PROBLEM 2: MULTIPLE CHOICE 4.

The statement of financial position is also

called
1. The objective of PAS 1 is
a. balance sheet.
a. to ensure comparability by prescribing the
basis for presentation of general purpose b. income statement.
financial statements.
C. positions statement.
b. to ensure the faithful representation of
financial statements. d. all of these

5. When preparing financial statements, PAS 1

c. to ensure the relevance of information
presented in the financial statements. requires management to assess the entity's
ability to continue as a going concern. The
d. to prescribe the recognition and assessment covers a minimum period or
measurement principles applicable to assets,
a. at least one year from the end of the
liabilities, income and expenses.
reporting period.
2. Entity A's financial statements in the current
b. at least two years from the end of the
period is comparable with Entity A's financial
statements in the previous period. This type of reporting period.
comparability is called C at least five years from the end of the
a. Inter-comparability reporting period.

d. there is no such requirement.

b. Intra-comparability

c. Extra-comparability 6 Which of the following is not considered an

appropriate application of offsetting under PAS
d. Intro-comparability 1

3. The scope of PAS 1 is a. Presenting a gain from the sale of a

noncurrent asset net of the related selling
a. the preparation and presentation of general expenses.
purpose financial statements.
b. Deducting foreign exchange losses from
b. the recognition, measurement and disclosure foreign exchange gains and presenting only the
requirements for specific transactions and other net amount.
events.
c. Deducting unrealized losses from unrealized
c. the presentation of general purpose financial gains from trading securities arnd presenting
statements as well as all other information only the net amount.
contained in an entity's annual report.
d. Deducting accumulated depreciation from
d. all of these the equipment account and presenting only the
carrying amount.
 a. Classified presentation

7. PAS 1 requires an entity to provide an b. Unclassified presentation

additional balancesheet dated as of the
c. Classified as to liquidity
beginning of the preceding period if certain
instances occur. Which of the following is not d. Based on liquidity
one of those instances? (Assume all of the
following has a material effect) 10. Which of the following best reflects the
definition of normal operating cycle under PAS
a. Retrospective application of an accounting 1?
policy.
a. For a manufacturing entity, this the usual
b. Retrospective restatement time it takes for the entity to acquire raw
c. Reclassification of items in the financial materials, process those rawmaterials into
finished goods, and sell the finished goods.
statements

d. Change in the frequency of reporting b. For a manufacturing entity, this is the usual
time it takesfor the entity to acquire raw
8. The PFRSS apply to which of the following? materials, process those rawmaterials into
finished goods, sell the finished goods
a. A management's review of the entity's onaccount, and collect the receivables.
financial performance during the period vis-à-
vis its targets for that period contained in the c. For a manufacturing entity, this is the usual
entity's annual report, which also includes the time it takesfor the entity to acquire raw
entity's financial statements. materials on account andsettle the account.

b. Schedules, reconciliations and returms d. For a manufacturing entity, this is the usual
required by the Bureau of Internal Revenue time it takes for the entity to sell finished goods
(BIR) to be filed together with the financial on account and collect the receivables.
statements.

c. Environmental reports required by the

Department of Environment and Natural PROBLEM 3: MULTIPLE CHOICE
Resources (DENR) that are included in the 1. Who is responsible for the preparation and
entity's annual report. fair presentation of an entity's financial
statements in accordance with the PFRSs?
d. Explanatory material and other information
that are disclosed in the notes to the financial a.Accountant
statements.
b. Management
9. This is the most commonly used method of
presenting a statement of financial position. It c. Auditor
facilitates the computation of liquidity and
d. Government regulatory body
solvency ratios.
 d. Presenting comprehernsive income as a note
disclosure only is prohibited.

5. When a separate statement of profit or loss

(income statement)is presented,
2. The statement of financial position may be a. it shall be displayed immediately before the
presented eithershowing current/non-current statement presenting comprehensive income.
distinction (classified) or basedon liquidity
(unclassified). PAS 1 encourages a(an) b. it shall be displayed immediately after the
statement presenting comprehensive income.
a. classified presentation
c. it shall be displayed alone. The entity may opt
b. unclassified presentation. not to present information on comprehensive
c. combination of a and b income.

d. none of these d. Any of these.

3 Which of the following is a current asset? 6. Which of the following is not correct when an
entity opts to use the "two-statement
a. Deferred tax asset expected to reverse within presentation" of income and expenses?
3 0monthsfrom the reporting date
a. The separate income statement forms part of
b. Property, plant and equipment a complete set of financial statements and shall
be displayed immediately before the statement
C. Non-trade note receivable due in 13 months
presenting comprehensive income.
d. Accounts receivable
b. The profit or loss section is not presented
4. Which of the following statements is anymore in the statement presenting
incorrect regarding the provisions of PAS 1? comprehensive income.

a An entity is required to present separate c. The profit or loss section is required to be

sections of profit or loss and other presented in the statement presenting
comprehensive income. comprehensive income.

b. Presenting an income statement or d. The separate statement presenting

statement of profit or loss in addition to a comprehensive income begins with the amount
statement of other comprehensive income is of profit or loss.
permitted when an entity elects to use the
"two-statement" presentation.

c. Presenting an income statement or statement

of profit or loss alone without a statement of
other comprehensive income is allowed.
 c. those that are subsequently reclassified to
profit or loss and those that are

d. continuing and discontinued operations

7. Entity A reclassifies a gain that was previously

recognized in other comprehensive income to 10. When an entity changes the end of its
the current period's profit or loss. According to reporting period ar presents financial
PAS 1, how should Entity A present the statements for a period longer or shorter than
reclassification adjustment in the other one year, an entity shall disclose all of the
comprehensive income section of the following, except
statement of comprehensive income?
a. the period covered by the financial
a.as an addition statements.

b. as a deduction b. the reason for using a longer or shorter

period.
c. only at net of tax
C. the fact that amounts presented in the
d. none of these financial statements are not entirely
8. Which of the following is a current liability? comparable.

a. Deferred tax liability d. a quantification of the possible adjustments

that would eliminate the effects of the longer or
b. An obligation for which the entity has an shorter reporting period.
unconditional right to defer.
PROBLEM 4: FOR CLASSROOM DISCUSSION
c. A long-term obligation that becomes payable
on demand because of a breach of loan Scope
agreement but the lender agrees before the 1. PAS 1 applies to which of the following?
balance sheet date to provide a grace period for
the lender to rectify the breach. a. The preparation and presentation of general
purpose financial statements.
d. An obligation for which the entity has a
conditional right to defer. b. The recognition and of specific assets,
liabilities, income and expenses.
9. According to PAS 1, items of other
comprehensive income are presented according C. The disclosure requirements for specific
to the following groupings transactions and other events.

a. ordinary and extraordinary items d. All of these.

b. by nature and by function General features

3. Entity A wants to change the presentation of, Complete set of financial statements
and the classification of some itenms in, its
financial statements. Which of the following 5. According to PAS 1, a complete set of
financial statements includes which of the
statements is incorrect?
following
a. Entity A can make the change if it is required
a. Income tax retum
by a PFRS,

b. Entity A can make the change if the change is b. Directors' reports

expected to result in reliable and more relevant c. Notes
information to the users of its financial
statements. d. All of these

c. Entity A may be required to provide an Additional Statement of financial position

additional balance sheet dated as at the
6. PAS 1 requires an entity to present an
beginning of the preceding period.
additional statement of financial position as at
d. Entity A can make the change only if it makes the beginning of the preceding period when an
an irrevocable promise not to make another entity makes any of the following, except
change within the next five years.
a. the retrospective application of an
4. The financial statements of Entity A shows accounting policy statements.
line items described as "Other current assets,"
b. the retrospective restatement of items in the
"Other Non-current liabilities," and
financial
"Miscellaneous expenses." Which of the
following is correct? C. the redassification of items in the financial
statements.
a. Entity A considers the items included in these
line items as dissimilar and cannot be included d. the prospective application of a change in
in material classes of similar items and are also accounting estimate among assets and
individually immaterial to warrant separate liabilities?
presentation.

b. Entity A considers the items included in these

line items as individually material but with 7. The statement of financial position of which
dissimilar nature or function. of the following entities does not show current
and noncurrent distinctions
C. Entity A considers the items included in these
line items as comprising a material class of a. Banks and other financial institutions
similar items.
b. Mining companies
d. This manner of presenting items is
c. Trading enterprises
unacceptable under
d. Manufacturing firms
PAS 1.
8. The principles of PAS 1 in relation to the d. All of these are included
classification of liabilities as current or
noncurrent favor the current classification. PAS 3. These deal with the computation of cost of
sales and cost of ending inventory cost formulas
1 provides stricter conditions for classifying
liabilities as noncurrent. Which of the following shall Entity A use?
statements best reflects a valid reason for this? a. net realizable value
a. Noncurrent liabilities are usually more b. perpetual inventory system
material in terms
C. cost formulas
of size compared to current liabilities.
d. costing
b. Most primary users are concerned more with
an entity's

current liabilities when making economic 4. Entity A's inventories consist of items that are
decisions ordinarily interchangeable. According to PAS 2,
which of the following cost formula shall entity
because of the shorter duration of time before A's use
they cause
a. Specific identification
an outflow of economic resources.
b. FIFO

c. Weighted Average
PAS 2 INVENTORIES
d. b or c
PROBLEM 2: MULTIPLE CHOICE
5. Which of the following statements is
1. Which of the following is not included as part incorrect regarding the use of cost formulas?
of the cost of an inventory?
a. PAS 2 requires the use of specific
a. Purchase cost, net of trade discount identification of costs for inventories that are
b. Direct labor cost not ordinarily interchangeable.

b. Entities may choose between the FIFO and

c. Freight in
the Weighted Average cost formulas for
d. Selling cost inventories that are ordinarily interchangeable.

2. Conversion costs do not include which of the C. Different cost formulas may be used for each
following costs? class of inventory with dissimilar nature and
use.
a. Direct materials
d. Only one formula shall be used for all
b. Direct labor inventories regardless of differences in their
c. Production nature and use.
6. Entity A's buys and sells two types of d. selling prices are rising because demand has
products - Product A and Product B. Items of increased
Product A are not ordinarily interchangeable
9. Write-downs of inventories to their net
while items of Product B are ordinarily
intercharngeable. According to PAS 2, what cost realizable value are recognized
formula shall Entity A use? (specific a. in profit or loss
identification "SI, irst-in, first out 'FlFO,
weighted average "WA') b. in other comprehensive income

Product A. Product B c. directly in equity

a. SI. FIFO or WA d. any of these

b. SI, FIFO or WA SI, FIFO or WA

c. FIFO. WA

d. SI. SI 10. Inventories are usually written-down to net

realizable value
7. Entity A is a distributor of oil. Entity A's
inventories are ordinarily interchangeable. a. on an item by item basis.
Entity A maintains a specific level of inventory
b. on the basis of their classification, for
such that the latest purchases are the ones
example, as all finished goods, all work in
dispatched first to the sales outlets.
process and all raw materials and supplies.
Consequently, the latest purchases are sold
first. Which of the following cost fórmulas shall C. every year.
be used by Entity A?
d. on the basis of their relative stand-alone
a. Last-in, First-out (LIFO) selling
b. FIFO PAS 7 STATEMENT OF CASH FLOWS
c. Weighted Average 2. Which of the following cash flows is
presented in the operating activities section of a
d. b or c
statement of cash flows?
8. In which of the following instances is a write-
a. cash receipts from issuing shares or other
down of inventories to net realizable value may
equity instruments and cash payments to
not be required?
redeem them
a. the inventories are damaged
b. cash receipts from issuing notes, loans, bonds
b. the inventories have become wholly or and mortgage payable and other short-term or
partially obsolete long-term borrowings, and their repayments

c. the estimated costs to complete or costs to c. cash receipts from the sale of goods,
sell have increased rendering of services,or other forms of income
d. cash payments by a lessee for the reduction 2. Which of the following is incuded in the
of the outstanding liability relating to a lease investing activities section of the statement of
cash flows?
3. In the statement of cash flows of a non-
financial institution, interest expense paid is a.Acquisition and sale of investments in held for
presented under trading securities.

a. operating activities. b. Acquisition and sale of items of property,

plant and equipment that are routinely
b. investing activities. manufactured in the entity's ordinary course of
c. financing activities. business and are to be held for rentals and
reclassified to inventories when the assets
d. a or c cease to be rented and become held for sale.

C. Acquisition and sale of short-term

investments in cash equivalents.
4. Which of the following is presented in the
activities section of the statement of cash d. Cash inflow from repayment of loan.
flows?
3. Which of the following is included in the
a. Purchase of a treasury bill three months financing activities section of the statement of
before its maturity date. cash flows?

b. Exchange differences from translating foreign a. cash payments for purchases of goods and
currency denominated cash flows. services

c. Acquisition of equipment through issuance of b. cash receipts and cash payments in the
note payable. acquisition and disposal of property, plant and
equipment, investment property, intangible
d. Bank overdrafts that can be offset.
assets and other noncurrent assets
5. EntityA acquires equipment by paying a 10%
c. loans to other parties and collections thereof
down payment and issuing a note payable for
(other than loans made by a financial
the balance. How should Entity A report the
institution)
transaction in the statement of cash flows?
d. cash receipts from issuing shares or other
Down payment. Note payable
equity instruments and cash payments to
a. Investing activities. None redeem them

b. Investing activities. Financing activities 4 This method of presenting cash flows from
(used in) operating activities involves adjusting
c. Financing activities. None accrual basis profit or loss for the effects of
changes in operating asets and liabilities and
d. None. None
effects of non-cash items.
a.Direct method a. Change from the cost model to the fair value
model of measuring investment property.
b. Indirect method
b. Change in business model for classifying
c. Inverse method financial assets resulting to the reclassification
d. Reverse method of a financial asset from being measured at
amortized cost to fair value
5. Entity A declares cash dividends in 20x1 and
pays the dividends in 20x2. How should Entity A c. Change in the method of recognizing revenue
report the dividends paid in the statement of from long- term construction contracts.
cash flows for d. Change in the depreciation method, useful
20x1. 20x2 life or residual value of an item of property,
plant and equipment.
a. Operating activities. None
.
b. Financing activities None

c. None. Financing activities

d. None. Operating or Financing

4. These result from new information or new
PROBLEM 1: MULTIPLE CHOICE developments.

1. A change in measurement basis is most likely a. Changes in accounting estimates

a
b. Changes in accounting policies
a. change in accounting policy.
C. Correction of errors
b. change in accounting estimate.
d. All of these
C. error.
5. The effect of which of the following is
d. any of these presented in profit or loss in the current period
(or current and future periods, both are
2. A correction of prior period error is
affected) rather than as an adjustment to the
accounted for by
opening balance of retained earnings.
a. retrospective application.
a. Correction of a prior period error.
b. retrospective restatement.
b. Change in accounting policy.
C. prospective application.
c.Change in accounting estimate.
d. impracticable application.
d. All of these.
3. Which of the following is a change in
PROBLEM 2: FOR CLASSROOM DISCUSSION
accounting estimate?
1 According to I'AS 8, in the absence of a PFRS a. using a transitional provision, if any.
that specifically deals with a transaction,
management shall b. retrospectively.

C. prospectively.
a. refer to the concepts under the Conceptual
Framework. d. a, b or c, which ever is most appropriate
b. adopt the provisions of the US GAAP. 5. Entity A changes its inventory cost formula
C. use its judgment in developing and applying from FIFO to weighted average. How should
Entity A account for this change?
an accounting policy that results in information
that is relevant and reliable. a. by retrospective restatement, as a change in
accounting policy
d. consider the applicability of relevant
accounting literature. b. by prospective application, as a change in
accounting estimate

c. by retrospective application, as a change in

accounting policy

d as a correction of prior period error

2. According to PAS 8, a change in accounting
policy is accounted for

a. using a transitional provision, if any.

b. retrospectively.

c. prospectively, if retrospective application is

impracticable.

d. a, b orc, whichever is most appropriate

3. This efers to applying a new accounting policy

to transactions, other events and conditions as
if that policy had always been applied.

c. Retrospective application

c. Prospective application

d. Retrospective restatement

d. Impracticable application

4. According to PAS 8, a change in accounting

estimate is accounted for