CONCEPCION HOLY CROSS COLLEGE INC.

Minane, Concepcion, Tarlac

PROFELEC1- UPDATES IN FINANCIAL REPORTING STANDARDS

QUIZ- PAS 7 AND 8
1 Semester AY 2022 – 2023
st

Name: Feliciano, Bryan M.____Class Schedule: _4-7_______________________________

Course/Year/Section: ______
Instructor: KRIST MARK Q. MACAPUGAY, MBA, CAT, RCA, MICB, CTT, CTB, CB Date: ___________________

I. Multiple Choice

1.D 11.D

2.A 12.A

3.A 13.A

4. C 14.B

5.D 15.C

6.D 16. d

7.D 17.D

8.C 18. a

9.B 19. D

10.B 20. A
 I. MULTIPLE CHOICES: USE THE ANSWER SHEET PROVIDED IN ANSWERING THE ITEMS. ONLY
ONE ANSWER PER NUMBER IS VALID. (40 pts.)

1. The statement of cash flows provides answers to all the following questions except

a. Where did the cash come from during the period?

b. What was the cash used for during the period?
c. What was the change in the cash balance during the period?
d. What is the impact of inflation on the cash balance at the end of the year?

2. Operating activities are

a. The principal revenue-producing activities of the entity and other activities that are not
investing or financing activities.
b. The acquisition and disposal of long-term assets and other investments not included in cash
equivalents.
c. Activities that result in changes in the size and composition of the contributed equity and
borrowings of the entity.
d. Original and planned investigation undertaken with the prospect of gaining new scientific or
technical knowledge and understanding.

3. Interest and dividend received may not be classified as cash inflows from

a. Operating activities
b. Investing activities
c. Financing activities
d. None of the above

4. Jagiya uses the direct method to prepare its statement of cash flows. The entity had the
following cash flows during the current year

Cash receipts from the issuance of

ordinary shares P400,000
Cash receipts from customers 200,000
Cash receipts from dividends on long-
term investments 30,000
Cash receipts from repayment of loan
made to another company 220,000
Cash payments for wages and other
operating expenses 120,000
Cash payments for insurance 10,000
Cash payments for dividends 20,000
Cash payments for taxes 40,000
Cash payment to purchase land 80,000
The net cash provided by (used in) operating activities is

a. P60,000 c. P30,000
b. P40,000 d. (P20,000)
 5. In preparing a statement of cash flow using the indirect method, cash flows from operating
activities

a. Are always equal to accrual accounting income

b. Are calculated as the differences between revenues and expenses
c. Can be calculated by appropriately adding to or deducting from net income those items in
the income statement that do affect cash
d. Can be calculated by appropriately adding to or deducting from net income those items in
the income statement that do not affect cash

6. Using the indirect method, cash flows from operating activities would be increased by which
of the following?

a. Gain on sale of investments

b. Increase in prepaid expenses
c. Decrease in accounts payable
d. Decrease in accounts receivable

7. Which of the following items would be presented in a cash flow statement?

a. Payment of dividends through a share investment scheme

b. Acquisition of an investment in a subsidiary for consideration consisting of an exchange of
non- current assets and liabilities
c. Refinancing of long-term debt
d. Proceeds from the issue of debentures

8. CO Co. had the following balances on December 31, 2022:

Cash in checking account P 35,000

Cash in money market account 75,000

Treasury bill, purchased 11/1/2022, maturing 1/31/2023 350,000

Treasury bill, purchased 12/1/2022, maturing 3/31/2023 400,000

Tran’s policy is to treat as cash equivalents all highly liquid investments with a maturity of three months
or less when purchased. What amount should Trans report as cash and cash equivalents in its December
31, 2022, balance sheet (statement of financial position)?

a. P110,000

b. P385,000

c. P460,000

d. P860,000
 9. Which of the following is not a basic characteristic of a system of cash control?
a. Use of a voucher system

b. Combined responsibility for handling and recording cash

c. Daily deposit of all cash received

d. Internal audits at irregular intervals

10. The principal purpose of a voucher system is to provide assurance that

a. all cash receipts are deposited intact in the bank.

b. all cash disbursements are approved before a check is issued.

c. all cash receipts are recorded in the accounting records.

d. all purchase invoices are supported by debit memoranda.

11. On December 31, 2022, West Company had the following cash balances:
Cash in banks P1,800,000

Petty cash funds (all funds were reimbursed on 12/31/22) 50,000

Cash in banks includes P600,000 of compensating balances against short-term borrowing arrangements
at December 31, 2022. The compensating balances are not legally restricted as to withdrawal by West.
In the current assets section of West's December 31, 2022, balance sheet (statement of financial
position), what total amount should be reported as cash?

a. P1,200,000

b. P1,250,000

c. P1,800,000

d. P1,850,000

12. The amount reported as "Cash" on a company's statement of financial position normally should
exclude
a. postdated checks that are payable to the company.
b. cash in a payroll account.
c. undelivered checks written and signed by the company.
d. petty cash.
 13. The cash balance of KOREAN Co.. comprises the following:

Cash on hand 300,000

Cash in bank – savings – BPI 600,000

Cash in bank – current – BPI (240,000)

Cash in bank – deposit in escrow – Metrobank 300,000

Cash in bank – current – Metrobank ( 60,000)

Cash in bank – current – BDO ( 90,000)

Total 810,000

Additional information:

 Cash on hand includes undeposited collections of P60,000.

 The cash in bank – savings maintained at BPI includes a P150,000 compensating balance which is not
restricted.
What amount of cash is reported in the financial statements?

a. 660,000

b. 810,000

c. 900,000

d. 960,000

14. Prospective application of recognizing the effect of a change in an accounting estimate means

a. Recognizing the effect of the change in the accounting estimate in the current and future
periods affected by the change.
b. Applying a new accounting policy to transactions, other events and conditions as if that policy
had always been applied.
c. Correcting the recognition, measurement, and disclosure of amounts of elements of financial
statements as if a prior period error had never occurred
d. Any of the above

15. An entity shall change an accounting policy only if the change:

I. Is required by a Standard or an Interpretation.

II. Results in the financial statements providing reliable and more relevant information about
the effects of transactions, other events or conditions on the entity’s financial position,
financial performance, or cash flows.

a. I only c. I or II
b. II only d. Neither I nor II
16. Changes in accounting policies include

a. The application of an accounting policy for transactions, other events or conditions that differ
in substance from those previously occurring.
b. The application of a new accounting policy for transactions, other events or conditions that
did not occur previously or were immaterial.
c. Both and b.
d. Neither a nor b.

17. Prior period errors include all of the following, except

a. Effects of mathematical mistakes
b. Mistakes in applying accounting policies
c. Oversights or misinterpretation of facts and fraud
d. Effects of change in the estimated useful life of an asset

18. Which of the following statements regarding prior period errors is incorrect?

a. The correction of prior period errors can be distinguished from changes in accounting
estimates.
b. The correction of prior period errors that relate to prior period requires the restatement of the
comparative information in the financial statements.
c. The amount of the correction of a prior period error that relate to prior periods should be
reported as adjustment to the opening balance of retained earnings.
d. The gain or loss recognized on the outcome of a contingency which previously could not be
estimated reliably constitute a correction of a prior period error.

19. Which statement is correct regarding changes in accounting policies?

a. An entity is not permitted to change an accounting policy.

b. A change in the measurement basis applied is not a change in accounting policy.
c. If a new pronouncement does not include specific transitional provisions, the change in
accounting policy is applied prospectively.
d. If a change in accounting policy is required by a new standard or interpretation, the change is
accounted for as required by that new pronouncement.

20. A change in accounting estimate is accounted for by

a. Prospective application
b. Retrospective application
c. Retrospective restatement
d. Any of the above