DIRECT FINANCING LEASE-LESSOR

1. Gross investment in the lease is equal to

a. Sum of the lease payments receivable by a lessor under a finance lease and any unguaranteed
residual value accruing to the lessor.

b. The lease payments under a finance lease of the lessor

c. Present value of lease payments under a finance lease of the lessor and any unguaranteed
residual value.

d. Present value of the lease payments under a finance lease of the lessor.

2. Which is the correct accounting treatment for a finance lease in the accounts of a lessor?

a. Noncurrent asset equal to net investment in lease and all finance payments in income
statement.

b. Receivable equal to gross investment in the lease and all finance payments by reduction of debt.

c. Receivable equal to net investment in the lease and finance taking interest to income
statement.

d. Receivable equal to net investment in the lease and all finance payments by reduction of debt.

3. Lessors shall recognize asset held under a finance lease as a receivable at an amount equal to
the

a. Gross investment in the lease

b. Net investment in the lease

c. Gross rentals

d. Residual value whether guaranteed or unguaranteed

4. The lease receivable in a direct financing lease is

a. The gross amount of lease payments.

b. Gross rentals minus fair value of the leased asset.

c. The present value of lease payments.

d. The cost of the asset less any depreciation

 5. Under a direct financing lease, the excess of aggregate rentals over the cost of the underlying
asset should be recognized as interest income of the lessor

a. In increasing amounts during the term of the lease

b. In constant amounts during the term of the lease

c. In decreasing amounts during the term of the lease

d. After the cost of the underlying asset has been fully recovered through rentals

POSTEMPLOYMENT BENEFITS

1. Which statement characterizes defined contribution plan?

a. Defined contribution plans are more complex than defined benefit plans.

b. The employer's obligation is satisfied by making the appropriate amount of periodic

contribution.

c. The investment risk is borne by the employer.

d. Contributions are made in equal amounts by employer and employees.

2. Which is not a characteristic of defined contribution plan?

a. The employer contribution each period is based on a formula.

b. The benefits to be received are usually determined by an employee's highest salary.

c. The accounting for a defined contribution plan is straightforward and uncomplicated.

d. The benefit of gain or the risk of loss from the assets contributed to the plan is borne by the
employee.

3. A formula in a defined contribution plan

a. Defines the benefits that the employee will receive at the time of retirement.

b. Ensures that the defined benefit cost and funding are the same.

c. Requires an employer to contribute a certain sum each period based on the formula.

d. Ensures that enough fund would be available.

4. Which statement is true concerning the recognition and measurement of a defined contribution
plan?

a. The contribution shall be recognized as expense in the period it is payable.

b. Any unpaid.contribution at the end of the period shall be recognized as accrued liability.
 c. Any excess contribution shall be recognized as prepaid expense but only to the extent that the
prepayment will lead to a reduction in future payments or a cash refund.

d. All of these statements are true about a defined contribution plan.

5. Which statement is incorrect concerning the recognition and measurement of a defined benefit
plan?

a. Actuarial assumptions are required to measure the obligation and expense and there is a
possibility of actuarial gains and losses.

b. The obligation is measured on a discounted basis.

c. The defined benefit plan must be fully funded.

d. The expense recognized for a defined benefit plan is not necessarily the amount of contribution
due for the period.

PROJECTED BENEFIT OBLIGATION FAIR VALUE OF PLAN ASSETS PREPAID/ACCRUED BENEFIT COST

OTHER EMPLOYEE BENEFIT

1. What are compensated absences?

a. Unpaid time off

b. A form of healthcare

c. Payroll deductions

d. Paid time off

2. If the payment of employees' compensation for future absences is probable, the amount can be
reasonably estimated and the obligation obligati relates to rights that accumulate, the
compensation should be

a. Accrued if attributable to services not yet rendered.

b. Accrued if attributable to services already rendered.

c. Accrued if attributable to services whether already rendered or not.

d. Recognized when paid.

 3. Which of the following criteria is not required for the recognition of a liability for compensated
absences?

a. The amount of the obligation must be estimable.

b. Payment of the obligation must be probable.

c. Payment of the obligation requires the use of current assets.

d. The compensation either vests with the employee or can be carried forward to subsequent
years.

4. An employer offered special termination benefits. The employees accepted the offer which
provided for immediate lump sum payments and future payments at the end of the next two
years. The amount of expense recognized in the current year should include

a. The total of the lump sum and future payments

b. One third of the lump sum payments and one third of the present value of the future payments

c. Only the lump sum payments

d. The lump sum payments and the present value of the future payments

5. What is the requirement for the accrual of a sick pay?

a. Sick pay benefits can be reliably estimated.

b. Sick pay benefits vest.

c. Sick pay benefits do not vest.

d. Sick pay benefits accumulate.

ACCOUNTING FOR INCOME TAX

1. Justification for the method of determining periodic deferred tax expense is based on the
concept of

a. Matching of periodic expense to periodic revenue.

b. Objectivity in the calculation of periodic expense

c. Recognition of asset and liability.

d. Consistency of tax expense measurement with actual tax planning strategies.

2. Which of the following differences would result in future taxable amount?

 a. Expenses or 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.

3. A temporary difference which would result in a deferred tax liability is

a. Interest revenue on municipal bonds.

b. Accrual of warranty expense

c. Excess tax depreciation over accounting depreciation

d. Subscription received in advance

4. A temporary difference which would result in a deferred tax asset is

a. Tax, penalty or surcharge.

b. Dividend received on share investment.

c. Excess tax depreciation over accounting depreciation.

d. Rent received in advance included in taxable income at the time of receipt but deferred for
accounting purposes.

DEFERRED TAX ASSET AND LIABILITY

1. An entity shall offset a deferred tax asset and deferred tax liability

a. When the income taxes are levied by different taxing authority

b. When the entity has no legal enforceable right to offset

c. When the income taxes are levied by the same taxing authority and the entity has a legal
enforceable right to offset a current tax asset against a current tax liability

d. Under all circumstances

2. Which deferred tax asset is recognized for deductible temporary differences and operating loss
carryforward when

a. It is probable that taxable income will be available against which the deferred tax asset can be
used.

b. It is probable that accounting income will be available against which the deferred tax asset can
be used.
 c. It is possible that taxable income will be available against which the deferred tax asset can be
used.

d. It is possible that accounting income will be available against which the deferred tax asset can be
used.

3. Which statement is true regarding reporting deferred income taxes in the financial statements?

a. Deferred tax assets are always netted against deferred tax liabilities

b. Deferred taxes of one jurisdiction are offset against another jurisdiction in the netting process

c. Deferred tax assets and liabilities may only be classified as noncurrent

d. Deferred tax assets and liabilities may only be classified as current and noncurrent based on
expiration date

4. It is the aggregate amount included in the determination of net profit for the period in respect of
current tax and deferred tax

a. Tax expense

b. Current tax expense

c. Deferred tax expense

d. Deferred tax benefit

5. Which statement us incorrect concerning tax assets and liabilities?

a. Deferred tax assets and liabilities shall be discounted

b. Tax assets and liabilities shall be presented separately from other assets and liabilities in the
statement of financial position

c. Deferred tax assets and liabilities shall be distinguish from current tax assets and liabilities

d. When an entity makes a distinction between current and noncurrent assets and liabilities as
current

SHAREHODERS’ EQUITY

1. Total shareholders' equity represents

a. A claim against specific assets.

b. The maximum amount that can be borrowed.

 c. A claim against the total assets of an entity.

d. Only the amount of retained earnings.

2. In accounting for shareholders' equity, the accountant is primarily concerned with which of the
following?

a. Determining the total amount of shareholders' equity

b. Distinguishing between realized and unrealized revenue

c. Recording the source of each of the various elements of shareholders' equity

d. Making sure that the directors do not declare dividends in excess of retained earnings

3. The term residual owner means that ordinary shareholders

a. Are entitled to a dividend every year in which the entity earns an income.

b. Have the rights to specific assets of the entity.

c. Bear the ultimate risks and uncertainties and receive the benefits of ownership.

d. Can negotiate individual contracts for the entity.

4. Shares that have a fixed per-share amount printed on the share certificate are called

a. Stated value shares

b. Fixed value shares

c. Uniform value.shares

d. Par value shares.

5. The Par value of an ordinary share represents

a. The liquidation value of the share.

b. The book value of the share.

c. The legal nominal value assigned to the share.

d. The amount received by the corporation when the share is originally issued.

SHAREHODERS’ EQUITY (TREASURY SHARES)

1. Gain on retirement of treasury shares shall credited to

a. Share premium

b. Retained earning

c. Share capital

d. Income

2. Shares issued exceed shares outstanding as a result of

a. Declaration of share split

b. Declaration of share dividend

c. Purchase of treasury shares

d. Payment in full of subscribed shares

3. When treasury shares are sold at a price above cost

a. A gain is credited

b. A loss is reported

c. A revenue is credited

d. Contributed capital is increased

4. Which is not a method to account for treasury shares?

a. Cost method

b. Par value method

c. Retained earnings method

d. Constructive retirement method

5. Which is incorrect in relation to treasury shares?

a. Treasury shares shall be recorded at cost.

b. The total cost of treasury shares shall be deducted from shareholders' equity.

c. Treasury shares may be recognized as financial asset.

d. Gain on sale of treasury shares is not recognized as income.

RETAINED EARNINGS

1. An entity declared a cash dividend on a certain date. payable on another date. Retained earnings
would

a. Increase on the date of declaration

b. Not be affected on the date of declaration

c. Not be affected on the date of payment

d. Decrease on the date of payment

2. The actual total amount of a cash dividend to be paid is determined on the date of

a. Record

b. Declaration

c. Declaration or record, whichever is earlier

d. Payment

3. A dividend which is a return to shareholders of a portion of their original investment is

a. Liquidating dividend

b. Patronage dividend

c. Liability dividend

d. Participating dividend

4. Total shareholders' equity is not affected by the

a. Issuance of a share dividend

b. Conversion of bonds payable into share capital

c. Sale of treasury shares at more than cost

d. Declaration of a cash dividend

5. How would the declaration and subsequent issuance of a 10% share dividend affect share capital
and share premium, respectively, when the fair value of the shares exceeds par value?

a. No effect and No effect

 b. No effect and Increase

c. Increase and No effect

d. Increase and Increase

RETAINED EARNINGS APPROPRIATION AND QUASI-REORGANIZATION

1. For which of the following purposes should an appropriation for possible loss contingencies. be
established?

a. To match applicable costs with current revenue.

b. To reduce fluctuations in net income in order to lend stability of the entity.

c. To charge operations in periods of rising prices for the losses which may otherwise be absorbed
in periods of falling prices.

d. To inform shareholders that a portion of retained earnings should be set aside from amounts
available for dividends because of such contingencies.

2. Which statement is incorrect concerning appropriations of retained earnings?

a. Appropriations of retained earnings do not change the total amount of shareholders' equity.

b. Appropriations of retained earnings reflect funds set aside for a designated purpose, such as
plant expansion.

c. Appropriations of retained earnings can be made as a result of contractual requirements.

d. Appropriations of retained earnings can be made at the discretion of the board of directors

3. Which statement is incorrect concerning appropriations of retained earnings?

a. Appropriations do not reduce total retained earnings.

b. The only proper way to eliminate an appropriation of retained earnings after it has served its
purpose is to revert to the unappropriated retained earnings.

c. An appropriation of retained earnings does not mean that assets are segregated for a specific
purpose.

d. When treasury shares are purchased, retained earnings must be apppropriated equal to the par
or stated value of the treasury shares.

4. Which statement is incorrect concerning appropriations of retained earnings?

 a. Appropriations do not reduce total retained earnings.

b. The only proper way to eliminate an appropriation of retained earnings after it has served its
purpose is to revert to the unappropriated retained earnings.

c. An appropriation of retained earnings does not mean that assets are segregated for a specific
purpose.

d. When treasury shares are purchased, retained earnings must be apppropriated equal to the par
or stated value of the treasury shares.

5. The use of equity reserves under international accounting standards

a. Is strictly voluntary on the part of the management of an entity.

b. Is based on whether a reserve is part of distributable or nondistributable equity.

c. Is primarily for the benefit of shareholders rather than creditors.

d. Results in the elimination of retained earnings from the total shareholders' equity.

SHARED BASED COMPENSATION SHARE APPRECIATION RIGHT

1. What is the measurement date for share-based payment to employees classified as liability?

a. The service inception date

b. The grant date

c. The settlement date

d. The end of reporting period

2. For share appreciation rights, the measurement date for computing compensation is the

a. Date the rights mature

b. Date the share reaches a predetermined amount

c. Date of grant

d. Date of exercise

3. For cash settled share-based payment transaction, any change in fair value of liability is

a. Included in profit or loss

b. Included in retained earnings

c. Treated as component of other comprehensive income

d. Not recognized

4. If share-based payment transaction provides that the employees have the right to choose the
settlement whether in cash or shares, the entity is deemed to have issued

a. A compound financial instrument

b. An equity instrument

c. A liability instrument

d. Either an equity or a liability instrument but not both

5. If the entity has the choice of settlement in a cash and share alternative, the entity shall account
for the instrument initially as

a. Equity only

b. Liability only

c. Partly equity and partly liability

d. Either equity or liability but not both