DR. FILEMON C.

AGUILAR MEMORIAL COLLEGE

MIDTERM EXAMINATION
CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS
1st Semester 2020-2021

Name ______________________________ Score ____________________

Date _______________________ Section ______ Instructor : Dr. Gutierrez, CPA, DBA__

MULTIPLE CHOICE : Choose the correct answer and write in capital letter on the space provided for
in each number.

1. All of the following describe accounting except

a. A service activity
b. An information system
c. A universal language of business
d. Exact science rather than an art

2. The accounting process is the recognition or non-recognition of business activities as

accountable events
a. Identifying
b. Measuring
c. Communicating
d. Reporting

3. What are the three main areas in the practice of the accountancy profession?
a Public accounting, private accounting and managerial accounting
b. Auditing, taxation and managerial accounting
c. Financial accounting, managerial accounting, corporate accounting
d. Public accounting, private accounting, government accounting

4. It is the area of the accountancy profession that encompasses the process of analyzing,
classifying, summarizing and communicating all transactions involving the receipt and
disposition of government funds and property, and interpreting the results thereof.
a. Internal auditing
b. External auditing
c. Private accounting
d. Government accounting

5. Which statement is true regarding managerial and financial accounting>

e. Managerial accounting is generally more precise
f. Managerial accounting need not follow generally accounting principles while
financial must follow GAAP
g. Managerial accounting has a future focus
h. The emphasis on managerial accounting is relevance and the emphasis on financial
accounting is timeliness.

6. What is the purpose of the conceptual framework?

i. To assist the IASB to develop IFRS based on consistent concepts
j. To assist preparers to develop consistent accounting policy when no Standards
apply to a particular transaction or when Standard allows a choice of accounting
policy
k. To assist all parties to understand and interpret the Standards
l. All of these can be considered a purpose of the Conceptual Framework

7. The underlying theme of the conceptual framework .is

a. decision usefulness
b. understandability
c. timeliness
d. comparability
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8. Which of the following is an internal user of financial information
a. board of directors
b. shareholders
c. holder of bonds
d. creditor with long term contract

9. In measuring financial performance, accrual accounting is used because

a. cash flows are considered less important.
b. it provides a better indication of ability to generate cash flows than cash basis
c. it recognizes revenue when cash is received
d. it is one of the implicit transactions

10. Under the revised Conceptual Framework, during a period when an entity is under the
direction of a particular management, financial reporting provides information about
a. both entity performance and management performance
b. management performance but not entity performance
c. entity performance but not management performance
d. neither entity performance nor management performance

11. An entity issuing the annual financial reports within one month after the end of the
accounting period is an example of which enhancing quality of accounting information.
a. Neutrality
b. Timeliness
c. Predictive value
d. Representational faithfulness

12. According to the conceptual framework, predictive value and confirmatory value are
ingredients of
a. relevance
b. faithful representation
c. understandability
d. comparability

13. Recognizing expected losses immediately but deferring expected gain is an example of
a. materiality
b. conservatism
c. cost effectiveness
d. timeliness

14. Conceptual framework includes which constraint?

a. Prudence
b. conservatism
c. costs
d. all the choices are constraint

15. The usefulness of providing information in the financial statements is subject to the
constraint of
a. consistency
b. cost-benefit
c. reliability
d. representational faithfulness

16. A reporting entity

a. can be a single entity
b. a portion of a single entity
c. can comprise more than one entity
d. all of the above
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17. Which of the following is not a basic assumption underlying financial accounting
a. Economic entity assumption
b. Going concern assumption
c. Periodicity assumption
d. Historical cost assumption

18. The valuation of a promise to receive cash in the future at present value is valid because of
what concept?
a. entity
b. time period
c. going concern
d. monetary unit

19. What is the accounting concept that justifies the usage of accruals and deferrals?
a. going concern
b. materiality
c. consistency
d. stable monetary unit

20. Which basic assumption may not be followed when a entity in bankruptcy reports financial
results?
a. economic entity assumptions
b. going concern assumption
c. periodicity assumption
d. monetary unit assumption

21. It is an increase in asset or a decrease in liability that results in the increase in equity other
than contribution from equity holders
a. asset
b. liability
c. income
d. expenses

22. Which statement in relation to income is true?

a. income encompasses both revenue and gain
b. revenue encompasses both income and gain
c. gain encompasses both income and revenue
d. income encompasses revenue only

23. Which is not within a definition of an asset?

a. an asset is a present economic resource
b. the economic resource is a right that has potential to produce economic benefits
c. the economic resource is controlled by the entity as a result of past events
d. future economic benefit is expected to flow to the entity.

24. It is the duty or responsibility that an entity has no practical ability to avoid.
a. right
b. obligation
c. equity
d. expense

25. An outflow of asset based on an activity that represents the major operations
a. loss
b. liability
c. expense
d. equity
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26. It is the removal of all or recognized asset or liability from the statement of financial position
a. write off
b. derecognition
c. extinguishment
d. retirement

27. Which of the following is not an acceptable basis for recognition of revenue?
a. passage of time
b. performance of service
c. completion of percentage of a project
d. upon signing of contract

28. The term recognized is synonymous with the term

a. recorded
b. realized
c. matched
d. allocated

29. Which of the following is an example of the cause and effect association principle?
a. sales commission
b. allocation of insurance costs
c. depreciation of PPE
d. officers’ salaries

30. Current value includes

a. fair and present value
b. fair value and current cost
c. current cost and present value
d. fair value, present value and current cost

31. It is the sorting of assets, liabilities, equity, income and expenses with similar characteristics.
a. classification
b. summarization
c. interpretation
d. recognition

32. All of the following can be considered appropriate classification, except

a. current and non-current assets
b. current and non-current liabilities
c. ordinary share capital and preference share capital
d. offsetting asset and liability

33. Financial capital is defined as

a. net assets in monetary terms
b. net assets in terms of physical productive capacity
c. legal capital
d. share capital issued and outstanding

34. The physical capital maintenance concept requires the adoption of what measurement basis?
a. historical cost
b. current costs
c. fair value
d. present value

35. Under the financial capital concept, net income occurs when
a. the nominal amount of net assets at year end increased
b. the physical productive capital at year end increased after excluding any distributions to
and contributions from owners.
c. the nominal amount of net assets at year-end increased after excluding distributions to
and contributions from owners.
 d. the physical productive capital at year-end increased.
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36. Financial statements must be prepared at least
a. annually
b. quarterly
c. semi-annually
d. monthly

37. When there is much variability, the operating cycle is measured at

a. The mean value
b. median value
c. 12 months
d. 3 years

38. In which section of the statement of financial position should cash that is restricted for the
settlement of a liability due 18 months after the reporting period be presented?
a. Current assets
b. equity
c. non-current liabilities
d. non-current assets

39. Treasury shares should be reported as

a. Current assets
b. Investment
c. Other asset
d. Reduction of shareholders’ equity

40. Which of the following is not a non-current investment?

a. cash surrender value of life insurance policy
b. franchise
c. land held for speculation
d. sinking fund

41. It is a change in equity during a period resulting from transactions and other events, other
than those changes resulting from transactions with owners in their capacity as owners
a. Profit or loss
b. comprehensive income
c. other comprehensive income
d. share capital

42. Other comprehensive income includes all, except

a. gain and loss arising from translating the financial
statements of a foreign corporation
b. gain and loss from debt investment measured at fair
value through OCI
c. gain and loss on hedging instrument in a cash flow
hedge
d.Dividend paid to shareholders

43. The income statement reveals

a. resources and equity at a point in time
b. resources and equity for a period of time
c. net earnings at a point in time
d. net earnings for a period of time

44. Which of the following items would cause net income to differ from comprehensive
income
a. unrealized loss on equity investment measured at fair
value through other comprehensive income
b. unrealized loss on investment held for trading
c. loss on exchange of similar assets
d. loss on exchange of dissimilar assets
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45. The income statement would help in which of the following
a. evaluate liquidity
b. evaluate solvency
c. estimate amount , timing and uncertainty of future cash
flows
e. estimate future financial stability
f.
46. Childish Company provided the following information in relation to an inventory
Materials 700,000
Storage costs of finished goods 180,000
Delivery to customers 40,000
Irrecoverable purchase taxes 60,000

At what figure should the inventory be measured?

a. 880,000
b. 760,000
c. 980,000
d. 940,000

47. ( IFRS )
Parrot Company provided the following inventory data
Materials 300,000
Production labor costs 330,000
Production overhead 120,000
General administrative costs 100,000
Marketing costs 50,000

What is the value of the completed inventory?

a. 630,000
b. 850,000
c. 750,000
d. 900,000

48. ( AICPA Adapted )

Virtue Company provided the following data for the current year

Merchandise purchases 4,000,000

Freight In 100,000
Freight Out 50,000
Purchase Returns 20,000
Interest on inventory loan 200,000

What is the inventoriable cost of the purchase?

a. 4,280,000
b. 4,030,000
c. 4,080,000
d. 4,130,000

49.
Mildred Company is a wholesaler of office supplies. The FIFO is used, The entity reported the following
activity for inventory of calculators during the month of August.

Units Cost
August 1 inventory 20,000 36.00
7 Purchase 30,000 37.20
12 Sale 36,000
21 Purchase 48,000 38.00
22 Sale 38,000
29 Purchase 16,000 38.60
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What is the ending inventory on August 31?

a. 1,500,800
b. 1,501,600
c. 1,522,880
d. 1,529,600

50. ( IAA )

The inventory of Hazel Company at the end of the current year is to be recorded at the lower of cost and net
realizable value. Ending inventory data follows :

ITEMS UNITS COST ESTIMATED SALES PRICE COST OF DISPOSAL

A 1,000 P 120 P 180 P 30

B 1,500 110 140 20
C 1,200 150 170 30
D 1,800 140 190 30
E 1,200 130 200 40

What is the inventory value applying the lower of cost and net realizable value?

Show solutions.
Box your answers.

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