Cash, Receivables, Inventory, Biological Assets, PPE

Source: CPA Review Schools

Choose the best answer.

1. Bank overdraft , if material, should be B. The reimbursement of the petty cash fund
should be credited to the cash account
A. Reported as deduction from current asset
section C. The petty cashier’s summary of petty cash
payments serves as a journal entry that is
B. Reported as deduction from cash posted to the appropriate general ledger
account
C. reported as current liability
D. Entries that include a credit to the cash
D. Netted against cash and a net cash amount
account should be recorded at the time
reported
payments from the petty cash fund are made
2. The petty cash fund account under the
6. Which of the following should be considered
imprest fund system is debited
cash?
A. Only when the fund is created
A. Postdated checks
B. When the fund is created and every time it is
B. Certificates of deposit
replenished
C. Money market checking accounts
C. When the fund is created and when the size
f the fund is increased D. Money market savings certificates
D. When the fund is created and when the fund 7. Bank statements provide information about
is decreased all of the following, except
3. If the cash balance in an entity’s bank A. Checks cleared during the period
statement is less than the correct cash balance
and neither the entity nor the bank has made B. NSF checks
any error, there must be
C. Bank charges for the period
A. Deposits credited by the bank but not yet
recorded by the entity D. Errors made by the depositor entity

B. Outstanding checks 8. Subsequent to initial recognition, loans and

receivables are measured at
C. Bank charges not yet recorded by the entity
A. Cost
D. Deposits in transit
B. Amortized cost using straight line method
4. If the cash balance shown in an entity’s
accounting records is less than the correct cash C. Amortized cost using effective interest
balance and neither the entity nor the bank has method
made any error, there must be
D. Fair value
A. Deposits credited by the bank but not yet
9. All of the following are characteristics of
recorded by the entity
loans and receivables, except
B. Outstanding checks
A. They have fixed and determinable payments
C. Bank charges not yet recorded by the entity
B. The holder has demonstrated a positive
D. Deposits in transit intention and ability to hold them to maturity

5. Which is true when a petty cash fund is C. They are unquoted.

used?
D. The holder can recover substantially all of its
A. The petty cash fund balance should be investment unless there has been credit
reported as investment deterioration

Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 1

10. If there is an evidence that an impairment 15. When direct writeoff method is used, the
loss on loan receivable has been incurred, the entry to write off a specific customer account
amount of the loss is equal to the would

A. Excess of the principal amount of the loan A. Increase the net income
over its carrying amount
B. Have no effect on net income
B. Excess of the carrying amount of the loan
over the principal amount of the loan C. Increase both accounts receivable and net
income
C. Excess of the present value of cash flows
related to the loan over the carrying amount of D. Decrease both accounts receivable and net
the loan receivable income

D. Excess of the carrying amount of the loan 16. Which of the accounting principles primarily
receivable over the present value of the cash supports the use of allowance for doubtful
flows related to the loan accounts?

11. Credit balances in accounts receivable A. Continuity principle

should be classified as
B. Full disclosure principle
A. Part of accounts payable
C. Matching principle
B. Noncurrent liability
D. Conservatism
C. Current liability
17. Which of the following is a method to
D. Deduction from accounts receivable generate cash from accounts receivable?

12. A method of estimating doubtful accounts A. Assignment only

that focuses on the income statement rather
B. Factoring only
than the statement of financial position is the
allowance method based on C. Both A and B
A. Credit sales D. Neither A nor B
B. Direct write off 18. If financial assets are exchanged for cash
and other consideration but the transfer does
C. Aging of accounts receivable
not meet the criteria for a sale, the transferor
D. balance of accounts receivable and the transferee should account for
transaction as
13. Estimation of uncollectible accounts
receivable based on a percentage of sales i. Secured borrowing

A. Emphasizes measurement of NRV of ii. Pledge of collateral

accounts receivable
A.I only
B. Emphasizes measurement of total assets
B. II only
C. Emphasizes measurement of bad debt
C. Both I and II
expense
D. Neither I nor II
D. Is only acceptable for tax purposes
19. if receivables are hypothecated against
14. Which method of recording uncollectible
borrowings, the amount of receivables involved
accounts expense is consistent with accrual
should be
accounting?
A. Disclosed in the notes
A. Allowance method only
B. Excluded from the total receivables, with
B. Direct writeoff only
disclosure
C. Both A and B
C. . Excluded from the total receivables, with no
D. Neither A nor B disclosure

Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 2

D. Excluded from the total receivables and a B. Trade discounts
gain or loss is recognized between the face
value and the amount of borrowings C. Recoverable purchase taxes

20. Notes receivable discounted with recourse D. Import duties on shipping of inventory
should be inward

A. Included in total receivables with disclosure 25. Fixed production overheads include all of
of contigent liability the following, except

B. . Included in total receivables without A. Indirect materials and indirect labor

disclosure of contigent liability
B. Depreciation of factory building
C. Excluded from total receivables with
C. Maintenance of factory equipment
dislclosure of contingent liability
D. Cost factory management and administration
D. Excluded from total receivables without
dislclosure of contingent liability 26. Variable production overheads are allocated
to each unit of production on the basis of the
21. Accounting for the interest in a
noninteresting bearing note receivable is an A. Normal capacity of the production facilities
example of what aspect of accounting theory?
B. Actual use of the production facilities
A. Matching
C. Either the normal capacity or the actual use
B. Verifiability of production facilities
C. Substance over form D. Neither the normal capacity nor the actual
use of production facilities
D. Accounting entity
27. When manufacturing inventory, what is the
22. A note receivable bearing a reasonable
accounting treatment for abnormal freight in
interest rate is sold to bank with recourse. At
costs?
the date of the discounting transaction, the
note receivable discounted account should be A. Charge to expense for the period.
A. Decreased by the proceeds from discounting B. Charge to the finished goods inventory.
transaction
C. Charge to raw materials inventory.
B. Increased by the proceeds from the
discounting transaction D. Allocate to raw materials, work in process
and finished goods.
C. Increased by the face amount of the note
28. The costs of inventories of a service
D. Decreased by the face amount of the note provider include all of the following, except
23. Inventories are assets (choose the correct A. Labor and other costs of personnel directly
one) engaged in providing the service.
A. Held for sale in the ordinary course of B. Compensation of supervisor personnel
business. directly engaged in providing the service.
B. In the process of production for sale. C. Attributable overhead incurred in providing
the service.
C. In the form of materials or supplies to be
consumed in the production process or in the D. Profit margin factored into the price
rendering of services. charged against the customer by the service
provider.
D. Held for use in the production or supply of
goods or services. 29. The inventories of a service provider may
simply be described as
24. Which of the following should not be taken
into account when determining the cost of A. Work in progress
inventories?
B. Contract in progress
A. Storage costs of part-finished goods
C. Unbilled services

Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 3

D. Inventory of a service provider D. Neither I nor II

30. Theoretically, freight and warehousing costs 35. Inventories shall be measured at
incurred in the transfer of consigned goods
from the consignor to the consignee should be A. Cost
considered
B. Net realizable value
A. An expense by the consignor
C. Lower of cost and net realizable value
B. An expense by the consignee
D. Higher of cost and net realizable value
C. Inventoriable by the consignor

D. Inventoriable by the consignee 36. Net realizable value is the

31. The credit balance that arises when a loss A. Estimated selling price
on purchase commitment is recognized should
be B. Estimated selling price less cost to sell

A. Presented as a current liability C. Estimated selling price less cost to complete

B. Subtracted from ending inventory D. Estimated selling price less cost to complete
and cost to sell
C. Presented as an appropriation of retained
earnings 37. What is the method of accounting for
D. Presented in the income statement inventory in which the cost of goods sold is
recorded each time a sale is made?
32. The cost of inventories that are not
ordinarily interchangeable and goods or A. Periodic system
services produced and segregated for specific
projects shall be measured using B. Perpetual system

A. FIFO C. Professional system

B. Average method D. Accounting system

C. LIFO 38. During periods of rising prices, when the
D. Specific identification FIFO inventory cost flow method is used, a
perpetual inventory system would
33. The cost of inventories shall be measured
using A. Not be permitted

A. FIFO B. Result in a higher ending inventory than a

periodic inventory system
B. Average method

C. LIFO C. Result in the same ending inventory as a

periodic inventory system
D. Either FIFO or average method
D. Result in a lower ending inventory than a
34. Under the weighted average cost formula,
periodic inventory system.
the cost of each item is determined from the
39. In applying the retail method, the standard
I. Weighted average of the cost of similar items
at the beginning of a period and the costs of requires the use of
similar items at the end of the period.
A. Conservative retail
II. Weighted average of the cost of similar items
at the beginning of a period and the costs of B. Average cost retail
similar items purchased or produced during the
period. C. FIFO retail

A. I only D. LIFO retail

B. II only
C. Either I or II

Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 4

40. To produce an inventory valuation using the B. Annual perennial cropping
average retail inventory method, the
C. Floriculture and aquaculture, including fishing
computation of the ratio of cost to retail should
D. Ocean fishing
A. Include markups but not markdowns
46. Biological assets are measured at
B. Include markups and markdowns
A. Cost
C. Ignore both markups and markdowns
B. Lower of cost or net realizable value
D. Include markdowns but not markups
C. Net realizable value
41. At the certain stages of production,
D. Fair value less cost to sell
inventories of agricultural, forest and mineral
products are measured at 47. Agricultural produced is harvested product
of an entity’s biological assets and measured at
A. Net realizable value
A. Fair value
B. Cost
B. Fair value less cost to sell at the point of
C. Standard cost harvest

C. Net realizable value

D. Relative sales price
D. Net realizable value less normal profit margin
42. The commodities of broker-traders are
measured at 48. Where the fair value of the biological asset
cannot be determined reliably, the biological
A. Fair value asset shall be measured at

B. Fair value less cost to sell A. Cost

C. Net realizable value B. Cost less accumulated depreciation.

D. Lower at cost or market C. Cost less accumulated depreciation and

accumulated impairment losses.
43. Biological assets are
D. Net realizable value.
A. Living animals only 49. A gain or loss arising on the initial
recognition of biological asset and from a
B. Living plants only
change in fair value less cost to sell of a
biological asset shall be included.
C. Both living animals and living plants
A. The profit or loss for the period
D. Neither living animals nor living plants
B. Other comprehensive income.
44. The following provides examples of
biological assets, agricultural produce and C. A separate revaluation reserve
products that are the result of processing after
D. A general reserve
the harvest. Which is an incorrect combination?
50. It is the present value of the cash flows an
Biological asset Agricultural produce Product after harvest
entity expects to arise from the continuing use
A.Trees Felled trees Logs,lumber of an asset and from its disposal at the end of
its useful life or expects to incur when settling a
B. Dairy Cattle Cheese Milk liability.

A. Entity-specific value
C. Pigs Carcass Sausage
B. Fair value
D. Vines Grapes Wine
C. Value in use
45. Agricultural activity includes all of the
following, except D. Discounted value

A. raising livestock
Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 5
51. Major space parts and stand-by equipment asset given up, which is used in measuring the
which an entity expects to use over more the cost of the asset received?
one period would qualify as
A. Fair value of asset given up
A. Inventory
B. Fair value of asset received
B. Property, plant and equipment
C. Carrying amount of asset given up
C. Deferred charge
D. Either fair value of asset given up or fair
D. Expense value of asset received

52. Cost directly attributable to bringing the 56. Which is incorrect concerning self-
asset to the location and condition for its intend constructed asset?
use include all of the following, except
A. The cost of self-constructed asset is
A. Cost of employee benefits not arising determined using the same principles as for an
directly from the construction and acquisition acquired asset.
of property, plant and equipment.
B. Any internal profits from construction are
B. Cost of site preparation eliminated in arriving at the cost self-
constructed asset.
C. Initial delivery and handling cost
C. The cost of abnormal amounts of wasted
D. Installation and assembly cost material, labor or other resources incurred in
the production of a self-constructed asset is
53. Cost that are not included in the carrying
included in the cost of asset.
amount of an item of property, plant and
equipment but expensed immediately include D. If an entity makes similar assets for sale in
all of the following, except the normal course of business, the cost of the
asset is usually the same as the cost of
A. Cost of opening a new facility
constructing an asset.
B. Cost of introducing a new product or service,
57. The useful life of an asset is
including cost of advertising and promotional
activities I. The period over which an asset is expected to
be available for use by an entity
C. Cost of conducting business in a new
location, including cost of staff training II. The number of production of similar units
expected to be obtained from the asset by an
D. Cost of testing whether the asset is
entity.
functioning properly
A. I only
54. The cost of an item of property, plant and
B. II only
equipment that is acquired in exchange for
C. Both I and II
combination of monetary and nonmonetary
D. Neither I nor II
asset is measured at the
58. A variety of depreciation methods can be
A. Fair value of the asset given up pus the
used to allocate the depreciable amount of an
amount of any cash or cash equivalent
asset over its useful life. Which statement is
transferred.
incorrect?
B. Fair value of the asset received plus the
A. Straight line depreciation results in a
amount of any cash or cash equivalent
constant charge over the useful life if the assets
transferred
residual value does not change.
C. Carrying amount of the asset given up plus
B. The diminishing balance method results in a
the amount of any cash or cash equivalent
decreasing charge over the useful life.
transferred
C. The units of production method results in a
D. Carrying amount of the asset received plus
charged based on the expected use or output.
the amount of any cash or cash equivalent
transferred D. The sum of year’s digits method results in
an increasing charge over the useful life.
55. If an entity is able to determine reliably the
fair value of either the asset received or the

Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 6

59. Gain or loss from disposal of an item of
property, plant and equipment is equal to the
difference between

A. Fair value of the asset on balance sheet date

and its carrying amount

B. Net realizable value on balance sheet date

and its carrying amount

C. Net proceeds from disposal and the cost of

the asset

D. Net proceeds from disposal and the carrying

amount of the asset

60. For items of property, plants and equipment

with insignificant changes in fair value,
revaluations are necessary only every

A. Five years

B. Ten years

C. Three to five years

D. Five to ten years

61. Which statement is incorrect concerning the

class of property, plant and equipment to be
revalued?

A. When an item of property, plant and

equipment is revalued, the entire class
property, plant and equipment to which that
asset belongs shall be revalued.

B. A class of property, plant and equipment is a

grouping of assets of a similar nature and use in
an entity’s operation.

C. The items within a class of property, plant

and equipment are revalued selectively

D. A class of assets may be revalued on a rolling

basis provided revaluation of the class of assets
is completed within a short period of time and
provided the revaluations are kept up to date.

Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 7