TOA

INSTRUCTIONS: Select the correct answer for each of the following questions.
Mark only one answer for each item by shading the box corresponding to the
letter of your choice on the answer sheet provided. STRICTLY NO ERASURES
ALLOWED. Use pencil no. 2 only.
1. The present value of the future benefits payable as a result of work done
before the start or change in a pension plan is the definition of
a. Minimum liability
b. Fair value of plan assets
c. Projected benefit obligation
d. Prior service cost
2. Which of the following is not a generally practiced method of presenting
the income statement?
a. Including prior period adjustments in determining net income
b. The single-step income statement
c. The consolidated statement of income
a. Including gains and losses from discontinued operations of a segment
of a business in determining net income
3. Which of the following would not be a correct form for an adjusting entry?
a. A debit to a revenue and a credit to a liability
b. A debit to an expense and a credit to a revenue
c. A debit to a liability and a credit to a revenue
d. A debit to an asset and a credit to a liability.
4. Cash dividends are paid on the basis of the number of shares
a. Authorized
b. Issued
c. Outstanding
d. Outstanding less the number of treasury shares
5. Which is a common method used in accounting for construction of a public
work under build-operate-transfer (BOT) arrangement?
a. Installment method
b. Percentage-of-completion method
c. Production method
d. Sales
6. Financial accounting is concerned with
a. General-purpose reports on financial position and results of
operations
b. Specialized reports for inventory management and control
c. Specialized reports for income tax computation and recognition
d. General-purpose reports on change in stock prices and future
estimates of market position
7. The Classification of a lease is normally carried out
a. At the end of the lease term
b. After a cooling off period of one year
c. At the inception of the lease
e. When the entity deems it to be necessary
8. In valuing raw materials inventory at lower cost or market, what is the
meaning of the term market?

a.
b.
c.
d.

Net realizable value

Net realizable value less a normal profit margin
Current replacement cost
Discounted present value

9. The overriding criterion by which accounting information can be judged is

that of
a. Usefulness for decision making
b. Freedom from bias
c. Timeliness
d. Comparability
10. Preparation of consolidated financial statement when a parent-subsidiary
relationship exist in an example of the
a. Economic entity assumption
b. Relevance characteristic
c. Comparability characteristic
d. Neutrality characteristic
11. Earnings per share is calculated before accounting for which of the
following?
a. Preference dividend for the period
b. Ordinary dividend
c. Taxation
d. Minority interest
12. During the lifetime of an entity, accountants procedure financial
statements at arbitrary points in time accordance with which basic
accounting concept?
a. Cost/Benefit constraint
b. Periodically assumption
c. Conservatism constraint
d. Matching principle
13. The residual interest in a corporation belongs to the
a. Management
b. Creditors
c. Common stockholders
d. Preferred stockholders
14. Allotments of the government general appropriation are recorded in the
registries
a. At the beginning of the year
b. At the end of the year
c. Semiannually
d. Quarterly
15. A decrease in net assets arising from peripheral or incidental transactions
is called a (n0
a. Capital expenditure
b. Cost
c. Loss
d. Expense
16. The covenants and other terms of the agreement between the issuer of
bonds and the lender are set forth in the
a. Bond indenture

b. Bond debenture
c. Registered bond
d. Bond coupon
17. The cost of the land does not include
a. Costs of grading, filling, draining, and clearing
b. Costs of removing old buildings
c. Costs of improvements with limited lives
d. Special assessments
18. Revenue is generally recognized when realized or realizable and earned.
This statement describes the
a. Consistency characteristic
b. Matching principle
c. Revenue recognition principle
d. Relevance characteristic
19. The use of a discounts lost account implies that the recorded cost of a
purchased inventory item is its
a. Invoice price
b. Invoice price plus the purchase discount lost
c. Invoice price less the purchase discount taken
d. Invoice price less the purchase discount allowable whether
taken or not
20. Of the following items, the only one which should not be classified as a
current liability is
a. Current maturities of long-term debt
b. Sales taxes payable
c. Short-term obligations expected to be refinanced
d. Unearned revenues
21. Let D equals the sum of the debit column of a firms unadjusted trial
balances, and C equals the sum of the credit column. Which of the following
statements is correct?
a. If D equals C, there is no chance that the firm made an accounting
error
b. If D does not equal C, it is possible that no errors were committed
c. D typically does not equal C because adjusting entries have not yet
been recorded
a. D does not equal the sum of all account increases during the
period
22. Valuing assets at their liquidation values rather than their cost is
inconsistent with the
a. Periodicity assumption
b. Matching principle
c. Materiality constraint
d. Historical cost principle
23. Accounting concept are not derived from which of the following?
a. Inductive reasoning
b. Experience
c. Pragmatism
a. Laws of nature

24. Republic Act 9298 is otherwise known as

a. Revised Accountancy Law
b. Revised Accountancy Act
c. Philippines Accountancy Act of 2004
a. Code of Professional Ethics for CPAs
25. What accounting concept justifies the usage of accruals and deferrals?
a. Going concern assumption
b. Materiality constraint
c. Consistency characteristic
d. Monetary unit assumption
26. Fox Inc. issued bonds with a maturity amount of P200, 000 and a
maturity ten years from date of issue. If the bonds are issued at a premium,
this indicates that
a. The yield (effective or market) rate of entered exceeded the nominal
(stated) rate.
b. The nominal rate of interest exceeded the yield rates
c. The yield and nominal rate coincided
d. No necessary relationships exist between the two rates.
27. Under which of the following depreciation expense to be higher the later
years of an assets useful life?
a. Straight-line
b. Actively method based on units of proportion
c. Sum-of-the years digit
d. Declining balance
28. Financial accounting can be broadly defined as the area of accounting
that prepares
a. General purpose financial statements to be by parties internal to the
business enterprise only
b. Financial statements to be used by investor only
c. General purpose financial statements to be used by parties
both internal and external to the business enterprise
d. Financial statements to be used primarily by management
29. Which of the following is not an internal event?
a. Depreciation
b. Using raw material in the production process
c. Dividend declaration and subsequent payment
d. All of these are internal transactions
30. Under PAS 23, which of the following may not be considered a qualifying
asset?
a. A power generation plant that normally takes two years to construct.
b. An expensive private jet that can be purchased from a local
vendor.
c. A toll bridge that usually takes more than year to build
d. A ship that normally takes one to two years to complete.
31. The installment method of recognizing profit for accounting purposes is
acceptable if
a. Collections in the year of sale do not exceed 30% of the total sales
price
b. An unrealized profit account is credited

c. Collection of sales price not reasonably assured

d. The method is consistently used for all sales of similar merchandise
32. Where the fair value of the biological asset cannot be determined
reliably, the biological asset should be assured at
a. Cost
b. Cost less accumulated depreciation
c. Cost
less
accumulated
depreciation
and
accumulated
impairment losses.
a. Net realizable value
33. Proponents of historical cost ordinarily maintain that in comparison with
all other valuation alternatives for general purpose financial reporting,
statements prepared using historical costs are more
a. Reliable
b. Relevant
c. Indicative of the entitys purchasing power
d. Conservative
34. Stock dividends distributable should be classified
a. On the income statement as an expense
b. On the balance sheet as an asset
c. On the balance sheet as liability
d. On the balance sheet as an item of stockholders equity
35. Which of the financial statement should investor primarily use to assess
the amount, timing, and uncertainty of investing and financing activities of
ABC Company?
a. Statement of operations
b. Statement of retained earnings
c. Statement of financial position
d. Statement of cash flows
36. Which of the following statements is not an objective of financial
reporting?
a. Provide information that is useful in investment and credit decisions
b. Provide information about enterprise resources, claim to those
resources, and changes to them
c. Provide information on the liquidation value of an enterprise
d. Provide information that is useful in assessing cash flow prospects
37. A company uses straight-line depreciation for financial reporting
purposes, but uses the accelerated depreciation for tax purposes. Which of
the following account balances would be lower in the general purposes
financial statements?
a. Accumulated depreciation
b. Cash
c. Retained earnings
d. Gross fixed assets
38. Financial accounting standards developed by the International
Accounting Standards Committee (IASC)
a. Must be followed by business firm in all developed countries
b. Must be followed by government enterprises worldwide
c. Guide the development of accounting principles for government
enterprises in centrally planned economies

d. Are recognized as acceptable

principles for business firms

world

class

accounting

39. Which of the following is true when account receivables are factored
without recourse?
a. The transaction may be accounted for either as a secured borrowing or
as a sale depending upon the substance of the transaction
b. The receivables are used as collateral for a promissory note issued to
the factor by the owner of the receivables
c. The factor assumes the risk of collectibility and absorbs any
credit losses in collecting the receivable
d. The financial cost (internal expense)
40. A troubled debt restructuring will generally result in a
a. Loss by the debtor and a gain by the creditor
b. Loss by both the debtor and the creditor
c. Gain by the debtor and the creditor
d. Gain by the debtor and a loss by the creditor
41. Which of the type of accounting change should always be accounted for
in current and future periods?
a. Change in accounting principles
b. Change in reporting entity
c. Change in accounting estimate
d. Correction of error
42. An exception to the general rule that sts should be charged to expense in
the period incurred is
a. Factory overhead costs incurred on a product manufactured
but not sold during the current accounting period
b. Interest costs financing of inventories that are routinely manufactured
in large quantities on a repetitive basis
c. General administrative fixed costs incurred in connection with the
purchase of inventory
d. Sales commission on salary costs incurred connection with the sale of
inventory
43. Which of the following transactions does not result in an increase in
retained earnings?
a. Correction of an error in which administrative expense was overstated
in a previous year
b. Issuance of a 3-for-1 stock split
c. A quasi-reorganization
d. Earning of net income for the period
44. The statement of financial position of non-profit organization displays the
organizations
a. Asset, liability and equity
b. Asset Liabilities and fund balance
c. Excess of assets over liabilities
d. Assets, Liabilities and net assets
45. Depreciation accounting
a. Provides funds
b. Funds replacements
c. Retains funds

d. All of these
46. Under the effective interest method of bond discount or premium
amortization, the periodic interest expense is equal to
a. The stated (nominal) rate of interest multiplied by the face value of the
bonds
b. The effective (yield) rate of interest multiplied by the face value of the
bonds
c. The stated rate multiplied by the beginning-of-period carrying amount
of the bonds
d. The effective rate multiplied by the beginning-of-period
carrying amount of the bonds
47. Accounting changes are often made and the monetary impact is reflected
in the financial statements of a company even though, in theory, this maybe
a violation of the accounting concept of
a. Materiality
b. Consistency
c. Conservatism
d. Objectivity
48. In classifying the elements of the financial statements, the primary
distinction between revenues and gains is
a. The materiality of the amounts involved
b. The likelihood that the transactions involved will recur in the future
c. The nature of the activities that give rise to the transactions
involved
d. The costs versus the benefits of the alternative methods of disclosing
the transactions involved
49. In accounting for a business combination, which of the following
intangibles should not be recognized as an asset apart from goodwill?
a. Trademarks
b. Lease agreements
c. Employee quality
d. Patents
50. Operating losses incurred during the start-up year of a new business
should be
a. Accounted for an reported like the operating losses of any
other business
b. Written off directly against retained earnings
c. Capitalized as a deferred charge and amortized over five years
d. Capitalized as an intangible asset and amortized over useful life