IA Flashcards by notpearl abare

Biological assets

a. Are found only in Biotech entities.
b. Are living animals or living plants and must be disclosed as a separate line item in the statement of financial position.
c. Must be measured at cost.
d. Do not generally have future economic benefit.

b. Are living animals or living plants and must be disclosed as a separate line item in the statement of financial position.

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It is the management by an entity of the biological transformation and harvest of biological asset for sale or for conversion into agricultural produce or into additional biological asset.
a. Agricultural activity
b. Biological activity
c. Economic activity
d. Development activity

Agricultural activity

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Biological transformation results from asset changes through all of the following, except

a. Growth
b. Degeneration
c. Procreation
d. Production of agricultural produce

Production of agricultural produce

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Agricultural activity results in which of the following type of asset?

a. Biological asset
b. Agricultural produce
c. Biological asset and agricultural produce
d. Neither biological asset nor agricultural produce

Biological asset and agricultural produce

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Agricultural activity includes all of the following, except

a. Raising livestock
b. Perennial cropping
c. Aquaculture
d. Ocean fishing

Ocean fishing

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Which statement is true about biological assets?

a. Biological assets are measured at fair value less cost of disposal. b. When fair value cannot be determined reliably, the biological asset shall be measured at cost less accumulated depreciation and impairment.
c. There is a rebuttable presumption that the fair value of biological asset can be measured reliably.
d. All of these statements are true about biological assets.

All of these statements are true about biological assets.

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Agricultural produce is

a. The harvested product from biological asset.
b. Measured at the time of harvest at the cost of production.
c. Measured at each reporting period at fair value less cost of disposal.
d. All of the choices are correct regarding agricultural produce.

The harvested product from biological asset.

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Agricultural produce as it grows on bearer plant is measured at the end of each reporting period prior to harvest at

a. Fair value
b. Fair value less cost of disposal
c. Fair value plus cost of disposal
d. Fair value less cost of disposal at the point of harvest

Fair value less cost of disposal

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Agricultural produce harvested from bearer plant is measured at

a. Fair value
b. Fair value less cost of disposal at the point of harvest
c. Cost of production less cost of disposal
d. Fair value plus cost of disposal at the point of harvest

Fair value less cost of disposal at the point of harvest

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The harvested agricultural produce is

a. Accounted for as inventory
b. Initially recognized at fair value less cost of disposal at the point of harvest.
c. Recorded as gain from change in fair value of agricultural produce.
d. All of these are correct about harvested agricultural produce.

All of these are correct about harvested agricultural produce.

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Generally speaking, biological assets relating to agricultural activity shall be measured using

a. Historical cost
b. Historical cost less depreciation less impairment
c. A fair value approach
d. Net realizable value

A fair value approach

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Which of the following is unlikely to be used in fair value measurement of biological asset?

a. Quoted market price
b. The most recent market transaction price
c. The present value of the expected net cash flows
d. External independent valuation

External independent valuation

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Which of the following criteria must not be satisfied before a biological asset can be recognized?

a. The entity controls the asset as a result of past event.
b. It is probable that future economic benefits relating to the asset will flow to the entity.
c. An active market for the asset exists.
d. The fair value can be measured reliably.

An active market for the asset exists.

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An entity had a plantation forest that is likely to be harvested and sold in 30 years. The income shall be accounted for in which of the following?

a. No income shall be reported annually until first harvest.
b. Income shall be measured annually and reported using a fair value approach.
c. The eventual sale proceeds shall be estimated and recognized over the 30-year period.
d. The plantation forest shall be measured every 5 years.

Income shall be measured annually and reported using a fair value approach.

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Where the fair value of the biological asset cannot be determined reliably, the asset shall be measured at

a. Cost
b. Cost less accumulated depreciation
c. Cost less accumulated depreciation and impairment loss
d. Net realizable value

Cost less accumulated depreciation and impairment loss

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A gain or loss arising on the initial recognition from a change in the fair value biological asset shall be included in

a. Profit or loss for the period.
b. Other comprehensive income.
c. A separate revaluation reserve.
d. An appropriation reserve.

Profit or loss for the period.

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Where there is a long aging or maturation process after harvest, the accounting shall be dealt with by

a. PAS 41, Agriculture
b. PAS 2, Inventories
c. PAS 16, Property, plant and equipment
d. PAS 40, Investment property

PAS 2, Inventories
?

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When agricultural produce is harvested, the harvest shall be accounted for as inventory at

a. The fair value less cost of disposal at point of harvest
b. The historical cost
c. The historical cost less accumulated impairment loss
d. Fair value

The fair value less cost of disposal at point of harvest
?

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Which statement is true regarding agricultural produce?

a. In all cases, an entity shall measure agricultural produce at fair value less cost of disposal at the point of harvest.
b. The prevailing view is that the fair value of agricultural produce at the point of harvest can always be measured reliably.
c. The fair value measurement of agricultural produce stops at the time of harvest.
d. All of these statements are true regarding agricultural produce.

All of these statements are true regarding agricultural produce.

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Land that is related to agricultural activity is measured

a. At fair value.
b. In accordance with PAS 16, Property, Plant and Equipment, or PAS 40, Investment Property.
c. At fair value in combination with the biological asset.
d. At the resale value separate from the biological asset.

In accordance with PAS 16, Property, Plant and Equipment, or PAS 40, Investment Property.

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A bearer plant is a living plant that

a. Is used in the production or supply of agricultural produce.
b. Is used to bear produce for more than one period.
c. Has a remote likelihood of being sold as agicultural produce, except for incidental scrap sales.
d. Must possess all of these characteristics.

Must possess all of these characteristics.

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All of the following can be considered bearer plant, except

a. Coconut tree
b. Grape vine
c. Rubber tree
d. Tree in a forest plantation to be harvested and sold as log or lumber

Tree in a forest plantation to be harvested and sold as log or lumber

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According to IASB, bearer plants are accounted for as

a. Biological assets with disclosure
b. Biological assets without disclosure
c. Property, plant and equipment
d. Noncurrent investment

Property, plant and equipment

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According to IASB, bearer animals are accounted for as

a. Biological assets
b. Propety, plant and equipment
c. Investment property
d. Agricultural produce

Biological assets

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Animals related to recreational activities are classified as a. Biological asset b. Property, plant and equipment c. Investment property d. Intangible asset

Property, plant and equipment

All would be classified as biological asset, except a. Dairy cattle b. Chicken c. Egg d. Tree

Egg

Which would be classified as agricultural produce? a. Lumber b. Yarn c. Butter d. Apple

Apple

All are classified as agricultural produce, except a. Sugar b. Wool c. Felled tree d. Milk

Sugar

Which would be classified as a product after harvest? a. Cotton b. Harvested cane c. Banana d. Cheese

Cheese

All would be classified as product after harvest, except a. Carpet b. Logs c. Sausage d. Carcass

Carcass

Under accrual basis of accounting, cash receipts and disbursements may a. Precede, coincide with, or follow the period in which revenue and expenses are recognized. b. Precede or coincide with but never follow the period in which revenue and expenses are recognized. c. Coincide with or follow but never precede the period in which revenue and expenses are recognized. d. Only coincide with the period in which revenue and expenses are recognized.

Precede, coincide with, or follow the period in which revenue and expenses are recognized.

Which statement regarding accrual basis versus cash basis of accounting is true? a. The cash basis is appropriate for smaller entities. b. The cash basis is less useful in predicting the timing and amount of future cash flows of an entity. c. Application of the cash basis results in an income statement reporting revenue and expenses. d. The cash basis requires a complete set of double entry records.

The cash basis is less useful in predicting the timing and amount of future cash flows of an entity.

Under cash basis of accounting a. Revenue is recorded when earned. b. Accounts receivable would be recorded. c. Depreciation is not recognized. d. The matching principle is ignored.

The matching principle is ignored.

Under the cash basis of accounting, revenue is recorded a. When earned and realized b. When earned and realizable c. When earned d. When realized

When realized

Total net income over the life of an entity is a. Higher under the cash basis than under the accrual basis b. Lower under the cash basis than under the accrual basis c. The same under the cash basis as under the accrual basis d. Not susceptible to measurement

The same under the cash basis as under the accrual basis

Under IFRS a. The cash basis of accounting is accepted. b. Events are recorded in the period the events occur e. Net income is lower under the cash basis than accrual basis. d. All of the choices are correct.

Events are recorded in the period the events occur ?

Accrual accounting adheres to which of the following? a. Matching principle b. Historical cost principle c. Matching principle and historical cost principle d. Neither matching principle nor historical cost

Matching principle

Under accrual accounting, which of the following does not describe a deferral? a. Deferral of revenue occurs when cash is received and recognized in financial income. b. Deferral typically results in the recognition of a liability or prepaid expense. c. Cash collected in advance of services being rendered. d. Cash paid up front for a one-year insurance policy.

Deferral of revenue occurs when cash is received and recognized in financial income.

Under accrual basis, a deferral is a transaction that impacts a. Cash and the income statement at the same time b. The income statement before impacting cash c. Cash before impacting the income statement d. The statement of financial position before impacting cash

Cash before impacting the income statement

Which statement is true about accrual and cash basis? a. Under accrual, if the earning process is not complete, revenue is nevertheless recorded. b. Under cash basis, if cash has been collected, revenue is recorded regardless of earning process. c. Under cash basis, revenue is recognized when the receivable is initially recorded. d. All of these statements are true.

Under cash basis, if cash has been collected, revenue is recorded regardless of earning process.

The premium on a three-year insurance policy expiring on December 31, 2025 was paid in total on January 1, 2023. If the entity has six-month operating cycle, then on December 31, 2023, the prepaid insurance reported as a current asset would be for a. 6 months b. 12 months c. 18 months d. 24 months

12 months

The premium on a three-year insurance policy expiring on December 31, 2025 was paid in total on January 1, 2023. The original payment was initially debited to a prepaid asset account. The appropriate adjusting entry had been recorded on December 31, 2023. The balance in the prepaid asset account on December 31, 2023 should be a. Zero b. The same as it would have been if the original payment had been debited initially to an expense account c. The same as the original payment d. Higher than if the original payment had been debited initially to an expense account

The same as it would have been if the original payment had been debited initially to an expense account

The premium on a three-year insurance policy expiring on December 31, 2025 was paid in total on January 1, 2023. If the original payment was recorded as a prepaid asset, how would total assets and shareholders' equity be affected during 2023? a. Total assets would decrease and shareholders' equity would increase b. Both total assets and shareholders' equity would decrease c. Both total assets and shareholders' equity would increase d. Neither total assets nor shareholders' equity would change

Both total assets and shareholders' equity would decrease

The premium on a four-year insurance policy expiring on December 31, 2024 was paid in total on January 1, 2021. If the original payment was recorded as a prepaid asset, the balance in prepaid asset on December 31, 2024 would be a. Lower than the balance on December 31, 2023 b. Lower than the balance on December 31, 2025 c. The same as the balance on December 31, 2025 d. The same as the original payment

Lower than the balance on December 31, 2023

At the beginning of the current year, an entity signed a 5-year contract enabling it to use a patented manufacturing process beginning in the current year. A royalty is payable for each product produced, subject to a minimum annual fee. Any royalties in excess of the minimum will be paid annually. On the contract date, the entity prepaid a sum equal to two years' minimum annual fees. In the current year, only minimum fees were incurred. The royalty prepayment shall be reported in the current year-end financial statement as a. An expense only b. A current asset and an expense c. A current asset and noncurrent asset d. A noncurrent asset

A current asset and an expense

If ending inventory is understated, the effect is to a. Overstate the net purchases b. Overstate the gross margin c. Overstate the cost of goods available for sale d. Overstate the cost of goods sold

Overstate the cost of goods sold

If beginning inventory is overstated, the effect is to a. Overstate net purchases b. Overstate gross margin c. Overstate cost of goods available for sale d. Understate cost of goods sold

Overstate cost of goods available for sale

The overstatement of ending inventory in the current year will cause a. Retained earnings to be understated in the currentyear-end statement of financial position b. Cost of goods sold to be understated in the income statement of next year. c. Cost of goods sold to be overstated in the income statement of the current year. d. Statement of financial position not to be misstated in the next year-end.

Statement of financial position not to be misstated in the next year-end.

At the middle of the year, an entity paid for insurance premium for the current year and debited the amount to prepaid insurance. At year-end, the bookkeeper forgot to record the amount expired. In the financial statements prepared at year-end, the omission a. Overstates owners' equity b. Understates assets c. Understates net income d. Overstates liabilities

Overstates owners' equity

If at end of current reporting period, an entity erroneously excluded some goods from ending inventory and also erroneously did not record the purchase of these goods, these errors would cause a. The ending inventory to be overstated b. The retained earnings to be understated c. No effect on net income, working capital and retained earnings d. Net income to be understated

No effect on net income, working capital and retained earnings

When the current year's ending inventory is overstated a. The current year's cost of goods sold is overstated b. The current year's total assets are understated. c. The current year's net income is overstated. d. The next year's net income is overstated

The current year's net income is overstated.

An overstatement of ending inventory in the current period would result in income of the next period being a. Overstated b. Understated c. Correctly stated d. The answer cannot be determined from the information

Understated

Which would result if the current year's ending inventory is understated in the cost of goods sold calculation? a. Cost of goods sold would be overstated b. Total assets would be overstated c. Net income would be overstated d. Retained earnings would be overstated

Cost of goods sold would be overstated

If the beginning inventory in the current year was overstated, the income for the current year would be a. Understated and assets are correctly stated. b. Understated and assets are overstated. c. Overstated and assets are overstated. d. Understated and assets are understated

Understated and assets are correctly stated.

Which of the following would cause income to be overstated in the period of occurrence? a. Overestimating bad debt expense b. Understating beginning inventory c. Overstated purchases d. Understated ending inventory

Understating beginning inventory

Failure to record the expired amount of prepaid rent expense would not a. Understate expense b. Overstate net income c. Overstate owners' equity d. Understate liabilities

Understate liabilities

Failure to record accrued salaries at year-end results in a. Overstated retained earnings b. Overstated assets c. Overstated liabilities d. Understated retained earnings

Overstated retained earnings

Failure to record depreciation at year-end results in a. Understated income b. Understated assets c. Overstated expenses d. Overstated assets

Overstated assets

Which of the following is a counterbalancing error? a. Understated depletion expense b. Bond premium under-amortized c. Prepaid expense adjusted incorrectly d. Overstated depreciation expense

Prepaid expense adjusted incorrectly

Which error will not self-correct next year? a. Accrued expense not recognized at year-end b. Accrued revenue not recognized at year-end c. Depreciation expense overstated for the year d. Prepaid expense not recognized at year-end

Depreciation expense overstated for the year

At year-end, an entity ordered merchandise for resale. The At yearndise was shipped fo.b. shipping point at year-end merche goods arrived early next year. The entity did not andrd the purchase in the current year and did not include the goods in ending inventory. The effects on the financial statements for the current year were a. Income and owners' equity were correct, liabilities were incorrect, assets were correct. b. Income and owners' equity were correct, assets and liabilities were incorrect. c. Income, assets, liabilities and owners' equity were correct. d. Income, assets, liabilities and owners' equity were incorrect.

Income and owners' equity were correct, assets and liabilities were incorrect.

Which of the following should not be reported retroactively? a. Use of an unacceptable accounting principle and changing to an acceptable accounting principle. b. Correction of an overstatement of ending inventory made in prior year c. Use of an unrealistic accounting estimate and changing to a realistic estimate d. Change from a good faith but erroneous estimate to a new estimate

Change from a good faith but erroneous estimate to a new estimate

Which of the following errors could result in an overstatement of both current assets and shareholders' equity? a. An understatement of accrued sales commissions b. Noncurrent note receivable principal is misclassified as current asset c. Annual depreciation on manufacturing machinery is understated d. Holiday pay expense for administrative employees is misclassified as manufacturing overhead

Holiday pay expense for administrative employees is misclassified as manufacturing overhead

EPS disclosures are required for a. Entities whose ordinary shares and potential ordinary shares are publicly traded. b. Entities that are in the process of issuing ordinary shares in the public market. c. All entities. d. Entities whose ordinary shares and potential ordinary shares are publicly traded and entities that are in the process of issuing ordinary shares in public market.

Entities whose ordinary shares and potential ordinary shares are publicly traded and entities that are in the process of issuing ordinary shares in public market.

EPS disclosures are a. Required for all public and nonpublic entities b. Required for public entities and encouraged for nonpublic entities c. Encouraged for public entities and required for nonpublic entities d. Encouraged for all entities

Required for public entities and encouraged for nonpublic entities

When an entity issues both consolidated and separate financial statements, the EPS information is required a. For both sets of financial statements b. In neither set of financial statements c. Only for consolidated financial statements d. Only for separate financial statements

Only for consolidated financial statements

Earnings per share shall be computed on the basis of a. The number of shares outstanding at the end of the year b. A weighted average of the number of shares outstanding during the year regardless of the extent of fluctuations c. A weighted average of the number of shares outstanding during the year except that minor fluctuations in the number of shares may be disregarded d. The number of shares outstanding at the middle of year

A weighted average of the number of shares outstanding during the year except that minor fluctuations in the number of shares may be disregarded

Earnings per share shall be reported for all of the following, except a. Continuing operations b. Discontinued operations c. Net income d. Net cash provided by operating activities

Net cash provided by operating activities

In computing basic earnings per share, if the preference shares are cumulative, the amount that should be deducted as an adjustment to the numerator is the a. Preference dividends in arrears b. Preference dividends paid during the year c. Annual preference dividend d. Annual ordinary dividend

Annual preference dividend

In computing basic earnings per share, the amount of preference dividends on noncumulative preference shares should be a. Deducted from net income whether declared or not b. Deducted from net income only when declared c. Added to net income only when declared d. Ignored

Deducted from net income only when declared

In computing basic earnings per share, the full amount of the required preference dividends on cumulative preference shares for the period should be a. Ignored b. Deducted from net income only when declared c. Deducted from net income whether declared or not d. Added to net income whether declared or not

Deducted from net income whether declared or not

In computing basic loss per share, the annual preference dividend on cumulative preference shares should be a. Ignored b. Deducted from the net loss whether declared or not c. Added to the net loss whether declared or not d. Added to the net loss only when declared

Added to the net loss whether declared or not

In the computation of weighted average number of shares when there is a share split, the additional shares are a. Weighted by the number of days outstanding. b. Weighted by the number of months outstanding. c. Considered outstanding at the beginning of the year. d. Considered outstanding at the beginning of the earliest year reported.

Considered outstanding at the beginning of the earliest year reported.

Earnings per share information is calculated before accounting for which of the following? a. Preference dividend for the period b. Ordinary dividend c. Taxation d. Minority interest

Ordinary dividend

Which figure for earnings does EPS information use? a. Net income attributable to ordinary equity holders and preference shareholders of the parent b. Income before taxation c. Income from continuing operations d. Net income attributable to ordinary equity holders of the parent

Net income attributable to ordinary equity holders of the parent

When an entity issues a share split a. The previous year's EPS is not adjusted for the issue. b. The previous year's EPS is adjusted for the issue. c. Only a note of the effect on the previous year's EPS is made. d. Only the diluted EPS for the previous year is adjusted.

The previous year's EPS is adjusted for the issue.

If a bonus issue occurs between the year-end and the date the financial statements are authorized for issue a. The EPS both for the current and the previous year are adjusted b. The EPS for the current year only is adjusted c. No adjustment is made to EPS d. Diluted EPS only is adjusted

The EPS both for the current and the previous year are adjusted

If a new issue of shares for cash is made between the year-end and the date the financial statements are authorized for issue a. The EPS both for the current and the previous year are adjusted. b. The EPS for the current year only is adjusted. c. No adjustment is made to EPS. d. Diluted EPS only is adjusted.

No adjustment is made to EPS.

The weighted average number of shares outstanding during the period for all periods should be adjusted for a. Any change in the number of ordinary shares without a change in resources. b. Any prior period adjustment. c. Any new issue of shares for cash. d. Any convertible instruments settled in cash

Any change in the number of ordinary shares without a change in resources.

Ordinary shares issued as part of a business combination are included in the EPS calculation from a. The beginning of the accounting period. b. The date of acquisition. c. The end of the accounting period. d. The midpoint of the accounting year.

The date of acquisition.

Shares issued to settle a liability are included in the EPS calculation from a. Date of the contract for services b. Halfway through the rendering of services c. The completion of services d. The settlement date

The settlement date

Shares issued upon the conversion of a mandatorily convertible instrument are included in the calculation of basic earnings per share from a. The date of the contract for the shares b. Halfway through the period c. The date of conversion d. The issue of the share certificate

The date of the contract for the shares

Under IFRS, where ordinary shares are issued but not fully paid, the ordinary shares are treated in EPS a. In the same way as fully paid ordinary shares. b. As a fraction of an ordinary share to the extent that the subscribed shares are entitled to participate in dividends. c. In the same way as warrants or options. d. Are ignored.

As a fraction of an ordinary share to the extent that the subscribed shares are entitled to participate in dividends.

The calculation of diluted EPS assumes that share options were exercised and that the proceeds were used to a. Buy ordinary shares as an investment b. Retire preference shares c. Buy treasury shares d. Increase net income

Buy treasury shares

Options and warrants are dilutive if a. The exercise price is lower than the average market price. b. The exercise price is higher than the average market price. c. The exercise price is equal to the average market price. d. The option shares represent 20% of ordinary shares.

The exercise price is lower than the average market price.

When applying the treasury share method for diluted EPS, the market price of the ordinary share used for the assumed acquisition of treasury shares is the a. Market price at the end of the year b. Average market price during the year c. Market price at the beginning of the year d. Average market price over a two-year period

Average market price during the year

In applying the treasury share method of computing diluted earnings per share, when is it appropriate to use the average market price of ordinary share during the year as the assumed repurchase price? a. Always b. When the average market price is higher than the exercise price c. Never d. When the average market price is lower than the exercise price

When the average market price is higher than the exercise price

Under the treasury share method, the number of potential ordinary shares is equal to a. Option shares b. Option shares minus assumed treasury shares c. Assumed treasury shares d. Option shares actually issued during the year

Option shares minus assumed treasury shares

All of the following must be disclosed in relation to earnings per share, except a. Forecast earnings per share for the following year. b. Instruments that could potentially dilute basic earnings per share in the future but not included in the diluted EPS because they are antidilutive in the current period c. The weighted average number of ordinary shares used d. The earnings figures used in calculating EPS.

Forecast earnings per share for the following year.

Dilution of EPS is defined as a. Decrease in earnings per share when any financial instrument is converted to any form of share capital. b. Decrease in share capital. c. Decrease in earnings per share when convertible instruments are converted to ordinary shares. d. Decrease in earnings per share when share capital is converted to debt capital.

Decrease in earnings per share when convertible instruments are converted to ordinary shares.

If a share option is converted on March 31 a. The potential ordinary shares are included in diluted EPS up to March 31, and in basic EPS from the date converted to the year-end, both weighted accordingly. b. The ordinary shares are not included in diluted EPS. c. The ordinary shares are not included in basic EPS. d. The effects of the share option are included only in previous year's EPS calculation.

The potential ordinary shares are included in diluted EPS up to March 31, and in basic EPS from the date converted to the year-end, both weighted accordingly.

In calculating whether potential ordinary shares are dilutive, the income figure used as the control number is a. Net income including discontinued operations b. Income from continuing operations c. Income before tax including discontinued operations d. Retained earnings for the year after dividends

Income from continuing operations

The nature of diluted earnings per share involving adjustment for share options can be described as a. Historical because earnings are historical b. Historical because it indicates an entity's valuation c. Proforma because it indicates potential changes in number of shares d. Proforma because it indicates potential changes in earnings

Proforma because it indicates potential changes in number of shares

Antidilutive securities a. Should be included in the computation of diluted earnings per share but not basic earnings per share. b. Are those whose inclusion in earnings per share computation would cause basic earnings per share to exceed diluted earnings per share. c. Include share options and warrants whose option price is less than the average market price. d. Should be disregarded in all EPS computations.

Should be disregarded in all EPS computations.

In calculating diluted earnings per share, which of the following should not be considered? a. The weighted average number of ordinary shares outstanding b. The amount of dividends declared on cumulative preference shares c. The amount of cash dividends on ordinary shares d. The number of ordinary shares resulting from the assumed conversion of bonds payable outstanding

The number of ordinary shares resulting from the assumed conversion of bonds payable outstanding

In determining diluted earnings per share, dividends on nonconvertible cumulative preference shares should be a. Disregarded b. Added back to net income whether declared or not c. Deducted from net income only if declared d. Deducted from net income whether declared or not

Added back to net income whether declared or not

The "if converted" method of computing earnings per shar assumes conversion of convertible bonds payable at a. Beginning of the earliest period reported or at time issuance, if later. b. Beginning of the earliest period reported regardless time of issuance. c. Middle of the earliest period reported regardless of th time issuance d. Ending of the earliest period reported regardless of t time of issuance

Middle of the earliest period reported regardless of th time issuance

In determining diluted EPS, interest expense, net of incor tax, on dilutive convertible bond payable should be a. Added back to weighted average shares outstandi for diluted earnings per share. b. Added back to net income for diluted EPS. c. Deducted from net income for diluted EPS. d. Deducted from weighted shares outstanding for dilut EPS.

Deducted from net income for diluted EPS.

Hyperinflation is indicated by all of the following, except a. The general population prefers to keep its wealth in nonmonetary assets. b. Interest rates, t rates, wages and prices are linked to a price index. c. The cumulative inflation rate over three years is approaching or exceeds 100%. d. All of these indicate hyperinflation

All of these indicate hyperinflation

All would indicate that hyperinflation exists, except a. The general population regards monetary amounts in terms of relatively stable foreign currency. b. The cumulative inflation rate over three years is approaching or exceeds 100%. c. Inflation rates have exceeded interest rates in three successive years. d. The general population prefers to keep its wealth in nonmonetary assets.

Inflation rates have exceeded interest rates in three successive years.

Which would indicate that hyperinflation exists? a. Sales on credit are at lower prices than cash sales. b. Inflation is approaching or exceeds 20% per year. c. Monetary items do not increase in value. d. People prefer to keep their wealth in nonmonetary assets or a stable foreign currency.

People prefer to keep their wealth in nonmonetary assets or a stable foreign currency.

An entity that wishes to present information about the effect of changing prices in a hyperinflationary economy should report this information in a. The body of the financial statements b. The notes to the financial statements c. Supplementary schedule d. Management's report to shareholders

The body of the financial statements

In a hyperinflationary economy, monetary items a. Are not restated because such items are already expressec in terms of the measuring unit current at year-end. b. Are measured at fair value. c. Are restated applying the general price index. d. Are restated applying the specific price index.

Are not restated because such items are already expressec in terms of the measuring unit current at year-end.

Monetary items consist of a. Assets and liabilities whose amounts are fixed by contract or otherwise in terms of pesos b. Assets and liabilities classified as current. c. Cash and cash equivalents plus all receivables. d. Cash, accounts receivable and current liabilities

Assets and liabilities whose amounts are fixed by contract or otherwise in terms of pesos

All of the following are monetary items, except a. Accounts payable b. Accounts receivable c. Administration costs paid in cash d. Loan repayment at face value

Administration costs paid in cash

The financial statements in a hyperinflationary economy shall be stated in terms of a. Historical cost b. Current cost c. Fair Value d. Measuring unit current at the end of reporting period

Measuring unit current at the end of reporting period

The gain or loss on the net monetary position in a hyperinflationary economy shall be included in a. Profit or loss and separately disclosed b. Retained earnings c. Equity d. Other comprehensive income

Profit or loss and separately disclosed

In a hyperinflationary economy, nonmonetary items a restated by applying a. General price index b. Specific price index c. Both general price index and specific price index d. Either general price index or specific price index

General price index

In current cost financial statements a. General price level gains or losses are recognized. b. Amounts are always stated in common purchasing c. All items are different from what they would be in a power. historical cost statement of financial position. d. Holding gains are recognized.

Holding gains are recognized.

When an entity adjusted the historical cost income statement by applying specific price index to the income statement is depreciation prepared according to a. Fair value accounting b. Purchasing power accounting c. Current cost accounting d. Nominal peso accounting

Current cost accounting

When an entity prepares financial statements on current cost basis, how is the cost of goods sold computed a. Number of units sold times average current cost b. Number of units sold times current cost at year-end c. Number of units sold times beginning current cost d. Beginning inventory at current cost plus cost of goods purchased less ending inventory at current cost

Number of units sold times average current cost

In a period of inflation, an entity discloses income on current cost basis. Compared to historical cost incom which condition increases the current cost income? a. Current cost is the same as historical cost. b. Current cost of land is less than historical cost. c. Current cost of goods sold is less than historical cost d. Ending net monetary assets are less than beginning

Current cost of goods sold is less than historical cost

Could current cost financial statements report hold gain during the period for which of the following? a. Goods sold b. Inventory c. Both goods sold and inventory d. Neither goods sold nor inventory.

Both goods sold and inventory

The IASB defines SMEs as entities that a. Do not have public accountability. b. Have public accountability and publish general purpose financial statements for external users. c. Do not publish general purpose financial statements for external users. d. Do not have public accountability and publish general purpose financial statements for external users.

Do not have public accountability and publish general purpose financial statements for external users.

Which statement describes the definition of an SME? a. Entities that have no public accountability b. Entities that have a specified number of employees c. Entities that have a certain statement of position total d. Entities that have a certain annual turnover

Entities that have no public accountability

All of the following entities are publicly accountable, except a. An entity whose shares are traded in a public markeť. b. An entity whose debt instruments but not the shares are traded in a public market. c. An entity whose shares and debt instruments are traded in an over-the-counter market. d. An entity that is not in the process of issuing shares and debt instruments for trading in a public market.

An entity that is not in the process of issuing shares and debt instruments for trading in a public market.

Which approach has the IASB taken in developing IFRS for SMEs? a. The exemptions given to smaller entities are prescribed in the mainstream accounting standards. b. GAAP for SMEs is developed on a national basis. c. The standard is independently developed. d. The standard is a simplified self-contained set of accounting principles that are based on full IFRS.

The standard is a simplified self-contained set of accounting principles that are based on full IFRS.

In the Philippines, which entity is not an SME? a. A nonpublicly accountable entity with total assets between P3,000,000 and P350,000,000. b. A nonpublicly accountable entity with total liabilities between P3,000,000 and P250,000,000. c. An entity that is not a holder of a secondary license issued by a regulatory agency. d. A public utility

A public utility

Which can be considered an SME? a. Bank and finance company b. Insurance company and investment house c. Pre-need company and securities broker d. None of these can be considered SME.

None of these can be considered SME.

Entities with total assets or total liabilities below the floor threshold of P3,000,000 are known as a. Micro-business entities b. Macro-business entities c. Medium-sized entities d. Small entities

Micro-business entities

If an SME that uses the PFRS for SMEs in the current year breaches the ceiling of the size criteria at the end of the current year, the entity is required to transition to full PFRS a. At the current year-end. b. At the current year-end if the event that caused the change is significant and continuing. c. In the next year if the event that caused the change is significant and continuing. d. At the discretion of management

In the next year if the event that caused the change is significant and continuing.

What is considered significant change that requires transition to PFRS for SMEs? a. 20% or more of the total assets or total liabilities b. 50% or more of the total assets or total liabilities c. 10% or more of the total assets or total liabilities d. No quantitative threshold can be made

20% or more of the total assets or total liabilities

This is defined as the first annual financial statements in which an SME adopts IFRS for SMEs. a. IFRS financial statements b. First annual financial statements that conform with IFRS for SMEs c. Opening statement of financial position d. First audited financial statements

First annual financial statements that conform with IFRS for SMEs

What is the date of transition to IFRS for SMEs? a. The beginning of the latest period in the most recent annual financial statements under previous GAAP. b. The end of the latest period in the most recent annual financial statements under previous GAAP. c. The beginning of the earliest period for which an entity presents full comparative information under IFRS for SMEs. d. The end of the earliest period for which an entity presents full comparative information under IFRS for SMEs.

The beginning of the earliest period for which an entity presents full comparative information under IFRS for SMEs.

The statement of financial position at the date of transition to IFRS for SMEs is best described as a. Provisional statement of financial position b. Closing statement of financial position c. Opening statement of financial position d. Originating statement of financial position

Opening statement of financial position

In the opening statement of financial position, which cannot be done by the first-time adopter of IFRS for SMEs? a. Recognize all assets and liabilities whose recognition is required by IFRS for SMEs. b. Recognize assets and liabilities required by full IFRS but IFRS for SMEs does not require such recognition. c. Reclassify an item as one type of asset, liability or equity under the previous accounting framework but a different type under IFRS for SMEs. d. Apply IFRS for SMEs in measuring all recognized assets and liabilities.

Recognize assets and liabilities required by full IFRS but IFRS for SMEs does not require such recognition.

Fair presentation in accordance with IFRS for SMEs is presumed to result from a. Compliance with IFRS for SMEs by an entity that has public accountability. b. Compliance with IFRS for SMEs, with additional disclosures where necessary, by an entity that has public accountability. c. Compliance with IFRS for SMEs by an entity that does not have public accountability. d. Compliance with IFRS for SMEs, with additional disclosures where necessary, by an entity that does not have public accountability.

Compliance with IFRS for SMEs, with additional disclosures where necessary, by an entity that does not have public accountability.

An entity that is not publicly accountable must make an explicit and unreserved statement of compliance with the IFRS for SMEs a. If the entity complies with all the requirements of IFRS for SMEs. b. If the entity complies with the vast majority of the requirements of IFRS for SMEs. c. If the entity complies with USA GAAP. d. If the entity complies with full IFRS.

If the entity complies with all the requirements of IFRS for SMEs.

Financial statements prepared by an SME must comply with the IFRS for SMEs. Which of the following statements suitably describes the nature of the compliance with the Standard? a. The accounting practices used are a mix of full IFRS and IFRS for SMEs b. The accounting practices used are a mix of local GAAP and IFRS for SMES c. The accounting practices used are a mix of full IFRS and local GAAP d. The SME has followed IFRS for SMEs in its entirety.

The SME has followed IFRS for SMEs in its entirety.

A nonpublicly accountable entity can claim compliance with IFRS for SMEs when the entity I. Complies with local tax requirements that are substantially the same as IFRS for SMEs. II. Complies with local tax requirements that are, except in name, word for word the same as IFRS for SMEs. III. Complies with all the requirements of IFRS for SMEs. IV. Complies with full IFRS. a. I and III b. II and III c. II, III and IV d. III and IV

II and III

The IASB sets effective dates for standards which are sometimes prospective and sometimes the standards become almost immediately effective. What is the effective date for the IFRS for SMEs? a. The IASB has not set an effective date for the Standard because the decision to whether to adopt the IFRS for SMEs is a matter for each jurisdiction. b. The IASB will set the date when the Standard has been in existence for a while in order to gauge the acceptance of the Standard. c. The date will be set by the IASB as soon as possible. d. The effective date was the date on the release of the Standard

The IASB has not set an effective date for the Standard because the decision to whether to adopt the IFRS for SMEs is a matter for each jurisdiction.

Investment property is defined as a. Land or a building, or part of a building, or both held for sale in the ordinary course of business. b. Land or a building, or part of a building, or both held to earn rentals only. c. Land or a building, or part of a building, or both held for capital appreciation only. d. Land or a building, or part of a building, or both held to earn rentals or for capital appreciation or both.

Land or a building, or part of a building, or both held to earn rentals or for capital appreciation or both.

An SME operates a bed and breakfast from a building it owns. The SME also provides its guests with other services including housekeeping, satellite television and broadband internet access. The daily room rental is inclusive of these services. Furthermore, upon request, the entity conducts tours of the surrounding area for its guests. Tour services are charged for a fee separately. The SME should account for the building as a. Inventory b. Investment property c. Property, plant and equipment d. Basic financial instrument

Property, plant and equipment

An SME must measure the investment property after initial recognition a. At fair value or using the cost-depreciation- impairment model and same accounting policy for all investment property. b. At fair value or using the cost-depreciation- impairment model elected item by item. c. At fair value. d. At fair value, for property whose fair value can be measured reliably without undue cost or effort on an ongoing basis and the cost-depreciation impairment model for all other investment property.

At fair value, for property whose fair value can be measured reliably without undue cost or effort on an ongoing basis and the cost-depreciation impairment model for all other investment property.

A building is held by a subsidiary to earn rentals under an operating lease from the parent. What is the accounting treatment of the building? a. Accounted for as property, plant and equipment by the subsidiary and an investment property by the group. b. Accounted for as property, plant and equipment. c. Accounted for as investment property. d. Accounted for as an investment property by the subsidiary and property, plant and equipment by the group.

Accounted for as an investment property by the subsidiary and property, plant and equipment by the group.

What is the presentation of investment property accounted for using the cost model? a. Property, plant and equipment b. Separate class of property, plant and equipment c. Included in all investment property d. Separate line item as investment property carried at cost less accumulated depreciation and impairment

Separate line item as investment property carried at cost less accumulated depreciation and impairment

An entity shall measure government grant at a. The amount of cash or cash equivalent received. b. The amount of cash or cash equivalent received or receivable. c. The fair value of the asset received or receivable. d. NIL.

The fair value of the asset received or receivable.

An SME must recognize a government grant that does not impose specified future performance conditions a. In income when the grant proceeds are receivable. b. In income over the periods necessary to match it with the related cost for which it is intended to compensate on a systematic basis. c. By applying an approach depending upon the accounting policy adopted. d. At the discretion of management.

In income when the grant proceeds are receivable.

An SME must recognize a government grant that imposes specified future performance conditions a. In income when the grant proceeds are receivable. b. In income over the periods necessary to match it with the related cost for which it is intended to compensate on a systematic basis. c. In income only when the performance conditions are met. d. At the discretion of management.

In income only when the performance conditions are met.

An SME must recognize government grant received before the income recognition criteria are satisfied b. In equity a. In income when the grant proceeds are received c. As a liability d. In income when the grant proceeds are receivable

As a liability

Borrowing costs are defined as a. Interest and other costs that an entity incurs in connection with the borrowing of funds. b. Effective interest expense c. Finance charges in respect of finance leases d. Exchange differences from foreign currency borrowings

Interest and other costs that an entity incurs in connection with the borrowing of funds.

Borrowing costs do not inlcude a. Interest incurred on bank overdraft b. Incremental administrative fees incurred in connection with raising loans c. Finance charges in respect of finance leases d. Dividends declared to equity holders

Dividends declared to equity holders

An SME must recognize all borrowing costs a. As an expense when incurred. b. As capitalizable when directly attributable to a qualifying asset. c. In retained earnings. d. In other comprehensive income

As an expense when incurred.

An SME shall capitalize all of the following as cost of property, plant and equipment, except a. Transport cost b. Loan raising cost c. Installation cost d. Nonrefundable purchase tax

Loan raising cost

Which of the following is a disclosure requirement in relation to borrowing cost under IFRS for SMEs? a. Borrowing cost capitalized during the period b. Segregation of qualifying asset from other assets c. Capitalization rate for borrowing cost capitalization d. Total finance cost recognized as expense

Total finance cost recognized as expense

Which of the following shareholder rights is most commonly enhanced in an issue of preference shares? a. The right to vote for the board of directors. b. The right to maintain one's proportional interest. c. The right to receive a full cash dividend before dividends are paid to other classes of share capital. d. The right to vote on major corporate issues.

The right to receive a full cash dividend before dividends are paid to other classes of share capital.

Preference shares participate ratably with the ordinary shareholders in any dividend distribution beyond the prescribed preference rate. a. Cumulative feature b. Participating feature c. Callable feature d. Redeemable feature

Participating feature

Which feature of preference share would most likely be opposed by ordinary shareholders? a. Convertible b. Callable c. Redeemable d. Participating

Participating

Noncumulative preference dividends in arrears a. Are not paid and not disclosed. b. Must be paid before any other cash dividends can be distributed. c. Are disclosed as liability until paid. d. Are paid to preference shareholders if sufficient funds remain after payment of ordinary dividend.

Are not paid and not disclosed.

How should cumulative preference dividends in arrears be reported? a. Note disclosure b. Increase in shareholders' equity c. Increase in current liabilities d. Increase in noncurrent liabilities

Note disclosure

When of the following is classified as nonmonetary? a. Allowance for doubtful accounts b. Accumulated depreciation c. Premium on bonds payable d. Advances to unconsolidated subsidiaries

Accumulated depreciation

Which of the following D2 is classified as nonmonetary? a. Warranty liability b. Accrued expense c. Unamortized discount on bonds payable d. Refundable deposit

Refundable deposit

Which of the following is classified as nonmonetary? a. Cash surrender value b. Long-term receivable c. Accrued liability on firm purchase commitment d. Inventory

Inventory

Which of the following is classified as monetary? a. Goodwill b. Equipment c. Patent d. Allowance for doubtful accounts

Allowance for doubtful accounts

Purchasing power gain or loss results from a. Monetary asset only b. Monetary liability only c. Both monetary asset and monetary liability d. Nonmonetary asset and nonmonetary liability

Both monetary asset and monetary liability

During a period of inflation, an account balance remaing constant. With respect to this account, a power loss will be recognized if the account is a purchasing a. Monetary asset b. Monetary liability c. Nonmonetary asset d. Nonmonetary liability

Monetary asset

During a period of inflation, an account balance remaine constant. With respect to this count, purchasing power gain will be recognized if the account is a a. Monetary liability b. Monetary asset c. Nonmonetary liability d. Nonmonetary asset

Monetary liability

During a period of deflation in which a liability account balance remains constant, which of the following occurs? a. A purchasing power loss if the item is a nonmonetary liability. b. A purchasing power gain if the item is a nonmonetary liability. c. A purchasing power loss if the item is a monetary liability. d. A purchasing power gain if the item is a monetary liability.

A purchasing power loss if the item is a monetary liability.

During a period of inflation in which a liability account balance remains constant, which of the following occurs? a. A purchasing power loss if the item is a nonmonetary liability. b. A purchasing power gain if the item is a nonmonetary liability. c. A purchasing power loss if the item is a monetary liability. d. A purchasing power gain if the item is a monetary liability.

A purchasing power gain if the item is a monetary liability.

During a period of deflation, an entity would have the greatest gain in general purchasing power by holding a. Cash b. Property, plant and equipment c. Finance lease liability d. Mortgage payable

Cash

Financial statements that are expressed under a stable monetary unit are a. Constant peso financial statements b. Nominal peso financial statements c. Current cost financial statements d. Fair value financial statements

Nominal peso financial statements

A general price level statement of financial position is prepared and presented in terms of a. The general purchasing power at latest year-end. b. The general purchasing power in the base period. c. The average general purchasing power of the peso. d. The general purchasing power at the date of issue

The general purchasing power at latest year-end.

Which method of reporting attempts to eliminate the effect of the changing value of the peso? a. Discounted present value of future cash flows b. Historical cost restated for change in the price level c. Replacement cost d. Exit value

Historical cost restated for change in the price level

The restatement of historical peso financial statements to reflect the general price level change results in presenting assets at a. Lower of cost or net realizable value b. Fair value c. Cost adjusted for purchasing power change d. Current replacement cost

Cost adjusted for purchasing power change

Which argument in favor of price level adjusted financial statements is not valid? a. Price level financial statements use historical cost. b. Price level financial statements compare uniform purchasing power among various periods. c. Price level statements measure assets and liabilities at current value. d. Price level statements measure earnings in terms of a common peso.

Price level statements measure assets and liabilities at current value.

Inventories must be measured at a. Cost b. The lower of cost and estimated selling price less cost to complete and dispose c. The lower of cost and fair value less cost to complete and dispose d. The most recent purchase price

The lower of cost and estimated selling price less cost to complete and dispose

Under PFRS for SMEs, if the selling price less cost to complete and sell is lower than cost of inventory, the writedown is recognized a. As an impairment loss b. As component of cost of goods sold c. As an impairment loss or a component of cost of goods sold d. Directly in retained earnings

As an impairment loss

Consumable stores or supplies to be consumed in the production process are included in a. Inventory b. Property, plant and equipment c. Investment property d. Intangible assets

Inventory

A property developer must classify properties that it holds for sale in the ordinary course of business as a. Inventory b. Property, plant and equipment c. Financial asset d. Investment property

Inventory

An SME may use techniques for measuring cost of inventories if the results approximate cost. Accepted techniques include all of the following, except a. Standard cost b. Retail method c. Most recent purchase price d. Gross profit method

Gross profit method

An SME shall account for investments in associate after initial recognition using a. Either cost model or fair value model and using the same policy for all investments in associatusin b. Either cost model or fair value model and the model can be elected on an investment by investment model c. Any of the cost model, equity method or fair value model and using the same accounting policy for all investments in associates. d. Any of the cost model, equity method or fair value model and the model can be elected on an investment by investment basis.

Any of the cost model, equity method or fair value model and the model can be elected on an investment by investment basis.

An SME that owns 30% of the voting ordinary shares a. Has significant influence over the investee. b. Has no significant influence over the investee. c. Has control over the investee. d. Has significant influence over the investee, provided that it does not have control or joint control over the investee.

Has significant influence over the investee, provided that it does not have control or joint control over the investee.

Under the cost model, the investment in associate is subsequently measured at a. Cost b. Cost less accumulated impairment loss c. Fair value d. Fair value less cost of disposal

Cost less accumulated impairment loss

Under the fair value model, the investment in associate is subsequently measured at a. Cost less accumulated impairment loss b. Equity c. Fair value less cost of disposal d. Fair value

Fair value

Investments in associates must be tested for impairment when the entity uses a. Cost model, equity method or fair value model. b. Cost model or equity method. c. Cost model or fair value model. d. Equity method or fair value model.

Cost model or equity method.

The lower of cost and estimated selling price less cost to complete and dispose

All of the following are considered basic financial instruments, except a. Cash b. Investment in bonds c.Accounts receivable d. Investment in convertible preference shares

Investment in convertible preference shares

All of the following are considered basic financial instruments, except a. Demand and fixed-term deposit b. Option and forward contract c. Loan from subsidiary due on demand d. A debt instrument that becomes payable on demand if the issuer defaults on interest payment.

Option and forward contract

All of the following are basic financial instruments, except a. Investment in nonconvertible and nonputtable preference shares. b. Compound financial instruments. c. A fixed-interest fixed-term loan from a bank d.Investment in nonputtable ordinary shares.

Compound financial instruments.

All of the following financial assets are basic financial instruments, except a. Cash b. Accounts receivable c. A passive interest in the nonputtable ordinary shares of another entity. d. An interest in the nonputtable ordinary shares where the investee is classified as an associate of the entity.

An interest in the nonputtable ordinary shares where the investee is classified as an associate of the entity.

An SME shall account for investments in initial recognition using associate after a. Either cost model or fair value model and using the same policy for all investments in associates. b. Either cost model or fair value model and the model can be elected on an investment by investment basis. c. Any of the cost model, equity method or fair value model and using the same accounting policy for all investments in associates. d. Any of the cost model, equity method or fair value model and the model can be elected on an investment by investment basis.

Any of the cost model, equity method or fair value model and using the same accounting policy for all investments in associates.

Has significant influence over the investee, provided that it does not have control or joint control over the investee.

Under the cost model, the investment in associate is subsequently measured at a. Cost b. Cost less accumulated impairment less c. Fair value d. Fair value less cost of disposal

Cost less accumulated impairment less

Under the fair value model, the investment in associate is subsequently measured at a. Cost less accumulated impairment loss b. Equity c. Fair value less cost of disposal d. Fair value

Fair value

Cost model or equity method.

Which statement reflects the accounting for financial instruments under IFRS for SMEs? a. All financial instruments must be measured at fair value. b. Reversal of an impairment loss is not allowed. c. All amortized cost instruments must be tested for impairment. d. All financial instruments must be measured at amortized cost.

All amortized cost instruments must be tested for impairment.

An SME must measure an intangible asset after initial recognition using a. Fair value model b. Cost model c. Revaluation model d. Either cost model or revaluation model

Cost model

An SME acquired a trademark that has a remaining legal life of five years but is renewable every ten years at little cost. The useful life of the trademark shall be a. Five years b. Based on best estimate of management but not exceeding 10 years. c. Fifteen years d. Indefinite

Based on best estimate of management but not exceeding 10 years.

Under IFRS for SMEs, goodwill is a. Not amortized but tested for impairment b. Amortized and tested for impairment annually c. Amortized and tested for impairment when there is an indication of impairment d. Not amortized and not tested for impairment

Amortized and tested for impairment when there is an indication of impairment

What is the accounting for research and development costs incurred by an SME? a. All research and development costs are capitalized. b. All research and development costs are expensed when incurred. c. All research costs are expensed when incurred and all development costs d. All research costs are capitalized and all development costs are expensed when incurred.

All research and development costs are expensed when incurred.

The useful life of the intangible asset of an SME is

FINITE

What is the recoverable amount of an asset? a. Fair value less cost of disposal b. Value in use c. Fair value less cost of disposal or value in use, whichever is higher d. Fair value less cost of disposal or value in use, whichever is lower

Fair value less cost of disposal or value in use, whichever is higher

If the fair value less cost of disposal cannot be determined a. The asset is not impaired. b. The recoverable amount is the value in use. c. The recoverable amount is the net realizable value. d. The carrying amount of the asset remains the same.

The recoverable amount is the value in use.

If the asset is to be disposed of a. The recoverable amount is the fair value less cost of disposal. b. The recoverable amount is the value in use. c. The asset is not impaired. d. The recoverable amount is the carrying amount

The recoverable amount is the fair value less cost of disposal.

Which is not relevant in determining value in use? a. The expected future cash flows from the asset b. The carrying amount of the asset c. Expectation about variation in future cash flows d. The time value of money

The carrying amount of the asset

The estimates of future cash flows in calculating value in use include all of the following, except a. Cash inflows from the continuing use of the asset. b. Cash outflows incurred to generate the cash inflows from the continuing use of the asset. c. Net cash flows from the disposal of the asset. d. Cash outflows for income tax.

Cash outflows for income tax.

A provision is a. A liability of uncertain timing or amount. b. A possible obligation as a result of past event. c. An adjustment to the carrying amount of asset. d. A liability of certain timing or amount.

A liability of uncertain timing or amount.

An SME shall recognize a provision only when a. The entity has a present obligation as a result of a past event. b. It is probable that the entity will be required to transfer economic benefits in settlement. c. The obligation can be estimated reliably. d. All of these are required in recognizing a provision.

All of these are required in recognizing a provision.

Which term is associated with a provision? a. Possible b. Likely c. Remote d. Probable

Probable

Provisions are accrued because the likelihood of an unfavorable outcome is a. Virtually certain b. Greater than 50% c. At least 75% d. Possible

Greater than 50%

No single amount within a range is a better estimate than any other amount or each point in the range is as likely as any other. What is the amount of accrual? a. Zero b. The midpoint of the range c. The minimum of the range d. The maximum of the range

The midpoint of the range

A contingent liability a. Definitely exists as a liability. b. Is accrued even though not reasonably estimated. c. Is the result of a loss contingency. d. Is not recognized in the financial statements.

Is not recognized in the financial statements.

Which of the following is not a contingent liability? a. A possible but uncertain obligation b. A present obligation that is not probable but measurable c. A present obligation that is probable but not measurable d. A present obligation that is both probable and measurable

A present obligation that is both probable and measurable

Which of the following is the proper way to report a probable contingent asset? a. As an asset b. As deferred revenue c. As a disclosure only d. No disclosure or no accrual

As a disclosure only

Contingent assets need not be disclosed when a. Virtually certain b. Probable c. Likely d. Possible

Possible

Which is the proper way to report a contingent asset, receipt of which is virtually certain? a. As an asset b. As unearned revenue c. As a disclosure only d. No disclosure or no accrual

As an asset

Which of the following arrangements should be accounted for in accordance with PFRS for SMEs on leases? a. Licensing agreements for such items as motion picture films, video recordings, plays, manuscripts, patents and copyrights b. Agreements that transfer the right to use assets even though substantial services by the lessor may be called for in connection with the operation or maintenance of such assets c. Leases to explore for or use minerals, oil, natural gas and similar nonregenerative resources d. Onerous operating leases

Agreements that transfer the right to use assets even though substantial services by the lessor may be called for in connection with the operation or maintenance of such assets

An SME entered, as lessee, into a five-day noncancelable lease of a motor vehicle that has an economic life of five years and nil residual value. Lease payments are on a daily basis. At the end of the lease term, the lessee returns the motor vehicle to the lessor. What is the accounting treatment of the lease? a. A finance lease b. An operating lease c. Neither a finance lease nor an operating lease d. Either a finance lease or an operating lease

An operating lease

Depreciation of a leased machine is I. Recognized by the lessee where the lessor and the lessee have classified the lease as finance lease. II. Recognized by the lessor where the lessor and the lessee have classified the lease as an operating lease. a. I only b. II only c. Either I or II d. Neither I nor II

Either I or II

A lessee that paid a certain amount to a broker for arranging a finance lease must a. Account for the fee as an expense in the period in which the fee was incurred. b. Include the fee in the cost of the leased asset. c. Defer recognition of the expense and recognize the fee on the straight line method over the lease term. d. Include the fee in the principal lease liability.

Include the fee in the cost of the leased asset.

An SME enters as lessee into a two-year lease in respect of a machine that has an economic life of four years with nil residual value. Rent per year is payable yearly in advance. The lessee holds an option to acquire the machine for a nominal amount. The option is exercisable at the end of the lease term when the fair value of the machine is expected to be very much higher than the nominal amount. At the commencement of the lease term, the lessor should I. Derecognize the machine and recognize a lease receivable. II. Continue to recognize the carrying amount of the machine subject to the lease as an item of property, plant and equipment. a. I only b. II only c. Both I and II d. Neither I nor II

I only

Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees or for termination of employment and include all of the following, except a. Short-term employee benefits b. Postemployment benefits c. Termination benefits d. Dividend payments to shareholders

Dividend payments to shareholders

The employees are each entitled to 20 days of paid holiday leave per calendar year. Unused holiday leave cannot be carried forward and does not vest. What is the treatment of the holiday leave? a. A short-term employee benefit b. A postemployment benefit c. Other long-term employee benefit d. A termination benefit

A short-term employee benefit

The employees are entitled to 10 days holiday leave per calendar year. Unused holiday leave may be carried forward until the employee leaves the employment of the entity, at which time the entity will pay the employee for all unused holiday leave. What is the treatment of the holiday leave? a. A short-term employee benefit b. A postemployment benefit c. Other long-term employee benefit d. A termination benefit

Other long-term employee benefit

An entity reimburses 50% of past employee's postemployment medical cost if the employee provides 25 years of service or more to the entity. What is the treatment of the obligation to pay 50% of past employee's postemployment medical cost? a. A short-term employee benefit b. A defined postemployment benefit c. A defined contribution postemployment benefit d. Other long-term employee benefit

Other long-term employee benefit

A profit-sharing plan requires an entity to pay a specified proportion of cumulative profit for a five-year period to employees who serve throughout the five-year period. What is the profit-sharing plan? a. A short-term employee benefit b. A postemployment benefit c. Other long-term employee benefit d. A termination benefit

Other long-term employee benefit

A profit-sharing plan requires an entity to pay a specified proportion of cumulative profit for the year to employees who serve the entity throughout the year. What is the profit-sharing plan? a. A short-term employee benefit b. A postemployment benefit c. Other long-term employee benefit d. A termination benefit

A short-term employee benefit

An entity made a public announcement of a commitment to a voluntary redundancy plan. The entity has an obligation to pay employees that choose voluntary redundancy a lump sum equal to twice their gross annual salary. What is the obligation to pay employees that choose voluntary redundancy? a. A short-term employee benefit b. A postemployment benefit c. Other long-term employee benefit d. A termination benefit

A termination benefit

The defined benefit liability of an SME is measured at a. The excess of the present value of benefit obligation over the fair value of the plan assets. b. The excess of the fair value of plan assets over the present value of benefit obligation. c. The present value of benefit obligation plus net actuarial gain not recognized minus fair value of plan assets. d. The present value of benefit obligation plus net actuarial gain not recognized minus fair value of plan assets minus unrecognized past service cost.

The present value of benefit obligation plus net actuarial gain not recognized minus fair value of plan assets.

Which is included in the term income tax? a. Domestic tax based on taxable income b. Foreign tax based on taxable income c. Tax payable by a subsidiary, associate or joint venture as distribution to the reporting entity. d. All of these are included in income tax.

All of these are included in income tax.

In computing deferred tax asset or liability, which tax rate is used? a. Current tax rate b. Estimated future tax rate c. Enacted future tax rate d. Prior tax rate

Enacted future tax rate

Which statement is true regarding reporting deferred tax asset and deferred tax liability in the financial statements? To To a. Deferred tax asset is always netted against deferred tax liability. b. Deferred taxes of one jurisdiction are offset against another jurisdiction in the netting process. c. Deferred tax asset and liability can only be classified as noncurrent. d. Deferred tax asset and liability are classified as current and noncurrent based on expiration date.

Deferred tax asset and liability can only be classified as noncurrent.

Which statement is correct about the presentation of deferred tax asset and liability? a. Current deferred tax asset is netted against current deferred tax liability. b. Noncurrent deferred tax asset is netted against noncurrent deferred tax liability. c. Deferred tax asset is never netted against deferred tax liability. d. Deferred tax asset is netted against deferred tax liability if they relate to the same tax authority

Deferred tax asset is never netted against deferred tax liability.

What is the formula in computing equity? a. Investments by owners plus retained earnings minus distributions to owners b. Investments by owners plus accumulated losses c. Investments by owners minus retained earnings d. Investment by owners plus distribution to owners

Investments by owners plus retained earnings minus distributions to owners

What is the measurement of equity shares issued? a. Fair value of cash received or receivable b. Fair value of cash or receivable plus direct issue cost c. Fair value of cash received or receivable less direct issue cost d. Fair value of shares issued less direct issue cost

Fair value of cash received or receivable less direct issue cost

An entity shall account for the transaction cost of an equity transaction as a. An expense immediately b. A deduction from equity c. An addition to equity d. A deduction from retained earnings

A deduction from equity

An entity shall reduce equity for a. Amount earned through profitable operations and retained for use in operations b. Share split c. Amount of distributions to owners d. Amount of bonus issue

Amount of distributions to owners

When an entity distributes an asset other than cash as dividend to the owners, the entity shall a. Not recognize a liability b. Recognize a liability equal to fair value of asset. c. Recognize a liability equal to carrying amount of asset. d. Do nothing.

Recognize a liability equal to fair value of asset.

An entity shall recognize the goods or services received ✓ in a share-based payment transaction a. Only when the share-based payment is cash-settled b. When the entity receives the goods or services. c. Only when the vesting period ends. d. Only on the date that the equity instruments are granted

When the entity receives the goods or services.

If share options granted to employees under a share-based payment transaction vest immediately a. The entity should defer recognition of the services rendered by the employees. b. The entity should record a liability. c. The employees are unconditionally entitled to the share-based payments. d. The entity should account for the services when these are rendered by the employees during the vesting period.

The employees are unconditionally entitled to the share-based payments.

For equity-settled share-based payment transactions, an entity shall measure the goods or services received a. Always at the fair value of goods and services received. b. Always at the fair value of the equity instruments issued. c. At the cost of goods and services provided by employees. d. At the fair value of the goods or services received unless that fair value cannot be estimated reliably.

At the fair value of the goods or services received unless that fair value cannot be estimated reliably.

For transactions for employee services as in share options, the fair value of the equity instruments is measured a. On the grant date. b. On the exercise date. c. At the end of the vesting period or exercise period. whichever is later. d. At the date when the entity knows how many instruments will vest.

On the grant date.

For transactions with parties other than employees, the measurement date is a. The grant date. b. The exercise date. c. When the entity obtains the goods or the counterparty renders service. d. When the warranty period for the goods or services expires

When the entity obtains the goods or the counterparty renders service.

On vesting date, the entity should a. Never adjust the number of equity instruments that ultimately vest. b. Revise the estimate to equal the number of equity instruments that ultimately vest for vesting conditions based on employee service and based on nonmarket performance. c. Revise the estimate to equal the number of equity instruments that ultimately vest for vesting conditions based on employee service and based on market performance. d. Revise the estimate to equal the number of equity instruments that ultimately vest for all vesting conditions.

Revise the estimate to equal the number of equity instruments that ultimately vest for vesting conditions based on employee service and based on nonmarket performance.

YOU CAN DO IT!! YOU WILL PASS THE COMPREHENSIVE EXAM IN GOD'S LOVE AND WILL!!

In measuring the fair value of shares and the related goods or services received, an entity a. Must always use the observable market price of the entity's own shares. b. Uses observable market price but only for non employee share-based transaction. c. Uses price established by the entity's directors for that type of share-based transaction. d. Uses observable market price and other measures according to a measurement hierarchy.

Uses observable market price and other measures according to a measurement hierarchy.

For modification of vesting condition in an equity-settledshare-based payment transaction for employee services,the entity should a. Recognize the increase in fair value over the remaining vesting period from the date of the modification. b. Take the modified vesting condition into account only if it is beneficial to employees and recognize the increase in fair value over the original vesting period. c. Take the modified vesting condition into account only if it is beneficial to employees and recognize the increase in fair value over the remaining vesting period from the date of the modification. d. Make no adjustment for compensation expense.

Take the modified vesting condition into account only if it is beneficial to employees and recognize the increase in fair value over the remaining vesting period from the date of the modification.

For a cash-settled share-based payment tansaction foremployee services, the entity should a. Recognize in profit or loss the cash paid out to the employees in the final year. b. Recognize in profit or loss the cash paid out to the employees over the vesting period. c. Recognize in profit or loss the estimate of the cash to be paid out to the employees over the vesting period. d. Recognize in profit or loss the grant date fair value of the liability over the vesting period.

Recognize in profit or loss the estimate of the cash to be paid out to the employees over the vesting period.

Specialized activities of an SME include all of thefollowing, except a. Agriculture b. Service concession c. Exploration and evaluation of mineral resources d. Insurance

Insurance

Biological asset is measured at a. Cost b. Lower of cost and net realizable value c. Net realizable value d. Fair value less cost of disposal

Fair value less cost of disposal

Agricultural produce is measured ata a. Fair value b. Fair value less cost of disposal at the point of harvest c. Net realizable value d. Net realizable value less normal profit margin

Fair value less cost of disposal at the point of harvest

The exploration expenditure incurred by an SME in exploration and evaluation activities may be classified as. a. Tangible asset b. Intangible asset c. Either tangible asset or intangible asset d. Neither tangible asset nor intangible asset

Either tangible asset or intangible asset

An SME shall measure subsequently the intangible exploration and evaluation asset using a. Cost model only b. Revaluation model only c. Either cost model or fair value model d. Either cost model or revaluation model

Cost model only

On the part of the private operator, the infrastructureasset in a service concession shall be recognized as a. Property, plant and equipment b. Financial asset c. Intangible asset d. Either financial asset or intangible asset

Either financial asset or intangible asset

The infrastructure asset in a service concessionrecognized as a financial asset by an SME issubsequently measured at a. Amortized cost b. Fair value through profit or loss c. Fair value through OCI d. Amortized cost, fair value through profit or loss or fair value through OCI

Amortized cost

Which is not addressed in IFRS for SMEs? a. Earnings per share b. Interim reporting and segment reporting c. Asset held for sale and discontinued operation d. All of these are not addressed in IFRS for SMEs.

All of these are not addressed in IFRS for SMEs.

Which accounting treatment is not allowed under IFRSfor SMEs? a. Weighted average method for inventory b. Equity method for associates c .Revaluation model for intangible assets d. Temporary difference approach for deferred taxation

Revaluation model for intangible assets

Which of the following is not a simplification of anaccounting practice allowed by IFRS for SMEs? a. Goodwill and other indefinite life intangible assets are amortized over the useful life. b. SMEs do not have to derecognize a financial asset when the entity transfers to another party substantially all of the risks and rewards of the asset. c. A simplified calculation is allowed if measurement of defined benefit obligation involves undue cost or effort. d. The cost model is permitted for investments in associates.

SMEs do not have to derecognize a financial asset when the entity transfers to another party substantially all of the risks and rewards of the asset.

Which is not within the definition of a small entity? a. With total assets or total liabilities betweenP3,000,000 or P100,000,000 b. Not required to file financial statements under SEC Rule 68 c. Not in the process of filing financial statements for the purpose issuing equity instruments in a public market d. Holder of a secondary license issued by regulatory agency

Holder of a secondary license issued by regulatory agency

Which small entity is not exempted from the mandatory adoption of PFRS for Small Entities? a. A small subsidiary of a parent under full PFRS b. A small subsidiary of a foreign parent moving toward full IFRS c. A small joint venture under full PFRS d. A small entity preparing financial statements underfull PFRS and has not decided to liquidate

A small entity preparing financial statements underfull PFRS and has not decided to liquidate

The financial statements of a small entity include all ofthe following, except a. Statement of financial position b. Statement of income c. Statement of retained earnings d. Statement of cash flows

Statement of retained earnings

The statements of income and changes in equity of a small entity can be combined if the only changes arise from all of the following, except a. Net income b. Payment of dividend c. Change in accounting estimate d. Change in accounting policy

Change in accounting estimate

Which is an adjustment of the opening balance of retained earnings? a. Change in accounting policy b. Change in accounting estimate c. Change in accounting policy and prior period error d. Change in accounting estimate and prior period eror

Change in accounting policy and prior period error

Which is not a basic financial instrument of a smallentity? a. Cash in bank b. Accounts receivable c. Note payable d. Investment in convertible preference shares

Investment in convertible preference shares

Basic financial instruments are initially measuredat a. Transaction price including transaction cost b. Transaction price excluding transaction cost c. Amortized cost d. Present value of future payments

Transaction price including transaction cost

Which statement is incorrect about subsequent measurement of basic financial instruments? a. Debt instruments are measured at amortized costusing effective interest b. Investment in untraded shares are carried at cost less impairment c. Investment in traded shares are measured fair value d Investment in traded shares are measured at the lower of cost or fair value

Investment in traded shares are measured fair value

For debt instrument at amortized cost, the impairmentloss is a. Excess of carrying amount overapresent value of cash flows b. Excess of present value of cash flows over carrying amount c. Excess of carrying amount over fair value. d. Excess of fair value over carrying amount

Excess of carrying amount overapresent value of cash flows

For financial asset measured at cost less impairment,the impairment loss is the excess of a. Carrying amount over the best estimate of selling price b. Best estimate of selling price over carrying amount c.Carrying amount over the fair value d. Fair value over best estimate of selling price.

Carrying amount over the best estimate of selling price

Inventories of a small entity are measured at a. Fair value b. Market value c. Lower of cost or market value d. Lower of cost or net realizable valuel

Lower of cost or market value

All investments in associate of a small entity are accounted for using a. Cost model b. Equity method c. Either cost model or equity method d. Fair value model

Either cost model or equity method

All investment properties of a small entity are subsequently measured using a. Cost model b. Fair value modela c. Either cost model or revaluation model d. Either cost model or fair value model

Either cost model or fair value model

A small entity shall apply which accounting policy for property, plant and equipment? a. Cost model b. Fair value model c. Either cost model or fair value model d. Either cost model or revaluation model

Either cost model or fair value model

Which statement is incorrect with respect to government grant of a small entity? a. Unconditional monetary grant is recognized in income when receivable. b. Conditonal monetary grant is recognized in income only when the performance condition is met. c.Monetary grant is recognized as liability before recognition criteria are met. d. Nonmonetary grant shall not be recognized.

Nonmonetary grant shall not be recognized.

What is the treatment of borrdwing cost of a small entity? a. Expensed as incurred b. Capitalized c. May be expensed or capitalized depending on circumstances d. Not recognized

Expensed as incurred

A small entity shall measure intangible asset using a. Cost model b. Fair value model c. Revaluation model d. Either cost model or fair value model

Cost model

How is impairment loss of an asset recognized? a. Excess of carrying amount over recoverable amount b. Excess of recoverable amount over carrying amount c. Excess of carrying amount over fair value less cost of disposal d. Excess of carrying amount over value in use

Excess of carrying amount over recoverable amount

Biological asset of a small entity is measured using a. Cost model b. Current market price model c. Either cost model or fair value model d. Either cost model or current market price model

Either cost model or current market price model

Agricultural produce of a small entity is measured at a. Current market price at the point of harvest b. Current market price less cost of disposal at then point of harvest c. Fair value at the point of harvest d. Fair value less cost of disposal at the point of harvest

Current market price at the point of harvest

What is the measurement of a provision? a. Best estimate at reporting date b. Best estimate at settlement date c. Present value of future payment d. Midpoint of the range

Best estimate at reporting date

A small entity shall account for a lease using a. Operating lease model b. Finance lease model c. Either operating lease or finance lease d. Operating lease for lessee and finance lease for lessor

Operating lease model

A small entity shall account for income tax using a. Taxes payable method b. Deferred income taxes method c. Either taxes payable method or deferred income taxes method d. Neither taxes payable method nor deferred income taxes method

Either taxes payable method or deferred income taxes method

Deferred tax asset or liability shall be measured at a. Current tax rate b. Expected future tax rate c. Enacted future tax rate d. Average annual tax rate

Enacted future tax rate

A small entity shall account for postemployment benefit using a. Accrual method b. Cash method c. Either accrual method or cash method d. Either accrual method or projected benefit method

Accrual method

The benefit obligation of small entity is calculated under a. R.A. 7641 b. Company policy c. Company policy if higher than R.A. 7641 d. Qualifying insurance policy

Company policy if higher than R.A. 7641

Equity instruments are measured at a. The amount of cash received b. Present value for deferred payment c. Fair value of noncash consideration received d. All of these are used in measuring equity instruments

All of these are used in measuring equity instruments

Equity settled share-based payment transactions are measured at a. Net asset value b. Fair value c. Liquidation value d. Assessed value

Net asset value

Cash settled share-based payment transactions are measured at a. Fair value of liability at reporting date b. Net asset value of liability at reporting date c. Fair value of liability at reporting date and remeasured at date of settlement d. Net asset value of liability at reporting date and remeasured at date of settlement

Fair value of liability at reporting date and remeasured at date of settlement

The revenue of small entity from sale of goods is measured at a. Fair value of consideration received or receivable b. Fair value of consideration received or receivable less trade discount, prompt payment discount and volume rebate c. Cash received less trade discount d. Present value of consideration

Fair value of consideration received or receivable less trade discount, prompt payment discount and volume rebate

Notes to financial statements a. Are relatively unimportant facts b . Document the source of financial statement facts c. Are an integral part of financial statements d. Are irrelevant and immaterial facts

Are an integral part of financial statements

Disclosure of information about key sources of estimation uncertainty a. Is voluntary b. Is mandatory c. Is either voluntary or mandatory d. Depends on the industry

Is mandatory

The presentation systematic manner of the notes to financial statements in a a. Is voluntary b. Is mandatory c. Is mandatory, as far as practicable d. Depends on the industry

Is mandatory, as far as practicable

the cross reference between each line in financial statements and any related information disclosed in the notes to financial statements a. Is voluntary b. Is mandatory c. Depends on the industry d. Is either voluntary or mandatory

Is mandatory

Disclosure of information about key sources of estimation uncertainty a. Is voluntary b. Is mandatory c. Is either voluntary or mandatory d. Depends on the industry

Is mandatory

Disclosure of information about judgments a. Is voluntary b. Is mandatory c. Is either voluntary or mandatory d. Depends on the industry

Is mandatory

Which best demonstrates the standard of adequate disclosure? a. The separate income statement b. The auditor's reeport c. The tax return d. The notes to financial statements

The notes to financial statements

Which statement is incorrect regarding notes to financial statements? a. IFRS requires specific note disclosures including disaggregation of inventories. b. IFRS requires a maturity analysis for receivables. c. should be IFRS requires that all notes clear, simple to understand and nontechnical in nature. d. All of the choices are correct

should be IFRS requires that all notes clear, simple to understand and nontechnical in nature.

Which is a method of disclosing pertinent information? a. Supporting schedule b. Parenthetical explanation c. Cross reference and contra item d. All of these are methods of disclosing pertinent information

All of these are methods of disclosing pertinent information

An inventory accounting policy that should be disclosed in a summary of significant accounting policies is a. Composition of inventory into raw materials, goods in process and finished goods b. Major backlog of inventory orders c. Method used for pricing inventory atory d. All of these should be disclosed

Method used for pricing inventory atory

Application of the full disclosure principle a. Is theoretically desirable but not practical because the cost of complete disclosure exceeds the benefit. b. Is violated when important financial information is buried in the notes to financial statements. c. Is demonstrated by the use of supplementary information presenting the effects of changing prices. d. Requires that the financial statements should be consistent and comparable.

Is demonstrated by the use of supplementary information presenting the effects of changing prices.

The standard of full disclosure is best described by which of the following? a. All information related to operating objectives must be disclosed in the financial statements. b. Information about each account balance appearing in the financial statements is included in the notes. c. Enough information should be disclosed in order that a prospective investor make can d. Disclosure of any financial facts significant enough to influence the judgment of a primary user

Disclosure of any financial facts significant enough to influence the judgment of a primary user

What is the purpose of information presented in the notes? a. To provide disclosures required by GAAP b. To correct improper presentation in the statements c. To provide recognition of amounts not included in the financial statements d. To present management response to auditor comments

To provide disclosures required by GAAP

The notes to financial statements should not be used to a. Describe significant accounting policies. b. Describe depreciation method employed. c. Describe the principles and methods peculiar to the industry in which the entity operates. d. Correct an improper presentation in the statements

Correct an improper presentation in the statements

An entity shall disclose in the summary of significant accounting policies a. The measurement basis used b. All the measurement bases whether used or not c. The measurement basis used in preparing the financial statements and the accounting policies used. d. All of the measurement bases and the accounting policy choices available to the entity

The measurement basis used in preparing the financial statements and the accounting policies used.

Which of the following information should be disclosed in the summary of significant accounting policies? a. Refinancing of debt subsequent to the reporting period b. Guarantee of indebtedness of others c. Criteria for determining which investments are treated as cash equivalents d. Adequacy of pension plan assets relative to vested benefits

Criteria for determining which investments are treated as cash equivalents

The summary of significant accounting policies should disclose a. Effect of retroactive application of an accounting change b. Income recognition on long term construction contracts c. Adequacy of pension plan assets d. Future lease payments

Income recognition on long term construction contracts

The summary of significant accounting policies should disclose a. The composition of property, plant and equipment and the depreciation method used b. The composition of property, plant and equipment only C. The depreciation method used only d. Neither the composition of property, plant and equipment nor the depreciation method used

The depreciation method used only

Which of the following should be included in of significant accounting policies? the summary a. Property, plant and equipment recorded at cost with the depreciation computed principally by straight line b. A business component was sold during the current year c. Breakdown of sales attributable to business components d. Future ordinary share dividends

Property, plant and equipment recorded at cost with the depreciation computed principally by straight line

Which is not a required disclosure of accounting policies? a. The measurement basis used b. Key management personnel involved in drafting the summary of significant accounting policies c. Disclosures required by Standards d. The nature of operations and the policies applied

Disclosures required by Standards

The disclosure of accounting policies is important to financial statement users in determining a. Net income for the year. b. Whether accounting policies are consistently applied from year to year. c. The measurement of obsolete inventory. d. Whether the working capital position is adequate.

Whether accounting policies are consistently applied from year to year.

Significant accounting policies may not be a. Selected on the basis of judgment. b. Selected from existing acceptable alternatives. c. Unusual or innovative in application. d. Omitted from financial statement disclosure

Omitted from financial statement disclosure

Related parties include all of the following, except a. Parent, subsidiary and fellow subsidiaries b. Associates c. Key management personnel and close family members of such key management personnel d. Two venturers simply because they share joint control over a joint venture

Two venturers simply because they share joint control over a joint venture

A related party transaction is a transfer a. Between related parties when a price is charged. b. Between related parties, regardless of whether a price is charged. c. Between unrelated parties when a price is charged. d. Between unrelated parties, regardless of whether a price is charged.

Between related parties, regardless of whether a price is charged.

Unrelated parties include which of the following? a. Providers of finance in the course of their normal dealings with an entity by virtue only of those dealings. b. Government agencies c. Single customer with whom an entity transacts a significant volume of business merely by virtue of the resulting economic dependence. d. All of these are unrelated parties

All of these are unrelated parties

Close family members of an individual include all, except a. The individual's spouse and children b. Children of the individual's spouse c. Dependents of the individual or individual's spouse d. Brothers and sisters of the individual

Brothers and sisters of the individual

The minimum disclosures about related party transactions include all of the following, except a. The amount of the transaction b. Amount of outstanding balance c. Allowance for doubtful accounts related to the outstanding balance d. Nature of the relationship

Nature of the relationship

Which is not included in key management personnel compensation? a. Short-term benefit b. Share-based payment c. Termination benefit d. Reimbursement of out-of-pocket expenses

Reimbursement of out-of-pocket expenses

Which of the following is not a mandated disclosure about related party transactions? a. Relationship between parent and subsidiaries b. Names of all the associates that an entity has dealt with during the year. c. Name of the entity's parent and, if different, the ultimate controlling party. d. If neither the entity's parent nor the ultimate controlling entity produces financial statements available for public use, then the name of the next most senior parent that does so.

Names of all the associates that an entity has dealt with during the year.

Which of the following is not a required minimum disclosure about related party transaction? a. The amount of related party transaction b. The amount of the outstanding balance c. The amount of similar transaction with unrelated parties to establish that comparable related party transaction has been entered at arm's length d. Doubtful debt related to the outstanding balance

The amount of similar transaction with unrelated parties to establish that comparable related party transaction has been entered at arm's length

Related party transactions include all, except a. A venturer sold goods to the joint venture. b. Sold a car to the uncle of the entity's finance director. c. Sold goods to another entity owned by the daughter of the managing director. d. All of these are related party transactions.

Sold a car to the uncle of the entity's finance director.

All of the following are related party transactions, except a. Transferred goods from inventory to a subsdiary b. Sold an entity car to the wife of the managing director c. Sold an asset to an associate d. Took out a huge bank loan

Took out a huge bank loan

An entity shall classify a noncurrent asset or disposal group as held for sale when a. The carrying amount of the asset or disposal group will be recovered through a sale transaction. b. The carrying amount of the asset or disposal group will be recovered through continuing use. c. The noncurrent asset or disposal group is to be abandoned. d. The noncurrent asset or disposal group is idle or retired from active use.

The carrying amount of the asset or disposal group will be recovered through a sale transaction.

A noncurrent asset that is to be abandoned shall not be classified as held for sale because a. The carrying amount will be recovered principally through continuing use. b. The noncurrent asset is difficult to value. c. It is unlikely that the noncurrent asset will be sold within twelve months. d. It is unlikely that there will be an active market for the noncurrent asset

The carrying amount will be recovered principally through continuing use.

An entity recently moved to a new building. The old building is being actively marketed for sale and the entity expects to complete the sale in four months. Which statement is incorrect regarding the old building? a. It will be reclassified as an asset held for sale. b. It will be classified as a current asset. c. It will no longer be depreciated. d. It will be measured at historical cost.

It will be measured at historical cost.

If a financial report contains both the consolidated financial statements of a parent and the parent's separate financial statements, segment information is required in a. The separate financial statements only b. The consolidated financial statements only c. Both the separate and consolidated financial statements d. Neither the separate nor the consolidated financial statements

Both the separate and consolidated financial statements

An operating segment is a component of an entity a. That engages in business activities from which it may earn revenue and incur expenses. b. Whose operating results are regularly reviewed by the entity's chief operating decision maker. c. For which discrete information is available. d. All of these characterize an operating segment.

All of these characterize an operating segment.

Which quantitative threshold is not a requirement in qualifying a reportable segment? a. The segment revenue, both external and internal, is 10% or more of the combined external and internal revenue of all operating segments. b. The segment profit or loss is 10% or more of the greater between the combined profit of profitable segments and combined loss of unprofitable segments. c. The segment assets are 10% or more of the combined assets of all operating segments. d. The segment assets are 20% or more of the combined assets of all operating segments

The segment assets are 20% or more of the combined assets of all operating segments

An operating segment is considered reportable when any of the following conditions is met, except a. Segment revenue is 10% or more of the combined revenue of all of the entity's segments. b. Segment assets are 10% or more of the combined assets of all segments. c. Segment liabilities are 10% or more of the combined liabilities of all segments. d. Segment's profit or loss is 10% or more of the combined profit of all segments that did not incur a loss.

Segment liabilities are 10% or more of the combined liabilities of all segments.

Operating segments that do not meet any of the quantitative thresholds a. Cannot be considered reportable. b. May be considered reportable and separately disclosed if management believes that information about the segment would be useful to the users of the financial statements. c. May be considered reportable and separately disclosed if the information is for internal use. d. May be considered reportable and separately disclosed if this is the practice within the economic environment in which the entity operates.

May be considered reportable and separately disclosed if management believes that information about the segment would be useful to the users of the financial statements

Segment reporting requires that an entity should provide reconciliations of segment information. Which is not a required reconciliation? a. The total of the reportable segments' revenue to the entity revenue b. The total of the reportable segments' profit or loss to the entity profit or loss before tax expense and discontinued operations c. The total number of major customers of all segments to the total number of major customers of the entity d. The total of the reportable segments' assets to the entity assets

The total number of major customers of all segments to the total number of major customers of the entity

It is a contract giving the owner the right but not the obligation to buy an asset at a specified price in the future. a. Interest rate swap b. Forward contract c. Futures contract d. Call option

Call option

If the market price is greater than the strike or exercise price, the call option is a. At the money b. In the money c. On the money d. Out of the money

In of the money

If the market price is lower than the option price, the call option is a. In the money b. At the money c. On the money d. Out of the money

Out of the money

If the market price option is is equal to the option price, the call a. Out of the money b. On the money c. At the money d. In the money

At the money

All of the following are based on a highly probable forecast transaction, except a. Forward contract b. Futures contract c. Option d. Interest rate swap

Interest rate swap

should be IFRS requires that all notes clear, simple to understand and nontechnical in nature.

All of these are methods of disclosing pertinent information

Disclosure of any financial facts significant enough to influence the judgment of a primary user.

Is demonstrated by the use of supplementary information presenting the effects of changing prices.

Method used for pricing inventory

An entity that entered into a related party transaction would be required to disclose all of the following information, except a. Nature of the relationship between the parties. b. Nature of any future transactions planned between the parties and the terms involved. c. Peso amount of the transaction. d. Amount due from or to related parties at the end of reporting period.

Nature of any future transactions planned between the parties and the terms involved.

Which is not a required related party disclosure? a. The son of the chief executive officer of the entity b. The parent of the entity c. An entity that has a common director with the entity d. Joint venture in which the entity is a venturer

An entity that has a common director with the entity

All of the following are related parties, except a. Joint venture in which the entity is a venturer b. A postemployment benefit plan for the employees c. An executive director of the entity d. The partner of a key manager is a major supplier of the entity

The partner of a key manager is a major supplier of the entity

Which of the following is not a related party of an entity? a. A shareholder of the entity owning twenty percent b. An entity providing banking facilities to the entity c. An associate of the entity d. Key management personnel of the entity

An entity providing banking facilities to the entity

Which of the following should be included in key management personnel compensation? a. Social security contributions b. Postemployment benefits c. Social security contributions and postemployment benefits d. Social security contributions, postemployment benefits and dividends to shareholders

Social security contributions and postemployment benefits

Which event after the reporting period would require adjustment? a. of plant as a Loss result of fire b. Change in the market price of investment c. Loss on inventory resulting from flood loss d. Loss on a lawsuit the outcome of which was deemed uncertain at year-end

Loss on a lawsuit the outcome of which was deemed uncertain at year-end

Events that occur after the current year-end but before the financial statements are issued and affect the realizability of accounts receivable should be a. Discussed only in the management annual report. b. Disclosed only in the notes to financial statements. c. Used to record an adjustment to bad debt expense. d. An adjustment directly to retained earnings.

Used to record an adjustment to bad debt expense.

Nonadjusting events include all of the following, except a. A major business combination after reporting period b. Announcing a plan to discontinue an operation c. Expropriation of major asset after reporting period d. Destruction of a major production plant by a fire before the end of the reporting period

Destruction of a major production plant by a fire before the end of the reporting period

Nonadjusting events include all of the following, except a. The entity announced the discontinuation of an operation. b. The entity entered into an agreement to purchase the leased building. c. Destruction of a building by earthquake after the end of reporting period. d. A mistake in the calculation of allowance for uncollectible accounts receivable.

A mistake in the calculation of allowance for uncollectible accounts receivable.

Which event after the end of reporting period would generally require disclosure? a. Retirement of key management personnel b. Settlement of litigation when the event that gave rise to the litigation occurred in a prior period. c. Strike of employees d. Issue of a large amount of ordinary shares

Strike of employees

Financial statements shall include disclosure of material transactions between related parties, except a. Nonmonetary exchange by affiliates b. Sales of inventory by a subsidiary to the parent when consolidated financial statements are prepared. c. Expense allowance for executives which exceed normal business practice d. An entity's agreement to act as surety for a loan to the chief executive officer

Nonmonetary exchange by affiliates

Which should be disclosed as related party transaction in the entity's separate financial statements? a. Key management personnel compensation b. Sales to affiliated entities c. Key management personnel compensation and sales to affiliated entities d. Neither key management personnel compensation nor sales to affiliated entities

Key management personnel compensation and sales to affiliated entities

An entity has cosigned the mortgage note on the home of its president guaranteeing the indebtedness in the event that the president should default. The entity considers the likelihood of default to be remote. How should the guarantee be treated in the financial statements? a. Disclosed only b. Accrued only c. Accrued and disclosed d. Neither accrued nor disclosed

Disclosed only

Which of the following transactions most likely would be a related party transaction requiring disclosure? a. The entity borrowed P1,000,000 from Southwest Bank issuing a noninterest-bearing note. b. The entity borrowed P2,000,000 from Northwest Bank at a rate significantly above the prevailing market rate. c. The entity borrowed P500,000 from Eastwest Bank with no scheduled terms for how or when funds will be repaid. d. All of these would be disclosed as related party transactions.

The entity borrowed P500,000 from Eastwest Bank with no scheduled terms for how or when funds will be repaid.

In order for a noncurrent asset to be classified as held for sale, the sale must be highly probable. What is the meaning of highly probable? a. The future sale is likely to occur. b. The future sale is more likely than not to occur. c. The sale is certain. d. The probability is higher than more likely than not.

The probability is higher than more likely than not.

An entity shall measure a noncurrent asset or disposal group classified as held for sale at a. Carrying amount b. Fair value less cost of disposal c. Lower between carrying amount and fair value less cost of disposal. d. Higher between carrying amount and fair value less cost of disposal.

Lower between carrying amount and fair value less cost of disposal.

What is the treatment of any gain on a subsequent increase in the fair value less cost of disposal of a noncurrent asset classified as held for sale? a. The gain shall be recognized in full. b. The gain shall not be recognized. c. The gain shall be recognized but not in excess of the cumulative impairment loss previously recognized. d. The gain shall be recognized but only in retained earnings

The gain shall be recognized but not in excess of the cumulative impairment loss previously recognized.

Which statement is true concerning the 75% overall size test for reportable segments? a. The total external and internal revenue of all reportable segments is 75% or more of the entity's external revenue. b. The total external revenue of all reportable segments is 75% or more of the entity's external and internal revenue. c. The total external revenue of all reportable segments is 75% or more of the entity's external revenue. d. The total internal revenue of all reportable segments is 75% or more of the entity's internal revenue.

The total external revenue of all reportable segments is 75% or more of the entity's external revenue.

The term chief operating decision maker a. Refers to a manager with a specific title. b. Must be disclosed by title in the financial reporting for segments. c. Must be described in the disclosures for the financial reporting for segments. d. Refers to a function of allocating resources to the operating segments and assessing their performance.

Refers to a function of allocating resources to the operating segments and assessing their performance.

Which statement is not true with respect to a chief operating decision maker? identifies a a. The term chief operating decision maker function and not necessarily a manager with a specific title. b. In some cases, the chief operating decision maker could be the chief operating officer. c. The board of directors acting collectively could qualify as the chief operating decision maker. d. The chief internal auditor would generally qualify as chief operating decision maker.

The chief internal auditor would generally qualify as chief operating decision maker.

In financial reporting for operating segments, an entity shall disclose all of the following, except a. Type of product and service from which each reportable segment derives revenue. b. The title of the chief operating decision maker. c. Factors used to identify the reportable segments. d. The basis of measurement of segment profit or loss and segment assets

The title of the chief operating decision maker.

Entity-wide disclosures include all, except a. Information about products b. Information about geographical areas c. Information about major customers d. Information about intersegment revenue

Information about intersegment revenue

Which is a required enterprise-wide disclosure regarding external customers? a. The identity of any external customer considered major by management b. The identity of any external customer providing 10% or more of operating segment revenue c. Information on major customers is not required in segment reporting d. The fact that transactions with a particular external customer constitute at least 10% of total entity revenue

The fact that transactions with a particular external customer constitute at least 10% of total entity revenue

Which entity is required to report on business segments? a. Publicly traded b. Not for profit c. Joint venture d. Nonpublic

Publicly traded

An entity must disclose all of the following about each reportable segment if the amounts are reviewed by the chief operating decision maker, except a. Depreciation expense b. Allocated expense c. Interest expense d. Income tax expense

Allocated expense

An entity shall disclose for each reportable segment all of the following specified amounts included in the measure of profit or loss, except a. Revenue from external customers b. Revenue from internal customers c. Interest revenue d. Gain on disposal of investment

Gain on disposal of investment

An entity shall disclose for each reportable segment all of the following specified amounts included in the measure of profit or loss, except a. Depreciation and amortization b. The entity's interest in the profit or loss of associate c. Income tax expense d. General corporate expenses

General corporate expenses

An entity must disclose all of the following about each reportable segment if the amounts are reviewed by the chief operating decision maker, except a. Unusual items b. Income tax expense c. Intersegment revenue d. Cost of goods sold

Cost of goods sold

For segment reporting purposes, which test must be applied to determine if a component is a reportable operating segment? a. Revenue test and asset test b. Revenue test, asset test and profit or loss test c. Revenue test, asset test and expense test d. Revenue test, asset test and cash flow test

Revenue test, asset test and profit or loss test

What may be considered as the practical limit to the number of reportable operating segments? a. Five segments b. Ten segments c. Six segments d. Four segments

Ten segments

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

Management approach

Which of the following provides the holder the right to sell at an exercise or strike price anytime during a specified period a gain accrues to the holder as the market price of the underlying falls below the strike price? a. Forward contract b. Put option c. Swaption d. Call option

Put option

Which type of contract is unique in that it protects the owner against unfavorable movement in the price while allowing the owner to benefit from favorable movement? a. Interest rate swap b. Forward contract c. Futures contract d. Option

Option

What is the amount initially paid for a call option? a. Option premium b. Notional amount c. Strike price d. Intrinsic value

Option premium

In exchange for the right inherent in an option contract, the owner of the option will typically pay a price a. Only when a call option is exercised. b. Only when a put option is exercised. c. When either a call option or a put option is exercised. d. At the time the option is received regardless of whether the option is exercised or not

At the time the option is received regardless of whether the option is exercised or not

Which statement is incorrect concerning an option? a. A call option is the right to purchase an asset at a specified price at some future time. b. A put option is the right to sell an asset at a specified price during a definite period at some future time. c. An option is a right and not an obligation. d. An option requires no payment

An option requires no payment

Which term best describes a component of a hybrid instrument? a. Financial asset at fair value. through other comprehensive income b. An embedded derivative c. Held for collection investment d. Financial asset held for trading

An embedded derivative

The process of bifurcation a. Protects an entity from loss. b. Includes entering into an agreement between two counterparties to exchange cash flows. C. Is the measurement of an embedded derivative. d. Separates an embedded derivative from the host contract.

Separates an embedded derivative from the host contract.

If not separated, the host contract is measured at a. Amortized cost b. Fair value through profit or loss C. Fair value through other comprehensive income d. Amortized cost, fair value through profit or loss or fair value through the comprehensive income

Amortized cost, fair value through profit or loss or fair value through the comprehensive income

Which is not an embedded derivative? a. Equity conversion option in a convertible bond b. Redemption option in an investment in redeemable Preference preference share price of gold c. Interest payment on bond investment linked to the d. Share warrant attached to bond payable

Share warrant attached to bond payable

An embedded derivative shall be bifurcated from the host contract under the following conditions, except a. The economic characteristics and risks of the host contract and the embedded derivative are not closely related. b. A separate instrument with the same terms as the embedded feature would meet the definition of a derivative. c. The host contract is measured at fair value through other comprehensive income. d. The host contract is measured at fair value through profit or loss.

The host contract is measured at fair value through profit or loss.

given debit credit material 600k 200k goods in process

COGM 7M COGS 7.1M

given ending goods in process 1,000,000 depreciation on factory building 320k beg, raw materials 400k

COGM 5,340,000

given materials used 50% direct labor 30% manufacturing overhead 20%

direct labor cost 1.8M

given beginning inventory 400k freight in 300k purchase returns 900k COGS is six times the distribution cost

Gross Purchases 8.2M