Professional Documents
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Question 1
On October 1, 2013 The Fernando Company acquired 100% of The Austria Company when the
fair value of Austria's net assets was P116 million and their carrying amount was P120 million.
The consideration transferred comprised P200 million in cash transferred at the acquisition date,
plus another P60 million in cash to be transferred 11 months after the acquisition date if a
specified profit target was met by Austria. At the acquisition date there was only a low
probability of the profit target being met, so the fair value of the additional consideration liability
was P10 million. In the event, the profit target was met and the P60 million cash was
transferred.
What amount should Fernando present for goodwill in its statement of consolidated financial
position at December 31, 2014, according to PFRS 3 Business Combinations?
94,000,000
144,000,000
80,000,000
84,000,000
Question 2
Which of the following accounting practices has been outlawed by PFRS 4?
Shadow accounting
Catastrophe provisions
Question 3
These are the "financial statements of a group in which the assets, liabilities, equity, income,
expenses and cash flows of the parent and its subsidiaries are presented as those of a single
economic entity".
Question 4
The investment in a subsidiary recorded as a purchase by the parent should be recorded on the
parent's books at
the fair value of the consideration given plus an estimated value for goodwill.
Question 5
Which of the following is not a characteristic of a conditional promise to a:
Gift may have to be returned to donor if condition is not met Depends on demand by
the promise for performance Recognized as contribution revenue when the conditions are
substantially met Depends on the occurrence of a specified future and uncertain events to
bind the promisor.
Question 6
Damon Limited acquired the net assets of Gina Limited. Damon Limited provided an item of
equipment as part of the consideration. The fair value of the equipment was P13,000. It cost
P20,000 and had a carrying amount of P12,000. Which of the following entries appropriately
reflects the gain or loss on the equipment?
Credit: Loss on sale (P1,000) Debit: Gain on sale (P1,000) Debit: Loss on sale
A group of former owners of one of the combining entities obtains control of the combined
entity
Question 8
PFRS 4 was introduced principally for what reason?
To ensure that insurance companies could comply with International Financial Reporting
from the financial services authorities in several countries. as a response to recent scandals
within the insurance industry
Question 9
A hedge of the exposure to changes in the fair value of a recognized asset or asset or liability or
an unrecognized firm commitment, is classified as a
Cash flow hedge
Underlying
Question 10
Company B acquired the assets (net of liabilities) of Company S in exchange for cash. The
acquisition price exceeds the fair value of the net assets acquired. How should Company B
determine the amounts to be reported for the plant and equipment, and for long-term debt of the
acquired Company S?
Plant and equipment (fair value); Long term debt (S's carrying amount)
Plant and equipment (S's carrying amount); Long term debt (fair value)
Plant and equipment (fair value); Long term debt (fair value)
Plant and equipment (S's carrying amount); Long term debt (S's carrying amount)
Question 11
The information contained within Appendix B of PFRS 3 in relation to disclosure:
within the body of PFRS 3 contains prescribed presentation formats for disclosure of
Merger
Business combination
Intercorporate directorship
Consolidation
Question 13
According to the cost recovery method of accounting, gross profit on an installment sale is
recognized as income:
On the date the final cash collection is received. In proportion to the cash collections.
On the date of sale. After cash collections equal to the cost of sales have been
received.
Question 14
The consideration transferred in a business combination is measured as the fair value of the:
net assets acquired consideration given plus directly attributable costs. costs
Question 16
When should an anticipated loss on a long term contract be recognized under the percentage of
completion method?
Interest expense as a percentage of the bonds' carrying amount varies from period to
period
Question 19
If the construction in progress account has a balance of 1,000,000 while the Progress Billings
on Contracts accounts balance is P800,000, how should these accounts be reflected on the
balance sheet?
The difference between the two accounts will be reflected as a current liability. The
difference between the two accounts will be reflected as a current asset. Progress Billings
on Contracts will be shown as a current liability. Construction in Progress will be shown as a
current asset.
Question 20
The process of preparing the combined financial statements of a group of entities is known as:
Question 22
The currency of the country in which the foreign operation is based is referred to as the:
Embedded derivative
Financial asset
Financial liability
Equity instrument
Question 24
When an acquiree disposes of a business, the gain or loss is recognised in:
revaluation surplus the statement of profit or loss and other comprehensive income
400,000
100,000
Question 26
It is the annual contribution from each province, city or municipality in the amount approved by
law for each barrio and intended solely for community development projects.
Infrastructure Fund
Trust Fund
Question 27
Agency NN issued check to Nongovernment Organization (NGO’s) for fund assistance
amounting to P100,000. The entry to record this transaction would be:
equity of the parent at the acquisition date. net assets of the parent at the acquisition
date. net assets of the subsidiary at the acquisition date. equity of the subsidiary at the
acquisition date.
Question 29
A single set of financial statements that combines the separate sets of financial statements for
all entities within an economic entity, is known as:
Question 32
PFRS requires that on initial recognition, financial assets and liabilities be measured at:
lower of cost or market value. historical cost. fair value. net present value.
Question 33
A company has a 40% share in a joint venture and loans the venture P2,000,000, what figure
will be shown for the loan in the balance sheet of the venturer?
Future contracts
Question 35
With respect to the cost a business acquisition, PFRS 3 requires cost(total consideration) to be
allocated
Question 36
Initially, a foreign currency transaction shall be recorded by applying
The spot exchange rate at the date of the settlement of the transaction.
Question 37
If the foreign operation reports in the currency of a hyperinflationary economy, assets, liabilities
income and expenses shall be translated at
Forward rate
Average rate
Closing rate
Question 38
In a business combination, the acquiree is the business that:
Forward rate
Closing rate
Historical rate
Question 40
Which of the following business combination expenses would not qualify as a direct acquisition
expense for a purchase?
Question 41
Control is presumed to exist when the parent owns directly or indirectly through subsidiaries
Question 42
In a business combination, the acquiree is the party that:
obtains control of the net assets the other entity pays the acquisition consideration.
gives up control over the net assets acquired finances the business combination
Question 43
Hall, Inc., - enters into a forecasted call option contract with Bennett Investment Co. on January
2, 2016. This contract gives Hall the option to purchase 1,000 shares of Bennett stock at P100
per share. The option expires on April 30, 2016. Bennett shares are trading at P100 per share
on January 2, 2016, at which time Hall pays P100 for the call option.
The call option would be recorded in the accounts of Hall as:
it is a non-current asset. it has a value that can be measured with reliability. it has a
Question 48
S and L owes the Kurt Corporation P6,000 on account, which is secured by accounts receivable
with a book value of P5,000. Its statement of affairs lists the accounts receivable securing the
Kurt account with an estimated realizable value of P4,500. Assume that S and L account is
unsecured. How much can Kurt expect to receive?
4,800
6,000
4,000
Question 49
Which of the following countries is not a member of the Group of Eight
U.S.
Thailand
Japan
Italy
Question 50
A loss from a construction contract shall be fully and immediately recognize under
percentage-of-completion method The cost recovery method Neither the cost recovery
nor percentage-of-completion method
Answers
1. A
2. C
3. A
4. C
5. B
6. D
7. C
8. A
9. C
10. C
11. A
12. B
13. D
SOLUTION:
Under the cost recovery method, equal amounts of revenue and expense are recognized
as collections are made until all costs have been recovered, postponing any recognition
of profit until that time.
14. D
15. C
16. C
17. D
SOLUTION:
An entity need not recognize the contributions of works of art and historical artifacts if the
collection is held for public exhibition rather than financial profit, cared for and preserved
and, if sold, the proceeds are use to acquire other items for collections.
18. A
19. B
20. B
21. B
22. B
23. C
24. B
25. C
26. A
27. C
SOLUTION:
Other Receivables is used to account amount due from all debtors not falling under any
of the specific types of receivables.
28. D
29. B
30. B
SOLUTION:
45. C
46. B
47. D
48. D
49. B
50. A