QUIZ – PPE and Intangibles

MODULE 1 – PPE and Intangible assets

Multiple choice

1. Which of the following costs is least likely recorded as Land Improvement?

a. Landscaping
b. Cost of permanent fence build around the real property for security
c. Pavement and roads that was added after some time from the construction of new building
d. Grading and levelling to improve the integrity of the land

2. Which of the following measurement model is not permitted for the subsequent measurement of
intangible assets under PAS 38?

a. None of the foregoing

b. Revaluation model
c. Cost model
d. Capital Assets pricing model

3. Which of the following taxes can be capitalized as cost of the PPE acquired?

a. All of the foregoing

b. Real property tax subsequent to acquisition
c. Non-refundable purchase taxes
d. Value added tax from imported property

4. When an exchange transaction lacks commercial substance, the initial measurement of the property
acquired shall be based on the

a. Carrying amount of the item received

b. Fair value of the item relinquished
c. Fair value of the item received
d. Carrying amount of the item relinquished

5. Which of the following be part of the cost of the newly acquired machinery that will replace an old
one?

a. Employee training cost

b. New machinery installation cost
c. All of the foregoing
d. Old machinery removal cost

6. An auditor analyzes repairs and maintenance accounts primarily to obtain evidence in support of the
audit assertion that all

a. Expenditures for property and equipment have not been charged expense.
b. Expenditures for property and equipment have been recorded in the proper period.
 c. Noncapitalizable expenditures for repairs and maintenance have been recorded in the proper
period.
d. Noncapitalizable expenditures for repairs and maintenance have been properly charged to
expense.

7. Consider the following costs:

1) Cost of an equipment used specifically only for a particular R&D project where at least one
requirement of PAS 38 for capitalization of R&D was met.
2) Improvement made on the occupied property under a lease agreement *Leasehold
improvement

a. No.1 is an outright expense and no.2 is an intangible asset

b. No.1 is an intangible asset and no.2 is a PPE
c. No.1 is an outright expense and no. 2 is a PPE
d. Both are accounted as PPE

8. Which of the following shall be held as intangible asset?

a. Internally developed publishing titles and masterheads

b. Purchase costs of a software to be leased out to clients
c. Research cost (satisfying all the requirements for capitalization under PAS 38)
d. Development costs (satisfying majority of the requirements for capitalization under PAS 38)

9. Which of the following is not added to the cost of the land?

a. Real property tax assessed after acquisition *Expense

b. Escrow fees paid to asset management company
c. Special assessment charges of the municipality
d. Option fee for the acquired property

10. A computer software purchased as an operating system for the hardware or as an integral part of a
computer-controlled machine tool that cannot operate without the specific software should be treated
as

a. Property, plant and equipment

b. Intangible asset
c. Inventory
d. Expense

11. Commercial substance exists when

a. Cash flows substantially differs between the two properties in exchange transaction.
b. Cash flows of the two properties exchanged are substantially the same
c. Cash flow from property given is greater than the cash flow from property received
d. Cash flow from property received is greater than the cash flow from property given.
12. Property, plant and equipment are tangible items that are:

I. Held for use in the production or supply of goods or services, for rental to others, or for
administrative purposes.
II. Properties held to earn rentals or for capital appreciation or both. *Investment Property
III. Expected to be used during more than one period.

a. I and II
b. II and III
c. I and III
d. I, II and III

13. The legal life of patent

a. 10 years
b. 10 years, renewable for another 10 years
c. 20 years
d. 20 years, renewable for another 20 years

14. When few property and equipment transactions occur during the year the continuing auditor usually
obtains and understanding of internal control performs

a. A through examination of the balances at the beginning of the year

b. Extensive tests of current year property and equipment transactions
c. Tests of controls
d. Analytical procedures to verify current year additions to property and equipment

15. Term discount in the purchase of PPE shall be

a. Deducted from the gross invoice price regardless of whether taken or not
b. Not deducted from gross invoice price regardless of whether taken or not
c. Deducted form the gross invoice price when discount is availed
d. Accounted as an income when availed and loss when not availed

16. What are intangible assets?

a. Non-monetary assets without physical substance

b. Monetary assets without physical substance
c. Non-monetary assets with physical substance
d. Monetary assets with physical substance

17. In testing the unrecorded retirements of equipment, an auditor is most likely to

a. Scan the general journal for unusual equipment additions and excessive debits to repairs and
maintenance expense
b. Compare depreciation journal entries with similar prior-year entries in search of fully
depreciated equipment
 c. Inspect items of equipment observed during the plant tour and then trace them to the
equipment subsidiary ledger
d. Select items of equipment from tahe accounting records and then locate them during the plant
tour.

18. The company is currently constructing its office building on a real property acquired. Which of the
following shall be added to the cost of the building under construction?

a. Cost of excavation to serve as the foundation of the construction

b. Cost of surveying done before construction
c. Permanent fence constructed around the perimeter of the property
d. Scrap value from the debris of the old building demolished

19. Which of the following is true about accounting for the research costs of the company’s R&D
project?

a. Research costs must be expensed

b. Research costs are recorded in other comprehensive income
c. Research costs may be capitalized as an intangible asset in very restrictive situations
d. Research costs are always deferred and expensed against future revenues

20. An old building was acquired and immediately demolished to give way to the construction of new
building. The cost of the old building shall be capitalized as cost of the new building when the building is
accounted as

a. Inventory
b. None of the foregoing
c. PPE
d. Investment Property

21. Consider the following statements:

1) There is goodwill involved in the acquisition of a business if the purchase price paid is in excess
of the proprietorship of the business acquired.
2) Goodwill might be viewed as the enjoyment of a profit by a company in excess of the normal or
usual return for the industry as a whole but such goodwill is not recorded if it has not been
purchased or paid for.
a. Only statement 1 is correct
b. Both statements are correct
c. Only statement 2 is correct
d. Both statements are incorrect

22. When the cost offered by a construction company exceeds the actual cost incurred from a self-
constructed facility, then the difference shall

a. Recorded as income
b. Not be accounted
c. Recorded as loss when amount is abnormally high
d. Part of the cost of PPE is abnormally high
23. Property donated to the company shall be accounted as

a. An income when the donation is a subsidy from a shareholder

b. As an income the donation is not as subsidy from a no shareholder
c. Part of additional paid in capital or share premium when the donor is a stockholder
d. An income when the donor is a shareholder or non-shareholder

24. ABC Corporation is performing its annual test of the impairment of goodwill for its reporting unit, it
has determined that the fair value of the unit exceeds it carrying value. Which of the following is correct
concerning this test of impairment?

a. The assets and liabilities should be valued to determined if there has been an impairment of
goodwill
b. Goodwill should be written down as impaired
c. Goodwill should be retested at the entity level
d. Impairment is not indicated and no additional analysis is necessary

25. In auditing intangible assets, an auditor most likely would review or recompute amortization and
determine whether the amortization period is reasonable in support of management’s financial
statement assertion of

a. Completeness
b. Existence and occurrence
c. Valuation and allocation
d. Rights and obligations

26. Which of the following R&D cost is an outright expense regardless of meeting all the requirements
set by PAS 38 for capitalization?

a. All of the foregoing

b. Design, construction and testing of a chosen alternative for new or improved materials, devices,
products, processes, systems or services.
c. Design, construction, and testing of pre-production of pre-use prototypes and models
d. Formulation, design, evaluation and final selection of possible alternatives for new or improved
materials, devices or services.

27. Which of the following cost shall be recognized as an outright expense?

a. Legal and administrative cost incurred in the application of a patent

b. Customer list acquired from a third party
c. Design cost of the trademark
d. Litigation cost incurred for the successfully defense a copyright

28. Fair value of the securities issued is the first priority in determining the initial measurement of the
property received in an exchange transaction apply?

a. Bonds and shares of stocks

b. Neither bonds nor shares of stocks
c. Bonds
 d. Shares of stocks

29. When few property and equipment transactions occur during the year the continuing auditor usually
obtains and understanding of internal control and performs.

a. Test of controls
b. A thorough examination of the balances at the beginning of the year
c. Analytical procedures to verify current year additions to property and equipment
d. Extensive tests of current year property and equipment transactions

30. Which of the following shall not be accounted as cost of the machinery and equipment?

a. Customs tax and duties

b. Safety features and added
c. Property insurance
d. Freight and delivery charges

31. Cost incurred to internally developed a software by Microsoft Inc. shall be capitalized to intangible
asset when these incurred

a. During the regular production of the software that are ready for sale
b. Before the establishment of technical feasibility
c. After the establishment of technical feasibility and those incurred during the mass production of
software
d. After the establishment of technical feasibility but before the mass production of software

QUIZ - Liability
1. Which of the following is a current liability?
a. Long-term loan contract where the provisions of loan arrangement was breached but
the lender agreed by the end of the reporting period to provide a period of grace
period ending at least twelve months after the reporting period. *NCL
b. currently maturing long-term obligation refinanced for at least 12 months after
reporting period and the refinancing was made before the reporting period and before
the authorized issuance of financial statements. *NCL
c. Currently maturing long-term obligation refinanced at least 12 months after reporting
period and the refinancing was made after the reporting period but before the
authorized issuance of financial statements.
d. Currently maturing long-term obligation where the debtor has unconditional right to
defer settlement for at least 12 months after reporting period. *NCL = debtor right
2. The audit objective in testing this assertion is to determine that payables represent valid and
legal claims of third party to audit client.
a. Presentation and disclosure
 b. Rights and obligation
c. Existence and occurrence
d. Valuation and allocation
3. Which of the following is a noncurrent liability?
a. Long-term loan contract where the provisions of loan arrangement was breached on or
before the end of the reporting period.
b. Currently maturing long-term obligation where the debtor has discretion to refinance
or roll over the obligation for at least 12 months after the reporting period.
c. Long-term loan contract where the provisions of loan arrangement was breached on or
before the end of the reporting period but lender agreed not to demand payment after
the reporting period and before the authorized issuance of financial statements.
d. Currently maturing long-term obligation where the creditor has unconditional right to
defer settlement for at least 12 months after reporting period.
4. Non-interest bearing note payable shall recognize
a. interest expense but not interest payable
b. interest payable but not interest expense
c. neither interest payable nor interest expense
d. interest expense and interest payable.
5. Defined by PAS 37 as possible obligation that arises from past events and whose existence
will be confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the entity or a present obligation that arises from past
events but is not recognized because it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation; or the amount of the obligation
cannot be measured with sufficient reliability.
a. Constructive obligation
b. Contingent liability
c. Estimated liability
d. Provision
6. The amortization of discount on a term bonds payable using effective interest method will
lead to
a. Decreasing interest expense and increasing carrying amount of bonds over time.
b. Increasing interest expense and decreasing carrying amount of bonds over time.
c. Decreasing interest expense and decreasing carrying amount of bonds over time.
d. Increasing interest expense and increasing carrying amount of bonds over time.
7. Gain or loss on extinguishment of debt accounted as asset swap is equals to
a. Fair value of liability extinguished minus fair value of asset transferred.
 b. Fair value of liability extinguished minus carrying amount of asset transferred.
c. Carrying amount of liability extinguished minus fair value of asset transferred.
d. Carrying amount of liability extinguished minus carrying amount of asset transferred.
8. Audit test conducted to determine that major type of obligations are properly described as
classified is an audit procedure designed to test the assertion of
a. Existence and occurrence
b. Rights and obligations
c. Presentation and disclosure
d. Valuation and allocation
9. Change in fair value of liabilities at fair value through profit or loss is charged to
a. Profit and loss when attributable to changes in the credit risk
b. OCI when attributable to changes in the credit risk
c. Profit and loss when attributable to causes other than credit risk
d. OCI or profit and loss when attributable to causes other than credit risk.
10. There is substantial modification of terms of the old liability if the gain or loss on
extinguishment of debt is
a. At least 10% of the carrying amount of the old liability
b. More than 10% of the carrying amount of the old liability
c. At least 10% of the present value of the new liability
d. More than 10% of the present value of the new liability
11. Provision shall not be recognized in the following cases, except for
a. CPA firm plan for staff training for recent changes in tax law.
b. Binding sale agreement from restructuring by sale of an operating unit.
c. Estimated probable future operating losses.
d. Major overhaul or repairs to be conducted next year.
12. The following liabilities are classified as current liabilities, except
a. Advances from customer
b. Deferred tax liability
c. Estimated warranty liability
d. Accrued interest expense
13. According to PFRS 9, initial measurement of financial liability shall be at fair value minus
transaction costs directly attributable to the issue of the financial liability, in case of financial
liability measured at
a. fair value through profit and loss
 b. Amortized cost using effective interest method at fair value through OCI
c. Amortized cost using effective interest method
d. Amortized cost using effective interest method at a fair value through profit and loss
14. Measurement of a provision which involves a large population of items, the obligation is
estimated by weighing all possible outcomes by their associated probabilities.
a. Expected value
b. Best estimate
c. Midpoint
d. Weighted average
15. After initial recognition, bonds payable shall be measured at
1) Amortized cost using the effective interest method.
2) Fair value through profit or loss
3) Fair value through other comprehensive income

a. 1, 2, and 3
b. 1 and 2
c. 1 and 3
d. 2 and 3
16. The formula to compute for the net proceeds from a bond issued in between interest dates
at a premium
a. Par value plus bond premium plus issue cost plus accrued interest
b. Par value plus bond premium minus issue cost plus accrued interest
c. Par value plus bond premium plus issue cost minus accrued interest
d. Par value plus bond premium minus issue cost minus accrued interest
17. When fair value of the bonds issued with warrants exceeds the fair value of the bonds
without the warrant, the excess shall be credited to
a. Share premium/APIC
b. Share capital
c. Retained earnings
d. Premium on bonds payable
18. At a minimum, line items of liabilities per PAS 1, do not include
a. Provision
b. Deferred tax liability
c. Liabilities included in disposal groups classified as held for sale per PFRS 5
d. Deferred revenue
19. Which of the following is incorrect when calculating the initial carrying amount of the bonds
payable at amortized cost?
a. Accrued interest is added to the quoted price of the bond when the bond is issued in
between interest dates.
b. Bond issue cost is deducted from the quoted price of the bonds *FV dapat
c. Bond discount is deducted from the par value of the bond
d. Bond premium is added to the par value of the bonds
20. Which of the following is true in relation to the fair value option of measuring a bond
payable?
1) At initial recognition, an entity may revocably designate a bond payable at fair value
through profit or loss
2) The bond payable is remeasured every year-end at fair value and any changes in fair
value are recognized in other comprehensive income

a. Both 1 and 2
b. 1 only
c. Neither 1 or 2
d. 2 only
21. The audit procedure used to verify accrued liabilities differ from those employed for the
verification of accounts payable because
a. Accrued liability balances are less material than accounts payable balances.
b. Accrued liabilities usually pertain to services of a continuing nature while accounts
payable are the result of completed transaction
c. Evidence supporting accrued liabilities in nonexistence while evidence supporting
accounts payable is readily available
d. Accrued liabilities at year-end will become accounts payable during the following year.
22. Which of the following is a substantive test that an auditor is most likely to perform to verify
the existence and valuation of recorded accounts payable?
a. Confirming accounts payable balances with known suppliers who have zero balances.
b. Investigating the open purchase order file to ascertain that pre-numbered purchase
orders are used and accounted for.
c. Vouching selected entries in the accounts payable subsidiary ledger to purchase orders
and receiving reports.
d. Receiving the client’s mail, unopened, for a reasonable period of time after year end to
search for unrecorded vendor’s invoices.
23. The primary audit test to determine if accounts payable are valued properly is
 a. An analytical procedure
b. Verification that accounts payable was reported as a current liability in the balance
sheet
c. Vouching accounts payable to supporting documentation
d. Confirmation of accounts payable
24. Which of the following shall least likely be included in the trade and other payable balance
in the statement of the financial position?
a. trade credits
b. unearned revenue
c. accrued utilities
d. bonds payable
25. The following are internal control for activities relevant to long-term liabilities, except
a. Documentation of authorization such as purchase orders and invoices.
b. Independent bond trustee or transfer agent for proper control of issued and unissued
debt securities.
c. Interest payment to be done by independently engaged interest-paying agent
d. None of the foregoing
26. Which of the following statements is incorrect regarding the application of PAS 37?
a. Gains on the expected disposal of assets are deducted from the estimated amount of
provision. This is done only when it is closely linked to the event of provision.
b. If the effect of the time value of money is material, the amount of a provision shall be
the present value of the expenditure expected. Discount rate shall be a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to
the liability.
c. If it is no longer probable that an outflow of resourced embodying economic benefits
will be required to settle the obligation, the provision shall be reversed.
d. Reimbursement shall be treated as a separate asset. The amount recognized for the
reimbursement shall not exceed the amount of the provision.
27. The floating of new bonds payable the proceeds from which are used in paying the original
bonds payable.
a. Bond refinancing
b. Early retirement of bond
c. Treasury bond
d. Bond refunding
28. Which of the following is not a liability per financial statement classification?
a. Advanced from customers
 b. Stock dividends payable *SHE
c. Provision
d. Redeemable preferred stock
29. Which of the following audit procedure is the best for identifying unrecorded trade
accounts payable?
a. Reviewing cash disbursements recorded subsequent to the balance sheet date to
determine whether the related payables apply to the prior period.
b. Reconciling vendors’ statement to the file of receiving reports to identify items received
just prior to the balance sheet date
c. Investigation payables recorded just prior to and just subsequent to the balance sheet
date to determine whether they are supported by receiving reports
d. Examining unusual relationship between monthly accounts payable balances and
recorded payments
30. Audit procedure to test the completeness assertion concerning liabilities includes
a. Performing purchase cut-off examination
b. Vouching recorded liabilities to vendors’ statements
c. Examining subsequent payments to creditors
d. Confirming recorded liabilities directly with suppliers and creditors
31. Financial liabilities least likely include
a. Financial liability at amortized cost
b. Contingent consideration by acquirer
c. Financial guarantee contracts
d. Financial liability at fair value through OCI
32. A contingent asset qualifies for recognition when the
a. Both A and B
b. Occurrence is probable and the amount can be reasonable estimated
c. Neither A nor B
d. Occurrence is possible and the amount can be reasonably estimated
33. Consider the following bonds:
1) Redeemable bond
2) Convertible bond
3) Debenture Bond
4) Collateral trust bond
Which of the following is (are) considered compound financial instrument?
a. 2 only
b. 2 and 4
c. 1 and 2
d. 1 only
34. Treasury bonds in the statement of financial position of the issuer shall be
a. classified separately as other asset
b. deducted from the total shareholders’ equity
c. deducted from the outstanding bonds payable
d. presented separately as other liability
35. A liability which is due to be settled within 12 months after the reporting period is classified
as current even if the original term was for a period longer than 12 months, and
a. Both A and B
b. An agreement to refinance the liability on a long-term basis is completed after the
reporting period and before the financial statements are authorized for issue.
c. An agreement to refinance the liability on a long-term basis is completed before the
reporting period and before the financial statements are authorized for issue.
a. D. Neither A nor B
36. Change in decommissioning a liability shall be capitalized as cost of the related asset when
there is
a. a decrease in decommissioning liability and the related asset is measured using cost
model.
b. an increase in decommissioning liability and the related asset is measured using cost
model.
c. an increase in decommissioning liability and the related asset is measure using
revaluation model.
d. a decrease in decommissioning liability and the related asset is measured using
revaluation model.
37. A change in decommissioning liability shall be accounted as a gain charged to profit or loss
or as part of OCI when there is
a. in increase in decommissioning liability and the related asset is measured using cost
model.
b. a decrease in decommissioning liability and the related asset is measured using
revaluation model.
c. an increase in decommissioning liability and the related asset is measured using
revaluation model.
 d. a decrease in decommissioning liability and related asset is measured using cost model.
38. When there is no substantial modification terms in debt restructuring, the difference in the
present value of the old and the new liability
a. Shall not be recognized as gain or loss
b. Shall be recognized as gain or loss in OCI
c. Shall be recognized as gain or loss in profit or loss
d. Shall be recognized as adjustment to interest expense

QUIZ – SHE
1. Which of the following audit procedures is performed by the auditor in order to test the
assertion of rights and obligations?

a. Obtain schedules of shareholder's equity accounts and reconcile to the general

ledger balances
b. Confirm shares outstanding with registrar on share and transfer agent.
c. Review minutes of board of directors' and shareholders' meetings for share
options and dividend restrictions.
d. Review articles of incorporation and by laws.

2. For reissuance of treasury shares at less than cost, the excess shall be debited to ___ as the
first priority
a. Share premium - share capital (original issuance)
b. Retained earnings
c. Share premium - treasury
d. Other comprehensive income

3. Which of the following audit procedures is least likely performed by the auditor in order to test
the assertion of existence and occurrence?
a. Trace equity transactions such as dividends and share issuance to
accounting records
b. Confirm shares outstanding with registrar on share and transfer agent
c. Review authorization and terms of share issues
d. Inspect share certificate book and certificates of shares held in treasury
4. When the call price is more than the par value of callable preference shares, the excess shall
debited to (in order of priority) Group of answer choices
a. Share premium-previous issuance, share premium-original issuance then
retained earnings
b. Share premium-original issuance then retained earnings
c. Share premium-original issuance, share premium-previous issuance then
retained earnings
d. Share premium-previous issuance then retained earnings

5. Which of the following activities to manage stockholders' equity represents control weakness?
Group of answer choices
a. Entries for the share issuances and transfers should be made by a person
who has authority to sign and issue certificates.
b. Share certificates should be serially prenumbered by the printer and that
the authority for signing and issuing the certificates be designated by the
board of directors
c. As individual certificates are issued, corresponding records of the
certificates should be prepared containing the name and address of the
shareholders and the number of shares issued to each
d. Cancelled certificates should be mutilated and any necessary documentary
stamps should be attached to the cancelled certificates

6. In performing tests concerning the granting of stock options, an auditor should

a. Trace the authorization for the transaction to a vote of the board of
directors.
b. Determine that sufficient treasury stock is available to cover any new stock
issued.
c. Confirm the transaction with the Securities and Exchange Commission.
d. Verify the existence of option holders in the entity’s payroll records or
stock ledgers.

7. Wasting asset entity can declared dividends not only to the extent of retained earnings but
also to the extent of
a. Carrying amount of the wasting asset
b. Accumulated depreciation
c. Share premium
 d. Accumulated depletion

8. An audit program for the retained earnings account should include a step that requires
verification of the
a. Authorization for both cash and stock dividends
b. Fair value used to charge retained earnings to account for a two-for-one-
stock split.
c. Approval of the adjustment to the beginning balance as a result of a write-
down of an account receivable
d. Gain or loss resulting from disposition of treasury shares

9. If the auditee has a material amount of treasury stock on hand at year-end, the auditor should
a. Count the certificates only if the company had treasury stock transactions
during the year.
b. Count the certificates only if the company classifies treasury stock with
other assets.
c. Count the certificates at the same time other securities are counted.
d. No count the certificates if treasury stock is a deduction from shareholders’
equity.

10. When shareholders may elect to receive cash in lieu of stock dividends, the amount charged
as dividends is the
a. expected value using probability of cash dividends and stock dividends
b. optional cash dividend
c. par value of stocks
d. fair value of stocks

11. Which of the following will not give rise to other comprehensive income? Group of answer
choices
a. Change in revaluation surplus
b. Gain on foreign exchange translation
c. Loss on extinguishment of debt
d. None of the foregoing
12. The auditor would not expect the client to debit retained earnings for which of the
following transactions? Group of answer choices
a. A 4-for 1 stock split
b. Correction of error affecting prior year's earnings
c. A 1-for 10 stock dividend
d. "Loss" resulting from disposition of treasury shares

13. The portion of the contributed capital or the minimum amount of the paid-in capital which
must remain in the corporation for the protection of corporate creditors.
a. Authorized capital
b. Legal capital
c. Additional paid in capital
d. Subscribed capital

14. The following equity transactions are considered illegal under Philippine laws, except
a. Reissuance of treasury shares at less than cost.
b. Returning legal capital to shareholders during the lifetime of the
corporation
c. Paying dividends if the entity has a deficit
d. Issuance of shares at a discount

15. If the redemption price is greater than the carrying amount of redeemable preference
shares, then the journal entry will include a
a. gain from redemption of preference shares
b. retained earnings
c. Share premium
d. loss from redemption of preference shares

16. Which statement regarding the accounting of donated capital is false?

a. Donated capital is part of the share premium.
b. Donated capital account is closed to retained earnings at year-end.
c. No journal entry is need for receipt of an entity’s own shares as donation.
d. Donated capital is credited when contribution is received from
shareholders.
17. Which is false regarding the declaration of stock dividends?
a. Treasury shares may be declared as stock dividends
b. Stock dividends may be declared out of share premium-share capital
c. Stock dividends may be measured using par value or market value of
shares
d. Stock dividend declaration will decrease the total shareholders' equity
*stock dividends has no effect in SHE

18. Which of the following shall be classified as liability instead of equity?

1. Preference shares that can be redeemed at the option of the holder.
2. Preference shares that can be redeemed at the option of the issuer.
a. Both 1 and 2
b. Neither 1 nor 2
c. 2 only
d. 1 only

19. The procedure of restating assets, liabilities and share capital balances in conformity with
fair value for the purpose of eliminating deficit.
a. Quasi-reorganization
b. Quasi-reengineering
c. Quasi-revaluation
d. Quasi-restrructure

20. Review minutes of board of directors' and shareholders' meetings for share options and
dividend restrictions is an audit procedure performed to test the assertion of
a. Presentation and disclosure
b. Valuation and allocation
c. Rights and obligations
d. Existence and occurrence
21. Dividends shall be recognized as liabilities on the
a. Date of payment
b. Date of record
c. Date of distribution
d. Date of declaration

22. For reissuance of treasury shares at more than cost, the excess shall be credited to ___ as
the priority
a. Share premium - share capital (original issuance)
b. Gain – profit or loss
c. Retained earnings
d. Share premium – treasury

23. When collectibility is reasonably assured, the excess of the subscription price over the par
value common stock subscribed should be credited to
a. Share premium-common on the date of issuance
b. Retained earnings on the date of issuance
c. Share premium-common on the date of collection
d. Share premium-common on the date of subscription

24. The following will decrease retained earnings, except

a. Dividends declared
b. Net loss
c. Change in accounting policy that overstate earnings in previous periods
d. Correction of prior period errors that overstate cost of sales in the
previous periods

25. If the fair value of warrants attached to the preference shares can be reasonably measured,
then the amount to be credited to share warrants outstanding would be the (according to
priority)
a. prorated cash proceeds based on the fair value of preference shares and
the warrants
b. residual amount of total fair values after deducting the par value of the
preference shares
 c. residual amount of cash proceeds after deducting the fair value of the
preference shares
d. fair value of the warrants

26. Generally, an unsuccessful bidding of delinquent shares will include an entry to debit
a. Treasury shares
b. Share capital
c. Retained earnings
d. Subscriptions receivable

27. Under IFRIC 17, when an entity settles the dividend payable, it shall recognize the
difference, if any, between the carrying amount of the assets distributed and the carrying
amount of the dividend payable

a. In other comprehensive income

b. As a deferred charge
c. Directly to retained earnings
d. In profit or loss
28. The winning bidder in the auction for delinquent shares would be the bidder with the
a. lowest number of shares bid for the stated amount due
b. highest number of shares bid for the stated amount due
c. lowest amount bid for the stated number of delinquent shares
d. highest amount bid for the stated number of delinquent shares

29. Shares that provide for mandatory redemption by the issuer for a fixed or determinable
amount at a fixed or determinable future date, or gives the holder the right to require the
issuer to redeem the instrument at or after a particular date for a fixed or determinable
amount.
a. Redeemable shares
b. Treasury shares
c. Convertible shares
d. Callable shares
30. Collection of subscribed shares for the full amount or receivable will include an entry to
a. credit subscribed share capital
b. credit share premium
c. debit subscriptions revenue
d. credit share capital
31. The measurement of stock dividend would be (1) large stocks dividend and (2) small stock
dividends
a. 1) market value and 2) par value
b. 1) market value and 2) book value
c. 1) par value and 2) market value
d. 1) par value and 2) book value

32. when warrants from preference shares previously acquired were exercise to acquire
ordinary shares, the journal entry will include a
a. debit share capital preference
b. debit share capital-ordinary
c. debit to share warrant
d. credit to share warrants

33. when a shareholder of XYZ, inc. donated shares of ABC Corporation to XYZ, Inc. the journal
entry will include a
a. no journal entry on receipt of donated shares
b. credit to income account
c. credit to donated capital
d. credit to retained earnings

34. which of the following issuance of share warrants will not be measured and recorded
accordingly?
a. warrants from bonds payable
b. warrants issued from employee stock option plan
c. warrants from preemptive rights of shareholders
d. warrants attached to preference shares

35. in retiring treasury shares, when the par value is less than the cost of treasury shares, the
excess shall be (choose the priority)
a. debited to share premium- treasury
b. debited to share premium – share capital (original issuance)
c. credited to share premium – share premium (original issuance)
d. credited to share premium – treasury

36. when a corporate client maintains its own stock records, the auditor primarily will rely upon
a. confirmation with the company secretary of shares outstanding at year-end

b. inspection of the stock book at year-end and accounting for all certificate numbers.
c. confirmation of the number of shares outstanding at year-end with the appropriate state
official
d. review of the corporate minutes for data as to shares outstanding

31. The following our contra equity accounts, except

a. Capital liquidated
b. stock issue cost
c. share premium
d. subscriptions receivable

32. The board of directors authorized payment of dividend on December 31 Year 1, those who
are registered as shareholders on or before January 15 Year 2 are entitled to receive dividends,
the distribution of the dividends will be on February 14 Year 2. January 15 year 2 is the
a. date of record
b. date of declaration
c. date of entitlement
d. date of payment
33. Stock split of 2 shares for every 1 share issued will
a. decrease share capital
b. increase share premium
c. not affect the share capital
d. increase share capital

35. Receipt of property as donation from a stockholder will be credited to

a. income account, with restriction
b. donated capital, with or without restriction
c. liability account, with restriction
d. no journal entry for receipt of donation
36. When shares are issued for noncash consideration, the equity component shall be recorded
at
a. Par value of the shares issued
b. Fair value of the shares issued
c. Book value of the noncash consideration
d. Fair value of the noncash consideration
37. The following dividends will result in the decrease of the total shareholders' equity, except
a. Cash dividend
b. None of the foregoing
c. Stock dividend
d. Script dividend
39. Receipt of property as donation from a nonstockholder will be credited to
a. income account with or without restriction
b. no journal entry for receipt of donation
c. liability account if with restriction
d. donated capital
40. Under IFRIC 17, change in fair value of the noncash dividend shall be reflected in the
measurement of the dividend payable on the
(1) End of reporting period
(2) Settlement date
1) Yes and 2) Yes
 1) Yes and 2) No
1) No and 2) No
1) No and 2) Yes
41. In closely held entities, if stock dividends are declared, the amount charged to retained
earnings is at
a. Fair market value
b. No capitalization required
c. Par value
d. Book value