1.

Allowing entities to estimate rather than physically count inventory at an interim period is an example of a tradeoff
between
a. Verifiability and comparability
b. Timeliness and comparability
c. Timeliness and verifiability
d. Neutrality and consistency
2. When after the end of reporting period an event occurs that is indicative of conditions that arose after the end of
reporting period
a. The entity shall disclose the nature and effect of the event in the financial statements.
b. The entity shall adjust the related amount in the financial statements
c. The entity shall disclose the nature and effect of the event and adjust the related amount
d. The entity shall disclose the nature but not the effect of the event
3. Which of the following components of OCI should be reclassified to RETAINED EARNINGS?
a. Revaluation surplus
b. Remeasurements of defined benefit plan
c. Gain or loss attributable to credit risk of a financial liability designated at FVPL
d. All of these components of OCI should be reclassified to retained earnings
4. Nontrade receivables are classified as current assets only if these are reasonably expected to be realized
a. Within one year or within normal operating cycle, whichever is shorter
b. Within one year or within normal operating cycle, whichever is longer
c. Within normal operating cycle
d. Within one year, length of operating cycle notwithstanding
5. When a specific customer account receivable is written off as uncollectible, what will be the effect on NET INCOME
under the allowance and direct write off method?
a. No effect under both allowance method and direct write off method
b. Decrease under both allowance method and direct write off method
c. No effect under allowance method and decrease under direct write off method
d. Decrease under allowance method and no effect under direct write off method
6. On August 15, an entity sold goods for which it received a note bearing the market rate of interest on that date.
The four-month note was dated July 15. Note principal, together with all interest, is due November 15. When the
note was recorded on August 15, which of the following accounts increased?
a. Unearned discount
b. Interest receivable
c. Prepaid interest
d. Interest revenue
7. When the accounts receivable are sold outright, the accounts receivable have been
a. Pledged
b. Assigned
c. Factored
d. Collateralized
8. When an entity factored accounts receivable without recourse with a bank, the transaction is best described as
a. Bank loan collateralized by the accounts receivable
b. Bank loan to be repaid by the proceeds from the accounts receivable
c. Sale of the accounts receivable to the bank, with risk of uncollectible accounts retained by the entity
d. Sale of the accounts receivable to the bank, with the risk of uncollectible accounts transferred to the bank.
9. The valuation of inventory on a prime cost basis
a. Would achieve the same results as direct costing
b. Would exclude all overhead from inventory cost
c. Is always achieved when standard costing is adopted
d. Is always achieved when the FIFO is adopted
10. Which inventory cost flow assumption would consistently result in highest income in a period of sustained
inflation?
a. FIFO
b. LIFO
c. Weighted average
d. Specific identification
11. If the qualifying asset is financed by specific borrowing the capitalizable borrowing cost is equal to
a. Actual borrowing cost incurred
b. Actual borrowing cost incurred up to completion of asset
c. Actual borrowing cost incurred up to completion of the asset minus any investment income from the
temporary investment of the borrowing
d. Zero
12. If the qualifying asset is financed by general borrowing, the capitalizable borrowing cost is equal to
a. Actual borrowing cost incurred
b. Total expenditures on the asset multiplied by a capitalization rate
c. Average expenditures on the asset multiplied by a capitalization rate or actual borrowing cost incurred,
whichever is lower
d. Average expenditures on the asset multiplied by a capitalization rate or actual borrowing cost incurred,
whichever is higher
13. The cost of land typically includes all of the following, except
a. Grading, filling, draining and clearing cost
b. Special assessment for street light and drainage system
c. Private driveway and parking lot
d. Assumption of any lien on the property
14. The cost of the building usually includes all of the following, except
a. Any renovating cost incurred to put the building purchased in a condition for the intended use
b. Cost of excavation
c. Expenditure for movable equipment and fixture
d. Cost incurred to have existing building removed to make room for construction of new building
15. The lump sum cost of acquiring land and usable old building is
a. Charged to land only
b. Charged to building only
c. Allocated between land and building based on relative fair value
d. Allocated between land and building based on carrying amount
16. The lump sum cost of acquiring land and an unusable old building with no fair value is
a. Charged to land only
b. Charged to building only
c. Allocated between land and building based on relative fair value
d. Allocated between land and building based on carrying amount
17. Which of the following is incorrect with respect to depreciation?
a. The depreciation method shall reflect the pattern in which the asset’s economic benefits are consumed
by the entity
b. Depreciation of an asset begins when it is available for use or when it is in the location and condition
necessary for the intended use
c. Depreciation ceases at the earlier between the date the asset is classified as held for sale and the date the
asset is derecognized
d. Depreciation is not recognized if the fair value of an asset exceeds carrying amount
18. The straight line method of depreciation is not appropriate for
a. Any entity that is neither expanding nor contracting an investment in equipment because it is replacing
equipment as the equipment depreciates
b. Equipment on which maintenance and repairs increase substantially with age
c. Equipment with useful life that is not affected by the amount of use
d. Equipment used consistently every period
19. Which of the following provides the best theoretical support for accelerated depreciation?
a. Assets are more efficient in early years and initially generate more revenue
b. Expense should be allocated in a manner that “smooths” earnings
c. Repairs and maintenance costs probably would increase in later periods so depreciation should decrease
d. Accelerated depreciation provides easier replacement because of the time value of money
20. An asset has nine-year useful life and is to be depreciated under the SYD method. The annual depreciation expense
would be the same as that under the straight line method in the
a. Third year
b. Fifth year
c. Seventh year
d. Ninth year
21. Which type of expenditure is included in exploration and evaluation of mineral resources?
a. The extraction and processing of mineral resource for transport to market
b. The commercial review of possible areas for mineral extraction before bidding for the legal right to explore
a specific area
c. The expenditure incurred after the technical feasibility and commercial viability of extracting a mineral
resource are demonstrable
d. None of these should be included in exploration and evaluation expenditures
22. What is the recoverable amount of an asset
a. Fair value less cost of disposal
b. Value in use
c. Fair value less cost of disposal or value in use, whichever is higher
d. Fair value less cost of disposal or value in use, whichever is lower
23. Patent and trade secret are an example of which general category of intangible asset?
a. Market-related
b. Customer-related
c. Artistic-related
d. Technology-based
24. Which of the following is true?
a. Trading securities can be classified as current or noncurrent depending on management’s intent
b. Held to maturity securities shall not be classified as current under any circumstance
c. Trading securities shall not be classified as current under any circumstance
d. Available for sale securities can be classified as current or noncurrent depending on management’s intent
25. How should prompt payment discount (cash discount) be dealt with when valuing inventories at the lower of cost
and net realizable value?
a. Added to cost
b. Ignored
c. Deducted in arriving at NRV
d. Deducted from cost
26. How is goodwill arising on the acquisition of an associate dealt with in the financial statements?
a. It is amortized
b. It is impairment tested individually
c. It is written off against profit or loss
d. Goodwill is not recognized separately within the carrying amount of the investment
27. Which of the following statements regarding depreciation is true?
a. An asset must be depreciated from the date of its purchase to the date of sale
b. The annual depreciation charge shall be constant over the life of the asset
c. The total cost of an asset must eventually be depreciated
d. If the carrying amount of an asset is less than the residual value, depreciation is not charged.
28. Undistributed stock dividends shall be reported as
a. A current liability
b. An addition to share capital outstanding
c. A reduction in total shareholders’ equity
d. A note to financial statements
29. At the inception of a finance lease, the guaranteed residual value should be
a. Included as part of minimum lease payments at present value
b. Included as part of minimum lease payments at future value
c. Included as part of minimum lease payments only to the extent guaranteed residual value is expected to
exceed estimated residual value
d. Excluded from minimum lease payments
30. A deferred tax liability shall be recognized for all
a. Permanent differences
b. Temporary differences
c. Taxable temporary differences
d. Deductible temporary differences
31. After being held for 30 days, a 90-day, 15% interest bearing note receivable was discounted at a bank at 18%. The
proceeds received from the bank upon discounting would be the:
a. Face value less the discount at 18%
b. Face value less the discount at 15%
c. Maturity value less the discount at 18%
d. Maturity value less the discount at 15%
32. What is the effect on EPS and shareholders’ equity with the reacquisition by an entity of its own stock?
a. Decrease in EPS and decrease in shareholders’ equity
b. No effect on EPS and increase in shareholders’ equity
c. Increase in EPS and decrease in shareholders’ equity
d. Decrease in EPS and increase in shareholders’ equity
33. Which of the following best describes the net effect on retained earnings of the purchase and subsequent sale of
treasury stock?
a. Retained earnings may never be increased but sometimes decreased
b. Retained earnings may never be increased or decreased
c. Retained earnings may never be decreased but sometimes increased
d. Retained earnings is always affected unless the reissue price is exactly equal to cost
34. Common shares issued would exceed common shares outstanding as a result of
a. Declaration of stock split
b. Declaration of stock dividend
c. Purchase of treasury stock
d. Payment in full of subscribed stock
35. It is an equity instrument that is subordinate to all other classes of equity instrument
a. Ordinary share
b. Potential ordinary share
c. Options
d. Warrants
36. Which of the following liabilities is not contingent?
a. A liability to replace specific defective television set already returned to the manufacturer
b. A liability to pay pension benefits if a specific employee lives to retirement
c. A liability to pay any adverse judgment for a product liability case currently on appeal
d. A liability to pay for books received by the college bookstore; terms allow for the return for full refund of
any books not sold
37. Which of the following provides the best explanation for why warranty expense should be estimated and recorded
in the year of the related sales?
a. Full disclosure
b. Revenue recognition
c. Matching
d. Materiality
38. In accounting for share based compensation under PFRS 2, what interest rate is used to discount both the exercise
price of the option and the future dividend stream?
a. The firm’s known incremental borrowing rate
b. The current market rate that firms in that particular industry use to discount cash flows
c. The risk-free interest rate
d. Any rate that firms can justify as being reasonable
39. Under installment method of accounting, income is recognized when
a. Collected
b. Earned
c. Title is transferred to the buyer
d. Title is retained by the seller
40. The term financial assets at fair value through total comprehensive income covers
a. FAFVTPL & FAFVTOCI
b. FAFVTPL & FAAC
c. FAFVTOCI & FAAC
d. FAFVTPL, FAFVTOCI, & FAAC
41. Statement 1: Nominal accounts are also called as temporary accounts because they are subject to adjusting entries
Statement 2: Assignment of receivables is considered as a sale of accounts receivable
Statement 3: A credit memo is usually added to the company book balance for bank reconciliation purposes
a. Only statement 1 is false
b. Only statement 2 is false
c. Only statement 3 is false
d. All of the statements are false
42. Revenue from an artistic performance is recognized once
a. The audience register for the event online
b. The tickets for the concert are sold
c. Cash has been received from the ticket sales
d. The event takes place
43. An inventory pricing procedure in which the oldest incurred rarely have an effect on the ending inventory
valuation is
a. LIFO
b. Conventional retail
c. Weighted average
d. FIFO
44. Making an entry in the general ledger is technically known as
a. Journalizing
b. Adjusting
c. Posting
d. Closing
45. The use of computers in processing data
a. Eliminates the need for accountants
b. Eliminates the double entry system as basis for analyzing transactions
c. Eliminates the need for financial reporting standards such as those promulgated by the FRSC
46. A deficiency in cash control may conceal cash shortage through company bank account and another bank account
a. Window dressing
b. Lapping
c. Kiting
d. Defalcation
47. An income statement prepared under the nature of expense method will not show
a. Cost of sales
b. Depreciation expense
c. Purchase of materials
d. Amortization of expense
48. Which of the following accounts is not in any way affected when a previously written-off receivable is
unexpectedly collected?
a. Cash
b. Doubtful accounts expense
c. Accounts receivable
d. Allowance for doubtful accounts
49. The term PFRS covers
a. Provisions of RA 9298
b. BIR revenue regulations
c. Some Philippines Standards on Auditing
d. Interpretations of existing Philippine Accounting Standards
50. Reversing entries are reversals of
a. Closing entries and are done at the end of the period
b. Adjusting entries and are done at the end of the period
c. Closing entries and are done at the start of the next period
d. Adjusting entries and are done at the start of the next period
51. The following statements are based on PAS 1
Statement I: an entity can rectify inappropriate accounting policies either by disclosure of the accounting policies
used or by notes or explanatory material
Statement II: an entity shall prepare its financial statements, except for the cash information, using the accrual
basis of accounting
Statement III: an entity shall not offset assets and liabilities or income and expense, unless required or permitted
by PFRS
a. Only statement I is false
b. Only statement II is true
c. Only statement II is false
d. Only statement III is true
52. The following statements are based on PAS 10 (Events after Reporting Period)
Statement I: An entity shall not adjust the amounts recognized in its financial statements to reflect non-adjusting
events after the balance sheet date
Statement II: If an entity declares dividends to holders of equity instruments after the balance sheet date, the
entity shall not recognize those dividends as a liability at the balance sheet date
Statement III: An entity shall not prepare its financial statements on a going concern basis if management
determines after the balance sheet date either it intends to liquidate the entity or to cease trading or that it has
no realistic alternative but to do so.
a. True, true, true
b. True, false, true
c. True, true, false
d. False, true, true
53. Under PAS 1, the profit or loss attributable to a non-controlling interest is required to be presented on the face of
the
a. Statement of cash flows
b. Balance sheet
c. Income statement
d. Statement of changes in equity
54. The following statements are based on PAS 24 (Related Party Disclosures)
Statement I: A related party transaction is a transfer of resources, services or obligations between related parties,
regardless of whether a price is charged
Statement II: Relationships between parents and subsidiaries shall be disclosed irrespective of whether there have
been transactions between those related parties
Statement III: An entity shall disclose key management personnel compensation, including termination benefits
and share-based payments
a. True, true, true
b. True, false, true
c. True, true, false
d. False, false, true
55. An entity shall disclose, either on the face of the balance sheet or in the notes, for each class of share capital all
of the following, except
a. The number of shares authorized
b. The number of shares issued (fully and partially paid)
c. Par value per share
d. Selling price per share
56. The use of current cost is required under
a. Financial capital concept
b. Physical capital concept
c. Sociological capital concept
d. Psychological capital concept
57. Cash dividends are paid on the basis of the number of shares
a. Authorized
b. Issued
c. Outstanding
d. Outstanding less the number of treasury shares
58. The cost of copany start-up activities, including fees of attorneys, should be
a. Capitalized, but not amortized, because of the indefinite life of the business
b. Capitalized and amortized
c. Capitalized and deferred until liquidation of the business
d. Expensed when incurred
59. The issuer should charge retained earnings for the par value of shares issued in
a. 1 for 6 stock dividend
b. 3 for 16 stock dividend
c. 2 for 7 stock dividend
d. 2 for 15 stock dividend
60. Gains or losses on the purchase and resale of treasury shares is reflected in
a. Paid-in capital only
b. Paid-in capital and retained earnings
c. Income, paid-in capital and retained earnings
d. Income and paid-in capital
61. If a dividend is declared after the balance sheet date but before the financial statements are authorized for issue,
the dividend is:
a. Recognized as a liability at the BS date
b. Not recognized as a liability at BS date
c. Recorded as a direct reduction of equity at the BS date
 d. Recorded as a reduction against the asset cash at BS date
62. Which of the following can be best described as residual equity?
a. Mortgage payable
b. Unsecured loans payable
c. Preferred stocks
d. Common stocks
63. Which is not a basis of the quantitative thresholds that an operating segment has to meet to be considered
reportable?
a. Segment assets
b. Segment liabilities
c. Segment revenue
d. Segment profit
64. Which will not be considered as an investment property?
a. Land held for long-term capital appreciation
b. Land held for a currently undetermined future use
c. Property that is leased to another entity under a finance lease
d. Building that is vacant but is held to be leased out under one or more operating leases
65. The failure to record an accrued expense at year-end will result in overstatement errors of
Net income Working capital Cash
a. No No Yes
b. No Yes No
c. Yes No No
d. Yes Yes No
66. PAS 40 requires that an investment property be accounted for using the
a. Cost model or fair value model
b. Cost model or revaluation model
c. Cost model or net realizable value model
d. Cost, fair value or net realizable value model
67. A bond investment with interest payment dates on February 1 and August 1 is sold on June 1, the cash received
from the sale
a. Does not include the accrued interest
b. Includes accrued interest for 2 months
c. Includes accrued interest for 4 months
d. Includes accrued interest for 7 months
68. A bond investment with interest payment dates on May 1 and November 1 is purchased on August 1. The amount
of interest receivable and interest income on December 31 would be equal to
a. 2 months and 5 months, respectively
b. 5 months and 5 months, respectively
c. 2 months and 8 months, respectively
d. 5 months and 8 months, respectively
69. The amount of accounts receivable is included in total receivables with appropriate disclosure when
PLEDGED ASSIGNED FACTORED
a. YES YES YES
b. YES YES NO
c. YES NO NO
d. NO NO NO
70. ABC Company factored its receivables with recourse to XYZ Bank. ABC received cash as a result of this transaction
which is best described as a
a. Loan from XYZ Collateralized by ABC’s accounts receivable
b. Loan from XYZ to be repaid by the proceeds from ABC’s accounts receivable
c. Sale of ABC’s accounts receivable to XYZ with the risk of uncollectible accounts retained by ABC
d. Sale of ABC’s accounts receivable to XYZ with the risk of uncollectible accounts transferred to XYZ
71. If an entity fails to amortize the premium on its bond investment designated as FAFVTPL, the income is
a. Overstated
b. Understated
c. Not affected
d. Either overstated or understated
72. A method of estimating uncollectible accounts that emphasizes income measurement is the allowance method
based on
a. Aging of receivables
b. Receivable financing
c. Percent of receivables
d. Percent of sales
73. Which journal is used to record credit purchase of furniture and fixture transaction?
a. General journal
b. Purchase journal
c. Sales journal
d. Cash disbursements journal
74. Which of the following differences would result in future taxable amount?
a. Expenses of losses that are deductible after they are recognized in accounting income
b. Revenues or gains that are taxable before they are recognized in accounting income
c. Expenses or losses that are deductible before they are recognized in accounting income
d. Revenues or gains that are recognized in accounting income but are never included in taxable income
75. A temporary difference which would result in a deferred tax liability
a. Interest revenue on municipal bonds
b. Accrual of warranty expense
c. Excess of tax depreciation over accounting depreciation
d. Subscription received in advance
76. The components of defined benefit cost include all, except
a. Service cost
b. Net interest
c. Remeasurements
d. Contribution to the plan
77. The service cost of a defined benefit plan comprises all of the following, except
a. Current service cost
b. Past service cost
c. Gains or loss on plan settlement
d. Net interest
78. Loss on retirement of treasury shares shall be debited to
a. Retained earnings
b. Share premium from treasury shares and then retained earnings
c. Share premium from treasury shares, share premium from original issuance and then retained earnings
d. Share premium from original issuance, share premium from treasury shares and then retained earnings
79. Loss from sale of treasury shares shall be charged to
a. Other expense
b. Retained earnings and then share premium from treasury shares
c. Share premium from treasury shares and then retained earnings
d. Share premium from original issuance, share premium from treasury shares and then retained earnings
80. Transaction costs that are directly attributable to the issuance of new shares should be
a. Expensed immediately
b. Charged to retained earnings
c. Deducted from equity
d. Deducted from equity, net of any related income tax benefit
81. Costs of public offering of shares or costs that relate to stock market listing of shares should be
a. Expensed immediately
b. Considered as component of other comprehensive income
c. Deducted from equity
d. Deducted from equity, net of any related income tax benefit
82. When shareholders may elect to receive cash in lieu of stock dividend, the amount to be charged to retained
earnings is equal to
a. Optional cash dividend
b. Fair value of the shares
c. Par value of the shares
d. Book value of the shares
83. An entity issued what is called a “20% share dividend”. At what amount per share should retained earnings be
reduced for the transaction?
a. Zero
b. Par value
c. Fair value at the declaration
d. Fair value at the date of issuance
84. An entity shall measure a liability to distribute noncash asset as dividend to the owners at
a. Carrying amount of the asset distributed
b. Fair value of the asset distributed
c. Either the carrying amount or fair value of the asset
d. Neither the carrying amount nor fair value
85. The issuer should charge retained earnings for the fair value of shares issued in a
a. 1 for 5 share dividend
b. 1 for 8 share dividend
c. 4 for 1 share split
d. 2 for 1 share split
86. A restriction of retained earnings is most likely to be required by
a. Purchase of property, plant and equipment
b. Purchase of treasury shares
c. Payment of last maturing series of a serial bond issue
d. Funding of past service cost
87. In computing earnings per share, if the preference shares are cumulative, the amount that should be deducted as
an adjustment to the numerator is the
a. Preference dividends in arrears
b. Preference dividends paid during the year
c. Annual preference dividend
d. Annual ordinary dividend
88. Where in the financial statements should basic and diluted EPS be reported?
a. In the accompanying notes
b. In management discussion and analysis
c. In the income statement
d. In the statement of cash flows
89. Potential ordinary shares include all of the following, except
a. Financial liabilities or equity instruments that are nonconvertible 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
90. Under the cash basis of accounting
a. Revenue is recorded when earning
b. Accounts receivable would appear in the statement
c. Depreciation of assets having an economic life of more than one year is not recognized
d. The matching principle is ignored
91. Prior to the current year, an entity used cash basis of accounting. At the current year-end, the entity changed to
the accrual basis. The entity cannot determine the beginning balance of supplies inventory. What is the effect of
the inability to determine beginning supplies inventory on the accrual basis net income and year-end accrual basis
owners’ equity?
Net Income Owners’ equity
a. No effect No effect
b. No effect Overstated
c. Overstated No effect
d. Overstated Overstated
92. The premium on a three-year insurance policy expiring on December 31, 2019 was paid in total on January 1,
2017. If the entity has six months operating cycle, then on December 31, 2017, the prepaid insurance reported as
current asset would be for
a. 6 months
b. 12 months
c. 18 months
d. 24 months
93. If an inventory account is understated at year-end, the effect is to
a. Overstate the net purchases
b. Overstate the gross margin
c. Overstate the cost of goods available for sale
d. Overstate the cost of goods sold
94. The overstatement of ending inventory in the current year will cause
a. Retained earnings to be understated in the current year-end statement of financial position
b. Cost of goods sold to be understated in the income statement of the next year
c. Cost of goods sold to be overstated in the income statement of the current year
d. Statement of financial position no be misstated in the next year end
95. Failure to record the expired amount of prepaid rent expense would NOT
a. Understate expense
b. Overstate net income
c. Overstate owners’ equity
d. Understate liabilities
96. Which of the following would cause income of the current period to be understated?
a. Capitalizing research and development cost
b. Failure to recognize unearned rent revenue
c. Changing from weighted average to FIFO for merchandise inventory
d. Understating estimate of residual value
97. Which of the following is a counterbalancing error
a. Understated depletion expense
b. Bond premium under-amortized
c. Prepaid expense adjusted incorrectly
d. Overstated depreciation expense
 98. An entity used a periodic inventory system and neglected to record a purchase of merchandise on account at year-
end. This merchandise was omitted from the year-end physical count. How will these errors affect assets, liabilities
and shareholders’ equity at year end and net earnings for the year?
Assets Liabilities Equity Net earnings
a. Understate Understate No effect No effect
b. Understate No effect Understate Understate
c. No effect Understate Overstate Overstate
d. No effect Overstate Understate Understate
99. Cash flows arising from trading securities are
a. Classified as operating activities
b. Classified as investing activities
c. Classified as financing activities
d. Not reported in the cash flow statement
100. Cash payments to acquire equity instruments are
a. Cash outflows for financing activities
b. Cash inflows from investing activities
c. Cash outflows for investing activities
d. Cash inflows from financing activities