Multiple Choice

Instruction: Choose the correct/best answer.

1. They are structured representation of the financial position and financial performance of an
entity
c. Financial statements
2. They show the results of management’s stewardship of the resources entrusted to it
a. Financial statements
3. What is the objective of financial statements according to PAS 1?
a. To provide information about the financial position, performance, and cash flow
of an entity that is useful to a wide range of users in making economic decisions
4. A complete set of financial statements includes the following components:
I. Statement of Financial Position
II. Statement of Comprehensive Income
III. Statement of Changes in Equity
IV. Statement of Cash Flows
V. Notes to Financial Statements
d. I, II, III, IV and V
5. An entity shall present:
d. each financial statement with equal prominence
6. A statements of financial position as at the beginning of earliest comparative period should be
prepared by an entity in any of the following circumstances except
d. When an entity changes any of its estimates used in accounting
7. Which of the following statements about financial statements is (are) incorrect?
b. They are the primary responsibility of both management and the external auditor
after audit
8. The entity shall display the following information prominently and repeat it when necessary
for the information to be presented to be understandable:
d. All of the above
9. At a minimum, the face of the Statement of Financial Position shall include all of the
following line items, except
c. Patents
10. Which one of the following is not required to be presented as minimum information on the
face of the Statement of Financial Position, according to PAS 1?
d. Contingent liability
11. Which of the following must be included on the face of the Statement of Financial Position?
d. Deferred tax
16. When an enterprise chooses not to present properly classified Statement of Financial
Position, how should assets and liabilities be presented?
 b. Assets and liabilities should be presented according to liquidity
17. Which statement is (are) correct concerning presentation information on the face of the
Statement of Financial Position?
I. Additional line items, headings and subtotals shall be presented on the face of the Statement of
Financial Position when such presentation is relevant to an understanding of the entity’s financial
position
II. The standard does not prescribe the order or format in which items are to be presented
c. Both I and II

24. Other comprehensive income includes all of the following except

d. Share premium
25. Which of the following statements about “other comprehensive income” section of the
Statement of Comprehensive Income is/are false?
I. The amount of the revaluation surplus reported in the other comprehensive income section of
the Statement of Comprehensive Income must be the same as the amount of revaluation surplus
ending balance in the general ledger.
II. Foreign exchange gains and losses arising from purchase of property and equipment should be
reported under the other comprehensive income section of Statement of Comprehensive Income
Ill. Unrealized gain or loss on the change in value of Investment Property should be presented in
other comprehensive income section of the Statement of Comprehensive Income
IV. Only the current year's unrealized gain or loss on change in value of available for sale
securities should be shown under other comprehensive income of the Statement of
Comprehensive Income.
c. I, II, and III only

26. An entity presents an analysis of expenses using a classification based on:

c. Either the nature of expenses or the function of expenses within the entity,
whichever provides information that is reliable and more relevant.
27. Separate line items in an analysis of expenses by nature include:
c. Depreciation, purchases of materials, employee benefits and advertising costs
28. Separate line items in an analysis of expenses by function include:
d. Cost of sales, administrative costs, transport costs, distribution costs etc.
29. When an entity opts to present Statement of Comprehensive Income classifying expenses by
function, which of the following is not required to be disclosed as "additional information"?
c. Director’s renumeration
30. The following is no longer an allowable line item for presentation on the face of the
Statement of Comprehensive Income:
a. extraordinary items
31. What is the objective of financial statements according to PAS 1?
a. To provide information about the financial position, performance, and cash flows
of an entity that is useful to a wide range of users in making economic decisions
32. Statement of Changes in Equity means
b. It is a statement that shows all changes in an entity's equity between two balance
sheet dates
33. The statement of changes in equity includes a reconciliation between;
c. The carrying amount of each component of equity at the beginning and the end of
the period separately disclosing changes resulting from: (i) profit or loss, (ii) each
item of comprehensive income, and (iii) the amounts of investments by, and
dividends and other distributions to owners,

65. On December 31, 2020, Excel Corp. sold merchandise for P75,000 to Fine Co. The term of
the sale were net 30, FOB shipping point. The merchandise was shipped on December 31, 2020
and arrived at Fine on January 5, 2021. Because of a clerical error, recorded until January 2021,
and the merchandise, sold at 25% markup, was included in Excel's inventory at December 31,
2020.
As a result, Excel's cost of goods sold for the year ended December 31, 2020 was
Understated by P60,000
66. For the past 3 years, Green Co. has failed to accrue unpaid wages earned by workers during
the last week of the year. The amounts omitted, which are considered material, were as follows:
December 31, 2018 56,000
December 31, 2020 51,000
December 31, 2021 64,000
The entry on December 31, 2006 21 to correct for these omissions would include a
c. Debit to wage expense for P13,000
67. An audit of Funny Co, for 2020, its first year of operations, detected the following errors
made at December 31, 2020:
Failed to accrue P50,000 interest expense
Failed to record depreciation expense on office equipment of P80,000
Failed to amortize prepaid rent expense of P100,000
Failed to delay recognition of prepaid advertising expense of P60,000
The net effect of these errors was to overstate net income for 2020 by
b. P 170,000
68. An audit of Angelina Company has revealed the following four errors that have occurred but
have not been corrected:
Inventory at December 31, 2019-P40,000, understated
Inventory at December 31, 2020-P15,000, overstated
Depreciation for 2019-P7,000, understated
Accrued expenses at December 31, 2020-P10,000, understated
The errors cause the reported net income for the year ending December 31, 2020 to be
b. Overstated by P65,000
69. Refer to # 68, the errors cause the reported retained earnings at December 31, 2020 to be
b. Overstated by P32,000
70. A cash collection of P5,000 from customer's open account was recorded as P500. The error
had been discovered when nominal accounts were still open. The correcting entry would require
a
b. P4,500 debit to cash