CPA REVIEW SCHOOL OF THE PHILIPPINES

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FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ

MULTIPLE CHOICE – SMALL ENTITIES

1. Which is not within the definition of a small entity?

a. With total assets or total liabilities between P3,000,000 and P100,000,000.
b. Not required to file financial statements with SEC in accordance with SEC regulations.
c. Not in the process of filing financial statements for the purpose of issuing equity instruments in a
public market.
d. Holder of a secondary license issued by regulatory agency, such as bank.
2. Which small entity is exempted from the mandatory adoption of PFRS for Small Entities?
a. A small subsidiary of a parent under full PFRS
b. A small subsidiary of a foreign parent moving toward full IFRS
c. A small joint venture under full PFRS
d. All of these entities are exempted from adoption of PFRS for small entities.
3. The financial statements of a small entity include all, except
a. Statement of financial position
b. Statement of income
c. Statement of retained earnings
d. Statement of cash flows
4. The statements of income and changes in equity of a small entity can be combined if the only changes
arise from all, except
a. Net income
b. Payment of dividend
c. Change in accounting estimate
d. Change in accounting policy and correction of prior period errors
5. Which is an adjustment of the opening balance of retained earnings?
a. Change in accounting policy
b. Change in accounting estimate
c. Change in accounting policy and prior period error
d. Change in accounting estimate and prior period error
6. Which is not a basic financial instrument of a small entity?
a. Cash in bank
b. Accounts receivable
c. Note payable
d. Investment in puttable ordinary shares
7. Basic financial instruments are initially measured at
a. Transaction price including transaction cost
b. Transaction price excluding transaction cost
c. Amortized cost
d. Present value of future payments
8. Debt instruments of a small entity are subsequently measured at
a. Amortized cost using effective interest method
b. Amortized cost using straight line
c. Cost
d. Fair value
9. Investments in untraded shares of a small entity are subsequently measured at
a. Cost
b. Cost less impairment
c. Fair value
d. Fair value less transaction cost

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10. Investment in traded shares of a small entity are subsequently measured at

a. Cost
b. Fair value
c. Lower of cost or fair value with changes in fair value recognized in profit or loss
d. Lower of cost or fair value with changes in fair value recognized in OCI
11. For debt instrument at amortized cost, the impairment loss is
a. Excess carrying amount over the present value of cash flows
b. Excess of present value of cash flows over carrying amount
c. Excess of carrying amount over fair value
d. Excess fair value over carrying amount
12. For financial asset measured at cost less impairment, the impairment loss is the excess of
a. Carrying amount over the best estimate of selling price
b. Best estimate of selling price over carrying amount
c. Carrying amount over fair value
d. Fair value over best estimate of selling price
13. Inventories of a small entity are initially measured at cost and subsequently measured at
a. Fair value
b. Market value
c. Lower of cost or market value
d. Lower of cost or net realizable value
14. What is the market value of inventory of a small entity?
a. Fair value
b. Probable selling price to willing buyers at reporting date
c. Fair value less transaction cost
d. Best estimate of management
15. If the market value of inventory of small entity is lower than cost, the difference is accounted for as
a. Impairment loss included in profit or loss
b. Impairment loss included in OCI
c. Component of cost of goods sold
d. Operating expense
16. All investments in associate of a small entity are accounted for using
a. Cost model
b. Equity method
c. Either cost model or equity method
d. Fair value model
17. All investments property of a small entity shall be subsequently measured using
a. Cost model
b. Fair value model
c. Either cost model or revaluation model
d. Either cost model or fair value model
18. A small entity shall apply which accounting policy for property, plant and equipment?
a. Cost model
b. Fair value model
c. Either cost model or fair value model
d. Either cost model or revaluation model
19. Under the fair value model, a small entity shall measure property, plant and equipment at
a. Fair value with changes in fair value recognized in profit or loss
b. Fair value with changes in fair value recognized in OCI
c. Fair value less transaction cost
d. Best estimate of fair value by management

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20. Which statement is correct with respect to government grant of a small entity?
a. Unconditional monetary grant is recognized in income when receivable.
b. Conditional monetary grant is recognized in income only when condition is met.
c. Monetary grant is recognized as liability before recognition criteria are met.
d. All of these statements are true.
21. What is the accounting policy of a small entity for a nonmonetary grant?
a. No recognition
b. Recognition at fair value
c. Either no recognition or recognition at fair value
d. Recognition at cost
22. What is the treatment of borrowing cost of a small entity?
a. Expensed as incurred
b. Capitalized
c. May be expensed or capitalized depending on circumstances
d. Not recognized
23. A small entity shall measure intangible asset using
a. Cost model
b. Fair value model
c. Revaluation model
d. Either cost model or fair value model
24. If the useful life of an intangible asset of a small entity cannot be estimated reliably.
a. The intangible asset is not amortized
b. The useful life must be 10 years.
c. The useful life is based on the best estimate of management
d. The useful life is based on the best estimate of management not exceeding 10 years.
25. How is impairment loss of an asset of a small entity recognized?
a. Excess of carrying amount over recoverable amount
b. Excess of recoverable amount over carrying amount
c. Excess of carrying amount over fair value less cost of disposal
d. Excess of carrying amount over value in use
26. Biological asset of a small entity is measured using
a. Cost model
b. Current market price model
c. Either cost model or fair value model
d. Either cost model or current market price model
27. The current market price of a biological asset of a small entity is the
a. Fair value
b. Probable selling price to willing buyers at reporting date
c. Probable selling price unwilling buyers at reporting date
d. Average selling price during the year
28. Agricultural produce of a small entity is measured at
a. Current market price at the point of harvest
b. Current market price less cost of disposal at the point of harvest
c. Fair value at the point of harvest
d. Fair value less cost of disposal at the point of harvest
29. What is the measurement of a provision?
a. Best estimate at reporting date
b. Best estimate at settlement date
c. Present value of future payment
d. Midpoint of the range
30. A small entity shall account for lease using
a. Operating lease model
b. Finance lease model
c. Either operating lease or finance lease
d. Operating lease for lessee and finance lease for lessor
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31. A small entity shall account for income tax using
a. Taxes payable method
b. Deferred income taxes method
c. Either taxes payable method or deferred income taxes method
d. Neither taxes payable method nor deferred income taxes method
32. Deferred income taxes are measured at
a. Current tax rate
b. Expected future tax rate
c. Enacted future tax rate
d. Average annual tax rate
33. A small entity shall account for postemployment benefits using
a. Accrual method
b. Cash method
c. Either accrual method or cash method
d. Either accrual method or projected benefit method
34. The benefit obligation of small entity is calculated under
a. R.A. 7641
b. Company policy
c. Company policy if higher than R.A. 7641
d. Qualifying insurance policy
35. The accrual method of estimating the benefit obligation of a small entity is applied using
a. Current salary
b. Future salary
c. Future salary with recognition of actuarial gain or loss
d. Current salary with recognition of actuarial gain or loss
36. Equity instruments issued by a small entity are measured at
a. The amount of cash received
b. Present value of payment if the payment is deferred and the time value of money is material
c. Fair value of resources if the equity instruments are exchanged for resources other than cash
d. All of these are used in measuring equity instruments issued by a small entity
37. Equity settled transactions of a small entity are measured at
a. Net asset value
b. Fair value
c. Liquidation value
d. Assessed value
38. Net asset value is equal to
a. Total assets less total liabilities
b. Total assets at fair value
c. Net assets at fair value
d. Total assets less total liabilities divided by shares outstanding
39. Cash settled transactions of a small entity are measured at
a. Fair value of liability at reporting date
b. Net asset value of liability at reporting date
c. Fair value of liability at reporting date and remeasured at date of settlement
d. Net asset value of liability at reporting date and remeasured at date of settlement
40. A small entity shall apply which method of recognizing revenue and expense?
a. Accrual basis
b. Cash basis
c. Modified cash basis
d. Either accrual basis or cash basis
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