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SET A III. The Financial Reporting Standards Council, theBoard Of

INSTRUCTONS: Select the correct answer for each of the following questions. Mark Accountancy, and the Professional Regulation Commission are involved in the
only one answer for each item by shading the corresponding letter of your choice on issuance of Philippine Financial Reporting Standards
the answer sheet provided. STIRCTLY NO ERASURES ALLOWED. Use Pencil No. 2 only.
a. Only I is true
1. Which of the following statements about accounting is true or false? b. I and II are true
c. I and III are true
I. The Romans kept elaborate financial records andstandardized systems for d. All statements are true
purposes such as the accountability of provincial governors but they not
develop any system of commercial bookkeeping. 3. Choose the incorrect statement about generallyaccepted accounting principles
(GAAP):
II. The first published work on double-entrybookkeeping is presumed to be a a. They are not rigid laws as they are subject to
book on arithmetic written by a businessman which include a chapter the amendment from time to time
subject.
b. Firms that do not comply with GAAP may suffer
III. The phenomenon of globalization gave rise to the complexity of negative economic consequences
international business activities and led to the mandatory uniform application of
international financial reporting standards by all countries. c. Generally accepted accounting principles andregulatory accounting
principles are both enforced by the Bureau of Internal Revenue.
Statement1 Statement2 Statement3
d. The Philippine Financial Reporting Standardsthat constitute GAAP in
a. True True False
the Philippines are not included in the scope of the Conceptual Framework
b. True False True
c. True True True 4. The body stablished by the Financial ReportingStandards Council as its support
d. True False False group tasked to study and deliberate on controversial issues affecting
2. Which of the following statements about the “dueprocess” system in the Philippine accounting practice is
development of a standard is (are) true? a. Philippine Accounting Principle Committee
I. It enables all interested parties to express their view on issues under b. Standing Interpretations Committee
consideration. c. Philippine Interpretations Committee
II. “Due process” in standard-setting takes thefollowing order: d. International Financial Reporting Standards Committee
Exposure draft for comment, Discussion Paper, and Standard
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5. Which of the following statements on the scope ofauthority of the PFRSs and c. The preparation of general-purpose financialstatements is usually
the conceptual Framework is false? based on the assumption that the primary users of information are external
a. The Philippine Financial Reporting Standards inthe Philippine decision-makers.
include the PFRSs, the PASs, and the
Philippine Interpretations d. The general objective of financial accounting isto provide
b. The Conceptual Framework has the highest levelof authority in information about the financial position, performance, and cash flows of an entity
financial accounting and reporting practice in the Philippines that
c. In the absence a Standard or an Interpretationthat specifically is useful in the making economic decisions
applies to a transaction, management should consider the applicability of the
Conceptual Framework in developing and applying an accounting policy that results 8. Which of the following statements will not pertain toan asset?
in information that is relevant and reliable a. It can command a price
d. The Philippine Financial Accounting Standardsapplies to all financial b. It should be exclusively owned by an economicentity
c. It is an economic good
reporting enterprises in the Philippines
d. It is limited in supply
6. Which of the following best describes the double-entryconcept?
a. Only two accounts are affected by each recordingof accountable 9. A system of bookkeeping whereby transactions are notanalyzed in terms of
event. debits and credits. Only a cash book summarizing receipts and disbursement is
b. The debit-credit convention must be used. used. This is known as
c. For every increases in asset, there must be an a. Double-entry system
increase in liability or revenue. b. Single-entry system
d. Events and transactions are analyzed and recorded using the c. Accrual basis
principle of duality and equality
d. hybrid basis
7. Which of the following statements about financialaccounting is incorrect?
a. General purpose financial statements must be 10. If an entity uses the modified cash basis ofaccounting, the modifications from
prepared by a certified public accountant. the accrual basis should have substantial support which requires that
a. The financial statements have only minor
b. Financial accounting is a social science thatcan be influenced by modification from GAAP.
changes in legal, political, social, and business environments.
b. The modifications must be the same as those
required by regulatory body.
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c. The modifications must be the same as GAAP andnot illogical. 13. Financial statements include a statement of financialposition, a statement of
cash flows, and a statement of changes in equity. Which of the following are
d. No modifications are allowed also included as components of basic financial statements?
11. Which of the following statements is incorrect? a. A statement of comprehensive income and accounting policies
b. An income statement and accounting policies
a. All of the accounts of a specific business
c. A combined statement of income and retained
enterprise are referred to as a ledger.
earnings
b. Every adjusting entry affects both a balancesheet and an income d. A statement of cost of goods manufactured and a
statement statement of retained earnings

c. Transactions often overlap accounting periods 14. According to the latest revision of PAS 1, which ofthe following situation will
require a submission of a third balance sheet of a reporting entity as of the
d.The fact that an expense is recognized on the income statement indicates beginning of the earliest traceable accounting period? I. When an entity
that an equivalent outlay of cash has been made in the same period. changes an accounting policy
retrospectively
12. Which of the following entities are required to applythe PRFS for SMEs in
II. When an entity reclassifies certain items in thefinancial statements
Philippine financial reporting?
III. When an entity makes a change in accountingestimate that has a material
a. Excelsior Enterprises with total assets of P347M and total liabilities
effect on current year's operations
of P 284M

b. ABC Noverlty Shoppe with total assets of P 30Mand total liabilities a. I only
of P 5M and submits financial statements to creditors, suppliers, and regulatory b. I and II only
bodies. c. II and III only
d. I, II and III
c. ABE Insurance Company with total assets of P340M and total
liabilities f P 195M 15. For financial reporting in the Philippines, are the following statements true or
false?
d. Rural Bank of Capistrano, Tarlac, with total
assets of P 300M and total liabilities of P 20M I. Philippine practice is present in the balance sheet current assets before non-
current assets, current liabilities; and equity accounts before liabilities. II. Notes are
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normally presented in the following order: summary of significant accounting b. Finance costs, tax expense and income.
policies, statement of compliance with PRFSs; supporting information for items c. Operating expenses, non-operating expenses andextraordinary
presented on the face of the FS; and lastly, other disclosures including contingent items
liabilities and non-financial disclosures d. Gross profit, operating profit and net profit.

a. I- true; - false 18. In accounting, the concept of "recognition" means

b. I- FALSE; II- true a. the process of formally incorporating in the
c. I- true; II- true totals of the balances sheet and income statement
d. I- false; II- false an item that meets "probability" and
"measurability" criteria for accountable events
16. Which of the following statements about "other comprehensive income" section criteria.
of the statement of Comprehensive income (SCI) is/are false?
b. journalizing a transaction in the books or
I. The amount of revaluation surplus reported in the other comprehensive
original entry and posting it to the ledger
income section of the SCI must be the same as the amount of revaluation surplus
ending balance in the general ledger c. assisting an amount or value to an accountable
II. Foreign exchanges gain and losses arising frompurchase of property and event and reporting it in the financial statements.
equipment should be reported under the other comprehensive income section of
the SCI III. Unrealized gain or loss on change in the value of investment Property d. journalizing and posting and accountable event
should be presented in other comprehensive income section of the SCI IV. Only the including it in the trial balance totals
current year's unrealized gain or loss on change in value of available for sale
securities should be shown under comprehensive income of the SCI. 19. Which of the following statements about the conceptof measurement or
valuation in accounting is (are) True?
a. I and II only
I. Under current GAAP, as a general rule, the primary basis of measurement of
b. III and IV only
assets upon acquisition is historical cost.
c. I, II and III only
II. There are some instances when assets andliabilities in the balance sheet are
d. I, II, III and I
a mixture of costs and values
17. Which of the following items is a required disclosurein the income statement? III. The final valuation of assets and liabilities inthe balance sheet are a mixture
of costs and values
a. Revenue, cost of goods sold and advertisingexpense.
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IV. Under no circumstances is price-level accountingacceptable as an alternative b. Included in profit or loss

measurement in accounting in present-day GAAP c. recognized directly in retained earnings
d. All of these
a. I and II only
b. I, II and IV only 22. Are the following statements regarding in the'profit' true or false?
c. I, II and III only (1) Profit is any amount over and above thatrequired to maintain the
d. I, II, III and IV capital at the beginning of the period

20. Which of the following concepts of accounting income is incorrect? (2) Profit is the residual amount that remainsafter expenses have been
a. The comprehensive income concept allows the inclusion of unrealized holding deducted from profit income.
gains and losses on available for
Statement1 Statement2 Statement1
sale securities and revaluation surplus in the
computation of the net income or loss for the accounting Statement2
period. a. False Falseb. False
True
b. The measurement of income is affected by the basis ofaccounting for revenue c. True False d. True
and expenses, that is, cash basis, modified cash or accural basis. True

c. The statement of comprehensive income includes bothrealized and recognized 23. Which of the Following statements about financialstatements is correct?
gains and losses but not the effect of changes in accounting policies and prior a. They accurately measure the results of thestewardship of
period’s errors management for the resources entrusted to it by the capital providers.

d. Under GAAP, the transaction approach is used to recordrevenues, expenses, b. They are the primary responsibility ofmanagement and the external
gains and losses throughout the auditor after audit.
reporting period.
c. PAS 1, Presentation of Financial Statementscovers the overall
21. For particular liabilities designated as at fairvalue through profit or loss, the considerations, contents and structure of basic financial statements for all
amount of the change in fair value that is attribute to change in the liability's credit businesses in their external and internal financial reporting requirements.
risk is d. They provide information about the financial
position, performance and cash flows of an
a. Competent of other comprehensive income
enterprise that is useful to a wide range of users
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27. Which of the following statements is true with regardto the accountant's
in making economic decisions. concept of Materiality?
I. Materiality is the threshold of recognition as to what accountable events will be
24. According to the Conceptual Framework for thepreparation and
recorded in the journals. II. Materiality is the threshold of a decision as to what
presentation of financial statements all of the following are examples of expenses
information is relevant to the face or body of the financial statements and what
except
information is relevant to be presented in the notes thereof.
a. A decrease in the value of inventories due to III. Materiality judgments are based solely on the magnitude of the item
sale Statement I Statement2 Statement3
b. A decrease in asset arising from distribution of a. True True True
assets to equity participants b. False False False
c. A decrease in asset because of benefit received c. False True False
in the current period d. True True False
d. A loss on the disposal of non-current asset
28. Which ONE of the following statements best describesthe term 'financial
25. It is the bringing together of separate enterprisesinto one economic entity position'?
as a result of one enterprise uniting with or obtaining control over the net assets a. The net income and expenses of an entity
and operations of another enterprise. b. The net of the financial assets less liabilities
a. Business combination of an entity
b. Merger c. The potential to contribute to the flow of cashand cash equivalents
c. Consolidation to the entity
d. Incorporate investment d. The assets, liabilities and equity of an entity

26. What is the best cost accumulation procedure to usewhen many batches, 29. Which of the following statements about measurementin accounting is (are)
each differing as to product specification, are produced? true?
a. Job order I. All assets must be initially recognized at historical cost, but the final
b. Process valuation can be mixture of costs and other values.
c. Actual II. Current selling price and net realizable valuediffer conceptually
d. Standard
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III. According to PAS 29. Hyper-inflationary Economy,only non-monetary items 32. The following statements relate to liabilities. Which statement is (are) true?
are restated to current pricelevel amounts in the balance sheet using the national I. Liabilities may be measured by estimates of adefinitive character when the
price index sourced from Central Bank of the Philippines amount of the liability cannot be measured precisely.
a. Only I is true II. All monetary liabilities should be stated in thebalance sheet at their present
b. Only II is true (discounted) values. III. Under current GAAP, there are instances when a decrease in
c. II and III are true liability is matched with an increase in revenue.
d. All statements are true
a. I and II only
30. Which one of the following terms best describes theamount of cash or cash b. II and III only
equivalents that could be currently obtained by selling in asset in an orderly c. I and III only
disposal? d. I, II and III
a. Fair value
b. Realizable value 33. Which of the following statements about Equity is (are) correct?
c. Residual value I. Since equity is the excess of assets over liabilities,equity cannot be
d. Value in use measured separately from the other elements of the financial position.
31. Which of the following statements about accountingrecognition is (are) II. Equity has no specific maturity date uponliquidation.
true? III. Income-related transactions as well as revaluationsurplus and unrealized
holding gains and losses automatically affect equity.
I. In accounting, there are instances when a gain or a loss would arise upon
IV.Under rare or extraordinary circumstances, a gain or loss may be recognized by an
initial recognition of an asset.
entity on transactions with its owners.
II. No asset can simultaneously be an asset of morethan one entity
III. At times, two or more entities may share thebenefits that an asset provides a.I and II only
IV. An appropriate basis for recognizing an asset iswhen a particular enterprise b.I and IV only
acquires the right to utilize and control access to the asset's benefits c.I, II and III only
d.I, II, III and IV
a. I and II only
34. According to PAS 1, Presentation of FS, an asset should be classified as current
b. I and IV only
when
c. I, II and III only
I. It is expected to be realized or held for sale orconsumption in the normal
d. I, II, III, IV course of the enterprise’s operating cycle.
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II. It is held primarily for trading purposes or for theshort-term and expected to least twelve months after the balance sheet date.
be realized within twelve months of the balance sheet date or the operating cycle,
d. after the balance sheet date, before the FS are authorized for issue, to provide a
whichever is longer.
grace period of at least twelve months after the balance sheet date
III. It is cash or a cash equivalent asset which is notrestricted in use.
a. I, II and III 37. According to the current Conceptual Framework, thefollowing are enhancing
b. I and II only qualitative objectives of accounting except
c. I and III only a. Timeless c. Reliability
d. III only b. Verifiability d. Comparability

35. According to PAS 1- Presentation of Financial Statements, which of the following 38. Which is incorrect concerning the qualitative characteristics of financial
is not among the criteria is classifying a liability as a current? statements?
a. Expected to be settled in the entity’s normaloperating cycle. a. The fundamental quality of faithfulrepresentation includes the need
to present information that is prudent, neutral, and free from material error.
b. Due to be settled within twelve months after thebalance sheet date. b. Information has the quality of relevance whenit influences the
c. The entity has an unconditional right to defer settlement of the liability for at economic decisions of user by helping them evaluate past, present or future events
least twelve months or confirming or correcting their past evaluations
after the balance sheet date. c. The need for comparability dictates that theseasonality nature of
d. It is held primarily for the purpose of being traded. the activities of an entity be disclosed in interim financial statements.
d. When information that are result of relatedparty transactions are
36. When an entity breaches an undertaking under a longterm loan agreement, on shown in the financial statements and described as such, these financial
or before balance sheet date, such liability continues to be classified as non-current statements lose their reliability.
if the lender has agreed
39. Which of the following statements pertaining to PAS 7, Statement of Cash
a. After balance sheet date, before the FS are authorizedfor issue, not to Flows is (are) true?
demand payment. I. In a statement of cash flows using the indirectapproach for
operating activities an increase in inventories should be presented as a deduction
b. Before balance sheet date, before the FS areauthorized for issue, not to from net income.
demand payment. II. In a Statement of Cash Flows, banks andfinancial institutions are
c. By the balance sheet date, before the FS are authorized for issue, to provide a allowed to report their receipts and disbursement transactions at net,
grace period of at
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III. Non – cash financing and investing activitiesneed not be reported in c. cost model of accounting;
the financial statements, whether on the face or in the notes thereto d. revaluation model of accounting.
IV. In a statements of Cash Flows using theindirect approach, decrease
in cash equivalents should be presented as addition to net income 43. When applying the provisions of PAS 18, Revenue,which of the following is
a. I and II only b. I, II and IV only c. not among the situations in which an enterprise may retain the significant risks and
I II and IV only d. I, II, III, IV rewards of ownership on the goods?
a. When the receipt of revenue from a particularsale is contingent on
40. AG&P, a construction entity entered into twocontracts with LEGASPI MALL, the derivation of revenue by the buyer from its sale of goods.
which were signed and negotiated as a single package: (1) a contract to build a b. When the enterprise retains an obligation forunsatisfactory
Shopping Mall over a period of three years, and (2) a maintenance contract on the performance covered by normal warrant provisions.
building for a period of five years. Under PAS 11, how should the two contracts be c. When the goods are shipped subject toinstallation and is a
accounted for? significant part of the contract which has not yet been completed by the enterprise.
a. Treat the building contract under the costrecovery method and the d. When the buyer has the right to rescind thepurchase for a reason
maintenance contract under the percentage of completion method. specified in the sales contract and the enterprise is uncertain about the possibility of
b. Combined and treated as a single contract return.
c. Segregated and considered two separatecontracts.
44. Revenue may, under proper circumstances, berecognized in which of the
d. Recognized both contracts under the completed
following circumstances?
production method
a. When goods marked at 150 percent gross margin on costare delivered to
41. For entities wanting to use the cost model ofaccounting, the revaluation of a
consignee.
subsidiary’s assets would be undertaken in the:
a. subsidiary’s records; b. When an entity’s loan from government is forgiven.
b. parent entity’s records;
c. consolidation worksheet; c. When at least 50 percent of the selling price isreceived in a “lay-way sale”
d. notes to the consolidated financial statements.
42. In a business combination the revaluation of noncurrent assets in the d. When accounts receivable are assigned on a withrecourse basis.
records of the subsidiary, means that the subsidiary has effectively adopted the:
45. Which of the following involves recognizing an expense?
a. parent-entity model of consolidation;
b. propriety model of accounting; a. A machinery is used in the production of goods for sale.
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b. A delivery truck is used in complying with the intervals of time of equal length
company’s sales policy of FOB Destination.
48. The accounting concept of matching is best
c. A sales discount is granted to customer who payswithin the discount period. demonstrated by
d. Previously unrecorded wages are paid to laborersengage in constructing a a. recognizing prepaid rent received as revenue
building for a company’s own use. b. not recognizing any expense unless some revenue
46. Are the following statements true or false, accordingto PAS 2, Inventories? is realize
c. establishing an allowance for possible market
i. Cost of factory management should be included in the cost of inventory
declines in inventory value
ii. At the end of each accounting period, the value of inventory is adjusted for d. recognizing ending inventory in the computation
increases and decreases in net realizable values of the cost of sales to be deducted from sales
Statement 1 Statement 2 49. During the year to December 31 2014, the followingevents occurred in
a. False False relation to Sancho Company.
b. False True
c. True False I. A counting error relating to the inventory at 31 December 2013 was discovered.
d. True True This required a reduction in the carrying amount of inventory at that date P 28,000
II. The provision for uncollectible receivables at 31 December 2013 was P 30,000.
47. The following statements, are application of thebasic features of financial During 2014 P 50,000 was written off the 31 December 2013 receivables.
accounting except
According to PAS 8 Accounting policies, changes in accounting estimates and errors,
a. Parent Corporation and its subsidiaries are what adjustments is required to restate Sancho’s retained earnings at 31 December
treated as a single enterprise
2013?
b. the basic financial statements contain the sameunderlying data and a. 0
made use of the same measurement rules, and are therefore fundamentally related b. P 28,000
c. P 30,000
c. estimates use in accounting are based on d. P 58,000
informed judgment
50. Which one of the following changes in accountingpolicy may be accounted
d. financial statements are prepared at periodic for prospectively?
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a. Arlene Company changed from FIFO to WeightedAverage Method of d. recognize as deferred asset in the balance sheet and re-classified as non-current
Inventory Evaluation because management deemed it more appropriate in asset when the court decision is known
the circumstances.
52. Mikey Inc. is facing lawsuit for product liability damages which remains unsettled
b. Cecil Inc., after complying with therequirements of PAS 16 on balance sheet date, December 31, 2014. Company lawyers estimate a probable
changed the valuation of its property and equipment from cost to revalued loss amounting to P 1,000,000. Mickey’s insurance adjuster However, has opined
amounts
that recovery from the insurance company amounting to P 700,000 is virtually
c. Rachel Corp., changed from cash basis to accrualbasis of certain. Under PAS 37, How should these situation be presented in the financial
accounting for revenue and expenses and has decided that it is impracticable to statement, December 31, 2013?
compute cumulative effect of the change of accounting policy.
a. Contingent loss of P 1,000,000: Contingent liabilityof P1,000,000
d. Anthony Enterprise changed from expensing tocapitalizing
borrowing cost as allowed by an accounting standard. b. Loss, net of gain ,P 300,000; Liability, Net of assetof P300,000

51. At balance sheet date, Monica Company was awaitingthe final details of a c. Loss, net of gain , P 300,000; Asset P 700,000;
court case for damages awarded in its favor. The amount probable receipt of Liability, P1,000,000
damages is unknown and will not be decided until the court sit again in several d. Loss, P 1,000,000; Liability,P1,000,000; Contingent
months time. How is this event dealt with in the preparation of financial Asset, P700,000; Contingent Liability, P 1,000,000
statements? 53. Which of the following ststement is (are) true?
I. A legal obligati0n is one that arises only from legislation.
a. do not recognized or disclosed in the financialstatements as the possibility
II. When an enterprise, by an established pattern ofpast practice, or a
of receiving the damages is remote;
sufficiently specific current statement has indicated to other parties that it will
b. recognized as an asset in the financial statements asthe receipt of damages accept certain responsibilities, it incurs a constructive obligation.
is probable; III. A contingent asset should be recognized in thebooks of account if it is
c. disclosed in the notes to the financial statements as it is possible that the entity probable that economic resources will flow to the enterprise,
will received the
a. Only I is true
damages and the court decision is out of its
b. Only II is true
control;
c. I and II are true
d. II and III are true
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54. Which of the following situation will require disclosure as a related party?
activities.
a. In conciliated financial statements in respect to intra-group transactions.
b. In related party relationship where control exists, irrespective of whether there b. A loss included in net income after operatingactivities but before net income
have been transaction from ordinary activities.
between related parties. c. An extraordinary loss.
d. A gain included in net income after operatingactivities but before net income
c. In financial statements of state-controlledenterprises of transaction with from ordinary activities.
other stated-controlled enterprises.
57. Which of the following statements regarding Cash and Cash equivalents is false?
d. In parent financial statements when they are madeavailable or published
a. Not all items included in cash constitute legal tender
with the consolidated financial statements.
b. Cash should be valued at fair value
55. Disclosure of related-party transactions is required by GAAP because c. Compensating cash balance that are legally restricted
for the payment of a current liability can be shown as
a. They do not commonly occur in the normal course of business. part of Cash and Cash Equivalent provided the restriction
b. They cannot be presumed to be carried out on an armslength basis and thus, is disclosed.
the enterprise's financial
d. If a bank or financial institution holding funds of a reporting entity is in bankruptcy
statements are not complete and reliable without such
or financial difficulty such cash should be written down to estimated realizable value
disclosures.
if the amount is lower than face value,
c. They usually have a greater material effect onfinancial statements than
transactions between unrelated parties. 58. Alice Company assigned its receivable to MC Bank ona without-recourse
d. They usually involve irregularities. basis. Control was surrendered in the transaction to MC Bank. Alice received cash as
a result of the transaction, which is best described as
56. On October 1, 2013, Bona Company contracted to by foreign goods requiring
payment in dollars one month after their receipt at Nova's factory. Title to the goods a. Loan from MC bank collateralized by Alice’s accounts receivable
passed on December 28, 2013. The goods where still in transit on December 31, b. Loan from MC Bank to be repaid by the proceeds from Alice’s accounts
2013. Exchange rates of the peso to the dollar were P68. P76 and P80 on Oct. 1, Dec. receivable
28, and Dec. 31, respectively. According to PAS 1, Nova should account for the c. Sale of Alice’s accounts receivable to Joy, with the risk of uncollectible
exchange rate fluctuation in 2013 as accounts retained by MC
a. A loss included in net income from operating Bank
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d. Sale of Alice’s accounts receivable to Joy, with the risk of uncollectible b. A financial asset is recognized when the entity obtains control of the
accounts transferred to instrument.
MC Bank
59. c. A financial asset is recognized when the entity obtains the risks and rewards
When a of ownership of the financial asset and has the ability to dispose the financial asset.
specific customer’s accounts is written off bya company using the allowance d. A financial asset is recognized when the entity
method, the effect on net income and the net realizable value (NRV) of the accounts becomes a party to the contractual provisions the
receivable is instrument.
62. All of the following are more common classifications for the disclosure of
Net Income NRV of A/R
inventories carried at lower of cost or net value in an in a set of financial statements:
a. None None
b. Decrease Decrease I II III
c. Increase Increase IV
d. Decrease None Raw materials inventory Yes Yes No
60. When fair value is used in the measurement ofassets in the financial No
statements, current GAAP provides the following references as basis of fair value Biological inventory Yes No Yes
except Yes
Work in progress inventory No Yes Yes
a. Price in an active market
No
b. Price in a more recent transaction Land held for resale No Yes
No Yes
c. Price based on the assessed value governmental
bodies
a. I;c. III d. b. II; IV
d. Price taken from industry or sector benchmarks
63. The weight average inventory costing method is particularly suitable to inventory
61. Under PAS 39, what is the principle for recognitionof financial asset?
whe;
a. A financial asset is recognized when it is probable that future economic
a. dissimilar products are stored in separate
benefits will flow to the entity and the cost or value of the instrument can be
locations;
measured reliably.
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b. the entity carries stocks of raw materials, work-in-progress and finished 66. According to PAS 2–inventories,. Which of thefollowing will be included in
goods; the computation of the cost ratio when estimating inventories by the average retail
method?
c. goods have distinct use-by dates and the goodsproduced first must be sold
earliest a. Purchase returns b. Mark-up, net c. Mark-down,
net d. All of these
d. homogeneous products are mixed together
67. The following assets are recognized upon initialmeasurement on the basis
64. Inventory estimates will be required for thefollowing except
for fair value rather than historical cost except
a. when interim financial statements are prepared
a. Investment property
b. when inventory is destroyed by typhoon or lahar
b. Held-for-trading securities
flow
c. Biological asset
c. as proof of reasonable accuracy of the physical
inventory d. Non-monetary asset received through government
grant
d. in the determination of the ending inventory to
be shown on the balance sheet at year end. 68. The amortization of premium over the life of the bondis an adjustment of
interest income in the investor’s books
65. When an inventory costing formula is changed, thechange is required to be
applied: a. Up b. Down c. Steady d. Cannot be
determined
a. prospectively and the adjustment taken through
the current profit or loss: 69. Which of the following gain and losses should betaken to profit and loss?
b. retrospectively and the adjustment taken through I. Unrealized gain or loss on change in value ofavailable-for-sale
the opening balance of accumulated profits; securities
c. prospectively and the current period adjustment II. Unrealized gain or loss on initial recognitionof biological asset
recognized directly in equity;
III. Gain or loss on conversion of InvestmentProperty to Inventories
d. retrospectively and the adjustment recognized as
IV. Unrealized gain or loss on change in value oftrading securities
an extraordinary gain or loss.
a. I and II only b. I, II and IV only c. II, III and IV only d. I, II, III and IV
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70. Alps Co. received a cash dividend from a common stockinvestment. Should d. Technological dependency
Alps report an increase in the investment account if it has classified the stock as 72. According to PAS 39, which of the following is not among the criteria for a
available-for-sale or uses the equity method of accounting
financial asset or liability to be classified as “held for trading”?
Available for sale a. It is a derivative
a. No b. It is acquired or incurred principally for the
b. Yes purpose of selling or repurchasing it in the near term.

Equity method instrument c. It is a derivative that is a designated and

effective hedging instrument
No
d. It is part of a portfolio of identifiedfinancial instruments that are
Yes managed together and for which there is evidence of a recent actual pattern of
Available for sale short-term profit-taking.

c. Yes 73. According to PAS 6 – PPE 2005, which of the followingstatements about
exchanges of property and equipment is (are) true?
d. No
I. The cost of a property item acquired in adissimilar asset exchange is
Equity method instrument measured at the fair value of the asset received adjusted by the amount of any cash
No or cash equivalents transferred.

Yes II. No gain nor loss should be recognized inexchanges of assets with no
commercial value
71. According to PAS 28, which of the following will not fall under the situation
of “existence of significant influence by an investor in the financial and operating III. Asset restoration and dismantling costs to beincurred in the future
policy decision of the investee but not control of these decisions” according to the terms of a contract should be capitalized at present value to the
asset cost upon initial recording of the asset
a. Participation in policy making process
b. Material intercompany transactions a. Only I is true c. II and III are true

c. Power to govern the financial and operatingpolicy decisions of an b. I and II are true d. All statements are true
enterprise so as to obtain benefits from its activities 74. Which of the following statement(s) regardingproperty and equipment is
(are) false?
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I. When the carrying amount of a depreciable assetequals its scrap 76. Which of the following statements is the assumption on which straight-line
value, there is zero depreciation for that particular accounting period. depreciation is based?
II. Start-up and similar pre-production costs arecomponents of the cost a. The operating efficiency of the asset decreases in later years
of property and equipment b. Service value declines as a function of time rather than use
III. If a component of a property item has a usefullife which is different c. Service value declines as a function of
from that of the property item to which it relates, it should be depreciated as a
obsolescence rather than time
separate asset.
d. Physical wear and tear are more important than economic
a. Only statement I is false c. Statements I and obsolescence.
II are false
77. Which of the following expenditures subsequent to acquisition cannot be
b.Only statement II is falsed. All statements are false added to the carrying amount of the asset?
75. Depreciation is computed on the original cost withoutdeducting the a. Costs of modification of a machinery that will increase its capacity
estimated salvage value under which of the following depreciation methods?
Double-Declining Balance b. Cost of upgrading machine parts to achieve substantial
improvements in quality of output
a. No
c. Cost of extensive repairs on a building that didnot increase its useful
b. No life.
c. Yes d. Costs of adopting new production processes that enabled
d. Yes substantial reduction in operating costs

Productive Output 78. Which of the following statements is (are) true regarding impairment of
assets?
No I. An impairment loss should be recognized both foran individual asset
Yes or for a cash-generating unit if, and only if, its recoverable amount is less than its
carrying amount.
Yes
II. The impairment loss should be allocated, first, to corporate assets,
No then allocated to the individual assets comprising the cash-generating unit, on a pro-
rata basis based on their carrying amounts, and then., to goodwill.
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III. To ensure uniformity of practice, the formula used in computing 81. When an owner-occupied property is transferred to investment property at
impairment loss is the same for all assets. fair value, a decrease in the carrying amount of the property to its fair value at the
date of transfer
IV. The increased carrying amount of an asset due to a reversal of an
impairment loss should not exceed the carrying amount that would have been a. Is recognized in profit and loss, or, for revalued property, charged
determined, had no impairment loss been recognized in prior year against revaluation surplus to the extent of its credit balance

a. I and II only b. I and IV onlyc. I III and IV only d. I, II, III and IV b. Is recognized in profit and loss at all times

79. According to the definition provided in PAS 38 Intangibles, activities c. Is absorbed by Retained Earnings, but only if the property is
undertaken in the ‘research’ phase of the generation of an asset may include: accounted for under the Revaluation Model

a. the application of knowledge to a design for theproduction of new d. Is carried directly to Equity
materials; 82. Citadel Corporation owns an office building along Makati Avenue. The first
and second floor are occupied by Citadel as Head Office, but an insignificant space in
b. original and planned investigation with the prospect of gaining the first floor is being rented out to a watch repairer. The third up to the tenth floor
new scientific knowledge; are occupied by a third party under an operating lease. What is the proper
accounting treatment for this in Citadel’s financial statements?
c. the use of research findings to create a substantially improved
product; a. The first and second floors are reported as
d. using knowledge to materially improve a manufacturing device. Property and Equipment; third to tenth floors are reported as Investment Property.
80. Which of the following statements in relation to recovery of impairment for b. The major portion of the first floor and the entire second
an intangible asset is not true? floor is reported as Property and Equipment while a small portion of the
first floor reported as Investment Property. The rest of the floors are
a. After a recovery of impairment has been recognized, the carrying reported as Investment Property
amount of the asset reported would be the higher between fair value less cost of
disposal and value in use. c. The entire building is reported as Investment
Property
b. No recovery of impairment is allowed for goodwill.
d. The entire building is reported as Property and
c. The recovery of impairment is reported as other income.
Equipment
d. The amount of recovery is limited to the carrying amount of the
asset that would have been reported had no impairment occurred. 83. Which of the following statements about PFRS 5, noncurrent assets held for
sale and discontinued operations is (are) true?
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I. In order for a non-current asset to be classified as held for sale, the d. Increase
sale must be probable, which means that the future sale is likely to occur.
Additional paid-in capital
II. Assets designated as held for sale should not be depreciated
No effect
III. An entity should classify a segment as
Increase
“discontinued operations” at the date the operation meets the criteria to be
classified as held for sale or when the entity has disposed of the operation No effect
IV. Assets classified as held for sale are carried at lower of carrying No effect
amount or fair value less cost to sell
Retained Earnings
a. I and II only b. II and III only c. II, III and IV d. I, II, III and IV No effect
84. If the payment of employees’ compensation for future absences is probable, Decrease
the amount can be reasonably estimated and the obligation relates to rights that
vest or accumulate, the compensation should be Decrease
a. Accrued if attributable to employees’ services not yet rendered Decrease
b. Accrued if attributable to employees’ services already rendered Stockholders’ Equity
c. Accrued if attributable to employees services whether already No effect
rendered or not No effect
d. Recognized when paid Decrease
85. How would the declaration and subsequent issuance of a 30% stock
No effect 86. How would a stock split affect each of the following?
dividend by the issuer affect each of the following the market value of the share
exceeds the par value of the stock? Asset
Common Stock a. Increase
a. No effect b. No effect
b. No effect c. No effect
c. Increase d. Decrease Total stockholders’ equity
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Increase b. Accumulated translation adjustment as a component of net income

No effect c. Loss on Foreign exchange as a component of net
No effect income

Decrease d. Retained earnings

89. VCSS Company’s four business segments have revenues and identifiable assets
Additional paid in capital
expressed as percentage of VCSS’s total revenues and total assets as follows:
No effect Revenue Assets
No effect Aphat 65% 66%

Increase Err 14% 18%

Decrease Rham 14% 4%

87. Araya Commercial obtained an interest-free loan of P500, 000 and a cash grant Sam 8% 12%
of P400, 000 from the City of Albay. The cash grant is a partial subsidy for the
100% 100%
annual salary of five of its employees for the year 2014. How should Araya
Commercial account for these events? Which of these business segments are deemed to be reportable segments?

a. Only the cash grant should be taken to Equity, as additional paid-in a. Alphat only
capital
b. Alphat and Err only
b. Only the cash grant should be recognized as income
c. Alphat, Err and Rham only
c. Both the cash grant and the interest-free loan should be taken to d. Alphat, Err, Rham and Sam
Equity, as additional paid-in capital
90. Which of the following statements is true?
d. Both the cash grant and the interest-free loan should be recognized
a. Temporary differences occur because accounting standards and
as income income tax laws differ as to when they recognize assets, liabilities, owners’ equity,
88. Exchange differences arising from translation of financial statements of a revenues, gains, expenses and losses
foreign entity should be accounted for as
b. The term “future taxable amount” relates to a deferred tax asset
a. Accumulated translation adjustment as a component of
stockholders equity
 lOMoARcPSD|17040645

c. “Future taxable amounts” include revenues and gains that are c. The government has a plan for a law requiring
included in the tax return before they are recognized for accounting purpose. all environment damage to be rectified
d. “Future deductible amounts” includes expenses and losses that are d. A chemical spill from a chemical plant has caused harm to the
included in the return before they are recognized for accounting purpose. surrounding wildlife
91. The Citri Company’s financial year end was October 93. In January 2013, Kris Co. made long-term improvementsto a recently leased
31, 2013 Between that date on which the financial statements for this year were building. The lease agreement provides for neither a transfer of title to Kris nor
completed and the date on which they were due to be authorized for issue a a bargain purchase option. The present value of the minimum lease payments
number of events took place. Which TWO of the following four events should be is not a substantial portion of the building’s market value, and the lease term
classified as non-adjusting events require disclosure only? is half of the building’s economic life. Should assets be recognized for the
building and the leasehold improvements? BuildingLeasehold improvements
[1] The Citri Company announced the discontinuationof an assembly a. Yes Yes
operation
b. No Yes
[2] The Citri Company entered into an agreement to purchase the
c. Yes No
freehold of its currently leased office
buildings d. No No
[3] The Citri Company received P150, 000 in respectof an insurance 94. A lesse when accounting for a lease incentive received under an operating
claim measured in the October 31, 2013 financial statements at P90, 000.
lease treats is as a:
[4] A mistake was discovered in the calculation of the allowance for
a. increase in rental income over the lease term;
collectible trade receivables leading to it being understated by P220, 000 in the
October 31, 2013 financial statements b. increase in rental expense over the lease term;
a. (1) and (2) b. (3) and (4) c. (1) and (3) d. (2) and (3) c. reduction in rental expense over the lease term;
92. An entity operates a chemical plant and has a published policy of making good d. reduction in rental income over the lease term
any damage caused to the environment. Which of the following would give
rise to a provision? 95. Which of the following is not true regarding a defined contribution plan?

a. It is likely that a chemical spill which would result to pay penalty will a. An appropriate funding pattern must be established to ensure that
enough money will be available at retirement to meet the benefits promised.
occur next year
b. An appropriate funding pattern must be established to ensure that
b. Research suggest that there is a possibility that the entity’s action
enough money will be available at retirement to meet the benefits promised
may cause damage to surrounding wildlife
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c. The expense recognized each period as equal to the cash d. Equity represented materially by liquid assets.
contribution using current salary levels
99. When there are two dilutive convertible securities, the one that should be
d. “Vested benefits” require a certain minimum number of years of used first to recalculate earnings per share is the security with the
service and to which an employee is entitled to received when he resigns and are
not contingent upon additional service under the plan a. Greater earnings adjustment

96. When the fair value of plan assets exceeds the defined benefit obligation, PAS
19R
a. Requires recognition of an asset.
b. Requires recognition of an asset if the excess fair value of plan
assets exceeds the corridor amount
c. Recommends but does not require recognition of
an asset
d. Does not permit recognition of an asset
97. For reporting purposes, currencies are defined as
a. International and functional
b. Foreign, functional and presentation
c. Domestic and international
d. Operating, international and presentation
98. With respect to the computation of earnings per share, which of the following
would be most indicative of a simple capital structure?
a. Common stock, preferred stock, and convertible securities
outstanding
b. earnings derived from one primary line of the business
c. Ownership interests consisting solely common stock
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b. Greater earnings per share adjustment

c. Smaller earnings adjustment
d. Smaller earnings per share adjustment
100. Which of the following statements about government funds is true or false?
Statement 1: Government funds include public moneys of every sort and other resources pertaining
to any agency of the government.
Statement 2: Government funds or property shall be spent or used solely for public purpose

a. Both statements are true

b. Both statements are false

c. First statements is true; second statements is false

d. First statement is false; second statement is true

END OF EXAMINATION Good luck and

God bless you!
 Set A

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