UNIVERSITY OF THE CORDILLERAS

QUIZ
FINANCIAL ASSETS AND LIAB
1. Which of the following is not a financial instrument?
a. Accounts payable c. Petty cash fund
b. Investment in equity securities d. Prepaid income tax

2. According to PFRS 9, a financial instrument is recognized

a. when the instrument has probable economic benefits that can be measured reliably
b. only when the entity becomes party to the contractual provisions of the instrument
c. when the entity enters to a binding contract to deliver a variable number of its own equity instrument
d. only when the instrument requires receipt of another financial instrument under conditions which are
potentially favorable

3. Under PFRS 9, financial assets are classified

a. on the basis of the entity’s business model or contractual cash flow characteristics of the financial asset
b. as financial assets subsequently measured either at fair value or at amortized cost
c. as fair value through profit or loss, loans and receivables, available-for-sale securities or held-to-maturity
securities
d. a and b

4. Financial assets are initially recognized and subsequently measured on the basis of
a. the entity’s business model for managing the financial assets
b. the contractual cash flow characteristics of the financial asset
c. a and b
d. a or b

5. If the entity’s business model’s objective is to hold assets in order to collect contractual cash flows and cash
flows are solely payments of principal and interest on the principal amount outstanding, the financial asset is
classified
a. according to management’s intention of holding the securities
b. as financial asset measured at amortized cost
c. as financial asset measured at fair value
d. any of these

6. According to PFRS 9, on initial recognition, the entity has the option of designating financial assets to be
measured at FVPL
a. if doing so provides more relevant and more reliable information
b. if doing so reduces “accounting mismatch”
c. if it is required by “shadow accounting”
d. at the entity’s management’s absolute discretion

7. When a financial asset at fair value through other comprehensive income is derecognized, any cumulative
unrealized gains or losses is
a. recognized in profit or loss as a reclassification adjustment
b. recognized in profit or loss as an adjustment to the realized gain or loss on the derecognition
c. transferred directly in equity
d. any of these as an accounting policy choice

8. Financial assets are initially measured

a. at fair value
b. at fair value plus direct transaction costs
c. at fair value plus direct transaction costs, except in the case of financial assets at fair value through profit or
loss where direct transaction costs are expensed immediately
d. at cost, in cases where the quoted prices of the financial assets are indeterminable

9. Subsequent changes in fair values of a financial asset classified as fair value through profit or loss are
a. recognized in profit or loss
b. recognized in other comprehensive income
c. recognized in other comprehensive income and accumulated in equity
d. ignored

10. Subsequent changes in fair values of a financial asset classified as fair value through other comprehensive
income are recognized in
a. recognized in profit or loss

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 b. recognized in other comprehensive income
c. recognized in other comprehensive income and accumulated in equity
d. ignored

11. Subsequent changes in fair values of a financial asset classified at amortized cost are
a. recognized in profit or loss
b. recognized in other comprehensive income
c. recognized in other comprehensive income and accumulated in equity
d. ignored

12. When the decline in the fair value of an investment classified at fair value through other comprehensive income
is other than temporary, i.e., permanent, the decline in fair value is permitted under PFRSs to be recognized
a. in profit or loss as an impairment loss
b. in other comprehensive income as a regular fair value adjustment
c. directly in equity by making a transfer between equity accounts
d. b and c

13. If acquisition cost of investment in bonds is less than face amount, there is
a. discount b. premium c. loss d. gain

14. If the effective interest rate is greater than the nominal rate, there is
a. discount b. premium c. loss d. gain

15. When an entity uses trade date accounting, a purchased financial asset is recognized
a. on the date of agreement to purchase
b. upon receipt of the financial asset purchased
c. upon full payment of the financial asset purchased
d. upon receipt of the financial asset purchased, provided that, the consideration is fully paid

16. Reclassification of financial assets

a. is made in accordance with management’s intention of holding the securities
b. is warranted if management changes its intention of holding the securities
c. is permitted only when the entity changes its business model for managing financial assets.
d. is accounted for retrospectively

17. If an entity changes its business model on August 1, 20x1, any reclassification entry is made on
a. January 1, 20x1 c. January 1, 20x2
b. August 1, 20x1 d. August 1, 20x2

18. When an entity reclassifies a financial asset, the initial measurement of the reclassified financial asset is
a. fair value on date of change in business model
b. fair value on reclassification date
c. carrying amount on date of change in business model
d. carrying amount on reclassification date

19. Which of the following financial assets may subsequently be reclassified?

a. Held for trading security in the form of an equity instrument
b. Financial asset at fair value through other comprehensive income
c. Financial asset designated at fair value through profit or loss
d. Financial asset initially classified at amortized cost

20. Which of the following dividends may be recognized as revenue?

a. cash dividends c. property dividends
b. share dividends d. a and c only

21. All of the following financial assets shall be measured at fair value through profit or loss except
a. Financial assets held for trading
b. Financial assets designated on initial recognition as fair value through profit or loss
c. Investments in quoted equity instruments
d. Financial assets at amortized cost

22. A financial asset is held for trading(choose the incorrect one)

a. It is acquired principally for the purpose of selling or repurchasing it in the near term
b. On initial recognition, it is part of portfolio of financial assets that are managed together and for which
there is evidence of a recent actual pattern of short-term profit taking.
c. It is derivative that is not designated as an effective hedging instrument.
d. It is derivative that is designated as an effective hedging instrument.

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23. Transaction costs include
a. Fees and commission paid to agent, levies by regulatory authorities, transfer taxes and duties
b. Debt premiums or discounts
c. Financing costs
d. Internal administrative costs

24. Reclassification of financial liabilities is

a. allowed only if an entity changes its business model
b. allowed only if management changes its intention of holding financial instruments
c. allowed only if an entity changes its accounting policy on financial instruments
d. prohibited

25. Financial liabilities are initially measured at

a. fair value plus transaction costs
b. fair value plus transaction costs, except financial liabilities at FVPL whose transaction costs are expensed
immediately.
c. fair value plus transaction costs, except financial liabilities at FVOCI whose transaction costs are recognized
in other comprehensive income.
d. fair value minus transaction costs, except financial liabilities at FVPL whose transaction costs are expensed
immediately.

CASH
26. The effect of compensating balance is
a. to provide greater security for the borrower
b. to decrease the yield on the loan to the lender
c. to increase the yield on the loan to the borrower
d. to increase the yield on the loan to the lender.
D
27. Compensating balance agreements that do not legally restrict the amount of funds shown on the balance sheet
should:
a. be reported in the current asset section
b. be reported in the Long-term investment section
c. be reported in the other asset section
d. be reported in the footnotes
D
28. Bank overdraft
a. Is a debit balance in a cash in bank account.
b. Is offset against demand deposit account in another bank.
c. Which cannot be offset is classified as current liability.
d. Which cannot be offset is classified as non-current liability.
C
29. Cash in foreign currency is valued at
a. Face value
b. Current exchange rate
c. Current exchange rate reduced by allowance for expected decline in peso
d. Estimated realizable value
B

30. The following statements relate to cash. Which statement is true?

a. The term “cash equivalent” refers to demand credit instruments such as money order and bank drafts.
b. The purpose of establishing a petty cash fund is to keep enough cash on hand to cover all normal operating
expenses for a period of time.
c. Classification of a restricted cash balance as current or noncurrent should parallel the classification of the
related obligation for which the cash was restricted.
d. Compensating balances required by a bank should always be excluded from “cash and cash equivalent”.
c

31. To be reported as “cash and cash equivalents”, the cash and cash equivalents must be

a. Unrestricted in use for current operations

b. Available for the purchase of property, plant and equipment
c. Set aside for the liquidation of long term debt
d. Deposited in bank

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32. Cash equivalents are

a. Short term and highly liquid investments that are readily convertible into cash
b. Short term and highly liquid investments that are readily convertible into cash with remaining maturity of
three months
c. Short term and highly liquid investments that are readily convertible into cash and acquired three months
before maturity
d. Short term and highly liquid marketable equity securities

33. All of the following can be classified as cash and cash equivalents, except?

a. Redeemable preference shares acquired and due in 60 days

b. Commercial papers held and due for repayment in 90 days
c. Equity investments
d. A bank overdraft

34. What is false concerning measurement of cash and cash equivalents?

a. Cash is measured at face value

b. Cash in foreign currency is measured at current exchange rate
c. If a bank or financial institution holding the funds of the company is in bankruptcy or financial difficulty,
cash should be written down to estimated realizable value
d. Cash equivalent should be measured at maturity value, meaning face value plus interest

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

a. Separately as current asset, with appropriate disclosure

b. Separately as noncurrent asset with appropriate disclosure
c. Be written off as an extraordinary loss
d. As part of cash and cash equivalents

36. Bank overdraft

a. Is a debit balance in cash in bank account

b. Is offset against demand deposit account in another bank
c. Which cannot be offset is classified as current liability
d. Which cannot be offset is classified as noncurrent liability

37. A compensating balance

a. Must be included in cash and cash equivalents

b. Which is legally restricted and related to a long term loan is classified as current asset
c. Which is legally restricted and related to a short term loan is classified separately as current asset
d. Which is not legally restricted as to withdrawal is classified separately as current asset

38. Unreleased checks (checks drawn before the end of reporting period but held for later delivery to creditors)

a. Shall be treated as outstanding checks

b. Shall be restored to the cash balance
c. Shall be treated as outstanding checks if the date is shortly after the end of reporting period
d. Shall be treated as outstanding checks if they are ultimately encashed

39. Which of the following shall not be considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks and personal checks
c. Coins, currency and available funds
d. Postdated checks and IOU’s

40. Which of the following statements is false?

a. Not all items included in cash constitute legal tender.
b. Cash may be offset against a liability if the deposit of funds in restricted account clearly constitutes the legal
discharge of the liability.
c. Legally restricted bank deposit held as compensating balances should be segregated from the cash account
and reported under a separate caption.
d. One-year BSP treasury bills with remaining maturity of three months on balance sheet date may be shown
as part of “cash and cash equivalents” provided this is disclosed.

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d

RECEIVABLES
41. Trade receivables are current assets if they are reasonably expected to be collected
a. Within one year.
b. Within the normal operating cycle.
c. Within one year or within the operating cycle, whichever is shorter.
d. Within one year or within the operating cycle, whichever is longer.

42. Non-trade receivables are classified as current assets only if they are reasonably expected to be collected in
cash.
a. Within one year or within the operating cycle, whichever is shorter.
b. Within one year or within the operating cycle, whichever is longer.
c. Within normal operating cycle.
d. Within one year, the length of the operating cycle notwithstanding.

43. Which is the proper presentation of receivables in the statement of financial position?
a. Trade receivables and non-trade receivables are shown separately
b. Non-trade receivables are presented as noncurrent assets
c. Trade accounts receivable and trade notes receivable shall be presented separately
d. Trade receivables and nontrade receivables which are currently collectible shall be presented as one
line item called “trade and other receivables”

44. If the ideal measurement of short-term receivables in the statement of financial position is the discounted value
of the cash to be received in the future, failure to follow this practice usually does not make the statement of
financial position misleading because
a. Most short-term receivables are not interest-bearing.
b. The allowance for doubtful accounts includes a discount element.
c. The amount of the discount is not material.
d. Most receivables can be sold to a bank or factor.

45. Accounts receivable shall be recognized initially at

a. Face value
b. Discounted value
c. Maturity value
d. Current value

46. Long-term notes receivable which nominally bear no interest or an interest which is unreasonably low shall be
recognized initially at
a. Face value
b. Present value
c. Maturity value
d. Current value

47. Credit balances in accounts receivable shall be classified as

a. Current liabilities
b. Part of accounts receivable
c. Long-term liabilities
d. Deduction from accounts receivable

48. Receivables from subsidiaries shall be classified as

a. Current asset
b. Noncurrent asset

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 c. Either current or noncurrent depending on the expectation of realizing them within one year or over one
year
d. Equity

49. Where the operating cycle extends beyond one year because of the normal credit terms as in the case of
installment sales of household appliances
a. It is proper to classify the entire receivables as current assets with disclosure of the amount not
realizable within one year, if material.
b. The entire receivables are shown as noncurrent asset.
c. The portion due in one year is shown as current and the balance as noncurrent.
d. The receivables are not recognized.

50. In the case of long-term installments receivable (real estate installment sales) where a major portion of the
receivables will be collected beyond the normal operating cycle
a. The entire receivables are shown as current without disclosure of the amount not currently due.
b. The entire receivables are shown as noncurrent.
c. Only the portion currently due is shown as current and the balance as noncurrent.
d. The entire receivables are shown as current with disclosure of the amount not currently due.

51. According to the PFRSs, receivables are initially recognized at

a. fair value c. present value
b. cost d. fair value plus direct transaction costs

52. MYTHICAL IMAGINARY Co. makes all of its sales on 30-day credit terms. During the period, MYTHICAL made
a special sale to one of its customers, wherein the customer was extended a 9-month credit term. MYTHICAL
received a P10M noninterest-bearing note on the sale. According to the PFRSs, MYTHICAL should initially
recognize the receivable at
a. face amount c. appraised value
b. present value d. fair value less costs to sell

53. SVELTE SLENDER Co. received a 3-year, 3%, note receivable from one of its customers. The current rate at
the date of receipt of the note was 12%. SVELTE should initially recognize the receivable at
a. face amount c. appraised value
b. present value d. fair value less costs to sell

54. Receivables are subsequently measured at their recoverable historical costs. Which of the following methods of
estimating uncollectible accounts is in conformance with the PFRSs?
a. Allowance method c. a or b
b. Direct write-off d. none of these

55. Which of the following methods may be used to estimate doubtful accounts?
I. percentage of credit sales
II. percentage of receivables
III. aging of receivables.
IV. combination of these methods
a. I only b. I, II and III c. II and III only d. all of these

56. The amount computed under the percentage of credit sales method is the
a. bad debts expense for the period c. a or b
b. required balance of the allowance account d. none of these

57. The amount computed under the percentage of receivables and aging methods is the
a. bad debts expense for the period c. a or b
b. required balance of the allowance account d. none of these

58. Which of the following rates may be used to compute for the interest income on a receivable?
a. stated rate c. effective interest rate
b. nominal rate d. coupon rate

59. Which of the following rates may be used to compute for the interest receivable on a note receivable?
a. imputed rate of interest c. yield rate

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 b. current rate d. nominal rate

60. A noninterest-bearing note

a. bears no effective interest rate
b. has a specified principal but an unspecified interest rate
c. does not result to any interest income
d. has an unspecified principal and an unspecified interest.

End!

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