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c. Median
d. Best estimate
7. Where there is a continuous range of possible outcomes, and each point in that range
is as likely as any other, the range to be used is the
a. Minimum
c. Midpoint
b. Maximum
d. Summation of the minimum and maximum
8.
At issuance date, the present value of a promissory note will be equal to its face
amount if the note
a. Bears a stated rate of interest which is realistic.
b. Bears a stated rate which is less than the prevailing market rate for similar notes.
c. Is noninterest bearing and the implicit interest rate is less than the prevailing market
rate for similar notes.
d. Is noninterest bearing and the implicit interest rate is equal to the prevailing market
rate for similar notes.
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a.
b.
c.
d.
28. Which statement is correct concerning a finance lease on the part of the lessor?
I. Initial direct costs should be recognized as expense in the income statement at the
inception of a sales type lease.
II. Initial direct costs incurred by the lessor in a direct financing lease are included in
the net investment in the lease and will have the effect of reducing the interest
income from the finance lease.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
29. If the sale and leaseback transaction results in a finance lease, any gain from the sale
and leaseback should
a. Not be recognized
b. Be recognized as income immediately.
c. Be deferred and amortized over the lease term.
d. Be deferred and amortized over the useful life of the asset.
30. ABC Company sold its headquarters building at a gain and simultaneously leased back
the building. The lease was reported as a finance lease. At the time of sale, the gain
should be reported as
a. Operating income
b. An extraordinary item
c. A separate component of stockholders equity
d. As asset valuation allowance
31. Under PAS 12, which enterprises are required to report deferred tax asset or liability?
I. Public enterprises
II. Nonpublic enterprises
a. I only
b. II only
c. Both I and II
d. Neither I nor II
32. Temporary difference is the
I. Difference between the tax basis of an asset or liability and its reported amount that
will result in taxable or deductible amounts in future years when the reported
amount of the asset or liability is recovered or settled respectively.
II. Item of income or expense which is included in either financial income or taxable
income but will never be included in the other.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
33. Taxable temporary difference is the
I. Temporary difference that will result in taxable amount in determining taxable
income of future periods when the carrying amount of the asset or liability is
recovered or settled.
II. Temporary difference that will result in deductible amount in determining taxable
income of future periods when the carrying amount of the asset or liability is
recovered or settled.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
34. A deferred tax liability is computed using
a. The current tax law, regardless of the enacted future tax law
b. Expected future tax law, regardless of whether this expected law has been enacted
c. Current tax law, unless enacted future tax law is different
d. Either current or expected future law, regardless of whether the expected law has
been enacted
35. It is deferred tax consequence attributable to a taxable temporary difference.
a. Deferred tax liability
c. Deferred tax asset
b. Current liability
d. Noncurrent deferred tax liability
36. It is deferred tax consequence attributable to a deductible temporary difference and
operating loss carry forward.
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37. It is the amount of income tax paid or payable for the year as determined in applying
the provisions of the enacted tax law to the taxable income.
a. Current tax expense
c. Deferred tax expense
b. Deferred tax benefit
d. Income tax expense
38. It is excess of taxable revenues over tax deductible expenses and exemptions for the
year as defined by the BIR.
a. Pretax financial income
c. Financial income subject to tax
b. Gross income
d. Taxable income
39. An entity shall offset deferred tax asset and deferred tax liability when
I. The deferred tax asset and deferred tax liability relate to income taxes levied by the
same taxing authority
II. The entity has a legal enforceable right to set off a current tax asset against a
current tax liability.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
40. Postemployment employee benefits include
a. Termination benefits
b. Short-term employee benefits
c. Equity compensation benefits
d. Retirement benefits, such as pensions
41. It is the increase in the present value of the defined benefit obligation resulting from
employee service in the current period.
a. Past service cost
c. Current service cost
b. Interest cost
d. Current service and interest cost
42. Which statement is correct concerning past service cost ?
a. The past service cost should be expensed immediately when additional benefits
vest immediately.
b. If the additional benefits are not vested, the past service cost is amortized on a
straight line basis over the period until the benefits vested.
a. Both I and II
b. Neither I nor II
c. I only
d. II only
43. The vested benefits are employee
a. Benefits accumulated in the hands of a trustee.
b. Benefits that are contingent upon future employment.
c. Benefits that are not contingent upon future employment.
d. Benefits that are to be paid to retired employees in the current period.
44. The corridor in the recognition of actuarial gain or loss is equal to
a. 10% of the present value of the defined benefit obligation at the beginning of the
year.
b. 10% of the fair value of the plan assets at the beginning of the year.
c. 10% of the lower between the present value of the defined benefit obligation and
the fair value of the plan assets at the beginning of the year.
d. 10% of the higher between the present value of the defined benefit obligation and
the fair value of the plan assets at the beginning of the year.
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