CHAPTER 1 - STATEMENT OF CASH FLOWS D.

​ Cash outflows from investing activities

I. Book 11. Under IFS, an entity can report interest paid on bank
1. The primary purpose of a statement of cash flows is loan in the statement of cash flows
to provide relevant information about A.​ In operating activities
A.​ Differences between net income and associated B.​ Either in operating activities or financing
cash receipts and disbursements activities
B.​ An entity's ability to generate positive net cash C.​ In financing activities
flows D.​ In investing activities or financing activities
C.​ The cash receipts and cash disbursements of an 12. Under IFS, the dividend received from share
entity during a period investments can be classified as
D.​ An entity's ability to meet cash operating needs A.​ Either an operating activity or a financing
2. Cash receipts from royalties and commissions are activity
A.​ Cash outflows for operating activities B.​ Either an operating activity or investing activity
B.​ Cash inflows from operating activities C.​ Only as an investing activity
C.​ Cash inflows from investing activities D.​ Only an operating activity
D.​ Cash outflows for financing activities 13. Under IFS, dividend paid can be classified
3. Cash flows arising from trading securities are A.​ Either as financing activity or operating activity
A.​ Classified as operating activities B.​ Either as operating activity or investing activity
B.​ Classified as investing activities C.​ Only as financing activity
C.​ Classified as financing activities D.​ Only as operating activity
D.​ Not reported in the cash flow statement 14. Which classification of the cash flow arising from the
4. Cash payments to acquire equity investments are proceeds from an earthquake disaster settlement would
A.​ Cash outflows for financing activities be most appropriate?
B.​ Cash inflows from investing activities A.​ Cash flow from operating activities
C.​ Cash outflows for investing activities B.​ Cash flow from investing activities
D.​ Cash inflows from financing activities C.​ Cash flow from financing activities
5. Cash receipts from issuing shares are D.​ Does not appear in the statement of cash flows
A.​ Cash inflows from investing activities 15. Cash flows relating to asset held for rental to others
B.​ Cash outflows for investing activities are classified as
C.​ Cash inflows from financing activities A.​ Operating
D.​ Cash outflows for financing activities B.​ Investing
6. Interest payments to lenders are classified as C.​ Financing
A.​ Operating activities D.​ Either operating or investing
B.​ Borrowing activities 16. Cash equivalents are
C.​ Lending activities A.​ Treasury bills and money market funds.
D.​ Financing activities B.​ Investments with original maturities of three
7. Dividend payments to shareholders are classified as months or less.
A.​ Cash outflows for investing activities C.​ Readily convertible to a known amount of cash.
B.​ Cash inflows from investing activities D.​ All of these are features of cash equivalents.
C.​ Cash inflows from financing activities 17. All can be classified as cash and cash equivalents,
D.​ Cash outflows for financing activities except
8. Interest received is classified as cash flow from A.​ Time deposit due in 60 days
A.​ Operating activities B.​ Treasury bill due for repayment in 90 days
B.​ Investing activities C.​ Equity investment
C.​ Financing activities D.​ Bank overdraft
D.​ Revenue activities 18. When an entity purchased a three-month Treasury
9. Cash advances and loans made by a financial bill, how would the purchase be treated in preparing the
institution are usually classified as statement of cash flows?
A.​ Operating activities A.​ Not reported
B.​ Investing activities B.​ An outflow for financing activities
C.​ Financing activities C.​ An outflow for lending activities
D.​ Component of cash and cash equivalents D.​ An outflow for investing activities
10. Cash payments to acquire treasury shares are 19. Which of the following is not considered as a cash
A.​ Cash inflows from financing activities equivalent?
B.​ Cash outflows from financing activities
C.​ Cash inflows from investing activities
 A.​ A three-year treasury note maturing on 7. Financial liabilities include
January 31 of next year purchased on A.​ Deferred revenue
December 1 of the current year B.​ Warranty liability
B.​ A three-year treasury note maturing on January C.​ Constructive obligation
31 of next year purchased on October 1 of the D.​ Loan payable
current year 8. Financial liabilities include all of the following, except
C.​ A 90-day Treasury bill A.​ Trade accounts payable
D.​ A 60-day money market placement B.​ Notes payable
20. Noncash investing and financing activities are C.​ Bonds payable
A.​ Reported only if the direct method is used. D.​ Income tax payable
B.​ Reported separately in the statement of cash 9. It is any contract that evidences residual interest in
flows. the assets of an entity after deducting all of the
C.​ Disclosed in a note or separate schedule. liabilities.
D.​ Not reported. A.​ Equity instrument
II. Financial Instruments Presentation B.​ Debt instrument
1. A financial instrument is any contract that gives rise C.​ Loan receivable
to a D.​ Financial asset with indeterminable fair value
A.​ A financial asset 10. Which is not an equity instrument?
B.​ A financial liability A.​ Ordinary share capital
C.​ A financial asset of one entity and a financial B.​ Bond payable
liability of another entity C.​ Preference share capital
D.​ A financial asset of one entity and a financial D.​ Share option or share warrant
liability or equity instrument of another entity 11. The major financial statements include all, except
2. Which is not classified as a financial instrument? A.​ Statement of financial position
A.​ Convertible bond B.​ Statement of changes in financial position
B.​ Foreign currency contract C.​ Statement of comprehensive income
C.​ Warranty provision D.​ Statement of changes in equity
D.​ Loan receivable 12. The major financial statements include all, except
3. Which cannot be considered a financial asset? A.​ Statement of financial position
A.​ Cash B.​ Income statement
B.​ A contractual right to receive cash or another C.​ Statement of cash flows
financial asset from another entity. D.​ Statement of retained earnings
C.​ A contractual right to exchange financial 13. What is the objective of financial statements?
instruments with another entity under A.​ To provide information about the financial
conditions that are potentially unfavorable position, financial performance and changes in
D.​ An equity instrument of another entity financial position of an entity that is useful to a
4. Which should be classified as a financial asset? wide range of users in making economic
A.​ Patent decisions.
B.​ Trade accounts receivable B.​ To present a statement of financial position and
C.​ Inventory a statement of comprehensive income.
D.​ Land C.​ To present relevant, reliable, comparable and
5. A financial liability understandable information to investors.
A.​ Must be classified as noncurrent liability. D.​ To present financial statements in accordance
B.​ Is a contractual obligation to deliver cash or with all applicable standards.
another financial asset to another entity. 14. Financial statements must be prepared at least
C.​ Is a contractual obligation to exchange financial A.​ Annually
instruments with another entity under B.​ Quarterly
conditions that are potentially favorable to the C.​ Semiannually
entity. D.​ Every two years
D.​ Is a contractual obligation to deliver cash or any 15. When entity changed the end of reporting period
asset to another entity. longer or shorter than one year, the entity shall disclose
6. Financial assets include all of the following, except all, except
A.​ Prepaid expenses A.​ Period covered by the financial statements
B.​ Cash in bank B.​ The reason for using a longer or shorter period
C.​ Investment in equity instrument C.​ The fact that amounts presented are not
D.​ Notes receivable entirely comparable
 D.​ The fact that similar entities have done so D.​ Statement of cash flows
16. The operating cycle is measured at 22. Conceptually, asset valuation accounts are
A.​ The mean value A.​ Assets
B.​ The median value B.​ Neither assets nor liabilities
C.​ Twelve months C.​ Part of shareholders' equity
D.​ Three years D.​ Liabilities
17. The operating cycle of an entity 23. Working capital is
A.​ Is the time between the acquisition of A.​ The group of assets needed to operate
materials entering into a process and their profitably.
realization in cash. B.​ Capital reinvested in business.
B.​ Is time in converting accounts receivable into C.​ Unappropriated retained earnings.
cash. D.​ Current assets less current liabilities.
C.​ Is a period of one year. 24. As generally used, the term net assets represents
D.​ Is the seasonal variation experienced by A.​ Retained earnings
entities. B.​ Current assets less current liabilities
18. An entity shall classify an asset as current under all, C.​ Total shareholders' equity
except D.​ Total assets less total liabilities
A.​ The entity expects to realize the asset or intends III. Investment in Associates
to sell or consume it within the normal 1. It is an entity over which the investor has significant
operating cycle. influence.
B.​ The entity holds the asset for the purpose of A.​ Associate
trading. B.​ Investee
C.​ The entity expects to realize the asset within C.​ Venture capital organization
twelve months after the reporting period. D.​ Mutual fund
D.​ Cash restricted to settle a liability for more 2. Which statement best describes significant influence?
than twelve months after the reporting period. A.​ The holding of a significant proportion of the
share capital in another entity
19. An entity shall classify a liability as current, except B.​ The contractually agreed sharing of control over
A.​ The entity expects to settle the liability within an economic entity
the entity's normal operating cycle. C.​ The power to participate in the financial and
B.​ The entity holds the liability primarily for operating policy decisions of an entity
trading. D.​ The mutual sharing in the risks and benefits
C.​ The liability is due to be settled within twelve 3. Under the equity method of accounting for
months after the reporting period. investments, an investor recognizes its share of the
D.​ The entity has a right to defer settlement for at earnings in the period in which the
least twelve months after the reporting period. A.​ Investor sells the investment
20. In the Philippines, the common practice is to present B.​ Investee declares a dividend
in the statement of financial position C.​ Investee pays dividend
A.​ Current before noncurrent assets, current D.​ Earnings are reported by the investee
before noncurrent liabilities and equity after 4. When an investor uses the equity method to account
liabilities. for investment in ordinary shares, cash dividends
B.​ Noncurrent before current assets, noncurrent received by the investor from the investee are recorded
before current liabilities and equity after A.​ Dividend income
liabilities. B.​ A deduction from the investment income
C.​ Current before noncurrent assets, noncurrent C.​ A deduction from the investment account
before current liabilities and equity after D.​ A deduction from shareholders' equity
liabilities. 5. When an investor uses the equity method to account
D.​ Noncurrent before current assets, current for investment in ordinary shares, the investment
before noncurrent liabilities and equity after account shall be increased when the investor recognizes
liabilities. A.​ A proportionate interest in the net income of
21. In analyzing an entity's financial statements, which the investee
financial statement would a potential investor primarily B.​ A cash dividend received from the investee.
use to assess liquidity and financial flexibility? C.​ Noncash dividend received from the investee.
A.​ Statement of financial position D.​ A share dividend received from the investee
B.​ Income statement. 6. Goodwill arising from an investment in associate is
C.​ Statement of retained earnings
 A.​ Included in the carrying amount of the 2. What valuation model should an entity use to
investment and amortized over the useful life measure property, plant and equipment?
B.​ Included in the carrying amount of the A.​ Revaluation model and fair value model
investment, and not amortized. B.​ Cost model and revaluation model
C.​ Charged to retained earnings. C.​ Cost model only
D.​ Expensed immediately. D.​ Cost model and fair value model
7. When an entity holds between 20% and 50% of the 3. The cost of property, plant and equipment comprises
voting power of an investee, which statement is true? all of the following, except
A.​ The investor must use the equity method. A.​ Purchase price
B.​ The investor should use the equity method B.​ Import duties and nonrefundable purchase
unless circumstances indicate that it is unable taxes
to exercise significant influence over the C.​ Any cost directly attributable in bringing the
investee. asset to the location and condition for the
C.​ The investor must use the cost method. intended use
D.​ The investor must use the fair value method. D.​ Initial estimate of the cost of dismantling the
8. An investor shall discontinue the equity method when asset for which the entity has no present
A.​ The investor ceases to have significant obligation.
influence over the associate. 4. The cost of property, plant and equipment comprises
B.​ The associate operates under severe purchase price and
restrictions. A.​ The implied interest on the debt financing
C.​ The investor ceases to have control over the B.​ The fair value of any noncash asset surrendered
associate. C.​ The estimated residual value of the asset
D.​ The activities of investor and associate are D.​ Directly attributable cost necessary to bring
dissimilar. the asset to the location and condition for the
9. When an investment ceases to be an associate, the intended use
fair value of the investment is regarded as its 5. Costs directly attributable to the acquisition of
A.​ Cost on initial recognition as a financial asset. property, plant and equipment include all of the
B.​ Fair value on initial recognition as a financial following, except
asset. A.​ Cost of site preparation
C.​ Fair value on initial recognition as a financial B.​ Cost of testing whether the asset is functioning
liability. properly
D.​ Amortized cost on initial recognition as an C.​ Installation and assembly cost
investment. D.​ Initial operating loss
10. The equity method is not applicable under all of the 6. Which of the following shall not be capitalized as cost
following circumstances, except of property, plant and equipment?
A.​ The investor is a wholly-owned subsidiary. A.​ Cost of excess materials from a purchasing
B.​ The investor's equity and debt instruments are error
not traded B.​ Cost of testing whether the asset works
C.​ The investor is in the process of filing financial correctly
statements with the SEC for the purpose of C.​ Initial delivery and handling cost
issuing debt and equity instruments in a public D.​ Cost of preparing the site for installation
market. 7. The initial operating loss should be
D.​ The ultimate parent of the investor produces A.​ Deferred and amortized over a reasonable
consolidated financial statements. period.
IV. PROPERTY, PLANT, AND EQUIPMENT B.​ Expensed and charged to the income statement.
1. Which of the following is not a characteristic of C.​ Capitalized as part of the cost of the plant.
property, plant, and equipment? D.​ Charged to retained earnings.
A.​ The property, plant and equipment are tangible 8. What is the proper treatment of freight and interest,
assets. on the loan to fund the cost of an imported machinery?
B.​ The property, plant and equipment are used in A.​ Both expenses are capitalized.
business. B.​ Interest may be capitalized but freight is
C.​ The property, plant and equipment are expensed.
expected to be used over a period of more than C.​ Freight is capitalized but interest cannot be
one year. capitalized.
D.​ The property, plant and equipment are subject D.​ Both expenses are expensed.
to depreciation.
9. Which term best describes the removal of the A.​ The entity will comply with the conditions of the
carrying amount of the property, plant and equipment grant.
from the statement of financial position? B.​ The grant will be received.
A.​ Derecognition C.​ The entity will comply with the conditions of
B.​ Impairment the grant and the grant will be received.
C.​ Writeoff D.​ The grant must have been received.
D.​ Disposal 2. Government grant in recognition of specific cost is
10. The carrying amount of property, plant and recognized as income
equipment shall be derecognized A.​ Over the same period as the relevant expense
A.​ On disposal B.​ Immediately.
B.​ When no future economic benefits are expected C.​ Over a maximum of 5 years using a straight line.
C.​ On acquisition D.​ Over a maximum of 5 years using a sum of
D.​ On disposal and when no future economic digits.
benefits are expected from the use of the 3. Government grant related to depreciable asset is
asset. usually recognized as income
11. Depreciation is best described as a method of a A.​ Immediately.
A.​ Asset valuation B.​ Over the useful life of the asset using a straight
B.​ Current value allocation line.
C.​ Cost allocation C.​ Over the useful life of the asset using the sum of
D.​ Useful life determination years' digits.
12. As generally used in accounting, what is D.​ Over the useful life of the asset and in
depreciation? proportion to the depreciation of the asset.
A.​ It is a process of asset valuation. 4. Government grant related to non depreciable asset
B.​ It applies technically to intangible assets. that requires fulfillment of certain conditions
C.​ It is used to indicate a decline in market value of A.​ Should not be recognized as income.
property, plant and equipment. B.​ Should be recognized as income immediately.
D.​ It systematically allocates the cost of property, C.​ Should be recognized as income over a
plant and equipment to accounting periods. reasonable period.
13. Which statement best describes the term D.​ Should be recognized as income over the
depreciation? periods which bear the cost of meeting the
A.​ The systematic allocation of the cost of an conditions.
asset less residual value over the useful life 5. A government grant that becomes receivable as
B.​ The removal of an asset from the statement compensation for expenses or losses already incurred
C.​ The amount by which the fair value of an asset should be recognized as income
exceeds carrying amount A.​ When received.
D.​ The amount by which the carrying amount of an B.​ Of the period in which it becomes receivable.
asset exceeds fair value C.​ Over a maximum of 5 years using a straight line.
14. Which is incorrect with respect to depreciation? D.​ Over a maximum of 10 years using a straight
A.​ The depreciation method shall reflect the line.
pattern in which the asset's economic benefits 6. In the case of a grant related to an asset, which of the
are consumed. following treatments is prescribed?
B.​ Depreciation of an asset begins when it is A.​ Record the grant at a nominal value in the first
available for the intended use. year and write it off in the subsequent year.
C.​ Depreciation ceases at the date the asset is B.​ Either set up the grant as deferred income or
derecognized. deduct it in arriving at the carrying amount of
D.​ Depreciation is not recognized if the fair value the asset
of an asset exceeds the carrying amount. C.​ Record the grant at fair value in the first year
15. All of the following factors need to be considered in and record it as income in the subsequent year.
determining the useful life of an asset, except D.​ As an extraordinary gain.
A.​ Expected usage of the asset 7. In the case of a grant related to income, which of the
B.​ Expected physical wear and tear following accounting treatments is prescribed?
C.​ Technical obsolescence A.​ Credit the grant to equity
D.​ Residual value B.​ Present the grant as other income or as a
V. Government Grants separate line item, or deduct it from the
1. Government grant shall be recognized when there is related expense
reasonable assurance that C.​ Credit the grant to retained earnings
 D.​ Credit the grant to sales revenue 5. Capitalization of interest ends when
8. The deferred grant income is classified as A.​ The asset is substantially complete and ready
A.​ Separate component of shareholders' equity for the intended
B.​ Noncurrent liability B.​ No further interest is being incurred
C.​ Current liability C.​ The asset is abandoned, sold or fully
D.​ Partly current liability and partly noncurrent depreciated.
liability D.​ The activities that are necessary to get the asset
9. If the cost of the asset is recorded net of the grant ready for the intended use have begun.
A.​ Equity is overstated 6. Which is required for borrowing costs incurred
B.​ Liability is overstated directly attributable to a qualifying asset?
C.​ Asset is understated A.​ Recognize as an expense in the period incurred
D.​ Net income is understated B.​ Capitalize as part of the cost of the asset
10. Which disclosure is not required about a C.​ Either recognize as an expense in the period
government grant? incurred or capitalize as part of the cost of the
A.​ The accounting policy adopted for government asset
grant D.​ Recognize as a deferred charge
B.​ Unfulfilled condition 7. Which should (not) be considered a qualifying asset?
C.​ The name of the government agency that gave A.​ A power generation plant that takes two years
the grant to construct
D.​ The nature and extent of government grant B.​ An expensive jet that can be purchased from a
VI. Borrowing Cost vendor
1. If the Qualifying asset is financed by specific C.​ A toll bridge that usually takes more than a year
borrowing, the capitalizable borrowing cost is equal to to build
on D.​ A ship that normally takes one to two years to
A.​ Actual borrowing cost incurred complete
B.​ Actual borrowing cost incurred up to 8. Interest income on specific borrowing for qualifying
completion of asset asset
C.​ Actual borrowing cost incurred up to A.​ Reduces the cost of the qualifying asset.
completion of asset minus any investment B.​ Reduces interest expense reported in the
income from the temporary investment of the income statement.
borrowing C.​ Increases equity.
D.​ Zero D.​ Must be credited to interest income.
2. Which of the following could be treated as qualifying 9. Which is the approach in accounting for interest
assets for the purpose of capitalizing borrowing cost? incurred in financing specifically construction of
A.​ Investment property property?
B.​ Financial asset at fair value A.​ Capitalize only the actual interest incurred
C.​ Inventory that is manufactured in large quantity during construction
D.​ Biological asset B.​ Charge construction with all costs of funds
3. If the qualifying asset is financed by general employed
borrowing, the capitalizable borrowing cost is equal to C.​ Capitalize no interest during construction
A.​ Actual borrowing cost incurred D.​ Capitalize interest equal to the prime interest
B.​ Total expenditures on the asset multiplied by a rate
capitalization rate 5. Which is now a disclosure requirement in relation to
C.​ Average expenditures on the asset multiplied borrowing cost?
by a capitalization rate or actual borrowing A.​ Accounting policy adopted for borrowing cost
cóst incurred, whichever is lower B.​ Borrowing cost capitalized during the period
D.​ Zero C.​ Segregation of qualifying asset from other
4. Which is not a condition that must be satisfied before assets
interest capitalization can begin on a qualifying asset? D.​ Capitalization rate used to determine the
A.​ Interest is being incurred amount of borrowing cost eligible for
B.​ Expenditures for the asset have been made. capitalization
C.​ The interest rate is equal to the bank prime VII. AGRICULTURE (BIOLOGICAL ASSET)
rate. 1. Biological assets
D.​ Activities necessary to get the asset ready for A.​ Are found only in Biotech entities.
the intended use are in progress.
 B.​ Are living animals or living plants and must be D.​ The fair value can be measured reliably.
disclosed as a separate line item in the 10. Land that is related to agricultural activity is
statement of financial position. measured
C.​ Must be measured at cost. A.​ At fair value.
D.​ Do not generally have future economic benefit. B.​ In the same manner as Property, Plant and
2. Biological assets are measured at Equipment, or Investment Property.
A.​ Fair value less cost of disposal C.​ At fair value in combination with the biological
B.​ Fair value plus cost of disposal asset.
C.​ Cost D.​ At the resale value separate from the biological
D.​ Cost less accumulated depreciation assets.
3. Agricultural produce is 11. A bearer plant is a living plant that
A.​ The harvested product from biological assets. A.​ Is used in the production or supply of
B.​ Measured at the time of harvest at the cost of agricultural produce.
production. B.​ Is used to bear produce for more than one
C.​ Measured at each reporting period at fair value period.
less cost of disposal. C.​ Has a remote likelihood of being sold as
D.​ All of the choices are correct regarding agricultural produce, except for incidental scrap.
agricultural produce. D.​ Must possess all of these characteristics.
4. Agricultural produce harvested from bearer plant is 12. All the following can be considered bearer plant,
measured at except
A.​ Fair value A.​ Coconut tree
B.​ Fair value less cost of disposal at the point of B.​ Grape vine
harvest C.​ Rubber tree
C.​ Cost less cost of disposal D.​ Tree in a forest plantation to be harvested and
D.​ Fair value plus cost of disposal at the point of sold as log or lumber.
harvest 13. Generally speaking, biological asset relating to
5. The harvested agricultural produce is agricultural activity shall be measured using
A.​ Accounted for as inventory A.​ Historical cost
B.​ Initially recognized at fair value less cost of B.​ Historical cost less depreciation less impairment
disposal at the point of harvest. C.​ A fair value approach
C.​ Recorded as gain from change in fair value of D.​ Net realizable value
agricultural produce. 14. A gain or loss arising on the initial recognition of a
D.​ All of these are correct about harvested biological asset and from a change in the fair value less
agricultural produce. cost of disposal shall be included in
6. Under IFRS, bearer plants are accounted for as A.​ The profit or loss for the period
A.​ Biological assets with disclosure B.​ Other comprehensive income
B.​ Biological assets without disclosure C.​ A revaluation surplus
C.​ Property, plant and equipment D.​ Retained earnings
D.​ Noncurrent investment 15. Where there is a long aging or maturation process
7. Under IFRS, bearer animals are accounted for as after harvest, the harvested product shall be accounted
A.​ Biological assets for as
B.​ Property, plant and equipment A.​ Biological asset
C.​ Investment property B.​ Inventory
D.​ Agricultural produce C.​ Property, plant and equipment
8. Animals related to recreational activities are classified D.​ Investment property
A.​ Biological assets VIII. Accounting Policies
B.​ Property, plant and equipment 1. A change in accounting policy shall be made when (I)
C.​ Investment property Required by an accounting standard. (II) The change will
D.​ Intangible asset
result in more relevant or reliable information about the
9. Which of the following criteria must not be satisfied
before a biological asset can be recognized? financial position, financial performance and cash flows
A.​ The entity controls the asset as a result of past of the entity.
events.
a.​ I only
B.​ It is probable that future economic benefits
relating to the asset will flow to the entity. b.​ Il only
C.​ An active market for the asset exists.
 c.​ Both I and II b.​ It does not affect the financial statements of
d.​ Neither I nor II prior period
2. A change in accounting policy requires what kind of c.​ It should be reported through the restatement
adjustment to the financial statements? of the financial statements
a.​ Current period adjustment d.​ It makes necessary the reporting of pro forma
b.​ Prospective adjustment amounts
c.​ Retrospective adjustment 8. Which of the following is the proper time period to
d.​ Current and prospective adjustment record the effect of a change in accounting estimate?
3. A change in accounting policy should be reported as a.​ Current period and prospectively
an adjustment to b.​ Current period and retrospectively
a.​ Beginning balance of retained earnings. c.​ Retrospectively
b.​ Net income for the current period. d.​ Current period
c.​ Comprehensive income for the current period. 9. Why is retrospective treatment of change in
d.​ Shareholders' equity for the current period. accounting estimates prohibited?
4. Which is a change in accounting policy? a.​ A change in accounting estimate is a normal
a.​ Change from cost model to fair value model in recurring correction or adjustment.
measuring investment property b.​ The retrospective treatment is not allowed.
b.​ Change from cost model to revaluation, model c.​ Retrospective treatment of a change in
in measuring property, plant and equipment accounting estimate is required by IFRS.
c.​ Change from FIFO to weighted average d.​ IFRS is silent on the issue.
d.​ All of these are considered change in accounting 10. Which is required for a change in the useful life of an
policy asset?
5. When it is difficult to distinguish between a change in a.​ Reported in the statement of retained earnings
accounting estimate and a change in accounting policy, b.​ Retrospective restatement
the change is treated as c.​ Recomputation of depreciation for current and
a.​ Change in accounting estimate with disclosure future years
b.​ Change in accounting policy d.​ All of these are required
c.​ Correction of an error 11. Which is not classified as an accounting change?
d.​ Change in accounting estimate with no a.​ Change in accounting policy.
disclosure b.​ Change in accounting estimate
6. How should the effect of a change in accounting c.​ Error in the financial statements
estimate be accounted for? d.​ All of these are classified as an accounting
a.​ By restating amounts reported in financial change
statements of prior periods 12. When financial statements for a single year are
b.​ By reporting proforma amounts for prior being presented, a prior period error should
periods a.​ Be shown as an adjustment of the beginning
c.​ As a prior period error balance of retained earnings
d.​ In the period of change and future periods if b.​ Affect net income of the current year
the change affects both c.​ Be shown in the statement of changes in equity
7. Which is characteristic of a change in accounting d.​ Be included in other comprehensive income
estimate? 13. Prior period errors
a.​ It usually need not be disclosed a.​ Do not include mistake in the application of
policy
 b.​ Do not affect presentation of financial c.​ Are indicative of conditions that arose after the
statements approval of the financial statements by
c.​ Do not require further disclosure shareholders.
d.​ Are omissions and misstatements in the d.​ Provide for conditions that existed after the
financial statements of prior periods date the financial statements were issued.
14. An example of a correction of an error is a change 4. Financial statements are authorized for issue
a.​ From FIFO inventory valuation to the average a.​ When the board of directors reviews and
method. authorizes the financial statements for issue.
b.​ In the useful life of property, plant and b.​ When the shareholders approve the financial
equipment. statements at their annual meeting
c.​ From cash basis to accrual basis of accounting. c.​ When the financial statements are filed with the
d.​ In the method of depreciation. regulatory agency.
15. A change from an unacceptable accounting principle d.​ When a supervisory board made solely of
to an acceptable accounting principle should be non executives approves the financial
reported statements.
a.​ Retroactively as correction of an error 5. Which event after the reporting period would require
b.​ Retroactively as change in accounting policy adjustment
c.​ As component of net income a.​ Loss of plant as a result of fire
d.​ As component of other comprehensive income b.​ Change in the market price of investment
IX. Events after Reporting Period c.​ Loss on inventory resulting from flood loss
1. Events after the reporting period are favorable or d.​ Loss on a lawsuit the outcome of which was
unfavorable events that occur between deemed uncertain at year-end
a.​ The end of the reporting period and the date of 6. Events that occur after the current year-end but
the next annual financial statements. before the financial statements are issued and affect the
b.​ The end of the reporting period and the date of realizability of accounts receivable should be
the next interim or annual financial statements. a.​ Discussed in the management annual report.
c.​ The end of the reporting period and the date b.​ Disclosed in the notes to financial statements.
when the financial statements are authorized c.​ Used to record an adjustment to bad debt
for issue. expense.
d.​ The end of the reporting period and the date of d.​ An adjustment directly to retained earnings.
the next interim statements. 7. Non Adjusting events include all, except
2. Events after the reporting period a.​ A major business combination after reporting
a.​ Require adjustment of the financial statements period
b.​ Must be disclosed only b.​ Announcing a plan to discontinue an operation
c.​ May require adjustment or disclosure c.​ Expropriation of major asset after reporting
d.​ Are ignored period
3. Adjusting events d.​ Destruction of a major production plant by a
a.​ Provide evidence of conditions that existed at fire before the end of the reporting period
the end of the reporting period. 8. Non Adjusting events include all, except
b.​ Are indicative of conditions that arose after the a.​ The entity announced the discontinuation of an
end of the reporting period. operation.
b.​ The entity entered into an agreement to
purchase the leased building.
 c.​ Distruction of a major production plant by fire. b.​ Adjust the foreign exchange year-end balances
d.​ A mistake in the calculation of allowance for to reflect all abnormal fluctuations and not just
uncollectible accounts receivable. advise movements
9. Which event after the end of the reporting period c.​ Disclose the post-reporting period event
would generally require disclosure? d.​ Ignore the post-reporting period event
a.​ Retirement of key management personnel X. Related Party Disclosures
b.​ Settlement of litigation when the event that 1. Which is not required as a related party disclosure?
gave rise to the litigation occurred in a prior a.​ The son of the chief executive officer of the
period entity
c.​ Strike of employees b.​ The parent of the entity
d.​ Issued a large amount of ordinary shares c.​ An entity that has a common director with the
10. At the end of the current reporting period, an entity entity
carried a receivable from a major customer who d.​ Joint venture in which the entity is a venturer
declared bankruptcy after the end of reporting period 2. All of the following are related parties, except
and before the issuance of financial statements. What a.​ Joint venture in which the entity is a venturer
should be reported at the current year-end? b.​ A postemployment benefit plan for the
a.​ Disclose the bankruptcy of the customer. employees
b.​ Make an adjustment for the event after the c.​ An executive director of the entity
reporting period. Make a provision for the d.​ The partner of a key manager is a major
event after the reporting period in the financial supplier of the entity
statements. 3. Which of the following is not a related party of an
c.​ Ignore the event. entity?
d.​ Reverse the sale pertaining to the receivable. a.​ A shareholder owning twenty percent
11. An entity built a new factory building during the b.​ An entity providing banking facilities to the
current year. Subsequent to the current year-end and entity
before issuance of financial statements, the building c.​ An associate of the entity
was destroyed by fire. What should be reported at the d.​ Key management personnel of the entity
current year-end? 4. Which is not included in key management personnel
a.​ Write off the carrying amount of the building compensation?
b.​ Make a provision for one-half of the carrying a.​ Short-term benefit
amount of the building b.​ Social security contribution
c.​ Make a provision for three-fourths of the c.​ Termination benefit
carrying amount of the building d.​ Reimbursement of out-of-pocket expenses
d.​ Disclose the non adjusting event in the notes 5. Close family members of an individual include all,
to financial statements except
12. An entity deals extensively with foreign currency a.​ The individual's spouse and children
transactions. Subsequent to the end of the reporting b.​ Children of the individual's spouse
period and before the date of authorization of the c.​ Dependents of the individual or individual's
issuance of the financial statements, there were spouse
abnormal fluctuations in foreign currency rate. What d.​ Brothers and sisters of the individual
should be reported at the current year-end? 6. A related party transaction is a transfer
a.​ Adjust the foreign exchange year-end balances a.​ Between related parties when a price is
to reflect the abnormal adverse fluctuations charged.
 b.​ Between related parties; regardless of whether a.​ Parent, subsidiary and fellow subsidiaries
a price is charged. b.​ Associates
c.​ Between unrelated parties when a price is c.​ Key management personnel and close family
charged. members of such key management personnel
d.​ Between unrelated parties, regardless of d.​ Two venturers simply because they share joint
whether a price is charged control over a joint venture
7. Which of the following is not a mandated disclosure 12. Unrelated parties include which of the following?
about related party transactions? a.​ Providers of finance in the course of their
a.​ Relationship between parent and subsidiaries normal dealings with an entity by virtue only of
b.​ Names of all the associates that an entity has those dealings.
dealt with during the year. b.​ Government agencies
c.​ Name of the entity's parent and, if different, the c.​ Single customer with whom an entity transacts
ultimate controlling party. a significant volume of business merely by
d.​ If neither the entity's parent nor the ultimate virtue of the resulting economic dependence.
controlling entity produces financial statements d.​ All of these are unrelated parties
available for public use, then the name of the 13. The minimum disclosures about related party
next most senior parent that does so. transactions include all of the following, except
8. Which of the following is not a required minimum a.​ The amount of the transaction
disclosure about related party transactions? b.​ Amount of outstanding balance
a.​ The amount of related party transaction c.​ Allowance for doubtful accounts related to the
b.​ The amount of the outstanding balance outstanding balance
c.​ The amount of similar transaction with d.​ Nature of the relationship
unrelated parties to establish that comparable 14. An entity that entered into a related party
related party transaction has been entered at transaction would be required to disclose all of the
arm's length following information, except
d.​ Doubtful debt related to the outstanding a.​ Nature of the relationship between the parties.
balance b.​ Nature of any future transactions planned
9. Related party transactions include all, except between the parties and the terms involved.
a.​ A venturer sold goods to the joint venture. c.​ Peso amount of the transaction.
b.​ Sold a car to the uncle of the entity's finance d.​ Amount due from or to related parties at the
director. end of reporting period.
c.​ Sold goods to another entity owned by the 15. Which should be disclosed as related party
daughter of the entity's managing director. transactions in the consolidated financial statements?
d.​ All of these are related party transactions. a.​ Key management personnel compensation
10. All of the following are related party transactions, b.​ Sales to affiliated entities
except c.​ Key management personnel compensation and
a.​ Transferred goods from inventory to a sales to affiliated entities
subsidiary d.​ Neither key management personnel
b.​ Sold an entity car to the wife of the managing compensation nor sales to affiliated entities
director XI. Income Taxes
c.​ Sold an asset to an associate 1. Accounting income is
d.​ Took out a huge bank loan a.​ The income for a period before deducting tax
11. Related parties include all of the following, except expense.
 b.​ The income for a period determined in 7. A deferred tax liability shall be recognized for all
accordance with tax law. a.​ Permanent differences
c.​ The income for a period after deducting tax b.​ Temporary differences
expense. c.​ Taxable temporary differences
d.​ The income after current tax expense is d.​ Deductible temporary differences
determined in accordance with tax law. 8. It is the deferred tax consequence attributable to a
2. These are differences that will result in future taxable deductible temporary difference and operating loss
amounts in determining taxable income of future carryforward.
periods. a.​ Deferred tax liability
a.​ Temporary differences b.​ Deferred tax asset
b.​ Taxable temporary differences c.​ Current tax liability
c.​ Deductible temporary differences d.​ Current tax asset
d.​ Permanent differences 9. It is the amount of income tax payable related to
3. These are differences that result in future deductible taxable income.
amounts in determining taxable income in future a.​ Current tax expense
periods. b.​ Total income tax expense
a.​ Taxable temporary differences c.​ Deferred tax expense
b.​ Deductible temporary differences d.​ Deferred tax benefit
c.​ Taxable temporary and permanent differences 10. It is the sum of the amount of income tax payable
d.​ Deductible temporary and permanent and deferred tax liability related to accounting income.
differences a.​ Tax expense reported in the income statement
4. In computing the current tax asset or current tax b.​ Current tax expense
liability, which tax rate is used? c.​ Deferred tax expense
a.​ Current tax rate d.​ Deferred tax benefit
b.​ Future enacted tax rate 11. Justification for the method of determining periodic
c.​ Average tax rate income tax expense is based on the concept of
d.​ Effective tax rate a.​ Matching of periodic expense to periodic
5. In computing the deferred tax asset or liability, which revenue.
tax rate is used? b.​ Objectivity in the calculation of periodic
a.​ Current tax rate expense
b.​ Estimated future tax rate c.​ Recognition of deferred tax assets and liability.
c.​ Enacted future tax rate d.​ Consistency of tax expense measurement with
d.​ Prior tax rate actual tax planning strategies.
6. When temporary difference will result in taxable 12. A deferred tax liability would result from
amount in future years a.​ Interest revenue on tax-exempt deposit
a.​ A deferred tax liability is recognized in the b.​ Doubtful accounts expense
current year. c.​ Excess of tax depreciation over accounting
b.​ A deferred tax asset is recognized in the current depreciation
year. d.​ Subscription received in advance
c.​ A deferred tax asset may be recognized in the 13. A deferred tax asset would result from
current year if certain conditions are met. a.​ Tax, penalty or surcharge.
d.​ A deferred tax liability may be recognized in the b.​ Dividend received on share investment.
current year if certain conditions are met.
 c.​ Excess tax depreciation over accounting 3. An entity made a public announcement of a
depreciation. commitment to a voluntary redundancy plan. The entity
d.​ Rent received in advance included in taxable has an obligation to pay employees that choose
income. voluntary redundancy a lump sum equal to twice their
14. Which is true regarding deferred income taxes? gross annual salary. What is the obligation to pay
a.​ Deferred tax asset is always netted against employees that choose voluntary redundancy?
deferred tax liability. a.​ A short-term employee benefit
b.​ Deferred taxes of one jurisdiction are offset b.​ A postemployment benefit
against another jurisdiction in the netting c.​ Other long-term employee benefit
process. d.​ A termination benefit
c.​ Deferred tax assets and liability may only be 4. A profit-sharing plan requires an entity to pay a
classified as noncurrent. specified proportion of the cumulative profit for a
d.​ Deferred tax assets and liability are classified as five-year period to employees who serve throughout
current and noncurrent based on expiration the five-year period. What is the profit-sharing plan?
date. a.​ A short-term employee benefit
15. At the current year-end, an entity had a deferred tax b.​ A post employment benefit
liability that exceeded a deferred tax asset. Which of the c.​ Other long-term employee benefit
following should be reported in the current year-end? d.​ A termination benefit
a.​ The excess of the deferred tax liability over the 5. It is a benefit plan under which an entity pays a fixed
deferred tax asset as a noncurrent liability. contribution into a separate fund and will have no legal
b.​ The excess of the deferred tax liability over the or constructive obligation to pay further contribution if
deferred tax asset as a current liability. the fund becomes insufficient to pay employee benefits.
c.​ The deferred tax liability as a noncurrent a.​ Postemployment benefit plan
liability. b.​ Defined contribution plan
d.​ The deferred tax liability as a current liability. c.​ Defined benefit plan
XII. Employee Benefits d.​ Employer plan
1. Employees are each entitled to 20 days of paid 6. Which statement is true concerning the recognition
holiday leave per year. Unused holiday leave cannot be and measurement of a defined contribution plan?
carried forward and does not vest. What is the holiday a.​ The contribution shall be recognized as an
leave? expense in the period it is payable.
a.​ A short-term employee benefit b.​ Any unpaid contribution at the end of the
b.​ A post employment benefit period shall be recognized as accrued liability.
c.​ Other long-term employee benefit c.​ Any excess contribution shall be recognized as a
d.​ A termination benefit prepaid expense.
2. Employees are entitled to 10 days holiday leave per d.​ All of these statements are true about a
year. Unused holiday leave may be carried forward until defined contribution plan.
the employee leaves employment at which time the 7. Which statement is incorrect concerning the
entity will pay the employee for all unused holiday recognition and measurement of a defined benefit
leave. What is the holiday leave? plan?
a.​ A short-term employee benefit a.​ Actuarial assumptions are required to measure
b.​ A postemployment benefit. the obligation and expense.
c.​ Other long-term employee benefit b.​ The obligation is measured on a discounted
d.​ A termination benefit basis.
 c.​ The defined benefit plan must be fully funded. 13. A pension liability is reported when
d.​ The expense recognized for a defined benefit a.​ PBO exceeds FVPA
plan is not necessarily the amount of b.​ Accumulated benefit obligation exceeds FVPA
contribution. c.​ Pension expense. is greater than funding
8. In a defined contribution plan, a formula is used that d.​ FVPA exceeds PBO
a.​ Defines the benefits that the employee shall 14. A pension asset is reported when
receive a.​ FVPA exceeds accumulated benefit obligation
b.​ Ensures that pension expenses are funded b.​ FVPA exceeds PBO
c.​ Requires an employer to contribute a certain c.​ PBO exceeds FVPA
sum each period based on the formula d.​ FVPA exceeds remeasurements
d.​ Ensures that employers are at risk to make sure 15. These are all forms of consideration given by an
funds are available at retirement entire exchange for services rendered by employees.
9. In a defined benefit plan, a formula is used that a.​ Employee benefits
a.​ Requires that gain or loss from the contribution b.​ Employee compensation
to the plan be borne by the employee. c.​ Fringe benefits
b.​ Defines the benefits that the employee shall d.​ Salaries and wages
receive at the time of retirement. 16. Short-term employee benefits include all, except
c.​ Requires cash funding for the plan. a.​ Wages, salaries and social security
d.​ Defines the contribution to be made by the contributions.
employer. b.​ Short-term compensated absences.
10. It is the increase in the present value of the defined c.​ Profit-sharing and bonuses payable in more
benefit obligation resulting from employee service in than twelve months after the end of the
the current period. reporting period
a.​ Current service cost d.​ Nonmonetary benefits, such as medical care,
b.​ Interest expense housing, car and free and subsidized goods.
c.​ Past service cost 17. Which of the following is not a characteristic of
d.​ Remeasurement short-term employee benefits?
11. It is the increase in the present value of the defined a.​ No actuarial assumptions are required to
benefit obligation for employee service in prior periods measure the benefit obligation.
resulting from a plan amendment or curtailment. b.​ There is no possibility of any actuarial gain or
a.​ Current service cost loss.
b.​ Net interest c.​ Short-term employee benefits by definition are
c.​ Past service cost payable no later than twelve months after
d.​ Employee benefit cost year-end.
12. The interest on the projected benefit obligation d.​ Short-term employee benefit obligations are
a.​ Reflects the incremental borrowing rate of the measured on a discounted basis.
employer. 18. These are employee benefits which are payable
b.​ Reflects the rate at which pension benefits after completion of employment.
could be effectively settled. a.​ Short-term employee benefits
c.​ Is the same as the expected return on plan b.​ Post Employment employee benefits
assets. c.​ Other long-term employee benefits
d.​ May be stated implicitly or explicitly when d.​ Termination benefits
reported.
19. Post Employment employee benefits include all of b.​ Are those that the employee is entitled to
the following, except receive even if fired.
a.​ Long-term disability benefits c.​ Are not contingent upon additional serve under
b.​ Retirement benefits, such as pensions the plan
c.​ Postemployment life insurance d.​ Are defined by all of these
d.​ Post Employment medical care XIII. Leases
20. The components of employee benefit expense 1. Under IFRS, a lessee is required to recognize
include all of the following, except a.​ Right of use asset and lease liability
a.​ Current service cost b.​ Right of use asset but not lease liability
b.​ Net interest c.​ Lease liability but not right of use asset
c.​ Past service cost d.​ Neither right of use asset nor lease liability
d.​ Contribution to the plan 2. The lessee may apply the operating lease model
21. When an entity amends a pension plan, past service under what condition?
cost should be a.​ Short-term lease
a.​ Treated as a prior period error. b.​ Low value lease
b.​ Amortized over the service period of c.​ Both short-term lease and low value lease
employees. d.​ Under all circumstances
c.​ Recorded in other comprehensive income. 3. A short-term lease is defined as
d.​ Expensed in the period the plan is amended. a.​ Twelve months or less
22. What is the meaning of "net interest" in relation to b.​ Six months or less
employee benefit expense? c.​ Twelve-month lease with a purchase option
a.​ Interest expense on defined benefit obligation d.​ Two-year lease with option to terminate
b.​ Interest income on the fair value of plan assets 4. Which statement is true about low value lease?
c.​ The difference between interest expense on a.​ The value of an underlying asset is based on the
defined benefit obligation and interest income value of the asset when new regardless of the
on the fair value of plan assets age of the asset.
d.​ Interest expense on defined benefit obligation b.​ The term of a low value lease may be more than
less tax twelve months.
23. The return on plan assets c.​ An underlying asset does not qualify as low
a.​ Is equal to the change in the fair value of the value lease if the nature of the asset is such that
plan assets during the year. the asset is typically not of low value when new.
b.​ Includes interest, dividends and change in the d.​ All of these statements are true about low
fair value of the plan assets during the year. value lease.
c.​ Is equal to the discount rate times the fair value 5. A right of use asset is initially measured at
of the plan assets at the beginning of the a.​ Cost
period. b.​ Fair value
d.​ Is equal to the expected rate of return times the c.​ Current cost
fair value of plan assets at the beginning of the d.​ Present value of expected cash
period. 6. The cost of right of use asset comprises all, except
24. Vested benefits a.​ The present value of lease payments
a.​ Usually requires a minimum number of years b.​ Lease payment made to lessor on or before
of service. commencement date
c.​ Initial direct cost incurred by lessee
 d.​ Estimated cost of dismantling the underlying a.​ Straight line basis over the lease term unless
asset for which the lessee has no present another systematic basis is representative of
obligation the time pattern of the user's benefit.
7. The right of use asset is reported as b.​ Diminishing balance basis
a.​ Noncurrent as separate line stem c.​ Sum of units basis
b.​ Property, plant and equipment d.​ Cash basis
c.​ Intangible asset 14. Which statement characterizes an operating lease?
d.​ Investment property a.​ The lessee records depreciation and interest.
8. A lessee with a lease containing a purchase option b.​ The lessee records the lease liability related to
that is reasonably certain to be exercised should the underlying asset.
depreciate the right of use asset over c.​ The lessor transfers title of the underlying asset
a.​ Useful life of the asset to the lessee for the duration of the lease term.
b.​ Lease term d.​ The lessor records depreciation and rent
c.​ Useful life of the asset or the lease term, revenue.
whichever is shorter 15. The lessor should report the underlying asset in an
d.​ Useful life of the asset or the lease term, operating lease as which of the following?
whichever is longer a.​ Off the statement of financial position
9. A lease liability is measured at b.​ Disclosed only
a.​ The absolute amount of lease payments c.​ Reported according to nature of the asset
b.​ The present value of lease payments d.​ Current asset
c.​ The present value of fixed lease payments XIV. INTANGIBLE ASSETS
d.​ The fair value of the underlying asset 1. Which condition must be met for an item to be
10. The lease payments include all of the following, recognized as an intangible asset other than goodwill?
except a.​ The fair value can be measured reliably.
a.​ Fixed lease payments b.​ The item is part of an activity aimed at gaining
b.​ Variable lease payments new scientific or technical knowledge.
c.​ Leasehold improvement c.​ The item is expected to be used in the
d.​ Residual value guarantee of the lessee production or supply of goods or services.
11. Rent received in advance by the lessor in an d.​ The item is non monetary, identifiable and
operating lease should be recognized as revenue lacks physical substance.
a.​ When received 2. An intangible asset is identifiable when
b.​ At the lease inception a.​ It is separable.
c.​ At the lease expiration b.​ It arises from contractual and other legal rights.
d.​ In the period specified by the lease c.​ It is either separable or it arises from
12. When should a lessor recognize in income a contractual and other legal rights.
nonrefundable lease bonus paid by a lessee on signing d.​ It is neither separable nor arises from
an operating lease? contractual and other legal rights.
a.​ When received 3. All of the following are identifiable, except
b.​ At the inception of the lease a.​ Patent
c.​ At the lease expiration b.​ Copyright
d.​ Over the lease term c.​ Franchise
13. Lease payments under an operating lease shall be d.​ Goodwill
recognized as rent income by the lessor on
4. Directly attributable costs of preparing the intangible a.​ The straight line method, unless the pattern of
asset for the intended use include all of the following, the economic benefit can be determined
except reliably
a.​ Cost of employee benefit arising directly from b.​ The double declining balance in all
bringing the asset to the working condition circumstances
b.​ Professional fee arising directly from bringing c.​ A subjective amount of periodic amortization
the asset to the working condition d.​ The straight line method in all circumstances
c.​ Cost of testing whether the asset is functioning 10. Once recognized, intangible assets can be carried at
properly a.​ Cost less accumulated amortization
d.​ Initial operating loss b.​ Cost less accumulated amortization and
5. The cost of an internally generated intangible asset impairment
includes all of the following, except c.​ Revalued amount less accumulated
a.​ Cost of materials used. amortization
b.​ Compensation costs of personnel directly d.​ Cost plus a notional increase in fair value since
engaged in generating the asset. the intangible asset is acquired
c.​ Fee to register a legal right. 11. Which does not qualify as an intangible asset?
d.​ Expenditure on training staff to operate the a.​ Computer software
asset. b.​ Registered patent
6. After initial recognition, an intangible asset shall be c.​ Copyright
measured using d.​ Notebook computer
a.​ Cost model 12. Which of the following would qualify as an
b.​ Revaluation model intangible asset?
c.​ Cost model or revaluation model a.​ Advertising and promotion
d.​ Cost model or fair value model b.​ Tuition fee paid to employees who decide to
7. An entity that acquired an intangible asset may use enroll in an M.B.A program while working with
the revaluation model for subsequent measurement the entity
only when c.​ Operating loss during the initial stage of the
a.​ The useful life can be reliably determined project
b.​ An active market exists for the intangible asset. d.​ Legal cost paid to lawyers to register a patent
c.​ The cost of the intangible asset can be 13. Intangible assets are classified as
measured reliably. a.​ Amortizable and non amortizable
d.​ The intangible asset is a monetary asset. b.​ Limited life and indefinite life
8. An intangible asset is regarded as having an indefinite c.​ Specifically identifiable and goodwill type
useful life-when d.​ Legally restricted and goodwill type
a.​ There is no foreseeable limit to the period over 14. Intangible assets with indefinite useful life are tested
which the asset is expected to generate net for impairment
cash inflows. a.​ Quarterly
b.​ There is a foreseeable limit to the period over b.​ Annually
which the asset is expected to generate net cash c.​ Biannually
inflows. d.​ There is no definite guideline for impairment
c.​ The useful life arises from contractual rights. 15. Operating loss incurred during the start-up years of a
d.​ The useful life arises from legal rights. new entity should be
9. What is the method of amortizing intangible assets? a.​ Accounted for like any other operating loss.
 b.​ Written off directly against retained earnings. d.​ Construction of prototype
c.​ Capitalized as an intangible asset and amortized 22. Which of the following costs should be excluded
over five years. from research and development expenses?
d.​ Capitalized as an intangible asset and amortized a.​ Modification of the design of a product
over twenty years. b.​ Acquisition of research and development
16. The major problem for an intangible asset is equipment for use on a current project only
determining c.​ Cost of marketing research for a new product
a.​ Fair value d.​ Engineering cost required to advance the design
b.​ Separability of a product to the manufacturing stage
c.​ Residual value 23. Which of the following is not one of the criteria
d.​ Useful life which must be met before development cost can be
17. One factor that is not considered in determining the capitalized?
useful life of an intangible asset is a a.​ The entity has sufficient funding to complete
a.​ Residual value the project.
b.​ Provision for renewal or extension. b.​ The entity intends to complete the project.
c.​ Legal life c.​ The entity can reliably identify the research
d.​ Expected action of competitors costs.
18. Factors in determining the useful life of an intangible d.​ The project has achieved technical feasibility.
asset include all of the following, except 24. Which of the following costs should be capitalized?
a.​ The expected use of the asset. a.​ Acquisition cost of equipment for current
b.​ Any legal or contractual provision project only
c.​ Any provision for renewal or extension of the b.​ Engineering cost incurred to advance the
legal life product to the full production stage
d.​ The amortization method c.​ Cost of research a market for the product
19. Which is not a consideration in determining the d.​ Salaries of research staff
useful life of an intangible asset? 25. Which statement is true about development cost?
a.​ Legal, regulatory or contractual provision a.​ Development cost must be expensed.
b.​ Provision for renewal or extension b.​ Development cost is always deferred.
c.​ Initial cost. c.​ Development cost may be capitalized as an
d.​ Obsolescence intangible asset in very restrictive situations.
20. Amortization of an intangible asset with a finite d.​ Development cost is charged to retained
useful life shall commence when earnings.
a.​ It is first recognized as an asset. XV. INVESTMENT PROPERTY
b.​ It is probable that it will generate economic 1. Which statement best describes investment
benefit. property?
c.​ It is available for the intended use. a.​ Property held for sale in the ordinary course of
d.​ The cost can be identified with reasonable business
certainty. b.​ Property held for use in the production and
21. Which would be considered research and supply of goods and property held for
development? administrative purposes
a.​ Routine effort to refine an existing product c.​ Property held to earn rentals or for capital
b.​ Periodic alteration to existing production line appreciation
c.​ Marketing research to promote a new product d.​ Property held for capital appreciation
2. An owner-occupied property is held by an owner 8. If the entity uses the fair value model for investment
a.​ For use in the production of goods or services. property, which statement is true
b.​ For administrative purposes. a.​ The entity should value the property at cost less
c.​ For sale in the ordinary course of business. accumulated depreciation and impairment.
d.​ For use in production of goods and services b.​ The entity should report the increase in fair
and for administrative purposes. value in other comprehensive income for the
3. Investment property includes all of the following, period.
except c.​ The entity depreciates the investment property.
a.​ Land held for capital appreciation d.​ The entity does not record depreciation.
b.​ Land held for currently undetermined use 9. Under IFS, assets classified as investment property
c.​ Building owned by the reporting entity leased are
out under an operating lease a.​ Held for rental income
d.​ Property held for sale in the ordinary course of b.​ To be sold for a quick profit
business c.​ Held for rental income or to be sold for a quick
4. Which of the following is an investment property? profit
a.​ Property being constructed or developed on d.​ Held for sale in the ordinary course of business
behalf of third party 10. An investment property is derecognized when
b.​ Property that is being constructed and a.​ It is disposed to a third party.
developed as investment property b.​ It is permanently withdrawn from use.
c.​ Property held for future development and c.​ No future economic benefits are expected from
subsequent use as owner-occupied property the disposal.
d.​ Owner-occupied property awaiting disposal d.​ In all of these cases
5. Directly attributable expenditures related to 11. Which statement regarding investment property is
investment property include correct?
a.​ Professional legal services and property a.​ If the entity elects the fair value model, no
transfer taxes. depreciation is taken
b.​ Start up cost b.​ Gain or loss from fair value adjustment is
c.​ Initial operating loss incurred before planned reported in the income statement.
occupancy. c.​ If the entity elects the cost model, depreciation
d.​ Abnormal amount of wasted material incurred should be recognized.
in constructing or developing the property. d.​ All of these statements are correct regarding
6. Subsequent to initial recognition, the investment investment property.
property shall be measured using 12. Which disclosure must be made when the cost
a.​ Fair value model or revaluation model models are used for investment property?
b.​ Fair value through profit or loss model a.​ The fair value of the property
c.​ Cost model or fair value model b.​ The present value of the property
d.​ Cost model or revaluation model c.​ The value in use of the property
7. If the entity uses the fair value model for the d.​ The net realizable value of the property
investment property, changes in fair value are 13. Which of the following disclosures shall be made
a.​ Recognized in profit or loss when the fair value model has been adopted?
b.​ Recognized in retained earnings a.​ Depreciation method used
c.​ Recognized in other comprehensive income b.​ The amount of impairment loss recognized
d.​ Not recognized c.​ Useful life
 d.​ Net gains or losses from fair value adjustments a.​ Recognized as operating expense.
14. Gain or loss from disposal of investment property b.​ Recognized as another expense.
shall be determined as the difference between the c.​ Recognized as a component of the cost of
a.​ Net disposal proceeds and carrying amount. goods sold.
b.​ Gross disposal proceeds and carrying amount. d.​ Deferred until the related inventory is sold.
c.​ Fair value and carrying amount of the asset. 6. Which of the following should be taken into account
d.​ Gross disposal proceeds and fair value of the when determining the cost of inventory?
asset. a.​ Storage cost of part-finished goods
15. Transfers from investment property to property, b.​ Abnormal freight.
plant and equipment are appropriate c.​ Recoverable purchase tax
a.​ When there is change of use. d.​ Interest on inventory loan
b.​ Based on the discretion of management. 7. Which of the following should not be taken into
c.​ Only when the entity adopts the fair value account when determining the cost of inventory?
model a.​ Storage cost of part-finished goods
d.​ The entity can never transfer property into b.​ Trade discount
another classification once it is classified as c.​ Freight cost on purchase
investment property d.​ Import duty on shipping of inventory inward
XVI. INVENTORIES 8. Which of the following costs should be included in
1. Inventories shall be measured at inventory valuation?
a.​ Cost a.​ Administrative cost
b.​ Net realizable value b.​ Abnormal material usage
c.​ Lower cost and net realizable value. c.​ Storage cost relating to finished goods
d.​ Higher of cost and net realizable value d.​ Fixed production overhead
2 The cost of inventory shall be measured using 9. Which of the following would not be reported as
a.​ FIFO inventory?
b.​ Average method a.​ Land acquired for resale by a real estate firm
c.​ LIFO b.​ Shares and bonds held for resale by a brokerage
d.​ Either FIFO or average method firm
3. Net realizable value is c.​ Partially completed goods
a.​ Current replacement cost d.​ Machinery acquired for use in the production
b.​ Estimated selling price process
c.​ Expected selling price less expected cost to 10. Which of the following costs of conversion cannot be
complete and expected cost of disposal included in the cost of inventory?
d.​ Estimated selling price less estimated cost to a.​ Cost of direct labor
complete and estimated cost of disposal b.​ Factory rent and utilities
4. Inventories are usually written down to net realizable c.​ Salaries of sales staff
value d.​ Factory overhead
a.​ Item by item 11. The cost of inventories does not include
b.​ By classification a.​ Salaries of factories staff
c.​ By total b.​ Storage cost necessary in the production
d.​ By segment process before a further production stage
5. The amount of any writedown of inventory to net c.​ Abnormal amount of wasted material
realizable value is d.​ Irrecoverable purchase tax
12. Which of the following should not be reported in d.​ Cost of transportation for merchandise
inventory? purchased
a.​ Raw materials 19. The specific identification method is required for
b.​ Equipment a.​ All inventory
c.​ Finished goods b.​ Retail inventory
d.​ Factory supplies c.​ Inventory that is interchangeable
13. Inventories encompass all of the following, except d.​ Inventory that is not interchangeable and
a.​ Merchandise purchased by a retailer goods produced and segregated for specific
b.​ Land and other property not held for sale. project
c.​ Finished goods produced 20. Which is the reason why the specific identification
d.​ Materials and supplies awaiting use in the method may be considered ideal for assigning cost to
production process inventory?
14. A property developer must classify properties that it a.​ The potential for manipulation of net income is
holds for sale in the ordinary course of business as reduced.
a.​ Inventory b.​ There is no arbitrary allocation of cost.
b.​ Property, plant and' equipment c.​ The cost flow matches the physical flow.
c.​ Financial asset d.​ It is applicable to all types of inventory.
d.​ Investment property 21. How should sales staff commission be dealt with
15. Factory supplies to be consumed in the production when measuring inventory at LCNRV?
process are included in a.​ Added to cost
a.​ Inventory b.​ Ignored
b.​ Property, plant and equipment c.​ Deducted in arriving at net realizable value
c.​ Investment property d.​ Deducted from cost
d.​ Intangible assets 22. How should trade discounts be dealt with when
16. Why is inventory included in the computation of net measuring inventory at LCNRV?
income? a.​ Added to cost
a.​ To determine cost of goods sold b.​ Ignored
b.​ To determine sales revenue c.​ Deducted in arriving at net realizable value
c.​ To determine merchandise returns d.​ Deducted in arriving at cost
d.​ Inventory is not included in the computation of 23. How should prompt payment discounts be dealt
net income with when measuring inventory at LCNRV?
17. Which of the following costs should not be included a.​ Added to cost.
as part of the cost of inventory? b.​ Ignored
a.​ Abnormal freight c.​ Deducted in arriving at net realizable value
b.​ Import duties d.​ Deducted from cost
c.​ Conversion costs 24. How should import duties be dealt with when
d.​ All of these are included in inventory measuring inventory at LCNRV?
18. Which of the following would not be separately a.​ Added to cost
accounted for in the computation of cost of goods sold? b.​ Ignored
a.​ Trade discounts applicable to purchases c.​ Deducted in arriving at net realizable value
b.​ Cash discounts taken during the period d.​ Deducted from cost
c.​ Purchase returns and allowances during the 25. Which of the following is not an acceptable method
period of applying the LCNRV?
 a.​ Inventory location d.​ Average ordinary shares outstanding during
b.​ Group inventory the year
c.​ Individual item 2. In computing basic earnings per share, if the
d.​ Total inventory preference shares are cumulative, the amount that
26. IFRS prohibits which of the following cost flow should be deducted as an adjustment to the net income
assumption is the
a.​ LIFO a.​ Preference dividends in arrears
b.​ Specific identification b.​ Preference dividends paid during the year
c.​ Weighted average c.​ Annual preference dividend
d.​ Any of these cost flow assumptions is allowed d.​ Annual ordinary dividend
27. Which inventory method measures most closely the 3. In computing basic earnings per share, the amount of
current cost of inventory? preference dividends on noncumulative preference
a.​ FIFO shares should be
b.​ Specific identification a.​ Deducted from net income whether declared or
c.​ Weighted average not
d.​ LIFO b.​ Deducted from net income only when declared
28. In a period of declining prices, the inventory method c.​ Added to net income only when declared
which tends to give the highest amount of cost of goods d.​ Ignored.
sold is 4. In computing basic earnings per share, the annual
a.​ Specific identification amount of the required preference dividends on
b.​ Average cost cumulative preference shares for the period should be
c.​ FIFO a.​ Ignored
d.​ LIFO b.​ Deducted from net income only when declared
29. In a period of falling prices, which inventory method c.​ Deducted from net income whether declared
provides the lowest amount of ending inventory? or not
a.​ Weighted average d.​ Added to net income whether declared or not
b.​ FIFO 5. In computing basic loss per share, the annual
c.​ Moving average preference dividend on cumulative preference shares
d.​ Specific identification should be
30. In a period of rising prices, which inventory method a.​ Ignored
provides the highest amount of net income? b.​ Deducted from the net loss whether declared or
a.​ Weighted average not
b.​ Moving average c.​ Added to the net loss whether declared or not
c.​ FIFO d.​ Added to the net loss only when declared
d.​ Specific identification 6. Where in the financial statements should basic and
EARNINGS PER SHARE diluted earnings per share be reported?
1. Earnings per share shall be computed on the basis of a.​ In the accompanying notes
a.​ Ordinary shares outstanding at the end of the b.​ In management discussion and analysis
year c.​ In the income statement
b.​ Ordinary shares outstanding at the beginning of d.​ In the statement of cash flows
year 7. An entity that reports a discontinued operation shall
c.​ Ordinary shares outstanding at the middle of present basic and diluted earnings per share for the
the year discontinued operation
 a.​ Only on the face of the income statement. c.​ A condensed statement of financial position and
b.​ Only in the notes to financial statements. an income statement.
c.​ Either on the face of the income statement or d.​ A condensed statement of financial position,
in the notes to financial statements. income statement and statement of cash flows
d.​ Only if management chooses to do so. 4. Which statement in relation to an interim report is
8. Earnings per share should be computed on the basis true?
of a.​ An interim financial report must consist of a
a.​ Preference shares complete set of financial statements.
b.​ Voting ordinary shares b.​ An interim financial report must consist of a
c.​ Voting and non voting ordinary shares condensed set of financial statements.
d.​ Voting ordinary shares and preference shares c.​ An interim financial report may consist of a
9. Undeclared preference dividends are deducted from condensed set or complete set of financial
net income in the EPS computation for which preference statements.
shares? d.​ All of these statements are true.
a.​ Noncumulative 5. Which statement is true regarding interim reporting?
b.​ Cumulative a.​ Interim reports are required on a quarterly
c.​ Neither cumulative nor noncumulative basis.
d.​ Both cumulative and noncumulative b.​ Interim reports are not required.
10. Earnings per share should always be reported for c.​ Interim reports require the preparation of only
a.​ Gross income an income statement and a statement of
b.​ Income before tax financial position.
c.​ Income from continuing operations d.​ All of these statements are true.
d.​ Prior period error 6. Interim financial statements are usually presented on
INTERIM FINANCIAL REPORTING a.​ Monthly basis
1. Interim financial reports shall be published b.​ Quarterly basis
a.​ Once a year at any time during the year. c.​ Semiannual basis
b.​ Within a month of the half year-end. d.​ Nine-month basis
c.​ On a quarterly basis. 7. For interim reporting, an inventory loss from a market
d.​ Whenever the entity wishes. decline in the second quarter shall be recognized
2. If an entity does not prepare interim financial reports a.​ In the fourth quarter
a.​ The year-end financial statements are deemed b.​ Proportionately over the last quarters
not to comply with IFRS. c.​ Proportionately in each of the four quarters
a.​ The year-end financial statements' compliance d.​ In the second quarter
with IFRS is not affected 8. For interim financial reporting, a gain on disposal of
b.​ The year-end financial statements shall not be property occurring in the second quarter shall be
acceptable under local jurisdiction. a.​ Recognized ratably over the last three quarters
c.​ Interim financial reports shall be included in the b.​ Recognized ratably over all four quarters
year-end financial statements. c.​ Recognized in the second quarter
3. Interim financial reports shall include as a minimum d.​ Disclosed in the second quarter
a.​ A complete set of financial statements. 9. Advertising costs incurred shall be deferred to provide
b.​ A condensed set of financial statements and an appropriate expense in each period for
selected notes. a.​ Interim reporting
b.​ Year-end reporting
 c.​ Interim reporting and year-end reporting 15. Conceptually, interim financial statements can be
d.​ Neither interim reporting nor year-end described as emphasizing
reporting. a.​ Timeliness over reliability
10. Which statement about interim reporting is true? b.​ Reliability over relevance
a.​ All entities that issue an annual report must c.​ Relevance over comparability
issue an interim financial report. d.​ Comparability over neutrality
b.​ A complete set of financial statements must be SHARE-BASED PAYMENT
presented for an interim period. 1. Share options are what type of share-based payment
c.​ The same accounting principles used for the transaction?
annual report should be employed for the a.​ Asset-settled share-based payment transaction
interim report. b.​ Equity-settled share-based payment
d.​ All of these statements are true. transaction
11. Publicly traded entities are encouraged to provide c.​ Cash-settled share-based payment transaction
interim financial reports d.​ Liability-settled share-based payment
a.​ At least at the end of the half year and within transaction
60 days of the end of the interim period 2. The compensation in a share option plan is measured
b.​ Within a month of the half year-end. a.​ Fair value of share options on date of grant
c.​ On a quarterly basis. b.​ Fair value of share options on date of exercise
d.​ Whenever the entity wishes. c.​ Intrinsic value of share options on date of grant
12. An interim financial report shall include as a d.​ Intrinsic value of share options on date of
minimum all of the following components, except exercise
a.​ Condensed statement of financial position and 3. The date on which total compensation expense is
statement of comprehensive income computed in a share option plan is the
b.​ Condensed statement of cash flows a.​ Date of grant
c.​ Condensed statement of changes in equity b.​ Date of exercise
d.​ Accounting policies and explanatory notes c.​ Date when the market price coincides with the
13. There is a presumption that anyone reading interim option price
financial reports shall d.​ Date when the market price exceeds the option
a.​ Understand all International Financial Reporting price
Standards. 4. Compensation resulting from a share option plan is
b.​ Have access to the records of the entity. a.​ Recognized in the period of exercise.
c.​ Have access to the most recent annual report. b.​ Recognized in the period of the grant.
d.​ Not make decisions based on the report. c.​ Allocated to the periods benefited by the
14. When the business is highly seasonal, what does the employee's required service.
standard suggest? d.​ Allocated over the periods of the employee's
a.​ Additional note about the seasonal nature service life to retirement.
b.​ Disclosure of financial information for the 5. In what circumstances is compensation expense
latest and comparative 12-month period in immediately recognized under a share option plan?
addition to the interim report a.​ In all circumstances.
c.​ Additional disclosure in the accounting policy b.​ In circumstances when the options are
note exercisable within two years.
d.​ No additional disclosure c.​ In circumstances when the options granted for
prior service are immediately exercisable.
 d.​ In no circumstances is compensation expense 2. Noncurrent asset held for sale is measured at a
immediately recognized. a.​ Carrying amount
6. Share appropriation rights are what type of b.​ Fair value less cost of disposal
share-based payment tra action? c.​ Lower between carrying amount and fair value
a.​ Asset settled share-based payment transaction less cost of disposal
b.​ Liability settled share-based payment d.​ Higher of carrying amount and fair value less
transaction cost of disposal.
c.​ Cash settled share-based payment transaction. 3. Noncurrent asset held for sale is presented as
d.​ Equity settled share-based payment transaction a.​ Current asset
7. A cash settled share-based payment transaction b.​ Other noncurrent asset
increases which of the following? c.​ Noncurrent investment
a.​ A current asset d.​ Property, plant and equipment
b.​ A noncurrent asset 4. If the fair value less cost of disposal is lower than the
c.​ Equity carrying amount of a noncurrent asset classified as held
d.​ A liability for sale, the difference is
8. What is the measurement date for a share-based a.​ Not accounted for.
payment to employees that is classified as a liability? b.​ Accounted for as an impairment loss.
a.​ The service inception date c.​ Charged to depreciation.
b.​ The grant date d.​ Debited to retained earnings.
c.​ The settlement date 5. A noncurrent asset that is to be abandoned shall not
d.​ The end of reporting period be classified as held for sale because
9. For share appreciation rights, the measurement date a.​ The carrying amount is recovered principally
for computing compensation is the through continuing use.
a.​ Date the rights mature b.​ It is difficult to value.
b.​ Date the share reaches a predetermined c.​ It is unlikely that the noncurrent asset is old
amount within twelve months.
c.​ Date of grant d.​ It is unlikely that there is an active market for
d.​ Date of exercise the noncurrent asset.
10. In accounting for share appreciation rights, DISCONTINUED OPERATION
compensation expense is generally 1. Which criterion does not have to be met in order for
a.​ Not recognized an operation to be classified as discontinued?
b.​ Recognized on the date of grant a.​ The operation shall represent a separate major
c.​ Allocated over the service period of employees line of business or geographical area.
d.​ Recognized on the date of exercise b.​ The operation is part of a single plan to dispose
NON CURRENT ASSET HELD FOR SALE of a separate major line of business or
1. An entity shall classify a noncurrent asset as held for geographical area.
sale when c.​ The operation is a subsidiary acquired
a.​ The carrying amount of the asset is recovered exclusively with a view to resale.
through a sale transaction. d.​ The operation must be sold within three
b.​ The carrying amount of the asset is recovered months after the end of reporting period
through continuing use. 2. What is the presentation of the results from
c.​ The noncurrent asset is abandoned. discontinued operation in the income statement?
d.​ The noncurrent asset is idle.
 a.​ Single amount below income from continuing c.​ Netted against the loss from operations of the
operations component as a part of discontinued
b.​ Single amount below gross income operations.
c.​ Broken down into each category of revenue and d.​ Included in other comprehensive income.
expense 8. When a component of a business has been
d.​ Presented in the notes discontinued during the year, the loss on discontinued
3. Assets of discontinued operation are measured at operations should
a.​ Lower between fair value less cost of disposal a.​ Include operating loss of the current period.
and carrying amount b.​ Exclude operating loss during the period.
b.​ Fair value less cost of disposal c.​ Be classified an extraordinary item.
c.​ Net realizable value d.​ Be classified an operating item.
d.​ Higher between fair value less cost of disposal 9. When a component of a business has been
and carrying amount discontinued during the year, the operating loss of the
4. Which is not required for a discontinued operation? component for the current year should be included in
a.​ Management must have entered into a sale a.​ Income statement as part of revenue and
agreement. expenses.
b.​ The component is available for immediate sale. b.​ Income statement as part of the loss on the
c.​ The sale is highly probable discontinued operation
d.​ Management is committed to sell the c.​ Income from continuing operations
component at a reasonable price d.​ Retained Earnings
5. A business component shall be reported as 10. When an entity discontinued an operation, the
discontinued operation transaction should be reported as
a.​ When the entity classified it as held for sale. a.​ A prior period error
b.​ When the entity received an offer for the b.​ Other income and expense item
component c.​ A single amount after income from continuing
c.​ When the entity sold part of the assets of the operations and before net income
component d.​ Bulk sale of assets included in income from
d.​ When the entity sold majority of the assets of continuing operations.
the component EXPLORATION AND EVALUATION OF MINERAL
6. When a component of an entity was discontinued RESOURCES
during the year, the loss on discontinued operation 1. Exploration and evaluation expenditures are incurred
should a.​ When searching for an area that may warrant
a.​ Exclude the associated employee relocation detailed exploration even though the entity has
cost. not yet obtained the legal rights to explore a
b.​ Exclude operating loss for the period. specific area.
c.​ Include associated employee termination cost. b.​ When the legal right to explore a specific area
d.​ Exclude associated lease cancelation cost. has been obtained but the technical feasibility
7. When an entity decided to sell a business component, and commercial viability of extracting a
the gain on the disposal should be mineral resource are not) yet demonstrable.
a.​ Presented as other income. c.​ When a specific area is being developed and
b.​ Presented as an adjustment to retained preparations for commercial extraction are
earnings. being made.
 d.​ In extracting mineral resource and processing OPERATING SEGMENTS
the resource to make it marketable or 1. An operating segment is a component of an entity
transportable. a.​ That engages in business activities from which it
2. When is an entity required to recognize exploration may earn revenue and incur expenses.
and evaluation expenditure as an asset? b.​ Whose operating results are regularly reviewed
a.​ When such expenditure is recoverable in future by the entity's chief operating decision maker.
periods. c.​ For which discrete information is available.
b.​ When the technical feasibility and commercial d.​ All of these characterize an operating segment.
viability of extracting the associated mineral 2. For segment reporting, which tests must be applied
resource have been demonstrated. to determine if an operating segment is reportable?
c.​ When required by the entity's accounting a.​ Revenue test and asset test
policy for recognizing exploration and b.​ Revenue test, asset test and profit or loss test
evaluation asset. c.​ Revenue test, asset test and expense test
d.​ Such expenditure is always expensed as d.​ Revenue test, asset test and cash flow test
incurred. 3. The approach used in segment reporting is known as
3. Which of the following expenditures would never a.​ Segment approach
qualify as an exploration and evaluation asset? b.​ Revenue approach
a.​ Expenditure for acquisition of right to explore c.​ Management approach
b.​ Expenditure for exploratory drilling d.​ Enterprise approach
c.​ Expenditures related to the development of 4. Segment revenue includes
mineral resource a.​ Sales to unaffiliated customers
d.​ Expenditures for activities in relation to b.​ Sales to unaffiliated customers and
evaluating the technical feasibility and intersegment sales
commercial viability of extracting a mineral c.​ Sales to unaffiliated customers and interest
resource revenue
4. Which measurement model applies to exploration d.​ Sales to unaffiliated customers and other
and evaluation asset subsequent to initial recognition? income
a.​ Cost model. 5. In financial reporting for operating segments, an
b.​ Revaluation model entity shall disclose all of the following, except
c.​ Cost model and revaluation model a.​ Type of' product from which each reportable
d.​ Recoverable amount model segment derives revenue.
5. Which type of expenditure is included in exploration b.​ The title of the chief operating decision maker.
and evaluation of mineral resources? c.​ Factors used to identify the reportable
a.​ The extraction and processing of mineral segments.
resource for transport to market. d.​ Segment profit or loss.
b.​ The commercial review of possible areas for 6. Which quantitative threshold is not a requirement in
mineral extraction before bidding for the legal qualifying a reportable segment?
right to explore a specific area. a.​ The segment revenue, both external and
c.​ The expenditure incurred after the technical internal, is 10% or more of the combined
feasibility and commercial viability of extracting external and internal revenue of all operating
a mineral resource are demonstrable. segments.
d.​ None of these should be included in b.​ The segment profit or loss is 10% or more of the
exploration and evaluation expenditures. greater between the combined profit of
 profitable segments and combined loss of d.​ All of these are used in measuring financial
unprofitable segments. assets
c.​ The segment assets are 10% or more of the 2. Which of the following is a characteristic of a financial
combined assets of all operating segments. asset held for trading?
d.​ The segment assets are 20% or more of the a.​ It is acquired principally for the purpose of
combined assets of all operating segments. selling or repurchasing it in the near term.
7. An operating segment is considered reportable when b.​ It is measured at FVOCI.
any of the following conditions is met, except c.​ Any unrealized gain or loss is recognized as
a.​ Segment revenue is 10% or more of the component of OCI.
combined revenue of all segments. d.​ Any gain or loss on disposal is directly
b.​ Segment assets are 10% or more of the recognized in retained earnings.
combined assets of all segments. 3. Under IFS, the presumption is that equity investments
c.​ Segment liabilities are 10% or more of the are
combined liabilities of all segments. a.​ Held for trading
d.​ Segment profit or loss is 10% or more of the b.​ Held to profit from price changes
combined profit of all segments that did not c.​ Held for trading and held to profit from price
incur a loss. changes
8. The term chief operating decision maker d.​ Held as financial assets at fair value through
a.​ Refers to a manager with a specific title. other comprehensive income
b.​ Must be disclosed by title. 4. All of the following shall be measured at FVPL, except
c.​ Must be described in the disclosures for a.​ Financial asset held for trading
segments. b.​ Debt investment irrevocably designated at FVPL
d.​ Refers to a function of allocating resources to c.​ Investment in quoted equity instrument
the operating segments and assessing their d.​ Debt investment at amortized cost
performance. 5. Equity investments irrevocably accounted for at fair
9. Which is true about major customer disclosure? value through other comprehensive income are
a.​ A major customer is defined as one providing a.​ Nontrading investments of less than 20%.
revenue which amounts to 10% or more of b.​ Trading investments of less than 20%.
combined external revenue of all operating c.​ Investments of between 20% and 50%.
segments. d.​ Investments of more than 50%.
b.​ The identities of major customers need not be 6. Entities are required to measure financial asset based
disclosed. on all of the following, except
c.​ The entity shall disclose the total amount of a.​ The business model for managing financial
revenue from all major customers. asset.
d.​ All of these statements are true about major b.​ Whether the financial asset is a debt or an
customer disclosure. equity investment.
FINANCIAL INSTRUMENT c.​ The contractual cash flow characteristics of the
1. Depending on the business model for managing financial asset.
financial assets, an entity shall classify financial assets d.​ All of the choices are required.
subsequent to initial recognition at 7. Debt investments held for collection of contractual
a.​ Fair value through profit or loss cash flows are reported at
b.​ Amortized cost a.​ Net realizable value
c.​ Fair value through other comprehensive income b.​ Fair value
 c.​ Amortized cost c.​ The fair value is based upon an entry price.
d.​ The lower of amortized cost and fair value d.​ The price should be adjusted for cost to
8. Debt investments not held for collection of transport the asset to the principal market.
contractual cash flows are reported at 4. Which of the following is an assumption used in fair
a.​ Amortized cost value measurement?
b.​ Fair value a.​ The asset must be in-use
c.​ The lower of amortized cost and fair value b.​ The asset must be considered in-exchange
d.​ Net realizable value c.​ The most conservative estimate must be used
9. Debt investments reported at amortized cost are d.​ The asset is in the highest and best use
a.​ Managed and evaluated based on a 5. Which of the following would meet the qualifications
documented risk management strategy as market participants?
b.​ Trading debt investments a.​ A liquidation market in which sellers are
c.​ Held for collection debt investments compelled to sell.
d.​ All of these are correct b.​ A subsidiary of the reporting unit interested in
10. A debt investment shall be measured at fair value purchasing assets similar to those being valued.
through other comprehensive income c.​ An independent entity that is knowledgeable
a.​ When the debt investment is held for trading. about the asset.
b.​ When the debt investment is not held for d.​ A broker or dealer that wishes to establish new
trading. market for the asset.
c.​ By irrevocable designation 6. The fair value at initial recognition is
d.​ When the business model is to collect a.​ The price paid to acquire the asset.
contractual cash flows that are solely b.​ The price paid to acquire the asset less
payments of principal and interest and also to transaction cost.
sell the financial asset c.​ The price paid to transfer or sell the asset.
FAIR VALUE MEASUREMENT d.​ The carrying amount of the asset acquired.
1. Fair value of an asset should be based upon 7. Which of the following is not a valuation technique
a.​ The replacement cost of an asset. used in fair value measurement?
b.​ The price that would be received to sell the a.​ Income approach
asset at the measurement date. b.​ Residual value approach
c.​ The original cost of the asset. c.​ Market -approach
d.​ The price that would be paid to acquire the d.​ Cost approach
asset. 8. Valuation techniques for fair value that include the
2. Which describes a principal market for an asset? Black Scholes formula, a binomial model, or discounted
a.​ The market that has the greatest volume and cash flow are examples of which valuation technique?
level of activity for the asset. a.​ Income approach
b.​ Any broker or dealer market b.​ Market approach
c.​ The most observable market c.​ Cost approach
d.​ The market that maximizes the amount received d.​ Exit value approach
3. Which is true for measuring an asset at fair value? 9. What is the market approach for measuring fair
a.​ The price of the asset should be adjusted for value?
transaction cost. a.​ Present value of future cash flows
b.​ The fair value of the asset should be adjusted
for cost of disposal.
 b.​ Prices and other relevant information of
transactions from identical or comparable
assets
c.​ The price to replace the service capacity of the
asset
d.​ The average of the present value of future cash
flows
10. Which of the following would be considered a Level
2 input for fair value measurement?
a.​ Quoted market price on a stock exchange for an
identical asset
b.​ Quoted market price available from a business
broker for a similar asset
c.​ Historical performance and return on the
investment
d.​ All of these would be considered Level 2 input