EASY

According to the FASB's conceptual framework, the calculation of comprehensive income includes
which of the following?
Income from
Distributions
Continuing Operations
to Owners
a.
No
No
b.
Yes
No
c.
Yes
Yes
d.
No
Yes
It is the approach of looking the entitys organization and management structure and its interim
financial reporting system to identify the business and geographical segment for external reporting
purposes.
a. Entity Approach
b. Scientific Approach
c. Management Approach
d. Business or geographical Approach
It is an accounting device for accumulating increases and decreases relating to particular accounting
value such as an asset or a liability.
a. Account
c. Trial Balance
b. Journal
d. Worksheet
This form represents the three major sections in a downward sequence of assets, liability and equity.
a. Account Form
b. Report Form
c. Single Form
d. Good Form
According to the FASB Conceptual Framework, the elements assets, liabilities, and equity describe
amounts of resources and claims to resources at/during a
a.
b.
c.
d.

Moment in Time
Yes
Yes
No
No

Period of Time
No
Yes
Yes
No

How should the following changes be treated?

I. A change is to be made in the method of calculating the provision for uncollectible receivables.
II. Investment properties are now measured at fair value, having previously been measured at
cost.
Change I
Change II
(a) Change in accounting policy
Change in accounting policy
(b) Change in accounting policy
Change in accounting estimate
(c) Change in accounting estimate
Change in accounting policy
(d) Change in accounting estimate
Change in accounting estimate

Which of the following is a disclosure requirement under PAS 23?

I. Amount of borrowing costs capitalized during the period.

II. Segregation of assets that are qualifying assets from other assets in the statement of financial
position or as a disclosure in the notes to financial statements.
III. Capitalization rate used to determine the amount of borrowing costs eligible for capitalization.
(a) I, II and III
(c) I and III only
(b) I and II only
(d) I only
Statement 1 Discount on bonds payable is treated as outright gain but amortized over the life of the
bonds by charging it to interest expense.
Statement 2 The common practice is to consider bond issue costs as a deferred charge and
therefore classified as other noncurrent asset.
A
B
C
D
STATEMENT 1
TRUE
TRUE
FALSE
FALSE
STATEMENT 2
TRUE
FALSE
FALSE
TRUE
Santo Corporation declares and distributes a cash dividend that is a result of current earnings.
How will the receipt of those dividends affect the investment account of the investor under each
of the following accounting methods?
a.
b.
c.
d.

Fair Value Method

No
Decrease
Increase
Decrease
No
No Effect
Decrease
No Effect

Equity Method
Effect

Effect

According to the definition provided in IAS 38 Intangibles, activities undertaken in the research
phase of the generation of an asset may include:
a. original and planned investigation with the prospect of gaining new
scientific knowledge;
b. using knowledge to materially improve a manufacturing device
c. the use of research findings to create a substantially improved product;
d. the application of knowledge to a design for the production of new materials;

AVERAGE:
1. All parent entities are required to present consolidation statements unless the following
conditions apply to them:
I. The parent is a wholly owned subsidiary.
II. The parent is a partly owned subsidiary and its owners do not object to the nonpresentation of consolidated financial statements.
III. The parents debt or equity securities are traded in a public market.
IV. The parent is not in the process of applying to issue any securities in a public market.

a. I and II only;
c. I, II and III only;
b. I, II and IV only;
d. I, II, III and IV.
A change in the presentation and classification of items in the financial statements is allowed when
I.
It is apparent, following a significant change in the nature of the entitys operations or a review
of its financial statements, that another presentation or classification would be more
appropriate.
II.
A PFRS requires a change in presentation.
a.
b.
c.
d.

I only
II only
Either I or II
Neither I nor II

The Board of Directors of an entity decided on December 15 of the current year to wind up
international operations in the Far East and move them to Australia. The decision was based on a
detailed formal plan of restructuring as required by PAS 37. This decision was conveyed to all
workers and management personnel at the headquarters in Europe. The cost of this restructuring
plan can be estimated reliably. How should the entity treat this restructuring in its financial statements
for the year ended December 31?
(a) Because the entity has not announced the restructuring to those affected by the
decision and thus has not raised an expectation and as no constructive obligation has
arisen, only disclose the restructuring decision and the cost of restructuring.
(b) Recognize a provision for restructuring since the board of directors has approved it and it has
been announced in the headquarters of the entity in Europe.
(c) Mention the decision to restructure and the cost involved in the chairmans statement in the
annual report since it is a decision of the board of directors.
(d) Because the restructuring has not commenced before year-end, based on prudence, wait until
next year and do nothing in this years financial statements.
Loans and receivables are non-derivative financial assets
a. With fixed or determinable payments that are quoted in active markets
b. With fixed or determinable payments that are not quoted in active markets
c. Without fixed or determinable payments that are quoted in active markets
d. Without fixed or determinable payments that are not quoted in active markets
One of the conditions that must be satisfied in order to recognize revenue in a transaction involving
the rendering of services is that the stage of completion of the transaction at the end of the reporting
period can be measured reliably. Which TWO of the following methods for determining the stage of
completion of a contract involving the rendering of services are specifically referred to in IAS18
Revenue, as being acceptable?
A Costs incurred to date as a percentage of the estimated total costs of the transaction
B Advances received to date as a percentage of the total amount receivable
C Surveys of work performed
D Revenue to date divided by total contract revenue
A document that contains disclosures including financial statements, that is issued to potential
investors, by companies seeking capital, is known as a:
a. securities statement;
c. trust deed;
b. company constitution;
d. prospectus.

The PICPA shall renew it certificate of accreditation once every

a. Two years
c. Four years
b. Three years
d. Five years
Which of the following are considered pervasive constraints by Statement of Financial Accounting
Concepts No. 2?
a.
Cost-benefit relationship and conservatism
b.
Timeliness and feedback value
c.
Conservatism and verifiability
d.
Materiality and cost-benefit relationship
DIFFICULT:
Cricket Corporation issued, without consideration, rights allowing stockholders to subscribe for
additional shares at an amount greater than par value but less than both market and book values.
When the rights are exercised, how are the following accounts affected?
Retained earnings
APIC
Retained earnings
APIC
(a)
(b)

Decreased
Not affected

Not affected
Not affected

(c)
(d)

Decreased
Not affected

Increased
Increased

An entity has a subsidiary that operates in a hyperinflationary economy. The subsidiarys financial
statements are measured in terms of the local currency, which is the zloty. The subsidiarys financial
statements have been restated in accordance with IAS 29. The parent is located in the United States
and prepares the consolidated financial statements in U.S. dollars. Which of the following accounting
procedures is correct in terms of the consolidation of the subsidiarys financial statements?
a. The subsidiarys financial statements shall be prepared using the zloty and then retranslated
into U.S. dollars.
b. The subsidiarys financial statements shall be prepared using the zloty, then restated
according to IAS 29, and then retranslated into U.S. dollars at closing rate.
c. The subsidiarys financial statements shall be remeasured in U.S. dollars, then restated
according to IAS 29 and consolidated.
d. The subsidiarys financial statements shall be deconsolidated and not included in the
consolidated financial statements.
Which statement is true concerning Earnings per Share calculation?
I. Potential ordinary shares issued by subsidiary shall be included in diluted EPS as they
could potentially have an impact on the net profit for the period and the number of shares
to be included in the calculation.
II. An entity shall disclose diluted EPS only if differs from basic EPS by material amount.
a. I only
b. II only

c. Both I and II
d. None of the above

A company using a periodic inventory system neglected to record a purchase of merchandise on

account at year end. This merchandise was omitted from the year end physical count. How will
these errors affect assets, liabilities, stockholders equity at year end and net earnings for the year?
Stockholders
Net
Assets
Liabilities
Equity
Earnings
(a)
(b)
(c)
(d)

No effect
No effect
Understate
Understate

Understate
Overstate
Overstate
Understate
Understate
No effect
No effect
Understate

Overstate
Understate
No effect
Understate

Treasury share was acquired for cash at a price in excess of its par value. The treasury share was
subsequently reissued for cash at a price in excess of its acquisition price. Assuming that the cost
method of accounting for treasury share transactions is used, what is the effect of the subsequent
reissuance of the treasury share on each of the following?
Additional paid
Retained
Shareholders
Additional paid Retained Shareholders
capital
earnings
equity
capital
earnings
equity
(e) Decrease
Decrease
No effect
(c)
Increase
No effect
Increase
(f) Increase
Increase
Increase
(d)
No effect
No effect
No effect
CLINCHER
Which of the following statements is incorrect?
(a) Many errors which affect both the income statement and the balance sheet are
counterbalancing errors.
(b) The correction of an accounting error affecting prior years income is reported and recorded by
using the retroactive approach.
(c) Many changes in accounting estimates are accounted for both in the period of change and in
some future period.
(d) All changes in accounting estimates should be accounted for only in the period of the
change; there is no effect on future periods.
During the lifetime of an entity accountants produce financial statements at artificial points in time in
accordance with the concept of
a.
b.
c.
d.

Objectivity
No
Yes
No
Yes

Periodicity
No
No
Yes
Yes

When a parent recognizes a pre-acquisition dividend that is declared by a wholly owned subsidiary it
makes the following entry in its accounting records:
a. DR Dividend receivable
c.
DR Dividend income
CR
Dividend income;
CR
Dividend receivable;
b. DR Dividend receivable
d.
DR Shares in subsidiary
CR
Shares in subsidiary;
CR
Dividend income.