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1
...
Which basic assumption may not be
followed when an entity in bankruptcy reports
financial results?

Correct answer: Board of Accountancy

Correct answer: Monetary unit assumption

2
...
Users of financial reports include which of
the following

Correct answer: The assigning of peso amounts
to the accountable events

Correct answer: Creditors, government
agencies and unions

3
...
Which of the following is not a basic
assumption underlying financial accounting?

Correct answer: Derive their credibility and
authority from general recognition and
acceptance by the accountancy profession
4
...
Accountants employed in entities in various
capacity as accounting staff, chief accountant
and controller are said to be engaged in
Correct answer: Private Accounting
6
...
The International Accounting Standards
Board was formed
Correct answer: to develop a single set of high
quality IFRS
8
...
Which of the following statements is
incorrect in relation to accountable events?
Correct answer: Sociological and physiological
matters are quantifiable
10
...
The economic entity assumption
Correct answer: Is applicable to all forms of
business organization
...
The accrual basis of accounting is most
useful for
Correct answer: Predicting the long-term
financial performance
16
...
The financial statements of an entity are
separate and distinct from financial statements
of the owners
...
The objectives of financial reporting are
based on
Correct answer: The needs of the users of the
information
19
...
Which underlying assumption serves as
the basis for preparing financial statements at
regular artificial points in time?
Correct answer: Accounting period

21
...
The need to have unbiased information
represents the qualitative characteristics of:

31
...
The statement of financial position

Correct answer: Neutrality

Correct answer: Omits many items that are of
financial value
...
The fundamental qualitative characteristics
of financial information are:

33
...
When preparing financial reports,
accountants are expected to use the same
accounting methods consistently from one
period to next
...
The statement of financial position
information is useful for all of the following,
except

Correct answer: consistency concept
25
...
Which statement is incorrect in relation to
the concept of capital?

Correct answer: Freedom from material error

Correct answer: The physical capital concept is
adopted by most entities in preparing financial
statements
...
Allowing entities to estimate rather than
physically count inventory at interim periods is
an example of tradeoff between

36
...
The primary users of general purpose
financial reports are:

37
...
Which of the following is not a
contributory factor towards faithful
representation?
Correct answer: Consistency
29
...
An item is ________ if knowledge of it
would affect or influence the decision of the
informed users of the financial statements
Correct answer: material

Correct answer: Cash fund set aside for
payment of equipment to be delivered a month
after reporting period
...
What would be an advantage of having all
countries adopt and follow the same
accounting standards?
Correct answer: Comparability and lower
preparation costs
39
...
Which of the following is a benefit of
providing financial information?
Correct answer: Improved allocation of
resources

41
...
What might a manager do during the last
quarter of a fiscal year if the intent is to
improve current annual net income?

Correct answer: President's letter

Correct answer: Relax credit policies for
customers
...
Revenue is
Correct answer: A subdivision of equity,
providing information about why equity
increased
...
A cash refund to a customer for
merchandise returned should be entered in
Correct answer: Cash payments journal
44
...

45
...

46
...

47
...

48
...

49
...


51
...
Which statement is correct in relation to
the income statement?
Correct answer: Additional disclosure is
required for the nature of expense when the
function of expense classification is used
...
The income statement information would
help in which of the following tasks?
Correct answer: Estimate future cash flows
54
...

55
...
Application of the full disclosure principle
Response: Requires that the financial
statements be consistent and comparable
...
Limitations of the income statement
include all of the following, except
Correct answer: Only actual amounts are
reported in determining net income
...
All of the following are required to appear
in the statement of changes in equity, except
Correct answer: Net cash received from issue of
shares during the period
59
...


60
...

Correct answer: True
61
...

Correct answer: False
62
...
Comprehensive income includes all
changes in equity during a period except those
resulting from investments by owners and
distributions to owners
...
Although the FASB has developed a
conceptual framework, no Statements of
Financial Accounting Concepts have been
issued to date
...
The objective of financial reporting is the
foundation of the conceptual framework
...
Verifiability and predictive value are two
ingredients of faithful representation
...
A conceptual framework is a coherent
system of concepts that flow from an objective
Correct answer: True
73
...


Correct answer: True

Correct answer: True

64
...
The elements of financial statements
include investments by owners
...
The idea of consistency does not mean that
companies cannot switch from one accounting
method to another
Correct answer: True
65
...

Correct answer: False
66
...

Correct answer: False
67
...

Correct answer: True
68
...

75
...

76
...

77
...

78
...
What is meant by comparability when
discussing financial accounting information?

88
...


Correct answer: decision usefulness
...
Which of the following is an ingredient of
relevance?

80
...


Correct answer: Neutrality
...
Which of the following is a fundamental
quality of useful accounting information?

81
...


Correct answer: Information that is measured
and reported in a similar fashion across points
in time
82
...

83
...

84
...

85
...
Financial information exhibits the
characteristic of consistency when
Correct answer: a company applies the same
accounting treatment to similar events, from
period to period
...
If the FIFO inventory method was used last
period, it should be used for the current and
following periods because of
Correct answer: consistency
...
The two fundamental qualities that make
accounting information useful for decision
making are
Correct answer: relevance and faithful
representation
...
Which of the following is a primary quality
of useful accounting information?
Correct answer: Faithful representation
...
The quality of information that means the
numbers and descriptions match what really
existed or happened is
Correct answer: faithful representation
...
Which of the following is a change in
accounting policy?
I - the application of an accounting policy for
transactions, other events or conditions that
differ in substance from those previously
occurring
II - the application of a new accounting policy
for transactions, other events or conditions that
did not occur previously or were immaterial
Correct answer: Neither I nor II
94
...

95
...
Which of the following should be accounted
for retrospectively?
Correct answer: Revaluation of land
97
...
It is the application of a new accounting
policy to transactions, other events and
conditions as if that policy had always been
applied
...
Which of the following is incorrect?
Correct answer: It is not inappropriate to make,
or leave uncorrected, immaterial departures
from IFRSs to achieve a particular presentation
of an entity’s financial position, financial
performance or cash flows
...
Tax effects of corrections of prior period
errors are accounted for in accordance with
what standard?
Correct answer: IAS 12
101
...

102
...

Correct answer: I or II
103
...
Change in accounting estimate is allowed
...
This is an adjustment of the carrying
amount of an asset or a liability, or the amount
of the periodic consumption of an asset, that
results from the assessment of the present
status of, and expected future benefits and
obligations associated with, assets and
liabilities
...
Which of the following is a correction of
an error that was committed from prior
periods?
Correct answer: Change from modified accrual
basis to accrual basis of accounting
...
Statement I: A prior period error shall be
corrected by retrospective restatement except
to the extent that it is impracticable to
determine either the period-specific effects or
the cumulative effect of the error
...
The following are not a characteristic of
change in accounting estimate, except for:
Correct answer: The prior period financial
statements are not affected
...
Which of the following is not true?
Correct answer: The use of reasonable
estimates is an essential part of the preparation
of financial statements but undermines their
reliability
...
Statement I: When it is impracticable to
determine the cumulative effect, at the
beginning of the current period, of an error on
all prior periods, the entity shall restate the
comparative information to correct the error
prospectively from the earliest date practicable
...

Correct answer: True; False
111
...

Statement II: Developing estimates is
potentially more difficult when retrospectively
applying an accounting policy or making a
retrospective restatement to correct a prior
period error
...
The effect of change in estimate should be
accounted for
Correct answer: The current and future period,
if the future period will be affected
113
...
PAS 2 Inventories shall not be applied to
which of the following?
Correct answer: assets held for use in the
production or supply of goods or services
115
...

116
...
Inventories of commodity broker-traders
are measured at
Correct answer: fair value less costs to sell

118
...

119
...
When the significant risks and rewards of
ownership are transferred to the buyer
II
...
The seller retains neither continuing
managerial involvement to the degree usually
associated with ownership nor effective control
over the goods sold
Correct answer: I, III
120
...
Identify the incorrect statement regarding
goods in transit
...

122
...
cost to be recognized as asset in the
statement of financial position
...
the amount recognized as expense in the
statement of profit or loss and other
comprehensive income when the related
revenues are recognized
...
obsolete items that need to be written down
to net realizable value
...
the point of sale where ownership is
transferred from the seller to the buyer
Correct answer: I and II

123
...
Inventories of producers of agricultural,
forest, and mineral products to the extent that
they are measured at net realizable value in
accordance with well-established practices in
those industries
...
Inventories of commodity broker-traders
measured at fair value less costs to sell
...
Inventories of a retail store
...
Inventories of a service concessionaire
...
Under this shipping cost agreement,
freight is paid in advance by the seller before
shipment
...
Which of the following is correct
regarding the recognition of inventories?
Correct answer: Inventories are recognized
only when they meet the definition of inventory
and they qualify for recognition as assets
...
Which of the following is incorrect
regarding the accounting for inventories?
Correct answer: Transfer of ownership over
inventories may coincide with or follow but
never precedes the transfer of physical
possession of the goods
...
In which of the following shall PAS 2
Inventories be applied?
Correct answer: Inventory of a service provider
consisting only of direct labor and overhead
127
...
Who should properly shoulder the freight
of the goods shipped?
Correct answer: the entity who owns the goods
129
...
Under this shipping cost agreement, the
buyer initially pays the freight of the goods
delivered
...
If the term of a purchase transaction is
FOB Destination, liability is recognized

134
...
Under this shipping cost agreement,
freight is not yet paid upon shipment
...

Correct answer: freight collect
136
...
If the term of a purchase transaction is
FOB Shipping Point, Freight prepaid, the party
who
finally shoulders the freight is the
Correct answer: buyer
138
...
Under this agreement, the seller should
pay for the freight of goods delivered
...
If the terms of a purchase or sale
transaction is FOB Destination, ownership is
transferred

Correct answer: FOB destination

Correct answer: when the buyer receives the
goods

Correct answer: seller

140
...
If the term of a purchase transaction is
FOB Destination, Freight collect, the party who
finally
shoulders the freight is the

150
...
If the term of a purchase transaction is
FOB Shipping Point, Freight prepaid, the party
who
initially shouldered the freight is the

151
...
When the opening balance of inventory or
net purchases during the period is overstated,
profit for the period is
Correct answer: understated
144
...

Correct answer: periodic system

Correct answer: proper determination of
periodic income and valuation of assets
152
...
Under the periodic system, which of the
following statements is correct?
Correct answer: If purchase returns is
understated, ending inventory is unaffected

145
...
Which of the following is not included as
inventory?

Correct answer: ending inventory is overstated

Correct answer: long-term major spare parts

146
...
Prior to physical count, cost of goods sold
under the periodic system is equal to

Correct answer: Understatement,
Overstatement
147
...
The entry to record the P10,000 freight
paid by the buyer on a purchase transaction
with terms of FOB Shipping Point, Freight
Collect is
Correct answer: Freight-in 10,000 Cash 10,000
149
...
Prior to physical count, the balance of the
inventory account of an entity using the
periodic system is
Correct answer: equal to the beginning balance
of inventory
157
...
If ending inventory is understated,
(choose the incorrect statement)
Correct answer: profit for the year is overstated
159
...
The entry to record the settlement of
P10,000 freight on a purchase transaction with
terms of FOB Shipping Point, Freight Prepaid
Correct answer: Accounts payable 10,000 Cash
10,000
161
...
The cost of inventory should not include
I
...

II
...

III
...

IV
...

V
...

VI
...

Correct answer: III, IV, VI
163
...
The purchase cost of inventories includes
all of the following, except

168
...
The specific identification method can be
used only:
Correct answer: when the actual acquisition
costs of individual units can be determined
from the accounting records
170
...
When determining the unit cost of an
inventory item, which of the following should
be included?
Correct answer: freight cost on the item
purchased
172
...
Reporting inventory at the lower of cost or
NRV is a departure from the accounting
principle of

173
...
The replacement cost is below
the net realizable value less the normal profit
margin
...
Generally accepted accounting principles
require the selection of an inventory cost flow
method which:

174
...
The cost of inventories includes
I
...
Costs of conversion
III
...
Which of the following methods of
measuring the cost of goods sold most closely
parallels the actual physical flow of the
merchandise?
Correct answer: Specific Identification

Correct answer: Trade discounts applicable to
purchases during the period
175
...

176
...
The inventory cost flow assumption where
the cost of the most recent purchase is matched
first against sales revenues is
Correct answer: none
178
...
Which of the following is least likely to be
included in determining the cost inventory?
Correct answer: Interest cost for amounts
borrowed to finance the purchase of inventory
180
...
Which of the following may not be
considered a “qualifying asset” under PAS 23?
Correct answer: An expensive private jet that
can be purchased from a local vendor
...
Under PAS 20, these are assistance by
government in the form of transfers of
resources to an entity in return for past or
future compliance with certain conditions
relating to the operating activities of the entity
...

Correct answer: Government grants
183
...

184
...
Under PAS 20, it is action by government
designed to provide an economic benefit
specific to an entity or range of entities
qualifying under certain criteria
...

Correct answer: Government assistance
186
...
These refer to interest and other costs
incurred by an entity in connection with the
borrowing of funds
...
It is an asset that necessarily takes a
substantial period of time to get ready for its
intended use or sale
...
Which of the following may not form a
valid basis for the accounting for government
grants?
Correct answer: cost principle
190
...
Other
borrowing costs are recognized as an expense
...
Which of the following assets may not
qualify as a qualifying asset?
Correct answer: Investment property measured
under the fair model
192
...

Score: 0 out of 1 No

193
...
Which of the following is not a term used
as substitute for government grants?
Correct answer: income tax holiday
195
...
An economic benefit received from the
government
II
...
With measurable value
IV
...
There is reasonable assurance that the
recipient entity will comply to the attached
conditions and that the grant will be received
...
Direct recognition in equity
...
What type of borrowing costs is eligible
for capitalization under PAS 23?
Correct answer: avoidable borrowing costs
197
...
Under PAS 20, this refers to government,
government agencies and similar bodies
whether local, national or international
...
Which of the following statements
incorrectly relate to the scope of PAS 20?
Correct answer: PAS 20 shall be applied in
accounting for, and in the disclosure of,
government grants and other forms of
government assistance
...
In relation to the accounting for
government grants, which of the following is
true?
Correct answer: Government grants, including
non-monetary grants at fair value, shall not be
recognized until there is reasonable assurance

that the entity will comply with the conditions
attaching to them and the grants will be
received
201
...
A new office building used by an
insurance entity as its head office which was
purchased specifically in the center of a major
city in order to exploit its capital gains
potential
...
An agricultural land is purchased for its
investment potential
...
Which of the following is correct?
Correct answer: the property may be classified
as investment property despite the lack of
permission
204
...

Which of the following may be treated as direct
costs of acquisition and, therefore, increases
the cost to be initially recognized for the
investment property?
Correct answer: Professional fees for legal
services and property transfer taxes
...
All of the following will not qualify as
investment property, except?
Correct answer: An agricultural land purchased
for appreciation purposes
206
...
An entity has a factory, which due to a
decline in activity, is no longer required and is
now classified as held for sale
...

208
...

209
...
The cost model used for property, plant, and
equipment is the same as the cost model used
for investment property
...
The revaluation model used for property,
plant, and equipment is the same as the fair
value model used for investment property
...
Identify the correct statements from the
following
...
Investment property may be valued
subsequent to initial recognition using the cost
model or the revaluation model
...
Depreciable properties measured under the
revaluation model are subject to depreciation
...
Depreciable investment properties
measured under the fair value model are not
subject to depreciation
...
The fair value of a property classified as
investment property measured under the fair
value model is required to be determined more
frequently than the fair value of a property
measured under the revaluation model
Correct answer: II, III, IV
211
...
Which of the following would be reported
as Investment Property?
Correct answer: Property available for lease
...
Which of the following statements best
describe 'owner-occupied property', according
to PAS40 Investment property?
Correct answer: Property held for use in the
production and supply of goods or services and
Property held for administrative purposes
214
...
The applicable PFRS/PAS for a property
being constructed or developed for future use
as investment property is
Correct answer: PAS 40, Investment Property
...
The distinguishing characteristic that
identifies an investment property from other
assets of an entity is?
Correct answer: Generates separately
identifiable cash flows from other assets of the
entities
217
...
The
property should be accounted for under
Correct answer: PAS 11
218
...

219
...
Which of the following is an investment
property?
Correct answer: Building rented out in an
operating lease where the owner provides
minimal services
221
...
Which of the following is not an
acceptable financial statement presentation for
intangible assets?

Score: 1 out of 1 Yes
229
...


Correct answer: Legal enforceability of a right
is a necessary condition for control because
without it an entity cannot be able to control
the future economic benefits from the asset
...
An asset that cannot be sold, transferred,
licensed, rented, or exchanged separately is
called
Correct answer: unidentifiable
24
...
Measurement of cost depends on how the
intangible asset is acquired
...
Separate acquisition
II
...
Acquisition by way of a government grant
IV
...
Internal generation
Correct answer: any of these
226
...
acquired an intangible asset
from 2UNITE Co
...
Which of the
following costs should be included as initial
cost of the intangible asset purchased?
Correct answer: non-refundable sales taxes
paid on the purchase
227
...
acquired an intangible
asset from IMAGINARY Co
...

Which of the following costs incurred by
Mythical should not be included as initial cost
of the intangible asset purchased?
Correct answer: advertising costs for the new
product that will be produced using the newly
acquired software
228
...
Future economic benefits from an
intangible asset may be obtained in various
ways which include
Correct answer: reduced operating costs
231
...
Which item listed below does not qualify
as an intangible asset?
Correct answer: Notebook computer
...
When an intangible asset is separately
acquired through purchase, which of the
following is incorrect?
Correct answer: trade discounts and rebates
are deducted from the purchase price only
when taken
224
...
the item meets the definition of intangible
asset
II
...
the cost of the asset can be measured
reliably
...
the entity becomes a party to the
contractual provisions of the intangible asset
V
...
If no active market exists for an intangible
asset, which of the following is true?
I
...
II
...
Which of the following provides the most
reliable estimate of the fair value of an
intangible asset?
Correct answer: quoted market price in an
active market
227
...


233
...
Which of the following is one of the
essential characteristics of an intangible asset?
Correct answer: identifiable
235
...
PAS 38 does not apply to all of the
following, except

236
...


Correct answer: right to utilize another entity’s
business concept

Correct answer: intangible asset

229
...
acquired an intangible asset
from SLENDER Co
...
All of the
following costs incurred by Svelte related to the
newly acquired asset should be expensed
immediately, except

Correct answer: Goodwill should be recorded
and periodically evaluated for impairment
...
The cost of intangible asset acquired in a
business combination is its
Correct answer: fair value at the acquisition
date
231
...
is separable, i
...
, capable of being separated
or divided from the entity and sold,
transferred, licensed, rented or exchanged,
either individually or together with a related
contract, asset or liability
II
...

Correct answer: I or II
232
...


237
...
After an impairment loss is recognized,
the adjusted carrying amount of the cashgenerating unit shall be its new accounting
basis
...
PAS 36 applies to all of the following
assets, except
Correct answer: Investment property measured
at fair value
240
...
PAS 36 applies to which of the following
assets?
Correct answer: Property, plant, and
equipment
242
...


243
...
If assets are to be disposed of

Correct answer: the smallest group of assets
that generates independent cash flows from
continuing use

Correct answer: The recoverable amount is the
fair value less costs of disposal
...
When deciding upon the discount rate to
be used, which factors should not be taken into
account?
Correct answer: Risks which relate to the asset
for which future cash flow estimates have been
adjusted
245
...
The asset is not impaired if
Correct answer: carrying amount is less than
recoverable amount
247
...

248
...

249
...
Value in use is:
Correct answer: the discounted present value of
future cash flows arising from use of the asset
and from its disposal
255
...
The carrying amount of the long-lived asset is
less than its fair value
...
The carrying amount of the long-lived asset
is not recoverable
...

256
...

257
...

258
...


250
...
Property, plant, and equipment must be
reviewed for impairment when which of the
following events occurs?

Correct answer: The recoverable amount is the
value-in-use
...
Goodwill should be tested for value
impairment at which of the following levels?

260
...

252
...
Estimates of future cash flows would
normally cover projections over a maximum of:
Correct answer: five years

262
...

263
...
Zombies Company owns a
number of herds of cattle
...
Are the following statements about
classification according to PAS 41 Agriculture
true or false?
I
...

II
...

Correct answer: False, True

270
...

271
...
According to PAS 41 this refers to the
management by an entity of the biological
transformation of biological assets for sale, into
agricultural produce, or into additional
biological assets
...
Agricultural activity covers a diverse
range of activities which includes all of the
following except
Correct answer: processing of grapes into wine
by a vintner who has grown the grapes
...
According to PAS41 Agriculture, which of
the following would be classified as a product
that is the result of processing after harvest?

274
...
Such diverse range of
activities have common features which includes
all of the following except

Correct answer: Cheese

Correct answer: Recognition of change

266
...
According to PAS41 Agriculture, which of
the following criteria must be satisfied before a
biological asset can be recognized in an entity's
financial statements?
I
...
It is probable that economic benefits
relating to the asset will flow to the entity
III
...
The asset forms a homogenous biological
group

Correct answer: fish pond operation
267
...
An entity had a plantation forest that is
likely to be harvested and sold in 30 years
...

269
...
Which of the following values is unlikely
to be used in fair value measurement of a
biological asset?
Correct answer: External independent
valuation

278
...

279
...
Biological assets
II
...
Agricultural produce at the point of harvest
IV
...
An unconditional government grant related
to a biological asset measured at cost land
related to agricultural activity
VI
...
According to PAS41 Agriculture, which of
the following items would be classified as
biological assets?
I
...
Chickens
III
...
Trees
Correct answer: II, IV
286
...

287
...


281
...
Commissions to brokers II
...
Transfer taxes and duties IV
...
At year-end , Zee Company has an
equipment with the following cost and
accumulated depreciation:
Equipment 9,000,000
Accumulated depreciation 3,000,000
Due to obsolescence and physical damage, the
equipment is found to be impaired
...
According to PAS 41 this refers to the
harvested product of the entity’s biological
assets
...

What amount should be recognized as cost of
the in-process research and development?

Correct answer: I, III, IV
280
...

Correct answer: Harvest

Correct answer: agricultural produce
283
...
It comprises the processes of growth,
degeneration, production, and procreation that
cause qualitative or quantitative changes in a
biological asset
...
Vanity Company showed the following
balance at year-end:
Copyright 500,000
Deposit with advertising agency used to
promote goodwill 400,000
Bond sinking fund 1,000,000
Excess of cost over fair value of identifiable net
Assets of acquired subsidiary 4,000,000
Trademark 900,000
What total amount should be reported as
intangible assets?
Correct answer: 5,400,000
292
...
The buildings have
been depreciated using the straight-line
method with a 20-year useful life and 10%
residual value
...

Because of the change in the use of the
buildings, the entity is evaluating the buildings
for possible impairment
...

The appropriate discount rate is 12%
...
65
...
Forester Company provided the following
assets in a forest plantation:
Freestanding tress 5,100,000
Land under trees 600,000
Roads in forests 300,000
Animals related to recreational activities
1,000,000
Bearer plants-rubber trees and grape vines
1,500,000
What total amount of the assets should be
classified as biological assets?
Correct answer: 5,100,000
294
...
The buildings have
been depreciated using the straight-line
method with a 20-year useful life and 10%
residual value
...

Because of the change in the use of the
buildings, the entity is evaluating the buildings
for possible impairment
...

The appropriate discount rate is 12%
...
65
...
On January 1, 2016, Boracay Company
bought a trademark from Lamitan Company
for P3,000,000
...
The carrying
amount of the trademark was P1,500,000 on
the books of Lamitan Company
...
Tobin Company incurred P1,600,000 of
research and development costs to develop a
product
For which a patent was granted at the
beginning of current year
...
At
the year-end, the entity paid P450,000 for legal
fees in a successful defense of the patent
...
Below is the shareholders' equity section
of PIC Company on December 31, 2014:
Preference share
...
2M
P3,000,000
Ordinary share, no par: 50,000 shares, issued
1,500,000
Donated capital 500,000
Accumulated profits 4,500,000
All preference dividends have been fully paid
...
00
Correct answer: P126
...
When an entity issues both consolidated
and separate financial statements, the EPS
information is required
Correct answer: Only for consolidated financial
statements

299
...

300
...
In computing basic earnings per share, if
the preference shares cumulative, the amount
that should be deducted as an adjustment to
the numerator is the
Correct answer: Annual preference dividend
302
...
Earnings per share shall be computed on
the basis of
Correct answer: A weighted average of the
number of shares outstanding during the year
except that minor fluctuations in the number of
shares may be disregarded
304
...
In computing basic earnings per share,
the full amount of the required preference
dividends on cumulative preference shares for
the period should be
Correct answer: Deducted from net income
whether declared or not
306
...
Ordinary shares issued as part of a
business combination are included in the EPS
calculation from
Correct answer: The date of acquisition

308
...
If a bonus occurs between the year-end
and the date that the financial statements are
authorized for issue
Correct answer: The EPS for both the current
and the previous year is adjusted
310
...
45
314
...
In addition,
the entity paid during the year an ordinary
dividend of P400,000 and a preference
dividend of P500,000 on the redeemable
preferences shares
...


Correct answer: Any change in the number of
ordinary shares without a change in resources

What amount should be reported as basic
earnings per share assuming the preference
shares are nonredeemable?

311
...
00

Correct answer: Ordinary dividend
312
...
50

Correct answer: 450,000

315
...

No dividends were declared on either the
preference or ordinary share in 2018 or 2017
...


313
...
50

313
...
Royal Company reported the following
capital structure on January 1, 2018:

Preference share capital, P10 par, 4%
cumulative,
25,000 shares issued and outstanding 250,000

Shares issued and outstanding
Ordinary share capital 200,000
Preference share capital 50,000

Ordinary share capital, P5 par, 200,000 shares
issued and outstanding 1,000,000

On October 1, 2018, the entity issued a 10%
stock dividend on ordinary shares and declared
the annual cash dividend of P200,000 on
preference shares
...

Net income for the year ended December 31,
2018 was P1,920,000
...

The entity paid no preference dividends during
2017 and paid P16,000 in preference dividends
during 2018
...
82
317
...

During 2018, the entity issued rights to acquire
one ordinary share at P100 in the ratio of one
share for every 5 shares held
...

The market value of each ordinary share
immediately prior to march 31, 2018 was P160
...

What amount should be reported as basic
earnings per share?
Correct answer: 17
...
On January1, 2018, Pink Company had
200,000 ordinary shares and 100,000 4%
P100 par value cumulative preference shares
outstanding
...

Net income for 2018 was P7,500,000
...
75
319
...

On July 1, 2018, a bonus issue was made in the
ratio of one additional ordinary share for each
original share
...
Laguna Company reported net income of
P15,000,000 for the current year
...

The next net income included a casualty loss of
P5,000,000 before income tax
...
00
320
...
Each preference share
is convertible into five ordinary shares
...
No dividends were paid or declared
...
0
321
...
The shareholders' equity of Joyful
Corporation on December 31, 2014 shows the
following account balances:
10% Preference share, 5,000 shares, P100 par
12% Preference share, 6
...

The last payment of dividends was on
December 31, 2012
...
68

323
...
Earnings per share should be computed
on the basis of
Correct answer: Voting ordinary share
325
...

326
...
What is the correct treatment of a share
dividend issued in mid-year when computing
the weighted average number of ordinary
shares outstanding for earnings per share
purposes?
Correct answer: The share dividend should be
weighted as if the additional shares were issued
at the beginning of the year
...
Expand Corporation's current statement
of financial position reports the following
shareholders' equity:
5% Cumulative preference share, P100 par
value per share,
5,000 shares issued and outstanding P500,000
Ordinary shire: P10 par value, 50,000 shares
issued
and outstanding 500,000
Share premium 300,000
Accumulated profits 700,000
Dividends in arrears on tile preference share
amount to P50,000
...
How much
would be the book value per share on ordinary
share?
Correct answer: P28
...
A component of an entity is classified as a
discontinued operation
I
...

II
...

Correct answer: Either I or II
330
...
When the discontinued criteria are met after
the end of the reporting period, the operation
shall retrospectively be separately presented as
a discontinued operation
...
The net cash flows attributable to the
operating, investing and financing activities of
a discontinued operation shall be separately
presented
...
According to PFRS 5, gains and losses on
remeasurement of assets held for sale are
Correct answer: recognized in profit or loss
332
...
A noncurrent asset or disposal group shall
be classified as held for sale when
I
...

II
...

Correct answer: Both I and II
334
...

Correct answer: Component of an entity
335
...
An entity classified a noncurrent asset
accounted for under the cost model as held for
sale at the current year-end
...
The
asset should be measured at the end of the
following year at
Correct answer: The lower of carrying amount
on the basis that it had never been classified as
held for sale and recoverable amount
...
The results of discontinued operations are
presented separately in the statement of profit
or loss and other comprehensive income
Correct answer: as a single amount net of tax
338
...
Represents a separate major line of business
or geographical area of operations
...
Is part of a single coordinated plan to
dispose of a separate major line of business or
geographical area of operations
...
Is a subsidiary exclusively with a view to
resale
...
A noncurrent asset that is to be
abandoned should not be classified as held for
sale because
Correct answer: Its carrying amount will be
recovered principally through continuing use
...
An entity shall recognize any subsequent
increase in fair value less cost to sell of a
noncurrent asset or disposal group classified as
held for sale as
Correct answer: Gain to be included in profit or
loss but not in excess of the cumulative
impairment loss previously recognized
341
...
The results of discontinued operation
shall be presented
Correct answer: On the face of the income
statement as a single amount below the income
from continuing operations
343
...

344
...
Which of the following statements is true
regarding the accounting treatment of costs to
sell under PFRS 5?
Correct answer: Costs to sell are discounted if it
is expected that the sale will be made beyond
one year
...
It is a group of assets to be disposed of by
sale or otherwise, together as a group in a
single transaction, and liabilities directly
associated with those assets that will be
transferred in the transaction
...
An entity has correctly classified its
manufacturing operation as a disposal group
held for sale and as discontinued operation
during the current year
...
The disposal group’s results for the preceding
year shall be re-presented as relating to
discontinued operation in the comparative
figures for the statement of comprehensive
income for the current year
...
The disposal group’s assets at the end of the
preceding year shall be re-presented as held for
sale in the comparative figures for the
statement of financial position at the current
year-end
...
An entity shall measure a noncurrent
asset or disposal group classified as held for
sale at
Correct answer: lower of carrying amount and
fair value less cost to sell
349
...
An asset that meets the criteria for
classification as held for sale after the end of
the reporting period but before the
authorization of the financial statements shall
be measured in the statement of financial
position at the lower of carrying amount and
fair value less cost to sell
...
To be classified as asset held for sale, the
sale must be expected to be completed within
12 months from the end of the financial year
...
In order for a noncurrent asset to be
classified as held for sale, the sale must be
highly probable
...

351
...
An entity shall classify a noncurrent asset
or disposal group as “held for sale” when
Correct answer: The carrying amount of the
asset or disposal group will be recovered
through a sale transaction
...
For the sale of a noncurrent asset held for
sale to be highly probable (choose the incorrect
one)
Correct answer: The sale should be expected to
qualify for recognition as a completed sale
within two years from the date of classification
of the asset as “held for sale”
...
According to PFRS 5, gain on impairment
reversal on an asset held for sale is
Correct answer: recognized only to the extent
of cumulative impairment losses previously
recognized
355
...




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