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1. Under SEC rules, which of the following entity may qualify as a SME?
B a. ReSA Life, a life insurance company
b. ReSA Store, a supermarket operating in Quezon City
c. ReSA Banking Corporation, a BSP-registered commercial bank
d. ReSA Waters, a water utility company servicing Metro Manila
3. Under PAS 7 (statement of cash flows), which of the following items is not being added to profit
under the indirect method of computing operating cash flows?
D a. Bad debt losses
b. Depreciation expense
c. Loss on sale of equipment
d. Increases in trade receivable
9. The proceeds from a bond issued with detachable share warrants should
be accounted for as follows:
A a. Fair value is assigned to the bonds with any excess proceeds
allocated to the share warrants
b. Fair value is assigned to the share warrants with any excess
proceeds allocated to the bonds
c. Proceeds shall be allocated on a pro-rate basis to the bonds
and share warrants based on their relative fair values
d. Proceeds shall be assigned entirely to the bonds and no equity
component for the share warrant is to be recognized
13. Under PAS 17, ‘unearned rent’ account is used by the lessor under the
A a. Operating lease
b. Operating lease and sales type lease
c. Operating lease and direct financing lease
d. Operating lease, sales type lease and direct financing lease
14.The following statements are based on PAS 16 (Property, Plant &
Equipment):
Statement I: After recognition of an asset, an item of property,
plant and equipment shall be carried at its cost less accumulated
depreciation and any accumulated impairment losses.
Statement II: After recognition of an asset, an item of 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
revaluation, less any subsequent accumulated depreciation and
subsequent accumulated impairment losses.
15.Under PAS 21, both foreign currency transaction gains and foreign
currency translation losses can be generally presented in the
D a. Statement of income
b. Statement of cash flows
c. Statement of financial position
d. Statement of comprehensive income
17. Under PAS 7 (statement of cash flows), dividend payments to shareholders are classified as part of
either
D a. Operating activities (under the benchmark treatment) or
investing activities (under the allowed alternative treatment)
b. Financing activities (under the benchmark treatment) or
investing activities (under the allowed alternative treatment)
c. Operating activities (under the benchmark treatment) or
Financing activities (under the allowed alternative treatment)
d. Financing activities (under the benchmark treatment) or
Operating activities (under the allowed alternative treatment)
19.Under PAS 17, which of the following situations would lead to a lease being classified as an
operating lease?
C a. Transfer of ownership to the lessee at the end of the lease
term
b. Option to purchase at a value below the fair value of the
asset
c. The lease term is at least 50% of the asset’s economic life
d. The present value of the minimum lease payments is 90% of the
fair value of the asset
20.The following statements are based on PFRS 2 (Share-based payment):
Statement I: For equity-settled share-based payment transactions, the
entity shall measure the goods or services received, and the
corresponding increase in equity, directly at the fair value of the
goods or services received.
Statement II: For equity-settled share-based payment transactions, if
the entity cannot estimate reliably the fair value of the goods and
services received, the entity shall measure their value by reference
to the fair value of the equity instruments granted.
Statement III: For cash-settled share-based payment transactions, the
entity shall measure the goods or services acquired and the liability incurred at the fair value of the
goods or services received.
D a. All of the statements are true
25. Which of the following accounting treatments is not allowed under PFRS for SMEs?
D a. Goodwill being amortized over a period of 10 years
b. Borrowing costs related to a qualifying asset being expensed
c. Investment in associates accounted by cost or fair value model
d. Property, plant and equipment accounted for under the
revaluation model
37. Given a hyperinflationary economy under PAS 29, which price index is used in (A) restating financial
statements and (B) measuring inflation?
D a. (A) General price index (B) General price index
b. (A) Consumer price index (B) Consumer price index
c. (A) Consumer price index (B) General price index
d. (A) General price index (B) Consumer price index
39. A company uses straight-line depreciation for financial reporting purposes, but uses the accelerated
depreciation for tax purposes. Which of the following account balances would be lower in the
financial statements used for tax purposes than it would be in the general purpose financial
statements?
C a. Accumulated depreciation
b. Cash
c. Retained earnings
d. Gross fixed assets
asset’s cost
47.To calculate net sales, (List A) must be (List B) cash receipts from
customers.
List A List B
A a. An increase in accounts receivable Added to
b. An increase in accounts receivable Subtracted from
c. An increase in accounts payable Added to
d. An increase in accounts payable Subtracted from
48. A call option on a common share is more valuable when there is a lower
B a. Market value of the underlying share
b. Exercise price on the option
c. Time to maturity on the option
d. Variability of market price on the underlying share
49. A direct labor overtime premium is charged to a specific job when the overtime is caused by
B a. Increased overall level of activity
b. Customer’s requirement for early completion of job
c. Management’s failure to include the job in the production
schedule
d. Management’s requirement that the job be completed before the
annual factory vacation closure
54.In the statement of cash flows, the purchase of fixed assets appears
in the (List A) activities section as a (List B) of cash.
List A List B
C a. Operating Source
b. Financing Use
c. Investing Use
d. Investing Source
65.Jon Company uses the equity method to account for its investment in
Lee Company common stock. How should Jon record a 2% stock dividend
received from Lee?
D a. As dividend revenue at Lee’s carrying value of the stock
b. As dividend revenue at the market value of the stock
c. As a reduction in the total cost of stock investment
d. As a memorandum entry reducing the unit cost of stock investment
70.If the price of the underlying is greater than the strike or exercise
price of the underlying, the call option is said to be
B a. At the money
b. In the money
c. On the money
d. Out of the money
72.If sales are accounted for using the installment method, which of the
following is (are) only recognized in proportion to the cash
collected on the sales during the period?
B a. Sales
b. Sales and cost of sales
c. Sales and cost of sales and selling expenses
d. Sales and cost of sales and administrative expenses
79. The cost of materials has risen steadily over the year. Which of the following methods of estimating
the ending balance of the materials inventory account will result in the highest net profit, assuming
all other variables remain constant?
B a. Last-in, first-out (LIFO)
b. First-in, first-out (FIFO)
c. Weighted average
d. Specific identification
b. State accounting
c. Commercial accounting
d. Managerial accounting
82.If Progress Billing (PB) account for a project is lower than the
Construction-in-Progress (CIP) account, then
A a. It should be presented as CIP (net of PB) under current asset
section
b. It should be presented as CIP (net of PB) under non-current
asset section
c. It should be presented as PB (net of CIP) under current
liability section
d. It should be presented as PB (net of CIP) under non-current
liability section
85.Preference share that has no claim on any prior year dividends that
were not declared is described as
C a. Cumulative
b. Participating
c. Non-cumulative
d. Non-participating
92.If a dividend is declared after the balance sheet date but before the
financial statements are authorized for issue, the dividend is:
B a. recognized as a liability at the balance sheet date
b. not recognized as a liability at the balance sheet date
c. recorded as a direct reduction of equity at the balance sheet
date
d. recorded as a reduction against the asset ‘cash’ at balance
sheet date.
95. The body authorized by law to promulgate rules and regulations affecting the practice of
accountancy in the Philippines is the
A a. Board of Accountancy
b. Financial Reporting Standards Council
c. Auditing and Assurance Standards Council
d. Philippine Institute of Certified Public Accountants
96. The issuer should charge retained earnings for the par value of shares issued in
C a. 1 for 6 stock dividend
b. 3 for 16 stock dividend
c. 2 for 7 stock dividend
d. 2 for 15 stock dividend
98. The costs of company start-up activities, including fees of attorneys, should be
99.Cash control and voucher systems are methods and procedures used to
C a. Ensure that current obligations are met
b. Ensure that excess cash does not exist
c. Ensure the safeguarding of cash
d. Ensure that unused cash is invested
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