CFAS PRACTICE SET

A.Y. 2024 – 2025 Second Sem

KNOWLEDGE CHECK

1. Goodwill arising from an investment in associate unless such influence can be clearly
is demonstrated.
a. Included in the carrying amount of the b. If an investor holds, directly or indirectly,
investment and amortized over the useful 20% or more of the voting power of the
life. investee, it is presumed that the investor
b. Included in the carrying amount of the does have significant influence, unless it
investment and not amortized over the can be clearly demonstrated that this is
useful life. not the case.
c. Charged to retained earnings c. A substantial or majority ownership by
d. Charged to expenses immediately another investor does not necessarily
2. If an associate has outstanding cumulative preclude an investor from having
preference shares held by outside interests, the significant influence.
investors computes share of profit or loss d. All of these statements are true about
a. After adjusting for preference dividends significant influence.
which were actually paid during the year 6. All of the following would indicate that
b. Without regard for preference dividends hyperinflation exists, except
c. After adjusting for the preference a. The general population regards monetary
dividends only when declared. amounts in terms of relatively stable
d. After adjusting for the preference foreign currency.
dividends whether or not the dividends b. The cumulative inflation rate over three
have been declared. years is approaching, or exceeds 100%.
3. It is an entity over which the investor has c. Inflation rates have exceeded interest
significant influence. rates in three successive years.
a. Associate d. The general population prefers to keep
b. Investee wealth in nonmonetary assets.
c. Venture capital organization 7. The financial statements of an entity that reports
d. Mutual fund in the currency of a hyperinflationary economy
4. Which statement best describes “significant shall be stated in terms of
influence”? a. Historical cost
a. The holding of a significant proportion of b. Current cost
the share capital of another entity c. Fair value
b. The contractually agreed sharing of d. Measuring unit current at the end of
control over an economic entity reporting period
c. The power to participate in the financial 8. The gain or loss on the net monetary position in a
and operating policy decisions of an hyperinflationary economy shall be included in
entity the
d. The mutual sharing in the risks and a. Profit or loss and separately disclosed
benefits of a combined entity b. Retained earnings
5. Which of the following statements is true c. Equity
concerning significant influence? d. Comprehensive income
a. If an investor holds, directly or indirectly, 9. During a period of inflation, an account balance
less than 20% of the voting power of the remains constant. With respect to this account, a
investee, it is presumed that the investor purchasing power loss will be recognized if the
does not have significant influence, account is a
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

a. Monetary asset c. Book value per share

b. Monetary liability d. Price earnings ratio
c. Nonmonetary asset 15. Where in the financial statements should basic
d. Nonmonetary liability and diluted EPS be reported?
10. During a period of inflation in which a liability a. In the accompanying notes
account balance remains constant, which of the b. In management discussion and analysis
following occurs? c. In the income statement
a. A purchasing power loss if the item is a d. In the statement of cash flows
nonmonetary liability. 16. An interim financial report contains
b. A purchasing power gain if the item is a a. A complete set of financial statements
nonmonetary liability. b. A condensed set of financial statements
c. A purchasing power loss if the item is a c. Either a complete set or condensed set of
monetary liability. financial statements
d. A purchasing power gain if the item is a d. Neither a complete set or condensed set
monetary liability. of financial statements
11. Earnings per share should be computed on the 17. Which basic financial statements are prepared
basis of as a minimum for interim financial reporting?
a. Preference share a. Statement of financial position and
b. Voting ordinary shares income statement
c. Voting and nonvoting ordinary shares b. Statement of financial position, income
d. Voting ordinary shares and participating statement and statement of
preference shares comprehensive income
12. Earnings per share should always be reported for c. Statement of financial position,
a. Gross profit statement of comprehensive income and
b. Income before tax statement of cash flows
c. Income from continuing operations d. Statement of financial position,
d. Prior period error statement of comprehensive income,
13. Potential ordinary shares include all of the statement of cash flows and statement of
following, except changes in equity
a. Financial liabilities or equity instruments 18. Publicly traded entities are encouraged to provide
that are nonconvertible into ordinary interim financial reports
shares a. At least at the end of the half year and
b. Share warrants within 60 days of the end of the interim
c. Share options or employee plans that period
allow employees to receive ordinary b. Within a month of the half year-end
shares as part of their renumeration c. On a quarterly basis
d. Shares which would be issued upon the d. Whenever the entity wishes
satisfaction of certain conditions 19. An entity is preparing interim financial
resulting from contractual arrangements, statements for six months ended June 30, 2017.
such as purchaser of a business In the interim financial statements for six
14. Total shareholder’s equity divided by the number months, a statement of financial position on June
of shares outstanding represents the 30, 2017 and a statement of comprehensive
a. Return on equity income for six months ended June 30, 2017 shall
b. Stated value per share
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

be presented. In addition, all of the following c. Deferred tax expense

shall be presented, except d. Deferred tax benefit
a. Statement of financial position on June 25. It is the aggregate amount included in the
30, 2016 determination of profit for the period in respect of
b. Statement of financial position on current tax and deferred tax.
December 31, 2016 a. Tax expense
b. Current tax expense
c. Statement of comprehensive income for
c. Deferred tax expense
six months ended June 30, 2016
d. Deferred tax benefit
d. Statement of cash flows for six months 26. Which statement characterizes defined
ended June 30, 2016 contribution plans?
20. Which of the following statements is true a. Defined contribution plans are more
regarding interim reporting? complex
a. The independent view is required for b. The employer’s obligation is satisfied by
interim financial statements. making the appropriate amount of
b. Interim reports are required on a quarterly periodic contribution.
basis. c. The investment risk is borne by the
c. Interim reports are not required. employer
d. Interim reports require the preparation of d. Contributions are made in equal amounts
only a statement of earnings and a by employer and employees.
statement of financial position 27. The formula in a defined benefit plan
21. These are differences that have future tax a. Requires that the benefit of gain or risk of
consequences.
loss from the assets contributed to the
a. Permanent differences
plan should be borne by the employee.
b. Taxable differences
c. Temporary differences b. Defines the benefits that the employee
d. Deductible differences will receive at the time of retirement
22. This type of difference will give rise to deferred c. Requires that the defined benefit cost
tax liability. and funding must be the same
a. Taxable temporary difference d. Defines the contribution to be made by
b. Permanent difference the employer and no promise is made
c. Deductible temporary difference concerning the ultimate benefits to be
d. Deferred difference paid to the employees.
23. Deferred tax assets and deferred tax liabilities do 28. Which is the correct definition of a provision?
not alter the tax to be paid in the current period. a. A possible obligation arising from past
However, they cause tax payments to either event
increase or decrease when they reverse in a
b. A liability of uncertain timing or amount
future period. The reversal of which of the
c. A liability which cannot be easily
following will cause an increase in tax payment?
a. Deferred tax liability measured
b. Deferred tax expense d. An obligation to transfer funds to an entity
c. Deferred tax asset 29. Which statement is incorrect concerning a
d. Deferred tax benefit contingent liability?
24. It is the amount of income tax payable in respect a. A contingent liability is not recognized in
of the taxable profit. the financial statements
a. Current tax expense b. A contingent liability is disclosed only
b. Total income tax expense
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

c. If the contingent liability is remote, no d. It is neither separable or it arises from

disclosure is required contractual and other legal rights
d. A contingent liability is both probable and 34. After initial recognition, an intangible asst shall
measurable. be measured using
30. Which best describes “impairment loss”? a. Cost model
a. The removal of an asset from the b. Revaluation model
statement of financial position c. Cost or revaluation model
b. The amount by which the carrying d. Cost or fair value model
amount of an asset exceeds the 35. Which does not qualify as an intangible asset?
recoverable amount a. Computer software
c. The systematic allocation of cost of an b. Registered patent
asset less residual value over the useful c. Copyright
life. d. Notebook computers
d. The amount by which the recoverable 36. Borrowing costs are defined as
amount of an asset exceeds the carrying a. Interest expense using e ective interest
amount method
31. What is the recoverable amount of an asset? b. Finance charges in respect of finance
a. Fair value less cost of disposal lease
b. Value in use c. Exchange di erences arising from foreign
c. Fair value less cost of disposal or value in currency borrowings to the extent that
use, whichever is higher these are regarded as an adjustment to
d. Fair value less cost of disposal or value in interest cost
use, whichever is lower d. Interest and other costs that an entity
32. What is fair value of an asset? incurs in connection with borrowing
a. The price that would be received to sell funds
an asset in an orderly transaction 37. This is defined as “assistance by government in
between market participants at the the form of transfer of resources to an entity in
measurement date return for past or future compliance with certain
b. The price that would be paid to transfer a conditions relating to the operating activities of
liability in an orderly transaction between the entity.”
market participants at the measurement a. Government grant
date b. Government assistance
c. The discounted value of future cash flows c. Government donation
expected to be derived from the asset d. Government aid
d. The undiscounted value of future cash 38. Which of the following statements best describes
flows expected to be derived from an investment property?
asset a. Property held for sale in the ordinary
33. An intangible asset is identifiable when course of business
a. It is separable b. Property held for use in the production
b. It arises from contractual and other legal and supply of goods or services and
rights property held for administrative purposes
c. It is either separable or it arises from c. Property held to earn rentals or for capital
contractual and other legal rights appreciation
d. Property held for capital appreciation
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

39. Subsequent to initial recognition, the investment b. Notes payable

property shall be measured using c. Bonds payable
a. Fair value or revaluation model d. Income tax payable
b. Fair value through profit or loss model 46. Which of the following should not be considered
c. Cost model or fair value model cash?
d. Cost or revaluation model a. Petty Cash Fund
40. Agricultural activity results in which of the b. Money orders
following type of asset? c. Coin and currency
a. Biological asset d. IOUs
b. Agricultural produce 47. Which of the following is usually considered
c. Biological asset and agricultural produce cash?
d. Neither biological asset nor agricultural a. Certificate of deposit
produce b. Checking amount
41. Agricultural produce as it grows on bearer plant is c. Money market saving certificate
measured at the end of each reporting period d. Post dated check
prior to harvest at 48. A cash equivalent is a short-term, highly liquid
a. Fair value investment that is readily convertible into known
b. Fair value less cost of disposal amount of cash and
c. Fair value plus cost of disposal a. Is acceptable as a means to pay current
d. Fair value less cost of disposal at the liabilities
point of harvest b. Has a current market value that is greater
42. A living plant with a dual use is classified as than the original cost.
a. Bearer plant c. Bears an interest rate that is at least
b. Biological asset equal to the prime interest rate at the
c. Investment property date of liquidation.
d. Inventory d. Is so near maturity that it presents
43. A financial instrument is any contract that gives insignificant risk of change in interest
rise to rate.
a. A financial asset 49. All of the following can be classified as cash and
b. A financial liability cash equivalents, except
c. A financial asset of one entity and a a. Redeemable preference shares acquired
financial liability of another entity and due to 60 days
d. A financial asset of one entity and a b. Commercial papers held and due for
financial liability or equity instrument of repayment in 90 days
another entity c. Equity investments
44. Financial assets include all of the following, d. A bank overdraft
except 50. Deposits in foreign bank which are subject to
a. Prepaid expenses foreign exchange restriction should be classified
b. Cash in bank a. Separately as current asset, with
c. Trade accounts receivable appropriate disclosure
d. Loans receivable b. Separately as noncurrent asset with
45. Financial liabilities include all of the following, appropriate disclosure
except c. Be written o as loss
a. Trade accounts payable d. As part of cash and cash equivalents
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

51. Bank overdraft generally should be b. To ease the payment of cash to vendors
a. Reported as a deduction from current c. To determine the honesty of the petty
assets cashier
b. Reported as a deduction from cash d. To e ectively control cash disbursements
c. Netted against cash and a net cash 57. The petty cash fund account under the imprest
amount reported fund system is debited
d. Reported as a current liability a. Only when the fund is created.
52. What is a compensating balance b. When the fund is created and every time
a. Saving account balance it is replenished.
b. Demand deposit account balance c. When the fund is created and when the
c. Temporary investment serving as size of the fund is increased.
collateral for outstanding loan d. When the fund is created and when the
d. Minimum deposit required to be fund is decreased
maintained in connection with a 58. A Cash Over and Short account
borrowing arrangement. a. Is not generally accepted
53. A compensating balance b. Is debited when the petty cash fund
a. Must be included in cash and cash proves out over
equivalent. c. Is debited when the petty cash fun proves
b. Which is legally restricted and related to a out short
long-term loan is classified as current d. Is a contra account to cash
asset. 59. Which of the following statements in relation to
c. Which is legally restricted and related to a an imprest system is incorrect?
short-term loan is classified as current a. The imprest petty cash system in e ect
asset. adheres to the rule of disbursement by
d. Which is not legally restricted as to check.
withdrawal is classified separately as b. Entries are made to the pretty cash
current asset. account only to increase or decrease the
54. Petty cash fund is size of the fund or to adjust the balance if
a. Separately classified as current asset not replenished at year-end.
b. Money kept on hand for making minor c. The petty cash account is debited when
disbursements of coin and currency the fund is replenished.
rather than by writing checks d. The petty cash fund is reported as part of
c. Set aside for the payment of payroll current assets.
d. Restricted cash 60. When an imprest petty cash fund is used, which
55. The internal control feature specific to petty cash of the following statements is true?
is a. The balance of the petty cash fund should
a. Separation of duties be reported in the statement of financial
b. Assignment of responsibility position as a long-term investment.
c. Proper authorization b. The petty cashier’s summary of petty
d. Imprest system cash payments serves as a journal entry
56. What is the major purpose of an imprest petty that is posted to the appropriate general
cash fund? ledger account.
a. To e ectively plan cash inflows and c. The reimbursement of the petty cash fund
outflows should be credited to the cash account.
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

d. Entries that include a credit to the cash c. Deposit in transit

account should be recorded at the time d. A customer’s note collected by the bank
the payments from the petty cash fund on behalf of the depositor
are made. 65. Which of the following must be deducted from
61. Which of the following statements in relation to the bank statement balance in preparing a bank
petty cash fund is false? reconciliation which ends with adjusted cash
a. Each disbursement from petty cash balance?
should be supported by a petty cash a. Deposit in transit
voucher. b. Outstanding check
b. The creation of a petty cash fund requires c. Reduction of loan charged to the account
a journal entry to reflect the transfer of of the depositor
fund out of the general cash account. d. Certified check
c. At any time, the sum of the cash in the 66. If the balance shown in the bank statement is
petty cash fund and the total of petty less than the correct cash balance and neither
cash vouchers should equal the amount the entity nor the bank has made any errors,
for which the imprest petty cash fund was there must be
established. a. Deposits credited by the bank but not yet
d. With the establishment of an imprest recorded by the entity
petty cash fund, one person is given the b. Outstanding checks
authority and responsibility for issuing c. Deposits in transit
checks to cover minor disbursements. d. Bank charges not yet recorded by the
62. Which of the following items must be added to entity
the cash balance per ledger in preparing a bank 67. If the cash balance shown in the accounting
reconciliation which ends with adjusted cash records is less than the correct cash balance and
balance? neither the entity nor the bank has made any
a. Note receivable collected by bank in favor errors, there must be
of the depositor and credited to the a. Deposits credited by the bank but not yet
account of the depositor recorded by the entity
b. NSF customer check b. Deposits in transit
c. Service charge c. Outstanding checks
d. Erroneous bank debit d. Bank charges not yet recorded by the
63. In preparing a bank reconciliation, interest paid entity
by the bank on the combined current and saving 68. Bank reconciliations are normally prepared on a
account is monthly basis to identify adjustments needed in
a. Added to the bank balance the depositor’s records and to identify bank
b. Subtracted from the bank balance errors. Adjustments on the part of the depositor
c. Added to the book balance should be recorded for
d. Subtracted from the book balance a. Bank errors, outstanding checks and
64. In preparing a monthly bank reconciliation which deposits in transit
of the following would be added to the balance b. All items except bank errors, deposits in
per bank statement to arrive at the correct cash transit and outstanding checks.
balance? c. Book errors, bank errors, deposit in
a. Outstanding check transit and outstanding checks.
b. Bank service check
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

d. Outstanding checks and deposits in d. Deduction from accounts receivable

transit. 74. Where the operating cycle extends beyond one
69. Bank statements provide information about all of year because of normal credit terms as in the
the following, except case of installment sales of household
a. Checks cleared during the period appliances
b. NSF checks a. It is proper to classify the entire
c. Bank charges for the period receivables as current assets with
d. Errors made by the depositor disclosure of the amount not realizable
70. Trade receivables are classified as current assets within one year, if material.
if these are reasonably expected to be collected b. The entire receivables are shown as
a. Within one year noncurrent assets.
b. Within the normal operating cycle c. The portion due in one year is shown as
c. Within one year or within the normal current and the balance as noncurrent.
operating cycle, whichever is shorter d. The receivables are not recognized.
d. Within one year or within the normal 75. In the case of long-term installment receivables
operating cycle, whichever is longer as in real estate installment sales where a major
71. Nontrade receivables are classified as current portion is collected beyond the normal operating
assets only if these are reasonably expected to cycle.
be realized in cash a. The entire receivables are shown as
a. Within one year, the length of the current without disclosure of the amount
operating cycle notwithstanding not currently due.
b. Within the normal operating cycle b. The entire receivables are shown as
c. Within one year or within the normal noncurrent.
operating cycle, whichever is shorter c. Only the portion currently due is shown
d. Within one year or within the normal as current and the balance as
operating cycle, whichever is longer noncurrent.
72. If the ideal measure of short-term receivables in d. The entire receivables are shown as
the statement of financial position is the current with disclosure of the amount not
discounted amount of the cash to be received in currently due.
the future, failure to follow this practice usually 76. Which method of recording bad debts loss is
does not make the statement of financial consistent with accrual?
position misleading because a. Allowance method
a. Most short-term receivables are b. Direct writeo method
noninterest-bearing. c. Percent of sales method
b. The allowance for doubtful accounts d. Percent of accounts receivable method
includes a discount element. 77. A method of estimating bad debts that focuses
c. The amount of the discount is immaterial. on the income statement rather than the
d. Most receivables can be sold to a bank or statement of financial position is the allowance
a factor. method based on
73. Credit balances in accounts receivable are a. Direct writeo
classified as b. Aging the trade accounts receivable
a. Current liabilities c. Credit sales
b. Parts of accounts payable d. The balance in the trade accounts
c. Long term liabilities receivable
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

78. A method of estimating uncollectible accounts 83. Why would an entity sell accounts receivable to
that emphasizes asset valuation rather than another entity?
income measurement is the allowance method a. To improve the quality of credit granting
based on process
a. Aging of accounts receivable b. To limit its legal liability
b. Direct writeo c. To accelerate access to amount collected
c. Gross sales d. To comply with customer agreements
d. Credit sales less returns and allowances 84. Which of the following is a method to generate
79. The advantage of relating the bad debt cash from accounts receivable?
experience to accounts receivable is that this a. Assignment
approach b. Factoring
a. Gives a reasonably accurate c. Assignment and factoring
measurement of receivables in the d. Assignment, factoring and discounting
statement of financial position. 85. The practice of realizing cash from trade
b. Relates bad debts expense to the period receivables prior to maturity date is widespread.
of sale. Which term is not associated with this practice?
c. Is the only generally accepted method for a. Hypothecation
measuring accounts receivable b. Factoring
d. Makes estimates of uncollectible c. Defalcation
accounts unnecessary. d. Pledging
80. Which of the following is not permitted in 86. When the accounts receivable are sold outright,
accounting for uncollectible accounts the accounts receivable have been
receivable? a. Pledged
a. Percentage of accounts receivable b. Assigned
b. Percentage of sales c. Factored
c. Direct writeo method d. Collateralized
d. Aging of accounts receivable 87. It is a predetermined amount withheld by a factor
81. When the direct writeo method of recognizing as a protection against customer returns,
bad debt expense is used, the entry to write o a allowances and other special adjustments.
specific customer account would a. Equity in assigned accounts
a. Increase net income b. Service charge
b. Have no e ect on net income c. Factor’s holdback
c. Increase accounts receivable and d. Loss on factoring
increase net income 88. Which of the following should not be taken into
d. Decrease accounts receivable and account when determining the cost of inventory?
decrease net income a. Storage costs of part-finished goods
82. Accounting for the interest in a noninterest b. Trade discounts
bearing note receivable is an example of what c. Recoverable purchase taxes
aspect of accounting theory? d. Import duties on shipping of inventory
a. Matching inward
b. Verifiability 89. The cost of inventory does not include
c. Substance over form a. Salaries of factory sta
d. Form over substance b. Storage cost necessary in the production
process before a further production stage
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

c. Abnormal amount of wasted materials d. Machinery acquired by a manufacturing

d. Irrecoverable purchase taxes entity for use in the production process.
90. Which of the following costs of conversion 96. Entity A acquires equipment by issuing shares of
cannot be included in cost of inventory? stocks. How should Entity A report the
a. Cost of direct labor transaction in the statement of cash flows?
b. Factory of rent and utilities a. Operating activities
c. Salaries of sales sta b. Investing activities
d. Factory overhead based on normal c. Financing activities
capacity d. Not reported
91. Which of the following should be taken into 97. When an entity changed the expected service life
account when determining the cost of inventory? of an asset, which of the following should be
a. Storage cost of part-finished goods reported?
b. Abnormal freight in a. Cumulative e ect of change in
c. Recoverable purchase tax accounting policy
d. Interest on inventory loan b. Proforma e ect of retroactive application
92. Inventories encompass all of the following, c. Prior period error
except d. An accounting change that should be
a. Merchandise purchased by a retailer reported in the period of change and
b. Land and other property not held for sale future periods
c. Finished goods produced 98. Which of the following is an example of a non-
d. Materials and supplies awaiting use in the adjusting event?
production process a. Sale of inventory for less than its carrying
93. A property developer must classify properties value shortly after the reporting period
that it holds for sale in the ordinary course of b. Amounts received in respect of an
business as insurance claim being negotiated at the
a. Inventory period end
b. Property, plant and equipment c. Destruction of a machine by fire after the
c. Financial asset reporting period
d. Investment property d. Bankruptcy of a major customer with a
94. Consumable supplies to be consumed in balance owing at the period end
production process are reported as
Use the following information for the next two questions:
a. Inventory
Entity A acquires equipment on January 1, 20x1.
b. Property, plant and equipment
Information on costs is as follows:
c. Financial asset
d. Investment property Purchase price, gross of trade discount 1,000,000
95. Which of the following should not be reported as Trade discount available 10,000
inventory? Freight costs 20,000
a. Land acquired for resale by a real estate Testing costs 30,000
firm Net disposal proceeds of samples
b. Shares and bonds held for resale by a generated
brokerage firm during testing 5,000
c. Partially completed goods held by a Present value of estimated costs of
manufacturing entity dismantling the
equipment at the end of its useful life 6,209
99. How much is the initial cost of the equipment?
 CFAS PRACTICE SET
A.Y. 2024 – 2025 Second Sem
KNOWLEDGE CHECK

a. 1,061,209
b. 1,051,209
c. 1,041,209
d. 1,031,209
100. The equipment has an estimated useful life of 10
years and a residual value of ₱200,000. Entity A
uses the straight line method of depreciation.
How much is the carrying amount of the
equipment on December 31, 20x3?
a. 788,846
b. 802,846
c. 795,846
d. 764,846
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