CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS

PAS 1,PAS 2, PAS 7, PAS 8, PAS 10

Quiz 2

Name: Date:
Section: Professor: JM Mercado

1. The statement of financial position is useful for all of the following, except
a. To compute rate of return
b. To analyze cash inflows and outflows for the period
c. To evaluate capital structure
d. To assess future cash flows

2. Which of the following cannot be considered fair presentation?

a. To select and apply accounting policies in accordance with applicable PFRS
b. To present information in a manner that provides relevant, reliable, comparable and
understandable information
c. To provide additional disclosure when compliance with specific PFRS is insufficient to
understand the entity’s financial position and financial performance
d. To rectify inappropriate accounting policies used or by notes or explanatory information

3. Which entity is a going concern?

a. Management intends to liquidate the company.
b. Managements intends to cease the entity’s operations.
c. Management has no realistic alternative but to cease the entity’s operation.
d. None of these can be considered a going concern entity.

4. An entity shall prepare how many statement of financial position as a result of retrospective
application, retrospective restatement and reclassification of items in the financial statements?
a. Two
b. Three
c. Four
d. One

5. Which of the following must be included as a line item in the statement of financial position?
a. Contingent asset
b. Property, plant and equipment analyzed by class
c. Share capital and reserves analyzed by class
d. Deferred tax

6. Inventories include all of the following assets, except

a. Held for sale in the ordinary course of a business.
b. In the process of the production for sale.
c. In the form of materials or supplies to be consumed in the production process or in the
rendering of services.
d. Held for use in the production or supply of goods or services.
7. The cost of inventory in the sum of
a. Cost of purchase and cost of conversion.
b. Direct cost, indirect cost and other cost.
c. Cost of purchase, cost of conversion and other cost incurred in bringing the inventory to the
present location and condition.
d. Cost of conversion and other cost incurred in bringing the inventory to the present location
and condition.
8. Which of the following costs of conversion cannot be included in cost of inventory?
a. Cost of direct labor
b. Factory rent and utilities
c. Salaries of sales staff
d. Factory overhead based on normal capacity

9. Which of the following should be included in inventory at the end of reporting period?
a. Goods in transit which were purchased FOB shipping point
b. Goods in transit which were purchased FOB destination
c. Goods received from another entity on consignment
d. Goods in transit to a customer which were sold to the customer FOB shipping point

10. A discount given to a customer for purchasing a large volume of merchandise is typically
referred to as
a. Quantity discount
b. Trade discount
c. Size discount
d. Cash discount

11. The use of purchase discount account implies that the recorded cost of a purchased inventory is
a. Invoice price
b. Invoice price plus any purchase discount lost
c. Invoice price less the purchase discount taken
d. Invoice price less the purchase discount allowable whether taken or not

12. The use of a discount lost account implies that cost of a purchased inventory is
a. Invoice price
b. List price
c. Invoice price less the purchase discount taken
d. Invoice price less the purchase discount allowable whether or not taken

13. Which of the following should be taken into account when determining the cost of inventory?
a. Storage cost of part-finished goods
b. Abnormal freight in
c. Recoverable purchase tax
d. Interest on inventory loan
14. The primary purpose of a statement of cash flows is to provide relevant information about
a. differences between net income and associated cash receipts and disbursements
b. an entity’s ability to generate positive net cash flows
c. the cash receipts and cash disbursements of an entity during a period
d. an entity’s ability to meet cash operating needs

15. Interest received and dividend received may be classifies alternatively as cash flow from
a. Operating activities
b. Investing activities
c. Financing activities
d. Revenue activities

16. In a statement of cash flows using indirect approach for operating activities, an increase in
inventory is presented as
a. Outflow of cash
b. Inflow and outflow of cash
c. Addition to net income
d. Deduction from net income

17. Which of the following is characteristic of a change in accounting estimate?

a. it usually need not to be disclosed
b. it does not effect the financial statements of prior period
c. it should be reported through the restatement of the financial statements
d. it makes necessary the reporting of proforma amounts for prior periods

18. The effect of change in accounting policy that is inseparable from the effect of a change in
accounting estimate should be reported
a. By restating the financial statements of all prior periods presented
b. As a correction of an error
c. As a component of income from continuing operations, in the period of change and future
periods if the change affects both.
d. As a separate disclosure after income from continuing operations.

19. A change in accounting policy shall be made when

I. Required by law.
II. Required by an accounting standard or an interpretation of the standard
III. The change will result in more relevant or reliable information about the financial position,
financial performance and cash flows of the entity.

a. I and III only

b. II and III only
c. I and II only
d. I, II and III
20. Which of the following should be treated as change in accounting policy?
a. A change is made in the method of calculating the provision for uncollectible accounts
receivable.
b. A change from cost model to fair value model in measuring investment property.
c. An entity engaging in construction contract for the first time needs on accounting policy to
deal with this.
d. All of these qualify as change in accounting policy.

21. If it is impracticable to determine the cumulative effect of an accounting change to any of the
prior periods, the accounting change should be accounted for
a. As a prior period adjustment
b. On a prospective basis.
c. As a cumulative effect change on the income statement.
d. As an adjustment to retained earnings.

22. The financial statements are authorized for issue

a. When the board of directors reviews the financial statements and authorized them for issue
b. When the financial statements are made available to shareholders.
c. When the shareholders approve the financial statements at their annual meeting.
d. When the approved financial statements are files with a regulatory body.

23. Events after reporting period that provide evidence about conditions that existed at the current
year-end and affect the realizability of accounts receivable should be
a. Discussed only in the management commentary.
b. Disclosed only in the notes.
c. Used to record an adjustment to doubtful accounts expense.
d. Used to record an adjustment to retained earnings.

24. Which event after the reporting period would require disclosure in the financial statements?
A. Retirement of the president
b. Settlement of litigation when the event that gave rise to the litigation occurred prior to the
end of reporting period
c. Strike of employees
d. Issue of a large amount of ordinary shares

25. All of the following events would be classified as nonadjusting events after reporting period,
except
a. The entity announced the discontinuance of the assembly operation
b. The entity entered into an agreement to purchase the 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 accounts
receivable