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Quizzes 21 25
Quizzes 21 25
25. The factor which determines whether or not goods should be included in a physical count of inventory is
A. The seller has legal title to the goods until they are delivered
B. The buyer has legal title to the goods until they are delivered
C. The transportation company has legal title to the goods while the goods are in transit
D. The legal title to the goods are determined by the shipping term agreed upon by the buyer and seller
26. An error in the physical count of goods on hand at the end of the reporting period resulted in overstatement
of ending inventory. The effect of this error in the current period is
Answer: C
27. If companies have identical inventoriable costs but use different inventory flow assumptions when the price
of goods have not been constant, then the
A. Cost of goods sold of the companies will be identical
B. Cost of goods sold available for sale of the companies will be identical
C. Ending inventory of the companies will be identical
D. Net income of the companies will be identical
29. The selection of an appropriate inventory cost flow assumption for an individual company is made by
A. the external auditors.
B. the SEC.
C. the internal auditors.
D. management.
30. Of the following companies, which one would not likely employ the specific identification method for
inventory costing?
A. Music store specializing in organ sales
B. Farm implement dealership
C. Antique shop
D. Hardware store
33. Government grant related to nondepreciable asset that requires fulfillment of certain conditions
A. Should not be recognized as income
B. Should be recognized as income immediately
C. Should be recognized as income over 40 years
D. Should be recognized as income over the periods which bear the cost of meeting the conditions
34. If qualifying asset is financed by general borrowing, the capitalizable borrowing cost is equal to
A. Actual borrowing cost incurred
B. Total expenditures on the asset multiplied by capitalization rate
C. Average expenditures on the asset multiplied by a capitalization rate or actual borrowing cost incurred,
whichever is lower
D. Average expenditures on the asset multiplied by a capitalization rate or actual borrowing cost incurred,
whichever is higher
36. A statement of cash flows typically would not disclose the effects of
A. capital stock issued at an amount greater than par value.
B. stock dividends declared.
C. cash dividends paid.
D. a purchase and immediate retirement of treasury stock.
41. The lower of cost and net realizable value basis of valuing inventories is an example of
A. comparability.
B. the cost principle.
C. conservatism.
D. consistency.
42. In respect to information included in financial statements, the accounting concept of ‘prudence’ ensures that:
A. The financial statements report what they purport to report.
B. An appropriate balance is achieved between the relevance and the reliability of information that has been
included
C. Information is provided to users within the time period in which it is most likely to bear on their decisions.
D. A degree of caution in the exercise of judgements about estimates is made
44. Under a lease where the lessee acquires the benefits of ownership of an asset, the lessee often recognizes the
present value of future rentals as an asset even though legal title to the property is not acquired. This is an
example of
A. Verifiability
B. Conservatism
C. Substance over form
D. None of the above
46. What is the primary difference in the treatment between the two concepts of capital maintenance?
A. The treatment of the effects of changes in the prices of assets and liabilities of the entity
B. The treatment of the effects of changes in the prices of expense and revenue of the entity
C. The treatment of the effects of changes in foreign exchange rates
D. The treatment of the effect of changes in foreign subsidiary
47. Which of the following is not a purpose of the conceptual framework of accounting?
A. To provide definitions of key terms and fundamental concepts.
B. To provide specific guidelines for resolving situations not covered by existing accounting standards.
C. To assist accountants and others in selecting among alternative accounting and reporting methods.
D. To assist the FRSC in the standard-setting process.
48. Recording the purchase price of a chalkboard eraser (with an estimated useful life of 10 years) as an expense
of the current period is justified by the
A. Going concern assumption.
B. Materiality constraint.
C. Matching principle.
D. Comparability principle.
49. According to the conceptual framework, the process of reporting an item in the financial statements of an
entity is
A. Realization.
B. Matching.
C. Allocation.
D. Recognition.
50. Bonus
QUIZ ON CHAPTERS 18-21
1. ABC Corp. would like to utilize its building for leasing purposes. The building was
previously used as office of its administrative employees, including its accountants. The
carrying amount of the building before the reclassification is P9,000,000 while its fair
market value is P10,000,000. Where should the difference of P1,000,000 be reflected?
a. Profit or loss section of the Statement of Comprehensive Income
b. Other comprehensive income section of the Statement of Comprehensive Income
c. None of the above
2. ABC Corp. owns 90% of the preferred shares of DEF Corp. Is ABC Corp. allowed to
apply equity method to account for its investment in DEF Corp.?
a. Yes
b. No
c. Maybe
3. If the investor pays more than the carrying amount of the net assets acquired and the
difference is due to undervaluation of land, the the undervalued amount should be
amortized over the useful life of the investment.
a. True
b. False
4. ABC Corp. recorded in the previous years impairment loss on an asset amounting to
P700,000. As of the end of the reporting period, the asset’s carrying amount is P3,000,000
while its recoverable amount is P4,000,000. The carrying amount of the asset had there
been no impairment is P3,700,000. In this case, how much should be the value of the
asset as of the reporting period?
a. P3,000,000
b. P3,700,000
c. P4,000,000
d. None of the above
5. In relation with the question above, how much is the gain on reversal of impairment?
a. None