26. Ms. D.

Mawari, the accountant of Ala Chamba Corporation discovered a purchase invoice for some small
items of office equipment amounting to P15,000 which was omitted from the books. She was already doing the
summarizing stage of the recording process and has prepared the financial statements for submission to
management. She did not see the need to include the omitted transaction in the records as she reasoned that the
amount involved is not material. The total assets of the corporation as of balance sheet date is P 500,000,000. This
situation is
A. An application of the materiality principle
B. A violation of the materiality principle
C. An application of cost – benefit constraint in financial reporting
D. A violation of the recognition principle for accountable events

27. Under the revised Conceptual Framework, which of the following are among the enhancing qualitative
objectives of financial accounting?
A. Relevance D. Faithful representation G. Comparability
B. Neutrality E. Verifiability H. Freedom from error
C. Understandability F. Timeliness I. Completeness

A. A, D, and F
B. C, E, F and G
C. E, G, H
D. C, D, E and F

28. The IASB conceptual framework includes a cost-benefit constraint (which is also the same as the Materiality
constraint or principle of convenience). This states that the benefits of the information must be greater than the
cost of providing it. Which of the following is not a proper application of the cost-benefit constraint?
A. The cost of an inexpensive waste can that has a useful life of 5 years is charged to expense upon acquisition.
B. The Board of Directors of Jericho Corporation passed a resolution the entities capitalization threshold for asset
recognition at P 50,000.
C. Before closing its books in 2020, Mea Culpa Corporation discovered an unrecorded sales invoice of 2019
amounting to P10,000. Since the amount is immaterial compared the 2019 Gross Sales of P20,000,000 no
correcting entry was made in 2020.
D. An extensive repairs amounting to P3,000,000 at the end of the 7 th year of a building with a life of ten years
was charged to expense. After the repairs, it was estimated that the building has a remaining life of three years.

29. Which of the following statements about the concept of measurement or valuation in Accounting is
(are) True?
I. Under current GAAP, as a general rule, the primary basis of measurement of assets upon acquisition is
historical cost.
II. There are some instances when assets are initially measured on the basis of fair value.
III. The final valuation of assets and liabilities in the balance sheet are a mixture of costs and values.
IV. According to IFRS, under no circumstances is price-level accounting acceptable as an alternative
measurement in accounting in present-day GAAP.

A. I and II only
B. I, II and IV only
C. I, II and III only
D. I, II, III and IV

30. The concept of verifiability is complied with when an accounting transaction occurs that A.
involves an arms-length transaction between two independent interests
B. furthers the objectives of the company
C. is promptly recorded in a fixed amount of pesos
D. allocates revenues or expense items in a rational and systematic manner