THEORY OF ACCOUNTS

Choose the best statement fitted to the question, choose wisely; if there is no answer
Shade E.
1. Which is(are) correct concerning the FRSC?
I. The FRSC replaces the ASC as the standard setting body in the Philippines
II. The FRSC is composed of 15 members with a Chairman and 14 representatives from various sectors
III. The Chairman and members of FRSC shall have a term of 2 years renewable for another term
IV. Any member of the ASC shall be disqualified from being appointed to the FRSC
a. I and II only
b. I, II, and III only
c. III and IV only
d. I, II, III, and IV
2. Which of the following government agency is represented in FRSC?
a. Bureau of Fisheries
b. CHED
c. Bureau of Internal Revenue
Customs

d. Bureau of

3. Under the IFRS Conceptual Framework (2010), which of the following is considered a fundamental
characteristic rather than an enhancing characteristic of financial information?
a. Timeliness
b. Verifiability c. Understandability d. Faithful representation
4. Failure to accrue wages payable to office personnel will
a. Overstate liability b. Overstate loss
c. Understate distribution cost
admin. cost

d. Understate

5. Under PAS 7 (statement of cash flows), which of the following items is not being added to profit
under the indirect method of computing operating cash flows?
a. Bad debt losses
b. Depreciation
c. Loss on sale of equipment
d. Increase in
trade receivable
6. Under PAS 33, treasury shares are considered as anti-dilutive because
a. They decrease the basic earnings per share
b. They decrease the diluted earnings per share
c. They decrease the number of common shares outstanding
d. They increase the income available to common shareholders
7.
a.
b.
c.
d.
e.

What chapter of the Conceptual Framework is still in process?

Chapter 1 The Objective of General Purpose Financial Reporting
Chapter 2 The Reporting Entity
Chapter 3 Qualitative Characteristics of Useful Financial Information
Chapter 4 The Framework (1989): The Remaining Text
None of the above because all are already published

8. Which of the following does not relate to Verifiability?

a. Quantified information need not be a single point estimate to be verifiable. A range of possible
amounts and the related probabilities can also be verified.
b. Generally, the older the information is the less useful it is. However, some information may
continue to be useful long after the end of a reporting period because, for example, some users
may need to identify and assess trends.
c. Direct verification means verifying a representation through direct observation, for example, by
counting cash.
d. An example indirect verification is verifying the carrying amount of inventory by checking the
inputs and recalculating the ending inventory using the same cost flow assumption.
9. This assumption was formerly considered as an underlying assumption on the previous Conceptual
Framework?
a. Going-Concern Assumption
b. Accrual Assumption
c. Cost Assumption d.
Entity Assumption
10.The amount reported as Cash on a companys balance sheet normally exclude
a. Received Postdated Checks
b. Payroll account
c. Petty cash d.
checks

Undelivered

11.If a note receivable is exchanged for a PPE an no interest rate is stated, the note is to be recorded
at
a. book value of PPE
b. notes face value c. notes maturity value
d. fair value
of PPE or note

12.Cash discounts permitted on the purchased direct materials (DM) are theoretically
a. deducted from DM, whether taken or not
c. added to other income, whether taken or not
b. deducted from DM, only if taken
d. ignored
13.Which government body is responsible for the design, preparation and approval of accounting
systems of government agencies?
a. Department of Budget & Management b. COA
c. Bureau of Treasury
d.
Government Agencies
14.A cable television company receives deposits from customers, which are refunded when service is
terminated. The average customer stays with the company eight years. How should these deposits
be shown on the financial statements?
a. Operating revenue
b. Paid-in capital
c. Other revenue
d. Liability
15.The basic purpose of derivative financial instruments is to manage some kind of risk such as all of
the following, except
a. Stock price movement
b. Currency fluctuations
c. Interest rate variations
d.
Uncollectibility of AR
16.Which of the following is not among the elements of control based on PFRS 10?
a. investors power over the investee
b. investors exposure, or rights, to variable returns from its involvement with the investee
c. investors ability to participate in the financial and operating policy decisions of an entity
d. investors ability to use its power over the investee to affect the amount of the investor's returns
17.PAS 16 Property, Plant and Equipment shall not apply to the following, except
I. The recognition and measurement of exploration and evaluation assets.
II. Property, plant and equipment classified as held for sale.
III. Biological assets related to agricultural activity
IV. Mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative
resources. V. Property, plant and equipment used for the extraction of minerals, oil or natural
gas.
a. I and II only
b. I, II and IV only
c. IV only
d. V only
e. IV and V only
18.Under the principles of PAS 16 Property, Plant and Equipment, which of the following should be
included in the cost of an item of property, plant and equipment? I. Initial delivery and handling
cost.
II. Cost of training staff on new asset.
III. Apportioned general overhead costs.
IV. Installation and assembly cost.
a. I, II, III and IV
c. II and IV only
b. I, II and III only
d. I and IV only
19.Allocation of the purchase price in a lump-sum acquisition of different assets may be based on all
of the these, except
a. Book values of the assets to the seller c.
Tax assessment values
b. Relative market values
d. Appraised values
20.Which statement is(are) correct regarding the scope of PAS 36 Impairment of Assets?
I. PAS 36 applies to some financial assets (i.e., investment in subsidiaries, associates, and
joint ventures).
II. PAS 36 does not apply to inventories, assets arising from construction contracts, deferred
tax assets, assets arising from employee benefits, or assets classified as held for sale
because existing PFRSs applicable to these assets contain requirements for recognizing and
measuring these assets.
III. PAS 36 applies to investment property that is measured at cost.
a. II only
b. I and II only
c. II and III only
d. I, II, and III
21.After initial recognition, Investment property are measured using
a. fair value model
b. cost model c. either A or B
d. Neither A nor B
22.A newly set up dotcom entity has engaged you as its financial advisor. The entity has recently
completed one of its highly publicized research and development projects and seeks your advice

a.
b.
c.
d.

on the accuracy of the following statements made by one of its stakeholders. Which of the
following statements is accurate?
Costs incurred during the research phase can be capitalized.
Costs incurred during the development phase can be capitalized if criteria such as technical
feasibility of the project being established are met.
Training costs of technicians used in research can be capitalized.
Designing the jigs and tools qualify as research activities.

23.Which of the following note disclosure is not required by PAS 38 Intangible Assets?
a. Useful lives of the intangible assets.
b. Reconciliation of the carrying amount at the beginning and end of the year.
c. Contractual commitments for the acquisition of intangible assets.
d. Fair value of similar intangible assets used by competitors.
24.Are the following statements concerning the measurement of financial instruments after initial
recognition true or false, according to PAS 39 Financial instruments: recognition and
measurement & PFRS 9 Financial Instruments?
I. Under PAS 39, Held-for-trading financial assets are measured at amortized cost.
II. Under PAS 39, Held-to-maturity investments are measured at fair value.
III. Under PFRS 9, If an entity holds an investment to collect contractual cash flows but would
sell the investment in particular circumstances (e.g., entity needs to fund capital
expenditures, among others), the investments should be classified as fair value through
profit or loss (FVPL) investment because the business model test was not satisfied.
IV. Under PFRS 9, there is no recycling between other comprehensive income (OCI) or profit or
loss.
a. True, False, True, True
b. False, False, True, True
c. False, False, False, True
d.
False, False, False, False
25.In accordance with PFRS 7 Financial instruments: disclosures, which of 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
26.Which of the following is not an appropriate basis for measuring the historical cost of fixed assets?
a. The purchase price, freight costs, and installation costs of a productive asset should be
included in the assets cost
b. Proceeds obtained in the process of readying land for its intended purpose, such as from
the sale of cleared timber, should be recognized immediately in income
c. The costs of improvement to equipment incurred after its acquisition should be added to
the assets cost if they provide future service potential
d. All costs incurred in the construction of a plant building, from excavation to completion of
a plant building, from excavation to completion, should be considered as part of the
assets cost
27.Which of the following is an internal user of a companys financial information?
a. A holder of the companys bonds
b. A holder of the companys stocks
c. A member of the board of directors
d. A member of the family of an incorporator
28.Which of the financial statement should an investor primarily use to assess the amounts, timing,
and uncertainty of investing and financing activities of ABC Company?
a. Statement of comprehensive income
b. Statement of financial position
c. Statement of changes in equity
d. Statement of cash flows
29.When it is impracticable to determine the effect of an error for all prior periods, the entity
a. Restates comparative information prospectively from the earliest date practicable
b. Restates comparative information prospectively up to the latest date practicable
c. Restates comparative information retrospectively from the earliest date practicable
d. Restates comparative information retrospectively up to the latest date practicable
30.A direct labor overtime premium is charged to a specific job when the overtime is caused by

a. Increased overall level of activity

b. Customers requirement for early completion of job
c. Managements failure to include the job in the production schedule
d. Managements requirement that the job be completed before the annual factory vacation closure

31.The physical capital maintenance concept is consistent with

a. Historical cost/nominal peso and historical cost/constant peso
b. Historical cost/nominal peso and current cost/constant peso
c. Current cost/nominal peso and historical cost/constant peso
d. Current cost/nominal peso and current cost/constant peso
32.The amortization of intangible assets over their useful lives is justified by the
a. Economic entity assumption
b. Going concern assumption
c. Monetary unit assumption
d. Historical cost assumption
33.In calculating diluted earnings per share (EPS), which of the following should not be considered?
a. The weighted number of shares outstanding
b. The amount of cash dividends declared on ordinary shares
c. The amount of dividends declared on cumulative preference shares
d. The number of ordinary shares resulting from the assumed conversion of debentures
outstanding
34.A bank
a.
b.
c.
d.

reconciliation is prepared monthly in order for the enterprise to

Arrive at the correct cash balance
Unearth any undetected cash fraud
Correct bank errors
Correct book errors

35.The publisher of a popular magazine offers a special discounted price for a three-year subscription.
At the balance sheet date, the revenue, which has already been collected but pertains to future
periods, is best to referred to as
a. Accrued subscription revenue(an asset account)
b. Unearned subscription revenue (a liability account)
c. Earned subscriptions revenue (a revenue account)
d. Pre-collected subscriptions receivable (a deferred asset account)
36.From the viewpoint of the investor, which of the following securities provides the least risk?
a. Mortgage bond
b. Subordinated debenture
c. Income bond
d. Debentures
37.The measurement basis often used to report a long-term payable requiring a commitment to pay
money at a determinable future date is
a. Current cost
b. General price level
c. Net realizable value
d. Present value of future cash flows
38.The Victoria Company acquired 30,000 4% Government Bonds redeemable in 2013 at the quoted
market price of P200. Victoria has no current intention to sell the Bonds and has a policy to hold
them as investments unless certain corporate criteria are met and the bonds are sold to maintain
liquidity. In accordance with PAS 39 Financial instruments: Recognition and Measurement, which
one of the following is the most appropriate classification for Victoria's investment in the
Government Bonds?
a. Held for trading
b. Available for sale c. Held to maturity investment
d. Loans and
receivables
39.Under PFRS 9 Financial Instruments, if an entity used its fair value option for equity instruments,
which of the following statements is incorrect?

a. dividends are to be recognized in profit or loss if said dividends are considered return on investment
b. no recycling of fair value changes to profit or loss on impairment, disposal or in any other
circumstances
c. impairment testing is required for this equity investment
d. additional disclosures are required for this equity investment
40.Which step in the accounting cycle is completed later than the others?
a. Posting
b. Adjustments
c. Journalizing
d. Identification and measurement
of transactions
41.In reconciling net income on an accrual basis to net cash provided by operating activities. What
adjustment is needed to net income because of (1) an increase during the period in prepaid
expenses, and (2) the periodic depreciation expense of company properties?
a. (1) Add (2) Add
b. (1) Add (2) Deduct
c. (1) Deduct (2) Add d. (1) Deduct (2)
Deduct

42.This accounting objective emphasizes the importance of the Income Statement as it is geared
toward proper income or performance determination of the enterprise.
a. Fund theory
b. Entity theory
c. Proprietary theory d. Residual equity theory

43.Which of the following is incorrect regarding the loss of significant influence under the revised PAS
28?
a. An entity loses significant influence over an investee when it loses the power to partake in the
financial and operating policy decisions of that investee
b. The loss of significant influence can occur with or without a change in absolute or relative
ownership levels
c. When an associate becomes subject to the control of a government, court, administrator or
regulator, significant influence is unaffected because of the potential rights on the investment in
associate
d. Loss of significant influence could occur as a result of a contractual arrangement
44.Which of the following formula is correct?
a. Assets to be realized less liabilities to be liquidated equals net asset at the beginning of the period
b. Assets to be realized less liabilities to be liquidated equals net asset at the end of the period
c. Assets not realized less liabilities not liquidated equals net asset at the beginning of the period
d.
Assets not realized less liabilities liquidated equals net asset at the beginning of the period
45.Which of the following can qualify as an asset of an entity?
a. Freely circulating air in the school campus university
b. An oxygen tank donated to Makati Medical Center
c. Good order by Nolasco Trading from XYZ Corp.
d. The position of a public highway fronting Jollibee in Dagupan City
46.Supplemental disclosures required only when the statement of cash flows is prepared using the
indirect method include
a. A schedule reconciling net income with net cash flows from operating activities
b. Amounts paid for interest and taxes
c. Amounts deducted for depreciation and amortization
d. Significant noncash investing and financing activities
47.It is a continuing appropriation for an indefinite period in excess of one fiscal year
a. Annual appropriation
b. Continuing appropriation c. Multi-year appropriation d. Noyear appropriation
48.For which of the following purposes should an appropriation for possible loss contingencies be
established?
a. To match applicable costs with current revenue.
b. To reduce fluctuations in net income in order to lend stability of the entity.
c. To charge operations in periods of rising prices for the losses which may
otherwise be absorbed in periods of falling prices.
d. To inform shareholders that a portion of retained earnings should e set aside
from amounts available for dividends because of such contingencies.

49.The dividends declared account is a nominal account and

a. Carried forward to the next accounting period
b. Closed directly to retained earnings
c. Closed directly to income summary
d. Closed directly to capital
50.When the right to receive dividend is forfeited in any one year in which dividend is not declared,
the preference share is said to be
a. Cumulative
b. Non-cumulative
c. Participating
d. Non-participating
51.
According to IAS 12, which of the following is/are disclosure requirements for taxes?
a. Tax expense relating to the reduction of deferred (but not current) tax expense by using a
previously
unrecognized tax loss, tax credit, or temporary difference of a prior period
b. The write-down (or its reversal) of a current tax asset +
c.An explanation of changes in the applicable tax rates compared to the previous accounting period
d. None of the above
52.Entity A acquired Entity B. On the acquisition date, Entity B had an operating lease as a lessee
with a remaining period of two years out of the original four years. Due to significant changes
in the market, Entity B is paying less than what you would expect to currently pay for a similar
lease. The value of the existing lease based on the current terms is 10,000 and that of a lease
based on relative market terms is 13,000. How should Entity A account for this?

A. Entity A should disregard this, as this is an operating lease of Entity B and no asset or liability is
recognized related to operating leases.
B. Entity A determines whether the terms of each operating lease in which Entity B is the lessee
are favorable or unfavorable. Entity A should account for the difference between the value of
the existing lease terms and the market terms in profit or loss.
C. Entity A determines whether the terms of each operating lease in which Entity B is the lessee
are favorable or unfavorable. Entity A should recognize an intangible asset separate from
goodwill for the favorable portion of the operating lease relative to market terms.
D. None of the above.
53. Which of the following statements about accounting is true or false?
I. The Romans kept elaborate financial records and standardized systems for purposes
such as the accountability of provincial governors but they did not develop any system
of commercial bookkeeping.
II. The first published work on double-entry bookkeeping is presumed to be a book on
arithmetic written by a businessman which included a chapter the subject.
III. The phenomenon of globalization gave rise to the complexity of international business
activities and led to the mandatory uniform application of international financial
reporting standards by all countries
Statement I
Statement II
Statement III
True
True
True
True

True
False
True
False

False
True
Ture
False

54.
Choose the incorrect statement about generally accepted accounting principles (GAAP):
A. They are not rigid laws as they are subject to amendment from time to time
B. Firms that do not comply with GAAP may suffer negative economic consequences
C. Generally accepted accounting principles and regulatory accounting principles are both enforced
by the Bureau of Internal Revenue.
D. The Philippine Financial Reporting Standards that constitute GAAP in the Philippines are not
included in the scope of the Conceptual Framework
55.
The body established by the Financial Reporting Standards Council as its support group
tasked to study and
deliberate on controversial issues affecting Philippine accounting practice is
A. Philippine Accounting Principles Committee
B. Standing Interpretations Committee

C. Philippine Interpretations Committee

D. IFRSC
56.

Which of the following best describes the double-entry concept?

a. Only two accounts are affected by each recording of accountable event
b. Debit-credit convention must be used
c. For every increase in asset, there must be an increase in liability or revenue
d. Events and transactions are analyzed and recorded using the principle of duality and
equality

57.
Which of the following statements about financial accounting is incorrect?
a. General purpose financial statements must be prepared by a CPA
b. Financial Accounting is a social science that can be influenced by changes in legal, political, social
and business environments.
c. The preparation of general-purpose FS is usually based on the assumption that the primary users of
information are external decision-makers.
d. The general objective of financial accounting is to provide information about the financial position,
performance, and cash flows of an entity that is useful in the making of economic decisions
58.Which of the following statements will not pertain to an asset?
a. It can command a price
b. It should be exclusively owned by an economic entity
c. It is limited in supply
d. An economic good
59.Which of the following is an asset but not an economic resource?
a. Investment property
b. Machinery
c. Deferred tax asset
d. Inventories
60.

Which of the following is not a characteristic of financial accounting?

a. Use of facts and estimates
C.
Subjective data provided relevant

b. Primarily historical in nature

D.

Concerned with general and purpose reports

61.
How would the declaration and subsequent issuance of a 30% stock dividend by the issuer
affect each of the following the market value of the share exceeds the par value of the stock?
Common Stock Additional paid-in capital
Retained Earnings
Stockholders
Equity

A.
B.
C.
D.
62.

A.
B.
C.
D.

No effect
No effect
Increase
Increase

No effect
Increase
No effect
No effect

No effect
Decrease
Decrease
Decrease

No effect
No effect
Decrease
No effect

How would a stock split affect each of the following?

Asset
Total stockholders equity
Additional paid in capital

Increase
No effect
No effect
Decrease

Increase
No effect
No effect
Decrease

No effect
No effect
Increase
Decrease

63.
An entity capitalizes borrowing costs as part of the cost of a qualifying asset on the
commencement date. The commencement date for capitalization is the date when entity first
meets all of the following EXCEPT: A. It undertakes activities that are necessary to prepare the
asset for its intended use or sale.
a. It undertakes activities that are necessary to prepare the asset for its intended use or sale.
b. Upon receipt of progress payment and government grants related to the asset.
c. It incurs expenditures for the asset.
d. It incurs borrowing cost.
64.
If the property comprise a portion that is held to earn rentals or for capital appreciation and
another portion that is held for use in the production or supply of goods or services or for
administrative purposes. If the portions could not be sold separately, the entity shall:
a. Both as PPE only
b. Both as Investment property only if the other portion is insignificant in nature.

c. Whole property either Investment in Property or PPE depending on which portion has the
larger Fair value.
d. Both as Investment Property only
65.
Statement 1: Under PFRS for SMEs, an entity is required to recognize all actuarial gains and
loss in profit or loss in all its defined benefit plans.
Statement 2: Under PFRS 13, Fair Value Measurement, active market is defined as the market
with the greatest volume and level of activity for the asset or liability.
a.
b.
c.
d.

Both statements are true

Both statements are false
Statement I is true; statement II is false
Statement I is false; statement II is true

66.
Statement 1: Deferred tax should be measured at the tax rates that are expected to apply in
the period when the deferred tax asset or liability is recognized.
Statement 2: The acquirer shall measure at the acquisition date components of non-controlling
interests in the acquiree that are present ownership interests and entitle their holders to a
proportionate share of the entity's net assets in the event of liquidation at either:

a) fair value; or
b) the present ownership instruments' proportionate share in the recognized amounts of the
acquiree's identifiable net assets.
A. Both statements are true.
B. Both statements are false
C. Statement 1 is true; statement 2 is false.
D. Statement 1 is false; statement 2 is true.
67.

IFRIC 4, Determining whether an Arrangement contains a Lease does not apply to:

A. Outsourcing arrangements
B. Public to private service concession arrangements
C. Arrangements in the telecommunications industry
D. Take-or-pay and similar contracts
68.

Which of the following statements is (are) true regarding impairment loss?

A. All property and equipment items should be tested for impairment annually.
B. The impairment loss should be allocated, first, to corporate assets, then allocated to the individual
assets comprising the cash-generating unit, on a pro-rata basis based on their carrying amounts,
and then, to goodwill.
C. To ensure uniformity of practice, the formula used in computing impairment loss is the same for all
assets.
D. An impairment loss of an asset carried at historical cost should always be taken to the income
statement.
69. Which of the following statements is/are false about the changes in PAS 16 Property, Plant and
Equipment and PAS 38 Intangible Assets?
I. When an item of PPE or Intangible Asset is revalued, the carrying amount of
that asset is adjusted to the revalued amount. This should be done by adjusting
the gross carrying amount in a manner that is consistent with the change in the
gross carrying amount of the asset so that revaluation of the carrying amount
of the asset. For example, the gross carrying amount may be restated by
reference to observable market data or it may be restated proportionately to
the change in the carrying amount. The accumulated depreciation at the date
of the revaluation is
adjusted to equal the difference between the gross carrying amount and the
carrying amount of the asset after taking into account accumulated impairment
losses
II. When an item of PPE or Intangible Asset is revalued, the carrying amount of
that asset may be adjusted to the revalued amount by eliminating the
accumulated depreciation against the gross carrying amount of the asset.

a
b
c

I only
II only
I and II

None of the above

70.
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 at year end
71.

When an inventory costing formula is changed, the change is required to be applied:

A. prospectively and the adjustment taken through the current profit or loss;
B. retrospectively and the adjustment taken through the opening balance of accumulated
profits
C. prospectively and the current period adjustment recognized directly in equity;
D. retrospectively and the adjustment recognized as an extraordinary gain or loss.

72.
According to PAS 2 Inventories, which of the following will be included in the computation
of the cost ratio when estimating inventories by the average retail method?
A. Purchase returns
B. Mark-up, net
C. Mark-down, net
D. All of these
73.
At balance sheet date, Monica Company was awaiting the final details of a court case for
damages awarded in its favor. The amount and probable receipt of damages is unknown and will
not be decided until the court sits again in several months time. How is this event dealt with in
the preparation of the financial statements?
A. do not recognize or disclose in the financial statements as the possibility of receiving
damages is remote;
B. recognize as an asset in the financial statements as the receipt of damages is
probable;
C. disclose in the notes to the financial statements as it is possible that the entity will
receive the damages and the court decision is out of its control;
D. recognize as a deferred asset in the balance sheet and re-classify as a non-current
asset when the court decision is known.

74. Mikey Inc. is facing a lawsuit for product liability damages which remains unsettled on balance
sheet date,
December 31, 2014. Company lawyers estimate a probable loss amounting to P 1,000,000.
Mikeys insurance adjuster however, has opined that recovery from the insurance company
amounting to P 700,000 is virtually certain. Under PAS 37, how should these situations be
presented in the financial statements, Dec. 31, 2013?
A. Contingent Loss of P1,000,000; Contingent Liability of P 1,000,000
B. Loss, net of gain, P300,000; Liability, net of Asset of P 300,000
C. Loss, net of gain, P 300,000; Asset, P 700,000; Liability, P 1,000,000
D. Loss, P 1.000,000; Liability, P1,000,000; Contingent Asset, P 700,000; Contingent Liability, P1,
000,00
75. Which of the following statements is (are) true?
I.
A legal obligation is one that arises only from legislation
II. When an enterprise, by an established pattern of past practice, or a sufficiently specific current
statement has indicated to other parties that it will accept certain responsibilities, it incurs a
constructive obligation
III. A contingent asset should be recognized in the books of account if it is probable that economic
resources will flow to the enterprise.
a
Only I is true
b
Only II is true
c
Only III is true
d
II and III are true
76. Disclosure of related-party transactions is required by GAAP because
A. They do not commonly occur in the normal course of business
B. They cannot be presumed to be carried out on an arms-length basis and thus, the enterprises
Financial statements are not complete and reliable without such disclosures

C. They usually have a greater material effect on financial statements than transactions between
unrelated parties
D. They usually involve irregularities

77. Which of the following statements regarding Cash and Cash equivalents is false?
A. Not all items included in cash constitute legal tender
B. Cash should be valued at fair value
C. Compensating cash balance that are legally restricted for the payment of a current
liability can be shown as part of Cash and Cash Equivalent provided the restriction is
disclosed.
D. If a bank or financial institution holding funds of a reporting entity is in bankruptcy or
financial difficulty such cash should be written down to estimated realizable value if the
amount is lower than face value
78. Which of the following statements pertaining to PAS 7, Statement of Cash Flows is (are) true?
I.
In a statement of cash flows using the indirect approach for operating activities an increase in
inventories should be presented as a deduction from net income.
II.
In a Statement of Cash Flows, banks and financial institutions are allowed to report their receipts
and disbursement transactions at net,
III.
Non cash financing and investing activities need not be reported in the financial statements,
whether on the face or in the notes thereto
IV.
In a statement of Cash Flows using the indirect approach, decreases in cash equivalents should be
presented as addition to net inome
A. I and II only
B.
I, III, and IV only
C. I II and IV only
D.
I, II, III, IV

79. The IASB tentatively decided that the mandatory effective date of IFRS 9 Financial Instruments
will be for annual periods beginning on or after __________________.
a. January 1, 2017
b. January 1, 2018
c. January 1, 2015
d. January 1, 2016
80.
a. PUP

All of the following are national government agencies except:

b. COA
c. GSIS d. BIR

81.
The weighted average inventory costing method is particularly suitable to inventory when:
A. dissimilar products are stored in separate locations;
B. the entity carries stocks of raw materials, work-in-progress and finished goods;
C. goods have distinct use-by dates and the goods produced first must be sold earliest
D. homogeneous products are mixed together

82. PACMan Company signs a contract with a licensor for the exclusive rights to broadcast matches in
a longestablished sporting competition covering the whole season for a number of years. The
entity is required to pay agreed amounts at the start of each season, with the rights to that season
and future seasons reverting to the licensor if payment is not made on time. PACMan concludes
that an obligation does not exist until the beginning of each season for the amount payable to
secure rights for that season.
In addition, PACMan Company acquires a basketball team. A critical factor in the Companys
decision to acquire the team was the reputation of its players, many of whom are regularly
selected to play for their country. A player cannot play for a team unless he is registered with
the relevant basketball authority. It is customary to see exchange transactions involving
players' registrations. The payment to a player's previous team in connection with the transfer
of the player's registration enables the acquiring team to negotiate a playing contract with the
player that covers a number of seasons and prevents other teams from using that player's
services.

I.
II.
III.
IV.

Which of the following statements is/are true applying principles of IAS 38 Intangible Assets in
relation to the acquisition of the basketball team?
The amounts paid for the transfer of the player correspond to the acquisition of a contractual right.
As it results from a contractual right, it is identifiable.
The cost in this case is reliably measurable, being the price agreed in the contract with other
basketball team.
The item does not meet the definition of an intangible asset since no future economic benefits are
expected from this acquisition.
a. I, II and III only

b. II, III and IV only c. I, III and IV only

d.

IV only

83. Which of the following statements is/are false in relation to the annual improvements to IFRS?

I.
II.
III.
IV.
a.
b.
c.
d.

Joint arrangements are outside the scope of IFRS 3, not just joint ventures.
In accounting for contingent consideration in a business combination under IFRS 3 Business
Combinations, contingent consideration can be measured at fair value through other
comprehensive income.
Short-term receivables and payables with no stated interest rates must be held at invoice amounts
under IFRS 13 Fair Value Measurement.
A management entity an entity that provides key management personnel services is not a related
party subject to the related party disclosures under IAS 24.
I, II and III only
II, III and IV only
I, III and IV only
IV only

84. Which of the following statements is/are true regarding the amendments in PAS 41 and PAS 16 that
will be effective in January 1, 2016?

I.
II.
III.
IV.
a.
b.
c.
d.

Bearer of assets will be accounted for as property, plant and equipment, separate from any related
produce.
Entities will have the option to apply IAS 16s cost model or revaluation model to subsequently
measure bearer biological assets.
Entities following either model will need to determine the useful life of the bearer biological asset in
order to depreciate it. The useful life will need to be re-evaluated every 3 years.
Early adoption of the new requirements is permitted.
I, II and III only
II, III and IV only
I, III and IV only
IV only

85. Which is true?

I.

Substantial modification of the terms of an existing financial liability or a part of it shall

be accounted for as an extinguishment of the original financial liability and the
recognition of a new financial liability.
II. An exchange between an existing borrower and lender of debt instruments with
substantially different terms shall not be accounted as an extinguishment of the
original financial liability.
III. Entity shall remove a financial liability or a part of a financial liability from its statement
of financial position when, and only when, it is extinguished (when the obligation
specified in the contract is discharged or cancelled or expires).

a.
b.
c.
d.

II only
II and III
I and III
All of the statements are correct.

86. To comply with Par 23 of IFRS 6: Exploration and Evaluation of Mineral Resources the entity shall
disclose:

A. Substantive Expenditure on exploration

B. The period for which the entity has the right to explore in the specific area has expired during the
period or will expire in the near future, and is not expected to be renewed
C. The amounts of assets, liabilities, income and expenses and operating and investing cash flows
arising from the exploration for and evaluation of mineral resources.
D. All of the above
87. With respect to the computation of earnings per share, which of the following would be most
indicative of a simple capital structure?
A.
Common stock, preferred stock, and convertible securities
outstanding
B.
Earnings derived from one primary line of the business
C.
Ownership interests consisting solely
common stock
E. Equity represented materially by liquid asset

88. Which of the following statements is true?

A. Temporary differences occur because accounting standards and income tax laws differ as to when
they recognize assets, liabilities, owners equity, revenues, gains, expenses and loses.
B. The term future taxable amount relates to a deferred tax asset
C. Future taxable amounts include revenues and gains that are included in the tax return before
they are recognized for accounting purposes.
D. Future deductible amounts include expenses and losses that are included in the tax return before
they are recognized for accounting purposes.
89.
An entity operates a chemical plant and has a published policy of making good any damage
caused to the environment. Which of the following would give rise to a provision?
A. It is likely that a chemical spill which would result to pay penalty will occur next year
B. Research suggests that there is a possibility that the entitys action may cause damage to
surrounding wildlife
C. The government has a plan for a law requiring all environment damage to be rectified
D. A chemical spill from a chemical plant has caused harm to the surrounding wildlife
90.
A lessee when accounting for a lease incentive received under an operating lease treats is
as a:
A. increase in rental income over the lease term;
B. increase in rental expense over the lease term;
C. reduction in rental expense over the lease term;
D. reduction in rental income over the lease term
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