FAR

Question 1

Which is not a purpose of the Conceptual Framework?

a. To provide definitions of terms and concepts.
b. To provide specific guidelines for resolving situations not covered by existing standards.
c. To assist CPAs in selecting among alternative accounting standards.
d. To assist IASB in the standard setting process

Answer 1

B

Question 2

Which relates to both relevance and faithful representation?
a. Comparability
b. Predictive value
c. Neutrality
d. Free from error

Answer 2

A

Question 3

Reversing entries apply to all of the following, except
a. Unearned revenue
b. Accrued wages
c. Prepaid insurance
d. Depreciation

Answer 3

D

Question 4

Which should not be considered a component of other comprehensive income?
a. Actuarial gain
b. Foreign currency translation loss
c. Revaluation surplus
d. Dividend paid to shareholders

Answer 4

D

Question 5

Which is a characteristic of a change in accounting estimate?
a. It usually need not be disclosed
b. It does not affect financial statements of prior period.
c. It requires restatement of financial statements
d. It requires reporting of proforma amount for prior periods.

Answer 5

B

Question 6

Which is not permitted in accounting for uncollectible accounts receivable?
a. Percentage of accounts receivable
b. Percentage of sales
c. Direct writeoff method
d. Aging of accounts receivable

Answer 6

C

Question 7

Equity investments irrevocably accounted for at FVOCI are
a. Nontrading investments of less than 20%
b. Trading investments of less than 20%
c. Investments between 20% and 50%
d. Investments of more than 50%

Answer 7

A

Question 8

When equity investments are accounted for at fair value, cash dividends received are recorded as
a. Dividend income
b. Addition to investor’s share of the investee’s profit
c. Deduction from investment
d. Either dividend income or deduction from investment

Answer 8

A

Question 9

The actual interest earned by the bondholder is
a. Effective rate
b. Yield rate
c. Market rate
d. Effective rate, yield rate or market rate

Answer 9

D

Question 10

60. Interest revenue on specific borrowing for qualifying asset
    a. Reduces the cost of the asset
    b. Reduces the interest expense to be reported
    c. Increases the cost of the asset
    d. Must be credited to interest income

Answer 10

A

Question 11

What is the discount rate to be used to compute the present value of expected future cash flows from a debt
instrument to determine any expected credit losses?
a. Prevailing market rate of similar debt instruments
b. Original effective rate of the debt instrument
c. New interest rate from agreement between the debtor and creditor
d. Weighted average cost of capital

Answer 11

B

Question 12

Which of the following does not describe the allowance method of recording inventory writedowns?
a. The presence of an allowance account indicates that cost exceeds net realizable value of inventory.
b. Loss on inventory writedown or reversal of such loss is reported separately but part of cost of goods sold.
c. Loss on inventory writedown or reversal of such loss is buried in cost of goods sold.
d. The cumulative loss on inventory writedown is maintained thru an allowance account.

Answer 12

C

Question 13

Under IFRS, the following are classified as biological assets, except
a. Plants with dual use
b. Bearer animals
c. Bearer plants
d. Agricultural produce growing on a bearer plant

Answer 13

C

Question 14

Which statement is incorrect concerning the equity method?
a. The investment in associate is initially recorded at cost.
b. The investor’s share of the profit or loss of the investee after the date of acquisition does not affect the
investment balance
c. The investor’s share of the profit or loss of the investee is recognized in the investor’s profit or loss.
d. Distributions received from the investee are recognized as liquidating dividends by the investor.

Answer 14

B

Question 15

The following are considered investment property except
a. Land to be leased out under a finance lease
b. Building held for undetermined use
c. Building being constructed for use as investment property
d. Land held for capital appreciation

Answer 15

A

Question 16

Repayment of government grant is treated as a
a. Change in accounting policy
b. Change in accounting estimate
c. Correction of error
d. Note disclosure only

Answer 16

B

Question 17

The following are capitalized costs of a building except
a. Architect fee
b. Renovation costs prior to use
c. Property tax incurred after date of acquisition
d. Cost of temporary housing for construction workers

Answer 17

C

Question 17

A noncurrent asset or disposal group is classified as “held for sale”. For the sale to be highly probable, the
sale should qualify for recognition as a completed sale within
a. Six months from the statement of financial position date.
b. Six months from the date of classification as held for sale.
c. One year from the statement of financial position date.
d. One year from the date of classification as held for sale.

Answer 17

D

Question 18

The sum of the reportable segment’s external revenue must be a least equal to what percent of total operating
segment’s external revenue?
a. 100%
b. 75%
c. 50%
d. 65%

Answer 18

B

Question 19

An inventory method which is designed to approximate inventory valuation at the lower of cost or net
realizable value is
a. LIFO
b. FIFO
c. Conventional retail method
d. Specific identification

Answer 19

C

Question 20

The Financial Reporting Standards Council (FRSC) is now renamed to Financial and Sustainability Reporting
Standards Council (FSRSC). Which of the following is true about the FSRSC?
a. To promulgate rules and regulations affecting the practice of accountancy in the Philippines
b. To prepare interpretations of PFRS for approval
c. To establish and improve accounting standards that will be generally accepted in the Philippines
d. To provide timely guidance on financial reporting issues not specifically addressed in current PFRS

Answer 20

C

Question 21

Which of the following is false about the functions of the International Accounting Standards Board (IASB)?
a. To develop a single set of high-quality, understandable and enforcement accounting standards
b. Does not conduct consultation with stakeholders to gather feedback on changes to accounting standards
c. To provide guidance on how to apply IFRS in practice
d. To bring about the convergence of national accounting standards and IFRS

Answer 21

B

Question 22

The Professional Regulation Commission (PRC) upon recommendation of the Board of Accountancy (BOA)
shall issue a Certificate of Registration to practice public accountancy which shall be valid for
a. 3 years only.
b. 3 years and renewable every 5 years.
c. 3 years and renewable every year.
d. 3 years and renewable every 3 years.

Answer 22

D

Question 23

What are the three main areas where Certified Public Accountants practice their profession?
a. Public accounting, private accounting and government accounting
b. Auditing, taxation and management advisory services
c. Public accounting, internal auditing and taxation
d. Controller, internal auditing and management advisory services

Answer 23

A

Question 24

Which of the following violates the concept of faithful representation?
a. Financial statements were issued six months late.
b. Expected risks are not reported.
c. Investments with carrying amount increased to management estimate of market value.
d. Management reports regularly refer to new projects.

Answer 24

C

Question 25

Which of the following statements is / are true?
Statement 1: The measurement bases include current value only.
Statement 2: Current value includes fair value, value in use, fulfillment value and current cost.
Statement 3: Financial capital is defined as net assets in monetary terms.
a. Statement 2 only.
b. Statements 2 and 3.
c. Statement 1 and 2.
d. All statements are true.

Answer 25

B

Question 26

The adjusting entry for depreciation as the same effect as the adjusting entry for
a. Accrued income
b. Unearned income
c. Accrued expense
d. Prepaid expense

Answer 26

D

Question 27

All of the following may be included in cash, except
a. Manager check
b. Customer’s postdated check
c. Checking account balance
d. Petty cash fund

Answer 27

B

Question 28

Which of the following is not included in the summary of significant accounting policies?
a. The depreciation method used for property, plant and equipment
b. Criteria for investments treated as cash equivalents
c. Breakdown of sales attributable to business components
d. Income recognition on long-term construction contracts

Answer 28

C

Question 29

Which of the following is false concerning investment in associate and equity method?
a. An investor shall use the equity method unless it is unable to exercise significant influence.
b. The investment balance changes as a result of the investor’s share in the profit or loss of the investee.
c. The entire carrying amount of the investment in associate is tested for impairment by comparing the
recoverable amount with the carrying amount.
d. If an investee suffers heavy losses, the investor’s share in the loss of the investee is first applied to any
loan or advances to the investee.

Answer 29

D

Question 30

How should an entity calculate the net proceeds to be received from the bond issuance?
a. Discount the bonds at the market rate of interest
b. Discount the bonds at the market rate of interest and deduct bond issue cost
c. Discount the bonds at the stated rate of interest
d. Discount the bonds at the stated rate of interest and deduct bond issue cost

Answer 30

B

Question 31

On January 1, 2023, an entity paid in total a premium on a three – year insurance policy expiring on December
31, 2025. The entity has a six-month operating cycle. On December 31, 2023, the prepaid insurance to be
reported as a current asset would be for
a. Six months
b. Twelve months
c. Eighteen months
d. Twenty-four months

Answer 31

B

Question 32

Debt issue cost
a. Is included in the measurement of debt measured at fair value through profit or loss
b. Will effectively decrease the market rate of interest
c. Will effectively increase the market rate of interest
d. Is amortized using the straight line method over the life of the bonds

Answer 32

C

Question 33

The nonredemption of gift certificates is called
a. Waiver
b. Breakage
c. Forfeiture
d. Rebate

Answer 33

B

Question 34

Disclosure usually is not required for
a. Contingent loss that is probable and not measurable
b. Contingent gain that is probable and measurable
c. Contingent loss that is remote and measurable
d. Contingent loss that is possible and measurable

Answer 34

C

Question 35

Which of the following statements is / are true about share capital and share issue costs?
Statement 1: If shares are issued for noncash consideration, they shall be measured by fair value of shares.
Statement 2: If shares are issued at par, any share issue costs incurred is debited to “Share Issuance Cost”,
which is an expense.
Statement 3: The share capital account is measured by the shares issued multiplied by the par value.
a. Statements 1 and 3 are true.
b. Statement 3 is true.
c. Statements 1 and 2 are true.
d. Statements 2 is true.

Answer 35

B

Question 36

Which of the following is not a component of other comprehensive income?
a. Foreign currency translation adjustment
b. Change in fair value of financial asset held for trading
c. Deferred loss on derivative financial instruments designated as a cash flow hedge
d. Change in revaluation surplus

Answer 36

B

Question 37

58. Which of the following statements is / are false?
    Statement 1: The right of use asset shall be reported as a separate line item under current assets.
    Statement 2: The lease liability shall be presented as partly current liability and partly noncurrent liability.
    Statement 3: The lessee is exempted from using the finance lease model if the lease is short-term only.
    a. All statements are false.
    b. Statements 2 and 3 are false.
    c. Statement 2 is false.
    d. Statements 1 and 3 are false.

Answer 37

D

Question 38

The approach used in segment reporting is known as
a. Segment approach
b. Enterprise approach
c. Revenue approach
d. Management approach

Answer 38

D

Question 39

Which of the following is true regarding full PFRS and PFRS for Small Entities?
a. Under both full PFRS and PFRS for Small Entities, the lessee shall apply the finance lease model.
b. Under both full PFRS and PFRS for Small Entities, the revaluation model may be used as an accounting
policy for property, plant and equipment.
c. Under both full PFRS and PFRS for Small Entities, investment properties shall be measured either using
the cost model or fair value model.
d. Under both full PFRS and PFRS for Small Entities, a statement of comprehensive income shall be
presented.

Answer 39

C

Question 40

Under SEC ruling, what reporting framework should micro entities use to prepare financial statements?
a. Full PFRS
b. PFRS for SMEs
c. PFRS for Small Entities or Income Tax Basis
d. None of the above

Answer 40

C