BIT INTERNATIONAL COLLEGE

TAGBILARAN CITY

AE14/ CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS

SEMI-FINAL EXAMINATION

Name: ________________________________ Admission No. ___________

MULTIPLE CHOICE. (2 POINTS EACH)

1. It means the amount expected to be received by an ordinary shareholder each year as
a return on investment.
a. Earnings per share c. Liquidation value
b. Book Value per share d. Par Value

2. “Dividends in arrears” on cumulative preference shall be reported

a. As an expense c. As a noncurrent liability
b. As a current liability d. In the notes to Financial Statements
It is a financial instrument or other contract that may entitle its holder to
ordinary shares
a. Warrants c. Potential ordinary shares
b. Options d. Convertible bonds
3. It is a financial instrument or other contract that may entitle its holder to ordinary
shares
a. Warrants c. Potential ordinary shares
b. Options d. Convertible bonds

4. In computing basic loss per share, the required annual preference dividend on
cumulative preference share should be
a. Ignored.
b. Deducted from the net loss whether declared or not.
c. Added to the net loss whether declared or not.
d. Added to the net loss only when declared.

5. In computing EPS, (choose the incorrect answer)

a. Dividend on convertible preference share should be added back to net income
b. Interest expense on convertible bond should be added back to net income net of
tax
c. Recognized only if they are dilutive
d. It is considered pro forma because it indicates potential changes in number of shares

6. Under the treasury share method, the number of incremental ordinary shares
is equal to
a. Option shares.
b. Option shares minus assumed treasury shares acquired.
c. Assumed treasury shares acquired
d. Option shares actually issued during the year
6. Under the treasury share method, the number of incremental ordinary shares is equal to
a. Option shares.
b. Option shares minus assumed treasury shares acquired.
c. Assumed treasury shares acquired
d. Option shares actually issued during the year

7. Noncumulative preference dividends arrears

a. Are not paid and not disclosed
b. Must be paid before any other cash dividends can be distributed
c. Are disclosed as liability until paid
d. Are paid to preference shareholders if sufficient fund remain after payment of the
current preference dividend.

8. This financial instrument gives the holder the right to purchase an ordinary share
a. Potential ordinary share
b. Warrant or option
c. Rights issue
d. Equity instrument

9. Which of the following is not considered potential ordinary shares?

a. Financial liabilities or equity instruments including preference shares, that are not
convertible into ordinary shares
b. Share warrants
c. Share options or employee plans that allow employees to receive ordinary shares as
part of their remuneration
d. Shares which would be issued upon the satisfaction of certain conditions resulting from
contractual arrangements, such as purchase of a business

10. The “if converted” method of computing earnings per share assumes conversion of
convertible securities as of the
a. Beginning of the earliest period or at time of issuance, if later.
b. Beginning of the earliest period reported regardless of Time of issuance.
c. Middle of the earliest period reported regardless of the time issuance.
d. Ending of the earliest period reported regardless of the time of issuance.

11. Interim financial reports prepared in accordance with PAS 34 shall, at a minimum,
include
a. condensed set of financial statements
b. a statement of financial position and an income statement.
c. complete set of financial statements
d. semi-annual interim financial statements
 12. Green Corporation had the following transactions during the quarter ended March 31,
2023.
Loss from typhoon 700,000
Payment of fire insurance premium for CY 2023 100,000

What amount should be included in the income statement for the quarter ended March 31,
2023?
a. 800,000 b. 725,000
b. 200,000 d. 100,000
13. Pink Company incurred an apparently permanent inventory loss from market decline
of P840,000 during June 2023. What amount of the inventory loss should be recognized
in Pink’s quarterly income statement for the three months ended June 30, 2023?
a. 210,000 b. 280,000
c. 420,000 d. 840,000

14. Blue Company has estimated that total depreciation expense for the year ending
December 31, 2023 will amount to P600,000 and that 2023 year-end bonuses to
employees will total P1,200,000. In Blue’s interim income statement for the six months
ended June 30, 2023, what total amount of expense relating to these two items should be
reported?

a. 1,800,000 b. 300,000
c. 900,000 d. 0
15. If an entity does not prepare interim financial reports,
a. its annual financial statements would not conform to PFRSs.
b. its annual financial statements should not be described to have been prepared in
accordance with PRFSs
c. the conformance of its annual financial statements with PFRSs is not affected.
d. a and b.
Cost of disposal, except those that have been recognized as liabilities, are deducted in measuring
fair value less
costs of disposal.
o Legal costs, stamp duty and similar transaction taxes
o Costs of removing the asset
o Direct incremental costs to bring an asset into condition for its sale
Note: Termination benefits and costs associated with reducing or recognizing a business
following the disposal of an
asset are not regarded as costs of disposal.
16. Cost of disposal, except those that have been recognized as liabilities, are deducted in
measuring fair value less costs of disposal. Which of the following is treated as cost of
disposal?
a. Legal costs, stamp duty and similar transaction taxes
b. Costs of removing the asset
c. Direct incremental costs to bring an asset into condition for its sale
d. Termination benefits and costs associated with reducing or recognizing a business
following the disposal of an asset

17. According to PAS 36, if it not possible to determine the recoverable amount of an
individual asset
a. that asset is not impaired
b. the carrying amount of that asset should be written-off in its entirety, unless a rough-
estimation can be made.
c. the recoverable amount of that asset should be determined in relation to the cash-
generating unit to which it belongs
d. that asset is useless; it should be given away to the garbage collection guy.

18. The reversal of an impairment loss results to

a. gain and an adjustment to the depreciation charges in subsequent periods
b. a gain, but no adjustment to the depreciation charges in subsequent periods
c. a loss and an adjustment to the depreciation charges in subsequent periods
d. a loss, but no adjustment to the depreciation charges in subsequent periods

19. On January 1, 2020, Red Company purchased a machine for P8,000,000 and
established an annual depreciation charge of P1,000,000 over an eight-year life. During
2023, after issuing its 2022 financial statements, Red concluded that the machine suffered
permanent impairment of its operational value, and P2,000,000 is a reasonable estimate
of the amount expected to be recovered through the use of the machine for the period
January 1, 2023 through December 31, 2027.

In Red’s December 31, 2023 balance sheet, the machine should be reported at a carrying
amount of
a. 4,000,000
b. 1,000,000
c. 1,600,000
d. 0
20. Refer to Item 19. What is the amount of impairment loss should be reported on Red’s
income statement for the year ended December 31, 2022?
a. 5,000,000
b. 2,000,000
c. 3,000,000
d. 0

21.
1. A contingent asset should be disclosed by note if an inflow of economic benefits is
possible.
2. No disclosure of a contingent liability is required if the possibility of a transfer of
economic benefits arising is remote.
3. Contingent assets must not be recognised in financial statements unless an inflow of
economic benefits is virtually certain to arise.

a. All three statements are correct b. 1 and 3 only

c. 2 and 3 only d. None of the above

22. An onerous contract is a contract in which __________ of meeting the obligations

under the contract __________ the economic benefits expected to be received under it. a.
Sunk cost; exceed b. Avoidable costs; less than
c. Opportunity costs; exceed d. Unavoidable costs; exceed

23. On February 5, 2023, White filed a P2,000,000 lawsuit against Black Company for
damages suffered when one of Black’s plant exploded on November 30, 2022. Black’s
legal counsel, expects the company will probably lose the lawsuit and estimates the loss
to be P500,000. White has offered to settle the lawsuit out of the court for P900,000, but
Black will not agree to the settlement. In its December 31, 2022 balance sheet, what
amount should Black report as liability from the lawsuit?
a. 2,000,000 b. 0
c. 900,000 d. 500,000

24. Refer to Item #23. What amount should White record as income from lawsuit for the
year ended December 31, 2022?
a. 2,000,000 b. 0
c. 900,000 d. 500,000.

25. Refer to Item #23. In its December 31, 2022 balance sheet, what amount should
White report contingent asset?
a. 2,000,000 b. 0
c. 900,000 d. 500,000.

26. According to PAS 38, intangible assets are measured as follows:

Initial Measurement Subsequent Measurement
a. cost fair value
b. cost cost model or revaluation model
c. cost cost model or fair value
d. fair value cost model or revaluation model

27. Which of the following items would qualify as an intangible asset?

a. Advertising and promotion on the launch of a huge product.
b. College tuition fees paid to employees who decide to enroll in an executive
M.B.Aprogram at Harvard University while working with the entity.
c. Operating losses during the initial stages of the project
 d. Legal costs paid to intellectual property lawyers to register a patent.

28. Which of the following disclosures is not required with respect to intangible assets?
a. Useful lives of the intangible assets.
b. Reconciliation of carrying amount at the beginning and the end of the year.
c. Contractual commitments for the acquisition of intangible assets.
d. Fair value of similar intangible assets used by competitors.

29. The reason goodwill is referred to as a master valuation account is that

a. It represents the purchase price of a business that is about to be sold.
b. It is the difference between the fair value of the net identifiable assets as compared
with the purchase price of the acquired business.
c. The value of a business is computed without consideration of goodwill
and then goodwill is added to arrive at a master valuation.
d. It is the only account in the financial statements that is based estimated value.

30. Which of the following statements is incorrect regarding internal-use software?

a. The application and development costs should be amortized on a straight line basis
unless another systematic and rational basis is more appropriate.
b. Internal-use software is considered to be software that is marketed as a separate
product or as part of a product or process.
c. The costs of testing and installing computer hardware should be capitalized as
incurred.
d. The costs of training and application maintenance should be expensed as incurred
31. The following properties falls under the definition of investment properties except

a. Land held for a currently undetermined future use.

b. A building owned by the entity and leased out under an operating leases.
c. A building that is vacant and leased out under operating lease.
d. Property that is being constructed or developed on behalf of third parties

32. Which of the following statements is incorrect?

a. Investment property includes only land and building. It does not include any other
type of asset.
b. PAS 40 requires an entity to determine the fair value of the investment property,
regardless of the accounting policy used.
c. Under the fair value model, fair value is used for measurement purposes while under
the cost model, the cost is used for disclosure purposes.
d. PAS 40 encourages, but does not require, the use of an independent valuer in
determining the fair value of an investment property.
33. According to PAS 40, transfers to or from investment property shall be made only
when there is a
a. change in management’s intention
b. change in use
 c. change in business model
d. change in classification

34

35. Derecognition of an investment is not required when

a. it becomes the subject of an operating lease
b. it is sold
c. it is assessed to have no future economic benefits
d. it becomes the subject of finance lease

36. Which of the following is outside of the scope of PAS 41?

a. Dairy cattle used in the production of milk
b. Chickens used in the production of meat
c. Rice plants and other crops that produce only once
d. Mango trees and other plants that produce agricultural products repeatedly over a long
period of time

37. Agricultural activity includes all of the following, except

A. Raising livestock B. Perennial cropping
C. Aquaculture D. Ocean fishing

Refer Item 38-40.

The following information pertains to Orange Co.
Sheep 500,000 Wool 6,000
Rubber products 10,000 Thread 3,000
Trees in a timber plantation 95,000 Felled trees 8,000
Maize plants 40,000 Clothing 150,000
Lumber 62,000 Milk 9,000
Pigs 200,000 Carcass 7,000
Roasted peanuts 20,000 Sugar 67,000
Cotton plants 10,000 Harvested cotton 13,000
Peanut plants 5,000 Harvested peanuts 140,000
Sugarcane 25,000 Harvested cane 22,000
Tobacco plants 45,000 Picked leaves 3,000
Tea bushes 800,000 Oil palms 300,000
Dairy cattle 1,000,000 Picked grapes 2,000
Fruit trees 600,000 Picked fruit 10,000
Tea 43,000 Grape vines 2,000,000
Rubber trees 300,000 Harvested latex 10,000
Yarn 22,000 Cured tobacco 320,000
Carpet 3 3,000 Wine 500,000
Logs 45,000 Processed fruit 20,000
Wheat plants 60,000 Palm oil 50,000
Cheese 75,000 Bean plants 20,000
Sausages 88,000 Cured hams 92,000

38. How much is classified as biological assets that are accounted for under PAS
41Agriculture?
a. 2,660,000 b. 2,000,000 c. 6,000,000 d. 2,250,000

39. How much is classified as property, plant and equipment that are accounted for underPAS 16
Property, Plant and Equipment?
a. 4,000,000 b. 4,860,000 c. 4,560,000 d. 3,650,000

40. How much is classified as agricultural produce?

a. 149,000 b. 248,000 c. 290,000 d. 250,000

“God Bless”