b.

Retrospectively
c. Both retrospective and prospective
d. None of the abvoe

33. Change in the method of inventory valuation/costing from FIFO to weighted average
should be accounted for
a. Prospectively
b. Retrospectively
c. Both retrospective and prospective
d. None of the above

34. IFRS prohibits which of the following cost flow assumptions?

a. LIFO
b. Specific identification
c. Weighted average
d. Any of these cost flow assumptions is allowed
e. None of the above

35. Which disclosure is not required about government grant?

a. The accounting policy adopted for government grant
b. Unfulfilled condition
c. The name of the government agency that gave the grant
d. The nature and extent of government grant
e. None of the above

36. Government grant related to depreciable asset is usually recognized as income

a. Immediately
b. Over the useful life of the asset using straight line
c. Over the useful life of the asset using sum of the years’ digit
d. Over the useful life of the asset and in proportion to the depreciation of the asset
e. None of the above

37. Government grant in recognition of specific cost is recognized as income

a. Over the same period as the relevant expense
 b. Immediately
c. Over a maximum of 5 years using straight line
d. Over a maximum of 5 years using sum of digits
e. None of the above

38. Government grant related to nondepreciable asset that requires fulfillment of certain
conditions
a. Should not be recognized as income
b. Should be recognized as income immediately
c. Should be recognized as income over a reasonable period
d. Should be recognized as income over the periods which bear the cost of meeting the
conditions
e. None of the above
 MIDTERM EXAM

1. In the statement of changes in equity, the effect of a change in accounting policy is presented
A. Separately for each component of equity
B. In aggregate for total equity
C. In total for the amount attributable to owners of the parent and the noncontrolling interest
D. Separately for the total amount attributable to owners of parent and the noncontrolling interest
E. None of the above

2. Correction of errors in the prior period are included in

A. OCI C. Share Premium
B. Net income D. None of the above

3. Which of the following is not a related party?

A. A shareholder owning 20%
B. Joint venturers of a joint venture
C. An associate
D. CEO of the company
E. None of the above

4. Related party transactions include all, except

A. A venturer sold goods to the joint venture
B. Sold a car to the uncle of the entity’s finance director
C. Sold goods to another entity owned by the daughter of the managing director
D. All of these are related party transactions

5. Which event after the end of the reporting period would generally require disclosure?
A. Retirement of key management personnel
B. Settlement of litigation when the event that gave rise to the litigation occurred in a prior period
C. Strike of employees
D. Issue of large amount of ordinary shares

6. Given the following information for Tin Corporation:

A. Retirement of key management personnel
B. Settlement of litigation when the event that gave rise to the litigation occurred in a prior period
C. Strike of employees
D. Issue of large amount of ordinary shares

7. The financial statements are authorized for issue

A. When the board of directors reviews the financial statements and authorizes them for issue
B. When the financial statements are made available to shareholders
C. When the shareholders approve the financial statements at their annual meeting
E. When the approved financial statements are filed with a regulatory body
F. None of the above

8. Events that occur after the current year-end but before the financial statements are issued and affect the
realizability of accounts receivable should be
A. Treated as adjustment to allowance for bad debts
B. Should be discussed with the management
C. Should be disclosed in the notes to financial statements
D. None of the above
9. All of the following components of OCI should be reclassified to profit or loss, except
A. Gain or loss from translating the financial statements of a foreign operation
B. Gain or loss on remeasuring debt investment at fair value through profit or loss
C. The effective portion of gain or loss on hedging instrument in a cash flow hedge
D. All of these should be reclassified

10. Unusual and infrequent gain and loss should be reported

A. As an extraordinary item net of tax below income from continuing operations
B. As an extraordinary item net of tax within income from continuing operations
C. As a separate line item within income from continuing operations
D. As a separate line item below income from continuing operations
E. None of the above

11. Which of the following should be reported when an entity changed from the straight line method of
depreciation to the sum of the years digit (SYD) method?
A. Cumulative effect of change in accounting policy
B. Proforma effect of retroactive application
C. Prior period error
D. None of the above

12. Because of the implementation of PFRS 16 Leases, ABC Corp. made an inventory of all its leases and
accounted for these leases under the said standard. How should ABC Corp. account for the change?
A. Prospectively
B. Retrospectively
C. As an adjustment to profit and loss accounts of the prior year
D. None of the above

13. Assuming there is no accounting standard that applies specifically to a transaction, what is the second most
authoritative source in developing and applying an accounting policy?
A. Accounting literature and accepted industry practice
B. Most recent pronouncement of other standard-setting body
C. The requirement and guidance in the standard or interpretation dealing with similar and related issue
D. None of the above

14. Despite doing all reasonable effort to determine whether the change is a change in accounting estimate or a
change in accounting policy, ABC Corp. still failed. In this case, the change is treated
A. Change in accounting policy
B. Change in accounting estimate with appropriate disclosure
C. Correction of error
D. None of the above

15. On February 2020, the entity discovered that inventory in 2019 was overstated. The 2019 financial statements
were authorized for issue on April 20, 2020. What must the entity do?

A. Adjust the beginning balance of 2020 inventory

B. Correct the 2019 financial statements upon discovery of the error
C. Account for the overstatement retrospectively
D. None of the above

16. What is the proper accounting treatment for a change in reporting entity?
A. Restatement of financial statements of all prior periods presented
B. Restatement of current period financial statements
C. Note disclosure and supplementary schedule
 D. Adjustment of retained earnings and note disclosure

17. Costs directly attributable to bring the asset to the location and condition for the intended use include all,
except
A. Cost of site preparation
B. Initial delivery and handling cost
C. Abnormal amount of wasted materials
D. All should be part of the cost of the asset

18. ABC Corp. exchanged its machinery (book value of P100,000 and fair value of P200,000) for the machinery of
DEF Corp. (book value of P50,000 and fair value of P80,000). The transaction lacks commercial substance. In
this case, how much should ABC Corp. record the machinery received from DEF Corp.?
A. P50,000
B. P80,000
C. P100,000
D. P200,000

19. Which of the following costs are capitalized for self-constructed assets?
A. Materials and labor only
B. Labor and overhead only
C. Materials and overhead only
D. Materials, labor, and overhead

20. Assets that qualify for interest cost capitalization include

A. assets under construction for a company's own use.
B. assets that are ready for their intended use in the earnings of the company.
C. assets that are not currently being used because of excess capacity.
D. All of these assets qualify for interest cost capitalization.

21. The period of time during which interest must be capitalized ends when
a. the asset is substantially complete and ready for its intended use.
b. no further interest cost is being incurred.
c. the asset is abandoned, sold, or fully depreciated.
d. the activities that are necessary to get the asset ready for its intended use have begun.

22. Which of the following statements is true regarding capitalization of interest?

a. Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited
to the land account and not to the building account.
b. The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred.
c. When excess borrowed funds not immediately needed for construction are temporarily invested, any interest
earned should be offset against interest cost incurred when determining the amount of interest cost to be
capitalized.
d. The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest
rate by the amount of average accumulated expenditures on qualifying assets during the period.

23. One of Entity A’s delivery trucks had an accident on February 14, 20x2. The truck is totally wrecked and is
uninsured. Entity A’s December 31, 20x1 current-period financial statements were authorized for issue on
March 31, 20x2. Entity A asked you if it can write-off the carrying amount of the destroyed truck from its
December 31, 20x1 statement of financial position. What will you tell Entity A?
A. Yes, go ahead. Write-off the truck because the event is an adjusting event.
B. No. Don’t write-off the truck because the event is a non-adjusting event.
C. No. Don’t write-off the truck because the event is a non-adjusting event. You should, however, disclose the
event if you deem it to be material.