Which of the following statement is incorrect
regarding receivables on the statement of financial
position?*
1/1
Receivables are a financial asset
Receivables ae financial instruments
Non-trade receivables are generally reported as
separate items in the statement of financial position.
Accounts receivable are written promises of the
purchaser to pay for goods or services.
The statement of financial position contributes to
financial reporting by providing a basis for all of the
following except*
1/1
Evaluating the capital structure of the enterprise
Determining the increase in cash due to operations
Assessing the liquidity and financial flexibility of the
enterprise
Computing rates of return
When an entity breaches under a long-term
agreement on or before the end of the reporting
period with the effect that the liability becomes
payable on demand, the liability is classified as*
1/1
Current under all circumstances
Noncurrent if the lender agreed after the reporting
period to provide a grace period for at least twelve
months after the reporting period.
Current if the lender has agreed after the reporting
period and before the issuance and before the
issuance of the statements not to demand payment
as a consequence of the breach.
Noncurrent under all circumstances
Which of the following will most likely to cause the
non-recognition of an asset or liability?*
1/1
It is uncertain whether the asset or liability exists.
The probability of an inflow (outflow) of future
economic benefits from the asset (liability) is low
Recognizing the asset or liability would not provide
relevant and faithfully represented information
There is a measurement uncertainty regarding the
asset or liability
When the classification of items in the financial
statements is changed, the entity*
1/1
Must reclassify the comparative amounts unless it is
impracticable to do so
Must not reclassify the comparative amounts
Must reclassify the current year amounts only.
Can choose whether or not to reclassify
Basic na Basic Company's account balances during
2020 showed the following changes, all increases:
Assets Php 3,560,000; Liabilities Php 1,080,000;
Ordinary Share Capital Php 2,400,000; Share Premium
Php 240,000.There was no changes in accumulated
profits for 2020 other than a Php 520,000 dividend
payment and years' earnings. How much is Basic na
Basic Company's net income/loss for 2020?*
2/2
Php 160,000
Php 360,000
Php 520,000
Php 680,000
Related party transaction includes all, except*
0/1
A venturer sold goods to he joint venture
Sold a car to the uncle of the entity's finance director
Sold goods to another entity owned by the daughter
of the managing director
All of these are related party transactions
Correct answer
Sold a car to the uncle of the entity's finance director
The draft financial statements of BEBE Co, for the year
ended December 31, 2020, are currently under
consideration by the directors. the net assets for the
year are shown as Php 3,500,000. Since December 31,
2020, the following events have occurred, but have
not been reflected in any way in the draft financial
statements to that date. Item 1 - A substantial
quantity of slow-moving inventory was sold for Php
320,000. The inventory had cost Php 600,000and had
been valued for the accounts at December 31, 2020,
ate its estimated net realizable value of Php
400,000Item 2 - A paid receivable paid the amount
owing of Php 130,000 in full. On December 31, 2020,
there were doubts as to whether it would be paid, and
a specific provision for the full amount had been
made in the accounts. What is the adjusted amount
of net assets should BBE Co. report in its December
31, 2020 balance sheet?*
2/2
Php 0
Php 3,420,000
Php 3,630,000
Php 3,550,000
Php 3,500,000
Which of the following statements in relation to the
term expense is false?*
0/1
Entities do not incur expenses per se but they initially
acquire assets
Expense is synonymous with expenditure
All expenses and losses are expired costs but not all
expired costs are expenses or losses.
All expenses decrease owners equity but not all
decrease in owner's equity are expenses
Correct answer
Expense is synonymous with expenditure
S1: According to PAS 1, an entity shall make an explicit
and unreserved statement of compliance with the
PFRSs in the notes only if the entity complies with all
the requirements of PFRSs. S2: An entity may omit the
notes when presenting general purpose financial
statements.S3: PAS 1 encourages, but does not
require, the disclosure of an entity's domicile and
legal form, its country of incorporation and the
addresses of its registered office, and a description of
the nature of its operations and its principal activities.
S4: According to PAS 1, PFRSs apply to financial
statements as well as to other information presented
in an annual report, a regulatory filing, or another
document.*
2/2
All statements are true
3 statements are true
2 statements are true
Only 1 statement is true
An increase in the carrying amount of an asset could
not possibly result in*
0/1
The recognition of an expense
An increase in total equity
No change in total equity
The recognition of an income
Correct answer
The recognition of an expense
S1: Total Comprehensive Income includes all non-
owner changes in equity. It comprises profit or loss
and other comprehensive income. S2: Cash and Cash
Equivalents should always be presented first in the
statement of financial position. S3: A revaluation
surplus on a noncurrent asset in the current year
should be recognized in the income statement.*
2/2
All statements are true
All statements are false
2 statements are true
Only 1 statement is true
The basis for classifying assets as current or
noncurrent is the period of time normally elapsed
from the time the entity expends cash to the time it
converts*
1/1
Inventory back into cash or 12 months whichever is
shorter
Inventory back into cash or 12 months, whichever is
longer
Receivable back into cash or 12 months, whichever is
longer
Tangible fixed assets back into cash or 12 months,
whichever is longer
The standard of full disclosure is best described by
which of the following?*
1/1
All information related to operating objectives must
be disclosed in the financial statements.
Enough information should be disclosed in order that
a prospective investor can make a wise decision.
Information about each account balance appearing in
the financial statements is included in the notes
Disclosure of any financial facts significant enough to
influence the judgement of a primary user.
At the beginning of the current year, an entity signed
a 5 year contract enabling it to use a patented
manufacturing process beginning in the current year.
A royalty is payable for each product produced,
subject to a minimum annual fee. Any royalties in
excess of the minimum will be paid annually. On the
contract date, the entity prepaid a sum equal to two
years' minimum annual fees. In the current year, only
minimum fees were incurred. The royalty
prepayment shall be reported in the entity's current
year-end financial statement as*
0/1
An expenses only
A noncurrent asset
A current asset
A current asset and an expense
Correct answer
A current asset and an expense
Significant financial reporting issues facing global
financial reporting and efficient capital allocation
includes all of the following except:*
1/1
How to provide real-time financial statement
information
How to report nonfinancial measures such as
customer satisfaction
How to provide backward-looking information
How to provide forward-looking information
Which of the following will most likely affect the
determination of whether an asset or a liability
exists?*
1/1
A low probability that the asset or liability will cause
inflows or outflows of future economic benefits
A high level of measurement uncertainty regarding
the asset or liability
An unresolved dispute over a ight or obligation
All of these are relevant in determining the existence
of an asset or liability
An asset and a liability emphasize that*
1/1
An asset is a right, and a liability is an obligation, that
has the potential to produce or cause the transfer of,
economic benefits.
An asset is a controlled resource, and a liability is an
obligation, that is expected to cause inflows or
outflows of economic benefits
An asset is a physical object and the liability is the
ultimate outflow of economic benefits from settling
the obligation
All of these are emphasized in the revised definitions
The information provided by financial reporting
pertains to*
1/1
Individual business enterprises, industries, and an
economy as a whole, rather than to members of
society as consumers
Business industries, rather than to individual
enterprises or an economy as a whole or to members
of society as consumers.
Individual business enterprises, rather than to
industries or an economy as a whole or to members
of society as consumers.
An economy as a whole and to members of society as
consumers, rather than to individual enterprises or
industries.
Gains are*
1/1
All of these can be considered gains
Increases in equity from peripheral transactions
Increases in equity resulting from transfers of assets
to the entity from owners
Inflows from selling a product to a customer
PAS 1 requires an entity to provide an additional
balance sheet dated as of the beginning of the
preceding period if certain instances occur. Which of
the following is not one of those instances, on the
assumption that all of the following has a material
effect?*
1/1
Retrospective restatement
Retrospective application of an accounting policy
Change in the frequency of reporting
Reclassification of items in the financial statements
What might a manager do during the last quarter of a
fiscal year if she wanted to decrease current annual
net income?*
1/1
Delay shipments to customers until after the end of
the fiscal year
Relax credit policies for customers.
Pay suppliers all amounts owed
Delay purchases from suppliers until after the end of
the fiscal year
Which is not within the definition of a liability?*
1/1
A present obligation that is estimated in amount
An obligation to provide goods or services in the
future
A note payable with no specified maturity date
The signing of a three-ear employment contract at a
fixed annual salary
The financial statements of ABC Company shows line
items described as "Other Current Assets," "Other
Noncurrent Liabilities," and "Miscellaneous
Expenses" Which of the following is correct?*
1/1
ABC Company considers the items included in these
line items as comprising a material class of similar
items.
ABC Company considers the items included in these
line items as dissimilar and cannot be included in
material classes of similar items and are also
individually immaterial to warrant separate
presentation.
ABC Company considers the items included in these
line items as individually material but with dissimilar
nature or function
This matter of presenting items is unacceptable under
PAS 1.
One criticism not normally aimed at a statement of
financial position prepared using current accounting
and reporting standards is*
1/1
The extensive use of separate classifcation
Failure to reflect current value information
Extensive use of estimates
The failure to include items of financial value that
cannot be recorded objectively
Which obligations are classified as current even if
these are due to be settled after more than twelve
months from the end of the reporting period?*
1/1
Current portion of interest-bearing liabilities
Bank Overdrafts
Dividends Payable
Trade Payables and accruals for employee and other
operating costs
S1: Both revenues and gains increase both net income
and equity. S2: A strength of the income statement as
compared to the statement of financial position is
that items that cannot be measured reliably can be
reported in the income statement. S3: The income
statement is useful for helping to assess the risk or
uncertainty of achieving future cash flows.*
2/2
All statements are true
All statements are false
2 statements are true
Only 1 statement is true
S1: Expropriation loss and casualty loss from
earthquake, typhoon, flood, fire, and other natural
disasters are considered components of income from
continuing operations.S2: An entity shall present
additional line items, headings, and subtotals in the
statement of comprehensive income or separate
income statement when such presentation is relevant
to an understanding of the financial performance of
theentity.S3: The partner of a Key Manager is a major
supplier of the Entity is considered as a related party
transaction.S4: A reporting entity is exempted from
providing the normal disclosures for transactions with
a government that has control, joint control, or
significant influence over the entity.*
2/2
All statements are true
3 statements are true
2 statements are true
Only 1 statement is true
At December 31, 2014, Ulysses Company’s liabilities
include the following: 1. Php 10,000,000 of 10% notes
are due on March 31, 2019. The financing agreement
contains a covenant that requires Ulysses to maintain
current assets at least equal to 200% of its current
liabilities. As of December 31, 2014, Ulysses has
breached this loan covenant. On February 10, 2015
before Ulysses financial statements are authorized for
issue, Ulysses obtained a period of grace from
Mayumi bank until January 31, 2016, having
convinced the bank that the company’s normal 3 to 1
ratio of current assets to current liabilities will be
reestablished during 2015. 2. Php 15,000,000 of
noncancelable 12% bonds were issued at face value
on September 30, 1993. The bonds mature on August
31, 2015. Ulysses expects to have sufficient cash
available to redeem the bonds at maturity. 3. Php
20,000,000 of 10% bonds were issued at face value on
June 30, 1995. The bonds mature on June 30,
2024,but bondholders gave the option to call the
bonds on June 30, 2015. However, the call option is
not expected to be exercised, given prevailing market
conditions What portion of Ulysses Company’s debt
should be reported as a noncurrent liability*
2/2
Php 0
Php 10,000,000
Php 30,000,000
Php 15,000,000
Php 20,000,000
Baby Company built a new factory building during the
current year. Subsequent to the current year-end and
before the issuance of financial statements, the
building was destroyed by fire and the claim against
the insurance entity proved futile because the cause
of the fire was negligence on the part of the caretaker
of the building. What should be reported at the
current year-end?*
0/1
Make a provision for three-fourths of the carrying
amount of the building
Disclose the nonadjusting event in the notes to
financial statements
Write off the carrying amount of the building
Make a provision for one-half of the carrying amount
of the building
Correct answer
Disclose the nonadjusting event in the notes to
financial statements
The net sales of Grass Manufacturing Company in
2020 is Php 580,000. The cost of goods manufactured
is Php480,000. The beginning inventories of Goods in
Process and Finished Goods are Php 82,000 and Php
65,000,respectively. The ending inventories are:
Goods in Process - Php 75,000, Finished Goods - Php
55,000, The Selling Expenses and General and
Administrative Expenses are 5% and 2.5% of Cost of
Sales, respectively. How much would be the net profit
before tax in the year 2020?*
2/2
Other Amounts
Php 45,725
Php 83,000
Php 90,000
Php 53,250
On March 25, 2020, the entity discovered that, as a
result of a computational error, depreciation expense
for the year ended December 31, 2019, is overstated.
The entity's December 31, 2019, Financial statements
were authorized for issue on April 1, 2020. The entity
must*
1/1
Correct its December 31, 2019, financial statements
before issuing them
Reduce depreciation for the year ended December
31, 2020
Restate the depreciation expense reported for the
year ended December 31, 2019, in the comparative
figures of its 2020 financial statements as a
retrospective restatement of a prior period error.
Do nothing
An objective of financial reporting is to provide*
1/1
Information about the investors in the entity
Information useful in assessing cash flow prospects
Information about the liquidation value of the entity
Information that will attract new investors
2/2
Php 18,200,000
Php 17,600,000
Answer cannot be determined
Php 19,000,000
Php 18,400,000
In the statement of changes in equity, the effects of
the correction of a prior period error are presented*
0/1
Separately for each component of equity
In aggregate for total equity and separately for the
total amounts attributable to owners of the parent
and the noncontrolling interest
Separately for the total amount attributable to
owners of the parent and the noncontrolling interest
In aggregate for a total equity
Correct answer
Separately for each component of equity
The draft financial statements of Clarion Company,
for the year ended December 31, 2020, are currently
under consideration by the directors. The net assets
for the year is shown as Php 3,500,000. Since
December 31, 2020, the following events have
occurred, but have not been reflected in any way in
the draft financial statements to that date. Item 1 - A
substantial quantity of slow-moving inventory was
sold for Php 320,000. The inventory had cost Php
600,000and had been valued for the accounts at
December 31, 2020, at its estimated net realizable
value of Php 400,000Item 2 - A trade receivable paid
the amount owing of Php 130,000 in full. On
December 31, 2020, there were doubts as to whether
it would be paid, and a specific provision for the full
amount had been made in the accounts. What is the
adjusted amount of net asset should Clarion Company
report in its December 31, 2020 balance sheet?*
2/2
Php 3,500,000
Php 3,550,000
Php 3,420,000
Php 3,630,000
Php 0
Between the date on which the financial statements
for this year were completed and the date on which
they were due to be authorized for issue, a number of
events took pace. All of the following events would be
classified as non adjusting events requiring disclosure,
except?*
0/1
A mistake was discovered in the calculation of the
allowance for uncollectible trade receivables
resulting in an understatement of the trade
receivables.
Destruction of a major production plan by fire
The entity entered into an agreement to purchase the
freehold of its currently leased office building
The entity announced the discontinuance of its
assembly operation
Correct answer
A mistake was discovered in the calculation of the
allowance for uncollectible trade receivables
resulting in an understatement of the trade
receivables.
* material and affect decision making should be
2/2
Php 58,500
Php 57,000
Php 117,000
Php 115,500
Php 0
In order for a noncurrent asset to be classified as held
for sale, the sale must be highly probable. What is the
meaning of highly probable?*
0/1
The sale is certain
The probability is higher than more likely than not
The future sale is likely to occur
The future sale is more likely than not occur
Correct answer
The probability is higher than more likely than not
Uncertainty and risk inherent in business situations
should be adequately considered in financial
reporting. This statement is an example of the
concept of:*
0/1
Neutrality.
Full disclosure.
Completeness.
Conservatism.
Correct answer
Full disclosure.
Which of the following statements is incorrect
regarding accounting concepts?*
1/1
Under the matching concept, revenues are matched
with expenses in order to properly determine the
profit for a period.
Under the going concern concept, the business entity
is assumed to carry on its operations for an indefinite
period of time.
Under the cost concept, the value of an asset is to be
determined on the basis of acquisition cost.
Under the materiality concept, items deemed
separately disclosed
When an entity decided to sell a business component,
the gain on the disposal should be*
1/1
Presented as Other Income
Netted against the loss from operations of the
component as a part of a discontinued operations
Included in other comprehensive income
Presented as an adjustment to retained earnings
Andres Bukid Co. was incorporated on January 1, Year
6, with Php 500,000 from the issuance of stock and
borrowed funds of Php 75,000. During the first year
of operations, net income was Php 25,000. On
December 15, Andres Bukid Co paid a Php 2,000 cash
dividend. No additional activities affected equity in
Year 6. At December 31, Year 6, Andres Bukid Co's
liabilities had increased to Php 94,000. In Andres
Bukid Co's December 31, Year 6 balance sheet, total
assets should be reported at*
2/2
Php 692,000
Php 600,000
Php 598,000
Php 617,000
Answer cannot be determined
The information provided by financial reporting
pertains to*
1/1
Business industries, rather than to individual
enterprises or an economy as a whole or to members
of society as consumers.
Individual business enterprises, industries, and an
economy as a whole, rather than to members of
society as consumers
An economy as a whole and to members of society as
consumers, rather than to individual enterprises or
industries.
Individual business enterprises, rather than to
industries or an economy as a whole or to members
of society as consumers.
The results of operation of a component of an entity
that either has been disposed of or classified as held
for sale shall be reported in discontinued operations
if S1: The operations and cash flows of the component
have been or will be eliminated from the ongoing
operations of the entity as a result of the disposal
transaction. S2: The entity continues to have a
significant continuing involvement in the operations
of the component after the disposal transactions. S3:
The entity outsources the manufacturing operations
of a component and sells the manufacturing facility of
the component but continues to sell the product
previously manufactured by the facility sold.*
2/2
All statements are true
All statements are false
2 statements are true
Only 1 statement is true
An entity that entered into a related party transaction
would be required to disclose all of the following
information, except*
1/1
Amount due from or to related parties at the end of
the reporting period.
Peso amount of the transaction
Nature of the relationship between the parties
Nature of any future transactions planned between
the parties and the terms involved
Unusual and infrequent gain and loss should be rep*
1/1
As an extraordinary item net of tax below income
from continuing operations
As a separate line item within income from continuing
operations but not net of applicable income tax
As a separate line item within income from
discontinued operations net of applicable income tax
As a separate line item within income from continuing
operations net of applicable income tax
A company has outstanding accounts payable of Php
30,000 and a short-term construction loan in the
amount of Php100,000 at year-end. The loan was
refinanced through the issuance of long-term bonds
after year-end but before the issuance of financial
statements. How should these liabilities be recorded
in the balance sheet?*
1/1
Current liabilities of Php 30,000, noncurrent liabilities
of Php 100,000
Current liabilities of Php 130,000
Noncurrent liabilities of Php 130,000
Current liabilities of Php 130,000, with required
footnote disclosure of the refinancing of the loan
The full disclosure principle requires a balance
between*
1/1
Reliability and Neutrality
Comparability and consistency
Timeliness and Predictive Value
Relevance and Cost-effectiveness
An entity classified a noncurrent asset accounted for
under the cost model as held for sale at the current
year-end. Because no offers were received at an
acceptable price, the entity decided at the end of next
year not to sell the asset but to continue to use it. The
asset shall be measured at the end of next year at
what amount?*
1/1
The lower of its carrying amount and its recoverable
amount
The lower of its carrying amount on the basis that it
had never been classified as held for sale and its
recoverable amount
The higher of its carrying amount on the basis that it
had never been classified as held for sale and its
recoverable amount.
The higher of its carrying amount and its recoverable
amount
A change in accounting policy shall be made when S1:
Required by law S2: Required by an accounting
standard S3: The change will result in more relevant
or reliable information about the financial position,
financial performance and cash flows of the entity*
2/2
All statements are true
All statements are false
2 statements are true
Only 1 statement is true
A receivable classified as current on the statement of
financial position is expected to be collected within*
1/1
The current operating cycle
The current operating cycle or 1 year, whichever is
longer
The current operating cycle or 1 year, whichever is
shorter
1 year
An entity has a loan due for repayment in six months'
time but the entity has the option to refinance for
repayment two years later. The entity plans to
refinance this loan. In which section of the statement
of financial position should thisloan be presented.?*
1/1
Noncurrent Assets
Current Assets
Current Liabilities
Noncurrent Liabilities
An entity's financial statements for the year ended
April 30, 2020, were approved by its finance director
on July 7, 2020,and a public announcement of its
profit for the year was made on July 10, 2020. The
board of directors authorized the financial
statements for issue on July 15, 2020, and the
financial statements were approved by the
shareholders on July 20, 2020. After what date should
consideration no longer be given as to whether the
financial statements on April30, 2020, need to reflect
adjusting and non adjusting events?*
0/1
July 15, 2020
July 7, 2020
July 10, 2020
July 20, 2020
Correct answer
July 15, 2020
An entity deals extensively with foreign currency
transactions. Subsequent to the end of the reporting
period and before the date of authorization of the
issuance of the financial statements, there were
abnormal fluctuations in the foreign currency rate.
What should be reported at the current year-end?*
1/1
Ignore the post reporting period event
Adjust the foreign exchange year-end balance to
reflect the abnormal adverse fluctuations
Disclose the post-reporting period event
Adjust the foreign exchange year-end balances to
reflect all abnormal fluctuations and not just adverse
movements
An entity uses calendar year as its accounting period.
The statement of financial position prepared on
December 31, 2021 covers the period:*
1/1
From business’ inception up to December 31, 2021.
January 1, 2020 to December 31, 2020.
December 31, 2020 to December 31, 2021.
January 1, 2021 to December 31, 2021.
Earnings*
1/1
Are the same as comprehensive income
Exclude certain gains and losses included in
comprehensive income
Include certain losses excluded from comprehensive
income
Include certain gains excluded from comprehensive
income
The term comprehensive income*
1/1
Includes all changes in equity during a period except
those resulting from investments by and distributions
to owners
Must be reported on the face of the income
statement
Is the net change in owners' equity for the period
Is synonymous with the term net income
Asset measurements in conventional financial
statements:*
1/1
Are confined to historical cost and current cost.
Reflect several financial attributes.
Are confined to historical cost.
Do not reflect output values.
Public utilities' balance sheets list the plant assets
before the current assets. This is acceptable under
which accounting principle/guideline?*
0/1
Conservatism.
This is not acceptable.
Industry practices.
Cost.
Correct answer
This is not acceptable.
Which of the following cannot be considered fair
presentation of financial statements*
1/1
To select and apply accounting policies in accordance
with applicable PFRS
To present information in a manner that provides
relevant and faithfully represented financial
information
To provide additional disclosures when compliance
with specific PFRS is insufficient to understand the
financial position and financial performance.
To rectify inappropriate accounting policies either by
disclosures of the accounting policies used or by notes
or explanatory information
Which statements about the statement of financial
position is not true?*
1/1
A revaluation surplus on a non current asset in the
current year should be recognized in the income
statement
Provisions should be recognized in the statement of
financial position
The number of shares authorized for issue should be
reported in the statement of financial position or the
statement of changes in equity or in the notes
Biological assets should be reported in the statement
of financial position
Mango Company bought a machine on January 1,
2020, for Php 240,000 at which time it had an
estimated useful life of eight years, with no residual
value. Straight line method of depreciation is used for
all of Mango's depreciable assets. On January 1, 2020,
the machine's estimated useful life was determined
to be only 6 years from the acquisition date. In
Mango's 2020 financial statements, how much should
be reported as the cumulative effect on prior years
because of the change in the estimated useful life of
the machine*
2/2
Php 28,000
Php 20,000
Php 12,000
Php 0
A cable television entity receives deposits from
customers that are refunded when service is
terminated. The average customer stays with the
entity 8 years. How should these deposits be shown
on the financial statements?*
1/1
Other Revenue
Operating Revenue
Paid-in Capital
Liability
When the classification of items in the financial
statements is changed, the entity*
1/1
Must reclassify the comparative amounts unless it is
impracticable to do so
Must reclassify the current year amounts only.
Must not reclassify the comparative amounts
Can choose whether or not to reclassify
Separate line items in an analysis of expenses by
nature include*
0/1
Purchases, transport costs, employee benefits,
depreciation, extraordinary items
Depreciation, purchases, transport costs, employee
benefits and advertising costs.
Purchases, distribution costs, administrative costs,
employee benefits, depreciation, taxes
Cost of goods sold, administrative and distribution
costs
Correct answer
Depreciation, purchases, transport costs, employee
benefits and advertising costs.
Why is reclassification adjustment used when
reporting other comprehensive income?*
1/1
The adjustment made to adjust for the income tax
effect of reporting comprehensive income
The adjustment made to avoid double counting of
items
The adjustment made to make net income equal to
comprehensive income
The adjustment to reclassify an item of
comprehensive income as another item of
comprehensive income
Events after the reporting period are defined as*
1/1
Events, favorable and unfavorable, that occur
between the end of the reporting period and the date
of the entity's next interim or annual financial
statements
Events, favorable and unfavorable, that occur
between the end of the reporting period and the date
of the entity's next annual financial statements
Events, favorable and unfavorable, that occur
between the end of the reporting period and the date
when the financial statements are authorized for
issue
All choices relate to events after the reporting period
Which of the following is not a justification for a
change in depreciation method?*
1/1
To confirm with the depreciation method prevalent in
a particular industry
A change in the estimated useful life
A change in the pattern of estimated future benefit
A change in the future benefit from the asset
How should the effect of a change in accounting
estimate be accounted for?*
0/1
In the period of change and future periods if the
change affects both
By reporting proforma amounts for prior periods
As a prior period adjustment to beginning retained
earnings
By restating amounts reported in financial statements
of prior periods
Correct answer
In the period of change and future periods if the
change affects both
Which of the following is not correct when an entity
opts to use the two-statement presentation of
income and expenses*
0/1
The profit or loss section is required to be presented
in the statement presenting comprehensive income
The separate statement presenting comprehensive
income begins with the amount of profit or loss
The separate income statement forms part of a
complete set of financial statements and shall be
displayed immediately before the statement
presenting comprehensive income
The profit or loss section is not presented anymore in
the statement presenting comprehensive income
Correct answer
The profit or loss section is required to be presented
in the statement presenting comprehensive income
Fair presentation requires an entity (choose the
incorrect one)*
1/1
To rectify inappropriate accounting policies used or
by notes or explanatory information.
To provide additional disclosures when compliance
with specific PFRS is insufficient to understand the
entity's financial position and financial performance.
To present information in a manner that provides
relevant, reliable, comparable, ad understandable
information
To select and apply accounting policies in accordance
with applicable PFRS
The entity must disclose comparative information
for*
1/1
The previous comparable period for all amounts
reported and for all narrative and descriptive
information
The previous comparable period for all amounts
reported
The previous comparable period for all amounts
reported, and for all narrative and descriptive
information when it is relevant to an understanding
of the current period's financial statements.
None of the given choices
The net sales of Grass Manufacturing Company in
2020 is Php 580,000. The cost of goods manufactured
is Php480,000. The beginning inventories of Goods in
Process and Finished Goods are Php 82,000 and Php
65,000,respectively. The ending inventories are:
Goods in Process - Php 75,000, Finished Goods - Php
55,000, The Selling Expenses and General and
Administrative Expenses are 5% and 2.5% of Cost of
Sales, respectively. How much would be the net profit
before tax in the year 2020?*
0/2
Php 45,725
Php 83,000
Php 90,000
Php 53,250
None of the given choices
Correct answer
Php 53,250
LAGOTNA Co. uses a calendar year accounting period.
In 2020, LAGOTNA Co. decides to adopt the PFRSs for
the first time. LAGOTNA Co., reports one-year
comparative information. If LAGOTNA Co., reports
two years of comparative information, how many
balance sheets will be prepared on December 31,
2020?*
0/1
3 accounting principles.
1 To correct improper presentation in the financial
4 statements.
2 To present management's responses to auditor
Correct answer
4
An entity manufactures and sells household products.
The entity experienced losses associated with its
small appliance group. Operations and cash flows for
this group can be clearly distinguished from the rest
of the entity's operations. The entity plans to sell the
small appliance group with its operations. what is the
earliest point at which the entity shall report the small
appliance group as a discontinued operation?*
1/1
When the entity classifies it as held for sale
When the entity sells the majority of the assets of the
segment
When the entity first sells any of the assets of the
segment.
When the entity receives an offer for the segment
Grand Company placed an order with Little Company
for new specialized machinery. The order was
noncancelable once signed and Grand agreed to pay
for the machinery at the time the order was signed on
February 1, 2020. Little held the machinery to Grand's
order from June 1, 2020, the date on which it was
completed. Grand commenced using the machinery
on August 1, 2020 when Little completed the
installation process. Little had staff on standby to deal
with any operating problems until the warranty
period ended on November 1, 2020. Little shall
recognize the revenue from the sale of this
specialized machinery on*
0/1
June 1, 2020
November 1, 2020
August 1, 2020
February 1, 2020
Correct answer
August 1, 2020
What is the purpose of information presented in
notes to the financial statements?*
0/1
To provide disclosures required by generally accepted
comments.
To provide recognition of amounts not included in the
totals of the financial statements.
Correct answer
To provide disclosures required by generally accepted
accounting principles.
An entity deals extensively with foreign entities, and
its financial statements reflect these foreign currency
transactions. Subsequent to the reporting period, and
before the date of authorization of the issuance of the
financial statements, there were abnormal
fluctuations in foreign currency rates. The entity
should*
1/1
Disclose the post-reporting event in the notes as a
non adjusting event
Adjust the foreign exchange year-end balances to
reflect the abnormal adverse fluctuations in foreign
exchnage rate
Adjust the foreign exchange year-end balances to
reflect all the abnormal fluctuations in foreign Indicate the proper order of presenting the notes to
exchange rates and not just adverse movements. financial statements I. Statement of compliance with
Ignore the post-reporting period event PFRS II. Other Disclosures, such as contingent
liabilities, unrecognized contractual commitments,
Andres Bukid determined that due to obsolescence, and nonfinancial disclosures. III. Supporting
equipment with an original cost of Php 180,000 and information for items presented on the face of the
accumulated depreciation at January 1, 2005 of Php financial statements. IV. Summary of significant
84,000 had suffered permanent impairment, and as a accounting policies*
result should have a fair value of only Php 60,000 as 0/1
of the beginning of the year. Additionally, the fair
value of only Php 60,000 as of the beginning of the I, III, IV, and II
year. Additionally, the remaining useful life of the I, IV, II, and III
equipment was reduced from eight years to three I, IV, III, and II
years. In its December 31, 2005 Balance sheet, how I, II, III, and IV
much should Andres Bukid report as accumulated Correct answer
depreciation?*
0/2 I, IV, III, and II

Php 20,000 The minimum disclosures prescribed under PAS 24

Php 104,000 are to be made separately for certain categories of
Php 120,000 related parties. Which of the following is not among
Php 140,000 the list of categories specified under the standard for
None of the given choices purposes of separate disclosure?*
1/1
Correct answer
Joint ventures in which the entity is a venturer
Php 140,000 Entities with joint control or significant influence over
the entity
A company sell products to a customer who uses An entity that has a common director with the entity
Express Charge, a credit card not issued by a bank. The parent of the entity
The company should record:* The effect of a change in accounting policy that is
0/1 inseparable from the effect of a change in accounting
A small increase in the allowance for doubtful estimate shall be reported*
accounts. 0/1
An account receivable from Express Charge. By restating the financial statements of all prior
An account receivable from the customer. periods presented
A cash receipt. As a correction of an error
Correct answer As a component of income from continuing
operations, in the period of change and future periods
An account receivable from Express Charge. if the change affects both
As a separate disclosure after income from continuing
A debit balance in the cash short or over account at
operations, in the period of change and future periods
the end of the period that can be attributed to the
if the change affects both.
fault of the petty cashier is treated as a:*
Correct answer
0/1
As a component of income from continuing
Miscellaneous income. operations, in the period of change and future periods
Payable to employee. if the change affects both
Receivable from employee.
Miscellaneous expense. *
Correct answer 0/2
Receivable from employee.
 Accrual basis.

Full disclosure.
Materiality.
Matching principle.
S1 and S2
S2 and S3
S1 and S3 Users are better able to evaluate an entity’s ability to
S1, S2, and S3 generate cash and cash equivalents if they are
Correct answer provided with information that focuses on the
entity’s:*
S2 and S3
1/1
A new drug named Sinovaccum was introduced by an
Financial position.
entity in the market on December 1, 2020. The
Performance.
entity's financial year ends on December 31, 2020. It
Cash flows.
was the only entity that was permitted to
All of these.
manufacture this patented drug. The drug is used by
patients suffering from an irregular heart beat. On
March 31, 2021, after the drug was introduced, more
than 1,000 patients died. After a series of *
investigations, authorities discovered that when this 0/2
drug was simultaneously used with AstraZebra, a drug
used to regulate hypertension, the patient's blood
would clot, and the patient suffered a stroke. A
lawsuit for Php 100,000,000 has been filed against the
entity. The financial statements were authorized for
issuance on April 30, 2021.Which of the following Php 160,000
options is the appropriate accounting treatment for None of the given choices
the event after reporting period?* Php 520,000
0/1

The entity should provide Php 100,000,000 because Php 360,000

this is an adjusting event and the financial statements
were authorized to be issued after the incident.
If the probability of the lawsuit being decided against
the entity is remote, the entity should disclose it in
the notes, because it is a non adjusting material event
The entity should disclose the Php100,000 as a
contingent liability because it is an adjusting event
The entity should disclose Php 100,000,000 as a
contingent liability because it is a present obligation
with an improbable outflow
Correct answer
The entity should disclose Php 100,000,000 as a
contingent liability because it is a present obligation
with an improbable outflow
Determining periodic earnings and financial position
depends on measuring economic resources and
obligations and changes in them as these changes
occur. This explanation pertains to:*
1/1
Php 680,000
Correct answer
Php 360,000
On March 25, 2020, the entity discovered that, as a
result of a computational error, depreciation expense
for the year ended December 31, 2019, is overstated.
The entity's December 31, 2019, financial statements
were authorized for issue on April 1, 2020. The entity
must*
0/1
Restate the depreciation expense reported for the
year ended December31, 2019, in the comparative
figures of its 2020 financial statements as a
retrospective restatement of a prior period error.
Reduce depreciation for the year ended December
31, 2020
Do nothing
Pray and Trust the Process
Correct its December 31, 2019,financial statements
before issuing them
Correct answer
Correct its December 31, 2019,financial statements
before issuing them
Why are certain costs of doing business capitalized
when incurred and then depreciated or amortized
over subsequent accounting cycles.*
0/1
To aid management in the decision-making process
To adhere to the accounting concept of conservatism
To reduce the income tax liability
To match the costs of production with revenue as
earned
Correct answer
To aid management in the decision-making process
Which of the following most likely would be
considered a discontinued operation?*
1/1
An entity that is a franchisor in the quick-service
restaurant business also operates company-owned
restaurants that are unprofitable in a certain region
and, as a result, the entity decides to exit both the
quick-service business as well as the company-owned
restaurants in that region.
The unprofitable brands of a beauty products
component of an entity that manufactures and sells
consumer products are discontinued.
Shifting or marketing function from one location to
another
A sporting goods manufacturer has a bicycle division
that meets the definition of a component of the entity
and decides to outsource the manufacture of its
bicycles.
The financial statements prepared under GAAP*
1/1
Reflect a single measurement basis which is historical
Are not highly precise because many estimates and
judgement must be made
Do not articulate with one another
Contain a limited number of future projections.
Jaguar Company has recorded bad debts expense in
the past at a rate of 1.5% of net sales. In 2020, Jaguar
decides to increase its estimate to 2%. If the new rate
had been used in prior years, cumulative bad debt
expense would have been Php 380,000 instead of Php
285,000. In 2020, bad debt expense will be Php
120,000 instead of Php 90,000.If Jaguar's tax rate is
32%, what amount should it report as the cumulative
effect of changing estimated bad debts expense?*
0/2
Php 64,600
Php 95,000
Php 120,000
None of the given choices
Php 0
Correct answer
Php 0
When the current year’s ending inventory is
overstated*
0/1
The current year’s net income is overstated
The current year’s total assets are understated
The next year’s income is overstated
The current year’s cost of gods sold is overstated
Correct answer
The current year’s net income is overstated
The primary purpose of the statement of financial
position is to reflect*
1/1
The success of a company's operations for a given
amount of time
The status of the firm's assets in case of forced
liquidation of the firm
Items of value, debt, and net worth
The fair value of the firm's assets at some moment in
time
Which of the following characteristics may result in
the classification of a liability as current?*
0/1
Violation of provisions of a debt agreement.
Debts to be liquidated from funds that have been
accumulated and are reported as noncurrent assets.
Obligations for advance collections that involve long-
term deferment of the delivery of goods or services.
Short-term obligations refinanced with long-term
debt at the end of the reporting period.
Correct answer
Violation of provisions of a debt agreement.
What criterion is excluded in the definition of cash The obligation to provide goods that customers have
equivalents?* ordered and paid for during the current year
0/1
Correct answer
Readily convertible to known amounts of cash.
Subject to an insignificant change in value. The obligation to provide goods that customers have
Short-term, highly liquid investments. ordered and paid for during the current year
Investment in high quality instruments. The valuation of an assurance to receive cash in the
Correct answer future at present value on a business entity’s financial
statements is well-founded because of the accounting
Investment in high quality instruments. concept of:*
0/1
Entity A determined that an asset exists. However,
the asset's low probability of inflows of economic Periodicity.
benefits and its very high level of measurement Materiality.
uncertainty affected Entity A's recognition decisions Business continuity.
about the asset, as these raised doubt on whether the Business entity.
asset's recognition would result in useful information.
Consequently, Entity A did not recognize the asset, Correct answer
but because Entity A deemed it relevant, information
Business continuity.
about the asset was nonetheless provided in the
notes. Which of the following statements is correct?*
0/1 Which of the following is generally classified as a
current liability on the balance sheet?*
Entity A's accounting treatment is grossly incorrect
0/1
because all items that meet the definition of an asset
should always be recognized, regardless of the asset's Postdated checks.
potential to produce economic benefits and its Customer NSF checks.
measurement uncertainty Bank overdrafts.
Entity A's non-recognition of the asset is correct. Travel advances.
However, the asset should have been completely
ignored as providing information about unrecognized Correct answer
items in the notes is not acceptable under the Bank overdrafts.
conceptual framework
Entity A's treatment for the asset is acceptable. The At the beginning of the current year, an entity
asset is referred to as a non-existent asset. installed cabinets to display its merchandise in
Entity A's treatment for the asset is acceptable. The customer's stores. The entity expects to use these
asset is referred to as an unrecognized asset cabinets for 5 years. The income statement for the
current year should include.*
Correct answer 0/1
Entity A's treatment for the asset is acceptable. The
One-fifth of the cabinet costs in cost of goods sold
asset is referred to as an unrecognized asset
All of the cabinet costs in selling, general and
Which of the following represents a liability* administrative expenses
0/1 One-fifth of the cabinet costs in selling general, and
The obligation to pay for goods that an entity expects administrative expenses
to order from suppliers next year All of the cabinet costs in cost of goods sold
Correct answer
The obligation to pay interest on a five year note
One-fifth of the cabinet costs in selling general, and
payable that was issued the last day of the current
administrative expenses
year.
The obligation to distribute an entity's own shares Which of the following statements in relation to the
next year as a result of a stock dividend declared near term expense is false?*
end of the current year
1/1
Expense is synonymous with expenditure
All expenses and losses are expired costs but not all
expired costs are expenses or losses
All expenses decrease owners equity but not all
decrease in owner's equity are expenses
Entities do not incur expenses per se but they initially
acquire assets.
Which of the following statements is true regarding
accounting and reporting standards for discontinued
operations?*
1/1
Discontinued operations shall follow gross income on
the face of the income statement.
A component of an entity always represents the same
concept as an operating segment used in reporting
disaggregated information
A recognition of an impairment loss would be
necessary for a component that had not been sold by
year-end if the fair value of the component was
determined to be less than the carrying amount
The results of the discontinued operation include only
the gain or loss on disposal of the component and not
the income or loss from operating the discontinued
operation
If an entity ended a period with a larger inventory
that it had at the beginning of the period, which of the
following statements is true?*
0/1
The cost of goods sold was smaller than net purchases
The cost of goods sold was greater than net purchases
The cost of goods available for sale was smaller than
cost of goods sold
Net income was greater than gross profit
Correct answer
The cost of goods sold was smaller than net purchases
PASADO Company intends to refinance a portion of
its short-term debt in Year 2 and is negotiating a long-
term financing agreement with a local bank. This
agreement would be noncancelable and would
extend for a period of 2years. The amount of short-
term debt that PASADO Company can exclude from
its statement of financial position at December 31,
Year 1*
0/1
Is zero unless the refinancing has occurred by year
end
Is reduced by the proportionate change in the
working capital ratio
May exceed the amount available for refinancing
under the agreement
Depends on the demonstrated ability to consummate
the refinancing
Correct answer
Depends on the demonstrated ability to consummate
the refinancing
A statement of financial position allows investors to
assess all of the following except the*
1/1
Liquidity and financial flexibility of the enterprise
Net realizable value of enterprise assets
The capital structure of the enterprise
The efficiency with which enterprise assets are used
An entity that sprays chemicals in residences to
eliminate or prevent infestation of insects requires
that customers prepay for 3 months service at the
beginning of each new quarter. Select the term that
appropriately describes this situation from the
viewpoint of the entity*
0/1
Accrued Income
Earned Income
Deferred income
Prepaid Expense
Correct answer
Deferred income
Non-current assets are presented as current assets in
the statement of financial position*
0/1
Never presented as current items.
Only if they are actually sold after the reporting
period but before the date of authorization of the
financial statements for issue.
Only when they are expected to be sold within
12months from the end of reporting period.
Only when they qualify as held for sale assets under
PFRS 5.
Correct answer
Only when they qualify as held for sale assets under
PFRS 5.
Noncurrent asset or disposal group is classified as
held for sale when the asset is available for immediate
sale and the sale is highly probable. For the sale to be
highly probable. (choose the incorrect one)*
1/1
The sale is expected to qualify for recognition as a
completed sale within two years from the date of
classification of the asset as held for sale
An active program to locate a buyer and complete the
plan must have been initiated.
Management must be committed to a plan to sell the
asset
The asset must be actively marketed for sale at a
reasonable price in relation to its current fair value
Which is incorrect concerning the presentation of
comparative interim financial statements?*
0/1
Income statements for the current interim period and
cumulatively for the current year to date with
comparative income statement for the immediately
preceding year.
Statement of cash flows cumulatively for the current
financial year to date with comparative statement for
the comparable year to date period of the
immediately preceding year.
Statement of changes in equity cumulatively for the
current financial year to date with a comparative
statement for the comparable year to date period of
the immediately preceding year.
Statement of financial position as of the end of the
current interim period and comparative statement of
financial position as of the end of the immediately
preceding fiscal year.
Correct answer
Income statements for the current interim period and
cumulatively for the current year to date with
comparative income statement for the immediately
preceding year.
S1: Provisions should be recognized in the statement
of financial position S2: A revaluation surplus on
noncurrent assets in the current year should be
recognized in the statement of changes in equity S3:
Dividends paid should be recognized in the statement
of comprehensive income S4: A loss on disposal of
assets should be recognized in the statement of
changes in equity*
0/2
All statements are true
3 statements are true
2 statements are true
Only 1 statement is true
Correct answer
Only 1 statement is true
For the purpose of decision making:*
1/1
Accounting information provides information about
future events.
The future is used as a guide to past estimates.
Accounting information provides information about
the outcomes of past decisions.
The accountant never becomes involved in the
budgeting process.
The entity decided to extend its reporting period from
a year to a 15-month period. Which of the following
is not required in case of change in reporting period?*
0/1
The entity shall change the reporting period only if
other similar entities in the geographical area in
which it generally operates have done so in the
current year.
The entity shall disclose the reason for using a longer
period than a period of12 months.
The entity shall disclose the period covered by the
financial statements
The entity shall disclose that comparative amounts
used in the financial statements are not entirely
comparable
Correct answer
The entity shall change the reporting period only if
other similar entities in the geographical area in
which it generally operates have done so in the
current year.
At the end of the current year, an entity had cash
accounts at three different banks. One account is
segregated solely for payment into a bond sinking
fund 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?*
1/1
The segregated and regular accounts should be
reported as current assets net of the overdraft.
The segregated account should be reported as a
noncurrent asset, and the regular account should be
reported as a current asset net of the overdraft
The segregated and regular accounts should be
reported as current assets, and the overdraft should
be reported as current assets, and the overdraft
should be reported as current liability
The segregated account should be reported as a
noncurrent asset, the regular account should be
reported as a current asset, and the overdraft should
be reported as a current liability
* Refinancing of debt subsequent to the reporting
0/2
All statements are true
3 statements are true
2 statements are true
Only 1 statement is true
Correct answer
2 statements are true
A chemical entity has no overseas sales. The entity
produces different products from the process. The
entity sells its products from the process. The entity
sells its product to small businesses, larger national
businesses, and multinational entities. Internal
reports are reviewed by the chief operating decision-
maker on this basis. The management of the entity
proposed to disclose just one business segment
because it sells all of its products nationally?*
0/1
Yes, even though there are three different groups of
customers, they all present the same risks to the
entity
Yes, PFRS 8 will allow the entity to disclose a single
business segment
No, the entity can identify three different sets of
customers and shall therefore disclose information on
that basis.
PFRS 8 on segment reporting
Correct answer
No, the entity can identify three different sets of
customers and shall therefore disclose information on
that basis.
Which of the following information shall be disclosed
in the summary of significant accounting policies?*
0/1
Criteria for determining which investments are
treated as cash equivalents
Adequacy of pension plan assets relative to vested
benefits
period
Guarantees of indebtedness of others
Correct answer
Criteria for determining which investments are
treated as cash equivalents
0/1
Only Statement 1
Both Statements 1 and 3
Only Statement 3
Both Statements 2 and 3
Correct answer
Only Statement 3
Which of the following will most likely to cause the
non-recognition of an asset or a liability?*
1/1
Recognizing the asset or liability would not provide
relevant and faithfully represented information
The probability of an inflow (outflow) of future
economic benefits from the asset (liability) is low
It is uncertain whether the asset or liability exists
There is a measurement uncertainty regarding the
asset or liability
A transaction that is material in amount, unusual in
nature, and infrequent in occurrence, shall be
presented separately as*
0/1
Component of income from discontinued operation,
net of applicable income tax
Component of income from continuing operations,
but not net of applicable income tax
Component of income from continuing operations,
net of applicable income tax
Prior period error, net of applicable income tax
Correct answer
Component of income from continuing operations,
but not net of applicable income tax
The estimated life of a building that has been
depreciated 30 years of an originally estimated life of
50 years has been revised to a remaining life of 10
years. What is the treatment of the accounting
change?*
1/1
Adjust accumulated depreciation to its appropriate
balance, through net income, based on a 40-year life
and then depreciate the adjusted carrying amount as
though the estimated life had always been 40 years.
Continue to depreciate the building over the original
50-year life
Depreciate the remaining carrying amount over the
remaining life of the asset
Adjust accumulated depreciation to its appropriate
balance, through retained earnings, based on a 40-
year life and then depreciate the adjusted carrying
amount as though the estimated life had always been
40 years.
PAS 1 requires an entity to provide an additional
balance sheet dated as of the beginning of the
preceding period if certain instances occur. Which of
the following is not one of those instances? (Assume
all of the following has a material effect)*
0/1
Reclassification of items in the financial statements
Retrospective restatement
Retrospective application of an accounting policy
Change in the frequency of reporting
Correct answer
Change in the frequency of reporting
Assuming that the ideal measure of short-term
receivable in the balance sheet is the discounted
value of the cash to be received in the future, failure
to follow this practice usually does not make the
balance sheet misleading because:*
0/1
Most receivables can be sold to a bank or factor.
The allowance for uncollectible accounts includes a
discount element.
Most short-term receivable are not interest-bearing.
The amount of discount is not material.
Correct answer
The amount of discount is not material.
Entity A enters into a purchase commitment with
Entity B (Seller). Neither party performs its obligation
on the contract, i.e., Entity A did not yet pay the
purchase price, while Entity B did not yet deliver the
goods. Which of the following is incorrect?*
1/1
If Entity A performs its obligation first, Entity A's
combined right and obligation changes to a liability
The contract is executory. Entity A has a combined
right to receive the goods and an obligation to pay for
them.
Entity A recognizes neither an asset nor liability
except when the contract becomes burdensome,
such as when the goods become obsolete before they
are delivered.
If Entity B performs its obligation first, entity A's
combined right and obligation changes to liability
S1: Financial statements do not provide all the
information that users may need to make economic
decisions since they largely portray the financial
effects of past events and do not necessarily provide
nonfinancial information. S2: Financial statements
show the results of stewardship of management or
the accountability of management for the resources
entrusted to it. S3: An entity whose financial
statements comply with PFRS shall not make an
explicit and unreserved statement of such compliance
in the notes. S4: Materiality provides that the specific
requirements of PFRS need not be met if the resulting
information is not material.*
0/2
All statements are true
3 statements are true
2 statements are true
Only 1 statement is true
Correct answer
3 statements are true
An expense is recognized immediately in the income
statement I. When an expenditure produces no future
economic benefits II. When cost incurred ceases to
qualify for recognition as an asset in the statement of
financial position*
0/1
I only To provide relevant information about cash receipts
II Only and cash payments of an entity during a period
Either I or II To assess the ability of the entity to pay dividends to
Neither I nor II stockholder
To help investors, creditors and other users to assess
Correct answer the entity's ability to generate positive future net cash
Either I or II flows

What happens when an entity record the payment of
payable made in the subsequent period as if it were
made in the current period?*
0/1
Lapping.
Kiting.
Window dressing.
Fishing.
Correct answer
Window dressing.
Which of the following should not be reported as
inventory?*
0/1
Land acquired for resale by a real estate firm
Shares and bonds held for resale by a brokerage firm
Partially completed goods held by a manufacturing
entity
Machinery acquired by a manufacturing entity for use
in the production process.
Correct answer
Machinery acquired by a manufacturing entity for use
in the production process.
The results of a discontinued operations are
presented in the statement of profit or loss*
1/1
Before the profit or loss from continuing operations
but after the profit for the year.
Separately from the profit or loss from continuing
operations and it does not affect the profit for the
year.
As an adjustment to the beginning balance of the
retained earnings.
After the profit or loss from continuing operations but
before the profit for the year.
The primary purpose of statement of cash flows is*
1/1
To disclose separately noncash investing and
financing activities
An operating segment is considered reportable when
any of the following conditions is met, except*
1/1
Segment revenue is 10% or more of the combined
revenue of all of the entity's segments
Segment assets are 10% or more of the combined
assets of all segments
Segment liabilities are 10% or more of the combined
liabilities of all segments.
Segment profit or loss is 10% or more of the combined
profit of all segments that did not incur a loss
If at the end of period an entity erroneously excluded
some goods from its ending inventory and also
erroneously did not record the purchase of these
goods in its accounting records, these errors would
cause?*
1/1
No effect on net income, working capital and retained
earnings
The ending inventory, cost of goods sold and retained
earnings to be understated.
Cost of goods available for sale, cost of goods sold and
net income to be understated.
The ending inventory, cost of goods available for sale
and retained earnings to be understated.
Haggard Company entered into a call option contract
for speculation with a bank speculator on January1,
2020. The contract gave the entity the option to
purchase 10,000 shares at Php 100 per share. The
option expires on April 30, 2020. Each share is trading
at Php 100 on January 1, 2020 at which time the entity
paid Php 10,000 for the call option. The price per
share is Php 120 on April 30, 2020, and the time value
of the option has not changed. In order to settle the
option contract, the entity would most likely?*
2/2
Pay the bank Php 200,000
None of the given choices
Receive Php 200,000 from the bank
Purchase the shares at Php 100 per share and sell the
shares at Php 120 per share to the bank
Receive Php 190,000 from the bank
On the statement of cash flows, which of the
following items will affect both financing activities
and operating activities?*
1/1
Payment of dividends.
Redemption of debt.
Collection of loans to other entities.
Issuance of equity securities.
The premium on a three-year insurance policy
expiring on December 31, 2020, was paid in total on
January 1, 2018. If the original payment was recorded
as a prepaid asset, how would total assets and
shareholders' equity be affected during 2018?*
1/1
Both total assets and shareholders' equity would
decrease
Neither total assets nor shareholders' equity would
change
Both total assets and shareholders' equity would
increase
Total assets would decrease and shareholders' equity
would increase
Compared to the accrual basis of accounting, the cash
basis understates income by the net decrease during
the accounting period of*
1/1
Accounts receivable but not of accrued expenses
Neither accounts receivable nor or accrued expenses
Both accounts receivable and accrued expenses
Accrued expenses but not of accounts receivable
Fortitude Company purchased cattle at an auction for
P200,000 on July 1, 2022. Cost of transporting the
cattle back to the company's farm was P2,000 and the
company would have to incur cost similar
transportation cost if it was to sell the cattle in the
auction, in addition an autioneer's fee of 2% of sales
price. What amount should the biological assets be
initially recognized?*
2/2
200,000
198,000
194,000
196,000
An embedded derivative shall be bifurcated from the
host contract when all of the following conditions are
satisfied except*
0/1
The economic characteristics and risks of the host
contract and the embedded derivative are not closely
related.
The host contract is measured at fair value through
proÒt or loss
A separate instrument with the same terms as the
embedded feature would meet the deÒnition of a
derivative
The host contract is measured at fair value through
other comprehensive income.
Correct answer
The host contract is measured at fair value through
proÒt or loss
S1: A two-year treasury note purchased six weeks
prior to maturity would not qualify as a cash
equivalent. S2: To qualify as cash equivalent, an item
generally must be readily convertible to cash and
have an original maturity of three months or less. S3:
Original maturity, for the determination of cash
equivalency is defined as the date of original
issuance.*
2/2
All statements are true
All statements are false
2 statements are true
Only 1 statement is true
Derivatives derive their value from change in a
benchmark based on any of the following, except*
1/1
Share price
Foreign currency rate
Discount on accounts receivable
Commodity price
In a statement of cash flows, if the equipment is sold
at a gain, the amount shown as a cash inflow from
investing activities equals the carrying amount of the
equipment.*
1/1
Plus the gain only
Plus the gain and less the amount of tax attributable
to the gain
With no addition or subtraction
Plus both the gain and the amount of tax attributable
to the gain

When preparing a reconciliation of net income to cash
from operations, an increase in the ending inventory
will result in an adjustment to reported net income
because?*
1/1
Inventory is an expense deducted in computing net
income but is not a use of cash
All changes in noncash accounts must be disclosed.
The net increase in inventory is part of the di×erence
between cost of goods sold and cash paid to suppliers.
Cash is increased because inventory is a current asset
* ended December 31, 2020 was*
An interim financial report must consist of a
condensed set of financial statements
An interim financial report may consist of a
condensed set or complete set of financial statements
On December 30, 2020, Fine corporation sold
merchandise for Php 75,000 to Day Company. The
terms of the sale were n/30, FOB shipping point. The
merchandise was shipped on December 31, 2020, and
arrived at Day on January 2, 2021. Due to clerical
error, the sale was not recorded until January 2021
and the merchandise sold at a 25%markup on cost,
was included in Fine's inventory at December 31,
2020.As a result, Fine's cost of goods sold for the year

2/2

Understated by Php 75,000

Understated by Php 60,000
The error was counterbalanced.
Understated by Php 15,000

*
2/2

A
B
C Php 600,000 provided by financing activities
D None of the given choices
Score Php 48,000 used by financing activities
Question 1 Php 48,000 provided by financing activities
2/2 Php 428,000 used by financing activities
Question 2 If a financial report contains both the consolidated
2/2 financial statements of a parent and the parent's
Question 1 separate financial statements, segment information is
Question 2 required in*
1/1

Which of the following statements about an interim The separate financial statements only
report is true* The consolidated financial statements only
1/1 Both the separate and consolidated financial
statements
An interim financial report must consist of a complete Neither the separate nor the consolidated financial
set of financial statements statements
Interim financial statements must be presented with
the most recent annual financial statements *
2/2

Php 220,000
Php 215,000
Php 195,000
None of the given choices
Php 225,000
The following are options of embedded derivative
except*
0/1
A detachable warrant which gives the holder the right
to purchase the underlying asset at a specific price
within a certain time frame
Equity conversion option in a convertible bond
instrument that allows the holder to convert the bond
into shares of the issuer
Redemption option in an investment in redeemable
preference share that allows the issuer to repurchase
the preference shares
An investment in bond whose interest or principal
payment is linked to the price of gold or silver
Correct answer
A detachable warrant which gives the holder the right
to purchase the underlying asset at a specific price
within a certain time frame
Preparing the statement of cash flows, using the
indirect method, involves all of the following except
determining the*
1/1
Cash provided by operations
Change in cash during the period.
Cash provided by or used in investing and Ònancing
activities.
Cash collections from customers during the period.
On February 1, 2023, BESH began service
proprietorship with an initial cash investment of Php
2,000. The proprietorship provided Php 5,000 of
services in February and received full payment in
March. The proprietorship incurred expenses of Php
3,000 in February, which were paid in April. During
March, BESH drew Php 1,000 against the capital
account. In the proprietorship's financial statements
for the two months ended March 31, 2023, prepared
under the cash basis of accounting, what amount
should be reported as capital?*
2/2
Php 1,000
None of the given choices
Php 7,000
Php 3,000
Php 6,000
On September 1, 2020, Omskrt began a service
proprietorship with an initial investment of Php
400,000.Omskrt provided Php 800,000 of services
during September. Collections were made except for
Php 200,000 which were paid the following month.
Expenses were incurred in the amount of Php 400,000
including Php 100,000 which are to be paid next
month. Omskrt withdrew Php 60,000 against the
capital account. In September 30, 2020 financial
statement, what amount of capital should be
reported under the cash basis accounting?*
0/2
Php 800,000
Php 740,000
Php 840,000
Php 640,000
None of the given choices
Correct answer
Php 640,000
Graphic Publishers offered a contest in which the
winner would receive Php 1,000,000 payable over
20years. On December 31, 2020. Graphic announced
the winner of the contest and signed a note payable
to the winner for Php 1,000,000, payable in 50,000
installments every January 2. Also, on December 31,
2020, Graphic purchased an annuity for Php 418,250
to provide the Php 950,000 prize monies remaining
after the first Php 50,000 installment, which paid on
January 2, 2020.In its 2020 income statement, what
should graphic report as contest prize expense?*
2/2
Php 1,000,000
Php 0
Php 468,250
Php 418,250
In preparing for a statement of cash flows, sale of
treasury stock at an amount greater than cost would
be classified as a(an)*
1/1
Financing activity
Investing activity
Operating activity
Transfer activity
 Php 200,000
An entity must disclose all of the following about each Php 76,000
reportable segment if the amounts are reviewed by None of the given choices
the chief operating decision maker, except*
1/1 In preparing a statement of cash flows, cash flows
from operating activities*
Depreciation expense 1/1
Allocated expense
Interest expense Can be calculated by appropriately adding to or
Income tax expense deducting from net income those items in the income
statement that do affect cash
* Can be calculated by appropriately adding to or
0/2 deducting from net income those items in the income
statement that do not affect cash.
Are calculated as the difference between revenues
and expenses.
Are always equal to accrual accounting income.

Cash equivalents would not include short-term

investments in a money market funds*
1/1
None of the given choices Commercial Paper
Php 6,900,000 Money market funds
Php 5,900,000 Certificate of Deposit
Php 7,900,000 FVOCI
Php 8,900,000
Correct answer In a period of inflation, an entity discloses income on
a current cost basis. Compared to historical cost
Php 5,900,000 income, which condition increases the current cost
income?*
Caroline, Inc. exchanged a tract of land it held in
1/1
Mississippi for a tract of land owned by Rosalie
Corporation located in Illinois. How is this transaction Current cost is the same as historical cost
reported on Caroline, Inc.’s statement of cash flows?* Current cost of goods sold is less than historical cost
1/1 Ending net monetary assets are less than beginning
Current cost of land is less than historical cost
As a cash inflow and a cash outflow from financing
activities. At December 31, 2020, Dayplanner Inc. had 250,000
As a cash inflow and a cash outflow from investing shares of common stock outstanding. On October 1,
activities. 2021, an additional 60,000 shares of common stock
As a cash inflow from investing activities and a cash were issued for cash. Dayplanner also had 2,000,000
outflow from financing activities. of 8 percent convertible bonds outstanding at
This transaction is not reported in the body of the December 31, 2021, which are convertible into
statement of cash flows. 50,000 shares of common stock. The bonds are
* dilutive in the 2021 earnings per share computation.
No bonds were issued or converted into common
2/2
stock during 2021. What is the number of shares that
should be used in computing diluted earnings per
share for the year ended December 31, 2021?*
2/2

315,000

Php 190,000
Php 170,000
For Book Value per Share, 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*
0/1
As a current liability
As a noncurrent liability
In a note to the financial statements
As a reduction in shareholders’ equity
Correct answer
In a note to the financial statements
What is the date of transition to IFRS for SMEs?*
1/1
The end of the earliest period for which an entity
presents full comparative information under IFRS for
SMEs
The end of the latest period in the most recent annual
financial statements under previous GAAP
The beginning of the earliest period for which an
entity presents full comparative information under
IFRS for SMEs
The beginning of the latest period in the most recent
annual financial statements under previous GAAP
Which argument in favor of price level adjusted
financial statements is not valid?*
0/1
Price level financial statements use historical cost
Price level financial statements measure current
value
Price level financial statements compere uniform
Price level financial statements measure earnings in
terms of a common peso
Correct answer
Price level financial statements measure current
value
A general price level statement of financial position is
prepared and presented in terms of*
1/1
The general purchasing power of the peso in the base
period
The average general purchasing power of the peso
The general purchasing power of the peso at the time
the financial statements are issued
The general purchasing power of the peso at the
latest end of reporting period
Which of the following is required to be shown as line
item for an SME but not under full IFRS*
1/1
Inventory
Financial Asset
Property Plant and Equipment
Investment in Joint Venture
If the maximum amount available for cash dividend is
declared on December 31, 2021, what amount of
dividend is payable to the ordinary shareholders? *
0/3
0
Correct answer
2,100,000
Of the following, select the incorrect statement
concerning earnings per share.*
1/1
During a loss period, the amount of loss attributed to
each share of common stock should be computed.
During a period, changes in stock issued or reacquired
by a company may affect earnings per share.
During periods when all income is paid out as
dividends, earnings per share and dividends per share
under a simple capital structure would be identical.
Under a simple capital structure, no adjustment to
shares outstanding is necessary for a stock split on the
last day of the fiscal period.
Earnings per share information should be reported for
all of the following except*
0/1
Extraordinary gain.
Continuing operations.
Net income.
Cash flows from operating activities.
Correct answer
Cash flows from operating activities.
At December 31, 2020 and 2021, November Corp. had Callable.
outstanding 2,000 shares of P110 par value, 8% Participating.
cumulative preference shares and 10,000 shares of Preference shares participate ratably within the
P10 par value ordinary shares. At December 31, 2020, ordinary shareholders in any profit distribution
dividends in arrears on the preference shares were beyond the prescribed preference rate*
P12,000. Cash dividends declared in 2019 totaled
P35,000.What amount were payable on ordinary 1/1
shares? * Redeemable feature
0/2 Cumulative feature
23.22 Participating feature
Correct answer Callable featre

5,400 Dividends in arrears are:*

The main purpose of reporting diluted earnings per
share is to*
1/1
Indicate earnings shareholders will receive in future
periods.
Show the maximum possible dilution of earnings.
Distinguish between companies with a complex
capital structure and companies with a simple capital
structure.
Provide a comparison figure for debt holders.
The main purpose of reporting diluted earnings per
share is to:*
1/1
Indicate earnings shareholders will receive in future
periods.
Distinguish between entities with a complex capital
structure and entities with a simple capital structure.
Provide a comparison figure for debt holders.
Show the maximum possible dilution of earnings.
Earnings per share disclosures are strictly required
for:*
0/1
Small and medium entities (SMEs).
Publicly accountable entities (PAEs).
Both SMEs and PAEs.
Neither SMEs nor PAEs.
Correct answer
Publicly accountable entities (PAEs).
Which of the following features of a preference share
would most likely be opposed by the ordinary
shareholders?*
1/1
Redeemable.
Convertible.
0/1
Noncumulative preferred dividends that has not been
declared for a given period of time.
Dividends on common stock that have not been
declared.
Cumulative preferred dividends that have not been
declared for a given period of time.
Dividends on preferred stock that have been declared
but not paid.
Correct answer
Cumulative preferred dividends that have not been
declared for a given period of time.
If there is a deficit, the preference shareholders
would share on a pro rata basis with the ordinary
shareholders. The preference share may have a call
price, and this is __________ for book value
computation*
0/1
Ignored
Deducted to total shareholders' equity
Added to total shareholders' equity
Deducted to Net Income
Correct answer
Ignored
The purchase (acquisition) of treasury shares:*
0/1
Increases shares issued.
Decreases shares outstanding.
Decreases shares issued.
Increases shares outstanding.
Correct answer
Decreases shares outstanding.
Glendale Enterprises had 200,000 shares of common
stock issued and outstanding at December 31, 2019.
On July 1, 2020, Glendale issued a 10 percent stock
dividend. Unexercised stock options to purchase
40,000 shares of common stock (adjusted for the
2020 stock dividend) at Php 20 per share were
outstanding at the beginning and end of 2020. The
market price of Glendale's common stock (which was
not affected by the stock dividend) was Php 25 per
share during 2020. Net income for the year ended
December 31, 2020, was Php 1,100,000. What should
be Glendale's 2020 diluted earnings per common
share?*
···/2
5.05
Correct answer
4.82
Which of the following gain and loss should be
recognized in other comprehensive income of an
SME?*
1/1
Gain and loss arising on translating the financial
statements of a foreign operation
Gain and Loss from discontinued operations
Gain on remeasuring equity investment at FVOCI
Extraordinary gain and loss
What is the book value per ordinary share?*
0/2
60
Correct answer
144
The conversion of preference shares into ordinary
shares requires that any excess of the par value of the
ordinary shares issued over the carrying amount of
the preference shares being converted should be*
1/1
Reflected currently in income.
Reflected currently in other comprehensive income.
Treated as a prior period adjustment.
Treated as a direct reduction of retained earnings.
The accounting for quasi-reorganization usually
involves:*
1/1
Write-down of assets and elimination of a deficit.
Write-up of assets and elimination of deficit.
Write-down of both assets and retained earnings.
Write-up of assets and write-down of retained
earnings.
The primary purpose of quasi-reorganization is to give
the entity the opportunity to:*
0/1
Revalue understated assets to their fair value.
Eliminate a deficit in retained earnings.
Distribute shares of a newly created subsidiary to
shareholders.
Obtain relief from its creditors.
Correct answer
Eliminate a deficit in retained earnings.
In computing basic earnings per share, the amount of
preference dividends on noncumulative preference
shares shall be*
1/1
Ignored
Added to net income only when declared
Deducted from net income only when declared
Deducted from net income whether declared or not
Accounting Studio currently has stock rights
outstanding for 2,000 common shares. The exercise
price of these shares is Php 20. The options were
issued in January of 2023. The average market price
of the related common stock during the year 2023
was Php 25. The average market price of the related
common stock during 2024 was Php 21 and during
2025 was Php 19. The company's fiscal year ends on
December 31 of each year. How should these stock
rights be treated in the earnings per share calculation
for the year ending December 31, 2024?*
1/1
The stock options are antidilutive and should not be
included either in basic or diluted earnings per share.
The stock options are dilutive and should be included
in diluted earnings per share in the amount of 2,000
shares.
The stock options are dilutive and should be included
in diluted earnings per share in the amount of 95
shares.
The stock options are dilutive and should be included
in diluted earnings per share in the amount of 400
shares.
The effect of recording a 100% stock dividend would
be to?*
1/1
Leave working capital unaffected, decrease earnings
per share and decrease debt to equity ratio
Decrease the current ratio, decrease working capital
and decrease book value per share
Leave working capital unaffected, decrease earnings
per share and decrease book value per share
Leave inventory turnover unaffected, increase
earnings per share and increase book value per share.
The EPS computation that is forward-looking and
based on assumptions about future transactions is*
1/1
Diluted EPS.
Basic EPS.
Extraordinary EPS.
Continuing operations EPS.
What is the correct treatment of a stock dividend
issued in mid-year when computing the weighted
average number of ordinary shares outstanding for
earnings per share purposes?*
1/1
The stock dividend should be weighted by the length
of time that the additional shares are outstanding
during the period.
The stock dividend should be ignored since no
additional capital was received.
The stock dividend should be included in the
weighted average number of shares outstanding only
if the additional shares result in a decrease of three
percent or more in earnings per share
The stock dividend should be weighted as if the
additional shares were issued at the beginning of the
year.
For companies with a complex capital structure, a
convertible security is potentially dilutive if*
0/1
Its incremental EPS is equal to basic EPS after
considering any stock options, rights, and warrants.
Its incremental EPS is less than basic EPS after
considering any stock options, rights, and warrants.
Its incremental EPS is greater than basic EPS after
considering any stock options, rights, and warrants.
Its incremental EPS is less than 1.00 after considering
any stock options, rights, and warrants.
Correct answer
Its incremental EPS is less than basic EPS after
considering any stock options, rights, and warrants.
An entity is covered by PFRS for SMEs if*
0/1
It has a total assets or total liabilities are more than
the Php 100,000,000 floor threshold.
It has a total assets or total liabilities are below the
Php 3,000,000 floor threshold.
It has a total assets more than Php 100,000,000 to
Php 350,000,000 or with total liabilities more than
Php 100,000,000 to Php 250,000,000
It has a total assets more than Php 350,000,000 or
with total liabilities above Php 250,000,000
Correct answer
It has a total assets more than Php 100,000,000 to
Php 350,000,000 or with total liabilities more than
Php 100,000,000 to Php 250,000,000
Accounting Studio currently has stock rights
outstanding for 2,000 common shares. The exercise
price of these shares is Php 20. The options were
issued in January of 2023. The average market price
of the related common stock during the year 2023
was Php 25. The average market price of the related
common stock during 2024 was Php 21 and during
2025 was Php 19. The company's fiscal year ends on
December 31 of each year. How should these stock
rights be treated in earnings per share calculations for
the year ending December 31, 2023?*
1/1
The stock options are dilutive and should be included
only in diluted earnings per share in the amount of
400 shares.
The stock options are dilutive and should be included
both in basic and diluted earnings per share.
The stock options are antidilutive and should not be
included either in basic and diluted earnings per
share.
The stock options are dilutive and should be included
both in basic and diluted earnings per share in the
amount of 400 shares.
Potential ordinary shares include all of the following,
except:*
1/1
Share options and other employee plans that allow
employees to receive ordinary shares as part of their
remuneration.

Shares which would be issued upon satisfaction of

certain conditions resulting from contractual
arrangement, such as the purchase of a business.

Financial liabilities or equity instruments, including

preference shares, that are not convertible into
ordinary shares.
Share warrants.
The statement of financial position at the date of
transition to IFRS for SMEs is best described as*
1/1

Provisional statement of financial position

Opening statement of financial position
Originating statement of financial position
Closing statement of financial position

If an SME that uses the PFRS for SMEs in the current

year breaches the ceiling of the size criteria at the end
of the current year, the entity is required to transition
to full PFRS*
1/1

At the current year-end if the event that caused the

change is significant and continuing
At the current year-end
At the discretion of management
In the next year if the event that caused the change is
significant and continuing
Which of the following shareholder rights is most
commonly enhanced in an issue of preference
shares.*

1/1

The right to vote on major corporate issues.

The right to maintain one's proportional interest
The right to vote for the board of directors
The right to receive a full cash dividend before
dividends are paid to other classes of share capital
What is the basic loss per share?*

0/2

2.23
Correct answers
(64) or 64