60 days of the sale of goods to the distributors d. When the goods goods are sold to the distribut distributor or provided provided estimated estimated additional additional revenue is also booked under the “protection clause” based on past experience. 126.

Rev Revenue enues s are are cons consiidere dered d to hav have bee been ear earned ned when hen

a. Goods are shipped , not yet received by buyer, buyer, under terms “ sale on trial” b. Goods are sold under “lay-away” terms, where where goods are delivered delivered only only when buyer makes the final payment in a series of installments. c. Goods are shipped, shipped, not not y yet et recei received ved by buyer, buyer, where where the buyer buyer has has the the right to rescind the purchase if the goods goods are not within the specifications specifications in the contract d. The entity ships goods subject to installation installation which is a significant significant part of the contract and the entity has completed such installation.

127. Revenue , under proper circumstances may be recognize recognized d at all of  the following moments in time EXCEPT  a. After the the earning earning process process has been comple completed ted and an exchange exchange has has taken place b. Upon the the receipt receipt of of cash from from the the customer customer c. As certain certain stages stages of comple completion tion of product production ion are attaine attained d d. When goods goods are shipped shipped under under terms terms “ sale sale on approval” approval” 128. 12 8. How How sho shoul uld d ear earne ned d but but unbi unbill lled ed reve revenu nues es at the the bal balan ance ce sh shee eett dat date e on on a long-term construction contract be disclosed if the percentage of completion method of revenue recognition is used? a. In a footnote to the financial statements until the customer customer is formally billed for the portion of the work completed. b. As a receivable in the noncurrent asset section of the balance sheet c. As construction construction in progress in the noncurrent noncurrent asset section of the balance sheet d. As construction construction in progress in in the current asset section of the balance sheet 129. Com Company pany R is is a ret retail ailer that that off offe ers “la “lay yaway away” ” sal sales to its its cus custo tom mers. Comp Compan any y R reta retain ins s the the merc mercha hand ndis ise e sets sets it aside aside in its its inve invent ntor ory, y, and and collects a cash deposit from the the customer. Company Company R does not require require the cust custo omer to ente nter into nto an ins nsttalm alment note note or othe ther fix fixed paym ayment commitme commitment nt or agreement agreement when the initial initial deposit deposit is received received.. The merchandise is not released to the customer until the customer pays the full purchase purchase price. price. In the event that the customer customer fails fails to pay the remainin remaining g purchase purchase price price within within two two years, years, the custome customerr forfeits forfeits its its cash deposit deposit.. In the event event the mercha merchandi ndise se is lost, lost, damaged, damaged, or destro destroyed yed,, Company Company R either must refund refund the cash deposit to the customer customer or provide provide replacement merchandise. The revenue from “layaway” sales should be recognized by Company R when a. the goods are are delivered to the customer b. 50% of the purchase price is paid by the customer c. a substantial portion of the purchase price is paid by the customer d. the last installment installment payment is is made by the customer 130. a. b. c. d.

Expenses may be best described as Costs which which have have no discernible discernible benefit benefit to future future operati operations ons The consider consideration ation given given to acquire acquire goods goods or servi services ces Costs that that are associ associated ated with with revenues revenues of of a given perio period d Gross Gross decrea decreases ses in owner’s owner’s equity equity

131. Which of the followi owing state atements is true? a. Expenses Expenses are are synonymo synonymous us with with expenditu expenditures res b. Not all all expen expenses ses are are expir expired ed costs costs c. All All expir expired ed costs costs are are expen expenses ses

d. Expense, Expense, in the broadest broadest sense, sense, includes includes expired expired costs and losses losses that are deducted from revenue, in a narrow sense, expense is distinguished from loss 132. 13 2. An expi expira rati tion on of of c cos ostt whi which ch is incu incurr rred ed wit witho hout ut com compe pens nsat atio ion n and and iis sn not ot absorbed as costs of revenue is called a. Loss b. Deferred charge c. Indirect costs d. Deferred credit 133. 13 3. Whic Which h of the the fol follo lowi wing ng tra trans nsac acti tion ons s woul would d req requi uire re the the rec recor ordi ding ng of of an expense? a. Cash paid paid to a suppli supplier er in settlemen settlementt of a previo previously usly recor recorded ded promise promise to pay when some advertising supplies were purchased. b. Cash paid paid to office office emplo employees yees for for service services s rendered rendered durin during g the month month c. Cash Cash paid paid to acqui acquire re a new new truck truck to be be used used in the the busine business ss d. Cash paid paid to settle settle an unrecorde unrecorded d liability liability for for factory factory suppli supplies es receive received d and already consumed 134. In ex expense recognition p prrinciple, wh which of of th the fo following is is not  an important class of expense? a. Expe Expend ndit itur ures es to to acqu acquir ire e asse assets ts b. Expenses Expenses from on-recipr on-reciprocal ocal transfers transfers and casualties casualties c. Cost Cost of of asset asset other other than than produ products cts dis dispos posed ed of  of  d. Declines Declines in market market prices prices of inventori inventories es held held for for sale sale 135. a. b.

Expenses cannot arise from External events other than transfers c. Production Non-reciprocal transfers to owners d. Casualties

136. 13 6. Whic Which h of the the fol follo lowi wing ng bes bestt desc descri ribe bes s the the dist distin inct ctio ion n betw betwee een n expe expens nses es and losses? a. Losses Losses are repor reported ted net-of-r net-of-relat elated-tax ed-tax effect effect whereas whereas expense expenses s are not not reported net-of-tax b. Losses Losses are extrao extraordina rdinary ry charges charges where whereas as expenses expenses are ordinar ordinary y charges charges c. Losses Losses are material material items items whereas whereas expenses expenses are are immat immateria eriall items items d. Losses Losses result result from from periphe peripheral ral or incidental incidental transactio transactions ns whereas whereas expense expenses s result from ongoing major or central operations of the entity.

 ASSETS, LIABILITIES, LIABILITIES, EQUITY  EQUITY  Cash and Receivables 137. 137. Which Which of the following following cannot cannot be shown as part of cash in the current current assets section of the balance sheet? a. Comp Compen ensa sati ting ng bala balanc nce e not not lega legall lly y rest restri rict cted ed b. Regula gularr P Pay ayrroll oll acc accou ount nt c. Cash deposit with utility company d. Check Check paid paid by deposi depositor tor in paymen paymentt of of past past due due acco account unt 138. 138. Which Which of the followi following ng statement statements s regarding regarding Cash and Cash Cash equivale equivalents nts is false? false? a. Petty cash fund of P 8,000 composed of currency and coins of P 2,100 and unreplenished petty cash vouchers of P 5,900 should be shown in the current asset section at P2,100 only. b.. Legally restricted restricted Compensating cash cash balance for payment of a current liability is shown as part of  Cash and Cash Equivalent Equivalent provided provided the restriction restriction is disclosed.

c. If a bank or financial institution holding funds of a reporting entity is in in bankruptcy or financial difficulty such cash should be written down to estimated realizable value if the amount is lower than face value d. Not all items included included in cash constitute constitute legal tender money. 139. 13 9. Whic Which h of the the foll follow owin ing g is a key key elem elemen entt of inte intern rnal al cont contro roll over over cash cash payments? a. Making daily bank deposits for all cash receipts b. Periodically reconciling the cash account balance on the company’s books to the bank statement balance. c. Requiring that all petty cash vouchers vouchers be approved by two signatories d. Authorizing and verifying that all cash payments are recorded daily 140. LMN Company issued a note solely in exchange for cash. Assuming that the

items below differ in amount the present value of note at issuance is equal to the a. Pro Proceed ceeds s rece receiived b. Face amount c. Proceeds Proceeds recei received, ved, discou discounted nted at the prevai prevailing ling intere interest st rate rate for simila similarr notes d. Face amount amount di discount scounted ed at at the the prevai prevailing ling interest interest rate for simil similar ar notes notes 141. Accounts Receivable Receivable and Revenue Revenue can be properly properly recognized recognized when a. Goods are shipped under terms FOB Destination, not yet received by buyer. b. Goods are sold under “lay-away” terms, terms, where where goods are delivered delivered only only when buyer makes the final payment in a series series of installments. installments. c. The entity ships goods goods subject subject to installation which is a significant part of  the contract and the the entity has completed such installation. d. Goods are shipped, not yet received by buyer, where the buyer has the right to rescind the purchase if the goods are not within the specifications in the contract 142. When a specific customer’s account is written off by a company using the allowance allowance method, method, the the effect effect on net income income and and the the net net realizable realizable value value []NRV] of the accounts receivable is Net income NRV of Accounts Receivable a. Decrease Decrease b. Increase Increase c. Decrease None d. None None 143.Supsup Company received two one-year notes in payment for merchandise sold. One note, was interest bearing, with a face amount of P 3,000 at an annual rate rate of 18 percent. The other note had had a face amount of of P 3,540 and was non- interest interest bearing. bearing. Its implied implied interest interest rate was 18 percent. percent. Based on the above information, which of the following statements is true? a. The total total amount amount of cash ultimate ultimately ly to be receive received d will be more more for the interest bearing note. b. Both notes notes will cause the the same amount amount of total interest interest to be recognize recognized. d. c. The amount amount of interest interest revenue revenue which which should should be recogniz recognized ed is more for for the interest-bearing note. d. The amount amount which which should be credit credited ed to sales revenu revenue e is more for for the noninterest-bearing note.

144.Which of the following would indicate indicate that Cecil Company’s note receivable receivable or other loan is impaired? a. When the note receivab receivable le is written written off.. b. When there there is an increasing increasing number number of default default or delinquency delinquency in interest interest or principal payments c. When the the market market value of the the note falls falls below its its book value value due to interest interest rate changes d. When the maker maker of the note is experie experiencing ncing financial financial difficu difficultie lties. s.

Inventories 145. According to the net method , which of the following items should be included in cost of inventory? a b c d Freight costs yes yes no no Purchase discounts not taken no yes yes no 146.Which TWO of the following should be taken into account when determining the cost of inventories per PAS 2 Inventories? Inventories? I. Storage costs of part-finished goods III. Recoverable purchase taxes II. Trade discounts IV Administrative costs a. I and II b. II and III c. III and IV d. I and IV 147.According to IAS2 Inventories, Inventories, which TWO of the following costs should be included in inventory valuations? I Transport Transport costs costs for raw materials materials III. Storage Storage costs costs relating relating to finished goods II Abnormal material usage IV. Fixed production overheads a. I and II b. II and III c. I and IV d. III and IV 148.How should import duties be dealt with when valuing inventories at the lower of cost and net realisable value (NRV) according to IAS2 Inventories? Inventories? (select  one answer) a. Added to cost b. Deducted in arriving at NRV c. Deducted from cost d. Ignored 149.How 149.How should should sales staff commissio commission n be dealt with when valuing inventories inventories at the lower of cost and net realisable value (NRV), according to PAS2 Inventories? Inventories? (select one answer) a. Added to cost b. Deducted in arriving at NRV c. Deducted from cost d. Ignored 150.How should trade discounts be dealt with when valuing inventories at the lower of cost and net realizable value (NRV) according to PAS 2 Inventories? Inventories? a. Added to cost b. Deducted in arriving at NRV c. Deducted from, cost d. Ignored 151.Inventory estimates will be required for the following except  a. when interim financial statements are prepared b. when inventory is destroyed by typhoon or lahar flow c. as proof of reasonable accuracy of the physical inventory d. in the determination of the ending inventory to be shown on the balance sheet at year end. 152.Under the retail inventory method of approximating ending inventory, which of  the following is included in the computation of the cost to retail percentage? a. Freight-in b. Mark-up c. Mark-down d. All of  these

 Agriculture  Agriculture (PAS 41)

153.According to PAS 41 – Agriculture, biological assets and agricultural produce held for regular sale should be valued at a. Cost c. Lower of cost or net realizable value b. Net realizable value d. Fair value less point of sale costs 154.W 15 4.Whi hich ch one one of thes these e is not not with within in the the rang range e of acti activi viti ties es cons consid ider ered ed as “agricultural activity” a. Capability of change c. Production of change b. Management of change d. Measurement of change

Financial Instruments (Basics) (Basics) PAS 39 155.Which of the following is not a financial asset? a. Cash b. An equity equity instrumen instrumentt of anothe anotherr entity entity c. A contrac contractual tual right right to receive receive cash d. A contractual right exchange exchange financial assets or financial liability liability with with another entity under conditions that are are potentially potentially favorable or unfavorable to the entity 156.Which of the following following is not among the categories categories of financial assets? a. Held-to-maturity investments c. Financial assets at fair value through profit or loss b. Loans and receivables d. Non-monetary assets 157.In .In accordanc ance with IAS39 Fina Financ ncia iall inst instru rume ment nts: s: reco recogn gnit itio ion n and and measurement , which ONE of the following terms best describes a compound financial instrument component of a hybrid instrument that also includes a non-derivative host contract? a. An avai availa labl blee-fo forr-sa sale le fina financ ncia iall asse assett c. A held held-t -too-ma matu turi rity ty investment b. An embedded derivative d. A financial asset held for trading 158.In 15 8.In accord accordanc ance e with with IFRS7 IFRS7 Financial Financial instrumen instruments: ts: disclosure disclosures s , whic which h of the the following best describes the risk that an entity will encounter if it has difficulty in meeting obligations associated with its financial liabilities? a. Liquidity risk b. Credit risk c. Financial risk d. Payment risk 159.Unrealized gains and losses for available for sale securities are a. Includ Included ed in in the the dete determ rmina inatio tion n of income income b. Included Included in income income for unrealize unrealized d gains gains and includ included ed in equity equity for unrealized losses c. Included Included in income income fpr unrealize unrealized d losses losses and included included in in equity equity for for unrealized gains d. Included Included in other comprehe comprehensive nsive income income and stockholde stockholders’ rs’ equity equity 160.The Rissa Company has entered into into a contract contract on June 1, 20X3 that that requires requires it to issue its own ordinary shares with a value of P 250,000 on 31 May 20X6. In accordance with PAS32, Financial instruments: presentation, presentation , Tootakk should classify the contract as (select one answer) a. financial asset b. a financial liability c. an equity instrument d. an embedded derivative 161.Which TWO of the following are types of hedging relationship as defined by PAS39 Financial instruments: recognition and measurement ? A Cash flow hedge C. Interest rate hedge B. Credit risk hedge D. Fair value hedge a. A and B b. B and C c. A and D d. C and D

Investments in Associate (PAS 28) 28) 162.An 162.An investor investor uses the equity equity method method of of accounting accounting for for an investm investment ent in the common stock of another company when the investment a. Is composed composed of common common stock stock and and it is is the investor’ investor’s s intent intent to vote the common stock b. Ensure Ensures s a sourc source e of supp supply ly such such as as raw mater material ials s c. Enables Enables the the invest investor or to exercise exercise significan significantt in influen fluence ce over the investee investee d. Is obtai obtained ned by an an excha exchange nge of stoc stock k for for stock stock 163.Accor 163.According ding to PAS PAS 28, which of of the followi following ng will not not fall under under the the situation situation of “ existenc existence e of  significant influence by an inves investor tor in the financial financial and and operating policy decisions decisions of the investee but not control of these these decisions” a. Part Partic icip ipat atio ion n iin np pol olic icy y maki making ng proc proces ess s b. Mate Materi rial al inte interc rcom ompa pany ny tran transac sacti tion ons s c. Po Power wer to gov govern ern the fin financ ancial ial and ope operat rating ing pol polic icy y decis decision ions s of an enterprise so as to obtain benefits from its activities d. Techn echnol olog ogiical cal depe dependen ndenc cy

Property, Plant and Equipment (PAS 16) 164.Ac 16 4.Accor cordin ding g to PAS 16, Prope Property rty,, plant plant and equipm equipment ent includ includes es all of the following except  a. Property Property used used in production production or supply of goods and service services s b. Property used for extraction of minerals, oil or natural natural gas gas c. Biological assets related to agricultural activity and mineral rights d. Property for rental rental purposes purposes and administrative purposes 165.Which ONE of the following statements best describes 'residual value'? a. The estimated net amount currently obtainable if the asset were at the end of its useful life b. The pres present ent valu value e of estim estimate ated d future future cash cash flows flows expe expecte cted d to arise arise from from the continuing use of the asset and from its ultimate disposal c. The amount at which the asset could be exchanged between knowledgeable, willing parties in an arm's length transaction d. The amou amount nt of cash cash or cash cash equiv equivale alents nts that that coul could d curre currentl ntly y be obtain obtained ed by selling selling the asset in an orderly orderly disposal 166.Wh 16 6.Which ich ONE of the followin following g terms terms best best descr describe ibes s the cost (or an amount amount substituted for cost) of an asset less its residual value? a. Revalued amount b. Carrying amount c. Recoverable amount d. Depreciable amount 167.S 16 7.Sop ophi hia a Compa Company ny purc purcha hase sed d heav heavy y equip equipme ment nt from from Ana An a Compan Company y on September 30, 2011, 2011, with with payment due on March 31, 31, 2012. 2012. If Sophia’s 2011 net income included no foreign exchange transaction gain or loss, then the transaction could have a. Resulted Resulted in an extrao extraordin rdinary ary gain b. Been denominate denominated d in Philippi Philippine ne pesos pesos c. Caused Caused a foreign foreign curren currency cy gain gain to be reporte reported d as a contra contra account account against against the heavy equipment d. Caused Caused a foreign foreign currency currency translati translation on gain to be reporte reported d in equity 168.Which 168.Which of the following following statements statements best describes describes the carrying carrying amount of an asset? a. The cost (or an amount amount substi substitut tuted ed for cost) of the asset less its residu residual al value

b. The amount amount at which the asset asset is recogniz recognized ed in the statement statement of financial financial position position after deducting any accumulate accumulated d depreciati depreciation on and accumulate accumulated d impairment losses b. The higher higher of the asset's asset's net selling selling price price and its value value in use c. The fair value value of the asset asset at the the date of a revaluati revaluation on less any subsequ subsequent ent accumulated impairment losses 169. Which of the following terms terms best describes describes the removal removal of an asset from an entity's statement of  financial position? a. Derecognition b. Impairment c. Write-off d. Depreciation 170.T 17 0.The he carr carryi ying ng amou amount nt of prop proper erty ty,, plan plantt and and equi equipm pmen entt subs su bseq eque uent nt to acquisition is the a. Histor Historica icall cost less less accum accumul ulate ated d depreci depreciati ation on b. Revalued Revalued amount amount less accumulate accumulated d deprec depreciatio iation n and accumulat accumulated ed impairment losses thereon c. Fair Fair value value less less accumu accumulat lated ed impai impairm rment ent losse losses s thereon thereon d. Amount Amount at which which an an asset asset is recognize recognized d in the the balance balance sheet less accumulated depreciation and accumulated impairment losses thereon 171.According to PAS16 Property Property,, plant and equipment  equipment , which of the following items should be capitalized into the cost of property, plant and equipment? A. Cost of prepari preparing ng the site site for install installation ation B. Cost of testing testing whether whether the asset asset works correctl correctly y C. Cost of excess excess materials materials resultin resulting g from a purchasing purchasing error D. Initial Initial operating operating losses while while demand demand builds up a. A and B b. A and C c. A, B and C d. A, B, C and D 172.As a. b. c. d.

generally used in accounting, what is depreciation? It is a process process of asset asset valuati valuation on for for balance balance sheet sheet purposes. purposes. It applie applies s only only to longlong-liv lived ed intang intangibl ible e assets assets.. It is used to to indicate indicate a decline decline in in market market value value of long-li long-lived ved asset asset It is an accou accounting nting proces process s which which systemati systematically cally allocates allocates long-l long-lived ived asset asset cost to accounting periods.

173.Which TWO of the following statements are correct per PAS16 Property, plant  and equipment ? A. Assets Assets are depre depreciate ciated d even if their their fair fair value value exceeds exceeds their their carrying amount B. Land and and buildi buildings ngs are are accounte accounted d for separately separately,, even even when when acquired together C A non-current asset acquired as the result of an exchange of assets is not recognized D. A gain on disposal of a non-current asset is is classified classified as revenue a. A and B b. A and C c. A and D d. B and D

PAS 38 – Intangibles: 174.Which 174.Which of of the follow following ing should should be amorti amortized zed over over the periods periods of estima estimated ted benefit? a. Patent registration cost for a successfully developed product for commercial sale b. Goodwill arising arising from the purchase of an existing business c. Costs incurred incurred in organizing a corporation d. Legal cost in successful defense of of a patent infringement infringement suit. 175.Which of the following factors should not  be considered in determining the useful life of an intangible

asset? a. Effects of obsolescence, changes in market demand for the product b. Expected actions actions of competitors competitors and potential potential competitors competitors c. The period of control over the asset and legal or similar limits on the use of the asset, such as expiry dates of related leases or or contractual contractual or regulatory regulatory provisions 176.Which of the following should not be amortized over the periods of estimated benefit? a. Trademarks b.. Computer software costs c. Costs incurred incurred in organizing a corporation d.. Patent right purchased from an a n inventor 177.U 17 7.Und nder er PA PAS S 38 38,, Intang Intangibl ible e Ass Assets ets,, legal egal fees fees incu incurr rred ed by a comp compan any y in defending defending its patent patent rights rights should be capita capitalize lized d when when the the outcome outcome of of the litigation is Successful Unsuccessful Successful Unsuccessful a. Yes Yes c. No No b. Yes No No d. No Ye Y es 178. 17 8. Are each each of the follow following ing factor factors s releva relevant, nt, accord according ing to PAS PAS38 38 Intangible assets, assets, in determ determini ining ng the annual annual amorti amortizat zation ion expense expense on an intangib intangible le asset? (1) The cost. (2) The amortization method. Factor Factor (1) Factor Factor (2) Factor Factor (1) (1) Facto Factorr (2) a. Not relevant Not relevant c. Re Relevant Not relevant b. Not relevant relevant Relevant Relevant d. Relevant Relevant Relevant Relevant

Liabilities Liabilities Provisions, Contingent Contingent Liabilities Liabilities and Contingent Contingent Assets Assets 179.Which of the following is not an essential characteristic for an item to be reported as a liability on the balance sheet? a. The liability is the present obligation of a particular pa rticular enterprise b. The liability arises from past transactions or events c. The liability is payable to a specifically identified payee d. The settlement settlement of the liability liability requires an outflow outflow of resources embodying economic benefits 180.Current liabilities include a. Only obligation obligations s which which are expected expected to be settled settled within within the normal normal operating cycle b. Only oblig obligations ations which which are are to be be settled settled withi within n one year year from from balance balance sheet date c. Obligation Obligations s which which are expected expected to to be settl settled ed within within the the normal normal operating operating cycle and obligations which are due to be settled within one year from balance sheet date d. Refinanced Refinanced long-te long-term rm debt debt falling falling within within one one year year from balance balance sheet sheet date for which which the the entity entity has the discretion to refinance refinance 181.According to PAS 37, Provisions, Contingent Liabilities and Contingent Assets , a liability of uncertain timing or amount is known as a. Provision c. Constructive obligation b. Obligating event d. Contingent liability 182.This 182.This creat creates es a legal or constructi constructive ve oblig obligation ation that results results iin n an enter enterprise prise having no realistic alternative to settling the obligation is known as a. Obligating event b. Restructuring c. Onerous contract d. Provision

Stockholders’ Stockholders’ Equity  183.This is the residual interest in the economic resources of a company that remains after deducting economic obligations:

a. Productive resources c. Net income b. Owners’ interest d. Net cash balance 184.A company’s plan to raise the unit market price of its shares and reduce the number of shares outstanding may be accomplished by means of a a. Reverse split b. Property dividend declaration c. Stock split d. Purchase of treasury stock 185.Sa 18 5.Sagan gana a Corp.. Corp.. declare declared d and paid a liquid liquidati ating ng divide dividend nd of P1 P100 00,00 ,000. 0. This This distribution resulted in a decrease in Sagana’s Paid-in Capital Retained Earnings Paid-in Capital Retained Earnings a. No Yes c. Yes No b. Yes Yes d. No Yes 186.Allied Corporation Corporation declared a 10% 10% stock dividend. The declaration a. Would decreas decrease e both retained retained earnings earnings and total stockhol stockholders’ ders’ equity equity b. Would decre decrease ase retaine retained d earnings earnings but would have no effect effect on total total stockholders’ equity c. Would have have no effect effect on retained retained earnings earnings but would would decrease decrease total total stockholders’ equity d. Would have have no effect on retained retained earnings earnings and total total stockholder stockholders’ s’ equity. equity. 187.How would the declaration and subsequent issuance of a 30% stock dividend by the issuer affect each of the following when the the market value value of the share exceeds the par value of the stock? Common Stock Additional paid-in capital Retained Earnings Stockholders’ Equity  a. No effect No effect No effect No effect b. No effect Increase Decrease No effect c. Increase No effect Decrease Decrease d. Increase No effect Decrease No effect 188.This is a procedure of eliminating a deficit without going through a formal liquidation and re-incorporation proceedings. a. Quasi-reorganizatio Quasi-reorganization n c. Recapitalization b. Conversion d. Retirement 189.The following relate to revaluation of plant assets and quasi-reorganization quasi-reorganization.. Which statement is false? a. The differe difference nce betwee between n historic historical al cost net book book value and sound sound value value is credited to Revaluation Surplus b. Under Philippin Philippine e GAAP, GAAP, quasi-reor quasi-reorganiz ganization ation can be effected effected through through revaluation of assets c. After a quasi-reor quasi-reorganiza ganization, tion, the balance balance of Retained Retained Earnings Earnings will increase. d. Any rem remainin aining g balanc balance e of reval revaluatio uation n surpl surplus us (or appra appraisal isal capit capital)i al)in n the ledger after wiping out a deficit deficit may be used to wipe out losses that may be incurred incurred in the future. 190.A company acquired acquired some of its own own common shares at a price greater than both their par value and original issue price price but less than their book value. The company uses the cost method of accounting

for treasury stock. stock. What is the impact impact of this acquisition acquisition on total stockholders’ equity (TSE), and the net book value (NBV) per per common common share? a. SE – decrease ; NBV – increase c. SE – decrease; NBV – decrease b. SE – increase ; NBV – decrease d. SE – increase; NBV increase 191.How would a stock split affect each of the following? Asset Total stockholders’ equity Additional paid in capital a. Increase Increase No effect b. No effect No effect No effect c. No effect No effect Increase d. Decrease Decrease Decrease

Cost Accounting Concepts 192.Which of the following is a period cost? a. Selling expense b. Materials inventory d. Direct labor

c. Manufacturing overhead

193.The overstatement of the work in process inventory at the end of the period will result in the: a. Overstatement o the cost of goods manufactured manufactured in that period. period. b. Understatement of the net income income for that period. period. c. Understatement of the gross profit from from sales in that period. d. Overstatement of the net income income for that period. period. 194.The fixed portion of the semivariable cost of electricity for a manufacturing plant is a Period cost Product cost Period cost Product cost a. Yes No c. No Yes b. Yes Yes d. No No 195.The term “conversion costs” refers refers to: a. Manufactur Manufacturing ing costs costs incurred incurred to produce produce units units of output. output. b. All costs costs associ associate ated d with with manufac manufactur turing ing other than direct direct labor labor costs and raw materials costs. c. Costs Costs which which are associat associated ed with market marketing ing,, shippi shipping, ng, wareho warehousi using, ng, and billing activities. d. The sum of direct direct labor labor costs and all all factory factory overhead overhead costs. costs. 196.The term “prime costs” refers refers to: a. Manufactur Manufacturing ing costs costs incurred incurred to produce produce units units of output. output. b. All costs costs associ associate ated d with with manufac manufactur turing ing other than direct direct labor labor costs and raw material costs. c. Costs which which are are predeter predetermine mined d and should should be attained. attained. d. The sum of of raw materi materials als costs costs and direct direct labor labor costs. costs. 197.The term “variable costs” refer to: a. All costs costs which which are likel likely y to respo respond nd to the amount amount of attentio attention n devoted devoted to them by a specified manager b. All costs costs which which do not change in in total for for a given period period of time time and relevant relevant rang range e but but whic which h beco become mes s prog progre ressi ssive vely ly smal smalle lerr on a per per unit unit basi basis s as volume increases. c. All manufact manufacturin uring g costs incurr incurred ed to produce produce units units of output. output. d. All costs costs which fluctuate fluctuate in total total in response response to small changes changes in the rate rate of  utilization of capacity. 198. 19 8.Wh Whic ich h one one of the the foll follow owin ing g cost costs s woul would d be most most repr repres esen enta tati tive ve of a semivariable cost? a. Equipment rentals c. Supervisor salaries. b. Electricity for machinery. d. Plant insurance. 199.Which type of cost is not recorded in the accounting records?

a. Irre Irrele leva vant nt cost costs. s. b. Sunk Sunk cost costs s c. Oppo Opport rtun unit ity y cost costs. s. Noncontrollable costs. 200.Which statement is incorrect? a. Within Within the relevant relevant range, range, variable variable costs change on a per per unit unit basis. basis. b. Middle-le Middle-level vel manage management ment is is primaril primarily y responsibl responsible e for fixed fixed costs. costs. c. Direct Direct labor labor is an elemen elementt of both both prime prime costs and conver conversion sion costs. costs. d. The work work of a plant supervisor supervisor would would be consid considered ered direct direct labor. labor.

d.

 JOB ORDER COSTING 201.Joanne, Corp. uses a job order cost system. It should record the use of direct materials previously purchased as a increase in: a. Stores control. c. Factory overhead control. b. Factory overhead applied. d. Work in process control. 202.Prize, Inc. uses the job order cost system. It shall record the use of indirect materials previously purchased as a decrease in: a. Factory overhead applied. c. Stores control b. Factory overhead control d. Work-in-process control 203.In a job cost system, manufacturing overhead is An indi indire rect ct A nece necess ssar ary y elem elemen entt An indi indire rect ct A nece necess ssar ary y elem elemen entt cost of jobs in production cost of jobs in production a. No Yes c. Yes Yes b. No No d. Yes No 204.A 20 4.A direct direct manufa manufactu cturi ring ng labor labor overti overtime me premiu premium m should should be charge charged d to a specific job when the overtime is caused by the a. Increased overall level of activity. b. Customer’s requirement for early early completion of job. job. c. Management’s failure failure to include include the job in the production production schedule. d. Management Management’s ’s requiremen requirementt that the job be completed completed before the annual annual factory vacation closure. 205.Angela Decor Inc. incurred direct labor overtime premium of P250,000 during October, 2010. As Angela’s cost accountant, you are charging the overtime premium to specific jobs because it was precipitated by: a. Customer wanted the job completed earlier. b. Increased production activity leading to the Christmas season. c. Factor Factory y manage manager’s r’s failure failure to includ include e the job in the preced preceding ing month’s month’s production schedule. d. Factory manager’s manager’s decision decision to complete all jobs before the annual machinery maintenance in December. 206.Using direct materials in production and charging direct labor costs to a job results in debits to a. Finished goods inventory c. Work in process inventory b. Direct Direct materials materials and direct direct labor d. Material Materials s inventor inventory y and manufacturing wages. 207.Co 20 7.Costs sts are accumu accumulat lated ed by respo responsi nsibil bility ity cente centerr for contro controll purpos purposes es when when using Job order costing Process costing Job order costing Process costing a. Yes Yes c. No No b. Yes No d. No Yes PROCESS COSTING 208.A 20 8.Apr pril il Corp Corp.. is a semi semi-c -con ondu duct ctor or manu manufa fact ctur urer er wher where e the the mate materi rial als s are are succ su cces essi sive vely ly run run thro throug ugh h the the Fron Frontt-of of-L -Lin ine, e, Bond Bondin ing g and and EndEnd-of of-L -Lin ine e departments. For purposes of product-costing, the bonding department should treat the materials received from the Front-of-Line department as: a. Work-i k-in process b. Equivale alent units c. Raw materials d. Finished goods 209.In computing the current period’s manufacturing cost per equivalent unit, the FIFO method of process costing considers current period costs a. Only. b. Less Less cost cost of begin beginnin ning g work work in proce process ss in inve vento ntory ry

c. Plu Plus s cost cost of begi beginni nning ng work work in proces process s invent inventory ory.. d. Plu Plus s cost cost of endi ending ng work work in in proces process s invent inventory ory 210.The units transferred in from the first department to the second department should be included in the computation of the equivalent units for the second department for which of the following methods of process costing? FIFO Weighted average FIFO Weighted average a. Yes Yes c. No Yes b. Yes No d. No No 211. A process costing system was used for a department that began operations in  January 2010. Approximately the same number of physical units, at the same degree of completion, were in work in process at the end of both January and Februa February ry.. Monthl Monthly y conver conversio sion n costs costs are alloca allocated ted betwe between en ending ending work work in proc proces ess s and and unit units s comp comple lete ted. d. Comp Compar ared ed to the the FIFO FIFO meth method od,, woul would d the the weightedaverage method use the same or a greater number of equivalent units to calculate the monthly allocations? Equivalent units for weighted Equivalent units for weighted to average compared FIFO average compared to FIFO  January February January February a. Same Same c. Greater number Same b. Greater Greater number number Greater Greater number number d. Same Greater number 212.The economic order quantity formula assumes that a. Periodic demand demand for the good is known. b. Carrying costs per unit vary with with quantity ordered. ordered. c. Costs of placing an order vary vary with quantity ordered. ordered. d. Purchase costs per unit differ due to quantity discounts. 213.NYK’s shipbuilding company construct huge sailing vessels. NYK’s accountant would consider the inexpensive stain used only on the wood of the wheel of a vessel to be: a. A direct material. c. A prime cost. b. A direct material as well as a prime cost. d. A conversion cost. 214.The variable factory overhead application rate under the normal, practical, and expected activity levels would be the same : a. Exce Except pt for for norm normal al volu volume me.. c. Exce Except pt for for expe expect cted ed acti activi vity ty.. b. Except for practical capacity. d. For all three activity levels. 215.Rh 21 5.Rhea, ea, Inc. Inc. a manufac manufactur turing ing concer concern n engage engages s your your servic services es to develo develop p a factory overhead application for use in a process costing system. Which of the following could be used as a denominator? a. Actual factory overhead. c. Estimated factory overhead. b. Ac Actual direct labor hours d. Estimated direct labor hours. 216.In 21 6.In proces process s cost cost system system,, applic applicati ation on of factor factory y overhe overhead ad usually usually would would be recorded as an increase in a. Finished goods inventory control. c. Cost of goods sold b. Factory overhead control d. Work in process inventory control

Standard Costing 217.T 21 7.The he manag managem emen entt of Baby Baby Quee Queen n Pick Pickle le Fact Factor ory y budg budget eted ed prod produc ucti tion on of  700,000 units at a cost of P1,450,000. If actual production was 700,000 units at a cost of P1,490,000, then Baby Queen’s production supervisor was: a. Effective c. Both effective and efficient b. Efficient d. Neither effective nor efficient. 218. What standard cost variance represents the difference between actual factory overhe overhead ad incurr incurred ed and budget budgeted ed factor factory y overhe overhead ad based based on actual actual hours hours worked? a. Volume variance b. Spending varianc ance c. Efficiency variance d. Quantity variance

 Activity Activity- based Cost System System 219.Investments in activity-based costing systems are justified only if they lead to a. More accurate inventory values c. Better cost-driver analysis b. Better management decisions d. More accurate product costs 220.Le .Leni Co. Co. deve devellops ops compu ompute terr prog progra ram ms to meet cus usttomer omers’ s’ sp spe ecial cial requi require remen ments. ts. How should should Gram Gram catego categori rize ze paymen payments ts to employ employees ees who develop these programs? Dir Direct cost costs s Valu Value e-add -addin ing g cost costs s Dir Direct ect cost costs s Value alue-a -add ddiing costs a. Yes Yes c. No No b. Yes No d. N o Yes Spoiled Goods – Normal & Abnormal Scrap Materials 221.Normal spoilage and abnormal spoilage should be classified as Normal Abnormal Normal Abnormal a. Period cost Period cost c. Period cost Product cost b. Prod Produc uctt cost cost Peri Period od cost cost d. Prod Produc uctt cost cost Prod Produc uctt cost cost 222.In 22 2.In a qualit quality y contro controll progra program, m, which which of the follow following ing is(are is(are)) catego categoriz rized ed as internal failure costs? I. Rework. II. Responding Responding to customer customer complaints. complaints. III. Statistical quality control procedures. a. I only b. II only c. III only d. I, II, and III  Joint & By-product By-product Costing Costing 223. 223. For purposes purposes of allocating allocating joint costs to joint products products,, the sales at point of  sale, reduced by cost to complete after split-off, is assumed to equal to the a. Joint costs. c. Net sales value at split-off  b. Total costs d. Sales price less a normal profit margin at point of sale 224.In accounting for by-products, the value of the by-product may be recognized at the time of  Production Sale Production Sale a. Yes Yes c. No No b. Yes No d. No Yes PAS 33 - EARNINGS PER SHARE 225.Are the following statements in relation to the term 'dilution' true or false, according to PAS 33 Earnings per share? share? (1) A reduction in earnings per share is an example of dilution. (2) A reduction in loss per share is an example of dilution. Statement (1) Statement (2) Statement (1) Statement  (2) a. False False c. True False b. False True d. True True 226.Are the following statements true or false, according to IAS33 Earnings per  share? share? (1) Earnings per share amounts should not be presented if they are negative, i.e. losses per share. (2) Earnin Earnings gs per share share amount amounts s calcul calculate ated d for dis discon contin tinued ued operat operation ions s should be presented. Statement (1) Statement (2) Statement (1) Statement  Statement  (2) a. False False c. True False b. False True d True True 227.The Peabody Company is calculating its weighted average number of ordinary shares in issue during during the year ended December 31, 31, 20X7. During During the year it issued new ordinary shares for cash at full market price and made a 1 for 8

bonus issue. Are the following statements true or false, according to PAS33 Earnings per share? share? (1) New shares issued as a result of bonus issue should be time apportioned from their date of issue (2) New shares issued for cash at full market price should be time apportioned from their date of issue. Statement (1) Statement (2) Statement (1) Statement  (2) a. b.

False False

False True

c. d.

True True

False True

PFRS for Small and Medium – Sized Entities 228.Which 228.Which of the following following will meet the definiti definition on of a small and medium-siz medium-sized ed entity? a. CJ Foodhaus Foodhaus retails retails food. food. It is is in the proce process ss of issuing issuing securit securities ies in a domestic stock exchange. b. A small, small, private private,, unlisted unlisted manufactur manufacturer er c. A large private private unlisted unlisted commerci commercial al bank d. A manufactur manufacturing ing company company with with total total assets assets of P600 P600 milli million on and total total liabilities of P 200 million 229. 229. Which Which of the following following entities entities must not describe describe its financial financial statements statements as being in compliance with the PFRS PFRS for SMEs even if it is allowed by law to prepare its financial statements in accordance with the PFRS for SMEs? SMEs? I. An entity whose shares are traded in a public market II. An entity whose debt instruments (but not its shares) are traded in a public market III. An entity that is in the process of issuing its debt instruments (but not its shares) for trading in a public market (eg a local securities exchange). a. I and II only b. II and III only c. I and III only d. I, II and III End of Summary I

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