QUIZ 1 ● The Conceptual Framework should

1. Which is not a purpose of the Revised increase users’ understanding and

Conceptual Framework? confidence in financial reporting
● To assist the IASB to develop IFRS 4. The presentation of notes to financial
based on consistent concepts. statements in a systematic manner
● To assist preparers to develop ● Is voluntary
consistent accounting policy when ● Is mandatory
no standard applies to a particular ● Is mandatory, as far as practicable
transaction or when Standard allows ● Depends on the industry
a choice of accounting policy. 5. All of the following components of OCI
● To assist all parties to understand should be reclassified to profit or loss,
and interpret the Standards. except
● To assist regulatory agencies in ● Gain and loss arising from
issuing rules and regulations for a translating the financial statements
particular industry. of a foreign operation.
2. When an entity breaches under a ● Gain and loss on remeasuring debt
long-term loan agreement on or before investment at FVOCI
the end of the reporting period with the ● The effective portion of gain or loss
effect that the liability becomes payable on hedging instrument in a cash flow
on demand, the liability is classified as hedge
● Current under all circumstances ● Gain or loss on remeasuring equity
● Noncurrent under all circumstances investment at FVOCI.
● Current if the lender agreed after the 6. In presenting a statement of financial
reporting period and before the position, an entity
issuance of the statements not to ● Must make the current and
demand payment as a consequence noncurrent presentation.
of the breach. ● Must present assets and liabilities in
● Noncurrent if the lender agreed after the order of liquidity.
the end of the reporting period to ● Must choose either the current and
provide a grace period for at least noncurrent or the liquidity
twelve months after the reporting presentation.
period. ● Must make the current and
3. Which statement is not true noncurrent presentation except
concerning the Conceptual Framework? when a presentation based on
● The Conceptual Framework should liquidity provides information that is
be a basis for standard setting. reliable and more relevant.
● The Conceptual Framework should 7. This comprises all “non-owner
allow practical problems to be solved changes in equity.” It excludes owner
more quickly. changes in equity, such as subscription,
● In cases of conflict, the Conceptual issuance, and reacquisition of share
Framework prevails over the capital and declaration of dividends.
relevant PFRS. ● Other comprehensive income
● Changes in equity
● Total comprehensive income
 ● Profit or loss ● Accounting standard in financial
8. Doubtful accounts expense is reporting
recognized according to which expense ● The meaning of “present fairly in
recognition principle? accordance with GAAP”
● Direct matching ● The objectives and concepts for use
● Immediate recognition in developing standards of financial
● Systematic and rational allocation accounting and reporting
● Critical event recognition ● The hierarchy of sources of GAAP
9. Neutrality is supported by the exercise 13. What is the “first item” presented in
of prudence. Prudence is the exercise of the notes to financial statements?
care and caution when dealing with ● Statement of compliance with PFRS.
uncertainties in the measurement ● Summary of significant accounting
process such that policies
● Assets and income are overstated ● Supporting information for items
● Liabilities and expenses are presented in the financial statements
understated ● Other disclosures, including
● Assets and income are not contingent liabilities and nonfinancial
overstated and liabilities and disclosures
expenses are not understated. 14. The assumption that an entity will not
● Assets, liabilities, income and be sold or liquidated in the near future is
expenses are not overstated. known as
10. Which of the following statements ● Economic entity assumption
about materiality is not correct? ● Monetary unit assumption
● An item must make a difference or it ● Time period assumption
need not be disclosed. ● Going concern assumption
● Materiality is a matter of absolute 15. An entity shall present an analysis of
size. expenses using a classification based on
● An item is material if omitting, ● The nature of expenses.
misstating or obscuring it could ● The function of expenses
reasonably be expected to influence ● Either the nature of expenses or the
the economic decision of primary function of expenses within the
users. entity, whichever provides
● Materiality is a subquality of information that is reliable and more
relevance. relevant.
11. Fundamental qualitative ● Either the nature of expenses or the
characteristics of accounting function of expenses within the
information are entity, whichever the entity would
● Relevance and comparability prefer to present.
● Comparability and consistency 16. A financial liability that is due to be
● Faithful representation and settled within twelve months after the
relevance reporting period shall be classified as
● Neutrality and verifiability noncurrent
12. The Conceptual Framework is
intended to establish
 ● When it is refinanced on a long-term 19. The term “revenue recognition”
basis before the issue of financial conventionally refers to
statements. ● The process of identifying
● When the entity has the right at the transactions to be recorded as
end of the reporting period to roll revenue in an accounting period.
over an obligation for at least twelve ● The process of measuring and
months after the and of reporting relating revenue and expenses of an
period. entity for an accounting period.
● When it is refinanced on a long-term ● The earning process which gives
basis after the end of reporting rise to revenue realization.
period. ● The process of identifying those
● Under all of these circumstances. transactions that result in an inflow
17. When an entity changes the end of of assets from customers.
the reporting period longer or shorter 20. The major financial statements
than one year, an entity shall disclose all include all, except
of the following, except ● Statement of financial position
● Period covered by the financial ● Statement of comprehensive income
statements. ● Statement of cash flows
● The reason for using a longer or ● Statement of retained earnings
shorter period. 21. What provides "the why" or the goal
● The fact that amounts presented in and purpose of accounting?
the financial statements are not ● Measurement and recognition
entirely comparable. concept
● The fact that similar entities in the ● Qualitative characteristic of
geographical area in which the entity accounting information
operates have done so. ● Element of financial statements
18. Materiality judgment is least likely to ● Objective of financial reporting
be applied in which of the following? 22. Which statement is not a specific
● in determining whether an item objective of financial reporting?
warrants separate presentation in ● To provide information that is useful
the financial statements or is to be in investment and credit decisions.
aggregated with other items ● To provide information about entity
● in determining whether information resources, claims against those
could influence the decisions of resources and changes in those
users, and therefore, must be resources.
presented in the financial statements ● To provide information on the
● in determining whether the cost of liquidation value of an entity.
processing and communicating ● To provide information that is useful
information exceeds the benefits in assessing cash flow prospects.
expected to be derived from it 23. Enhancing qualitative characteristics
● whether additional information needs of accounting information include
to be provided, including the level of ● Relevance, faithful representation
detail and conciseness of the and materiality
information’s presentation
 ● Comparability, understandability, ● Fair value, value in use, fulfillment
timeliness and verifiability value and current cost
● Faithful representation and 28. What is the new definition of liability
timeliness under the Revised Conceptual
● Materiality and understandability Framework?
24. What is the purpose of the notes to ● A present obligation of the entity
financial statements? arising from past event the
● To provide disclosures required by settlement of which is expected to
IFRS. result in an outflow of economic
● To correct improper presentation in benefit.
financial statements ● A present obligation of the entity
● To provide recognition of amounts arising from present event.
not included in financial statements ● A present obligation of the entity to
● To present management response to transfer an economic resource as a
auditor comments result of past event.
25. Inflation is ignored in accounting due ● An obligation that the entity has
to practical ability to avoid.
● Economic entity assumption 29. Which of the following financial
● Going concern assumption statements would be dated as at a
● Monetary unit assumption certain date?
● Periodicity assumption ● Statement of financial position
26. Which statement is not true about ● Statement of profit or loss and other
current value measurement? comprehensive income
● Fair value of an asset is the price ● Statement of cash flows
that would be received to sell an ● All of these
asset in an orderly transaction 30. What are the attributes that make
between market participants at the information provided in the financial
measurement date. statements useful to the readers?
● Value in use is the present value of ● Qualitative characteristics of
the cash flows expected to be financial information
derived from the use and ultimate ● Quantitative characteristics of
disposal of an asset. financial information
● Fulfillment value is the absolute ● Elements of financial statements
amount of cash expected to be ● Objectives of financial reporting
transferred for the payment of 31. Under the Revised Conceptual
liability. Framework, which of the following
● Current cost is the cost of an criteria need not be satisfied for a
equivalent asset at reporting date liability to exist?
comprising the consideration paid ● The entity has an obligation or a
and transaction cost. duty or responsibility that it has no
27. Current value includes practical ability to avoid
● Fair value ● The obligation is to transfer an
● Value in use economic resource and not the
● Fulfillment value ultimate outflow of economic benefit.
 ● The obligation is a present obligation ● The previous comparable period for
that exists as a result of a past all narrative and descriptive
event. information.
● The settlement of the obligation is ● The previous comparable period for
expected to result in an outflow of all amounts reported, and for all
economic benefit. narrative and descriptive information
32. This type of presentation of when it is relevant to an
statement of financial position does not understanding of the current period’s
show distinctions between current and financial statements.
noncurrent items. ● The previous two comparable
● Classified presentation periods for all amounts reported.
● Unclassified presentation
● Non-discriminating presentation QUIZ 2
● Awesome presentation 1. Which of the following statements
33. Faithful representation includes best describes a statement of cash
● Predictive value and confirmatory flows?
value ● The statement of cash flows shows
● Completeness, free from error and information on an entity’s income
neutrality and expenses during the period.
● Comparability and understandability ● The statement of cash flows is also
● Timeliness and verifiability called the statement of activities.
34. What is the new definition of an asset ● The statement of cash flows shows
under the Revised Conceptual historical changes of cash and cash
Framework? equivalents during the period.
● A resource controlled by the entity ● The statement of cash flows shows
as a result of past event and from information on an entity’s assets,
which future economic benefit is liabilities and equity.
expected to flow to the entity. 2. On December 1, 20x1, you imported a
● A resource controlled by the entity machine from a foreign supplier for
and from which future economic $100,000, due for settlement on January
benefit is expected to flow to the 6, 20x2. Your functional currency is the
entity. Philippine peso. When preparing the
● A present economic resource December 31, 20x1 statement of financial
controlled by the entity as a result of position, which of the following will you
past event. translate to the closing rate?
● A present economic resource ● a. Machine
controlled by the entity as a result of ● b. accounts payable
past event and from which future ● c. a and b
economic benefit is expected to flow ● d. none of these
to the entity. 3. According to PAS 10, these are those
35. An entity must disclose comparative events, favorable and unfavorable, that
information for occur between the end of the reporting
● The previous comparable period for period and the date when the financial
all amounts reported. statements are authorized for issue.
 ● Events after the reporting period ● A major customer liquidates its
● Adjusting events business after the end of the
● all of these reporting period.
● Non-adjusting events ● The entity announces a major
4. According to PAS 8, these are the restructuring after the end of the
specific principles, bases, conventions, reporting period.
rules and practices applied by an entity ● The settlement after the reporting
in preparing and presenting financial period of a court case that confirms
statements. that the entity has a present
● Accounting standards obligation at the end of reporting
● Accounting assumptions period.
● Accounting policies 8. In 20x1, Entity A proposes an
● Accounting estimates environmental clean-up project for a
5. Deferred tax assets and deferred tax river. The government supports this
liabilities do not alter the tax to be paid project and gives Entity A a ₱1M
in the current period. However, they monetary grant conditioned that the
cause tax payments to either increase or money will only be spent on the
decrease when they reverse in a future proposed project. The proposed project
period. The reversal of which of the is expected to take about 2 years to
following will cause an increase in tax complete. Entity A starts the clean-up
payment? project in 20x2. How should Entity A
● Deferred tax benefit recognize income from the government
● Deferred tax asset grant?
● Deferred tax expense ● in full when Entity A receives the
● Deferred tax liability grant
6. PAS 16 requires an entity to review the ● over 2 years starting in 20x1
depreciation method and the estimates ● over the period of the project as
of useful life and residual value at the expenses are incurred
end of each year-end. A change in any of ● the grant is not recognized as
these is accounted for using income
● a specific transitional provision of a 9. An asset is being constructed for an
PFRS. enterprise's own use. The asset has
● retrospective application. been financed with a specific new
● prospective application. borrowing. The interest cost incurred
● any of these during the construction period as a
7. Which of the following is most likely to result of expenditures for the asset is
be a non-adjusting event? ● a part of the historical cost of
● The determination after the reporting acquiring the asset to be written off
period of the cost of asset over the estimated useful life of the
purchased, or the proceeds from asset.
asset sold, before the end of ● interest expense in the construction
reporting period. period.
 ● recorded as a deferred charge and investments in marketable securities
amortized over the term of the during the year. How will the dividends
borrowing. be presented in Entity A’s statement of
● a part of the historical cost of cash flows?
acquiring the asset to be written off b. as operating activity
over the term of the borrowing used c. as financing activity
to finance the construction of the a. as investing activity
asset. d. a or b
10. During the period, deferred tax 15. Which of the following is presented
assets increase by ₱400 while deferred under the investing activities section of a
tax liabilities increase by ₱500. The net statement of cash flows?
change of ₱100 is a ● Collection of accounts receivable
● deferred tax liability ● Cash purchases of inventories
● deferred tax asset ● Purchase of equipment through cash
● deferred tax expense ● Issuance of share capital through
● deferred tax income cash
11. Which of the following is considered 16. Capitalization of borrowing costs
a government grant under PAS 20? ● Shall be suspended during
● Award of major government temporary periods of delay.
contracts ● May be suspended only during
● Cancellation of an existing loan from extended periods of delays in which
the government active development is delayed.
● Free technical advice ● Should never be suspended once
● Public improvements capitalization commences.
12. These are those which do not give ● Shall be suspended only during
rise to a right to receive (or an obligation extended periods of delays in which
to deliver) a fixed or determinable active development is delayed
amount of money. 17. These arise from misapplication of
● Monetary items accounting policies, mathematical
● Non-monetary items mistakes, oversights or
● Financial items misinterpretations of facts, or fraud.
● Non-financial items ● Change in accounting estimate
13. These arise from misapplication of ● Error
accounting policies, mathematical ● Impracticable application
mistakes, oversights or ● Change in accounting policy
misinterpretations of facts, or fraud. 18. Which of the following costs are
● d. PAS 8 does not permit a change included in the cost of inventories?
in accounting policy ● Administrative and general overhead
● a. is required by a PFRS ● Abnormal material usage
● c. a or b ● Storage costs relating to finished
● b. results in reliable and more goods
relevant information ● Transport costs for raw materials
14. Entity A, a financial institution,
received cash dividends from its
19. A change in the pattern of Solution:
consumption of economic benefits from
5m*10% = 500k
an asset is most likely a 7m + 500k -180k =7,320,000
● any of these
23.
● change in accounting policy.
● Error
● change in accounting estimate.
20. PAS 8 permits a change in
accounting policy only if the change
● d. PAS 8 does not permit a change ● 235,000
in accounting policy ● 310,000
● c. a or b ● 110,000
● a. is required by a PFRS ● 460,000
● b. results in reliable and more Solution:
relevant information
35K + 75K + 200K = 310K
21. At the end of the period, Entity A has
taxable temporary difference of 24 - 25
₱100,000. Entity A’s income tax rate is
30%. Entity A’s statement of financial
position would report which of the
following?
● 30,000 income tax expense
● 30,000 deferred tax expense
● 30,000 deferred tax liability
● 30,000 deferred tax asset
Solution:
100k*30% = 30k How much is the initial cost of the
TTD give rise to DTL equipment?
● 1,061,209
22. On January 1, 20x1, Entity A obtained
● 1,051,209
a 10%, ₱5,000,000 loan, specifically to
● 1,041,209
finance the construction of a building.
● 1,031,209
The proceeds of the loan were
Solution:
temporarily invested and earned interest
income of ₱180,000. The construction
was completed on December 31, 20x1 for
total construction costs of ₱7,000,000.
How much is the cost of the building on
initial recognition?
● 7,000,000
● 7,320,000
● 7,500,000 The equipment has an estimated useful
● 6,680,000 life of 10 years and a residual value of
₱200,000. Entity A uses the straight line
method of depreciation. How much is the
carrying amount of the equipment on ● 5,460
December 31, 20x3? ● 5,580
● 788,846 ● 5,180
● 802,846 ● 5,280
● 795,846 Solution:
● 764,846
Solution:

How much is the ending inventory under

the Weighted Average cost formula?
26-28 (The average is calculated as each
additional purchase is made, i.e.,
‘moving average’.)
● 5,580
● 5,680
How much is the ending inventory under ● 5,380
the FIFO cost formula? ● 5,860
● 6,540 Solution:
● 5,640
● 5,840
● 4,860
Solution:

29-33

How much is the component of the total

defined benefit cost to be recognized in
other comprehensive income?
How much is the ending inventory under ● 180,000
the Weighted Average cost formula? ● (180,000)
(The average is calculated on a periodic ● 60,000
basis.) ● (60,000)
How much is the total defined benefit Solution:
cost for 20x1? PV of DBO beg 1,800,000
● 588,000
● 468,000 FVPA beg 1,440,000
● 228,000
● 348,000 NDBL 360,000
Solution: How much is the component of the total
defined benefit cost to be recognized in
profit or loss?
● 408,000
● 18,000
● 390,000
● 348,000
Solution:
Service cost 390,000

Net interest on ndbl

(ndba) 18000

Total dbc in p/l 408,000

How much is the net defined benefit

liability (asset) in Entity A’s December
31, 20x1 statement of financial position?
● 588,000 liability
● 360,000 asset
● 588,000 asset
● 360,000 liability
Solution:
PV of DBO end 2,160,000

FVPA end 1,572,000

NDBL 588,000

How much is the net defined benefit

liability (asset) in Entity A’s December
31, 20x0 statement of financial position?
● 588,000 asset
● 588,000 liability
● 360,000 liability
● 360,000 asset