TOA 2014 (51-100)

51. Which of the following is not a description or a function of the Financial Reporting Standards
Council?
a. It establishes generally accepted accounting principles in the Philippines.
b. It assists the Professional Regulatory Board of Accountancy (BoA) in carrying out its power and
function to promulgate accounting standards in the Philippines.
c. It is the successor of the Accounting Standards Council (ASC) and the creator of Philippine
Interpretations Committee (PIC).
d. It receives financial support principally from the Professional Regulations Commission (PRC).
52. To be highly effective, the actual results of the hedge must be within the range of
a. 100% - 150%
b. 100% - 125%
c. 80% - 100%
d. 80% - 125%
53. Which of the following errors will probably be disclosed by the preparation of a trial balance (i.e.,
would cause it to be out of balance)?
a. Failure to post an entire journal entry (i.e., nothing is posted)
b. Failure to record an entry in the journal (i.e., nothing is entered)
c. Failure to post part of a journal entry
d. Posting the debit of a journal entry as a credit, and the credit as a debit
54. If the market rate of interest is lower than the face interest rate on the date of issuance, the bonds
will
a. Sell at a discount
b. Sell at a premium
c. Sell at face value
d. Not sell until the face interest rate is adjusted
55. The following statements are based on PAS 28 (Investment in Associates):
Statement I: An investment in an associate shall be accounted for using the equity method
(benchmark) or cost method (alternative).
Statement II: An investor shall discontinue the use of equity method from the date when it ceases to
have significant influence over an associate and shall account for the investment in accordance with
PAS 39.
Statement III: On the loss of significant influence, the investor measure at historical cost any
investment the investor retains in the former associate.
a. Only Statement I is false.
b. Only Statement II is true.
c. Only Statement III is true.
d. All of the statements are false.
56. One characteristic of a corporation is
a. Unlimited liability of its owners
b. The ease with which the ownership is transferred
c. Shareholders acting as automatic corporate agents
d. Dissolution upon the death of an owner
57. The following statements are based on PFRS for SMEs
Statement I: If an entity's normal operating cycle is not clearly determinable, its duration is assumed to
be twelve (12) months.

Statement II: If an entity is unable to make a reliable estimate of the useful life of an intangible asset,
the life shall be presumed to be twenty (20) years.
Statement III: An entity shall recognize all borrowing cost as an expense in profit or loss in the period
in which they are incurred.
a. True, true, true
b. True, false, true
c. True, false, false
d. False, false, false
58. Which of the following is an example of deferral?
a. Accruing year-end wages
b. Recognizing prepaid rent
c. Recognizing revenues earned but not yet recorded
d. Recognizing expenses incurred but not yet recorded
59. Depreciation best applies to
a. Recorded costs that must be divided among periods
b. Recorded revenues that must be divided among periods
c. Unrecorded (accrued) expenses that must be recorded
d. Unrecorded (accrued) revenues that must be recorded
60. Determine the true statement(s) existing to the presentation of the statement of changes in equity:
Statement I: The amounts of dividends shown as distributions to owners and the amounts of dividends
per share should be shown in the notes only.
Statement II: Components of equity include each class of contributed equity, the accumulated balance
of each class of other comprehensive income and retained earnings.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
61. Under PFRS 4, it refers to a party that has a right to compensation under an insurance contract if
an insured event occurs
a. Cedant
b. Insurer
c. Reinsurer
d. Policyholder
62. Which of the following items is an example of investment property?
a. Property that is leased to another entity under a finance lease
b. Property that is being constructed or developed in behalf of third parties
c. Property that is being constructed or developed for future use as investment property
d. Property held for short-term sale in the ordinary course of business
63. A pretax income always results when
a. The cost of goods sold exceeds operating expenses
b. Revenues exceed the cost of goods sold
c. Revenues exceed operating expenses
d. The gross margin exceed operating expenses
64. The following statements are based on PFRS 3 (Business Combinations):
Statement I: The entity shall account first each business combination by applying the acquisition
method.

Statement II: The acquirer shall measure the identifiable assets acquired and the liabilities assumed at
their acquisition date fair values.
Statement III: For each business combination, the acquirer shall measure any non-controlling interest
in the acquiree either at fair value or at the non-controlling interest's proportionate share of the
acquiree's identifiable net assets.
a. All of the statements are true.
b. Only statement I is true.
c. Only statement II is false.
d. Only statement III is false.
65. Under PAS 1, which if the following is not among the criteria in classifying a liability as current?
a. Expected to be settled in the entity's normal operating cycle
b. Due to be settled within twelve months after the balance sheet date
c. It is held primarily for the purpose of being traded
d. The entity has an unconditional right to defer settlement of the liability for at least twelve months
after the balance sheet date
66. Under section 34 of PFRS for SMEs, one of the following is not among the three (3) categories of
"specialized activities"
a. Insurance
b. Agriculture
c. Service Concession
d. Extractive Activities
67. The purchase of treasury stock does not affect
a. The amount of stock outstanding
b. The amount of stock issued
c. Total assets
d. Total shareholder's equity
68. Land improvements
a. Are subject to depreciation
b. Should be included in the cost of land
c. Should be deducted from the cost of land
d. Should be charged as an expense in the year purchased
69. Which would most likely use the retail inventory method?
a. A farm supply company
b. A TV repair company
c. A dealer in heavy machinery
d. A men's clothing shop
70. What is the authoritative status of the Conceptual Framework?
a. It has the highest level of authority. In case of a conflict between the Framework and a Standard or
Interpretation, the Framework overrides the Standard or Interpretation.
b. If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the
Framework. In the absence of a Standard or an Interpretation that specifically applies, the Framework
should be followed.
c. If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the
Framework. In the absence of a Standard or Interpretation that specifically applies to a transaction,
management should consider the applicability of the Framework in developing and applying an
accounting policy which results in information that is relevant and reliable.

d. The Framework applies when FRSC develops new or revised Standards. An enterprise is never
required to consider the framework.
71. A corporation has issued only one type of stock and wants to compute book value per share. It
needs all the information below, except
a. Retained Earnings
b. Total contributed capital
c. The current year's dividends
d. Total shares outstanding and distributable
72. What is correct concerning the 75% overall size test for operating segments?
a. The total external and internal revenue of all reportable segments is 75% or more of the entity's
external revenue.
b. The total external revenue of all reportable segments is 75% or more of the entity's external and
internal revenue.
c. The total external revenue of all reportable segments is 75% or more of the entity's external
revenue.
d. The total internal revenue of all reportable segments is75% or more of the entity's internal revenue.
73. Then following statements are based on PAS 11 (Construction Contracts):
Statement I: Contract revenue is measured at the fair value of the consideration received or receivable.
Statement II: The measurement of contract revenue is affected by a variety of uncertainties that on the
outcome of future events. The estimates often need to be revised as events occur and uncertainties are
resolved.
Statement III: The amount of contract revenue may increase or decrease from one period to the next.
a. Only Statement I is true
b. Only Statements I and II are true
c. Only Statements II and III are true
d. All of the above statements are true
74. How frequent shall a government unit covered by NGAS (New Government Accounting System)
prepare financial reports?
a. Monthly
b. Quarterly
c. Semiannually
d. Annually
75. The following statements to discount on notes payable, which of the following statements is
correct?
Statement I: The discount on notes payable is an adjunct liability account which is shown as a
deduction from note payable.
Statement II: The discount on notes payable represents interest charges applicable to future periods.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
76. If the price of the underlying is greater than the strike or exercise price of the underlying, the call
option is
a. At the money
b. In the money
c. On the money
d. Out of the money

77. A statement of financial position as at the beginning of the earliest comparative period should be
prepared by an entity in an any of the following circumstances, except
a. When an entity applies an accounting policy retrospectively
b. When an entity makes a retrospective restatement of items in the financial statements
c. When an entity reclassifies items in the financial statements
d. When an entity changes in any of its estimates used in accounting
78. The following statements are based on PAS 34 (Interim Financial Reporting):
Statement I: Interim financial report means a financial report containing either a complete set of
financial statements or a set of condensed set of financial statements for an interim period.
Statement II: If an entity publishes a complete set of financial statements in its interim financial report,
the form and content of those statements shall conform to the requirements of PAS 1 for a complete
set of financial statements.
Statement III: An entity shall apply different accounting policies in its interim financial statements and
its annual financial statements.
a. Only statement I is true
b. Only statement II is true
c. Only statement III is false
d. All of the statements are true
79. The Purchases Discount Lost account may appear in the accounting records if which method is
used to account for purchased discounts?
a. Net price method
b. Gross price method
c. Allowance method
d. Sales price method
80. The following statements are based on PAS 38 (Intangible Assets):
Statement I: Internally generated goodwill shall not be recognized as an asset.
Statement II: No intangible asset arising from research or research phase of an internal project shall be
recognized.
Statement III: Internally generated brands, mastheads, publishing titles, customer lists and items
similar in substance shall be recognized as intangible assets.
a. All of the statements are true
b. Only statement I is true
c. Only Statement II is false
d. Only Statement III is false
81. The term "outstanding check" refers to
a. Checks that have been lost in the mail or for some other reason have been misplaced
b. Depositor checks which have been processed by the bank but have not yet been recorded by the
depositor
c. Customer checks which have been returned by the bank because the customer's bank would not
honor them
d. Depositor checks which have not yet cleared the banking system
82. What are the qualitative characteristic of financial statements according to the Framework?
a. Qualitative characteristics are the attributes that make the information provided in financial
statements useful users.
b. Qualitative characteristics are broad class sees of financial effects of transactions and other events.

c. Qualitative characteristics are non-quantitative aspects of an entity's position and performance and
changes in financial position.
d. Qualitative characteristics measure the extent to which an entity has complied with all relevant
Standards and Interpretations
83. The following statements are based on PAS 29 (Financial Reporting in Hyperinflationary
Economies):
Statement I: The financial statements of an entity whose functional currency is the currency of a
hyperinflationary economy, whether they are based on a historical cost approach or a current cost
approach, shall be stated in terms of the measuring unit current at end of the reporting period.
Statement II: When an economy ceases to be hyperinflationary, an entity shall discontinue the
preparation and presentation of financial statements under PAS 29 and shall treat the amounts
expressed in the measuring unit current at the end of the reporting period as the basis for the carrying
amounts in its subsequent financial statements.
a. True, true
b. True, false
c. False, true
d. False, false
84. Under the effective interest method, as a discount is amortized each period, the
a. Amount amortized decreases
b. Bonds' carrying value decreases
c. Interest expense recorded increases
d. Interest paid on bondholders increases
85. Financial statements of not-for-profit organization focused on
a. Basic information for the organization as a whole
b. Standardization of funds nomenclature
c. Inherent differences of not-for-profit organization that impact reporting presentations
d. Distinctions between current fund and noncurrent fund
86. The following are based on PAS 24 (Related Party Disclosure)
Statement I: Relationships between a parent and its subsidiaries shall be disclosed only if there are
transactions between them.
Statement II: An entity shall disclose the name of its parent and, if different, the ultimate controlling
party.
a. True, true
b. True, false
c. False, true
d. False, false
87. Abnormal spoilage in a manufacturing process should be charged to
a. Profit or loss
b. Accumulated profit or loss
c. Manufacturing overhead applied
d. Manufacturing overhead control
88. Under the indirect method, which of the following items must be deducted from reported net
income to determine the net cash flow from operating activities?
a. Decreases in current assets
b. Depreciation of plant assets
c. Amortization of bond discount
d. Decreases in current liabilities

89. A newly acquired plant asset is to be depreciated over its useful life. The rationale for this process
is the
a. Economic entity assumption
b. Monetary unit assumption
c. Materiality assumption
d. Going concern assumption
90. The following are based on PAS 20 (Accounting for Government Grants and Disclosure of
Government Assistance):
Statement I: Government grants shall be recognized in profit or loss on a systematic basis over the
periods in which the entity recognizes as expenses the related costs for which the grants are intended
to compensate
Statement II: A government grant that becomes receivable as compensation for expenses or losses
already incurred or for the purpose of giving immediate financial support to the entity with no future
related costs shall be recognized in profit or loss of the period in which it becomes receivable.
a. True, true
b. True, false
c. False, true
d. False, false
91. The following statements refer to PFRS for SMEs
Statement I: The PFRS for SMEs is organized by topic, with each topic presented in a separate
numbered section.
Statement II: All of the paragraphs in the PFRS for SMEs, which has a total of 35 sections, have equal
authority.
Statement III: Some sections include appendices of implementation guidance that are not part of the
PFRS but, rather, are guidance for applying it.
a. All of the statements are false
b. All of the statements are true
c. Only statement III is true
d. Only statement I is true
92. An entity classifies expenses by logistics quality control, manufacturing plant engineering, sales &
marketing, research & development, finance & administration. The classification basis is by
a. Object of expenditure
b. Nature of expense
c. Area of responsibility
d. Function performed
93. The following are based on PAS 21 (The Effects of Changes in Foreign Exchange Rates):
Statement I: A foreign currency transaction shall be recorded, on initially recognition in the functional
currency, by applying to the foreign currency amount the spot exchange rate between the functional
and the foreign currency at the date of the transaction.
Statement II: For practical reasons, a rate that approximates the actual rate at the date of the
transaction is often used, for example, an average rate for a week or a month might be used for all
transactions in each foreign currency occurring during the period even if exchange rates fluctuate
significantly during the period.
a. Only statement I is true
b. Only statement I is false
c. Both statements are true
d. Both statements are false

94. The deferred tax consequence attributable to a deductible temporary difference and operating loss
carry forward is known as
a. Tax asset
b. Current tax
c. Tax expense
d. Tax liability
95. Under PAS 11, when it is probable that total contract costs on a fixed price construction contract
will exceed total revenue, the expected loss should be
a. Set off against profit of other construction contract where available
b. Recognized as an expense immediately, unless revenue to date exceeds costs to date
c. Apportioned to the years of the contract according to the percentage of completion method
d. Recognized as an expense immediately
96. Goodwill should be recorded in the accounting records only when
a. It is internally generated
b. It can be established that a definite benefit or advantage has resulted to a firm from some item such
as good name, capable staff, or reputation
c. It is acquired through the acquisition of another business
d. A firm reports above normal earnings for five or more consecutive years
97. Under PAS 26 (Accounting and Reporting by Retirement Benefit Plans), investments held by
retirement benefit plans should be stated at which of the following value in their statement of net
assets?
a. Fair value
b. Value in use
c. Net realizable value
d. Original cost less impairment
98. Under PAS 18 (Revenue), which is not a criterion to satisfy before revenue from sale of goods be
recognized in profit or loss?
a. Revenue can be reliably measured
b. Control over the goods sold has been relinquished but management maintains continuing
involvement over the goods sold
c. The risks and rewards of ownership has been transferred to the buyer
d. The outcome of the transaction is probable
99. For which type of hedge are changes in fair value deferred and amortized as an equity adjustment?
a. Cash flow hedge
b. Operating hedge
c. Fair value hedge
d. Notional value hedge
100. For purposes of computing the weighted average number of shares outstanding in the EPS
computation, a mid-year event that must be treated as occurring at the beginning of the year is the
a. Issuance of shares
b. Issuance of share warrants
c. Issuance of shares out of stock split
d. Purchase and reissuance of treasure shares

ANSWERS
51. A
52. D
53. C
54. B
55. B
56. B
57. B
58. B
59. A
60. B

61. D
62. C
63. D
64. A
65. D
66. A
67. B
68. A
69. D
70. C

71. C
72. C
73. D
74. D
75. 76. B
77. D
78. A
79. A
80. D

81. D
82. A
83. A
84. C
85. A
86. C
87. A
88. D
89. D
90. A

91. 92. 93. A

94. A
95. D
96. C
97. A
98. B
99. A
100. C