Bulacan State University, Malolos

ACCTG MISC

1)MAE should report “Total noncurrent liabilities” in the face of its statement of financial position as a.   Php 5,000,000                                                                                                        c. Php 5,120,000

b.   Php 6,000,000                                                                    d.    Php 6,120,000

 

2. MAE should report “Total shareholders’ equity” in the face of its statement of financial position as a.   Php 6,000,000                                                                                c.     Php 5,900,000

b.   Php 5,800,000                                                                    d.    Php 5,700,000

 

MJ Company provided the following information for the year 2019:

Income tax expense	320,000
Raw Materials – Jan 1	200,000
Goods in process – Jan 1	240,000
Finished goods – Jan 1	360,000
Raw Materials – Dec 31	280,000
Goods in process – Dec 31	170,000
Finished goods – Dec 31	300,000
Sales	7,500,000
Gain from expropriation of asset	100,000
Earthquake loss	300,000
Office expenses	250,000
Accounting and legal fees	150,000
Delivery expenses	200,000
Gain on sale of equipment	100,000
Interest income	10,000
Sales returns and allowances	50,000
Depreciation – machineries	60,000
Depreciation – store equipment	70,000
Depreciation – office equipment	40,000
Office salaries	150,000
Advertising	160,000
Sales salaries	400,000
Factory supplies used	110,000
Repairs and maintenance – machinery	50,000
Rent – factory building	120,000
Light, heat and power	320,000
Superintendence	210,000
Indirect labor	250,000
Direct labor	950,000
Purchases	3,000,000

3. Under “Cost of goods sold” method, “Net sales revenue” of JM Company to be reported in its Income Statement is

a.   Php 7,500,000                                                                                    c.    Php 7,710,000

b.   Php 7,450,000                                                                                    d.    Php 7,660,000

 

4. Under “Cost of goods sold” method, “Cost of goods sold” of JM Company to be reported in its Income Statement is

a.   Php 5,230,000                                                                                    c.    Php 5,060,000

b.   Php 5,420,000                                                                                    d.    Php 5,120,000

 

5. Under “Cost of goods sold” method, “Distribution costs” of JM Company to be reported in its Income Statement is

a.   Php 830,000                                                                                        c.    Php 870,000

b.   Php 980,000                                                                                        d.    Php 910,000

 

6. Under “Nature of expense” method, “Total income” of JM Company to be reported in its Income Statement is

a.   Php 7,450,000                                                                                    c.    Php 7,500,000

b.   Php 7,660,000                                                                                    d.    Php 7,710,000

 

7. “Net income” of JM Company is Php 500,000 in what method of presentation of Income Statement?
   1. Nature of expense method                                                        c.     a and b
   2. Cost of goods sold method                                                     d. neither a nor b

 

8. Which of the following would represent the least likely use of an income statement?
   1. Use by investor interested in financial position
   2. Use by labor unions to examine earnings closely as a basis for salary discussions
   3. Use by customers to determine an entity’s ability to provide needed goods and services
   4. Use by government to formulate tax policy

 

9. Investor and creditors use income statement for all of the following, except
   1. To evaluate past performance of an entity
   2. To provide basis for predicting future performance
   3. To help assess the risk and uncertainty of achieving future cash flows
   4. To evaluate the future performance of an entity

 

10. Which of the following changes during a period is not a component of other comprehensive income?
    1. Unrealized gain on equity instrument measured at fair value through other comprehensive income
    2. Actuarial gain on defined benefit plan
    3. Foreign currency translation adjustment
    4. Treasury share

 

11. S1. Information about the cash flows of an entity is useful in providing users of financial statements with a basis to assess the ability of the entity to generate cash and cash equivalents and the needs of the entity to utilize those cash flows.

S2. The objective of IAS 7 is to require the provision of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows which classifies cash flows during the period from operating, investing and financing activities.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.   False, False

 

12. S1. Statement of cash flows provides information about cash receipts and cash payments of an entity during a period.

S2. A statement of cash flows, when used in conjunction with the rest of the financial statements, provides information that enables users to evaluate the changes in net assets of an entity.

12. 1. True, True                                                           c.     False, True
    2. True, False                                                      d.   False, False
13. S1. Investing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.

S2. Financing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.    False, False

14. The following are cash flows from operating activities, except
    1. Cash payments to acquire equity instruments of other entity
    2. Cash receipts for securities held for trading
    3. Cash receipts from royalties, rental fees, commissions and other revenue
    4. Cash payments for salaries and wages of production workers

 

15. The following are cash flows from investing activities, except
    1. Cash proceeds from sale of land not intended for use and reported as investment property
    2. Advances to other parties other than advances made by construction company
    3. Cash payments for acquiring tools
    4. Cash used to acquire treasury shares

 

16. The following are cash flows from financing activities, except
    1. Cash proceeds from issuing ordinary shares
    2. Cash receipts from issuing bonds
    3. Cash payments for settling mortgages
    4. Cash payments for royalties

 

17. Which of the following is a noncash transaction?
    1. Issuing share capital in exchange of previously issued bonds
    2. Reduction to lease payable by issuance and paying cheque
    3. Usage of petty cash fund for postage stamps
    4.  

Dividend received 500,000 Dividend paid 1,000,000 Cash received from customers 10,000,000 Cash received from the sale of building 800,000 Proceeds from issuing share capital 1,500,000 Interest received 200,000 Proceeds from sale of long-term investments 2,000,000 Cash paid to suppliers and employees 6,000,000 Interest paid on long-term debt 400,000 Income taxes paid 300,000 Cash payment to purchase land 800,000 Cash balance, January 1 1,800,000

Electronic bank transfer for settlement of previously acquired equipment MAE Company provided the following information during the current year:

 

 

 

 

 

 

 

 

 

 

 

 

18. What is the net cash provided by operating activities?

a.   4,300,000                                                                             c.   3,700,000

b.   4,000,000                                                                             d.   3,000,000

 

19. What is the net cash provided by investing activities?

a.   2,500,000                                                                             c.    2,000,000

b.   2,200,000                                                                             d.                0

 

20. What is the net cash provided by financing activities?

a.   1,500,000                                                                             c.       500,000

b.   1,000,000                                                                             d.               0

 

21. What is the cash balance on December 31?

a.    8,300,000                                                                             c.   6,500,000

b.   7,300,000                                                                             d.    5,800,000

 

22. Under PAS 7, the dividend received from share investments can be classified as
    1. Operating activity only                                   c.     Either operating or financing activity
    2. Financing activity only                                d.    Either operating or investing activity

 

23. Under Pas 7, an entity can report interest paid on bank loan in the statement of cash flows
    1. Either in operating or investing activity c.    In financing activity
    2. Either in operating or financing activity d. In operating activity

24. Which classification of the cash flow arising from the proceeds of flash flood calamity settlement would be most appropriate?
    1. Operating activities                                         c. Financing activities
    2. Investing activities                                      d.   Does not appear in the statement of cash flows

 

25. S1. Unrealized gains and losses arising from changes in foreign currency exchange rates are not cash flows.

S2. The effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency is reported in the statement of cash flows in order to reconcile cash and cash equivalents at the beginning and the end of the period.

1. 1. True, True                                                           c.     False, True
   2. True, False                                                      d.   False, False

 

26. S1. It is optional for an entity to outline all significant accounting policies applied in preparing financial statements.

S2. An entity that does not apply the same accounting policies, generally, does not achieve comparability of financial statement.

1. 1. True, True                                                           c.     False, True
   2. True, False                                                      d.   False, False

 

27. An entity is permitted to change an accounting policy only if the change:

1. is required by a standard or interpretation
2. results in the financial statements providing profitable and feasible operation, other events or conditions on the entity’s financial statements
3. results in the financial statements providing more relevant and reliable information about the effects of transactions, other events or conditions on the entity’s financial position, performance or cash flows
   1. I only                                                                     c. I and III only
   2. I and II only                                                    d.   I, II and III

 

28. When a standard or an Interpretation specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item must be determined by applying the Standard or Interpretation and considering any relevant Implementation Guidance issued by the FRSC for the Standard or Interpretation.

In the absence of a Standard or an Interpretation that specifically applies to a transaction, other event or condition, management must use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgment, the management must refer to, and consider the applicability of the following sources:

1. the requirements and guidance in FRSC standards and interpretations dealing with similar and related issues
2. the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Conceptual Framework
3. the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature and accepted industry practices

The order of the aforementioned application should be

1. 1. I before II (III may consider)                        c.      I and II simultaneously (III may consider)
   2. II before I (III may consider)                   d.      I and II interchangeably (III may consider)

 

29. The following are changes in accounting policy, except
    1. Change from PFRS for SMEs to Full PFRS reporting.
    2. Change in the method of inventory valuation from LIFO to FIFO.
    3. Change in depreciation pattern of office equipment, from straight line method to double declining balance method.
    4. Initial adoption with revaluation of carrying amount of assets.

30. The following are disclosures relating to changes in accounting policy caused by a new standard or interpretation:

1. the title of the standard or interpretation causing the change
2. the nature of the change in accounting policy
3. a description of the transitional provisions, including those that might have an effect on future periods
4. for the current period and each prior period presented, to the extent practicable, the amount of the adjustment for each financial statement line item affected, and for basic and diluted earnings per share (only if the entity is applying IAS 33)
5. the amount of the adjustment relating to periods before those presented, to the extent practicable
6. if retrospective application is impracticable, an explanation and description of how the change in accounting policy was applied.
   1. I, II, III, IV, V and VI                                                         c.     I, II, III and IV only
   2. I, II, III, IV and V only                                                  d. I, II and III only

 

31. S1. A change in accounting estimate is an adjustment of the carrying amount of an asset or liability, or related expense, resulting from reassessing the expected future benefits and obligations associated with that asset or liability.

S2. A change in accounting estimate is a normal recurring or adjustment of an asset or liability which is the natural result of the use of an estimate.

1. 1. True, True                                                           c.     False, True
   2. True, False                                                      d.   False, False

 

32. The effect of a change in an accounting estimate shall be recognized currently and prospectively by including it in profit or loss in:

1. the period of the change, if the change affects the period only
2. the period of the change and future periods, if the change affects both.
   1. I and II                                                                  c.   II only
   2. I only                                                                 d.    neither I nor II

 

33. S1. Prospective application means that any resulting adjustment from the change in accounting policy shall be reported as an adjustment to the opening balance of retained earnings.

S2. Retrospective application means that the change is applied to transactions, other events and conditions from the date of change in estimate.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.    False, False

 

34. Provided are the disclosures relating to changes in accounting estimates:

1. the nature and amount of a change in an accounting estimate that has an effect in the current period or is expected to have an effect in future periods
2. if the amount of the effect in future periods is not disclosed because estimating it is impracticable, an entity shall disclose that fact
   1. I only                                                                     c. I and II
   2. II only                                                               d. neither I nor II

 

35. S1. The general principle in IAS 8 is that an entity must correct all material prior period errors retrospectively in the first set of financial statements authorized for issue after their discovery by restating the comparative amounts for the prior period(s) presented in which the error occurred.

S2. The general principle in IAS 8 is that an entity must correct all material prior period errors retrospectively in the first set of financial statements authorized for issue after their discovery by restating the opening balances of assets, liabilities and equity for the earliest prior period presented if the error occurred before the earliest prior period presented.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.   False, False

 

36. The objectives of PAS 10 – Events after the Reporting Period is to prescribe

1. when an entity should adjust its financial statements for events after the reporting period
2. the disclosures that an entity should give about the date when the financial statements were authorized for issue and about events after the reporting period
3. an entity should not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate
   1. I only                                                                     c. I and III only
   2. I and II only                                                    d. I, II and III

37. S1. Nonadjusting events after the reporting period are those that provide evidence of conditions that exist at the end of reporting period.

S2. Adjusting events after the reporting period are those that are indicative of conditions that arise after the end of reporting period.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.    False, False

 

38. An event, which could be favorable or unfavorable, that occurs between the end of the reporting period and the date that the financial statements are authorized for issue.
    1. Events during the reporting period          c.      Subsequent events
    2. Events before the reporting period     d.     Fortuitous events

 

39. Non-adjusting events should be disclosed if they are of such importance that non-disclosure would affect the ability of users to make proper evaluations and decisions. The required disclosure is/are
    1. the nature of the event
    2. an estimate of its financial effect or a statement that a reasonable estimate of the effect cannot be made
    3. a and b are required disclosures
    4. a and b are not required disclosures

 

40. Adjusting events exclude all, except
    1. the receipt of information after the reporting period indicating that an asset was impaired at the end of the reporting period, or that the amount of a previously recognized impairment loss for that asset needs to be adjusted
    2. a major business combination after the reporting period or disposing of a major subsidiary
    3. major ordinary share transactions and potential ordinary share transactions after the reporting period
    4. entering into significant commitments or contingent liabilities

 

41. Nonadjusting events exclude all, except
    1. commencing major litigation arising solely out of events that occurred after the reporting period
    2. the determination after the reporting period of the amount of profit-sharing or bonus payments, if the entity had a present legal or constructive obligation at the end of the reporting period to make such payments as a result of events before that date
    3. the sale of inventories after the reporting period may give evidence about their net realizable value at the end of the reporting period
    4. the bankruptcy of a customer that occurs after the reporting period usually confirms that the customer was credit-impaired at the end of the reporting period

 

42. S1. An entity shall prepare its financial statements on a going concern basis if management determines after the reporting period either that it intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so.

S2. An entity shall disclose the date when the financial statements were authorized for issue and who gave that authorization.

1. 1. True, True                                                           c.     False, True
   2. True, False                                                      d.   False, False

 

43. A statement of financial position as at the beginning of the earliest comparative period should prepare by an entity in any of the following circumstances, except when an entity
    1. applies an accounting policy retrospectively
    2. reclassifies items in the financial statements
    3. changes in any of its estimates used in accounting
    4. makes retrospective restatement of items in the financial statements

 

44. Significant changes in the market value of trading securities occurring after the balance sheet date should
    1. be treated as a prior period error in next year’s financial statement
    2. result in an adjustment of the market value used in the lower of cost or market valuation at balance sheet date
    3. be considered in the valuation of the securities at the balance sheet date and disclosed in the notes to financial statements
    4. not be considered in the valuation of the securities at balance sheet date but disclosed in the notes to financial statements

45. PAS 10 covers adjusting and nonadjusting events after the reporting period up to
    1. date of financial statements publication.
    2. date of authorization to issue financial statements.
    3. date when financial statements are filed with the regulator.
    4. date when financial statements are approved by shareholders.

 

46. MAE Company had used the weighted method of inventory valuation since it began operations in 2016. The entity decided to change to specific identification method for measuring inventory at the beginning of 2018.

The following schedule shows year-end inventory balances.

YEAR	Weighted Average	Specific Identification
2016	3,400,000	4,300,000
2017	6,700,000	6,000,000
2018	7,200,000	6,700,000

 

What pretax amount should be reported in the statement of retained earnings for 2018 as the cumulative effect of the change in accounting policy?

1. 1. 500,000 decrease                                                             c.       900,000 increase
   2. 700,000 decrease                                                         d. 1,200,000 decrease

 

47. Using the information from the preceding number, what pretax amount should be reported in the statement of retained earnings for 2019 as the cumulative effect of the change in accounting policy, if the entity decided to change its accounting policy at the beginning of 2019?
    1. 500,000 decrease                                                             c.       900,000 increase
    2. 700,000 decrease                                                         d. 1,200,000 decrease

 

48. Using the information from the preceding number, the following events were reported by MAE Company during 2019:

• It was decided to write off 1,000,000 from inventory which was over two years old as it was obsolete.
• Sales invoice No. 0713 had been omitted from the financial statements for the year ended December 31, 2017, amounting to 500,000

Aside from the change in measuring inventory (weighted average to specific identification), what amount should be also reported as prior period error in the financial statements for the year ended December 31, 2019?

1. 1. 1,000,000 decrease                                                         c.   500,000 increase
   2. 500,000 decrease                                                          d. no other amount should be reported

 

49. Using the information from the preceding number, how much is the net effect of the events occurred to the retained earnings
    1. 1,000,000 decrease                                                         c. 500,000 increase
    2. 500,000 decrease                                                          d.             0

 

 

 

50. MJ Company purchased a machine on January 1, 2015 for 5,000,000. At the date of acquisition, the machine had a life of five years with no residual value. The machine was depreciated on a straight- line basis.

On January 1, 2018, the entity determined that the machine had a useful life of seven years from the date of acquisition.

 

What is the balance of accumulated depreciation on January 1, 2019? a.                     0                                                                                c. 2,500,000

b.   500,000                                                                                 d. 3,500,000

 

51. In 2019, a firm changed from the FIFO method of accounting for inventory to weighted average. The firm’s 2019 and 2018 comparative financial statements will reflect which method or methods?
    1. 2018: FIFO, 2019: FIFO                                    c. 2018: Weighted Average, 2019: FIFO
    2. 2018: FIFO, 2019: Weighted Average   d.    2018: Weighted Average, 2019: Weighted Average

52. In 2019, a firm changed from the straight-line (SL) method of depreciation to double-declining method (DDB). The firm’s 2019 and 2018 comparative financial statements will reflect which method or methods?

a.    2018: SL, 2019: SL                                              c.      2018: DDB, 2019: DDB

b.   2018: SL, 2019: DDB                                         d.   2018: SL, 2019: either SL or DDB

 

53. A company has included in its consolidated financial statement this year a subsidiary acquired several years ago that was appropriately excluded from consolidated last year. This results in
    1. a correction of error.
    2. neither an accounting change nor a correction of an error.
    3. an accounting change that should be reported prospectively.
    4. an accounting change that should be reported by restating the financial statements of all prior periods presente

 

54. The following do not fall within the definition of “related parties” as defined by PAS 24, except
    1. Government department and agencies.
    2. The wife of a key management personnel who has the authority to plan, direct, and control the activities of the reporting enterprise.
    3. A supplier with whom the reporting entity has a one-year contract for the supply of raw materials.
    4. Providers of finance in the course of their normal dealings with an enterprise by virtue only of those dealings.

 

55. According to PAS 24, all of the following are necessarily considered related parties of JMS Company, except
    1. An associate of JMS Company
    2. Key management personnel of JMS Company
    3. An entity providing banking facilities to JMS Company
    4. BS, a shareholder of JMS Company owning 45% of the ordinary share capital

 

56. Which of the following situations will require disclosures as a related party?
    1. In consolidated financial statements in respect to intra-group transactions.
    2. In parent, separate financial statements when they are made available or published with consolidated financial statements.
    3. In the financial statements of state-controlled enterprise of transactions with other state- controlled enterprises.
    4. In related party relationships where control exists, irrespective of whether there have been transactions between related parties.

 

57. S1. Relationships between a parent and its subsidiaries shall be disclosed only of there are transactions between them.

S2. An entity shall disclose the name of its parent and, if different, the ultimate controlling party.

1. 1. True, True                                                           c.     False, True
   2. True, False                                                      d.   False, False

 

58. S1. Based on PAS 24, items of similar nature may be disclosed in aggregate except when separate disclosure is necessary for an understanding of the effects of related-party transactions on the financial statements of the entity.

S2. Disclosures that related-party transactions were made on terms equivalent to those that prevail in arm’s length transactions are made only if such terms can be sustained.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.   False, False

 

59. If an entity publishes a complete set of financial statements in its interim financial report, the form and content of those statements should conform to
    1. PAS 34                                                                  c.     PAS 1
    2. PAS 27                                                              d. PFRS 10

 

60. The interim financial report is intended to
    1. provide an update on the latest complete set of annual financial statements
    2. correct error discovered subsequent to the release of the financial statements
    3. provide additional information not disclosed previously in the annual financial statements
    4. provide information that are requested by the investors in relation to a planned initial public offering

61. Conceptually, interim financial statements can be described an emphasizing
    1. comparability over neutrality                      c. reliability over understandability
    2. relevance over comparability                 d.    timeliness over reliability

 

62. it is the approach of looking into an entity’s organization and management structure and its interim financial reporting system to identify the business and geographical segment to external reporting purposes.
    1. Entity approach                                                c. Organizational approach
    2. Management approach                            d. Scientific approach

 

63. PAS 34 states a presumption that anyone reading interim financial reports will
    1. have access to the records of the entity.
    2. not make decisions based on the reports.
    3. have access to the most recent annual report.
    4. understand all Philippine Financial Reporting Standards.

 

64. JMS Inc. owns a number of farms that harvest produce seasonally. Approximately 80% of the entity’s sales are in the period August to October. Because the entity’s business is seasonal, PAS 34 suggest
    1. no additional disclosure.
    2. additional disclosure in the accounting policy note.
    3. additional disclosure in the notes about seasonal nature of the business.
    4. disclosure of the seasonal nature of the business and disclosure of financial information for the latest and comparative 12-month period in addition to the interim report.

 

65. S1. Interim financial report means a financial report containing either a complete set of financial statements or a set of condensed financial statements for an interim period.

S2. 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.

S3. An entity shall apply different accounting policies in its interim financial statements and in its annual financial statements.

1. 1. True, True, True                                               c.   True, False, False
   2. True, True, False                                          d.    False, True, False

 

66. According to PAS 29, characteristics of the economic environment of a country which indicate the existence of hyperinflation include:

1. the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power
2. the general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency
3. sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short
4. interest rates, wages, and prices are linked to a price index
5. the cumulative inflation rate over three years approaches, or exceeds, 100%
   1. I or II only                                                            c.   I, II, III or IV only
   2. I, II or III only                                                 d.   I, II, III, IV or V

 

67. S1. Intelligent judgment may be used in determining whether restatement of financial statement is required.

S2. PAS 29 established an absolute rate at which hyperinflation will be deemed to arise.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.   False, False

 

68. Given a hyperinflationary economy under PAS 29, which price index is used in restating financial statements and measuring inflation? (Legend: GPI – General Price Index; CPI – Consumer Price Index)

A.                         B.			C.	D.
Restating Financial Statements Measuring Inflation	GPI GPI	GPI CPI	CPI GPI	CPI CPI

69. Money loses purchasing power at such a rate that comparison of amounts from transactions and events that have occurred at different times, even within the same accounting period is misleading.

This financial accounting problem is addressed through

1. 1. Fair value accounting                                      c.     Price-level accounting
   2. Peso accounting                                           d.    Revaluation of property

 

70. Under PAS 29, the financial statements of an entity that reports in the currency of a hyperinflationary economy are stated in terms of
    1. Current cost                                                       c.   lower of cost or market value
    2. Historical cost                                                d. measuring unit current at the balance sheet date

 

71. A company should disclose information about the effects of changing prices in a hyperinflationary economy
    1. in the body of the financial statements
    2. in the notes to the financial statements
    3. in the management’s report to shareholders
    4. as a supplementary information to the financial statements

 

72. The following statements are based on PAS 29

S1. The financial statements of an entity whose functional current is the currency of a hyperinflationary economy shall be stated in terms of measuring unit current at the end of the reporting period (balance sheet date).

S2. The gain or loss on the net monetary position shall be included in profit or loss and separately disclosed.

S3. When an economy ceases to be hyperinflationary, an entity shall treat the amount expressed in the measuring unit current at the end of the reporting period as the basis for carrying amounts in the subsequent financial statements.

1. 1. True, True, True                                                               c. True, False, False
   2. True, True, False                                          d.   False, True, False

 

73. Upon first time adoption of PFRS, an entity may elect to use fair value as deemed cost for
    1. financial liability not held for trading
    2. intangible asset for which there is no active market
    3. any individual item of property, plant and equipment
    4. biological asset related to agricultural activity for which there is no active market

 

74. Under PFRS 1, how should a first-time adopter of PFRS recognize the adjustments required to present the opening PFRS statement of financial position?
    1. All of the adjustments should be recognized in profit or loss
    2. All of the adjustments should be recognized directly in retained earnings or, if appropriate, in another category of equity.
    3. Current adjustments should be recognized in profit or loss and noncurrent adjustments should be recognized in retained earnings
    4. Adjustments that are capital in nature should be recognized in retained earnings and adjustments that are revenue in nature should be recognized in profit or loss.

 

75. JMS Corporation is a first-time adopter of PFRS. The most recent financial statements it presented under previous GAAP were on December 31, 2018. JMS adopted PFRS for the first time and intended to present the first PFRS financial statements on December 31, 2019. The entity plans to present a two-year comparative information for years 2018 and 2017. The opening PFRS statement of financial position should be prepared on
    1. January 1, 2017                                                 c.    January 1, 2019
    2. January 1, 2018                                             d.    January 1, 2020

 

76. Which is the correct order of the following steps in the accounting cycle?

1. Preparation of Financial Statements
2. Making closing entries in the general journal
3. Posting transaction entries in the general ledger
4. Making reversing entries in the general journal
   1. II, III, IV, I                                                             c.    III, I, II, IV
   2. II, IV, III, I                                                        d.    III, I, IV, II

77. A voucher system is usually used for transactions involving
    1. Cash disbursements                                       c.     Cash receipts and disbursements
    2. Cash receipts                                                 d.    Purchase on account

 

78. The double-entry concept in accounting means which of the following?
    1. The debit-credit convention must be used
    2. Only two accounts are affected by each transaction recording
    3. At least two accounts are affected by each transaction recorded
    4. For every asset increased, a revenue or liability must also be increase

 

79. Which of the following errors will probably be disclosed by the preparation of a trial balance (would cause it to be out of balance)?
    1. Failure to post part of a journal
    2. Failure to post an entire journal entry (nothing is posted)
    3. Failure to record an entry in the journal (nothing is entered)
    4. Posting the debit of a journal entry as a credit, and the credit as debit

 

80. The effect of closing entries is to
    1. Change assets
    2. Change liabilities
    3. Change retained earnings
    4. Change debit balances of all accounts into credits and vice-versa

 

81. S1. An entity may be a first-time adopter if, in the preceding year, it prepared PFRS financial statements for internal management use, as long as those PFRS financial statements were not made available to owners or external parties such as investors or creditors.

S2. If a set of PFRS financial statements was, for any reason, made available to owners or external parties in the preceding year, then the entity will be considered to be on PFRSs, and PFRS 1 will be applied.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.   False, False

 

82. An entity can be a first-time adopter if, in the preceding year, its financial statements:

1. Asserted compliance with some but not all PFRSs
2. Compliance with both previous GAAP and PFRSs (Previous GAAP means the GAAP that an entity followed immediately before adopting to PFRSs.)
3. Compliance with PFRSs even if the auditor's report contained a qualification with respect to conformity with PFRSs.
4. Included only a reconciliation of selected figures from previous GAAP to PFRSs.
   1. I or II only                                                            c.   III or IV only
   2. II or III only                                                     d.   I or IV only

 

83. The following are requirement of PFRS 1 as disclosures that explain how the transition from previous GAAP to PFRS affected the entity's reported financial position, financial performance and cash flows, except,
    1. reconciliations of equity reported under previous GAAP to equity under PFRS both (a) at the date of transition to PFRSs and (b) the end of the last annual period reported under the previous GAAP
    2. explanation of immaterial adjustments that were made, in adopting IFRSs for the first time, to the statement of financial position, statement of comprehensive income and statement of cash flows (the latter if presented under previous GAAP)
    3. if the entity recognized or reversed any impairment losses in preparing its opening IFRS statement of financial position
    4. appropriate explanations if the entity has elected to apply any of the specific recognition and measurement exemptions permitted under PFRS 1 – for instance, if it used fair values as deemed cost

84. Under PFRS 1, how should a first-time adopter of PFRS recognize the adjustments required to present opening PFRS statement of financial position?
    1. All of adjustment should be recognized in profit or loss.
    2. All of the adjustments should be recognized directly in retained earnings or, if appropriate, in another category of equity.
    3. Current adjustments should be recognized in profit or loss and noncurrent adjustments should be recognized in retained earnings.
    4. Adjustments that are capital in nature should be recognized in retained earnings and adjustments that are revenue in nature should be recognized in profit or loss.

 

85. Upon first time adoption of PFRS, an entity may elect to use fair value as deemed cost for
    1. Financial liability not held trading
    2. Intangible asset for which there is no market
    3. Any individual item of property, plant and equipment
    4. Biological asset related to agricultural activity for which there is no active market

 

86. An operating segment is a component of an entity:

1. That engages in business activity from which it may earn revenue and incur expenses, including revenue and expenses relating to transactions with other components of the same entity
2. Whose operating results are regularly reviewed by the entity’s chief operating decision maker
3. For which discrete financial information is available
4. May engage in business activity which it has yet to earn revenue
   1. I or II only                                                            c.   I, III or IV only
   2. I, II or III only                                                 d.    I, II, III or IV

 

87. S1. Segment reporting shall apply to the separate or individual financial of an entity and to the consolidated financial statements of a group with a parent whose debt or equity instruments are not traded in a public market.

S2. The purpose of segment reporting is to enable investors and users make better assessment of each business activity leading to understanding of the position of the entity as a whole.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.    False, False

 

88. S1. Chief operating decision maker’s function is to allocate resources to the segments and asses their performance.

S2. Operating segments are identified based on the components of the entity that are considered to be important for internal management reporting purposes.

1. 1. True, True                                                           c.   False, True
   2. True, False                                                      d.   False, False

 

89. The following are not “quantitative thresholds” of identifying an operating segment, except

1. The segment revenue, including both sales to external customers and intersegment sales or transfers, is 10% or more of the combined revenue, internal and external, of all operating segments.
2. The absolute amount of profit or loss is 10% or more of the greater in absolute amount of combined profit of all operating segments that reported a profit or combined loss of all operating that reported a loss
3. The assets of the segment are 10% or more of the combined assets of all operating segments
   1. I and II only                                                         c.   I and III only
   2. II and III only                                                  d.    I, II and III

 

90. The following statements are incorrect concerning the 75% overall size test for reportable segments, except

1. The total external revenue of all reportable segments is 75% or more of the entity’s external revenue
2. The total external and internal revenue of all reportable segments is 75% or more of the entity’s external revenue
3. The total external revenue of all reportable segments is 75% or more of the entity’s external and internal revenue
4. The total internal revenue of all reportable segments is 75% or more of the entity’s internal revenue
   1. I only                                                                     c.     I and III only
   2. I and II only                                                    d.   I and IV only

91. S1. Under PFRS 8, there is no precise limit as to number of reportable segments are to be determined and disclosed.

S2. PFRS 8 suggests that if the number of reportable segments exceeds five but less than ten, it is likely the information may be too detailed and consequently lose its usefulness

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.   False, False

 

92. S1. Two or more operating segments may be aggregated even if they have dissimilar nature of product or service

S2. An entity may combine information about operating segments that do not meet the 75% thresholds even if the operating segments have dissimilar economic characteristic and share a majority of the aggregation criteria

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.   False, False

 

93. According PFRS 8, the entity shall not disclose the following except,

1. General information about the operating segment
2. Information about segment profit or loss, including revenue and expenses included in profit or loss, segment assets and segment liabilities
3. Reconciliations of the totals of segment revenue, profit or loss, segment assets, segment liabilities and other material segment items to corresponding items in the entity’s financial statements.
   1. I only                                                                     c. I and III only
   2. I and II only                                                    d.   I, II and III

 

94. S1. Under PFRS 8, an entity disclosed factors used to identify reportable segments including the basis of organization is a general information

S2. Types of products and services from which each reportable segment derives its revenue should be disclosed as information about segment profit or loss according to PFRS 8.

1. 1. True, True                                                           c. False, True
   2. True, False                                                      d.   False, False

 

95. Under PFRS 8, the entity shall provide all of the following reconciliations, except
    1. The total for all item of information, whether material or not, disclosed by the reportable segments to the corresponding amount for the entity
    2. The total assets and liabilities of all reportable segments to the entity’s respective total assets and liabilities
    3. The total revenue for all reportable segments to the entity revenue
    4. The total profit or loss of all reportable segments to the entity profit or loss before income tax expense and discontinued operations

 

96. Entity-wide disclosures include all, except
    1. Information about major customers
    2. Information about intersegment sales
    3. Information about products and services
    4. Information about geographical areas

 

97. Under PFRS 8, an entity shall disclose the following geographical information, except,
    1. Revenue from external customers in the entity’s country of domicile, and in all foreign operations in total
    2. Current assets located in the entity’s country of domicile and in all foreign countries in total
    3. Separate disclosures of material revenue from external customers in an individual foreign country
    4. The basis for attributing revenue from external customers to individual countries.

 

98. S1. A major customer is defined as a single internal customer providing revenue which amounts to 10% or more of an entity’s internal revenue

S2. The major customer disclosure means that an entity shall provide information about the extent of reliance on the major customers

1. 1. True, True                                                           c.     False, True
   2. True, False                                                      d.   False, False