FINAL EXAM

1. To be relevant, information should have which of the following?

a. Verifiability.
b. Confirmatory value.
c. Understandability.
d. Costs and benefits.

2. The PFRSs do not apply to

a. sole proprietorships.
b. partnerships.
c. cooperatives.
d. non-profit organizations.
e. The PFRSs apply to all of these entities.

3. "Aanhin mo pa ang damo kung patay na ang kabayo.”

a. Materiality
b. Relevance
c. Timeliness
d. Biological asset - Horse

4. This refers to financial statements that are intended to meet the needs of users who
are not in a position to require an entity to prepare reports tailored to their particular
information needs.
a. All-purpose financial statements
b. General purpose financial statements
c. Managerial reports
d. Unisex financial statements

5. A complete set of financial statements does not include a

a. statement of financial position
b. statement of comprehensive income
c. statement of retained earnings
d. notes

6. Which of the following is an acceptable method of reporting other comprehensive

income and its components?
a. In a statement of profit or loss and other comprehensive income.
b. In a statement of changes in equity
c. In the notes only.
d. All of these

7. Which of the following may be included in the cost of inventories?

a. Storage costs of part-finished goods
b. Abnormal amount of wasted costs of materials, labor and factory overhead
c. Recoverable purchase taxes
 d. Administrative costs

8. Which of the following cost formulas is not allowed under PAS 2?

a. FIFO
b. Weighted average
c. Specific identification
d. LIFO

9. Interest expense that is paid in cash is presented in the statement of cash flows
under
a. operating activities.
b. investing activities
c. financing activities
d. a or c

10. When it is difficult to distinguish a change in accounting policy from a change in

accounting estimate, the change is treated as
a. a change in an accounting estimate.
b. a change in an accounting policy.
c. a correction of prior period error.
d. not accounted for.

11. ABC Co. completes the draft of its December 31, 20x1 year-end financial statements
on January 31, 20x2. On February 5, 20x2, the board of directors reviews the
financial statements and authorizes them for issue. The entity announces its profit
and selected other financial information on February 23, 20x2. The financial
statements are made available to shareholders and others on March 1, 20x2. The
shareholders approve the financial statements at their annual meeting on March 18,
20x2 and the approved financial statements are then filed with a regulatory body on
April 1, 20x2. Events after the reporting period are those occurring
a. from December 31, 20x1 to February 5, 20x2.
b. from January 1, 20x2 to February 5, 20x2.
c. from January 1, 20x2 to February 23, 20x2.
d. from January 1, 20x2 to March 18, 20x2.

12. These are differences that do not have future tax consequences.
a. Permanent differences
b. Taxable differences
c. Temporary differences
d. Deductible differences

13. This type of difference will give rise to deferred tax asset.
a. Taxable temporary difference
b. Permanent difference
c. Deductible temporary difference
d. No difference
14. In accounting parlance, depreciation means
a. the amount derived by dividing the cost of an asset over its useful life.
b. the amount derived by multiplying the cost of an asset by its useful life.
c. the systematic allocation of the depreciable amount of an asset over its
useful life.
d. the decline the in the value of an asset during the period.

15. It is a type of retirement plan where the employer assures a definite amount of
benefit to be received by the employee. The risk that funds needed to pay the
agreed benefits may be insufficient is retained by the employer.
a. Defined contribution plan
b. Defined benefit plan
c. Leche plan
d. Plan vs. zombies

16. According to PAS 23, borrowing costs are capitalized when

a. they relate directly to the acquisition, construction or production of a
qualifying asset.
b. the entity chooses to capitalize them.
c. they are material and are expected to be incurred over more than one reporting
period.
d. all of these

17. Which of the following are not related parties?

a. A parent and its subsidiary
b. Two or more subsidiaries with the same parent
c. A company and its Chief Executive Officer
d. Two co-venturers of a common joint venture business

18. According to PAS 27, which of the following is required to present separate financial
statements?
a. A publicly-listed entity
b. A parent
c. An entity with an investment in associate
d. None of these

19. On January 1, 20x1, Entity A acquires 25% interest in Entity B for ₱800,000. Entity B
reports profit of ₱1,000,000 and declares dividends of ₱100,000 in 20x1. How much
is the carrying amount of the investment in associate on December 31, 20x1?
a. 800,000
b. 1,250,000
c. 1,000,000
d. 1,025,000
20. Entity A issues convertible bonds with face amount of ₱2,000,000 for ₱2,600,000.
Each ₱1,000 bond is convertible into 10 shares with par value of ₱60 per share. On
issuance date, the bonds are selling at 102 without the conversion option. What is
value allocated to the equity component on initial recognition?
a. 2,040,000
a. 540,000
b. 560,000
c. 460,000

21. Which of the following is correct regarding the provisions of PAS 34?
a. All entities should publish quarterly interim reports.
b. All publicly-listed entities should publish quarterly interim reports.
c. All publicly-listed entities should publish semi-annual interim reports.
d. PAS 34 does not require any entity to publish interim reports, and how
often.

22. If a cash-generating unit (CGU) is impaired, the impairment loss is allocated first to
a. the goodwill in that CGU.
b. the noncurrent assets in that CGU.
c. the current assets in that CGU.
d. a and b

23. The amount at which an asset is recorded in the books of accounts minus any
accumulated depreciation and accumulated impairment losses is referred to as
a. fair value.
b. cost.
c. carrying amount.
d. amortized cost.

24. Which of the following is considered a bearer plant?

a. Palm oil
b. Corn oil
c. Baby oil
d. Oil palm

25. According to PFRS 5, assets held for sale are measured at

a. fair value.
b. fair value less costs to sell.
c. carrying amount.
d. lower of b and c

26. After recognition, exploration and evaluation assets are accounted for under the
a. cost model
b. fair value model
c. revaluation model
d. a or c
27. Entity A acquires a legal right to search for mineral resources in a specific area.
What PFRS should Entity A apply in accounting for the costs it incurs on its
exploration and evaluation activities?
a. PAS 26
b. PFRS 4
c. PFRS 5
d. PFRS 6

28. Which of the following properly describes credit risk?

a. The possibility that Entity A will not be able to settle its financial liabilities
when they become due.
b. The possibility that Entity A will incur loss on its foreign-currency denominated
financial instruments when there is an adverse change in foreign exchange rates.
c. The possibility that Entity A cannot collect on its receivables.
d. The possibility that Entity A will be required to pay higher interest on its variable-
rate loan when market interest rates increase.

29. Andrix Domingo’s Sari-sari Store has a sign that reads “Your credit is good but I
need cash.” What type of risk is Mr. Andrix trying to avoid by putting up that sign?
a. credit risk
b. market risk
c. liquidity risk
d. store risk

30. Rex Banggawan Co. acquires investment in stocks of Darrell Joe Asuncion. The
investment will be held for trading and it gives Rex neither significant influence nor
control over Darrell. Rex will most likely measure the investment
a. at fair value through profit or loss.
b. using the equity method.
c. at amortized cost.
d. at historical cost

31. According to PFRS 10, which of the following is not an element of control?
a. power
b. exposure, or rights, to variable returns
c. major holdings
d. ability to affect return.

32. Which of the following is a peculiar characteristic of a joint arrangement?

a. significant influence
b. joint control
c. control
d. joint venture
33. This PFRS provides a single framework for measuring the fair value of an asset,
liability or equity when other PFRSs require or permit measurement at fair value or
fair value less costs to sell. It also prescribes the disclosures related to fair value
measurement.
a. PFRS 3
b. PAS 1
c. PFRS 9
d. PFRS 13

34. The tenant (as opposed to the landlord) in a lease contract is referred to as the
a. Lessor
b. Lessee
c. Leasee
d. Tenor

35. Which of the following is a characteristic of a finance lease?

a. The lease term is substantially less than the estimated economic life of the
leased property.
b. The lease contains a bargain-purchase option.
c. The present value of the minimum lease payments at the beginning of the lease
term is 75% or more of the fair value of the property at the inception of the lease.
d. The lease obligation does not appear in the balance sheet of the lessee.

36. Leases are accounted for under

a. PAS 16
b. PFRS 14
c. PFRS 15
d. PFRS 16

37. PFRS 8 relates to which of the following?

a. Disclosure of operating segments
b. Disclosure of related party relationships and transactions
c. Disclosure of events after the reporting period
d. Interim financial reporting

38. You are the accountant of ABC Co. During the period, ABC Co. acquired short-term
investment in stocks, which of the following financial reporting standards would most
likely be relevant in accounting for the transaction?
a. PFRS 8
b. PFRS 9
c. PAS 28
d. b or c

39. You are a CPA and were engaged to audit the annual financial statements of ABC
Co., a mining company. Which of the following standards is most likely relevant to
ABC Co.?
 a. PFRS 4
b. PAS 34
c. PAS 41
d. PFRS 6

40. You are the accountant of ABC Co. During the period, your company acquired
majority holdings in XYZ, Inc. This transaction gave rise to goodwill. Which of the
following standards will be referred to in your company’s notes to the financial
statements under summary of significant accounting policies?
a. PFRS 3
b. PFRS 10
c. PAS 36
d. All of these

41. You are the accountant of Entity X. The board of directors asked you for an advice
because they feel like the company’s financial statements do not properly reflect the
company’s financial position. The board noted out that the company’s properties
(i.e., land) are absurdly stated at their historical cost. The properties were acquired
50 years ago and the market prices of the properties have more than tripled since
then. In providing your professional advice, you will most certainly quote the
provisions of which of the following standards?
a. PAS 7
b. PAS 33
c. PAS 16
d. All of these

42. When determining whether an investor controls an investee, the investor should
refer to
a. PAS 21
b. PFRS 10
c. PAS 10
d. PAS 1

43. When measuring the fair value of an asset or a liability, an entity refers to
a. PFRS 13
b. PAS 28
c. PFRS 1
d. PFRS 7

44. Non-current assets held for sale and discontinued operations are accounted for
under
a. PFRS 4
b. PAS 41
c. PFRS 5
d. PFRS 8
45. The equity method of accounting for investments is discussed under
a. PAS 28
b. PAS 29
c. PAS 21
d. PFRS 2

46. The computation of employee retirement benefits expense is addressed in this

standard.
a. PAS 17
b. PFRS 7
c. PAS 19
d. PFRS 9

47. This standard deals with the recognition and measurement of financial instruments.
a. PAS 32
b. PFRS 7
c. PFRS 9
d. PFRS 3

48. Joint arrangements are discussed under

a. PFRS 1
b. PFRS 11
c. PAS 20
d. PAS 24

49. Entity A is preparing its first PFRS financial statements. Which of the following
standards is most relevant to Entity A?
a. PFRS 1
b. PAS 12
c. PAS 8
d. PFRS 9

50. This standard is most relevant to insurance companies.

a. PFRS 14
b. PFRS 15
c. PFRS 16
d. PFRS 17

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