ACC221

Supplemental Material
Theories

1. Which of the following is an example of employee benefits?

a. Free or subsidized goods or services
b. Termination benefits
c. Disability benefits
d. All of the above

2. Which of the following characterizes short-term employee benefits?

I. Short-term employee benefit obligations are measured on a discounted basis.
II. Short-term employee benefit obligations are measured on undiscounted basis.
III. In measuring short-term employee benefit obligations, actuarial assumptions are taken into
consideration.
IV. In measuring short-term employee benefit obligations, actuarial assumptions are not taken into
consideration.
V. Actuarial gains and losses are recognized.
VI. Actuarial gains and losses are not recognized.
VII. Short-term employee benefits are payable within 12 months after the end of the reporting period.
VIII. Short-term employee benefits are payable within 12 months before the end of the reporting period.
a. I, III, V and VII
b. I, III, V and VIII
c. II, IV, VI and VII
d. II, IV, VI and VIII

3. Which statement is incorrect concerning the recognition and measurement of defined benefit plan?
a. Actuarial assumptions are required to measure the obligation and expense and there is a
possibility of actuarial gains and losses.
b. The obligation is measured on a discounted basis.
c. The expense recognized for defined benefit plan is not necessarily equal to the amount of
contribution due the period.
d. None of the foregoing statements is incorrect.

4. Which of the following is not a component of the defined benefit cost?

a. Service cost
b. Net interest
c. Remeasurements
d. All of these are the components of the defined benefit cost

5. It is the change in the present value of the defined benefit liability due to the passage of time.
a. Return of plan assets
b. Service cost
c. Benefit liability
d. Interest on defined benefit liability

6. Which of the following statements about shareholders’ equity is correct?

a. Reports financial position at a point in time.
b. Reports financial performance for a period of time.
c. Reports sources and changes of equity.
d. Reports changes in cash between accounting periods.

7. Organization cost shall

a. be capitalized.
b. be deferred.
c. be expensed outright.
d. not be recognized.

8. The following statements are the common sources of APIC, except:

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 a. Issuance of dividends
b. Donated capital
c. Resale of treasury shares at more than its cost.
d. Excess of issuance price over its stated value.

9. Which of the following statements about treasury stock is incorrect?

a. Shares held as treasury stock are not entitled to dividends.
b. Shares held as treasury stock are not entitled to assets upon liquidation.
c. Shares held as treasury stock include shares that has been retired or cancelled.
d. Shares held as treasury stock has no voting right.

10. The pre-emptive right of an ordinary shareholder is the right to

a. Exclude preference shareholders from voting rights.
b. Receive cash dividends before distribution to preference shareholders.
c. Share proportionately in corporate assets upon liquidation.
d. Share proportionately in any new issue of shares of the same class.

11. Stock split is recorded by a

a. Memorandum entry.
b. Journal entry.
c. A and B.
d. A or B, at the option of the entity.

12. How would the declaration and subsequent issuance of a 10% share dividend affect share capital and share
premium, respectively, when the fair value of the shares exceeds par value?
a. No effect and no effect.
b. No effect and increase.
c. Increase and no effect.
d. Increase and increase.

13. According to PFRS 2, a share-based payment transaction is

a. equity-settled.
b. cash-settled.
c. Either A or B
d. Neither A or B

14. The total compensation in a share option plan is measured at which of the following?
a. Fair value of the share options at date of grant.
b. Intrinsic value of the share options at date of grant.
c. Fair value of the share options at date of exercise of share options.
d. Intrinsic value of the share options at date of exercise of share options.

15. If there is an acceleration of vesting, any payment made to employees on the settlement of the grant shall
be
a. recognized as deferred charge.
b. recognized in retained earnings.
c. recognized as other comprehensive income.
d. accounted for as repurchase of equity interest and any excess payment is recognized as expense.

16. Earnings per share represents

a. earnings in common share outstanding for the period.
b. earnings per all shares of stock issued during the period.
c. cumulative earnings per share.
d. earnings per share authorized for the period.

17. Earnings per share will be calculated using

a. The number of shares outstanding at the end of the year.
b. A weighted average of the number of shares outstanding during the year regardless of the extent
of fluctuations.

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 c. A weighted average of the number of shares outstanding during the year except that minor
fluctuations in the number of shares may be disregarded.
d. The number of shares outstanding at the middle of the year.

18. In calculating EPS, preferred dividends are not deducted from net income when
a. the preferred stock is noncumulative and dividends are not declared.
b. the preferred stock is noncumulative and dividends are declared.
c. The preferred stock is cumulative and dividends are declared.
d. The preferred stock is cumulative and dividends are not declared.

19. When are ordinary shares issued as a result of the conversion of a debt instrument included in the
computation of weighted average number of shares?
a. The date when cash is receivable.
b. The date when dividends are reinvested.
c. The date when instrument is converted into ordinary shares.
d. A or B, whatever comes first.

20. Which of the following is a limitation of the financial statement?

a. Many items that are of financial value are omitted.
b. Judgments and estimates are used.
c. Current fair value is not reported.
d. All of these.

21. The primary responsibility for the preparation and presentation of the financial statement rests with the
a. Management of the entity.
b. Accountant of the entity.
c. Internal auditor.
d. External auditor.

22. In presenting a statement of financial position, an entity must

a. Make the current and noncurrent presentation.
b. Present assets and liabilities in order of liquidity.
c. Choose either the current and noncurrent or the liquidity presentation, meaning free choice of
presentation.
d. Make the current and non-current presentation, except when a presentation based on liquidity
provides information that is reliable and more relevant.

23. Comprehensive income includes

a. Components of profit or loss and other comprehensive income
b. Components of financial position.
c. Both A and B.
d. Neither A and B.

24. Which of the following is not an acceptable option of reporting other comprehensive income?
a. In a separate statement of comprehensive income.
b. In a single statement of comprehensive income.
c. In statement of changes in equity.
d. In the notes to financial statements.

25. What is the correct order of presenting the notes to financial statements?
I. Other disclosures, such as contingent liabilities, unrecognized contractual commitments and non-
financial disclosures.
II. Statement of compliance with PFRS
III. Supporting information or computation for line items presented in the financial statements.
IV. Summary of significant accounting policies used
a. II, III, IV, I
b. II, IV, III, I
c. II, IV, I, III
d. II, III, I, IV

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 26. The vested benefits
a. Are employee benefits that are not conditional on future employment.
b. Are benefits to be paid to the retired employees in the current period.
c. Are benefits to be paid to the retired employees in the subsequent year.
d. Are benefits accumulated in the hands of a trustee.

27. Which is not a characteristic of short-term employee benefits?

a. No actuarial assumptions are required to measure the benefit obligation.
b. There is not possibility of any actuarial gain or loss.
c. Short-term employee benefits by definition are payable no later than twelve months after the end
of the current period.
d. Short-term employee benefit obligations are measured on a discounted basis.

28. It is a benefit plan under which an entity pays a fixed contribution into a separate fund and will
have no legal or constructive obligation to pay further contribution if the fund becomes insufficient
to pay employee benefits.
a. Post-employee benefit plan
b. Defined contribution plan
c. Defined benefit plan
d. Muti-employer plan

29. It is issuance by an entity of its own shares to its shareholders without consideration and under
conditions indicating that such action is prompted mainly by a desire to increase the number of shares
outstanding for the purpose of effecting a reduction in unit market price.
a. Share split c. Share dividend
b. Reverse share split d. Recapitalization

30. Which statement is incorrect concerning treasury shares?

a. Treasury shares shall be recorded at cost irrespective of whether acquired below or above pay
value.
b. The total cost of treasury shares shall be deducted from equity.
c. Treasury shares may be recognized as financial asset.
d. Gain or loss on sale of treasury shares shall not be included in profit or loss.

31. Share warrant outstanding shall be reported as

a. Liability. c. Reduction of share premium.
b. Share capital. d. Share premium.

32. An ordinary shareholder does not possess which of the following?

a. The right to share in the earnings of the corporation when dividend are declared.
b. The right to vote in the election of the board of directors of the corporation.
c. The right to direct ownership of the corporate assets.
d. The right to share proportionately in corporate assets in case of liquidation if such assets exceed
the claims of creditors.

33. At the date of the financial statements, shares issued would exceed shares outstanding as a result
of
a. Declaration of share split.
b. Declaration of a stock dividend.
c. Purchase of treasury shares.
d. Payment in full of subscribed shares.

34. For cash-settled share-based payment transactions, an entity shall measure the goods or services
received and the liability incurred at

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 a. Fair value of the goods and services received.
b. Fair value of the liability.
c. Either the fair value of the goods or services received or the fair value of the liability.
d. Neither the fair value of the goods or services received nor the fair value of the liability.

35. It is the difference between the fair value of the shares to which the counterparty has the right to
subscribe and the price the counterparty is required to pay for those shares.
a. Fair value c. Market value
b. Intrinsic value d. Book value

36. If the stock dividend is less than 20%, how much of the retained earnings should be capitalized?
a. Par value of the shares.
b. Fair value of the shares on the date of declaration.
c. Fair value of the shares on the date of record.
d. Fair value of the shares on the date of issuance.

37. When an entity settles the property dividend payable, it shall recognize the difference between the
carrying amount of the asset distributed and the carrying amount of the dividend payable in
a. Profit or loss.
b. Other comprehensive income.
c. Equity
d. Retained earnings

38. Which of the following would not affect retained earnings?

a. Conversion of preference shares into ordinary shares
b. Share split
c. Reissue of treasury shares
d. Share dividend

39. A restriction of retained earnings is most likely to be required by

a. Exhaustion of potential benefits of the investment credit.
b. Purchase of treasury shares.
c. Payment of last maturing series of a serial bond issue.
d. Amortization of past service cost.

40. Under the treasury share method in computing the earnings per share, the number of potential
ordinary shares is equal to
a. Option shares.
b. Option shares minus assumed treasury shares acquired.
c. Assumed treasury shares acquired.
d. Option shares actually issued during the year.
41. 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.

42. Which statement is incorrect concerning presenting of earnings per share

I. An entity shall present on the face of the income statement basic and diluted earnings per share
for income or loss from continuing operations.
II. An entity that reports a discontinued operation is not required to disclose the basic and diluted
earnings per share for the discontinued operation, either on the face of the income statement or
in the notes.
a. I only b. II only c. Both I and II d. Neither I nor II

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43. The effect of recording a 100% stock dividend would be to
a. Decrease book value per share.
b. Increase book value per share.
c. Decrease retained earnings and decreases book value per share.
d. Increase retained earnings and increase book value per share.

44. An entity has not declared or paid dividends on its cumulative preference shares in the last three
years. The dividends in arrears shall be reported
a. In a note to the financial statements.
b. As a reduction in shareholders’ equity.
c. As a current liability.
d. As a noncurrent liability.

45. The “if converted” method of computing earnings per share assumes conversion of convertible
securities as of the
a. Beginning of the earliest period reported or at time of issuance, if later.
b. Beginning of the earliest period regardless of time of issuance.
c. Middle of the earliest period reported regardless of the time of issuance.
d. Ending of the earliest period reported regardless of the time of issuance.

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