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INTERMEDIATE ACCOUNTING PART III

FINAL EXAMS
1. ABC Co. has identified the following five operating segments: “Credit,” “Hotel,”
“Transportation,” “Grocery,” and “Events planning.” ABC Co. treats the “Hotel” and
“Events planning” as a single segment for internal reporting purposes. Each of the
“Events planning” and “Transportation” segments does not qualify under any of the
quantitative thresholds of PFRS 8. How should ABC Co. disclose its reportable
segments?
a. ABC Co. shall treat each of the “Hotel,” “Credit,” and “Grocery” as reportable
segments. The other segments should not be disclosed.
b. ABC Co. shall treat each of the “Hotel,” “Credit,” and “Grocery” as reportable
segments. The other segments should be combined and disclosed in the “All other
segments” category.
c. ABC Co. shall treat the “Hotel” and “Events planning” as a single reportable
segment and each of the “Credit” and “Grocery” segments also as reportable
segments. The “Transportation” segment shall be included in the “All other
segments” category.
d. ABC Co. shall treat the “Hotel” and “Events planning” as a single reportable
segment and combine all the other segments and report them under the “All other
segments” category.

2. An entity recently has acquired a new brand from a competitor company. The brand
qualifies as a component of an entity and represents a major line of business for which
discrete financial information is available. This operating segment does not meet any of
the threshold criteria for a reportable segment. Furthermore, this segment is unique
and does not share similar characteristics with the other operating segments of the
entity. Which of the following statements is correct?
a. The entity can disclose this new segment separately if it is a distinguishable
component and is used by management in internal reporting even though it does
not meet the PFRS criteria.
b. The entity cannot voluntarily disclose this new segment separately because PFRS 8
discourages voluntary disclosure of operating segments. Operating segments are
reportable only if they either result from aggregation or qualify under any of the
quantitative thresholds.
c. The entity can disclose this new segment separately only if it can be aggregated
with another operating segment and the combined segment qualifies in all of the
quantitative thresholds.
d. The entity can disclose this new segment separately only if it can be aggregated
with another operating segment and the combined segment qualifies in any of the
quantitative thresholds.

3. According to PFRS 8, a reportable operating segment is one which

a. management uses in making decisions about operating matters.
b. results from aggregation of two or more segments and qualify under any of the
quantitative thresholds.
c. a and b
d. none of these

4. Which of the following is not among the quantitative thresholds under PFRS 8?
a. at least 10% of total revenues (external and internal).
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b. at least 10% of the higher of total profits of segments reporting profits and total
losses of segments reporting losses, in absolute amount.
c. at least 10% of total assets (inclusive of intersegment receivables).
d. at least 10% of total revenues (external only)

5. According to PFRS 8, disclosures for major customer shall be provided if revenues from
transactions with a single external customer amount to
a. at least 75% of the entity’s external and internal revenues.
b. at least 75% of the entity’s external revenues.
c. 10% or more of the entity’s external revenues.
d. less than 10% of the entity’s external revenues.

1. Philippine Financial Reporting Standards (PFRSs) are Standards and

Interpretations adopted by the Financial Reporting Standards Council
(FRSC). They comprise:
a. Philippine Financial Reporting Standards (PFRSs)
b. Philippine Accounting Standards (PASs)
c. Interpretations
d. all of these

2. The correct arrangement of the following in accordance with the hierarchy of

financial reporting standards is
I. Conceptual framework
II. PFRSs comprising PASs, PFRSs, and Interpretations
III. Management’s judgment
IV. Standards issued by other standard-setting bodies that use a similar
framework
a. I, II, IV, III b. II, III, I, IV c. II, III, IV, I d. II,
I, III, IV

3. The types of accounting changes under PAS 8 are

I. change in accounting policy
II. change in accounting estimate.
III. change in reporting entity
IV. prior period errors
a. I and II b. I, II and III c. I, II, and IV
d. all of these

4. This type of accounting change results from change in measurement basis

a. Change in accounting policy c. Prior period error
b. Change in accounting estimate d. Change in reporting entity

5. This type of accounting change results from changes in the realization (or
incurrence) of expected inflow (or outflow) of economic benefits from assets
(or liabilities).
a. Change in accounting policy c. Prior period error
b. Change in accounting estimate d. Change in reporting entity

6. According to PAS 8, these are those adopted by an entity in preparing and

presenting its financial statements which shall be applied consistently.
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a. Accounting estimates c. PFRSs

b. Accounting policies d. Debit credit

7. Accounting policies shall be changed

I. when the change is required by PFRSs
II. when the change results in a more relevant and reliable information
a. I only b. II only c. I or II d. none

8. Changes in accounting policies are accounted for

a. based on specific transitional provisions of relevant PFRS
b. by retrospective application by restatement of the beginning balance of
retained earnings and by restatement of previously presented financial
statements, unless impracticable.
c. by prospective application
d. choice (a) or in the absence thereof then choice (b)

9. A voluntary change in accounting policy is accounted for

a. based on specific transitional provisions of relevant PFRS
b. by retrospective application by restatement of the beginning balance of
retained earnings and by restatement of previously presented financial
statements, unless impracticable.
c. by prospective application
d. choice (a) or in the absence thereof then choice (b)

10. Early application of a PFRS is

a. a voluntary change in accounting policy.
b. not a voluntary change in accounting policy.
c. an involuntary change in accounting policy.
d. a prior period error

11. Changes in accounting estimates are accounted for

a. based on specific transitional provisions of relevant PFRS
b. by retrospective application by restatement of the beginning balance of
retained earnings and by restatement of previously presented financial
statements, unless impracticable.
c. by prospective application
d. choice (a) or in the absence thereof then choice (b)

12. Which of the following is incorrect regarding the accounting for a change
in accounting estimate?
a. The effect of a change in accounting estimate affects profit or loss in the
current period or future periods, or both.
b. No adjustments are made to the beginning balance of retained earnings
or to previously presented financial statements.
c. The effect of a change in accounting estimate affects profit or loss in the
current period only.
d. Previous financial statements need not be adjusted to apply the changed
estimate in prior periods.
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13. A correction of prior period error is accounted for by (Item #1) while a
change in accounting policy is accounted for by (Item #2)
a. Retrospective restatement, Retrospective application
b. Retrospective application, Retrospective restatement
c. Prospective application, Retrospective restatement
d. None of these

14. If an entity adjusts the beginning balance of its retained earnings, then
there must be a
a. change in accounting policy c. change in accounting
estimate
b. correction of prior period error d. a or b

15. Adjustments to the beginning balance of retained earnings

a. are also presented in the income statement
b. are made because of a current period error
c. are made net of tax
d. are presented in the statement of financial position

16. Retrospective restatement and retrospective application (choose the

incorrect statement)
a. involves adjustments to the beginning balance of retained earnings
b. are presented in the statement of changes in equity
c. affects profit or loss in the current period
d. are not presented in the statement of financial position

17. Prior period errors in items of other comprehensive income

a. require net of tax adjustments to the beginning balance of retained
earnings
b. require gross of tax adjustments to the beginning balance of retained
earnings
c. may not require any adjustment to the beginning balance of retained
earnings
d. a or b as an accounting policy choice in accordance with PAS 1

18. Which of the following errors is not a counterbalancing error?

a. misstatement of unearned income and prepaid expenses
b. misstatement of accrued income and accrued expenses
c. misstatement of inventory
d. misstatement of depreciation

19. Which of the following statements is incorrect?

a. Counterbalancing errors automatically reverse in subsequent period if
not corrected.
b. Non-counterbalancing errors do not automatically reverse in subsequent
period.
c. Some errors affect only the statement of financial position.
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d. Errors in financial statement elements may be rectified by appropriate

disclosures in the notes.

20. If ending inventory is understated,

a. profit for the year is overstated
b. cost of sales for the year is also understated
c. working capital is overstated
d. profit for the year is also understated

21. If an asset-related account (e.g., prepaid insurance) is understated,

a. profit for the year is overstated
b. cost of sales for the year is also understated
c. working capital is overstated
d. profit for the year is also understated

22. If current assets are understated, working capital is

a. overstated c. effect is indeterminable
b. understated d. not affected

23. The effect of prior period errors in retained earnings

a. is none
b. is always counterbalancing
c. is equal to the sum of the effects of prior period errors to profit
d. is limited to the effect of non-counterbalancing errors only

24. Which of the following items are included in the statement of changes in
equity?
a. Total comprehensive income for the period, dividends declared, and
proceeds from issuance of share capital.
b. Proceeds from issuance of shares, loan notes issued or repaid, retained
profit for the period, surplus on revaluation of non-current assets.
c. Profit on ordinary activities, income tax expense, extraordinary items.
d. Accumulated profits, reserves, issued share capital, and profit sharing of
employees.

25. The initial adoption of the revaluation model for PPE is

a. a change in accounting policy accounted for under PAS 16 Property, plant
and equipment
b. a change in accounting policy accounted for under PAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors
c. a change in accounting estimate accounted for prospectively
d. a change in accounting estimate accounted for retrospectively

26. According to PAS 8, these are the specific principles, bases, conventions,
rules and practices applied by an entity in preparing and presenting
financial statements.
a. Accounting principles c. Accounting assumptions
b. Accounting policies d. Financial Reporting Standards
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27. It 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.
a. Change in accounting estimate c. Prior period error
b. Change in accounting policy d. Fundamental error

28. Omissions or misstatements of items are material if they could,

individually or collectively; influence the economic decisions of users taken
on the basis of the financial statements. Materiality depends on the
a. judgment of users, specially regulatory bodies
b. size and nature of the omission or misstatement judged in the
surrounding circumstances
c. relevance of the matter
d. judgment of the auditor and provisions of standards

29. These are omissions from, and misstatements in, the entity’s financial
statements for one or more prior periods arising from a failure to use, or
misuse of, reliable information that: (a) was available when financial
statements for those periods were authorized for issue; and (b) could
reasonably be expected to have been obtained and taken into account in the
preparation and presentation of those financial statements.
a. Change in accounting estimate c. Prior period error
b. Change in accounting policy d. Fundamental error

30. According to PAS 8, prior period errors include the effects of the following
I. mathematical mistakes
II. mistakes in applying accounting policies
III. oversights or misinterpretations of facts
IV. fraud
a. II, IV b. I, II, III c. III, IV d. all of these

31. This refers to applying a new accounting policy to transactions, other

events and conditions as if that policy had always been applied.
a. Retrospective restatement c. Change in accounting policy
b. Prospective application d. Retrospective application

32. It results when the entity cannot apply it after making every reasonable
effort to do so.
a. Impracticable application
b. Impractical application
c. Accounting failure
d. Financial Statement Preparation Failure

33. This refers to (a) applying the new accounting policy to transactions,
other events and conditions occurring after the date as at which the policy
is changed; and (b) recognizing the effect of the change in the accounting
estimate in the current and future periods affected by the change.
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a. Prospective restatement c. Change in accounting estimate

b. Prospective application d. Pro forma financial statements

34. This refers to correcting the recognition, measurement and disclosure of

amounts of elements of financial statements as if a prior period error had
never occurred.
a. Retrospective restatement c. Correction of Prior Period Error
b. Correction of Fundamental Error d. Retrospective application

35. For a particular prior period, it is impracticable to apply a change in an

accounting policy retrospectively or to make a retrospective restatement to
correct an error if:
I. the effects of the retrospective application or retrospective restatement
are not determinable
II. the retrospective application or retrospective restatement requires
assumptions about what management’s intent would have been in that
period
III. the retrospective application or retrospective restatement requires
significant estimates of amounts and it is impossible to distinguish
objectively information about those estimates.
a. I or II b. I or III c. I, II or III d. II and III

36. Which of the following statements is incorrect?

a. Implementation Guidance for Standards issued by the IASB does not
form part of those Standards, and therefore does not contain
requirements for financial statements.
b. Changes in accounting estimates result from new information or new
developments and, accordingly, are not corrections of errors.
c. The initial application of a policy to revalue assets in accordance with
PAS 16 Property, Plant and Equipment or PAS 38 Intangible Assets is a
change in an accounting policy.
d. An entity shall account for a change in accounting policy resulting from
the initial application of a Standard or an Interpretation in accordance
with the specific transitional provisions, if any, in that Standard or
Interpretation
e. When an entity changes an accounting policy upon initial application of
a Standard or an Interpretation that does not include specific transitional
provisions applying to that change, or changes an accounting policy
voluntarily, it shall apply the change prospectively.

37. 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.
a. I and II b. I or II c. I only d. Neither I nor II

38. Which of the following statements is incorrect?

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a. For the purpose of PAS 8, early application of a Standard or an

Interpretation is not a voluntary change in accounting policy.
b. When an entity applies a new accounting policy retrospectively, it applies
the new accounting policy to comparative information for prior periods as
far back as is practicable.
c. The amount of the resulting adjustment relating to periods before those
presented in the financial statements is made to the opening balance of
each affected component of equity of the earliest prior period presented.
Usually the adjustment is made to retained earnings.
d. When it is impracticable for an entity to apply a new accounting policy
retrospectively because it cannot determine the cumulative effect of
applying the policy to all prior periods, the entity applies the new policy
prospectively from the start of the earliest period practicable. It therefore
disregards the portion of the cumulative adjustment to assets, liabilities
and equity arising before that date.
e. The use of reasonable estimates is not an essential part of the
preparation of financial statements and may undermine their reliability.

39. The effect of a change in an accounting estimate shall be recognized

prospectively by including it in profit or loss in:
I. the period of the change, if the change affects that period only
II. the period of the change and future periods, if the change affects both
a. II only b. I or II c. I only d. Neither I nor II

40. To the extent that a change in an accounting estimate gives rise to

changes in assets and liabilities, or relates to an item of equity, it shall be
recognized by adjusting the carrying amount of the related asset, liability or
equity item in
I. the period of the change
II. the period of the change and future periods
a. I and II b. I or II c. I only d. Neither I nor II

41. Either the direct method or the indirect method of presenting cash flows
is used in presenting cash flows from
a. operating activities only c. financing activities only
b. investing activities only d. any of these activities

42. With regards to the preparation of statement of cash flows using the
indirect method, which of the following statements is correct?
I. Amortization of bond discount on long term debt should be presented
in a statement of cash flows as subtraction from profit.
II. Amortization of bond premium on long term debt should be presented
in a statement of cash flows as subtraction from profit.
III. Amortization of bond discount on a bond investment should be
presented in a statement of cash flows as subtraction to from profit.
IV. Amortization of bond premium on a bond investment should be
presented in a statement of cash flows as subtraction to from profit
a. I and III b. I and IV c. II and III d. II and IV
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43. During the year, REVERIE DAYDREAM Co.’s unamortized bond discount
account decreased by P30,000. If REVERIE prepares its statement of cash
flows using the indirect method, how is the change in unamortized bond
discount shown in the statement of cash flows?
a. As an addition to profit in the operating activities section.
b. As a subtraction from profit in the operating activities section.
c. As a financing cash inflow.
d. As a financing cash outflow.

44. Which of the following financial statements readily shows information on

whether the reporting entity obtained cash financing during the period by
issuing debt of equity instruments?
a. Statement of financial position
b. Statement of cash flows.
c. Statement of changes in equity.
d. Statement of profit or loss and other comprehensive income

45. During the current year, INCIPIENCY BEGINNING Co. amortized a bond
discount. INCIPIENCY prepares its statement of cash flows using the
indirect method. In which section of the statement should INCIPIENCY
report the amortization of the bond discount?
a. Financing activities. c. Investing activities.
b. Operating activities. d. Cash equivalents.

46. Which of the following items is specifically included in the body of a

statement of cash flows?
a. Operating and non-operating cash flow information
b. Conversion of debt to equity
c. Acquiring an asset through a finance lease
d. Purchasing a building by giving a mortgage to the seller.

47. On the face of the statement of cash flows, all of the following would be
specifically identified as cash in(out)flows from investing activities except for:
a. purchase of fixed assets. c. gain on sale of equipment.
b. sale of fixed assets. d. none

48. The statement of cash flows provides us with important clues on all of
the following except:
a. Financial practices of management.
b. Projected changes for the following year in current liability accounts.
c. Feasibility of financing capital expenditures.
d. Ability to meet debt service requirements.

49. The primary purpose of the statement of cash flows is to

a. provide information about a company's cash receipts and cash payments
during the accounting period
b. measure the change in the company's assets
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c. state the company's financial position at period-end

d. analyze net income during the accounting period

50. The amortization of a copyright may be presented in

a. operating activity. c. an investing activity.
b. financing activity. d. none of these.

51. Purchasing treasury share for cash is a(n)

a. operating activity. c. investing activity.
b. financing activity. d. none of these.

52. In using a work sheet approach to preparing a statement of cash flows,

after all the changes in the balance sheet accounts have been explained and
entered on the work sheet, the
a. cash account is adjusted to an accrual basis.
b. change in the Cash account is also explained.
c. changes in the income statement accounts are also explained.
d. general journal entries are prepared.
(Adapted)

53. Which of the following items would not be found on a statement of cash
flows prepared using the direct method?
a. Interest Received c. Interest Paid
b. Profit d. Issue of Bonds Payable for Cash

54. Declaring and paying a cash dividend is normally a(n)

a. operating activity. c. investing activity.
b. financing activity. d. none of these.

55. Purchasing a new plant by issuing a mortgage is a(n)

a. operating activity. c. investing activity.
b. financing activity. d. none of these.

56. Receiving dividends on securities held is normally a(n)

a. operating activity. c. investing activity.
b. financing activity. d. none of these.

57. Purchasing long-term investments for cash is

a. operating activity. c. investing activity.
b. financing activity. d. none of these.

58. Purchasing land for cash is a(n)

a. operating activity. c. investing activity.
b. financing activity. d. none of these.

59. An entity needs to purchase 20 warehouses in various states. To finance

the cash purchases, it issues new shares in a seasoned equity offering. It
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also issues high coupon bonds on which interest must be paid semi-
annually. If the entity purchases the warehouses at the beginning of the
year, which of the cash flows will be affected in the year-end statements?
Investing Operating Financing
I. affected affected affected
II. unaffected affected affected
III. affected unaffected affected
IV. unaffected unaffected unaffected

a. I. b. II. c. IV. d. III.

60. Which of the following does not affect an entity’s cash flows:
a. warranty expenses.
b. sale of an "impaired" asset.
c. purchase of a trademark financed by stock issuance.
d. change of depreciation method.

61. PAS 34 Interim Financial Reporting

a. requires listed entities to provide interim financial reports
b. requires listed entities and those in the process of enlisting their
securities to provide interim financial reports
c. requires listed entities and those in the process of enlisting their
securities and non-SMEs to provide interim financial reports
d. does not state which entities are required to provide interim financial
reports.

62. PAS 34 Interim Financial Reporting

a. encourages publicly-listed entities to at least provide semi-annual interim
financial reports and publish them not later than 60 days after the end of
the interim period.
b. encourages publicly-listed entities to at least provide quarterly interim
financial reports and publish them not later than 45 days after the end of
the interim period.
c. requires publicly-listed entities to at least provide semi-annual interim
financial reports and publish them not later than 60 days after the end of
the interim period.
d. requires publicly-listed entities to at least provide quarterly interim
financial reports and publish them not later than 45 days after the end of
the interim period.

63. PAS 34 shall be applied by

I. entities which are required by the government or other entities to provide
interim financial reports
II. those who choose to provide interim financial reports.
a. I only b. I and II c. II only d. Neither I nor II

64. Which standard applies to the following? (Item #1) condensed financial
statements; (Item #2) complete set of financial statements?
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a. PAS 34, PAS 1 c. PAS 1, PAS 34

b. PAS 24, PAS 1 d. PFRS for SMEs, PAS 1

65. If an entity opts to present complete set of financial statements during an

interim period, it shall apply
a. PAS 34 b. PAS 1 c. PFRS 1 d. PFRS 8

66. Which of the following statements is incorrect?

a. In the interest of relevance and timeliness, less information is normally
provided in a condensed set of interim financial statements.
b. Users of interim financial statements are assumed to have access to the
most recent annual financial report.
c. Only information that is significant to the understanding of changes in
financial position and performance of an entity since the end of the last
annual reporting are included in the interim financial report.
d. An entity shall not provide a complete set of financial statements in its
interim financial reporting. Only condensed financial statements shall be
provided.

67. Which of the following statements is incorrect?

a. Estimates are used to a greater extent during interim periods as
compared to annual reporting.
b. The comparative interim statement of financial position is dated as of the
end of the immediately preceding annual financial year. The comparative
financial statements for the other financial statements are prepared on a
year-to-date basis.
c. Statements of comprehensive income are prepared covering the interim
period and a year-to-date basis; comparative statements of
comprehensive income are provided for similar periods.
d. No additional information is encouraged by PAS 34 if the entity’s
business is highly seasonal.

68. Which of the following statements is incorrect?

a. The same accounting policies are followed during the interim period as
those followed in annual reporting, except for accounting policy changes
made after the date of the most recent annual financial statements that
are to be reflected in the next annual financial statements.
b. Costs that do not benefit other interim periods are recognized in full in
the interim period such costs were incurred.
c. Measurements for interim reporting purposes should be made on a year-
to-date basis, so that the frequency of the entity's reporting (annual, half-
yearly, or quarterly) does not affect the measurement of its annual
results.
d. A change in accounting estimate during an interim period is accounted
for prospectively by restating financial statements reported in previous
interim periods but not the most recent annual financial statement.

69. Income tax expenses during interim periods are recognized based on
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a. the best estimate of the weighted average income tax rate in effect during
the quarter.
b. the effective income tax rate during the current quarter.
c. the substantially enacted future income tax rate if different from the
current income tax rate
d. the best estimate of the weighted average annual income tax rate
expected for the full financial year.

70. A corporation issues quarterly interim financial statements and uses the
lower of cost or net realizable value to measure its inventory in its annual
financial statements. Which of the following statements is correct regarding
how the corporation should value its inventory in its interim financial
statements?
a. Inventory losses should be recognized in the interim statements.
b. Inventory write-downs should be made only in the annual financial
statements.
c. Only the cost method of valuation should be used.
d. Gains from valuations in previous interim periods should be fully
recognized.
(AICPA)

71. Which of the following is not an apparent limitation or problem regarding

interim reporting?
a. Considerable judgment should be made in determining which
information is significant or insignificant to users which may or may not
be included in a condensed financial report.
b. As reporting periods are shortened, the effects of errors in estimation
and allocation are magnified, and randomly occurring events which
might not be material in the context of a full fiscal year could create
major distortions in short interim period summaries of reporting entity
performance.
c. Seasonal fluctuations and temporary market conditions affects the
reliability, comparability, and predictive value of interim reports.
d. The conciseness and limited time of preparation undermine the
usefulness of interim financial reports making them useful only to
internal users who have direct access to additional information on the
reporting entity.

72. If an estimate of an amount reported in an interim period is changed

significantly during the final interim period of the financial year but a
separate financial report is not published for that final interim period, which
of the following statements is true?
a. the nature and amount of that change in estimate shall be disclosed in a
note to the annual financial statements for that financial year.
b. the nature and amount of that change in estimate need not be disclosed
in a note to the annual financial statements for that financial year.
c. a separate financial report should be published for that final interim
period.
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d. an estimate of an amount reported in an interim period should not be

changed significantly during the final interim period of the financial year

73. An interim financial report shall include, at a minimum, all of the

following components, except
a. If an entity publishes a complete set of financial statements in its interim
financial report, the form and content of those statements shall conform
to the requirements of PAS 1 for a complete set of financial statements.
b. If the financial statements are condensed, they should include, at a
minimum, each of the headings and sub-totals included in the most
recent annual financial statements and the explanatory notes required by
PAS 34.
c. Additional line-items should be included if their omission would make
the interim financial information misleading. If the annual financial
statements were consolidated (group) statements, the interim statements
should be group statements as well.
d. In the statement that presents the components of profit or loss for an
interim period, an entity need not present basic and diluted earnings per
share for that period when the entity is within the scope of PAS 33
Earnings per Share.

74. Which of the following statements is incorrect regarding PAS 34?

a. A user of an entity’s interim financial report is assumed to have access to
the most recent annual financial report of that entity.
b. It is unnecessary for the notes to an interim financial report to provide
relatively insignificant updates to the information that was already
reported in the notes in the most recent annual report.
c. At an interim date, an explanation of events and transactions that are
significant to an understanding of the changes in financial position and
performance of the entity since the end of the last annual reporting
period is more useful.
d. All disclosure requirements in PAS 1 should be provided when the entity
prepares condensed interim financial statements.

75. An entity shall include all of the following information, as a minimum, in

the notes to its interim financial statements, if material and if not disclosed
elsewhere in the interim financial report, except
a. a statement that the same accounting policies and methods of
computation are followed in the interim financial statements as
compared with the most recent annual financial statements or, if those
policies or methods have been changed, a description of the nature and
effect of the change
b. explanatory comments about the seasonality or cyclicality of interim
operations
c. the nature and amount of items affecting assets, liabilities, equity, net
income, or cash flows that are unusual because of their nature, size, or
incidence
 P a g e | 15

d. the nature and amount of changes in estimates of amounts reported in

prior interim periods of the current financial year or changes in estimates
of amounts reported in prior financial years, if those changes have a
material effect in the current interim period
e. segment information even if PFRS 8 Operating Segments does not require
that entity to disclose segment information in its annual financial

76. Which of the following items is included in the financing activities section
of the statement of cash flows?
a. Cash effects of transactions involving making and collecting loans.
b. Cash effects of acquiring and disposing of investments and property,
plant, and equipment.
c. Cash effects of transactions obtaining resources from owners and
providing them with a return on their investment.
d. Cash effects of transactions that enter into the determination of net
income.

77. Which combination below explains the impact of credit card interest
incurred and paid during the period on (1) equity on the balance sheet and
(2) the statement of cash flows? (Item #1) Effect on Equity on Balance Sheet;
(Item #2) Reflected on Statement Cash Flows as a(n)
a. Decrease, Investing outflow
b. Decrease, Operating or financing outflow
c. No effect, Financing or investing outflow
d. No effect, Operating outflow

78. A reader of a statement of cash flows wishes to analyze the major classes
of gross cash receipts and tress cash payments from operating activities.
Which methods of reporting cash flows from operating activities will supply
that information?
a. Both the direct and indirect methods c. Only the indirect method
b. Only the direct method d. Neither method.

79. In the statement of cash flows, the payment of cash dividends appears in
the <List A> activities section as a <List B> of cash.
List A List B List A List B
a. Operating or investing Source c. Investing or financing Use
b. Operating or financing Use d. Investing Source
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80. In the determination of cost of goods sold, <List A> must be <List B>
cash payments for goods along with other adjustments.
List A List B
a. An increase in accounts payable Added to
b. A decrease in accounts payable Added to
c. An increase in inventory Added to
d. A decrease in inventory Subtracted from

81. Which of the following statements is incorrect?

a. Events after the reporting period are those that occur between the end of
reporting period and the date the financial statements are authorized by
an entity’s management for issue.
b. Adjusting events are those that provide conditions that existed at the end
of reporting period. The financial statements are adjusted for these
events.
c. Non-adjusting events are those that provide conditions that arose after
the end of reporting period. If relevant to users, these events are
disclosed in the financial statements.
d. The date the financial statements are authorized for issue is the date
when an entity’s management authorizes the financial statements for
issue, if such authorization is subject to further approval by other
parties, the date the financial statements are authorized for issue is the
date the financial statements are approved by other parties.

82. This refers to those events, favorable or unfavorable, that occur between
the end of the reporting period and the date that the financial statements
are authorized for issue.
a. Events after the reporting period
b. Type I events
c. Adjusting events after the reporting period
d. Non-adjusting events after the reporting period

83. Under PAS 10, these refer to those events that provide evidence of
conditions that existed at the reporting period.
a. Events after the reporting period
b. Type I events
c. Adjusting events after the reporting period
d. Non-adjusting events after the reporting period

84. Under PAS 10, these refer to those that are indicative of conditions that
arose after the reporting period.
a. Events after the reporting period
b. Type I events
c. Adjusting events after the reporting period
d. Non-adjusting events after the reporting period

85. Which of the following statements is correct?

a. An entity should prepare its financial statements on a going concern
basis even if events after the reporting period indicate that the going
concern assumption is not appropriate.
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b. When an entity’s management is required to submit its financial

statements to its shareholders for approval after the financial statements
have been issued, for purposes of determining the events after the
reporting period, the financial statements are deemed authorized for
issue on the date when shareholders approve the financial statements.
c. When an entity’s management is required to issue its financial
statements to a supervisory board (made up solely of non-executives) for
approval, for purposes of determining the events after the reporting
period, the financial statements are deemed authorized for issue when
the supervisory board approves the financial statements.
d. Events after the reporting period include all events up to the date when
the financial statements are authorized for issue, even if those events
occur after the public announcement of profit or of other selected
financial information.

86. The management of an entity completes draft financial statements for the
year to December 31, 20x1 on February 28, 20x2. On March 18, 20X2, the
board of directors reviews the financial statements and authorizes them for
issue. The entity announces its profit and selected other financial
information on March 19, 20x2. The financial statements are made available
to shareholders and others on April 1, 20x2. The shareholders approve the
financial statements at their annual meeting on May 15, 20x2 and the
approved financial statements are then filed with a regulatory body on May
17, 20x2. For purposes of PAS 10 Events after the reporting period, the
financial statements are authorized for issue on
a. March 18, 20x2 d. May 15, 20x2
b. March 19, 20x2 e. May 17, 20x2
c. April 1, 20x2
(Adapted)

87. On March 18, 20x2, the management of an entity authorizes financial

statements for issue to its supervisory board. The supervisory board is
made up solely of non-executives and may include representatives of
employees and other outside interests. The supervisory board approves the
financial statements on March 26, 20x2. The financial statements are made
available to shareholders and others on April 1, 20x2. The shareholders
approve the financial statements at their annual meeting on May 15, 20x2
and the financial statements are then filed with a regulatory body on May
17, 20x2. For purposes of PAS 10 Events After the Reporting Period, the
financial statements are authorized for issue on
a. March 18, 20x2 d. May 15, 20x2
b. March 19, 20x2 e. May 17, 20x2
c. April 1, 20x2
(Adapted)

88. The following are adjusting events after the reporting period.
I. The settlement after the reporting period of a court case that confirms that
the entity had a present obligation at the reporting period.
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II. The receipt of information after the reporting period indicating that an
asset was impaired at the reporting period, or that the amount of a
previously recognized impairment loss for that asset needs to be adjusted
III. The determination after the reporting period of the cost of assets
purchased, or the proceeds from assets sold, before the reporting period.
IV. The determination after the reporting period of the amount of profit-
sharing or bonus payments, if the entity had a present legal or
constructive obligation at the reporting period to make such payments as a
result of events before that date.
V. The determination after the reporting period that estimates made as of the
reporting period such as the expected useful lives of depreciable assets
were inappropriate due to sudden technological advances happening after
the reporting period but before their authorization for issue.
VI. The discovery of fraud or errors that show that the financial statements
are incorrect.
a. I, II, III, and V c. I, III, IV, and V
b. I, II, III, IV, V, and VI d. I, II, III, IV, and VI

89. Which of the following is an adjusting event after the reporting period?
a. The bankruptcy of a customer that occurs after the reporting period due
to a casualty that happened after the reporting period but before the
authorization of the financial statements for issue.
b. The sale of inventories after the reporting period giving evidence that the
net realizable value assigned to the inventories at the reporting period
were inappropriate.
c. A decline in the value of held for trading securities was charged as loss
as of the reporting period. Subsequent to year-end but before the
financial statements were authorized for issue, the market price of the
investment tripled.
d. The value of a financial asset through other comprehensive income was
materially overstated due to an unexpected shift in the stock market from
bullish to bearish after the reporting period.
e. An entity declares dividends to holders of equity instruments after the
reporting period.

90. After the reporting period but before the completion of financial
statements, MOTLEY MIXTURE Company is contemplating whether to
present its financial statements as going concern or as non-going concern.
Which of the following situations would preclude MOTLEY from issuing
financial statements presented on a going concern basis?
I. MOTLEY’s management determines after the reporting period that it
intends to liquidate the entity.
II. MOTLEY’s management determines after the reporting period that it will
cease trading.
III. MOTLEY’s management determines after the reporting period that it has
no realistic alternative but to cease trading and liquidate the entity.
IV. Deterioration in operating results and financial position after the reporting
period.
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a. III b. I, II, c. I, II, III d. I, II, III, IV

91. Which of the following statements is incorrect?

a. Related party transactions and outstanding balances with other entities
in a group are disclosed in an entity’s financial statements.
b. Intragroup related party transactions and outstanding balances are not
eliminated in the preparation of consolidated financial statements of the
group.
c. Related party relationships are a normal feature of commerce and
business.
d. A related party relationship could have an effect on the profit or loss and
financial position of an entity.
e. Knowledge of related party transactions, outstanding balances and
relationships may affect assessments of an entity’s operations by users of
financial statements, including assessments of the risks and
opportunities facing the entity.

92. An entity’s ability to affect the financial and operating policies of an

investee is through the presence of
I. Control
II. Joint control
III. Significant influence
a. I only b. I or III c. Any of I, II, or III d. I, II and
III

93. Which of the following statements is correct?

I. The profit or loss and financial position of an entity may be affected by a
related party relationship even if related party transactions do not occur.
II. The mere existence of the relationship may be sufficient to affect the
transactions of the entity with other parties.
a. True, true b. True, false c. False, false d.
False, true

94. All of the parties enumerated are related to an entity , except

a. the entity is a subsidiary, an associate, or a venture in a joint venture.
b. the party is a member of the key management personnel of the entity or
its parent.
c. the party is a close member of the family of an individual having control,
significant influence, or joint control over the entity or a member of the
key management personnel of the entity or its parent.
d. the party is a post-employment benefit plan for the benefit of employees
of the entity, or of any entity that is a related party of the entity.
e. two entities simply because they have a director or other member of key
management personnel in common

95. Which of the parties enumerated is related to an entity?

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a. two entities simply because they have a director or key manager in

common;
b. two venturers who share joint control over a joint venture
c. providers of finance, trade unions, public utilities, government
departments and agencies in the course of their normal dealings with an
enterprise
d. a single customer, supplier, franchiser, distributor, or general agent with
whom an enterprise transacts a significant volume of business merely by
virtue of the resulting economic dependence.
e. a subsidiary or parent, an associate, or a venturer of the entity

96. According to PAS 24 Related Party Disclosures, which of the following is

not a related party of PEREGRINE WANDERING Company?
a. A shareholder of PEREGRINE Company owning 30% of the ordinary
share capital
b. An entity providing banking facilities to PEREGRINE Company
c. An associate of PEREGRINE Company
d. Key management personnel of PEREGRINE Company
(ACCA)

97. According to PAS 24, this refers to a transfer of resources, services or

obligations between related parties, regardless of whether a price is charged.
a. Inter-company Transfer c. Departmental Transfer
b. Inter-company Transaction d. Related party transaction

98. Which of the following may fall within the close members of the family of
an individual (as provided in PAS 24) who may be expected to influence, or
be influenced by, that individual in their dealings with the entity?
a. the individual’s wife and their children
b. the individual’s domestic partner
c. the individual’s domestic partner’s children
d. the individual’s domestic partner’s dependents
e. all of the above

99. Raymunda is a director of and an owner of 25% interest in the NCPAR

Company. She also owns 65% of the PH Care, Inc. and is a director of the
Cebu CPAR Corporation. Raymunda's husband is the sole owner of the
Beauty Parlor, Inc. Raymunda's daughter holds 5% of the shares in the
Feminine Products Company. The only involvement she has in the company
is to receive dividends. Which companies would be classified under PAS 24
Related Party Disclosures as related parties of NCPAR?
I. PH Care, Inc.
II. Cebu CPAR
III. Beauty Parlor, Inc.
IV. Feminine Products Company
a. I and III b. I, II and III c. II and III d. all of
these
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100. Which of the following statements is incorrect?

a. Control is the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
b. Relationships between parents and subsidiaries shall be disclosed only
when there have been transactions between those related parties.
c. Joint control is the contractually agreed sharing of control over an
economic activity.
d. Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities of the
entity, directly or indirectly, including any director (whether executive or
otherwise) of that entity.
e. Significant influence is the power to participate in the financial and
operating policy decisions of an entity, but is not control over those
policies. Significant influence may be gained by share ownership, statute
or agreement.

“Again, I tell you that if two of you on earth agree about anything you ask for, it will be
done for you by my Father in heaven. For where two or three come together in my name,
there am I with them.”
(Matthew 18:19-20)

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