CEBU ROOSEVELT MEMORIAL COLLEGES

MIDTERM EXAMINATION (CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS)

1ST SEMESTER SY 2020-2021

NAME: Red Claude M. Palacio BSA1-A

1. The primary purpose of the statement of cash flows 6. Cash payments to acquire equity instruments of
is other entities and interests in joint venture are
a. To provide relevant information about cash a. Cash outflows for financing activities
receipts and cash payments of an entity during a b. Cash inflows from investing activities
period. c. Cash outflows for investing activities
b. To help investors, creditors and other users to d. Cash inflows from financing activities
assess the entity’s ability to generate positive
future net cash flows. 7. Cash receipts from issuing shares and other equity
c. To disclose separately noncash investing and instruments are
financing activities. a. Cash inflows from investing activities
d. To assess the ability of the entity to pay b. Cash outflows for investing activities
dividends to stockholders. c. Cash inflows from financing activities
d. Cash outflows for financing activities
2. An entity shall prepare a statement of cash flows and
shall present it as 8. In a statement of cash flows, dividend payments to
a. Supplementary financial statement shareholders shall be classified as
b. Note to financial statement a. Cash outflows for investing activities
c. Supporting schedule for amount appearing as b. Cash inflows from investing activities
cash and cash equivalent c. Cash inflows from financing activities
d. Integral part of the entity’s basic financial d. Cash outflows for financing activities
statements
9. In the statement of cash flows, alternatively interest
3. Cash flows in the statement of cash flows are received and dividend received may be classified as
a. Inflows of cash and cash equivalents cash flow from
b. Outflows of cash and cash equivalents a. Operating activities
c. Inflows and outflows of cash b. Investing activities
d. Inflows and outflows of cash and cash c. Financing activities
equivalents d. Revenue activities

4. Cash equivalents are 10. An entity shall report cash flows from operating
a. Short-term highly liquid investments that are activities using
readily convertible to know amount of cash a. Direct method
b. Investments subject to an insignificant risk of b. Indirect method
changes in value c. Either direct method or indirect method
c. Short-term, highly liquid investments that are d. Neither direct method nor indirect method
readily convertible to known amount of cash and
which are subject to an insignificant risk of 11. It is an adjustment of the carrying amount of an asset
changes in value or a liability or the amount of the periodic
d. Short and long-term highly liquid investments consumption of an asset that results from the
that are readily convertible to known amount of assessment of the present status and expected future
cash and which are subject to an insignificant benefit and obligation associated with the asset and
risk of changes in value liability.
a. Change in accounting estimate
5. An entity may hold securities for dealing or trading b. Change in accounting policy
purposes. Cash flows arising from the purchase and c. Correction of a prior period error
sale of dealing or trading securities are d. Change in reporting entity
a. Classified as operating activities
b. Classified as investing activities 12. The effect of a change in accounting estimate shall
c. Classified as financing activities be recognized prospectively by including it in profit
d. Not reported in the cash flow statement or loss of
a. Current period only
b. Future period only
 c. Prior periods only position, financial performance and cash
d. Current period and future periods if the change flows of the entity.
affects both a. I only
b. II only
13. A change in measurement basis is c. Either I or II
a. A change in accounting estimate d. Neither I nor II
b. A change in accounting policy
c. A correction of an error 19. This means “applying a new accounting policy to
d. Not an accounting change transactions, other events and conditions as if that
policy had always been applied”.
14. When it is difficult to distinguish between a change a. Retrospective application
in estimate and a change in accounting policy, an b. Retrospective restatement
entity shall c. Prospective applications
a. Treat the entire change as a change in estimate d. Prospective restatement
with appropriate disclosure.
b. Apportion on a reasonable basis the relative 20. This means “correcting the recognition,
amounts of change in estimate and the change in measurement and disclosure of amounts of elements
accounting policy and treat each one of financial statements as if a prior period error had
accordingly. never occurred”.
c. Treat the entire change as a change in a. Retrospective application
accounting policy. b. Retrospective restatement
d. Ignore it in the year of the change and then wait c. Prospective application
for the following year to see how the change d. Prospective restatement
develops and then treat it accordingly.
21. PAS 10 covers adjusting and non-adjusting events
15. Prior period errors include all of the following, after the reporting period up to
except a. Date of financial statements publication.
a. Effects of mathematical mistakes b. Date of authorization to issue the financial
b. Mistakes in applying accounting policies statements.
c. Oversights or misinterpretation of facts and c. Date when financial statements are filed with the
fraud regulator.
d. Effects of a change in the estimated useful life of d. Date when financial statements are approved by
an asset shareholders.

16. These are the specific principles, bases, conventions, 22. Adjusting events after reporting period include all of
rules and practices applied in the preparation and the following, except
presentation of financial statements. a. The settlement of a court case after the issuance
a. Accounting policies of the financial statements that confirms that the
b. Accounting principles entity has a present obligation.
c. Accounting standards b. Bankruptcy of a customer occurring between the
d. Accounting concepts end of the reporting period and date of issuance
of financial statements.
17. A change in accounting policy includes all of the c. Determination after reporting period and before
following, except the issuance of the statements of the cost of asset
a. The initial adoption of a policy to carry assets at purchased at the end of the reporting period.
revalued amount. d. The discovery of fraud or errors between the end
b. The change from cost model to revaluation of the reporting period and the date of issuance
model in measuring property, plant and of financial statements.
equipment.
c. The change in inventory valuation from FIFO to 23. Which of the following events after the reporting
weighted average method. period would require adjustment before issuance of
d. The change in depreciation method from sum of the financial statements?
years’ digits to straight line. a. Loss of plant as a result of fire
b. Change in the quoted market price of financial
18. A change in accounting policy shall be made when asset held as an investment
I. Required by an accounting standard or an c. Loss on inventory resulting from a storm surge
interpretation of the standard. d. Loss on a lawsuit the outcome of which was
II. The change will result in more relevant or deemed uncertain at year-end
reliable information about the financial
24. Parts of the notes to financial statements are events 30. It is the amount of income tax payable in respect of
after the reporting period which pertains to those the taxable profit.
events both favorable and unfavorable that occur. a. Current tax expense
a. After the balance sheet date. b. Total income tax provision
b. After issuance of the statements. c. Deferred tax expense
c. After the balance sheet date prior to issuance of d. Deferred tax benefit
financial statements.
d. Between the balance sheet date and the date 31. Which of the following statements in relation to
when the financial statements are authorized for deferred tax assets and liabilities is true?
issue. I. Deferred tax liabilities are the amounts of
income taxes payable in future periods in
25. Non-adjusting events after the balance sheet date respect of taxable temporary differences.
should be disclosed if II. Deferred tax assets are the amounts of
a. They are unusual and material. income taxes recoverable in future periods
b. They relate to conditions existing at the balance in respect of deductible permanent
sheet date. differences.
c. Non-disclosure would affect the amounts
presented in the financial statements. a. I only c. Both I and II
d. Non-disclosure would affect the ability of users b. II only d. Neither I nor II
of the financial statements to make proper
decisions. 32. Deferred tax assets are the amount of income taxes
recoverable in future periods in respect of
26. It is the profit for a period determined in accordance a. The carryforward of unused tax losses only
with the rules established by taxation authorities b. Taxable temporary differences and carryforward
upon which income taxes are payable. of unused tax losses
a. Accounting profit c. Deductible temporary differences and
b. Taxable profit carryforward of unused tax losses
c. Net profit d. Permanent differences
d. Accounting profit subject to tax
33. Which of the following differences would result in
27. These are differences between the carrying amount future taxable amount?
of an asset or liability in the statement of financial a. Expenses or losses that is deductible after they
position and its tax base. are recognized in accounting income.
a. Temporary differences b. Revenues or gains that is taxable before they are
b. Timing differences recognized in accounting income.
c. Permanent differences c. Expenses or losses that is deductible before they
d. Accounting differences are recognized in accounting income.
d. Revenues or gains that are recognized in
28. These are differences that will result in future accounting income but are never included in
taxable amount in determining taxable profit of taxable income.
future periods when the carrying amount of the asset
or liability is recovered or settled. 34. A temporary difference which would result in a
deferred tax asset is
a. Temporary differences a. Tax, penalty or surcharge
b. Taxable temporary differences b. Dividend received on share investment
c. Deductible temporary differences c. Excess tax depreciation over accounting
d. Permanent differences depreciation
d. Rent received in advance included in taxable
29. These are differences that result in future deductible income at the time of receipt but deferred for
amount in determining taxable profit in future accounting purposes.
periods when the carrying amount of the asset or
liability is recovered or settled. 35. Which is not a major characteristic of property, plant
and equipment?
a. Taxable temporary differences a. The property, plant and equipment are tangible
b. Deductible temporary differences assets.
c. Taxable temporary and permanent differences b. The property, plant and equipment are used in
d. Deductible temporary and permanent differences business.
c. The property, plant and equipment are expected
to be used over a period of more than one year.
 d. The property, plant and equipment are subject to b. The depreciation method used shall not reflect
depreciation. the pattern in which the asset’s economic
benefits are consumed by the entity.
36. Major spare parts and standby equipment which are c. The depreciation charge for each period shall be
expected to be used over a period of more than one recognized as an expense unless it is included in
year shall be classified as the carrying amount of another asset.
a. Property, plant and equipment d. The estimation of the useful life of an item of
b. Inventory property, plant and equipment is a matter of
c. Noncurrent investment judgment based on the experience of the entity
d. Expense with similar assets.

37. Under the cost model, subsequent to initial 42. The depreciation method applied to property, plant
recognition as an asset, an item of property, plant and equipment shall be reviewed periodically, and if
and equipment shall be carried at there has been a significant change in the expected
a. Cost pattern of consumption of economic benefits from
b. Revalued amount those assets, the change
c. Cost less accumulated depreciation and any a. Shall be accounted for as a change in accounting
accumulated impairment loss policy
d. Revalued amount less accumulated depreciation b. Shall not be recognized
and any accumulated impairment loss c. Shall be accounted for as a change in accounting
estimate
38. The cost of an item of property, plant and equipment d. Shall be accounted for as correction of a prior
comprises all of the following, except period error
a. Purchase price
b. Import duties and nonrefundable purchase taxes 43. The depreciation method prescribed by PAS 16 is
c. Any cost directly attributable in bringing the a. Straight line c. Units of production
asset to the location and condition for its b. Diminishing balance d. None
intended use
d. Initial estimate of the cost of dismantling and 44. According to PAS 16, an entire class of PPE is
removing the item and restoring the site, the subsequently measured under the
obligation for which the entity does not incur a. Cost model c. Fair value model
when the item was acquired b. Revaluation model d. a or b

39. Costs directly attributable to bringing the asset to the 45. Which of the following is not classified as property,
location and condition for its intended use include plant and equipment?
all of the following, except a. Land held for future plant site
a. Cost of employee benefit not arising directly b. Building used in business
from the construction and acquisition of c. Equipment held for environmental and safety
property, plant and equipment reasons
b. Cost of site preparation d. Minor spare parts and short-lived stand-by
c. Initial delivery and handling cost equipment
d. Installation and assembly cost
46. Which item appears first on the statement of cash
40. Costs that are expensed immediately include all of flows prepared using the direct method?
the following, except a. Cash receipts from customers
a. Cost of opening a new facility b. Depreciation
b. Cost of introducing a new product or service, c. Net income
including cost of advertising and promotional d. Retained earnings
activities
c. Cost of conducting business in a new location, 47. Under the direct method, which of the following
including cost of staff training items must be deducted from reported net income to
d. Cost of testing whether the asset is functioning determine the net cash flow from operating
properly activities?
a. Amortization of bond discount
41. Which of the following statements is incorrect with b. Decreases in current assets
respect to depreciation? c. Decreases in current liabilities
a. The depreciable amount of item of property, d. Depreciation of plant assets.
plant and equipment shall be allocated on a
systematic basis over its useful life.
48. Under the revaluation model of accounting for
property, plant and equipment
a. Asset must be revalued quarterly
b. Asset must be revalued annually
c. Asset must be revalued bi-annually
d. There is no rule regarding the frequency of
revaluation

49. Which is the best explanation why accounting

changes are classified into different categories?
a. The materiality of the changes involved.
b. The fact that some treatments are considered
GAAP and some are not.
c. A survey of managers and their need to provide
a favorable profit picture.
d. Each category involved different method of
recognizing changes in the financial statements.

50. Under PAS 8, which of the following is the first step

within the hierarchy of guidance when selecting
accounting policies?
a. Apply the requirements in PFRS dealing with
similar and related issues.
b. Consider the most recent pronouncements of
other standard setting bodies.
c. Apply a standard from PFRS if it specifically
relates to the transaction, other event or
condition.
d. Consider the applicability of the definitions,
recognition criteria and measurement concepts
in the Conceptual Framework.

Answers:

1) A.
2) D
3) D
4) D
5) A
6) C
7) D
8) C
9) C
10) C
11) A
12) D
13) B
14) A
15) A
16) A
17) D
18) A
19) A
20) B
21) D
22) A
23) B
24) D
25) D
26) B
27) A
28) B
29) C
30) A
31) C
32) B
33) A
34) C
35) D
36) A
37) C
38) D
39) A
40) A
41) C
42) C
43) D
44) A
45) A
46) A
47) B
48) D
49) D
50) C