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2. Which of the following methods of amortization is normally used for intangible asset?
a. Double-declining balance.
b. Straight line.
c. Sum of the years’ digit.
d. Units of production.
3. Which of the following research and development related costs should be capitalized and
depreciated over current and future periods?
a. Inventory used for a specific research period.
b. Administrative salaried allocated to research and development.
c. Research findings purchased to aid a particular research project currently in process.
d. Research and development general laboratory building which can be put to
alternative use in the future.
4. Operating losses incurred during the start-up years of a new business should be
a. written off directly against retained earnings.
b. capitalized as a deferred charge and amortized over five years.
c. accounted for and reported like the operating losses of any other business.
d. capitalized as an intangible asset and amortized over a period not to exceed.
8. An impairment loss that relates to an asset that have been revalued should be recognized
in
a. profit or loss.
b. any reserve in equity.
c. opening retained earnings.
d. revaluation surplus that relates to the revalued asset.
10. Under PFRS 9, entities are required to measure financial assets either at fair value or
amortized cost based on all the following except,
a. the business model for managing financial asset.
b. whether the financial asset is a debt or equity investment.
c. the contractual cash flow characteristics of the financial asset.
d. all of these are considered in determining the measurement of the financial asset.
14. It is the branch of accounting that focuses on the general purpose reports of financial
position and operating results known as financial statements.
a. Financial accounting
b. Auditing
c. Managerial accounting
d. Taxation
15. Accounting has been given various definitions, which of the following is not one of those
definitions
a. Accounting is a service activity. Its function is to provide quantitative information,
primarily financial in nature, about economic entities that is intended to be useful in
making economic decisions.
b. Accounting is the art of recording, classifying, and summarizing in a significant manner
and in terms of money, transactions and events which are, in part of at least, of a
financial character and interpreting the results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and communicating
the results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.
19. Imagine you are a business manager. You would be most awesome as a manager in which
of the following independent scenarios?
a. Your company has an average total assets of ₱10M during the year. At the end of the
year, your company reported profit of ₱1M. The average return of other similar
companies with the same level of assets is 30%.
b. Your adoption of accounting policy has led to the immediate recognition of expenses.
Those costs could have otherwise been allocated over several periods. Accordingly,
your company did not declare dividends during the period. This resulted to a decline in
the market value of your company’s stocks while the prices of all other stocks in the
stock market have increased.
c. You changed your company’s method of allocating costs from an accelerated method
to a straight-line method. The change met the requirements of the PFRSs. This led to
the smoothing of expenses, which increased your company’s profit during the period
by 12%, above the industry average.
d. You are great at closing deals, that’s why you’re a boss. Eager to increase your
company’s resources, you were able to obtain a ₱20M loan from a bank. Interest
expense on the loan during the year was ₱3.4M while the return on investments of loan
proceeds was 2%.
20. Which of the following is not directly involved in the accounting standard-setting “due
process” in the Philippines?
a. Board of Accountancy
b. Bureau of Internal Revenue
c. Professional Regulations Commission
d. Financial Reporting Standards Council
21. Materiality judgment is least likely to be applied in which of the following?
a. in determining whether an item warrants separate presentation in the financial
statements or is to be aggregated with other items
b. in determining whether information could influence the decisions of users, and
therefore, must be presented in the financial statements
c. in determining whether the cost of processing and communicating information exceeds
the benefits expected to be derived from it
d. whether additional information needs to be provided, including the level of detail and
conciseness of the information’s presentation
24. An entity makes a change in accounting estimate. How does the entity recognize the effects
of the change in profit or loss?
a. Prospectively in the current period
b. Prospectively in the current and future periods
c. Retrospectively starting from the earliest period presented
d. a or b
27. At the end of the period, Entity A has deductible temporary difference of ₱100,000. Entity
A’s income tax rate is 30%. Entity A’s statement of financial position would report which
of the following?
a. 30,000 deferred tax asset
b. 30,000 deferred tax liability
c. 30,000 deferred tax expense
d. 30,000 income tax expense
28. Under PAS 10, which of the following is classified as an adjusting event rather than a
non-adjusting event?
a. The entity announced the discontinuance of its assembly operation.
b. The entity entered into an agreement to purchase the freehold of its currently leased
office building
c. Destruction of a major production plant by fire.
d. A mistake was discovered in the calculation of the allowance for uncollectible trade
receivables resulting to an understatement of the trade receivables.
29. Non-adjusting events after the balance sheet date should be disclosed if
a. they are unusual and material.
b. they related to conditions existing at the balance sheet date.
c. non-disclosure would affect the amounts presented in the financial statements.
d. non-disclosure would affect the ability of users of the financial statements to make
proper decisions.
30. All of the following can be classified as cash and cash equivalents, except
a. bank drafts
b. equity investments.
c. loan notes held due for repayment in 90 days.
d. redeemable preference shares acquired and due in 60 days.
33. PAS 2, Inventories, requires that when inventories are written down to net realizable
value, they are written-down
a. on a class-by-class basis.
b. on an item-by-item basis.
c. on the basis of industry segment.
d. according to the geographical segment within the entity.
34. You are a CPA and were engaged to audit the annual financial statements of ABC Co., a
mining company. Which of the following standards is most likely relevant to ABC Co.?
a. PFRS 4
b. PAS 34
c. PAS 41
d. PFRS 6
35. Entity A is preparing its first PFRS financial statements. Which of the following standards
is most relevant to Entity A?
a. PFRS 1
b. PAS 12
c. PAS 8
d. PFRS 9
37. The investor’s interest income for a period would be lowest if the bonds is purchased at
a. a discount
b. a premium
c. at the face value of the bonds
d. in between interest payment dates.
39. Under PFRS 9, which of the following is not a category of financial assets?
a. Financial assets at amortized cost.
b. Financial assets at fair value through profit or loss
c. Financial assets at fair value through accumulated profit or loss
d. Financial assets at fair value through other comprehensive income.
40. The computation of employee retirement benefits expense is addressed in this standard.
a. PAS 17
b. PFRS 7
c. PAS 19
d. PFRS 9
42. According to PAS 41, Agriculture, which of the following items would be classified as
biological asset?
a. Chickens.
b. Eggs.
c. Land in mango orchard.
d. Oranges.
45. Non-current assets held for sale and discontinued operations are accounted for under
a. PFRS 4
b. PAS 41
c. PFRS 5
d. PFRS 8
47. This standard deals with the recognition and measurement of financial instruments.
a. PAS 32
b. PFRS 7
c. PFRS 9
d. PFRS 3
48. Under PAS 41, any gain arising from the initial recognition of biological assets (e.g.,
when a calf is born) shall
a. recognized in the profit or loss.
b. recognized in the other comprehensive income.
c. not be recognized although note disclose is required.
d. deferred and amortized over the life of the biological asset.
49. A property developer must classify properties that it holds for sale in the ordinary course
of business as
a. financial asset.
b. inventory.
c. investment property.
d. property, plant and equipment.
51. In case of property held under an operating lease and classified as investment property,
the entity
a. has to use the fair value model only.
b. has the choice between the cost model and the fair value model.
c. has to account for the investment property under the cost model only.
d. needs only to disclose the fair value and can use the cost model under PAS 38.