EXAMINATION

Problem 1

On January 1, 2017, an entity granted to an employee the right to choose either shares or cash payment.
The choices are as follows:

• Share alternative - equal to 25,000 shares with par value of P30.

• Cash alternative - cash payment equal to the market value of P20,000 shares

The grant is conditional upon the completion of three years of service. On grant date, on January 1,
2017, the share price is P51.

The share prices for the three-year vesting period are P54 on December 31, 2017, P66 on December 31,
2018 and P65 on December 31, 2019.

After taking into account the effect of vesting restrictions, the entity has estimated that the fair value of
the share alternative is P48.

1. What is the compensation expense for 2017?

a. 360,000 b. 300,000 c. 420,000 d. 540,000

2. What is the compensation expense for 2018?

a. 880,000 b. 520,000 c. 580,000 d. 460,000

3. What is the compensation expense for 2019?

a. 480,000 b. 420,000 c. 600,000 d. 650,000

4. What is share premium if the employee has chosen the share alternative?

a. 730,000 b. 550,000 c. 370,000 d. 0

5. What is the share premium if the employee has chosen the cash alternative?

a. 875,000 b. 900,000 c. 180,000 d. 0

Problem 2

On January 1, 2017, an entity purchased an equipment for the cash price of P5M. The supplier can
choose how the purchased to be settled. The choices are 50,000 shares with par value of P50 in one
year's time, or a cash payment equal to be the market value of 40,000 shares on December 31, 2017. At
grant date on January 1, 2017, the market price of each share is P110 and on the date of settlement on
December 31, 2017, the market price of each share is P130.

6. What is the initial cost of the equipment?

a. 5,000,000 b. 2,500,000 c. 4,400,000 d. 5,500,000

7. What is the equity component arising from the purchase of equipment with share and cash
alternative?

a. 500,000 b. 400,000 c. 600,000 d. 0

8. What is the interest expense to ba recognized on December 31, 2017 if the supplier has chosen the
cash alternative?

a. 600,000 b. 400,000 c. 800,000 d. 0

9. What is the share premium on December 31, 2017 if the supplier has chosen the share alternative?

a. 5,000,000 b. 2,500,000 c. 4,400,000 d. 4,000,000

Problem 3

On January 1, 2017, an entity offered management share appreciation rights equal to 50,000 shares with
a predetermined price of P100. The service period is 3 years and the exercise date is January 1, 2020.
The quoted prices per share are P124 on December 31, 2017, P151 on December 31, 2018 and P151 on
December 31, 2019.

10. What amount should be charged to compensation expense for 2019?

a. 2,550,000 b. 1,300,000 c. 850,000 d. 0

11. What amount should be recognized as gain on reversal of share appreciation rights in 2019 if the
market price dropped to P120 on December 31, 2019?

a. 1,000,000 b. 1,700,000 c. 700,000 d. 0

12. Lehman Corporation purchased a machine on January 2, 2013, for P2,000,000. The machine has an
estimated 5 year life with no residual value. The straight-line method of depreciation is being used for
financial statement purposes and the following accelerated depreciation amounts will be deducted for
tax purposes:

2013 - P400,000 2016 - P230,000

2014 - 640,000 2017 - 230,000

2015 - 384,000 2018 - 116,000

Assuming an income tax rate of 30% for all years, the net deferred tax liability that should be reflected on
Lehman's statement of financial position at December 31, 2014, should be

a. P0 - P72,000
b. P4,800 - P67,200

c. 67,200 - P4,800

d. P72,000 - P0

13. When a change in the tax rate is enacted into law, its effect on existing deferred income tax accounts
should be

a. Handled retroactively in accordance with the guidance related to changes in accounting standards

b. Considered, but it should only be recorded in the accounts if it reduces a deferred tax liability or
increases a deferred tax asset.

c. Reported as an adjustment to tax expense n the period to change.

d. Applied to all temporary or permanent differences that arise prior to the date of the enactment of the
tax rate change, but not subsequent to the date of the change.

14. Man Company purchased 10% of Kind Corporation's 200,000 outstanding shares of ordinary shares
on January 2, 2018 for P2,500,000. On January 2, 2018, Man Company purchased another 40,000 shares
of Kind for P6,000,000. There was no goodwill as a result of either acquisition Kind reported earnings of
P6,000,000 and P7,000,000 for the year ended December 31, 2018 and December 31, 2019, respectively.
No dividends were declared in years 2018 and 2019, respectively by Kind Company.

What amount of income from investment should Man Company report in its statement of
comprehensive income related to its investment for the year ended December 31, 2019?

a. None

b. 1,400,000

c. 600,000

d. 2,100,000

15. On May 1, 2016 Golden Company purchased a short-term P4,000,000 face value 9% debt instrument
for P3,720,000 excluding the accrued interest and classified it as a investment to profit or loss which is
based on the business model of the entity to buy and sell portfolio of securities and to make profit for
shorter movements in the market rate of interest. Golden Company incurred and paid P20,000
transaction cost related to the acquisition of the instrument. The debt instruments mature on January 1,
2019, and pay interest semiannually on January 1 and July 1. On December 31, the fair market value of
the instruments is P3,880,000. On February 2, 2017, Graham Company sold the debt security for
P3,960,000.

What amount should Golden Company report for short-term debt securities on December 31, 2016?
a. P3,600,000

b. 3, 720,000

c. 3,880,000

d. 3,960,000

16. On January 2, 2018, Marco Company purchased 200,000 shares (20%) of Polo Company's ordinary
share for P4,500,000. During 2018, Polo reported the following in its statement of comprehensive
income a P4,000,000 net income and P500,000 unrealized gain from its investment in available for sale.
Polo Company paid cash dividends of P3,000,000 on December 31, 2018. On January 1, 2019, Marco
Company sold 50,000 shares of Polo company at the current market value of Polo's shares at P32 per
share.

What amount of gain should Marco company recognize from the sale of 50,000 shares?

a. 400,000

b. 450,000

c. 425,000

d. 500,000

17. Which of the following items is an example of investment property?

a. Property that is leased to another entity under a finance lease

b. Property that is being constructed or developed on behalf of third parties

c. Property that is being constructed or developed for future use as investment property

d. Property held for short-term sale in the ordinary course of business

18. On January 2, 2018, Star company originates a 10-year 7% P4,000,000. The loan carries an annual
interest rate of 7% and its repayable at par at the end of year 10 (December 31, 2027). Star company
charges a 1.25% (50,000) nonrefundable loan origination costs. The contract specifies that the borrower
has an option to prepay the instrument at approximately equal to instrument's amortized cost at each
exercise date, and that no penalty will be charged for prepayment. But at the inception of the contact,
Star company expects the borrower not to prepay, the amortization period is equal to the instrument's
full term and for that reason the effective yield rate is determined at 6. 823%.

What is the amortized cost of the instrument on December 31, 2019?

a. 4,050,000

b. 4,046,331
c. 4,042,413

d. 4,038,288

19. The Minor company leased a freehold building for 20 years, the useful life of the building, with effect
from 1 January 2017. At that date the fair value of the leasehold interest was P7.5M of which P6M was
attributable to the building. Annual rentals of P800,000 are payable in advance on 1 January.

How much should Minor company recognize as an operating lease expense in the year ended 31
December 2017, according to IAS17 Leases?

a. Nil

b. 160,000

c. 640,000

d. 800,000

20. A herd of 5 four year old animals was held on 1 January 2017. On 1 July 2017 a 4 1/2 year old animal
was purchased. The fair values less estimated point of sale costs were as follows: 4 year old animal at 1
January 2017 P15,000; 4 1/2 year old animal at 1 July 2017 P15,900; 5 year old animal at 31 December
2017 P17,250. What amount should the company recognize in its December 31, 2017 statement of
comprehensive income related to the animals as a result of the change in their fair market value?

a. 10,000

b. 12,600

c. 15,900

d. 28,500

21. Island company owes P2,000,000 plus P180,000 of accrued interest to First State Bank. The debt is a
10-year, 10% note. During 2017, Island's business deteriorated due to a faltering regional economy. On
December 31, 2019, First State Bank agrees to accept an old machine and cancel the entire debt. The
machine has a cost of P3,900,000 accumulated depreciation of P2,210,000 and fair market value of
P1,900,000.

How much should Island Company recognize as a finance income in its profit or loss as a result of the
financial liability's derecognition?

a. 210,000

b. 280,000

c. 310,000
d. 490,000

22. Silver Company purchased a plot of land with a building at a cost of P10,000,000 in 2015. The land
portion accounted for P2,000,000 of the purchase price. The building is depreciated on a staight-line
basis over 50 years, charging a full year's depreciation in the year of acquisition and none in the year of
disposal. On January 2, 2017, the land and building was revalued upward. An independent professional
valuer placed a valuation of P18,000,000 on the existing use basis, of which P4,000,000 was attributable
to the land portion. The surplus was incorporated in the accounts.

What is the total amount of revaluation surplus should the company recognize on January 2, 2017?

a. 2,000,000

b. 4,000,000

c. 6,320,000

d. 8,320,000

23. Derby company, a public limited company, has granted share option to its employees with a fair value
of P12,000,000. The option vest in three years time. The company uses the fair value model to estimate
the fair value of the options, the number of the employees that will vest and the reversion of estimates
such as the following:

• Grant date - January 1, 2016 estimate of employees leaving the company during the vesting period -
5%

• Revision of estimate - January 1, 2017 estimate of employees leaving the company during the vesting
period - 6%

• Actual number of employees leaving the company - December 31, 2018 - 5%

What would be the amount of expense changed in the income statement for the year ended December
31, 2018?

a. 3,760,000

b. 3,800,000

c. 3,880,000

d. 4,000,000

24. Salvation Corporation had two issues of securities outstanding - ordinary share and an 8% convertible
bond issue with a face amount of P16,000,000. Interest payment dates of the bond issue are June 30 and
December 31. The conversion clause in the bond indenture entitles the bondholders to receive forty (40)
shares of P20 par value ordinary share in exchange for each 1,000 bond. On June 30, 2017, the holders of
P2,400,000 face value bonds exercised the conversion privilege. The equity component of the
convertible debt at the time of issue is P950,000. The market price of the bonds in that date was P1,100
and the market price of the ordinary share was P35. The total unamortized bond discount at the date of
conversion was P1,000,000. In applying the book value method, what amount should Salvation credit to
the "Share Premium in Excess of Par" account as a result of this conversion?

a. 160,000

b. 330,000

c. 472,500

d. 1,440,000

25. Jason company has taken out a foreign loan of $100,000 that is recorded at P4,400,000. At the
reporting date, the carrying value of the loan is P4,000,000. The unrealized gain of P400,000 is included
in profit or loss,but will be taxable when the gain is realized on the repayment of the loan.

If the current and future tax rates are 34% and 35% respectively, what amount of deferred tax asset
should the company recognize?

a. None

b. 136,000

c. 140,000

d. 276,000

26. Dividends in the form of noncash assets are measured at

a. Fair value of the assets distributed

b. Carrying amount of the assets distributed

c. Either the carrying amount or fair value of the assets distributed

d. Neither the carrying amount nor fair value of the assets distributed

27. Mountain company sells a new product. During a move to a new location, the inventory records for
the product were misplaced. The entity has been able to gather some information from the purchases
and sales records. The julty purchases are as follows:

Quantity Unit Cost Total Cost

July 5 10,000 65 650,000

9 12,000 63 756,000
12 15,000 60 900,000

25 14,000 62 868,000

Total 51,000 3,174,000

On July 31, 15,000 units were on hand. The sales for July amount to P6,000,000 or 60,000 units at P100
per unit. The entity has always used a periodic FIFO inventory costing system. Gross profit on sales for
July was P2,400,000. What is the cost of inventory on July 1?

a. 1,354,000

b. 2,400,000

c. 2,826,000

d. 426,000

28. On July 1, 2013, Jayson company purchased as a long term investment P1,000,000 of Channing
Company's 8% bonds for P946,000, including accrued interest of P40,000. The bonds were purchased to
yield 10% interest. The bonds mature on January 1, 2019, and pay interest annually on January 1. Jayson
company used the effective interest method of amortization.

On December 31, 2013, what carrying amount of the investment in bonds?

a. 911,300

b. 916,600

c. 953,300

d. 960,600

29. The unadjusted physical inventory of Lindsay company at December 31, 2015 was P3,000,000. Other
information follows:

•Goods were received and recorded on January 2, 2016 with cost of P180,000. Information revealed that
the term of the shipment is FOB shipping point and these goods were shipped on December 29, 2015.

• Merchandise in the warehouse costing P240,000 was billed to the customer FOB shipping point on
December 29, 2015. These were excluded from inventory but these were shipped on January 3, 2016.

How much should Lindsay report as inventory in its December 31, 2015 statement of financial position?

a. 3,000,000 b. 3,180,000 c. 3,240,000 d. 3420,000

30. On December 2, 2014, Holland company purchased goods with a cash price 200,000. Some of the
costs incurred in connection with the acquisition of goods were as follows: import duties, 20,000;
transportation costs, 10,000 and handling costs 5,000. These goods were received on December 31,
2014. In Holland's December 31, 2014 balance sheet, at what amount should these goods included in
inventory?

a. 104,000

b. 107,000

c. 109,000

d. 100,000

31. An entity reported the following equity at the beginning of the current year:

Share capital, P10 par P5,000,000

Share Premium P2,000,000

Retained earnings P1,500,000

During the current year, the entity had the following share transactions:

• Acquired 20,000 treasury shares for P1,000,000

• Sold 15,000 treasury shares at P60 per share

• Sold the remaining treasury shares at P45 per share

What amount should be reported as share premium at year end?

a. 2,125,000

b. 2,150,000

c. 2,000,000

d. 1,975,000

32. During 2017, an entity decided to change from the FIFO method of inventory valuation to the
weighted average method. Inventory balances under each method were:

FIFO Weighted Average

December 31, 2014 4,500,000 5,400,000

December 31, 2015 7,800,000 7,100,000

December 31, 2016 8,300,000 7,800,000

Assuming income tax rates of 30% what amount should be reported as the effect of this accounting
change in the statement of retained earnings for 2017?

a. 350,000 decrease

b. 350,000 increase

c. 490,000 decrease

d. 490,000 increase

33. Star company has recently launched a model of consumer car. Its cars are sold with a three-year
warranty for manufacturing defects . past experience of similar models indicates that about 10% of the
cars are with some defects, of which 4% are minor defects, 3% care normal defects and 3% are major
defects. For the year ended December 31, 2015, the company sold 10,000 units of the new model. The
following information relates to the estimate of costs of defects associated with the new model:

Cost of repair per unit Probability Minor defects Normal defects Major defects

High 30% P1500 P4,000 P7,000

Medium 60% P1,200 P3,000 P5,000

Low 10% P1,000 P1,500 P2,000

What amount of provision should the company recognized for the year ended December 31, 2015.

a. None

b. 1,445,000

c. 1,590,000

d. 3,043,000

34. Presented below is the December 31 trial balance of Corinthians Company.

Corinthians Company

Trial Balance

December 31, 2015

Debit Credit

Cash P 14,800

Accounts Receivable 33,600

Allow. for Doubtful Accounts P2,160

Inventory, January 1 62,400

Furniture and Equipment 67,200

Accumulated Depreciation, January 1 26,880

Prepaid Insurance 4,080

Notes Payable 22,400

Owner, Capital 72,000

Sales 480,000

Purchases 320,000

Sales salaries expense 40,000

Advertising expense 5,360

Administrative salaries expense 52,000

Office expense 4,000

Total P603,440 P603,440

Information necessary for the preparation of adjusting journal entries:

a. Adjust the Allowance for Doubtful Accounts to 8 percent of the accounts receivable.

b. Furniture and equipment is depreciated at 20 percent per year.

c. Insurance expired during the year, P2,040.

d. Interest accrued on notes payable, P2,688.

e. Sales salaries incurred but not paid, P1,920.

f. Advertising paid in advance, P560

g. Office supplies on hand, P1,200, charged to Office Expense when purchased.

h. Inventory on December 31, P64,000.

Disregarding income taxes, the adjusted profit is

a. 39,224
b. 41,384

c. 41,912

d. 44,072

35. The retained earnings account of Lester corp for the year 2015 consists of the following items:

Debit Credit

Balance, January 1, 2015 P112,500

Writer off of organization costs P6,000

Excess of issuing price of share capital over par value 24,000

Loss on sale of equipment 2,500

Correction of error for prior year 10,500

Gain on sale of treasury shares 3,500

Cash and share dividends 60,000

Net income for the year 58,500

Balance, December 31, 2015 119,500

Total 198,000 198,500

The correct balance of retained earnings on December 31, 2015 is

a. 119,500

b. 100,500

c. 94,500

d. 92,000

36. The following account balances relating to property, plant and equipment of Paperback Company
appear on the books on December 31, 2014:

Land P6,000,000

Building 60,000,000

Accumulated depreciation 24,000,000

Plant, property and equipment have been carried at cost since their acquisition. The land was acquired
15 years ago while the building's construe was completed on January 1, 2005. The straight line method
for depreciation is used. On January 1, 2015, the company revalued property, plant and equipment. On
the same date, contracted professional appraisers submitted the following:

Fair Value

Land P8,000,000

Building 48,000,000

What is the revaluation surplus on December 31, 2015?

a. 13,200,000

b. 15,000,000

c. 13,800,000

d. 14,000,000

37. Which of the following is an implication of the going concern assumption?

a. The historical cost principle is creditable.

b. Depreciation and amortization policies are justifiable and appropriate.

c. The current-noncurrent classification of asset and liabilities is justifiable and significant.

d. All of these imply the going concern assumption.

38. The economic entity assumption

a. Is inapplicable to unincorporated businesses

b. Recognizes the legal aspects of business organizations

c. Requires periodic income measurement.

d. Is applicable to all forms of business organizations.

39. The inventory on hand at December 31, 2012 for Arrow Company valued at cost of P947,800. The
following items were not included in this inventory amount:

a.) Purchased goods in transit, shipped FOB Destination invoice price P32,000 which included freight
charges of P1,600.

b.) Goods held on consignment by Arrow company at a sales price of P28,000, including sales
commission of 20% of the sales price.
c.) Goods sold to Suits company, under terms FOB destination, invoiced for P18,500 which includes
P1,000 freight charges to deliver the goods. Goods are in transit.

d.) Purchased goods in transit, terms FOB shipping point, invoice price P48,00, freight cost P3,000.

e.) Goods out on consignment to GG Company, sales price P36,400, shipping cost of P2,000

Assuming that the company's selling price is 140% of inventory cost, the adjusted cost of Arrow
Company's inventory at December 31, 2012 should be

a. 1,055,000

b. 1,039,500

c. 1,039,300

d. 1,037,300

40. On December 31, 2012, the cash account of the Voice Company shows the following composition:

Petty cash fund - P0.06M; Cash in bank (payroll fund) - P4M; Travel fund - P0.30M; Dividend and interest
fund - P0.50M; Taxes fund - P0.24M; Cash in Bank (current) - P6M; Certificate of deposits (terms 90
days) - P2M; Certificate of deposit (term 180 days) - P3M; Cash in foreign bank (restricted) - P1M; Money
market fund (60 days) - P1M; Money market funds (6 months) - P1.8M; Customer's check dated January
14, 2013 - P0.12M; Customer's check dated December 30, 2012 returned for lack of funds - P0.08M; A
30-day BSP treasury bill - P2M; A BSP 3-year treasury bill acquired three months prior to the maturity
date - P2.4M; Bond sinking fund - P1.6M; Preferred redemption fund - P0.8M; Contingent fund - P0.6M;
Insurance fund - P0.40M; Fund for acquisition of a machine - P1M; Traveler's checks - P0.12M; Cashier
checks - P0.20M; Savings deposit set aside for dividends payable on July 31, 2013 - P1M; Pension fund -
P0.80M; Customers check outstanding for 18 months - P0.10M; Savings deposit in closed bank - P0.10M.

What is the correct cash and cash equivalents balance to be reported by The Voice Company on
December 31, 2012?

a. 19.820M

b. 18.820M

c. 16.420M

d. 15.620M

41. Which of the following would not be a correct form of an adjusting entry?

a. A debit to revenue and credit to liability

b. A debit to an expense and a credit to a liability

c. A debit to liability and a credit to revenue

d. A debit to an asset and a credit to liability

42. Which of the following best define a prepayment and a deferral?

a. Adjusting entries where cash flow precedes revenue or expense recognition

b. Adjusting entries where revenue or expense recognition precedes cash flow

c. Adjusting entries where cash flow and revenue or expense recognition are simultaneous

d. Adjusting entries where revenue or expense are recognized in the absence of cash flow

43. The purpose of the adjusting entries is to

a. Prepare revenue and expense accounts for recording the transaction of the next period

b. Apply the realization principle and the matching principle to transaction affecting two or more
accounting periods.

c. Adjust daily the balances in asset, liability, revenue and expense accounts for the effects of business
transactions

d. Adjust the capital account for the revenue, expense and withdrawal transactions which occurred
during the year

44. Which of the following properly describes a deferral?

a. Cash is received after revenue is earned

b. Cash is received before revenue is earned

c. Cash is paid after expense is incurred

d. Cash is paid at the same time that an expense is incurred

45. An entity owns a number of farms that harvest produce seasonally. What is the disclosure suggestion
if the business is highly seasonal?

a. Additional notes should be written in the interim reports about the seasonal nature.

b. Disclosure of financial information for the latest and comparative 12 month period in addition to the
interim reports.

c. Additional disclosure in the accounting policy note.

d. No additional disclosure.
46. Which is true concerning the 75% overall size test for operating segments?

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

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

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

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

47. Operations and cash flow that can be clearly distinguished, operationally and for financial reporting
purposes, from the rest of the entity.

a. Cash-generating unit

b. Component of the entity

c. Discontinued operations

d. Disposal group

48. The statement of financial position is useful for analyzing all of the following, except

a. Liquidity

b. Solvency

c. Profitability

d. Financial Flexibility

49. Which ONE of the following statements best describes 'residual value'?

a. The estimated net amount currently obtainable if the asset were at the end of its useful life

b. The present value of estimated future cash flows expected to arise from the continuing use of the
asset and from its ultimate disposal

c. The amount at which the asset could be exchanged between knowledgeable, willing parties in an
arm's length transaction

d. The amount of cash or cash equivalent that could currently be obtained by selling the asset in an
orderly disposal

50.Which of the following statements about accounting recognition is (are) true?

a. No asset can simultaneously be an asset of more than one entity

b. In accounting, there are instances when a gain or a loss would arise upon initial recognition of an asset

c. An appropriate basis for recognizing an asset is when a particular enterprise acquires the right to
utilize and control access to the asset's benefits.

d. All of the above statements are true.

51. According to the conceptual framework, the following are enhancing qualitative objectives of
accounting except

a. Reliability

b. Timeliness

c. Verifiability

d. Comparability

52. Which is incorrect concerning the qualitative characteristics of financial statements?

a. The need for comparability dictates that the seasonality nature of the activities of an entity be
disclosed in interm financial statements.

b. The fundamental quality of faithful representation includes the need to present information that is
prudent, neutral, and free from material error.

c. When information that is a result of related party transactions are shown in the financial statements
and described as such, these financial statements lose their reliability

d. Information has the quality of relevance when it influences the economic decisions of users by helping
them evaluate past, present or future events or confirming or correcting their past evaluations.

53. Compared with other types of money prices used for measuring resources in financial accounting,
the best arguments in favor of historical cost is that it is more

a. Relevant

b. Objective

c. Conservative

d. Indicative of the entity's purchasing power

54. Financial accounting and reporting focuses on the information needs of

a. Management

b. Creditors and investors

c. Financial analysts and consultants

d. All of the above

55. Compared to its 2017 cash basis net income, Despair Company's 2017 accrual basis net income
increased when it

a. Sold used equipment for cash at a gain in 2017

b. Recorded less account sales than that of the previous year

c. Had more accrued expense on December 31, 2016 than on January 1, 2017

d. None of the above

56. Which of the following accounting measurements may be made with the greatest degree of
objectivity

a. Net income

b. Bad debts expense for the year

c. Cost of land owned as at year-end

d. Appraised value of land at year-end

57. Which of the following is not part of the "due process" in the financial reporting standard setting
process in the Philippines?

a. Publication in the PRC Official Gazette

b. Creation of a task force by the standard setting body to study the proposed accounting standard

c. Distribution of the exposure draft for comment to CPA professionals and other interested parties.

d. None of the above

58. Statement 1: the periodicity assumption of accounting (used by the International Accounting
Standards Board) makes depreciation and amortization policies justifiable and appropriate.

Statement 2: the IASB conceptual framework specifically identifies accrual basis accounting as one of its
fundamental assumptions.

a. True, true

b. True, false

c. False, true
d. False, false

59. Statement 1: almost There, Inc. applies different accounting treatments to similar events from period
to period. Almost Their, Inc. is violating verifiability as described by the International Accounting
Standards Board's (IASB) Conceptual Framework.

Statement 2: Under International Financial Reporting Standards (IFRS) companies need not report
immaterial items within the body of the financial statements, but must disclose them in the notes or
supplementary information that accompany the financial statements.

a. True, true

b. True, false

c. False, true

d. False, false

60. Statement 1: Verifiability and predictive value are two ingredients of faithful representation.

Statement 2: The idea of consistency does not mean that companies cannot switch from one accounting
to another.

a. True, true

b. True, false

c. False, true

d. False, false