THEORY OF ACCOUNTS A.Y. 2015-2016
The major elements of the income statement are
1. “The point of sale when goods are delivered or services are
rendered, is the time at which revenue is to be recognized.” This
postulate is referred to as
a. Historical cost b. Money measuring unit
c. Revenue recognition d. Fiscal period
2. The Framework shall assist in promoting harmonization of
regulations, accounting standards and procedures relating to the
presentation of financial statements by:
A. Eliminating all alternative accounting treatments found in the
Philippine Accounting Standards
B. Providing a basis for reducing the number of alternative accounting
treatments permitted by the Philippine Accounting Standards
C. Establishing a preferred or benchmark treatment among acceptable
accounting treatments for a transaction, event or condition
D. Allowing preparers of financial statements to apply different
accounting treatments for similar transactions, events or condition
3. A general journal
A. Is a chronological lists of transactions and other events, expressed
in terms of debits and credits.
B. contains one record for each of the asset, liability, equity, revenue,
and expense accounts.
C. lists all the increases and decreases in each account in one place.
D. contains only adjusting entries.
4. Which of the following represents the best justification for
valuing the inventories at lower of cost and net realizable value?
A. It is easier to keep track of market value that it is to keep track of
cost as market value is available from any supplier.
B. Cost loses its relevance for the determination of cost of goods
sold if the cost of inventory has been incurred in an earlier accounting
period.
C. The balance sheet valuation of inventory is most important
consideration in the preparation of financial statements.
D. The practice of writing inventories below cost to net realizable
value is consistent with the view that assets should not be carried in
excess of amount expected to be realizable from their sale or value.
5. Compensating balance agreement (choose the incorrect one)
A. Reduces the amount of cash available to the borrower.
B. Always involves legal restriction on the compensating cash
balance.
C. Increases the effective interest rate to the borrower.
D. Should be disclosed in the notes to financial statements.
6. Which is correct regarding physical concept of capital?
A. It is adopted by most entities in preparing their financial statements
B. Capital is synonymous to net assets or equity
C. It is adopted if the users of financial statements are primarily
concerned with the maintenance of nominal invested capital or the
purchasing power of invested capital
D. A profit is earned only if the physical capital productive capacity
of the entity at the end of the period exceeds the physical productive
capacity at the beginning of the period, after excluding any
transactions with owners.
7. Which of the following methods of determining bad debt expense
does not properly match expense and revenue?
A. Charging bad debts with a percentage of sales under the allowance
method.
B. Charging bad debts with an amount derived from a percentage of
accounts receivable under the allowance method.
C. Charging bad debts with an amount derived from aging accounts
receivable under the allowance method.
D. Charging bad debts as accounts are written off as uncollectible.
8.
A. revenue, cost of goods sold, selling expenses, and general expense.
B. operating section, nonoperating section, discontinued operations
and cumulative effect.
C. revenues, expenses, gains, and losses.
D. All of these.
9.Assets may be best defined as:
A. economic resources invested by the owners of a business
B. tangible economic resources of value
C. economic resources invested by the creditors of a business
D. probable future economic benefits obtained or controlled by a
particular entity as a result of past transactions or events
10 Which of the following statement is true?
A. Trade accounts receivable are the only asset on which doubtful
accounts expense can be incurred.
B. The sole justification for providing for doubtful accounts is
conservatism.
C. Methods of estimating doubtful accounts expense based upon the
collectability of accounts receivable emphasize the income statement
rather than the balance sheet.
D. Provision for bad debt losses on trade receivable is usually
included in computing the balance of “allowance for doubtful
accounts”.
11. Liabilities and owners’ equity are similar in that
A. Both provide certain amounts of payments in the form of interest
and dividends respectively based upon written agreements.
B. Both provide specific timing of payments as a result of specific
maturity dates.
C. Both creditors and stockholders are equity holders, although they
have different rights with respect to income, risk, control, and
liquidation.
D. Both liabilities and owners’ equity are ranked equally when an
enterprise’s assets are distributed
12. A company changes from straight-line to an accelerated method of
calculating depreciation, which will be similar to the method used for
tax purposes. The entry to record this change should include a
A. credit to Accumulated Depreciation.
B. debit to Retained Earnings in the amount of the difference on prior
years.
C. debit to Deferred Tax Asset.
D. credit to Deferred Tax Liability.
13. An entity imported machinery to install in its new factory before
year-end. However, due to circumstances beyond its control, the
machinery was delayed by a few months but reached the factory
premises before year-end. While this was happening, the entity learned
from the bank that it was being charged interest on the loan it had
taken to fund the cost of the plant. What is the proper treatment of
freight and interest expense under PAS 16?
a. Both expenses should be capitalized
b. Interest may be capitalized but freight should be expressed
c. Freight charges should be capitalized but interest cannot be
capitalized under these circumstances
d. Both expenses should be expensed
14 Which of the following is not the basic purpose of the notes to
financial statements?
A. To present information about the basis of preparation of the FS
and the specific accounting policies selected and applied.
B. To disclose the information required by the PFRS that is not
presented elsewhere in FS.
C. To provide additional information which is not presented on the
face of FS but that is necessary for a pair presentation.
D. To provide information about the financial position, financial
performance and cash flow of an entity that is useful to a wide range of
users in making economic decision.
 15. 24. Biological assets during the period of growth,
degeneration, production and procreation are measured initial
recognition and every balance sheet at
A. cost
B. replacement cost
C. fair value
D. fair value less estimated point of sales
16. Which is incorrect concerning the recognition and measurement of
an intangible asset?
a. If an intangible asset is acquired separately, the cost comprises its
purchase price, including import duties and taxes and any directly
attributable expenditure of preparing the asset for its intended use.
b. If an intangible asset is acquired in a business combination that is an
acquisition, the cost is based on its fair value at the date of acquisition.
c. If an intangible asset is acquired free of charge or by way of
government grant, the cost is equal to its fair value.
d. If payment for an intangible asset is deferred beyond normal credit
terms, its cost is equal to the total payments over the credit period.
17. The IASB encourages publicly traded entities to provide interim
financial reports
A. At least at the end of the half-year end and within 60 days of the end of
interim period
B. Within a month of the half-year end
C. On a quarterly basis
D. Whenever the entity wishes
18. The Scandium Company is commencing a new construction
project, which is to be financed by borrowing. The key dates are as follows:
15 May 20X8 Loan interest relating to the project starts to be incurred
3 June 20X8 Technical site planning commences
12 June 20X8 Expenditures on the project start to be incurred
18 July 20X8 Construction work commences
According to IAS23 Borrowing costs, from what date can Scandium
commence the capitalization of borrowing costs?
a .15 May 20X8 b. 3 June 20X8 c.12 June 20X8 d.18 July 20X8
19. In accordance with IAS7 Statement of cash flows, and treating it as
a nonrecurring event, which classification of the cash flow arising from
the proceeds from an earthquake disaster settlement would be most
appropriate? (select one answer)
A Cash flows from operating activities
B Cash flows from investing activities
C Cash flows from financing activities
D Does not appear in the cash flow statement
20. For a bond payable with a term of 20 years, originally issued at a
discount and outstanding for 10 years, the theoretically preferred
presentation in the statement of the financial position is the
a. amount expected to be paid to the bondholders at bond maturity
b. face amount of the bonds less discount at the date of issue
c. bond maturity value less the unamortized discount when the
compound interest method of unamortized is issued
d. face amount of the bonds
21. If, at the end of a period, a company erroneously excluded some
goods from its ending inventory and also erroneously did not record
the purchase of these goods in its accounting records, these errors
would cause
A. the ending inventory and retained earnings to be understated.
B. the ending inventory, cost of goods sold, and retained earnings to be
understated.
C. no effect on net income, working capital, and retained earnings.
D. cost of goods sold and net income to be understated.
22. Filetto Company changed its method of pricing inventories from
FIFO to LIFO. What type of accounting change does this
represent?
A. A change in accounting estimate for which the financial statements
for prior periods included for comparative purposes should be
presented as previously reported.
B. A change in accounting principle for which the financial statements
for prior periods included for comparative purposes should be
presented as previously reported.
C. A change in accounting estimate for which the financial statements
for prior periods included for comparative purposes should be restated.
D. A change in accounting principle for which the financial statements
for prior periods included for comparative purposes should be restated.
23. The estimated life of a building that has been depreciated 30 years
of an originally estimated life of 50 years has been revised to a
remaining life of 10 years. Based on this information, the accountant
should
A.Continue to depreciate the building over the original 50-year life
B.Depreciate the remaining book value over the remaining life of the
asset
C.Adjust accumulated depreciation to its appropriate balance, through
net income, based on a 40-year life, and then depreciate the adjusted
book value as though the estimated life had always been 40 years
D.Adjust accumulated depreciation to its appropriate balance through
retained earnings, based on a 40-year life, and then depreciate the
adjusted book value as though the estimated life had always been 40-
years
24. Long lived properties items having no physical existence and
whose value lies in the rights, privileges and advantages they accord to
the owner; identifiable non-monetary assets without physical
substance.
a. Fixed asset b. Intangible Assets c. Deferred Charges
d. Tangible Assets
25. When the effective-interest method is used to amortize bond
premium or discount, the periodic amortization will
A. increase if the bonds were issued at a discount.
B. decrease if the bonds were issued at a premium.
C. increase if the bonds were issued at a premium.
D. increase if the bonds were issued at either a discount or a premium.
26. Long-term debt that matures within one year and is to be converted
into shares should be reported
A. as a current liability.
B. in a special section between liabilities and equity.
C. as part current and part non-current.
D. as non-current.
27. Under PFRS deferred tax assets are recognized for
I. Deductible temporary differences.
II. Deductible permanent differences.
III. Operating loss carryforwards.
IV. Operating loss carrybacks.
a. I, II, and III. b. I and III only. c. I and IV only.
d. II and III only.
28. A major distinction between temporary and permanent differences
is
A. permanent differences are not representative of acceptable
accounting practice.
B. temporary differences occur frequently, whereas permanent
differences occur only once.
C. once an item is determined to be a temporary difference, it
maintains that status; however, a permanent difference can change in
status with the passage of time.
D. temporary differences reverse themselves in subsequent accounting
periods, whereas permanent differences do not reverse.
29. QUANTUM Inc. leased a new machine having an expected useful
life of 30 years from Carbide Co. Terms of the non-cancellable 25-
year lease were that QUANTUM would gain title to the property upon
payment of a sum equal to the fair market value of the machine at the
termination of the lease. QUANTUM accounted for the lease as a
finance lease and recorded an asset and a liability in the finance
records. The asset recorded under this lease should properly be
amortized/depreciated over
a. 5 years (the period of actual ownership).
b. 22.5 years (the period of actual ownership).
c. 25 years (the term of the lease).
d. 30 years (the total asset life).
30. Which of the following is a correct statement of one of the criteria
for finance lease?
a. The lease transfers ownership of the property to the lessor.
b. b. The lease contains a purchase option.
c. The lease term is equal to or more than 75% of the estimated
economic life of the leased property.
d. The minimum lease payments (excluding executory costs) equals or
exceeds 90% of the fair value of the leased property.
31. When computing basic earnings per share on ordinary shares,
dividends on cumulative, nonconvertible preference shares should be
a. deducted from net income only if the dividends were declared or
paid in the current period.
b. added from net income regardless of whether the dividends were not
paid or declared in the period.
c. deducted from net income only if net income is greater than the
dividends.
d. deducted from net income regardless of whether the dividends were
not paid or declared in the period.
32. Which statement is incorrect regarding events after balance sheet
date?
a. Events after the balance sheet date that provide further evidence of
conditions that existed at the balance sheet date will require
adjustments to the financial statements.
b. Events or conditions that arose after the balance sheet date does not
require adjustments to the financial statements.
c. If an entity declares dividends after the balance sheet date, the entity
shall recognize those dividends as a liability at the balance sheet date.
d. An entity shall not prepare its financial statements on a going
concern basis if management determines after the balance sheet date
either that it intends to liquidate the entity or to cease trading, or that it
has no realistic alternative but to do so.
33.All of the following are characteristics of financial assets classified
as held to maturity, except:
A. they have fixed or determinable payments and a fixed maturity.
B. the holder can recover substantially all of its investment unless
there has been credit deterioration.
C. they are quoted in an active market.
D. the holder has demonstrated a positive intention and ability to hold
them to maturity.
34. Which of the following is true?
A. Trading securities can be classified as current or noncurrent
depending on management’s intent.
B. Held to maturity securities shall not be classified as current under
any circumstance.
C. Trading securities shall not be classified as current under any
circumstance.
D. Available for sale securities can be classified as current or
noncurrent depending on management’s intent.
35. Which of the following does not exhibit significant influence by an
investor in the financial and operating policy decisions of the investee?
A. participation in policy making process
B. material intercompany transactions
C. power to govern the financial and operating policy decisions of an
enterprise so as to obtain benefits from its activities
D. technological dependency
36. An investor uses the equity method to account for its 30%
investment in common stock of an investee. Amortization of the
investor’s share of the excess of fair market value over the book value
of depreciable assets at the date of the purchase should be reported in
the investor’s income statement as part of:
A. other expense. B. depreciation expense. C. equity in
earnings of investee. D. amortization of goodwill.
37. When bonds are acquired between interest payment dates, the price
paid for the bond is:
A. equal to the acquisition cost
B. increased by a charge for accrued interest to the date of purchase
C. decreased by a credit for accrued interest to the date of purchase
D. equal to par value increased by a charge for accrued interest to the
date of purchase
investment in subsidiary, equity in earnings of subsidiary, dividend
revenue and retained earnings
38. When stock dividends of different class are received
A. Cash is debited and dividend income is credited
B. A new investment account is debited and the original investment is
credited
C. A new investment account is debited and the dividend income is
credited
D. No formal entry is made but only a memorandum
39. 34. Which of the following statements is false?
(a) When common stock subscriptions are sold for more than par
value, the excess of the selling price over par is recorded as an
adjustment to retained earnings.
(b) Under the cost method, treasury stock is reported on the balance
sheet as an unallocated reduction of the total amount of stockholders’
equity, it is not reported in this manner under the par value method.
(c) The purchase of treasury stock reduces the number of outstanding
shares, and if the treasury stock is subsequently resold, it is again
classified as outstanding.
(d) Either common or preferred stock that has been reacquired by the
issuing corporation can be classified as treasury stock.
40. The characteristics of a derivative include (choose the incorrect
one):
A. A derivative has no notional amount.
B. The derivative is settled at a future date by a net cash payment.
C. The value of the derivative changes in response to the change in an
“underlying” variable.
D. The derivative requires either no initial net investment or a little net
investment than would be required for other types of contracts that
have a similar response to changes in market factors.
41. It is an agreement whereby one party will receive a swap payment
from another party if the interest rate is more than the underlying
interest rate, and will make a swap payment to the other party if the
interest rate is lower than the underlying interest rate.
A. receive fixed interest rate swap
B. receive variable, pay interest rate swap
C. receive fixed, pay variable interest rate swap
D. receive variable interest rate swap
41. Which is incorrect concerning an option?
A. A call option is the right to purchase an asset at a specified price
during a definite period at some future time.
B. A put option is the right to sell an asset at a specified price during a
definite period at some future time.
C. An option is a right and not an obligation to purchase or sell an
asset.
D. An option requires no payment.
42. The following statements refer to the general concept of
hyperinflation. Select the incorrect one.
A. In the process of restatement, the first procedure is made by
applying a general price index.
B. Any revaluation surplus recognized previously shall be presented
on year-end reports
C. Monetary items, whether assets or liability whose amounts are
fixed, shall not be restated
D. The restated amount of plants, goodwill and other intangibles is
reduced when it exceeds the recoverable amount.
43. The deliberate non-disclosure by companies of all their debt in
order to make their financial position look stronger
a. Troubled debt restructuring b. Captive finance companies c. Off
balance sheet financing d. Economic defeasance
44.Theoretically, a bond payable should be reported at the present
value of the principal plus the present value of the interest discounted
at the
a. stated interest rate for both the principal and interest
b. effective interest rate for both principal and interest
c. stated interest for principal and effective interest rate for interest
d. effective interest rate for principal and stated interest rate for interest
45. Manila Company issued a note in exchange for cash solely.
Assuming that the items below differ in amount, the present value of
the note at issuance is equal to the
a. face amount
b. face amount, discounted at the prevailing interest rate for similar
notes
c. proceeds received
d. proceeds received, discounted at prevailing interest rate
46. Which of the following statements regarding Investment Property
is (are) true
I. An investment property shall be measured initially at its cost
II. Transaction cost shall be included in the initial measurement of
investment property
III. With certain exceptions, an entity shall choose as its accounting
policy either the fair value model or the cost model and shall apply
such policy to all its investment property
a. I and II only b. I and III only c. II and III only
d. I, II and III
47 In the case of a nonmonetary grant, which of the following
accounting treatments is prescribed by PAS 20?
A. Record the asset at replacement cost and the grant at a nominal
value.
B. Record the grant at a value estimated by management.
C. Record both the grant and the asset at fair value of the
nonmonetary asset.
D. Record only the asset at fair value; do not recognize the fair
value of the grant
49. PAS 20, Government Grants provide two approaches to accounting
for government grants :
(1) capitalization approach and (2) income approach. Arguments in
support of the income approach include the following except:
A. Government grants are considered earned through compliance with
the condition and meeting envisaged obligations
B. Government grants are receipts from a source other than
shareholders or capital providers
C. Government grants represent an incentive provided by the
government without related costs.
D. Government grants are considered as extension of fiscal policies
similar to income and other taxes
50. Dolan Co. received merchandise on consignment. As of March 31,
Dolan had recorded the transaction as a purchase and included the
goods in inventory. The effect of this on its financial statements for
March 31 would be
A. no effect.
B. net income was correct and current assets and current liabilities
were overstated.
C. net income, current assets, and current liabilities were overstated.
d. net income and current liabilities were overstated.
51. If a business entity entered into certain related party transactions, it
would be required to disclose all of the following information except
A. nature of the relationship between the parties to the transactions.
B. nature of any future transactions planned between the parties and the
terms involved.
C. dollar amount of the transactions for each of the periods for which
an income state-ment is presented.
D. amounts due from or to related parties as of the date of each balance
sheet presented.
52. Companies should disclose all of the following in interim reports
except
A. basic and diluted earnings per share.
B. changes in accounting principles.
C. post-balance-sheet events.
D. seasonal revenue, cost, or expense
53. Of the following costs related to the development of natural
resources, which one is not a part of depletion cost?
a.Acquisition cost of the natural resource deposit
b.Exploration costs
c.Tangible equipment costs associated with machinery used to extract
the natural resource
d.Intangible development costs such as drilling costs, tunnels, and
shafts
54. The term "depreciable cost," or "depreciable base," as it is used in
accounting, refers to
a.the total amount to be charged (debited) to expense over an asset's
useful life.
b.the cost of the asset less the related depreciation recorded to date.
c.the estimated market value of the asset at the end of its useful life.
d.the acquisition cost of the asset.
55. Dominador Macatigbas is a farmer who owns land which borders
on the right-of-way of the Northern Railroad. On August 10, 2015,due
to the admitted negligence of the Railroad, hay on the farm was set on
fire and burned. Macatigbas had a dispute with the Railroad for several
years concerning the ownership of a small parcel of land. The
representative of the Railroad has offered to assign any rights which
the Railroad may have in the land to Macatigbas in exchange for a
release of his right to reimbursement for the loss he has sustained from
the fire. Macatigbas appears inclined to accept the Railroad's offer.
The Railroad's 2015 financial statements should include the following
related to the incident:
a.recognition of a loss and creation of a liability for the value of the
land.
b.recognition of a loss only.
c.creation of a liability only.
d.disclosure in note form only.
56. Titasen Corporation, a manufacturer of household paints, is
preparing annual financial statements at December 31, 2014. Because
of a recently proven health hazard in one of its paints, the government
has clearly indicated its intention of having Titasen recall all cans of
this paint sold in the last six months. The management of Lopez
estimates that this recall would cost P800,000. What accounting
recognition, if any, should be accorded this situation?
a.No recognition
b.Note disclosure only
c.Operating expense of P800,000 and liability of P800,000
d.Appropriation of retained earnings of P800,000
57. In a troubled debt restructuring in which the debt is continued with
modified terms and the carrying amount of the debt is less than the
total future cash flows, the creditor should
A. compute a new effective-interest rate.
B. not recognize a loss.
C. calculate its loss using the historical effective rate of the loan.
D. calculate its loss using the current effective rate of the loan.
58. Theoretically, the costs of issuing bonds could be
A. expensed when incurred.
B. reported as a reduction of the bond liability.
C. debited to a deferred charge account and amortized over the life of
the bonds.
D. any of these.
59. When the effective-interest method is used to amortize bond
premium or discount, the periodic amortization will
A. increase if the bonds were issued at a discount.
B. decrease if the bonds were issued at a premium.
C. increase if the bonds were issued at a premium.
D. increase if the bonds were issued at either a discount or a premium.
60. The rate of interest actually earned by bondholders is called the
a. stated rate. b. yield rate. c. effective rate. d.
effective, yield, or market rate.
61. Castelitte, Inc. issued bonds with a maturity amount of P200,000
and a maturity ten years from date of issue. If the bonds were issued at
a premium, this indicates that
A. the effective yield or market rate of interest exceeded the stated
(nominal) rate.
B. the nominal rate of interest exceeded the market rate.
C. the market and nominal rates coincided.
D. no necessary relationship exists between the two rates.
62. The printing costs and legal fees associated with the issuance of
bonds should
A. be expensed when incurred.
B. be reported as a deduction from the face amount of bonds payable.
C. be accumulated in a deferred charge account and amortized over the
life of the bonds.
D. not be reported as an expense until the period the bonds mature or
are retired.
63. Stockholders of a business enterprise are said to be the residual
owners. The term residual owner means that shareholders
A. are entitled to a dividend every year in which the business earns a
profit.
B. have the rights to specific assets of the business.
C. bear the ultimate risks and uncertainties and receive the benefits of
enterprise ownership.
D. can negotiate individual contracts on behalf of the enterprise.
64. A primary source of stockholders' equity is
A. income retained by the corporation.
B. appropriated retained earnings.
C. contributions by stockholders.
D. both income retained by the corporation and contributions by
stockholders.
65. Treasury shares are
A. shares held as an investment by the treasurer of the corporation.
B. shares held as an investment of the corporation.
C. issued and outstanding shares.
D. issued but not outstanding shares.
66. The cumulative feature of preferred stock
A. limits the amount of cumulative dividends to the par value of the
preferred stock.
B. requires that dividends not paid in any year must be made up in a
later year before dividends are distributed to common shareholders.
C. means that the shareholder can accumulate preferred stock until it is
equal to the par value of common stock at which time it can be
converted into common stock.
D. enables a preferred stockholder to accumulate dividends until they
equal the par value of the stock and receive the stock in place of the
cash dividends.
67. Which of the following statements about property dividends is not
true?
A. A property dividend is usually in the form of securities of other
companies.
B. A property dividend is also called a dividend in kind.
C. The accounting for a property dividend should be based on the
carrying value (book value) of the nonmonetary assets transferred.
D. All of these statements are true.
68 Primer Swiss Corporation issued a 100% stock dividend of its
common stock which had a par value of P10 before and after the
dividend. At what amount should retained earnings be capitalized for
the additional shares issued?
A. There should be no capitalization of retained earnings.
B. Par value
C. Market value on the declaration date
D. Market value on the payment date
69. The issuer of a 5% common stock dividend to common
stockholders preferably should transfer from retained earnings to
contributed capital an amount equal to the
A. market value of the shares issued.
B. book value of the shares issued.
C. minimum legal requirements.
D. par or stated value of the shares issued.
70. Corporations issue convertible debt for two main reasons. One is
the desire to raise equity capital that, assuming conversion, will arise
when the original debt is converted. The other is
A. the ease with which convertible debt is sold even if the company
has a poor credit rating.
B. the fact that equity capital has issue costs that convertible debt does
not.
C. that many corporations can obtain financing at lower rates.
D. that convertible bonds will always sell at a premium.
71. When convertible debt is retired by the issuer, any material
difference between the cash acquisition price and the carrying amount
of the debt should be
A. reflected currently in income, but not as an extraordinary item.
B. reflected currently in income as an extraordinary item.
C. treated as a prior period adjustment.
D. treated as an adjustment of additional paid-in capital.
72. The conversion of preferred stock into common requires that any
excess of the par value of the common shares issued over the carrying
amount of the preferred being converted should be
A. reflected currently in income, but not as an extraordinary item.
B. reflected currently in income as an extraordinary item.
C. treated as a prior period adjustment.
D. treated as a direct reduction of retained earnings.
73. The payment to executives from a performance-type plan is never
based on the
A. market price of the common stock.
B. return on assets (investment).
C. return on common stockholders' equity.
D. sales.
74. A deferred tax liability is classified on the balance sheet as either a
current or a noncurrent liability. The current amount of a deferred tax
liability should generally be
A. the net deferred tax consequences of temporary differences that will
result in net taxable amounts during the next year.
B. totally eliminated from the financial statements if the amount is
related to a noncurrent asset.
C. based on the classification of the related asset or liability for
financial reporting purposes.
D. the total of all deferred tax consequences that are not expected to
reverse in the operating period or one year, whichever is greater.

75. All of the following are procedures for the computation of deferred
income taxes except to
A. identify the types and amounts of existing temporary differences.
B. measure the total deferred tax liability for taxable temporary
differences.
C. measure the total deferred tax asset for deductible temporary
differences and operating loss carrybacks.
D. All of these are procedures in computing deferred income taxes.
76. Interperiod income tax allocation causes
A. tax expense shown on the income statement to equal the amount of
income taxes payable for the current year plus or minus the change in
the deferred tax asset or liability balances for the year.
B. tax expense shown in the income statement to bear a normal
relation to the tax liability.
C. tax liability shown in the balance sheet to bear a normal relation to
the income before tax reported in the income statement.
D. tax expense in the income statement to be presented with the
specific revenues causing the tax.
77. At the December 31, 2007 balance sheet date, Garth Brooks
Corporation reports an accrued receivable for financial reporting
purposes but not for tax purposes. When this asset is recovered in
2008, a future taxable amount will occur and
A. pretax financial income will exceed taxable income in 2008.
B. Garth will record a decrease in a deferred tax liability in 2008.
C. total income tax expense for 2008 will exceed current tax expense
for 2008.
D. Garth will record an increase in a deferred tax asset in 2008.
78. If the residual value of a leased asset is guaranteed by a third party
A. it is treated by the lessee as no residual value.
B. the third party is also liable for any lease payments not paid by the
lessee.
C. the net investment to be recovered by the lessor is reduced.
D. it is treated by the lessee as an additional payment and by the lessor
as realized at the end of the lease term.
79. A lessee with a capital lease containing a bargain purchase option
should depreciate the leased asset over the
A. asset's remaining economic life.
B. term of the lease.
C. life of the asset or the term of the lease, whichever is shorter.
D. life of the asset or the term of the lease, whichever is longer.
80. A lessor with a sales-type lease involving an unguaranteed residual
value available to the lessor at the end of the lease term will report
sales revenue in the period of inception of the lease at which of the
following amounts?
A. The minimum lease payments plus the unguaranteed residual value.
B. The present value of the minimum lease payments.
C. The cost of the asset to the lessor, less the present value of any
unguaranteed residual value.
D. The present value of the minimum lease payments plus the present
value of the unguaranteed residual value.
81. Under what circumstances can the profit or loss on an equity
instrument carried at fair value be dealt with in other comprehensive
income?
A. When the profit or loss is capable of recycling
B. When the equity investment is held for trading
C. When the equity investment is not held for trading
D. When the equity investment is available for sale
82. Under what circumstances can an entity classify financial assets
that meet the amortized cost criteria as at FVPL?
A. Where the instrument is held at maturity
B. Where the financial asset passes the contractual cash flow
characteristics test
C. If doing so eliminates or reduces an accounting mismatch
D. Where the business model approach is adopted
83. Which is a requirement for a component to be classified as a
discontinued operation?
A. The activities must cease permanently prior to the authorization of
issuance of financial statements by the management
B. The component must have been a cash-generating unit (CGU) or a
group of CGU while being held for use
C. The asset must have been classified as held for sale in the previous
financial statements
D. All of the above
84. Animals related to recreational activities shall be accounted from
what standard?
A. IAS 41- Agriculture
B. IAS 40- Investment Property
C. IAS 16- Property, Plant and Equipment
D. Either IAS 41 or IAS 16
85. 5.A sale should not be recognized as revenue by the seller at the
time of sale if
A. Payment was made by check
B. The selling price is less than the normal selling price
C. The buyer has a right to return the product and the amount of
future returns cannot be reasonably estimated
D. Only a promise to receive cash was obtained though the items
have been delivered
86. Which is not a purpose of the ASC framework?
a.To assist the ASC in developing accounting standards that represent
generally accepted accounting principles in the Philippines.
b.To assist the ASC in its review and adoption of existing International
Accounting Standards.
c.To assist auditors in forming an opinion as to whether financial
statements conform with Philippine GAAP.
d.To assist the Board of Accountancy in promulgating rules and
regulations affecting the practice of accountancy in the Philippines
87. The financial statements most frequently provided include all of
the following except the
A. statement of financial position. B. income statement.
C. statement of cash flows. D. statement of retained
earnings.
88. All the following are differences between financial and managerial
accounting in how accounting information is used except to
A. plan and control company's operations.
B. decide whether to invest in the company.
C. evaluate borrowing capacity to determine the extent of a loan to
grant.
D. All the above.
89. . Which of the following describes proper revenue recognition?
A. Goods shipped subject to installation and inspection are
recognized as revenue only when the buyer accepts delivery, and only
when the inspection is complete.
B. Goods under bill and hold sales are recognized as revenue when
there is an intention to acquire or manufacture the goods in time for
delivery.
C. Goods sold on approval when the buyer has negotiated a limited
right of return are recognized as revenue when the shipment has been
formally accepted by the buyer of the goods have been delivered, even
if the time period for rejection has elapsed.
D. In lay away sales under which the goods are delivered only when
the buyer makes the final payment in a series of installments, revenue
is recognized when the goods are delivered.
90. The information provided by financial reporting pertains to
A. individual business enterprises, rather than to industries or an
economy as a whole or to members of society as consumers.
B. business industries, rather than to individual enterprises or an
economy as a whole or to members of society as consumers.
C. individual business enterprises, industries, and an economy as a
whole, rather than to members of society as consumers.
D. an economy as a whole and to members of society as consumers,
rather than to individual enterprises or industries.
91.A soundly developed conceptual framework of concepts and
objectives should
A. increase financial statement users' understanding of and confidence
in financial reporting.
B. enhance comparability among companies' financial statements.
C. allow new and emerging practical problems to be more quickly
solved.
D. all of these.
92.On the derecognition of an available for sale security:
(a) the difference between the consideration received and the
carrying amount shall be recognized in profit or loss
(b) the difference between the consideration received and the
carrying amount shall be recognized as an adjustment of retained
earnings
(c) the difference between the sum of the consideration received and
any cumulative gain or loss that has been recognized directly in equity
and the carrying amount shall be recognized in profit or loss
(d) the difference between the sum of the consideration received and
any cumulative gain or loss that has been recognized directly in equity
and the carrying amount shall be included in retained earnings
93. This is a sum of money or other government resources set aside for
the purpose of carrying cut specific activities or attaining certain
objectives in accordance with specific regulations, restrictions or
limitations, and constitutes an independent fiscal and accounting
entity.
A. Cash disbursement ceiling
B. Appropriation
C. Fund
D. Budget
94. Assets may suffer an impairment in value for a variety of reasons,
but not likely as a result of:
a. A corporate restructuring.
b. Slumping demand for uncompetitive products.
c. Significant increases in market share.
d. Obsolescence.
95. If in the rare circumstance that a reliable measure of fair value is
no longer available, it becomes appropriate to carry a financial asset
without a fixed maturity at cost, the fair value carrying amount of the
financial asset becomes the new cost basis and any previous gain or
loss that has been recognized directly in equity shall:
(a) remain in equity until the financial asset is sold or otherwise
disposed of
(b) be recognized in earnings immediately
(c) included in retained earnings
(d) be amortized over a reasonable period to profit or loss
96. Why do companies provide trade discounts?
A. To avoid frequent changes in catalogs.
B. To induce prompt payment.
C. To easily alter prices for different customers.
D. Both a. and c.
97. Reversing entries
A. Impact the income statement only.
B. Impact the statement of financial position and the income statement.
C.Are not allowed under International Financial Reporting
Standards(PFRS).
D. Change amounts reported in the financial statements of the
preceding period.
98 If as a result of a change in intention or ability, it is no longer
appropriate to classify an investment as held to maturity, it shall be
reclassified as:
(a) available for sale and remeasured at fair value and the difference
between fair value and carrying amount shall be accounted for as
component of equity.
(b) available for sale and remeasured at fair value and the difference
between fair value and carrying amount shall be accounted for as
component of income.
(c) trading and remeasured at fair value and the difference between
fair value and carrying amount shall be included in profit or loss.
(d) nonmarketable investment and its carrying amount is the initial
cost.
99. For the composite method, the composite
a.rate is the total cost divided by the total annual depreciation.
b.rate is the total annual depreciation divided by the total depreciable
cost.
c.life is the total cost divided by the total annual depreciation.
d.life is the total depreciable cost divided by the total annual
depreciation.
100. What is the difference between the past service costs and prior
service costs?
A. past service costs refer to costs applicable to periods prior to a
particular data of actuarial valuation, and prior service costs refer to
costs applicable to employee service prior to the inception of a pension
plan
B. past service costs refer to costs applicable to employee service prior
to the inception on a pension plan, and prior service costs refer to costs
applicable to periods prior to a particular data of actuarial valuation
C. past service costs refer to costs applicable to a pension plan for an
employee who enters the plan after the inception of the plan in order to
bring the employee benefits into line with the other participants in the
plan, and prior service costs refer to changes in prior period pension
costs that are caused by a change in actuarial valuation
D. there is no difference between the two terns, and they may be used
interchangeably
-end of examination-