IA Flashcards
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.
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
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
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
Agricultural activity includes all of the following, except
a. Raising livestock
b. Perennial cropping
c. Aquaculture
d. Ocean fishing
Ocean fishing
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.
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.
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
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
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.
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
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
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.
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.
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
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.
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.
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.
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.
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
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
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
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
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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
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.
