REVIEWER IN THEORY OF ACCOUNTS

Multiple Choice

1. An entity shall measure initially a financial liability not designated at fair

value through profit loss at
a. Fair Value
b. Fair Value plus directly attributable transaction costs
c. Fair value minus directly attributable transactions cost
d. Face amount
2. Transaction cost directly attributable to the issue of a financial liability
include all of the following, except
a. Fees and commissions paid to agents
b. Levies by regulatory agencies
c. Transfer taxes and duties
d. Financing Costs
3. The fair value of a liability is defined as
a. The appraised value of the liability.
b. The price that would be received to assume the liability in an orderly
transaction between market participants.
c. The amount that would be paid when transferring a liability in an
orderly transaction between market participants.
d. The carrying amount of the liability on the date of transaction
4. After initial recognition, an entity shall measure a financial liability at
a. Amortized cost using the effective interest method.
b. Fair value through profit or loss
c. Either amortized cost using the effective interest method or fair value
through profit or loss.
d. Either amortized cost using the straight line interest method or fair
value through profit or loss.
5. Which of the following statements is true in relation to the fair value
option of measuring a financial liability?
a. At initial recognition, an entity may irrevocably designated a financial
liability at fair value through profit or loss.
b. The financial liability is measured at every year-end and any changes
in fair value are generally recognized in profit or loss
c. The interest expense on the financial liability is recognize using the
nominal interest rate.
d. All of these statements are true about the fair value option of
measuring financial liability.
6. Some liabilities, such as trade payables, accurals for employee and other
operating cost, are expected to be settled in more than twelve months after
the reporting period. How will an entity classify these items in the statement
of financial position?
a. Current
b. Non current
c. First classify as noncurrent since the term is more the twelve months,
then reclassify to current if the term is less than twelve months.
d. It will depend on the entity's policy.
7. Which of the following liabilities that are not part of the normal operating
cycle of an entity should be classified as noncurrent
 a. Financial liabilities classified as held for trading
b. Bank overdrafts
c. Current portion of noncurrent financial liabilities
d. Financial liabilities that provide financing but are not due for
settlement within twelve months after the reporting period.
8. With respect to loans classified as current liabilities, all of the following
events occur between the end of the reporting period and the date the
financial statements are authorized for issue are disclosed as non adjusting
event, except
a. Refinancing on a long-term basis
b. The entity has the discretion to refinance an obligation for a shorter
period.
c. Rectification of a breach of a long term loan arrangement
d. The granting by the lender of a period to rectify a breach of a long-
term loan arrangement ending at least twelve months after the
reporting period.
9. Which of the following should be classified as noncurrent liability>
a. Long-Term loan arrangement wherein an entity breaches a provision
such that the loan becomes payable on demand. After the reporting
period and before authorization of the financial statements for issue,
the lender has agreed not to demand payment.
b. Bond payable issued with the intention to repurchase in the near term
c. Dividend payable due in two years after the reporting period.
d. Trade note payable
10. Which of the following should be classified as noncurrent liability?
a. Accrual for employee and other operating cost
b. Provision
c. Financial liability held for trading
d. Deferred tax liability
11. All of the following conditions would require the classification of a liability
as current, except
a. The entity expects to settle the liability within the entity's operating
cycle
b. The entity's holds the liability for the purpose of trading
c. The liability is due to be settled within twelve months after the
reporting period
d. The entity has an unconditional right to defer settlement of the liability
for at least twelve months after the reporting period.
12. For a liability to exist
a. A past transaction or event must have occured.
b. The exact amount must be known.
c. The identity of the party owed must be known.
d. An obligation to pay cash in the future must exist.
13. The conceptually appropriate method of measuring a liability is to
a. Discount the amount of expected cash outflows that are necessary to
liquidate the liability using the market rate of interest at the date the
liability was initially incurred.
b. Discount the amount of expected cash outflows that are necessary to
liquidate the liability using the market rate of the interest at the date
financial statements are prepared.
 c. Record as a liability the amount of cash that the entity would be
required to pay to eliminate the liability in the ordinary course of
business on the date of the financial statements
d. Record as a liability the amount of cash actually received when a
liability was incurred.
14. It is a marketing scheme whereby an entity grants award credits to
customers and the entity can redeem the award credits in exchange for
free or discounted goods or services
a. Customer loyalty program
b. Premium plan
c. Marketing program
d. Loyalty Award
15. The consideration allocated to the award credits is measured at
a. Fair value of the award credits
b. Carrying amount of goods to be received in exchange
c. Fair value of the goods to be received in exchange
d. The proportion of the fair value of the award credits relative to the total
consideration recieved from the initial sale of the goods.
16. The accrual approach in accounting for product warranty cost
a. Is required for income tax reporting
b. Is frequently justified on the basis of expediency when warranty cost is
immaterial.
c. Finds the expense account being charged when the seller performs in
compliance with the warranty.
d. Represents accepted practice and should be used whenever the
warranty is an integral and inseparable part of the sale.
17. Which of the following best describes the accrual approach of accounting
for warranty cost?
a. Expensed when paid
b. Expensed when warranty claims are certain
c. Expensed based on estimate in year of sale.
d. Expensed when incurred.
18. Which is the correct definition of a provision?
a. A possible obligation arising from past events
b. A liability of uncertain timing or amount
c. A liability which cannot be easily measured
d. An obligation to transfer funds to an entity
19. A provision shall be recognized when
I. An entity has a present obligation as a result of a past event
II. It is probable that an outflow of resources embodying economic
benefits will be required to settle this obligation
III. The amount of the obligation can be measured reliably.
a. I and II only
b. I and III only
c. II and III only
d. I, II and III
20. A constructive obligation is an obligation
I. That is derived from an entity’s action that the entity will accept
certain responsibilities because of past practice, published policy or
current statement.
 II. The entity has created a valid expectation in other parties that it
will discharge those responsibilities
a. I only
b. II only
c. Both I and II
d. Neither I nor II
21. It is an event that creates a legal or constructive obligation because the
entity has no other realistic aternative but to settle the obligation.
a. Obligation event
b. Past event
c. Subsequent event
d. Current event
22. An outflow of resources embodying economic benefits is regarded as
“probable” when
a. The probability that the event will occur is greater than the probability
that the event will not occur.
b. The probability that the event will not occur is greater than the
probability that the event will occur
c. The probability that the event will occur is the same as the probability
that the event will not occur.
d. The probability that the event will occur is 90% likely
23. What amount is recognized as provision?
a. Best estimate of the expenditure
b. Minimum of the range
c. Maximum of the range
d. Midpoint of the range
24. Where there is a continuous range of possible outcomes, and each point
in that range is as likely as any other, the range to be used is the
a. Minimum
b. Maximum
c. Midpoint
d. Summation of the minimum and maximum
25. When the provision involves a large population of items, the estimate of
the amount
a. Reflects the weighting of all possible outcomes by their associated
probabilities
b. Is determined as the individual most likely outcome.
c. May be the individual most likely outcomes adjusted for the effect of
other possible outcomes
d. Midpoint of the possible outcomes.
26. The board of directors of an entity decided in the latter part of the current
year to wind up in the latter part 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 IFRS. This decision was conveyed to all workers and management
personnel at the headquarters in Europe. The cost of this restructuring
plan can be measured reliably. How should the entity treat this
restructuring in the financial statements for the current year-end?
a. Disclose only the restructuring decision and the cost of restructuring
because the entity has not announced the restructuring to those
 affected by the decision and thus has not raised an expectation that
the entity would actually carry out the 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
Chairman’s statement in the annual report since it is 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 year’s financial
statements.
27. Which of the following statements is incorrect concerning a contingent
liability?
a. A contingent liability is both probable and measurable
b. An entity shall not recognize a contingent liability in the financial
statements
c. A contingent liability is disclosed only
d. If a contingent liability is remote, no disclosure is required.
28. A contingent liability is a
I. Possible obligation that arises from past event and whose existence
will be confirmed only by the occurrence or nonoccurrence of one or
more future uncertain events not wholly within the control of the
entity
II. Present obligation that arises from past event and it is not probable
that an outflow of resources embodying economic benefits will be
required to settle the obligation OR the amount of the obligation
cannot be measured reliably
a. I only
b. II only
c. Both I and II
d. Neither I or II
30. Which of the following statements in incorrect concerning a contingent
asset?
a. A contingent asset is not recognized because this may result to
recognition of income that may never be realized
b. When the realization of income is virtually certain, the related asset is
no longer a contingent asset and its recognition is appropriate
c. A contingent asset is disclosed where an inflow of economic benefits is
probable
d. A contingent asset is disclosed where an inflow of economic benefits is
possible or remote.
31. The likelihood that the future event will or will not occur can be expressed
by a range of outcome. Which range means that the future event
occurring is very slight?
a. Probable
b. Reasonably Possible
c. Certain
d. Remote
32. An entity did not record an accrual for a present obligation bit disclose the
nature of the obligation and the range of the loss. How likely is the loss?
a. Remote
 b. Reasonably possible
c. Probable
d. Certain
33. Contingent assets are usually recognized when
a) Realized
b) Occurrence is reasonably possible and the amount can be reasonably
estimated
c) Occurrence is probable and the amount can be reasonably estimated
d) The amount can be reasonably estimated
34. Which of the following is the proper way to report a contingent asset,
receipt of which is virtually certain?
a) As an asset
b) As unearned revenue
c) As a disclosure only
d) No disclosure and no accrual
35. An entity operates a plant in a foreign country. It is probable that the
plant will be expropriated. However, the foreign government has indicated
that the entity will receive a definite amount of compensation for the
plant. The amount of compensation is less than the fair value but exceed
the carrying amount of the plant. The contingent asset should be
reported.
a) As a valuation allowance as part of shareholders’ equity
b) As a Fixed asset valuation allowance account
c) In the notes to the financial statements
d) In the statement of financial position
36. At year-end, an entity was suing a competitor for patent infringement.
The award from the probable favorable outcome could be reasonably
estimated. The entity's financial statement should report the expected
award as
a. Receivable and revenue
b. Receivable and reduction of patent
c. Receivable and deferred revenue
d. Disclosure only
37. Contingent liabilities will or will not become actual liabilities depending on
a. Whether they are probable and estimable
b. The degree of uncertainty
c. The present condition suggesting a liability.
d. The outcome of a future event.
38. A contingent liability shall be recognized when
a. Any lawsuit is actually field against an entity.
b. it is certain that funds are available to pay the amount of the claim
c. It is probable that a liability has been incurred even though the amount
of the loss cannot be reasonably estimated
d. The amount of the loss can be reasonably estimated and it is probable
prior to issuance of financial statement that a liability has been
incurred.
39. Under IFRS, a provision is
a. An event which is not recognized because it is not probable or cannot
be measured reliably
b. An event which is probable and measurable
c. An event which is possible or remote and measurable
 d. An event which is probable but not measurable
40. Information prior to the issue of financial statements indicated that it is
probable that at the date of the financial statements an entity has a
measurable present obligation related to a proven health hazard in its
product. What recognition should be accorded this situation?
a. No recognition
b. Note disclosure
c. Appropriation of retained earnings
d. Expense and liability
41. After initial recognition, bonds payable shall be measured at
a. Amortized cost using the effective interest method
b. Fair value through profit or loss
c. Amortized cost using the effective interest method and fair value
through other comprehensive income
d. Amortized cost using the effective interest method and fair value
through profit and loss
42. At the commencement of the lease term, the lessee shall recognize a
finance lease as asset and liability at an amount equal to the
a. Fair value of the lease asset
b. Present value of the minimum lease payments
c. Fair value of the leased asset or present value of the minimum lease
payments, whichever is lower
d. Fair value of the leased asset or present value of the minimum lease
payment, whichever is higher
43. Which of the following statements best describes “other long-term
employee benefits”?
a. Benefits that are not expected to be settled wholly within twelve
months at the end of the reporting period in which the service is
rendered
b. Benefits that are not expected to be settled within twelve months at
the end of the reporting period in which the service is rendered
c. Benefits payable as a result of an entity’s decision to terminate an
employee’s employment before the normal retirement date
d. Benefits which are payable after completion of employment
44. Postemployment employee benefits include all of the following, except
a. Long-term disability benefits
b. Retirement benefits, such as pensions
c. Postemployment life insurance
d. Postemployment medical care

45. When share with par value are sold, the excess of the proceeds over the
aggregate per value of the shares issued is credited to
a. Share capital
b. Share premium
c. Retained earnings
d. Gain on issuance of share capital
46. What is the treatment of "joint costs" that relate to the concurrent listing
and issuance of new shares and listing old existing shares?

a. The joint costs should be expensed immediately

b. The joins costs should be deducted from equity, net of tax benefit
 c. The joint costs should be deducted from equity, plus tax benefits
d. The joint costs should be allocated between the newly issued and
listed shares and the newly listed old existing shares pro rata based on
the number of shares outstanding

47. Treasury shares may be reissued as dividends, in which case what

amount shall be charged to retained earnings?
a. Cost of the treasury shares
b. Par value of the treasury shares
c. Fair value of the treasury shares on the date of declaration
d. Fair value of the treasury shares on the date of issuance
48. If the stock dividend is less than 20% how much of the retained earnings
shall be capitalized?
a. Par value of the shares
b. Fair value of the shares on the data of declaration
c. Fair value of the shares on the date of record
d. Fair value of the shares on the date of issuance
49. Liquidating dividends
a. Are prohibited under PFRS
b. Require a credit to share capital
c. Reduce amounts paid in by shareholders
d. All of the above
50. Which of the following shareholder rights is most commonly enhanced in
an issue of preference shares?
a. The right to vote for the board of directors.
b. The right to maintain one’s proportional interest in the entity.
c. The right to receive a full cash dividend before dividends are paid to
other classes of share capital.
d. The right to vote on major corporate issues.
51. Which of the following statements is true in relation to “call price” of
preference share?
a. The call price is the amount paid to preference shareholders upon
redemption of preference share during the lifetime of entity.
b. In the absence of liquidation value, the call price considered in
computing book value per share.
c. The call price is the amount paid to ordinary shareholders upon
liquidation of the entity.
d. All of these statements are true.
52. Which of the following statements is true in relation of preference as to
dividends?
a. If dividends are declared, the preference shareholders have the right to
receive dividends first before ordinary shareholders are paid a
dividend.
b. The preference shareholders have the right to receive an amount equal
to par value or liquidation value of their shareholdings in the event of
liquidation in addition to cumulative dividends in arrears.
c. If dividends are declared, the ordinary shareholders have the right to
receive dividends first before preference shareholders are paid a
dividend.
d. All of these statements are true.
53. An entity has outstanding both ordinary shares and nonparticipating,
noncumulative
preference shares. The liquidation value of the preference shares is equal
to the par value. The book value per ordinary share is unaffected by
a. The declaration of a share dividend on preference shares payable in
preference shares when the market price of the preference share is
equal to the par value.
b. The declaration of a share dividend on ordinary shares payable in
ordinary shares when the market price of the ordinary shares when the
market price of the ordinary shares is equal to the par value.
c. The payment of a previously declared cash dividend on the ordinary
shares.
d. A 2-for-1 split of the ordinary shares.
54. The cumulative feature of preference shares
a. Limits the amount of cumulative dividends to the par value of the
preference shares.
b. Requires that dividends not paid in any year must be made up in a
later year before dividends are distributed to ordinary shareholders.
c. Means that the shareholder can accumulate preference shares equal to
the par value of ordinary shares at which time the preference shares
can be converted into ordinary shares.
d. Enables a preference shareholder to accumulate dividends equal to the
par value of the shares.
55. EPS disclosures are
a. Required for all public and nonpublic
b. Required for public entities and encouraged for nonpublic entities
c. Encouraged for public entities and required for nonpublic entities
d. Encouraged for all entities.
56. EPS disclosure are required for
a. Entities whose ordinary shares and potential ordinary shares are
publicly traded.
b. Entities that are in the process of issuing ordinary shares in the public
market.
c. All entities
d. Entities whose ordinary shares and potential ordinary shares are
publicly traded or entities that are in the process of issuing ordinary
shares in public market.
57. How will the annual interest or preference dividend affect annual net
earnings available to ordinary shareholders each year?
a. Annual net earnings available to ordinary shareholders are reduced by
annual interest but not by preference dividend
b. Annual net earnings available to ordinary shareholders are reduced by
preference dividend but not by annual interest
c. Annual net earnings available to ordinary shareholders are reduced by
annual interest and preference dividend
d. Annual net earnings available to ordinary shareholders are not reduced
by annual interest or preference dividend
58. When applying the treasury share method for diluted earnings per share,
the market price of the ordinary share used for assumed acquisition of
treasury shares is the
a. Market price at the end of the year
 b. Average market price during the year
c. Market price at the beginning of the year
d. Average market price over a two-year period
59. In computing diluted EPS, interest expense on convertible bond payable
shall be
a. Added back to net income at gross
b. Added back to net income net of tax
c. Deducted from net income net of tax
d. Ignored
60. It is financial instrument that gives the holder the right to purchase
ordinary shares
a. Warrant or option
b. Debt or equity instrument convertible into ordinary share
c. Employee plan that allows an employee to receive ordinary shares as
part of remuneration
d. Contract arrangement requiring issuance of ordinary shares upon the
satisfaction of certain conditions
61. Which of the following is not an element of financial position?
a. Probable future economic benefit obtained or controlled by an entity as
a result of past transaction.
b. The residual interest in the assets of an entity after deducting its
liabilities.
c. Outflow or using up of an asset or incurrence of a liability from
delivering or producing goods of rendering services.
d. Probable future sacrifices of economic benefits arising from present
obligations to transfer assets or provide services to other entities in the
future as a result of past event.
62. This enhancing characteristic requires that users be well-informed and
diligent enough for the information to be useful.
a. Relevance
b. Reliability
c. Understability
d. Comparability
63. This quality of information deals with the specific question: Is the item
large enough to influence the decision of the user of the information?
a. Materiality
b. Completeness
c. Substance over form
d. Timeliness
64. The measurement basis that is most commonly applied in practice
because of its objectivity or fairness is
a. historical cost.
b. current cost.
c. realizable value.
d. present value.
65. Along with relevance, a fundamental decision-specific quality of financial
information is
a. faithful representation.
b. materiality.
c. neutrality.
d. reliability.
66. Which of the following shall not be presented as part of an entity’s Cash
balance?
a. Foreign currency deposits
b. Undeposited customer’s checks
c. Bank deposit segregated for acquisition of equipment
d. Bank deposit segregated for payment of salaries
67. Which of the following shall not qualify to be reported as cash
equivalents at December 31, 2014?
a. Redeemable preference shares, purchased 3 months before the
redemption date
b. 6-month treasury note, purchased on November 2, 2014 and
maturing January 31, 2015
c. 3-month certificate of deposit maturing on February 14, 2015
d. Ordinary shares of other entities held for trading purposes and
expected to be sold three months from the date of acquisition
68. On October 31, 2015, Aqua, Inc. had cash accounts at three different
banks. One account balance is segregated solely for a November 15, 2015
payment of an equipment ordered. A second account, used for branch
operations, is overdrawn. The third account, used for regular corporate
operations, has a positive balance.
How should these accounts be reported in Aqua’s October 31, 2015
classified statement of financial position?
a. The segregated account should be reported as a non-current asset,
the regular account should be reported as a current asset, and the
overdraft should be reported as a current liability.
b. The segregated and regular account should be reported as current
assets, and the overdraft should be reported as a current liability.
c. The segregated account should be reported as a non-current asset,
and the regular account should be reported as a current asset net
of the overdraft.
d. The segregated and regular accounts should be reported as current
assets net of the overdraft.
69. ABC, Inc. placed P1.5 million in the money market for 60 days subject to
pretermination. It is the company’s policy to treat as cash equivalents all
highly liquid instruments with maturity of 3 months or less from the date
of acquisition. The P1.5 million should be
a. included as part of cash and cash equivalents and the appropriate
disclosure in the notes to the financial statements should state the
company’s criteria for classifying financial instruments as cash
equivalents.
b. recorded as part of its debt investments at fair value through profit
or loss without need of any disclosure.
c. treated as short-term receivable with the appropriate disclosure in
the notes to the financial statements.
d. considered as part of its debt investments at fair value through
profit or loss with the appropriate disclosure in the notes to the
financial statements.
70. Which of the following is not true?
a. The impress petty cash system in effect adheres to the rule of
disbursement by check.
 b. Entries are made to the Petty Cash account only to increase or
decrease the size of the fund or to adjust the balance if not
replenished at year-end.
c. The Petty Cash account is debited when the fund is replenished.
d. The account “Cash Short/Over” if debit balance, is presented as
part of operating expenses.
71. Bank reconciliations are normally prepared on a monthly basis to identify
adjustments needed in the depositor’s record and to identify bank errors.
Adjustments should be recorded for
a. bank errors, outstanding checks, and deposits in transit.
b. all items except bank errors, outstanding checks, and deposits in
transit.
c. book errors, bank errors, deposits in transit, and outstanding
checks.
d. outstanding checks and deposits in transit.
72. Deposits held as compensating balances
a. usually do not earn interest.
b. if legally restricted and held against short-term credit may be
included as cash.
c. if legally restricted and held against long-term credit may be
included among current assets.
d. if legally restricted and held against short-term credit should not be
included in the cash balance but are reported among current
assets.
73. A proof of cash is a
a. proof of a company’s liquid position.
b. reconciliation of the cash receipts and payments during the
previous period, together with the beginning and ending balances
of cash.
c. proof of the existence of a cash deposit in a bank.
d. reconciliation of the cash receipts and payments during the current
period, together with the beginning and ending balances of cash.
74. If the cash balance shown in a company’s accounting records is less than
the correct cash balance, and neither the company nor the bank has made
any errors, there must be
a. deposits credited by the bank but not yet recorded by the company.
b. outstanding checks.
c. bank charges not yet recorded by the company.
d. deposit in transit.
75. At the beginning of 2012, Evans Company received a three-year zero-
interest-bearing P600,000 note receivable for merchandise sold. The
market rate for equivalent notes was 8% at that time. Evans reported this
note as charge to notes receivable and a credit to sales to sales revenue
for P600,000. What effect did this accounting for the note have on Evans’
profit for 2012, 2013, 2014, and its retained earnings at the end of 2014,
respectively?
a. Overstate, understate, understate, understate
b. Overstate, overstate, overstate, overstate
c. Overstate, overstate, understate, no effect
d. Overstate, understate, understate, no effect
76. Which of the following events does not necessarily provide objective
evidence that a receivable is impaired?
a. A downgrade of the debtor’s credit rating
b. Significant financial difficulty of the debtor
c. Default or delinquency in interest or principal payment
d. Bankruptcy proceedings undertaken by the debtor
77. When a company uses the allowance method of recognizing uncollectible
accounts, the entry to write off a customer’s account would have what
effect on profit and amortized cost of accounts receivables?
Profit Amortized cost of Accounts
Receivable

a. None None
b. Decrease Decrease
c. Increase Increase
d. Decrease None
78. Mary Quant Company prepares an accounts receivable aging schedule
with a series of computations as follows: 2% of the total peso balance of
accounts from 1-60 days past due, plus 5% of the total peso balance of
accounts from 61-120 days past due and so on. How would you describe
the total of the amounts determined in this series of computations?
a. It is the amount of uncollectible accounts expense for the year.
b. It is the amount that should be added to the allowance for
uncollectible accounts at year end.
c. It is the amount of the desired credit balance of the allowance for
uncollectible accounts to be reported in the year-end financial
statements.
d. When added to the total of accounts written off during the year, this
new sum is the desired credit balance of the allowance account.
79. Which of the following would not be reported as inventory?
a. Land acquired for resale by a real estate firm
b. Agricultural produce held by a farm
c. Partially completed goods held by a manufacturing company
d. Machinery acquired by a manufacturing company for use in the
production process
80. Goods on consignment should be included in the inventory of:
a. the consignor
b. the consignee
c. both the consigner and the consignee
d. neither the consigner nor the consignee
81. Which of the following shall be included in the cost of inventories?
a. selling costs
a. freight charges on goods acquired FOB destination
b. abnormal amounts of wasted materials, labor, or other production
costs
c. storage costs that are necessary to a further production process
82. Under these shipping terms, the buyer pays for the freight, which legally
must be borne by the seller
a. FOB shipping point, freight prepaid
 b. FOB shipping point, freight collect
c. FOB destination, freight prepaid
d. FOB destination, freight collect
83. When using the periodic inventory method, which or the following
generally would not be separately accounted for in the computation of
costs of goods sold?
a. Trade discounts applicable to purchases during the period
b. Cash (purchase) discounts taken during the period
c. Purchase returns and allowances of merchandise during the period
d. Cost of transportation-in for merchandise purchases during the
period
84. Which costing method is appropriate for inventories that are segregated
for a specific project and inventories that are not ordinarily
interchangeable?
a. Specific identification
b. Standard cost
c. Weighted average
d. Moving average
85. The gross profit method of estimating inventory would not be useful when
a. A periodic system is in use and inventories are required for interim
statements
b. Inventories have been destroyed or lost by fire, theft, or other
casualty, and the specific data required for inventory
valuation are not available
c. There is a significant change in the mix of the products being sold
d. There is a significant unmonitored change in the relationship
between gross profit and the selling price of goods being sold
86. Which statement is accurate about calculating the cost ratio to be used
with the average retail inventory method under IAS 2 inventories?
a. The beginning inventory is excluded and markdowns are not
deducted
b. The beginning inventory is included and markdowns are not
deducted
c. The beginning inventory is included and markdowns are deducted
d. The beginning inventory is excluded and markdowns are deducted
87. During 2015, the Mit Co. signed a non-cancellable contract to purchase
2,000 units of a raw material at P32 per pound. On December 31, 2015,
the market price of the raw material is P26 per unit, and the selling price
of the finished product is expected to decline accordingly. The financial
statements prepared for 2015 should report
a. An appropriation of retained earnings for P12,000
b. Nothing regarding this matter
c. A note describing the expected loss on the purchase commitment
d. A loss of P12,000 in the statement of comprehensive income
88. Which of the following is not an essential characteristic of property, plant
and equipment?
a. Estimated useful life is beyond one year.
b. Used in the conduct of business.
 c. Physical existence.
d. Intended for sale in the ordinary course of business.
89. Under the Philippine Interpretation Committee Q and A 2012-0, an entity
that purchased land and subsequently demolished building on it shall
treat the demolition costs as
a. a capitalized cost that shall be amortized over the estimated
time period between the tearing down of the building and the
completion of the plant.
b. expensed as incurred.
c. added to the cost of the plant.
d. added to the cost of the land.
90. An asset is being constructed for an enterprise's own use. The asset has
been finances with a specific new borrowing. The interest cost incurred
during the construction period as a result of expenditures for the asset is
a. A part of the historical cost of acquiring the asset to be written
all over the estimated useful life of the asset.
b. Interest expense in the construction period.
c. recorded as deferred charge and amortized over
the term of the borrowing.
d. A part of the historical cost of acquiring the asset to be written
off over the term of the borrowing used to finance the
construction of the asset.
91. Which of the following statement is incorrect?
a. Donations of property, plant and equipment should be recorded
at the fair value of the donated asset.
b. When a group of assets is acquired for a lump-sum price, the
lump price should be allocated to the individual assets based on
their carrying values.
c. Property acquired in exchange for shares or other securities of
the enterprise should be recorded at its fair value or the fair
value of the securities, whichever is more clearly evident.
d. When property is acquired in exchange for another asset, its
cost is usually determined by reference to the fair value of the
asset surrendered.
92. Which of the following statements is incorrect?
a. The depreciable amount of item of property, plant and
equipment shall be allocated on a systematic basis over its
useful life.
b. The depreciation method used shall not reflect the pattern in
which the asset’s economic benefits are consumed by the entity.
c. The depreciation charge for each period shall be recognized as
an expense unless it is included in the carrying amount of
another asset
d. The estimation of the useful life of an item of property, plant and
equipment is a matter of judgment based on the experience of
the entity with similar assets.

93. An asset’s carrying amount is the

a. cost of an asset or the amount substituted for the cost in the
financial statements, less its residual value.
 b. amount of cash or cash equivalent paid or the fair value of the
other consideration given to acquire an asset at the time of its
acquisition or construction.
c. net amount which the enterprise expects to obtain an asset at
the end of its useful life after deducting expected costs of
disposal.
d. amount at which an asset is recognized in the statement of
financial position after deducting any accumulated depreciation
and accumulated impairment loss.
94. Which of the following statements is incorrect?
a. If an item of property, plant and equipment is revalued, the
entire class of property, plant and equipment to which the asset
belongs shall be revalued.
b. The depreciation method used shall reflect the pattern in which
the asset’s future economic benefits are expected to be
consumed by the entity.
c. The carrying amount of an item of property, plant and
equipment shall be derecognized on disposal or when no future
economic benefits are expected from its use or disposal.
d. An asset’s recoverable amount is the lower of an asset’s net
selling price and its value in use.
95. Which of the following is not an essential characteristic of an intangible
asset?
a. Identifiability
b. Controlled by the enterprise
c. Expected future economic benefits
d. Indefinite useful life
96. An intangible asset shall be recognized if it is probable that the expected
future economic benefits that are attributable to the asset will flow to the
asset will flow to the enterprise and the cost of the asset
a. Can be reliably estimated
b. Can be reliably measured
c. Can be controlled by the enterprise
d. Is inseparable from the enterprise
97. The cost of purchasing patent rights for a product that might otherwise
have seriously competed with one the of the purchaser’s patented
products should be
a. Charged to expense in the period of purchase
b. Amortized over the legal life of the purchased patent
c. Added to factory overhead and allocated to production of the
purchaser’s product
d. Amortized over the remaining estimated life of the original patent
covering the product whose market would have been impaired by
competition from the newly patented product
98. Any instruments representing ownership shares and the right to acquire
ownership shares are?
a. Debt security
b. Equity security
c. Shareholders’ equity
 d. Marketable security
99. Equity securities acquired for trending shall be measured at?
a. Cost, being the purchase price.
b. Fair value, with change in fair value taken to profit or loss.
c. Fair value, with change in fair value taken to other comprehensive
income.
d.Cost, being the purchase price plus transaction costs.
100. Which of the following is not correct regarding trading securities?

a. They are held with the intention of being sold in a short period of
time.
b. Unrealized holding gains and losses are reported in profit or loss.
c. Any discount or premium on debt securities is not amortized.
d. Gain on sale is the excess of the net selling price over the cost the
securities sold.