If the balance shown on an entity's bank statement is less than the correct cash balance and neither the

entity nor the bank made any errors, there must be?

- Deposits in transit

What is the preferable presentation of accounts receivable from officers, employees, or affiliated
companies on a statement of financial position

- As assets but separately from other receivables. As offsets to equity.

Long-term notes receivable which nominally bear no interest or an interest which is unreasonably low
shall be recognized initially at;

- Present value

If material, deposits in foreign bank which are subject to foreign exchange restriction shall be classified
______.

- Separately as current asset, with appropriate disclosure Separately as noncurrent asset with appropriate
disclosure Both

When is revenue generally recognized?

- When the sale occurs.

Which of the following is NOT true regarding accounting for transfers of receivables under PFRS?

- Transfers of receivables can be treated as a sale if the transferee is a QSPE.

Is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.

- Financial Instrument

After initial recognition, an entity shall measure a financial asset either at

- fair value

A petty cash fund of P50,000 was composed of the following on December 31, 200x:

- 48,000

Which of the following best  describes a non-interest bearing note receivable?

- Includes an unspecified principal amount and an unspecified interest amount

Cash control systems are the methods and procedures used to ensure

- the safeguarding of cash

The equity of the assignor in assigned accounts is equal to;

- Assigned accounts receivable

Which contains information in addition to that presented in the statement of financial position,
statement of profit or loss and other comprehensive income, separate income statement of profit or loss
(if presented), statement of changes in equity and statement of cash flows?

- Notes

AC Inc. made a P10,000 sale on account with the following terms: 1/15, n/30. If the company uses the
gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the
sale?

- Debit Accounts Receivable forP9,900.

A transfer of receivables, with recourse, in exchange for cash should

- Be recorded as a sale of receivables.

Which among the following is not considered as a cash equivalent for purposes of a cash flow
statement?

- A three-year treasury note maturing on May 30, 2003 purchased by the enterprise on January 2, 2003

The underlying theme of the conceptual framework is

- decision usefulness.

Which of the following is a note that is not paid in full at maturity?

- Dishonored note

Notes receivable discounted with recourse should be;

- Excluded from total receivables with disclosure of the contingent liability

The discount or premium is amortized to interest revenue over thee term of the note using the

- Straight line method

Which of the following methods of determining bad debt expense most closely matches expense to
revenue?

- Charging bad debts with percentage of sales for that period

An accounts receivable is considered if a loss event indicates a negative effect on the estimated cash
flows to be received from the customer.
- dishonored

An accountant's primary task is to

- to supply financial information to statement users so that they could make informed judgment and
better decision.

Those who have ready access to accounting information for their decision-making needs;

- Internal Users

Which of the following is required before a transfer of receivables can be recorded as a sale?

- The transferor has not kept effective control over the transferred receivables through a repurchase
agreement.

If a company usually sells its accounts receivable, it records any factoring commissions as a;

- expense

The commonly used method in accounting for sales discount is

- Net method

Which of the following is included in the normal journal entry to record the collection of accounts
receivable previously written off when using the allowance method?

- Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

What is due process in the context of standard setting at the IASB?

- All of the choices

The two major standard-setting organizations in the world are;

- Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).

The plan of organization and all the methods and measures adopted within an entity to safeguard its
assets, check the accuracy of its accounting data, promote operational efficiency, and encourage
adherence to managerial policies is called?
- Internal control

Which will not require an adjusting entry on the depositor's books?

- Check in payment of account payable amounting to P50,000 is recorded by the depositor as P5,000

Financial information exhibits the characteristics of consistency when

- Accounting procedures are adopted which give a consistent rate of net income

Unreleased checks (checks drawn before balance sheet date but held for later delivery to creditors)
should be

- treated as outstanding checks. treated as outstanding checks if they are ultimately encashed.

Bank overdrafts should be reported in the balance sheet as part of?

- current liabilities.

The entry to replenish the petty cash fund for P100 of various minor expenditures would include a____?

- debit to Petty Cash

Which of the following best describes the characteristics of a financial instrument?

- The contract shall give rise to a financial asset of one party and financial liability or equity instrument of
another party.

When preparing a bank reconciliation, an NSF check will:

- Decrease the balance per depositor's records.

Who is responsible, at all times, for the amount of the petty cash fund?

- The petty cash custodian

Cash equivalents would not include short-term investments in

- available-for-sale securities

Accrual accounting is used because

- it recognizes revenues when cash is received and expenses when cash is paid.

Which is not considered as a cash equivalent?

- A three-year treasury note maturing on May 30 of the current year purchased by the entity on January
15 of the current year

All are non-financial assets except:

- Cash

Revenues are

- All of the choices are correct regarding revenues.

A deficiency in cash control that may conceal cash shortage through bank-to-bank transactions.

- Kiting

The trial balance will not balance when a company

- Debits two statement of financial position accounts and no income statement accounts.

The bank statement shall provide information about which of the following

- Notes charged by the bank

The trial balance

- Is used to prepare the statement of financial position while the general ledger is used to prepare the
income statement.

Equity is not affected by all

- cash receipts.

The following statements pertain to the cash short or over account. Which statement is true?

- The entry to account for daily cash sales for which a small amount of cash shortage existed would
include a debit to cash short or over account

Bonds which give the bondholders the right to exchange their bonds for share capital of the issuing
entity at any time prior to maturity.

- Convertible bonds
Which of the following are observable inputs used for fair value measurement?

- Bank prime rate and default on loan

Stock dividends when received are recognized as income

- False

This is a formal unconditional promise made under seal to pay a specified sum of money at a
determinable future date, and to make periodic interest payments at a stated rate until the principal
amount is paid.

- Bond

On the part of the shareholders, special assessment are recorded as additional cost of the investment
and on the part of the entity as share premium.

- True

A transaction whereby the outstanding shares are called in and replaced by a larger number,
accompanied by a reduction in the par or stated value of each share.

- Share Split

Bonds payable issued with scheduled maturities at various dates are called

- Term bonds None of the choices

Investment in bonds shall be measured subsequently at amortized cost.

- True

Date on which the payment of dividends is approved by the BOD

- Date of declaration

Transaction costs directly attributable to the acquisition of financial asset held for trading or financial
asset at fair value through profit or loss shall be expensed immediately.

- True

Any contract that evidence a residual interest in the assets of an entity after deducting all of its liabilities.

- Equity instruments

Number of share increases, but the total value of the shares remain the same

- Share Split

Which of the following statements is true for measuring an asset at fair value?
- The fair value is based upon an entry price to purchase the asset The price should be adjusted for
transportation costs to transport the asset to its principal market

The entity shall reclassify financial assets when, and only when, an entity changes its business model for
managing its financial assets.

- True

A change in valuation technique used to measure fair value should be reported as;

- A change in accounting estimate reported on a prospective basis

This method provides for an equal amount of premium or discount amortization each accounting
period.

- Effective interest method

Bonds which may be called in or redeemed by the issuing entity prior to their date of maturity

- Callable bonds

This means that the shares can be sold and still the original shareholder has the right to receive the
dividends on the payment date.

- Date of declaration Cash dividends

Transaction costs attributable to the acquisition of bond investments held for trading or at fair value
through profit or loss are expenses immediately.

- True

The covenants and other terms of the agreement between the issuer of bonds and the lender are set
forth in the

- bond indenture

Under PAS 28, adjustments to share in profit or loss of an associate may differ if the transaction is
downstream or upstream. Which of the following statements is true?
I. Jack Co. owns 20% interest in Old Man, Inc. During the year Old Man sold magic beans to Jack. This is
an upstream transaction.
II. Goldilocks Co. owns 20% interest in Papa Bear, Inc. During the year Goldilocks purchased porridge
from Papa Bear. This is a downstream transaction.

- True, false

Which of the following statement is the correct statement?

- Impairment losses on investments in associates are not accounted for under PAS 28.

In which of the following does X have significant influence?

- X owns 15% of the voting shares of ABC Co., all other shares are held in very small blocks and therefore
X has representatives in the board of directors.

When the effective-interest method is used to amortize bond premium or discount, the periodic
amortization will

- increase if the bonds were issued at either a discount or a premium

Under the effective-interest method of bond discount or premium amortization, the periodic interest
expense is equal to

- the market rate of interest multiplied by the face value of the bonds

The determination of the value or settlement amount of a derivative involves a calculation which uses:
I. An underlying.
II. A notional amount.

- Both I and II.

A change from the cost method to the equity method of accounting for an investment in common stock
resulting from an increase in the number of shares held by the investor requires;

- retroactive restatement as if the investor always had used the equity method

A corporation issues for cash P8,000,000 of 8%, 30-year bonds, interest payable semiannually. The
amount received for the bonds will be

- present value of 60 semiannual interest payments of P320,000, plus present value of P8,000,000 to be
repaid in 30 years

If the excess of the acquisition cost of an investment accounted for under equity method over the book
value of net assets acquired is attributable to an undervalued depreciable asset and an unidentifiable
asset, which of the following statements is correct

- The carrying amount of the investment is increased by the proportionate share in the profits earned by
the investee and decreased by the depreciation of the interest in the undervaluation and unaffected by
the separate impairment of the unidentifiable asset.

An investor uses the cost method to account for investment. Dividends received in excess of the
investor's share of investee's earnings subsequent to the date of investment
- Increase dividend revenue

Avoidable interest is the amount of interest cost that a company could theoretically avoid if it had not
made expenditures for the asset.

- True

A machine with a five-year estimated useful life and an estimated 10% salvage value was acquired on
January 1, 2015. The depreciation expense for 2017 using the double-declining balance method would
be original cost multiplied by

- 40% x 40%.

Using the information in no. 39, what is the gain from the birth of animal on July 1?

- No gain or loss

On April 1, 2015, Verlin Co. purchased new machinery for P240,000. The machinery has an estimated
useful life of five years, and depreciation is computed by the sum-of-the-years'-digits method. The
accumulated depreciation on this machinery at March 31, 2017, should be

- P160,000.

A plant site donated by a township to a manufacturer that plans to open a new factory should be
recorded on the manufacturer's books at

- its market value.

Agricultural activity includes all of the following, except;

- Ocean fishing

Which of the following expenditures subsequent to acquisition cannot be added to the carrying amount
of the asset?

- Cost of modification or an item of property that will extend its useful life or increase its capacity. Cost
of upgrading machine parts to achieve substantial improvement in quality of output.

Plant assets may properly include

- none of these.

According to PAS 41, all of the following would be classified as biological asset, except,
- Dairy cattle

On September 10, 2016, Jenks Co. incurred the following costs for one of its printing presses:
Purchase of attachment 55,000
Installation of attachment 5,000
Replacement parts for renovation of press 18,000
Labor and overhead in connection with renovation of press 7,000
Neither the attachment nor the renovation increased the estimated useful life of the press. However, the
renovation resulted in significantly increased productivity. What amount of the costs should be
capitalized?

- P85,000.

Storm Corporation purchased a new machine on October 31, 2016. A P1,200 down payment was made
and three monthly installments of P3,600 each are to be made beginning on November 30, 2016. The
cash price would have been P11,600. Storm paid no installation charges under the monthly payment
plan but a P200 installation charge would have been incurred with a cash purchase. The amount to be
capitalized as the cost of the machine on October 31, 2016 would be

- P11,800.

When funds are borrowed to pay for construction of assets that qualify for capitalization of interest, the
excess funds not needed to pay for construction may be temporarily invested in interest-bearing
securities. Interest earned on these temporary investments should be

- recognized as revenue of the period.

_____________ comprises growth, degeneration, production, and procreation that cause qualitative or
quantitative changes in a biological asset.

- Biological transformation

Use the information above in no. 29, how much shall be taken to profit or loss as a gain arising from
change in fair value due to price change?

- 30,000

Assets classified as Property, Plant, and Equipment must be both long-term in nature and possess
physical substance.

- True

Using the information in no. 39, what is the adjusted carrying amount of biological assets on December
31?

- 1,440,000
Gutierrez Company is constructing a building. Construction began in 2016 and the building was
completed 12/31/10. Gutierrez made payments to the construction company of P1,500,000 on 7/1,
P3,300,000 on 9/1, and P3,000,000 on 12/31. Average accumulated expenditures were

- P4,800,000.

To be consistent with the historical cost principle, overhead costs incurred by an enterprise constructing
its own building should be

- allocated on a pro rata basis between the asset and normal operations.

Bearer animals are classified as;

- Biological asset

On January 1, 2010, Forbes Company purchased equipment at a cost of P50,000. The equipment was
estimated to have a salvage value of P5,000 and it is being depreciated over eight years under the sum-
of-the-years'-digits method. What should be the charge for depreciation of this equipment for the year
ended December 31, 2017?

- P1,250

The major problem of accounting for intangibles is determining

- useful life

If an entity has a calendar year-end and a depreciable property is revalued at the middle of the current
year, how is the depreciation expense for the year determined?

- Depreciation for the first half of the year is based on cost and for the second half on revalued amount.

What is the treatment of the accumulated depreciation on the date of revaluation? I. Eliminated against
the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset.
II. Restated proportionately with the change in the gross carrying amount of the asset so that the
carrying amount after revaluation equals the revalued amount.

- Both I or II

After initial recognition, an intangible asset shall be carried using the

- Revaluation model only

The revaluation model means property, plant and equipment

- whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at
the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated
impairment losses.

All of the following are true regarding the revaluation model allowed under iGAAP except;

- When an asset is revalued, any increase in carrying amount is reported as miscellaneous revenue.

Intangible development costs and restoration costs are part of the depletion base.

- True

Depreciation is based on the decline in the fair market value of the asset.

- False

All of the following are true regarding the revaluation model allowed under GAAP except;

- When an asset is revalued, any increase in carrying amount is reported as miscellaneous revenue.

When at the date of initial classification and subsequent measurement of assets held for sale, the
amount of fair value less costs to sell is less than the carrying amount, an impairment loss shall be
recognized in

- Balance Sheet

Cash equivalents are short-term, highly liquid investments that are

- readily convertible to known amounts of cash

It refers to the amount of cash expected to be collected or the estimated recoverable amount?

- Net Realizable value

Information in a company's financial statements is considered to be reliable when it:

I is relevant to the decision making needs of users.
II represents faithfully the financial position, financial performance and cash flows of the entity.
III is neutral.
IV is prudent.
V reflects the economic substance of transactions, other events and conditions.

- II, III, IV and V only

When pledging accounts receivable;

- the pledge arrangements become the new valuation methodology entered in the accounting records

In the gross method, sales discounts are reported as a deduction from sales.

- True

After being held for 40 days, a 120-day 12% interest-bearing note receivable was discounted at a bank
at 15%. The proceeds received from the bank equal

- Maturity value less the discount at 15%

Disclosures for receivable include the following except;

- The amount of interest income accrued on impaired receivables

The percentage-of-receivables approach of estimating uncollectible accounts emphasizes matching over

valuation of accounts receivable.

- False

What happens when a petty cash is in use?

- Petty cash is debited when the fund is replenished.

The following statements pertain to accounting for petty cash fund. Which statement is false?

- With the establishment of an imprest petty cash fund, one person is given the authority and
responsibility for issuing checks to cover minor disbursements

When a customer purchases merchandise inventory from a business organization, she may be given a
discount which is designed to induce prompt payment. Such a discount is called a

- cash discount.

Sun Inc. factors P2,000,000 of its accounts receivables without guarantee (recourse) for a finance charge
of 5%. The finance company retains an amount equal to 10% of the accounts receivable for possible
adjustments. What would be recorded as a gain (loss) on the transfer of receivables?

- Gain of P100,000.

Which of the following statements is not normally an objective of financial reporting?

- To provide information about an entity's liquidation value.

Under generally accepted accounting principles

- Assets and liabilities are measured on the basis of their liquidation value.

It pertains to the total amount due on the note at maturity date.

- Maturity value

Which of the following best describes a trial balance?

- All of the choices are correct.

According to the IASB Conceptual Framework, the elements-assets, liabilities, and equity-describe
amounts of resources and claims to resources at/during a

- Moment in Time: Yes Period of Time: No

Which of the following controls most likely would assure that all billed sales are correctly posted to the
accounts receivable ledger?

- Daily sales summaries are compared to daily postings to the accounts receivable ledger.

It is defined as a contract that requires the issuer to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payment when due in accordance with the
original or modified terms of a debt instrument

- Financial guarantee contract

The one item that should be excluded from cash and cash equivalent on the December 31, 2003 balance
sheet of Zebra Company is

- A P10,000 minimum balance in the firm's current account which is maintained to avoid service charges

Which of the following represents a form of communication through financial reporting but not through
financial statements?

- President's letter.

Which of the following is an ethical concern of accountants?

- Earnings manipulation.

Which the basic purpose of the Conceptual Framework for Financial Reporting?

- To assist preparers of financial statements in applying accounting standards and in dealing with issues
that have yet to faint the subject of accounting standards
Promissory notes may be used except:

- When a notes receivable is dishonored.

Vivo, Inc had net sales in 2017 of P700,000. At December 31, 2016, before adjusting entries, the balances
in selected accounts were: accounts receivable P125,000 debit, and allowance for doubtful accounts
P1,200 credit. Vivo estimates that 2% of its net sales will prove to be uncollectable. What is the cash
realizable value of the receivables reported on the statement of financial position at December 31, 2017?

- P109,800

Morgan Manufacturing Company has the following account balances at year end:
Office supplies 4,000
Raw materials 27,000
Work-in-process 59,000
Finished goods 73,000
Prepaid insurance 6,000
What amount should Morgan report as inventories in its statement of financial position?

- 158,000

Bliss Co. uses the equity method to account for its investment in Nirvana, Inc. common stock. How
should Bliss record a 2% stock dividend received from Nirvana?

- As a memorandum entry reducing the unit cost of all Nirvana stock owned.

An inventory determined by observation and evidenced by a listing of the actual count, weight, or
measure is called;

- Continuous inventory

Assume that employees confessed to a $500,000 inventory theft but are not able to make restitution.
How should this material fraud be shown in the company's financial statements?

- Classified as a loss and shown as a separate line item in the income statement.

Which of the following computations may properly result to the correct amount of share in associates
profit or loss for the period?

- Share in profit of associate minus amortization of share in the undervaluation of associates asset minus
share in dividends declared by associate.

Under PFRS 9, all investments in equity must be measured at fair value.

- True

The times interest earned ratio is computed by dividing

- income before taxes by interest expense

When bond investment is held for "trading" or measured at fair value through profit or loss, it is
necessary to amortize any premium or discount.

- False

An entity purchased bonds at a discount on the open market as an investment and intends to hold these
bonds to maturity. The entity should account for these bonds at

- Amortized cost

Which of the following is a period cost?

- Freight in.

On June 1, P400,000 of bonds were purchased as a long-term investment at 97 and P500 was paid as the
brokerage commission. If the bonds bear interest at 12%, which is paid semiannually on January 1 and
July 1, what is the total cost to be debited to the investment account?

- 388,500

The fair value option allows an entity to;

- All of these are true of the fair value option.

S1. In applying the cost vs. net realizable value test, it is relevant to consider the form in which the
inventories will be sold which means that materials and other supplies held for use in the production of
inventories are not written down below cost if the finished products in which they will be incorporated
are expected to be sold at or above cost. S2: A broad-brush approach that looks at inventories in large
categories would not meet the requirements of PAS 2, because losses in value of individual items of
inventory would be masked by unrealized gains on others.

- Both statement are true

Which of the following statements is correct?

- According to PAS 28 Investments in Associates, a partnership cannot be an associate

Which of the following disclosures should be made when the fair value model has been adopted for
investment property?

- Net gain or loss from fair value adjustments

The proceeds from bonds issued with nondetachable share warrants shall he accounted for
- Partly as bonds payable and partly as shareholders equity

If a sinking fund is used to purchase securities, the sinking fund

- Increases when revenue is earned on the securities

Adjustments to the carrying amount of the investment in associate may be necessary for changes in the
investors proportionate interest in the investee arising from changes in the investees equity that have
not been recognized in the investees profit or loss. Which of the following may not necessitate an
adjustment to the investment in associate account?

- Changes in valuation of the associates FVOCI securities.

The following information was derived from the 2016 accounting records of Perez Co:
Perez's Central Warehouse Perez's Goods Held by Consignees
Beginning inventory 130,000 14,000
Purchases 575,000 70,000
Freight-in 10,000
Transportation to consignees 5,000
Freight-out 30,000 8,000
Ending inventory 145,000 20,000
Perez's 2016 cost of sales was?

- 600,000

Which of the following results in an increase in the investment account when applying the equity
method?

- Unrealized gain on intercompany inventory transfers for the prior year.

Pacific Corp. uses a perpetual inventory system. At year-end, Pacific inventory account had a balance of
P3, 680, 000, as against a completed physical inventory indicating foods on hand to cost only P3, 610,
000. Pacific should

- Reduce its cost of goods sold by P70,000.

Which of the following is not a common disclosure for inventories?

- Inventory location.

This method of estimating the cost of inventories requires the maintenance of records of both cost and
selling price wherein cost to retail is calculated ad applied to ending inventory.

- Purchase commitments

Groh Co. recorded the following data pertaining to raw material X during January 2016:
Date Received Cost Issued On hand
1/1/16 Inventory 8.00 3,200
1/11/16 Issue 16,000 1,600
1/22/16 Purchase 4,000 9.4 5,600
The moving-average unit cost of X inventory at January 31, 2016 is

- 8.70

A corporation entered into a purchase commitment to buy inventory. At the end of the accounting
period, the current market value of the inventory was less than the fixed purchase price, by a material
amount. Which of the following accounting treatments is most appropriate?

- Describe the nature of the contract in a note to the financial statements, recognize a loss in the income
statement, and recognize a reduction in inventory equal to the amount of the loss by use of a valuation
account.

Which of the following items should be included in a company's inventory at the statement of financial
position date?

- Goods in transit which were purchased f.o.b. destination.

Bell Inc. took a physical inventory at the end of the year and determined that 650,000 of goods were on
hand. In addition, Bell, Inc. determined that 50,000 of goods that were in transit that were shipped f.o.b.
shipping were actually received two days after the inventory count and that the company had 75,000 of
goods out on consignment. What amount should Bell report as inventory at the end of the year?

- 775,000.

Cash surrender value is classified as

- Current asset

For a bond issue which sells for less than its par value the market rate of interest is

- Higher than rate stated on the bond

In accordance with PFRS 9, bond investments are recognized initially at fair value plus transaction cost
that are directly attributable to the acquisition.

- True

Investments that are acquired in accordance with a financial policy looking to the accumulation of funds
for such purposes as plant expansion.

- Long-term investments.

This costing method is appropriate for inventories that are segregated for a specific project and
inventories that are not ordinarily interchangeable.
- Specific identification

The inventory of a service provider may simply be described as

- Work in progress

In a perpetual inventory system, two entries are normally made to record each sales transaction. The
purpose is best described by which of the following statements?

- One entry recognizes the sales revenue and the other recognizes the cost of goods sold

What is the estimated cost of ending inventory in item 43?

- 48,000

On December 31, 2010, Patel Co. purchased equity securities as trading securities. Pertinent data are as
follows:
Security Cost Fair Value At 12/31/11
A P132,000 P117,000
B 168,000 186,000
C 288,000 258,000
On December 31, 2011, Patel transferred its investment in security C from trading to available-for-sale
because Patel intends to retain security C as a long-term investment. What total amount of gain or loss
on its securities should be included in Patel's income statement for the year ended December 31, 2011? {

- P3,000 gain.

Which of the following would not be reported as inventory?

- Machinery acquired by a manufacturing company for use in the production process

Which of the following would not be included in the cost of work in process inventory?

- Depreciation on office equipment in the sales manager's office

Which of the following is not true of the perpetual inventory method?

- Purchase returns are recorded by debiting Accounts Payable and crediting Purchase Returns and
Allowances.

Which of the following observations is not consistent with the cost method of accounting?

- Investee dividends from earnings since acquisition by investor are treated as reduction of investment

____________ is the detachment of produce from a biological asset or the cessation of a biological asset's
life processes.
- Harvest

Which of the following intangible assets should be shown as a separate item on the statement of
financial position?

- Goodwill

When depreciation is computed for partial periods under a decreasing charge depreciation method, it is
necessary to

- determine depreciation expense for the full year and then prorate the expense between the two
periods involved.

Property, plant and equipment are defined as

- Tangible assets held for use in the production or supply of goods or services and expected to be used
during more than one reporting period.

Using the information in no. 34, what is the carrying amount of the biological asset as at year end?

- 7,600,000

When an asset's carrying amount is decreased as a result of a revaluation, the decrease shall be

- Recognized in profit or loss

Wilson Corporation is performing the test of impairment of its Technology reporting unit at 9/30/Y4. In
the first step of the process, Wilson has valued the unit using a multiple of earnings approach at
P2,000,000. The carrying value of the net assets of the Technology unit is P2,100,000. What should
Wilson do with this information?

- Perform step two of the test of impairment

When the revaluation model is used for reporting plant, property, and equipment, the gain or loss
should be included in

- A revaluation surplus account in other comprehensive income.

IFRS allows plant, property, and equipment to be valued using the cost model or the revaluation model.
Which statement is true about the revaluation model for valuing plant, property, and equipment?

- Revaluation of assets must be made on the last day of the fiscal year.

A gain or loss arising on the initial recognition of a biological asset and from a change in the fair value
less to cost to sell of a biological asset shall be included in

- Profit or loss for the period

Under the reporting requirements for impaired assets, impairment losses for assets to be held and used
shall be reported

- As a component of income from continuing operations.

Are the following statements about classification according to PAS 41 Agriculture true or false?

I. Sugar should be classified as agricultural produce

II. Wool should be classified as agricultural produce.

- Both True

Which of the following methods shall be used after initial recognition of property, plant and equipment?

I. An entity shall choose either the cost model or the revaluation model as if s accounting policy and
shall apply that policy to an entire class of property, plant and equipment.
II. An entity shall choose either the cost model or the revaluation model as its accounting policy and
shall apply that policy selectively to different classes of property, plant and equipment.

- Both I and II

Samson Company applies revaluation accounting to plant assets with a carrying value of P800,000, a
useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the
end of year 1, independent appraisers determine that the asset has a fair value of P750,000. The journal
entry to adjust the plant assets to fair value and record revaluation surplus in year one will include a;

- debit to Accumulated Depreciation for P50,000.

A principal objection to the straight-line method of depreciation is that it

- provides for the declining productivity of an aging asset.

An improvement made to a machine increased its fair market value and its production capacity by 25%
without extending the machine's useful life. The cost of the improvement should be

- capitalized in the machine account.

Which of the following is not dealt with by PAS 41?

- The processing of agricultural produce after harvesting

Using the information in no. 34, what amount of gain on agricultural produce should be recognized in
the current year?

- 850,000

The financial statements for year one will include the following information
- Plant assets P750,000.

Solar Products purchased a computer for P13,000 on July 1, 2016. The company intends to depreciate it
over 4 years using the double-declining balance method. Salvage value is P1,000. Depreciation for 2017
is

- P3,250

Property, plant and equipment are conventionally presented in the balance sheet at

- Historical cost minus depreciated portion thereof.

XYZ Industries, a company who uses GAAP reporting standards, is installing a new plant. The company
has incurred the following costs

1. Operating losses before commercial production P 200,000

2. Cost of the plant 1,500,000
3. Initial delivery and handling charges 300,000
4. Cost of site preparation 175,000
Which of these costs can XYZ capitalize in accordance with GAAP?

- 2, 3, & 4

Which of the following accurately describes the appropriate accounting for goodwill acquired through a
business combination?

- It should be recorded at cost and tested for impairment on an annual basis and more often if certain
events occur.

General Products Company bought Special Products Division in 2010 and appropriately recorded
P500,000 of goodwill related to the purchase. On December 31, 2011, the fair value of Special Products
Division is P4,000,000 and it is carried on General Product's books for a total of P3,400,000, including the
goodwill. An analysis of Special Products Division's assets indicates that goodwill of P400,000 exists on
December 31, 2011. What goodwill impairment should be recognized by General Products in 2011?

- P0

Agricultural produce held for sale in the ordinary course of business shall be dealt with by the entity in
accordance with

- PAS 41, Agriculture

Use of the sum-of-the-years'-digits method

- all of these.

Which of the following statements regarding revaluation of asset is incorrect?

- When an item of property and equipment is revalued, the entire class of property in which the asset
belongs should be revalued. When an item of property, plant and equipment is revalued, accumulated
depreciation s either restated proportionately with the change in the carrying amount of the asset or
eliminated against the gross carrying amount of the asset and the net amount restated to the revalued
amount.

An entity shall recognize any subsequent increase in fair value less cost to sell of a non-current asset or
disposal group classified as held for sale as

- Deferred gain as component of liability

The residual value of an intangible asset with a finite life shall be assumed zero, unless

I. There is a commitment by a third party to purchase the asset at the end of its useful life.
II. There is an active market for the asset and the residual value can be determined by reference to that
market and it is probable that such market will exist at the end of the asset's useful life.

- Both I and II

Which of the following principles best describes the conceptual rationale for the methods of matching
depreciation expense with revenues?

- Systematic and rational allocation

Revaluation surplus account is reported as

- a separate component of income from continuing operations

Which of the following information shall be disclosed in relation to biological assets and agricultural
produce?

- The aggregate gain or loss arising on the initial recognition of biological assets and agricultural
produce and from the change in fair value less cost to sell of biological assets.

Grayson Co. incurred significant costs in defending its patent rights. Which of the following is the
appropriate treatment of the related litigation costs?

- Litigation costs would be capitalized if the patent right is successfully defended.

Pat Company incurred costs to modify its building and rearrange its production line. As a result, an
overall reduction in production costs is expected. However, the modifications did not increase the
building's market value and the rearrangement did not extend the production line's life. What is the
treatment of the costs incurred?

- The rearrangement costs are capitalized and the modification costs are expensed

In accordance with IFRS 5, Noncurrent assets held for sale and discontinued operations, an asset should
be classified as held for sale when which TWO of the following criteria are satisfied?
I. The sale is highly probable.
II. The asset has a readily observable market value.
III. The sale is expected to be completed within 3 months of the end of the reporting period.
IV. The asset is available for immediate sale in its present condition.

- I and II.

Required disclosure for property, plant, and equipment in the financial statements is based upon

- age and depreciation method

Which of these is not a major characteristic of a plant asset?

- All of these are major characteristics of a plant asset.

If market value of an impaired asset recovers after an impairment has been recognized, the impairment
may be reversed in a subsequent period.

- True

Which is least likely to be classified as a sale of a component?

- sale by a communications company of its radio stations, but none of its television stations

Advantages of using historical cost as the basis of valuation of property, plant, and equipment include all
of the following except;

- it is a very reliable valuation

Which statement is incorrect concerning property, plant and equipment?

- The amount at which an asset is recognized in the balance sheet after deducting any accumulated
depreciation and accumulated impairment losses thereon is known as the depreciable amount.

Under U.S. GAAP, impairment losses

- none of the choices.

Economic factors that shorten the service life of an asset include

- all of these.

All intangibles are subject to periodic consideration of impairment with corresponding potential write-
downs.

- True
Using the information in no. 39, what is the gain from biological asset attributable to physical change?

- 167,000

If the fair value of the biological asset previously measured at cost less accumulated depreciation,
becomes reliably measurable

- The entity must switch to the fair value less point of sale cost measurement basis, the amount of
adjustment taken to profit or loss

Two independent companies, Hager Co. and Shaw Co., are in the home building business. Each owns a
tract of land held for development, but each would prefer to build on the other's land. They agree to
exchange their land. An appraiser was hired, and from her report and the companies' records, the
following information was obtained:
Hager's Land Shaw's Land
Cost and book value P192,000 P120,000
Fair value based upon appraisal 240,000 210,000
The exchange was made, and based on the difference in appraised fair values, Shaw paid P30,000 to
Hager. The exchange lacked commercial substance.
The new land should be recorded on Hager's books at

- P168,000.

The following statements pertain to recognition and measurement of an impairment loss. Which
statement is incorrect?

I. An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable
amount and should be recognized as an ordinary loss.
II. After the recognition of an impairment loss, depreciation of the asset for the future periods should be
equal to the revised carrying amount less its residual value allocated on a systematic basis over its
original life.

- Both I and II

Which of the following would be classified as agricultural produce?

- Apple

The carrying amount of property, plant and equipment subsequent to acquisition is the

- Amount at which an asset is recognized in the balance sheet less accumulated depreciation and
accumulated impairment losses thereon

During 2016, Kimmel Co. incurred average accumulated expenditures of P400,000 during construction of
assets that qualified for capitalization of interest. The only debt outstanding during 2016 was a P500,000,
10%, 5-year note payable dated January 1, 2014. What is the amount of interest that should be
capitalized by Kimmel during 2016?
- P40,000
PFRS and U.S. GAAP are similar in the accounting for impairments of assets held for disposal.

- True

Which is not valid with respect to revaluation of property?

- A class of assets may be revalued on a rolling basis provided the revaluation is completed within a
short period of time and kept up to date.

The factors that are considered in determining the useful life of an intangible asset include all of the
following, except;

- Expected action of competitors

Which of the following assets do not qualify for capitalization of interest costs incurred during
construction of the assets?

- ssets not currently undergoing the activities necessary to prepare them for their intended use.

Which of the following is not an intangible asset?

- Research and development costs

Under U.S. GAAP, impairment loss is measured as the excess of the carrying amount over the assets
discounted cash flow.

- False

Which of the following is not a major characteristic of a plant asset?

- Acquired for resale

Accounting for Agriculture is covered by International Accounting Standards _______?

- 41

Twilight Corporation acquired End-of-the-World Products on January 1, 2010 for P4,000,000, and
recorded goodwill of P750,000 as a result of that purchase. At December 31, 2010, the End-of-the-World
Products Division had a fair value of P3,400,000. The net identifiable assets of the Division (excluding
goodwill) had a fair value of P2,900,000 at that time. What amount of loss on impairment of goodwill
should Twilight record in 2010?

- P250,000
In relation to the financial statements, PAS 16 Property, Plant and Equipment, requires that the following
disclosures be made for each class of asset: I. The carrying amount at the beginning and end of the
reporting period. II. Accumulated depreciation. III. Total additions and disposals. IV. The total of
impairment losses. V. Fair value at reporting date.

- I, II, III and IV only

The following information is available for Barkley Company's patents:

Cost P1,720,000
Carrying amount 860,000
Expected future net cash flows 800,000
Fair value 650,000
Barkley would record a loss on impairment of

- P210,000.

As defined by PAS 38, how are intangible assets unlike other assets?

- They must have arisen from past events.

When a closely held corporation issues preferred stock for land, the land should be recorded at the

- fair market value of the land.

Which of the following is not a characteristic of all long-term nonmonetary assets?

- Possess physical substance.

Colt Football Co. had a player contract with Watts that is recorded in its books at P3,600,000 on July 1,
2016. Day Football Co. had a player contract with Kurtz that is recorded in its books at P4,500,000 on
July 1, 2016. On this date, Colt traded Watts to Day for Kurtz and paid a cash difference of P450,000. The
fair value of the Kurtz contract was P5,400,000 on the exchange date. The exchange had no commercial
substance. After the exchange, the Kurtz contract should be recorded in Colt's books at;

- P4,950,000

Which of the following is correct?

- The fair value of internally generated intangible assets may be estimated but should not be recorded
on the books or displayed on the financial statements of the entity.

The same recoverability test that is used for impairments of property, plant, and equipment is used for
impairments of indefinite-life intangibles.

- False

Which of the following statements regarding intangible assets is incorrect?

- Intangible assets should be amortized over a period not exceed 40 years.

During self-construction of an asset by Samuelson Company, the following were among the costs
incurred:

Fixed overhead for the year P1,000,000

Portion of P1,000,000 fixed overhead that would be allocated to asset if it were normal production
40,000
Variable overhead attributable to self-construction 35,000
What amount of overhead should be included in the cost of the self-constructed asset?

- P75,000

Fences and parking lots are reported on the balance sheet as

- land improvements.

An expenditure made in connection with a machine being used by an enterprise should be

- capitalized if it increases the quantity of units produced by the machine.

MCI Company, a company who uses IFRS reporting standards, has a non-current asset that has been
classified as held-for-sale. When the asset no longer meets this definition, Danson should

- Measure the asset at the lower of its carrying value before it was classified as held-for-sale and its
recoverable amount at the date when the company decided not to sell it.

Samson Company applies revaluation accounting to plant assets with a carrying value of P800,000, a
useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the
end of year 1, independent appraisers determine that the asset has a fair value of P750,000. The financial
statements for year one will include the following information:

- Accumulated depreciation P200,000.

Under IFRS, when an entity chooses the revaluation model as its accounting policy for measuring
property, plant, and equipment, which of the following statements is correct?

- When an asset is revalued, the entire class of property, plant, and equipment to which that asset
belongs must be revalued.

The units-of-production approach to depreciation is appropriate when depreciation is a function of time

instead of activity.

- False

On September 10, 2016, JKL Co. incurred the following costs for one of its printing presses:
Purchase of attachment P55,000
Installation of attachment 5,000
Replacement parts for renovation of press 18,000
Labor and overhead in connection with renovation of press 7,000
Neither the attachment nor the renovation increased the estimated useful life of the press. However, the
renovation resulted in significantly increased productivity. What amount of the costs should be
capitalized?

- P85,000.

Amortization of an intangible asset with a finite useful life shall commence when

- It is available for the intended use.

The term "betterment" refers to;

- An expenditure made to improve existing facilities by increasing "capacity".

On December 1, Miser Corporation exchanged 2,000 shares of its P25 par value common stock held in
treasury for a parcel of land to be held for a future plant site. The treasury shares were acquired by Miser
at a cost of P40 per share, and on the exchange date the common shares of Miser had a fair market
value of P50 per share. Miser received P6,000 for selling scrap when an existing building on the property
was removed from the site. Based on these facts, the land should be capitalized at

- P94,000.

_____________ is comprised of growth, degeneration, production, and procreation that cause qualitative or
quantitative changes in a biological asset

- Biological transformation

Which of the following expenditures qualifies for asset capitalization?

- Cost of materials used in prototype testing.

The major difference between the service life of an asset and its physical life is that;

- service life refers to the length of time an asset is of use to its original owner, while physical life refers
to how long the asset will be used by all owners.

When capitalizing interest during construction of an asset, an imputed interest cost on stock financing
must be included.

- False

An item of property, plant and equipment should be recognized as an asset when

I. It is probable that future economic benefits associated with the asset will flow to the enterprise.
II. The cost of the asset to the enterprise can be measured reliably. (E)
- Both I and II

Forester Co. on adoption of PAS 41 has reclassified certain assets as biological assets. The total value of
the forest assets is P6.0 million which comprises of freestanding trees (P5.1 million), land under trees
(P0.6 million), and roads in forests (P0.3 million). In Forester Co.'s statement of financial position, how
much of the forest assets would be classified as biological assets?

- 5,100,000

An unconditional government grant related to a biological asset that has been measured at fair value
less costs to sell should be recognized as

- Income when the grant becomes receivable

On January 2, 2016, Indian River Groves began construction of a new citrus processing plant. The
automated plant was finished and ready for use on September 30, 2017. Expenditures for the
construction were as follows:
January 2, 2016 P200,000
September 1, 2016 600,000
December 31, 2016 600,000
March 31, 2017 600,000
September 30, 2017 400,000
Indian River Groves borrowed P1,100,000 on a construction loan at 12% interest on January 2, 2016. This
loan was outstanding during the construction period. The company also had P4,000,000 in 9% bonds
outstanding in 2016 and 2017.
What were the weighted-average accumulated expenditures for 2017 by the end of the construction
period?

- P1,386,000

In accordance with ASC Topic 360, long-lived assets are required to be reviewed for impairment

- When circumstances indicate that the carrying amount of an asset might not be recoverable.

An entity produces milk for local ice cream producers. The entity began operations at the beginning of
the current year by purchasing milking cows for P5, 000, 000. The entity provided the following
information at year-end relating to the milking cows:
Carrying amount, beginning of the year 5,000,000
Change in fair value due to growth and price change 2,000,000
Decrease in fair value due to harvest 250,000
Newborn calf at year-end 400,000
Milk harvested during the year but not sold 850,000
What is the amount of gain on biological asset should be reported in the current year?

- 3,250,000

Which of the following is true about depreciation accounting?

- All of these.

Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by
Glen Inc. has a book value of P12,000 and a fair market value of P15,000. The asset given up by
Armstrong Co. has a book value of P20,000 and a fair market value of P19,000. Boot of P4,000 is received
by Armstrong Co.
What amount should Glen Inc. record for the asset received?

- P19,000