50.

Information on the utilization of economic resources is most useful when assessing an entity’s
a. management stewardship.
b. liquidity and solvency.
c. financial position and financial performance.
d. financial strengths and weaknesses, including the entity’s needs for additional financing

51.This refers to the comparability of financial statements of the same entity but in different periods.
a. Inter-comparability
b. Extra-comparability
c. Intra-comparability
d. Intro-comparability

52.Which of the following financial statements would not be dated as covering a certain reporting
period?
a. Statement of financial position
b. Statement of profit or loss and other comprehensive income
c. Statement of cash flows
d. Statement of changes in equity

53.Comprehensive income (or total comprehensive income) includes

a. Profit or loss
b. Other comprehensive income
c. a and b
d. All of these

54.What is the purpose of reporting comprehensive income?

a. To report changes in equity due to transactions with owners.
b. To report a measure of the overall financial performance of an entity.
c. To replace profit with a better measure.
d. To combine income from continuing operations with income from discontinued operations
and extraordinary items.
55.The information provided by financial reporting pertains to
a. individual business entities and the economy as a whole, rather than to industries or to
members of society as consumers
b. individual business entities, industries and the economy as a whole, rather than to members
of society as consumers
c. individual reporting entities, rather than to industries, the economy as a whole or members of
society as consumers
d. individual business entities and industries, rather than to the economy as a whole or to
members of society as consumers

56.Which of the following statements is correct when an entity departs from a provision of a PFRS?
a. The entity’s financial statements would be grossly incorrect; therefore, PAS 1 does not allow
such a departure.
b. PAS 1 permits such a departure if the relevant regulatory framework requires, or otherwise
does not prohibit, such a departure.
c. PAS 1 requires certain disclosures when an entity departs from a provision of a PFRS.
d. b and c

57.Which of the following statements is correct regarding the classification of financial liabilities as current or
noncurrent in accordance with PAS 1?
a. Currently maturing obligations are presented as current liabilities even if their original term is longer
than one year and even if a refinancing agreement is completed after the end of the reporting period
but before the financial statements are authorized for issue.
b. Currently maturing obligations are presented as noncurrent liabilities only if their original
term is longer than one year.
c. Currently maturing obligations are presented as noncurrent liabilities only if a refinancing
agreement is completed after the end of the reporting period but before the financial
statements are authorized for issue.
d. Currently maturing obligations are presented as noncurrent liabilities if a refinancing
agreement is completed after the financial statements are authorized for issue.

58.According to PAS 1, the judgments and estimates embodied in the financial statements, for example,
materiality judgments, assessments of uncertainty and risk, and the like, are the responsibility of the entity’s
a. management.
b. accountant.
c. auditor.
d. janitor.

59.Which of the following is not a disclosure requirement of PAS 1?

a. The financial effect of a departure when an entity departs from a PFRS requirement.
b. Any material uncertainties on the entity’s ability to continue as a going concern.
c. The recognition, measurement and disclosure of specific transactions and other events.
d. The reason for using a longer or shorter period when an entity changes the frequency of its
reporting.

60.An entity’s financial position or condition refers to which of the following?

a. The status of the entity’s assets, liabilities, and equity.
b. The amount of return that the entity has generated from its economic resources during the
period.
c. The level of change in the entity’s economic resources and claims to those resources, also
referred to as the economic phenomena.
d. All of these.

61.Comprehensive income excludes which of the following

a. Revaluation surplus
b. Gains and losses from investments measured at fair value through profit or loss
c. Income tax expense
d. Distributions to owners

62.Entity A needs guidance in accounting for its inventories. Entity A should refer to which of the
following?
a. PAS 1
b. PAS 2
c. PAS 7
d. PAS 8
63.Entity A needs guidance in preparing its statement of changes in equity. Entity A should refer to which of
the following?
a. PAS 1
b. PAS 2
c. PAS 7
d. PAS 8

64.Entity A buys and sells artifacts. Each artifact is unique and not ordinarily interchangeable.
According to PAS 2, the cost formula that Entity A should use is
a. Specific identification.
b. Weighted Average.
c. FIFO.
d. Any of these

65. Entity A acquires inventories and incurs the following costs:

Purchase price, gross of trade discount: 100,000
Trade discount: 20,000
Non-refundable purchase tax, not included in the purchase price above: 5,000
Freight-in (Transportation costs): 15,000
Commission to broker: 2,000
Advertisement costs: 10,000
How much is the cost of the inventories purchased?
a. 102,000
b. 122,000
c. 97,000
d. 100,000
Solution:

Purchase price, gross of trade discount 100,000

Trade discount (20,000)
Non-refundable purchase tax 5,000
Freight-in (Transportation costs) 15,000
Commission to broker 2,000
Total cost of inventories 102,000
66.Which of the following is presented in the activities section of the statement of cash flows?
a. Purchase of a treasury bill three months before its maturity date.
b. Dividends paid this year although declared in a prior year.
c. Acquisition of equipment through issuance of note payable.
d. Bank overdrafts that can be offset.

67.In the statement of cash flows of a non-financial institution, interest income received is presented under
a. operating activities.
b. financing activities.
c. investing activities.
d. a or c

68.An entity makes a change in accounting estimate. How does the entity recognize the effects of the change
in profit or loss?
a. Prospectively in the current period
b. Prospectively in the current and future periods
c. Retrospectively starting from the earliest period presented
d. a or b

69.Materiality does not make any difference with regard to

a. the separate presentation of items in the financial statements.
b. the disclosure of additional information in the notes.
c. intentional errors.
d. the level of rounding-off of amounts in the financial statements.

70.According to PAS 10, dividends declared after the reporting period, but before the financial
statements are authorized for issue, are
a. recognized as liability at the end of reporting period.
b. not recognized as liability at the end of reporting period.
c. disclosed only as an adjusting event.
d. any of these.

71.At the end of the period, Entity A has deductible temporary difference of ₱100,000. Entity A’s
income tax rate is 30%. Entity A’s statement of financial position would report which of the
following?
a. 30,000 deferred tax asset
b. 30,000 deferred tax liability
c. 30,000 deferred tax expense
d. 30,000 income tax expense

72.You are a business manager. During the period, you have authorized the acquisition of a
machine that will be used in your company’s manufacturing activities in the next 5 years. In your
selection of an appropriate accounting policy for the recognition and measurement of the
machine, which of the following reporting standards is most relevant?
a. PAS 1
b. PAS 2
c. PAS 16
d. PAS 32

73.Which of the following is not one of the principal issues in the accounting for PPE?
a. Recognition.
b. Initial measurement as asset.
c. Allocation of carrying amount over the period of use.
d. Recognition of carrying amount as expense when the related revenue is recognized

74.You are the General Manager of Entity A. You have received the actuarial report for your
company’s defined benefit plan. The report shows the following information:
PV of DBO – Jan. 1, 20x1 1,500,000
FVPA – Jan. 1, 20x1 1,200,000
PV of DBO – Dec. 31, 20x1 1,800,000
FVPA, end. – Dec. 31, 20x1 1,310,000
Actuarial gain 100,000
Return on plan assets 110,000
Discount rate 5%
When reporting on your company’s year-end highlights of financial summary, which of the
following will you report to the Board of Directors (the ‘big bosses’)?
a. Your company’s net liability for retirement benefits has increased by ₱490,000.
b. Your company’s net liability for retirement benefits has decreased by ₱300,000.
c. Your company’s net liability for retirement benefits has increased by ₱190,000.
d. I will tell them nothing.
Solution:
Net defined benefit liability, beg. (1.5M – 1.2M) = 300,000
Net defined benefit liability, end. (1.8M – 1.310M) = 490,000
Increase = 190,000

75. Entity A has 20 employees who are each entitled to one day paid vacation leave for each month of service
rendered. Unused vacation leaves are carried forward and can be used in future periods if the current period’s
entitlement is not used in full. However, unutilized entitlements are forfeited when employees leave the entity.
All the employees have rendered service throughout the current year and have taken a total of 150 days of
vacation leaves. The average daily rate of the employees in the current period is ₱1,000. However, a 5%
increase in the rate is expected to take into effect in the following year. Based on Entity A’s past experience,
the average annual employee turnover rate is 20%. How much will Entity A accrue at the end of the current
year for unused entitlements?

a. 0
b. 90,000
c. 75,600
d. 94,500
Solution: [(20 employees x 1 day x 12 months) – 150 days] x ₱1,000 x 105% x 80%* = 75,600
The paid absences are non-vesting.

76. Under a profit-sharing plan, Entity A agrees to pay its employees 5% of its annual profit. The bonus shall
be divided among the employees currently employed as at year-end. Relevant information follows:
Profit for the year ₱8,000,000
Employees at the beginning of the year 8
Average employees during the year 7
Employees at the end of the year 6
If you are an alumnus of Entity A, how much bonus do you expect to receive?
a. 66,667
b. 50,000
c. 57,143
d. 0
Explanation: Only those who are currently employed as at year-end are entitled to receive the bonus.
77.The transfer of resources from the government to an entity in exchange for past or future
compliance with certain conditions is called
a. Government grant.
b. Government assistance.
c. Government financial assistance.
d. Government asset transfer.

78.Entity A receives land from the government conditioned that the land will only be used in Entity A’s primary
business activities and should never be sold. If in case, Entity A decides not to use the land in its primary
business activities, it shall return the land to the government. Which of the following standards is least likely to
be relevant in accounting for the land?
a. PAS 2
b. PAS 16
c. PAS 20
d. All of these are relevant

79. On December 1, 20x1, you imported a machine from a foreign supplier for $100,000, due for
settlement on January 6, 20x2. Your functional currency is the Philippine peso. The relevant
exchange rates are as follows:
Dec. 1, 20x1 Dec. 31, 20x1 Jan. 6, 20x2
₱50:$1 ₱52:$1 ₱47:$1
The cost of the machine that will be disclosed in your December 31, 20x1 financial statements is
a. $100,000.
b. ₱5,000,000.
c. ₱5,200,000.
d. ₱4,700,000.
Solution: $100,000 x ₱50 spot exchange rate at acquisition date = ₱5M

80.On January 1, 20x1, Entity A started the construction of a qualifying asset. The qualifying asset is
financed through general borrowings. The average expenditures during the year amounted to
₱9,500,000. The capitalization rate is 11%. The actual borrowing costs incurred during the period
were ₱1,990,000. How much are the borrowing costs eligible for capitalization?
a. 1,990,000
b. 1,045,000
c. 1,090,000
d. 990,000
Solution:
Capitalizable BC from formula = 9,500,000 x 11% = 1,045,000
1,045,000 vs. 1,990,000 actual borrowing costs = Capitalizable BC is 1,045, 000