CFAS MCQ To provide information that the creditors can use in

deciding whether to grant loans to an entity. c.

1. Accounting is a service activity and the function is to To measure the periodic income of the economic entity.
provide quantitative information, primarily financial in d. To provide quantitative financial information about an
nature, about economic entities, that is intended to be entity that is useful in making economic decision.
useful in making economic [Link] accounting
definition is given by 11. What is the law regulating the practice of accountancy
in the Philippines?
a. Accounting Standards Council b.
AICPA Committee on Accounting Terminology c. a. R.A. No. 9298 b. R.A. No. 9198 c.
American Accounting Association d. R.A. No. 9928 d. R.A. No. 9892
Board of Accountancy
12. What is the body authorized by law to promulgate rules
2. All of the following describe accounting,except and regulations affecting the practice of the accountancy
profession in the Philippines?
a. A service activity b.
An information system c. A a. Board of Accountancy b.
universal language of business d. An Philippine Institute of Certified Public Accountants
exact science rather than an art c. Securities and Exchange Commission d.
Financial Reporting Standards Council
3. The important points made in the definition of
accounting include all of the-following,except 13. What are the three main areas in the practice of the
accountancy profession?
a. Accounting information is quantitative. b.
Accounting information is both quantitative and a. Public accounting, private accounting and managerial
qualitative. c. accounting. b. Auditing,
Accounting information is financial in nature. d. taxation and managerial accounting. c. Financial
Accounting information is useful in decision making. accounting,managerial accounting and corporate
accounting. d. Public
4. This accounting process is the recognition or accounting, private accounting and government
nonrecognition of business activities as accountable accounting.
events.
14. Which statement is incorrect in relation to the practice
a. Identifying b. Measuring c. of public accountancy?
Communicating d. Reporting
a. Single practitioners for the practice of public
5. What are the events that affect the entity and in which accountancy shall be registered CPAs in the Philippines.
other entities participate? b. Partners of partnerships formed for the practice of
public accountancy shall be registered CPAs in the
[Link] events [Link] events [Link] Philippines. c.
events [Link] events The Securities and Exchange Commission can register
any corporation organized for the practice of public
6. Which is incorrect in relation to an accountable event?
accountancy. d. All of
a. An event is acountable when it has an effect on asset, these statements are incorrect.
liability or equity. [Link]
15. CPAs are licensed by
subject matter of accounting is the measurement of
economic renources and obligations. a. The PICPA b. The SEC c.
c. Only economic activities are emphasized and The city government d. State government
recognized in accounting. d.
Sociological and psychological matters are quantifiable. 16. What is the standard-setting body in the Philippines at
the present time?
7. What is the measuring component in the definition of
accounting? a. Accounting Standard Council b.
Auditing and Assurance Standards Council c.
a. The recognition or nonrecognition of business Philippine Accounting Standards Board d.
activities as accountable events. b. Financial Reporting Standards Council
The assigning of peso amounts to the accountable
events. c. 17. All of the following are represented in FRSC, except
The preparation and distribution of accounting reports
to users of accounting information. d. The a. Board of Accountancy b.
preparation of audit report by CPAs. Securities and Exchange Commission c.
Commission on Audit d.
8. The most common financial attribute used in measuring Department of Budget and Management
financial information is
18. The Philippine Financial Reporting Standards
a. Historical cost b. Current cost c. collectively include
Fair value d. Value in use
a. PFRS corresponding to IFRS b.
9. The communicating process of accounting includes all of PAS correaponding to IAS c.
the following,except Philippine Interpretations corresponding to IFRIC and SIC
Interpretations and Interpretations developed by PIC.
a. Recording b. Classifying c. d. All of these are included in Philippine Financial
Summarizing d. Interpreting Reporting Standards
10. What is the overall objective of accounting? 19. Accounting standard-setting has been characterized as
a. To provide the information that the managers of an a. A political process b.
economic entity need to control the operations. b. Using the scientific method c.
 Pure deductive reasoning d. A accounting standard d.
legal process Discussion paper, research, exposure draft and
accounting standard
20. GAAP is an abbreviation for
30. The IASB employs a due process aystem which
a. Generally authorized accounting procedures b.
Generally applied accounting procedures c. a. Is an efficient system for collecting dues from
Generally accepted auditing practices d. members. b.
Generally accepted accounting principles Enables interested parties to express their views on
issues under consideration. c.
21. What is the primary service of CPAs in public practice? Identifies the accounting issues that are the most
important. d.
a. Auditing b. Taxation c. Requires that all CPAs must receive a copy of IFRS.
Managerial accounting d. Controllership
31. What is due process in standard-setting by IASB?
22. Accountants employed in entities in various capacity as
accounting staff, chief accountant or controller are said to a. IASB operates in full view of the public. b.
be engaged in Public hearings are held on proposed standards. c.
Interested parties can make their views known. d.
a. Public accounting b. Private accounting All of these are part of due process in standard-setting.
c. Government accounting d. Financial accounting
32. The standards published by IASB are called
23. It is the area of the accountancy profession that
encompasses the process of analyzing, classifying, a. International Accounting Standards b.
summarizing and communicating all transactions involving Financial Reporting Standards c.
the receipt and disposition of government funds and International Financial Reporting Standards
property and interpreting the results thereof. [Link] of Financial Accounting Standards

a. In ternal auditing b. External auditing c. 33. What is a possible danger if politics plays too big a role
Private accounting d. Government accounting in developing IFRS?

24. How many CPD credit units are required for a. Financial reporting standards are not truly generally
accreditation to practice the accountancy profession? accepted. b.
Individuals may influence the standards. c.
a. 120 units b. 100 units c. User groups become active. d.
60 units d. 15 units The IASB delegates its authority to elected officials.
25. A CPA shall be permanently exempted from renewal of 34. Accounting standard-setting
CPA license
a. Can be described as a political process which reflects
a. At the age of 65 years b. political actions of various interested user groups as well
When working abroad c. as a product of research and logic. b. Is based solely
When practicing the profession abroad d. on research and empirical findings. c. Is a legalistic
When studying abroad process d. Is democratic in
the sense that a majority of accountants must agree
26. The International Accounting Standards Board was
with a standard before it becomes enforceable.
formed
35. IFRIC Interpretations issued by IASB
a. To enforce IFRS in foreign countries b.
To develop a single set of high quality IFRS c. To a. Are considered authoritative and must be followed.
eatablish accounting standards for multinational entities b. Cover newly identified financial reporting issues not
d. To develop accounting standards for countries that do specifically addressed. c.
not have their own standard-setting bodies Cover issues where unsatisfactory or conflicting
interpretations have developed. d.
27. The International Accounting Standards Board
All of these are true about IFRIC Interpretations.
a. Was the predecessor to the IASC.
36. Financial accounting in concerned with
b. Can overrule the USA GAAP when their policies
disagree. c. a. General purpose reports on financinl position and
Promotes the use of high-quality and understandable financial performance. b.
global accounting standards. d. Has its Special reports for inventory management. c.
headquarters in Geneva Special reports for income tax computation. d.
General purpose reports on changes in share prices.
28. The IASB declared that the merits of proposed
standards are assessed 37. Financial accounting can be broadly defined as the area
of accounting that prepares
a. From a position of neutrality b.
From a position of materiality c. a. General purpose financial statements to be used by
Based on possible impact on behavior d. parties internal to the entity.
Based on arguments of lobbyist b. Financial statements to be used by investors. c.
General purpose financial statements to be used by
29. The standard-setting process includes in the correct
parties both internal and external to the entity.
order
d. Financial statements to be used primarily by
a. Exposure draft, research, discussion paper and management.
accounting standard b.
38. Financial accounting emphasizes reporting to
Research, exposure draft, discussion paper and
accounting standard c. a. Management b. Regulatory bodies c.
Research, discussion paper, exposure draft and Internal auditors d. Creditors and investors
39. Managerial accounting emphasizes d. All of these statements are true about the Conceptual
Framework.
a. Reporting financial information to external users
b. Reporting to the SEC c. 47. Which is not a purpose of the Revised
Expertise in data processing d. ConceptualFramework?
Developing accounting information for use within an
entity a. To assist the IASB to develop IFRS based on consistent
concepts.
40. Which statement is true regarding managerial and
financial accounting? b. To assist preparers to develop consistent accounting
policy when no Standard applies to a particular transaction
a. Managerial accounting is generally more precise. or when Standard allows a choice of accounting policy.
b. Managerial accounting need not follow generally
accepted accounting principles while financial c. To assist all parties to understand and interpret
accounting must follow GAAP. c. theStandards.
Managerial accounting has a future focus. d.
The emphasis on managerial accounting is relevance and d. To assist regulatory agencies in issuing rules
the emphasis on financial accounting is timeliness. andregulations for a particular industry.

41. Generally accepted accounting principles 48. The scope of the Revised Conceptual
Frameworkcomprises how many chapters?
a. Are accounting adaptations based on law. b.
Derive their credibility and authority from legal rulings a. Five b. Six
and court precedents. c. Derive
c. Seven d. Eight
their credibility and authority from a government
regulatory authority. d. Derive their 49. The Conceptual Framework provides the foundation for
credibility and authority from general recognition and Standards that
acceptance by the accountancy profession.
a. Contribute to transparency by enhancing international
42. Which statement best describes GAAP? comparability and quality of financial information.
a. The accounting principles have been formulated in the b. Strengthen accountability of management
public sector. b. The
accounting principles have been developed on the basis c. Contribute to economic efficiency by helping investors to
of such factors as usage and practical necessity. identify opportunities and risks.
c. The accounting principles are the same as laws. d.
The accounting principles do not apply to small and d. All of these are the result of Standards developed based
medium-sized entities. on consistent concepts.

43. Proper application of accounting principles is most 50. What is the authoritative status of the
dependent upon ConceptualFramework?

a. Existence of specific guidelines b. a. The Conceptual Framework has the highest level of
Oversight of regulatory bodies c. authority.
External audit function d.
Professional judgment of the accountant b. In the absence of a standard or an interpretation that
specifically applies to a transaction, the Conceptual
44. Once an accounting standard has been established framework shall be followed.

a. The standard is continually reviewed to see if c. In the absence of a standard or an interpretation that
modification is necessary. b. specifically applies to a transaction, management shall
The standard is not reviewed unless a regulatory consider the applicability of the Conceptual Framework in
authority makes a complaint. developing and applying an accounting policy that results
in information that is relevant and faithfully represented.
c. The task of reviewing the standard is given to the
national accounting organization. d. d. The Conceptual Framework applies only when theIASB
The principle of consistency requires that no revisions develops new standards.
ever be made to the standard.
51. The Conceptual Framework is intended to establish
45. The primary responsibility for properly applying GAAP
lies with a. GAAP in financial reporting.

a. External auditor b. b. The meaning of "present fairly in accordance with

Internal auditor c. GAAP".
Management d.
c. The objectives and concepts for use in developing
National accounting organization
standards of financial accounting and reporting.
46. Which statement is true about the Conceptual
d. The hierarchy of sources of GAAP.
Framework for Financial Reporting?
52. A Conceptual Framework should
a. The Conceptual Framework is not a Standard
a. Lead to uniformity of financial statements.
b. The Conceptual Framework describes the concepts for
general purpose financial reporting. b. Eliminate alternative accounting principles.
c. In case of conflict, the requirements of the IFRS prevail c. Guide multinational entities in developing
over the Conceptual Framework. generallyaccepted auditing standards.
d. Define the basic objectives, terms and concepts d. Creditors, government agencies and unions
ofaccounting.
60. The primary users of financial information include
53. Which is not a purpose of the Conceptual Framework?
a. Existing and potential investors
a. To provide definitions of key terms and fundamental
concepts. b. Existing and potential lenders and other creditors

[Link] provide specific guidelines for resolving situationsnot c. User group such as employees, customers, governments
covered by existing accounting atandards. and their agencies, and the public

[Link] asnist accountants in selecting among alternative d. Existing and potential investors, lenders and other
accounting and reporting methods. creditors

[Link] assist the International Accounting Standards Board in 61. Which group is not among the external users for whom
the standard-eetting process. financial statements are prepared?

54. In the Conceptual Framework for Financial Reporting, a. Customers

what provides the "why"of accounting?
b. Suppliers
a. Measurement and recognition concept
c. Employees
b. Qualitative characteristic of accounting information
d. All of these are external users of financial statements
c. Element of financial statement
62. Which of the following is an internal user of financial
d. Objective of financial reporting information?

55. The underlying theme of the Conceptual Framework is a. Board of Directors

a. Decision usefulness b. Understandability b. Shareholder

c. Timeliness d. Comparability c. Holder of bonds

56. The objective of financial reporting d. Creditor with long-term contract

a. Is the foundation for the Conceptual Framework 63. These users require information on risk and return
provided by their investment.
b. Includes the qualitative characteristics of useful
information a. Investors b. Employees

c. Is not found in the Conceptual Framework c. Lenders d. Customers

d. All of these are correct choices regarding the objective of 64. These users are interested in information about the
financial reporting profitability and stability of the entity in order to assess the
ability of entity to provide remuneration, retirement
57. Which of the following is not a benefit associated with benefits and employment opportunities.
the Conceptual Framework?
a. Customer
a. A Conceptual Framework should increase users'
understanding and confidence in financial reporting. b. The public

b. Pratical problems should be more quickly solvable. c. Governments and their agencies

c. A coherent set of accounting standards should result. d. Employees

d. Business entities will need far less assistance 65. These users are interested in information that enables
fromaccountants. them to assess whether their loans, the related interest
thereon, and other amounts owing to them will be paid
58. Which statement is not true concerning the Conceptual when due.
Framework?
a. Lenders and other creditors b. Borrowers
a. The Conceptual Framework should be a basis for
standard setting. c. Trade creditors d. Owners

b. The Conceptual Framework should allow 66. These users are interested in information about the
practicalproblems to be solved more quickly. continuance of an entity, especially when they have a long-
term involvement with or are dependent on the entity.
c. The Conceptual Framework should be based
onfundamental truth derived from the law of nature. a. Customers b. Employees

d. The Conceptual Framework should increase c. Trade unions d. Suppliers

users'understanding and confidence in financial reporting.
67. These users are interested in information in order to
59. Users of financial reports include which of the regulate the activities of an entity, determine taxation
following? policies and provide a basis for national statistics.

a. Creditors a. Governments and their agencies

b. Creditors and government agencies b. Major organization of users

c. Creditors and unions c. Bureau of Internal Revenue

d. Department of Finance a. Cash basis accounting in preferred over accrual basis.

68. These users need information on trends and recent b. Information about the financial effects of cash receipts
developments where an entity makes a substantial and cash payments is generally considered the best
contribution to the local economy providing employment indicator of ability to generate favorable cash flows.
and using local suppliers.
c. Over the long run, trends in revenue and expenses are
a. The public generally more meaningful than trends in cash receipts and
disbursements.
b. Governments and their agencies
d. All of the choices are correct regarding assessing cash
c. Finance entities flow prospects.

d. Private entities 76. In measuring financial performance, accrual accounting

is used because
69. The overall objective of financial reporting is to provide
information a. Cash flows are considered less important.

a. That is useful for decision making. b. It provides a better indication of ability to generate cash
flows than cash basis.
b. About assets, liabilities and equity of an entity.
c. It recognizes revenue when cash is received.
c. About financial performance during a period.
d. It is one of the implicit assumptions.
d. That allows owners to assess management performance.

70. The primary focus of financial reporting has been on

meeting the needs of which of the following groups? 77. The most useful information in predicting future cash
flows is
a. Management
a. Information about current cash flows
b. Existing and potential investors, lenders and other
creditors b. Current earnings based on accrual accounting

c. National taxing authorities d. Independent CPAs c. Information regarding the accounting policies used

71. The primary objective of financial reporting is to d. Information regarding the results obtained by using a
provide useful information to wide variety of accounting policies

a. Management b. Capital providers 78. The accrual basis of accounting is most useful for
c. Regulatory body d. Government a. Determining the amount of income tax liability.

72. Which is an objective of financial reporting? b. Predicting the short-term financial performance.

a. To provide information that is useful in making investing c. Predicting the long-term financial performance.
and credit decisions.
d. Determining the amount of dividends to be declared.
b. To provide information that is useful to management.
79. The objective of financial reporting is based on
c. To provide information about the potential users.
[Link] need for conservatism
d. To provide information about ways to solve internal and
external conflicts about the entity. b. Reporting on management stewardship

73. Which ia an objective of financial reporting? c. Generally accepted accounting principles

a. To provide information that is useful to management in d. The needs of the users of the information
making decisions.
80. Which statement is not true about financial reporting?
b. To provide information that clearly portrays nonfinancial
transactions. a. Financial reporting shall provide information about
entity resources, claims against those resources and
c. To provide information that is useful to assess the changes in them.
amount, timing, and uncertainty of prospective cash
receipts. b. Financial reporting shall not provide information useful
in evaluating management stewardship.
d. To provide information that excludes claims against the
resources. c. Financial reporting shall provide information useful in
investment, credit and similar decision.
74. An objective of financial reporting is to provide
d. Financial reporting shall provide information useful in
a. Information about the investors in the entity. assessing cash flow prospects.

b. Information about the liquidation value. 81. Which of the following is not an objective of financial
reporting?
c. Information that in useful in assessing cash flow
prospects. a. To provide information about an entity's assets and
claims against those assets
d. Information that will attract new investors.
b. To provide information that is useful in assessing an
75. Assessing cash flow prospects is interpreted to mean entity's sources and uses of cash
c. To provide information that is useful in lending and c. Predictive value, confirmatory value and materiality
investing decisions
d. Predictive value, confirmatory value, timeliness and
d. To provide information about the liquidation value of an materiality
entity
89. What is the quality of information that gives assurance
82. Financial reporting pertains to information about. that it is reasonably free of error and bias?

a. Individual business entities, rather than to industries a. Relevance b. Faithful representation

or an economy as a whole or to members of society as
consumers. b. c. Verifiability d. Neutrality
Business industries, rather than to individual entities or
an economy as a whole or to members of society as 90. Which of the following is the best description of
consumers. c. "faithful representation" in relation to information in
Individual business entities, industries, and an economy financial statements?
as a whole, rather than to members of society as
a. Influence on the economic decisions of users
consumers. d. An
economy as a whole and to members of society as b. Inclusion of a degree of caution
consumers, rather than to individual entities or
industries. c. Freedom from material error

83. Under the Revised Conceptual Framework, during a d. Comprehensibility to users

period when an entity is under the direction of a particular
management, financial reporting provides information 91. To achieve faithful representation, the financial
about statements

a. Entity performance and management performance a. Must have predictive and confirmatory value.

b. Management performance but not entity performance b. Must be complete, neutral and reasonably free from
error.
c. Entity performance but not management performance
c. Are understandable, comparable, verifiable and timely.
d. Neither entity performance nor management
performance. d. Must possess all of these.

84. What are the attributes that make the information 92. The financial accounting information is directed toward
provided in the financial statements useful to the readers? the common needs of users and is independent of
presumptions about particular needs and desires of specific
a. Qualitative characteristics of financial information. b. users.
Quantitative characteristics of financial information c.
Elements of financial statements d. a. Relevance b. Verifiability
Objectives of financial reporting
c. Neutrality d. Completeness
85. Qualitative characteristics
93. In the event of conflict between the economic
a. Are considered either fundamental or enhancing. b. substance of a transaction and the legal form, the
Contribute to the decision-usefulness of financial economic substance shall prevail.
reporting information. c.
Distinguish better information from inferior information a. Form over substance
for decision-making purposes. d. All of the
b. Substance over form
choices are correct.
c. Relevance
86. The fundamental qualitative characteristics are
d. Completeness
a. Relevance and faithful representation
94. The enhancing qualitative characteristics of financial
b. Relevance, faithful representation and materiality
information are
c. Relevance and reliablity
a. Comparability and understandability
d. Faithful representation and materiality
b. Verifiability and timeliness
87. Accounting information is considered relevant when it
c. Comparability, understandability and verifiability
a. Can be depended on to represent the economic
d. Comparability, understandability, verifiability and
conditions and event that it is intended to represent.
timeliness
b. Is capable of making a difference in a decision.
95. Financial information exhibits consistency when
c. Is understandable by reasonably informed users of
a. Accounting procedures are adopted which smooth net
accounting information.
income and make results consistent between years.
d. Is verifiable and neutral.
b. Gains and losses are shown separately on the income
88. The ingredients of relevant financial information are statement.

a. Predictive value and confirmatory value c. Accounting entities give similar events the same
accounting treatment each period.
b. Predictive value, confirmatory value and timeliness
d. Expenditures are reported as expenses.
96. When information about two different entities engaged 104. The overriding qualitative characteristic of accounting
in the same industry has been prepared and presented in information is
similar manner, the information exhibits the
enhancingqualitative characteristic of a. Relevance

a. Relevance b. Faithful representation b. Understandability

c. Consistency d. Comparability c. Faithful representation

97. The characteristic that is demonstrated when a high d. Decision usefulness

degree of consensus can be secured among independent
measurers using the same measurement method is 105. Which of the following terms best describes
information that influences the economic decisions of
a. Relevance b. Understandability users?

c. Verifiabilit d. Neutrality a. Reliable b. Prospective

98. Which concept of accounting holds that, to the c. Relevant d. Understandable

maximum extent possible, financial statements shall be
based on arm's length transactions? 106. What is the quality of information that enables users
to better forecast future operations?
a. Revenue realization b. Verifiability
a. Faithful repreeentation b. Materiality
c. Monetary unit d. Matching
c. Comparabilit d. Relevance

107. According to the Conceptual Framework, predictive

99. An entity issuing the annual financial reports within one value and confirmatory value are ingredients of
month after the end of reporting period is an example of
which enhancing quality of accounting information? a. Relevance b. Faithful representation

a. Neutrality c. Understandability d. Comparability

b. Timeliness 108. Which term best describes information in financial

statements that is neutral?
c. Predictive value
a. Understandable b. Comparable
d. Representational faithfulness
c. Relevant d. Unbiased
100. Allowing entities to estimate rather than physically
count inventory at interim periods is an example of a 109. What is meant by comparability when discussing
tradeoff between financial accounting information?

a. Verifability and comparability a. Information has predictive and confirmatory value.

b. Timeliness and comparability b. Information is reasonably free from error.

c. Timeliness and verifiability c. Information is measured and reported in a similar

fashion across entities.
d. Neutrality and consistency
d. Information is timely.
101. Which qualitative characteristic of financial
information requires that information should not be biased 110. What is meant by consistency when discussing
in favor of one group of users to the detriment of others? financial accounting information?

a. Relevance b. Free from error a. Information is measured and reported in a similar

fashion across points in time.
c. Completeness d. Neutrality
b. Information is timely.
102. For information to be useful, the linkage between the
users and the decisions made is c. Information is measured similarly across the industry.

a. Relevance b. Faithful representation d. Information is verifiable.

c. Understandability d. Verifiability 111. Which of the following is not an enhancing qualitative

characteristic?
103. Which statement is true in relation to the enhancing
quality of understandability? a. Understandability b. Profit-oriented

a. Users have a reasonable knowledge of business and c. Timeliness d. Comparability

economic activities and review the information with
112. Changing the method of inventory valuation should be
reasonable diligence.
reported in the financial statements under what enhancing
b. Users are expected to have significant business quality of accounting information?
knowledge.
a. Understandability b. Verifiability
c. Financial statements shall exclude complex matters.
c. Timeliness d. Comparability
d. Financial statements shall be free from material error.
113. When an entity applies the same accounting
treatment to similar events from period to period, the
entity is exhibiting which of the following qualities?
a. Verifiability a. Comparability

b. Consistency b. Representational faithfulness

c. Predictive value c. Consistency

d. All of the choices are correct d. Feedback value

114. When there is agreement between a measure or 123. Recognizing expected losses immediately but
description and the phenomenon it purports to represent deferring expected gains is an example of
the information possesses which characteristic?
a. Materiality b. Conservatism
a. Verifiability b. Predictive value
c. Cost effectiveness d. Timeliness
c. Faithful representation d. Timeliness
124. Which statement about materiality is true?
115. The qualitative characteristic of faithful
representation includes a. An item must make a difference or it need not be
disclosed.
a. Predictive value b. Neutrality
b. Materiality is a matter of relative size or importance.
c. Corfirmatory value d. Timeliness
c. An item is material if the omission or mistatement would
116. Enhancing qualitative characteristics of accounting influence the judgment of a primary user.
information includes all of the following, except
d. All of these statements are true about materiality.
a. Timeliness b. Materiality
125. An item would be considered material when
c. Comparability d. Verifiability
a. The expected benefit exceeds the additional cost.
117. The enhancing quality of understandability means that
information should be understood by b. The impact on earnings is greater than 10%.

a. Those who are experts in the interpretation of c. The standard definition of materiality is met.

financial information d. Omitting, misstating or obscuring the information would

make a difference to the primary users.
b. Those who have a reasonable understanding of business
and economic activities 126. The Conceptual Framework includes which constraint?

c. Financial analysts a. Prudence b. Conservatism

d. CPAs c. Cost d. All of the choices are constraints

118. Enhancing qualitative characteristics of accounting 127. Which best describes the cost-benefit constraint?
information include
a. The benefit of the information must be greater than the
a. Relevance and comparaoility cost of providing it.

b. Comparability and timeliness. b. Financial information should be free from cost to users.

c. Understandability and relevance c. Cost of providing financial information is not always

evident or measurable but must be considered.
d. Neutrality and comparability
d. All of the choices are correct.
119. When different competent accountants independently
agree on the amount and method of reporting an 128. What is an enhancing quality of accounting
economic event, what in the concept domonstrated? information?

a. Reliability b. Comparability a. Information must be decision-useful to all users.

c. Completeness d. Verifiability b. General-purpose financial reporting is the primary

source of information for statement users.
120. According to the conceptual framework, verifiability
implies c. Users need reasonable knowledge of business and
financial accounting matters to understand the information
a. Legal evidence b. Logic contained in financial statements.

c. Consensus d. Legal verdict d. All of the choices are correct.

121. When an entity has started placing its quarterly 129. The ability through consensus among measurers to
financial statements on its web page, thereby reducing by ensure that information represents what it purports to
ten days the time to get information to investors and represent is an example of the concept of
creditors, the qualitative concept involved is
a. Relevance b. Verifiability
a. Comparability b. Consistency
c. Comparability d. Feedback value
c. Timeliness d. Faithful representation
130. Which of the following accounting concepts states
122. When an entity changed the inventory valuation that an accounting transaction shall be supported by
method, which characteristic is jeopardized by this change? sufficient evidence to allow two or more qualified
individuals to arrive at easentially similar conclusion?
a. Conservatism b. Objectivity c. Reliability

c. Periodicity d. Stable monetary unit d. Representational faithfulness

131. Objectivity is assumed to be achieved when a 139. What is the general objective of financial statements?
transaction
a. To provide information about economic resources of an
a. Is recorded in a fixed amount of pesos entity, claims against the entity and changes in the
economic resources and claims.
b. Involves the payment or receipt of cash
b. To assess future cash flows to the entity.
c. Involves an arm's length transaction between two
independent parties c. To assess management stewardship of economic
resources.
d. Allocates revenue and expenses in a rational and
systematic manner d. To satisfy the information needs of users of financial
statements.
132. The principle of objectivity includes the concept of
140. A reporting entity is
a. Summarization b. Classification
a. Necessarily a legal entity.
c. Conservatism d. Verifiability
b. Necessarily an economic entity.
133. Proponents of historical cost maintain that statements
prepared using historical cost are more c. An entity that is required or chooses to prepare financial
statements.
a. Objective.
d. A regulatory government authority.
b. Relevant
141. A reporting entity
c. Indicative of purchasing power
a. Can be a single entity
d. Conservative
b. Can be a portion of a single entity
134. The consistency standard requires that
c. Can comprise more than one entity
a. Expenses should be reported when incurred.
d. All of these can be considered a reporting entity
b. The effect of accounting changes upon income should be
properly disclosed. 142. If the reporting entity comprises both the parent and
its subsidiaries, the financial statements are referred to as
c. Gains and losses should not bo recognized.
a. Consolidated financial statements
d. Accounting procedures should be adopted when the
result is a consistent rate of return. b. Unconsolidated financial statements

135. Which of the following relates to both relevance and c. Combined financial statements
faithful representation?
d. Separate financial statements
a. Comparability b. Feedback value
143. Combined financial statements provide financial
c. Neutrality d. Free from error information about

136. Which of the following situations violates the concept a. The parent and its subsidiaries
of faithful representation?
b. The parent
a. Financial statements were issued nine months late.
c. The subsidiaries
b. Data on segments having the same expected risks are
reported to analysts estimating future profit. d. Two or more entities without a parent-subsidiary
relationship
c. Financial statements included an item of property, plant
and equipment with carrying amount increased to 144. Which best describes the term going concern?
management estimate of market value.
a. When current liabilities exceed current assets
d. Management reports to shareholders regularly refer to
new projects undertaken. b. The ability of the entity to continue in operation for the
foreseeable future
137. What is the underlying concept governing the GAAP
pertaining to recording gain contingencies? c. The potential to contribute to the flow of cash and cash
equivalents to the entity
a. Conservatism b. Relevance
d. The expenses exceed income
c. Consistency d. Reliability
145. Which is an implication of the going concern
[Link] usefulness of providing information in financial assumption?
statements is subject to the constraint of
a. The historical cost principle is credible.
a. Consistency
b. Depreciation and amortization policies are justifiable and
b. Cost-benefit appropriate.
c. The current and noncurrent classification of assets and a. Only to the legal anpecte of businese organizations
liabilities is justifiable and significant.
[Link] to the economic aspects of business organizations
d. All of these are an implication of going soncern.
c. Only to buniness organizations
146. The relatively stable economic, political and social
environment supports d. Whenever accounting is involved

a. Conservatism b. Materiality 155. When a parent and subsidiary relationship exists,

consolidated financial statements are prepared in
c. Timeliness d. Going concern recognition of

147. Which of the following is not a basic assumption a. Legal entity b. Economic entity
underlying financial accounting?
c. Stable monetary unit d. Time period
a. Economic entity assumption
156. The valuation of a promise to receive cash in the
b. Going concern assumption future at present value is valid because of what accounting
concept?
c. Periodicity assumption
a. Entity b. Time period
d. Historical cost assumption
c. Going concern d. Monetary unit
148. Which basic assumption may not be followed when an
entity in bankruptcy reports financial results? 157. What is the accounting concept that justifies the
usage of accruals and deferrals?
a. Economic entity assumption
[Link] concern [Link]
b. Going concern assumption
[Link] [Link] monetary unit
c. Periodicity assumption
158. During the lifetime of an entity accountants produce
d. Monetary unit assumption financial statements at arbitrary points in time in
accordance with what basic accounting concept?
149. The economic entity assumption
[Link] [Link]
a. Is inapplicable to unincorporated businesses.
[Link] of measure [Link]
b. Recognizes the legal aspects of business organizations.
159. The elements directly related to the measurement of
c. Requires periodic income measurement. financial position are
d. Is applicable to all forms of business organizations. a. Asset, liability and equity
150. What is being violated if an entity provides financial b. Asset and liablity
reports in connection with a new product introduction?
c. Income and expense
a. Economic entity b. Periodicity
d. Asset, liability, equity, income and expense
c. Monetary unit d. Continuity
160. The elements of financial position describe amounts
151. Which underlying assumption serves as the basis for of resources and claims against resources
preparing financial statements at regular artificial points in
time? a. During a period of time

A. Accounting entity b. Going concern b. At a moment in time

c. Accounting period d. Stable monetary unit c. During a period of time and at a moment in time

152. Which basic accounting assumption is threatened by d. Neither during a period of time nor at a moment in time
the existence of severe inflation in the economy?
161. The elements directly related to the measurement of
a. Monetary unit assumption financial performance are

b. Periodicity assumption a. Income and expense

c. Going concern assumption b. Asset, liability and equity

d. Economic entity assumption c. Asset and liability

153. Inflation is ignored in accounting due to d. Income, expense and equity

a. Economic entity assumption 162. It is a present economic resource controlled by the

entity as a result of past events.
b. Going concern assumption
a. Asset c. Equity
c. Monetary unit assumption
b. Liability d. Income
d. Time period assumption
163. It is a present obligation of the entity to transfer an
154. The concept of accounting entity in applicable economic resource as a result of past events.
a. Asset c. Equity c. The entity has not yet obtained economic benefit but
must transfer an economic resource.
b. Liability d. Income
d. The entity has already obtained economic benefit and
167. It is the residual interest in the assets of the entity must transfer economic resource.
after deducting all of the liabilities.
175. Rights that have the potential to produce economic
a. Income benefits and correspond to an obligation of another entity
include all, except
b. Equity
a. Right to receive cash
c. Retained earnings
b. Right to receive goods
d. All of the choices match the definition
c. Right to exchange economic resources with another
168. It is an increase in asset or a decrease in liability that entity on favorable terms
results in increase in equity other than contribution from
equity holders. d. Right over property, plant and equipment

B. Asset b. Liability 176. An economic resource could produce economic

benefit if an entity is entitled to all, except
c. Income d. Expenses
a. To receive contractual cash flows
169. It is a decrease in asset or an increase in liability that
results in decrease in equity other than distribution to b. To exchange economic resources with another entity on
equity holders. unfavorable terms

a. Asset b. Liability c. To receive cash by selling the economic resource

c. Income d. Expense d. To extinguish a liability by transferring an economic

resource
170. This arises in the course of ordinary regular activities
of the entity and is referred to by a variety of different 177. It is the present ability to direct the use of an
names including sales, fees, interest, dividends, royalties economic resource and obtain the benefit that may flow
and rent. from it.

[Link] [Link] a. Control b. Legal right

[Link] [Link] c. Obligation d. Ownership

171. Which statement in relation to income is true? 178. It is a duty or responsibility that an entity has no
practical ability to avoid.
a. Income encompasses both revenue and gain.
a. Right b. Obligation
b. Revenue encompasses both income and gain.
c. Equity d. Expense
c. Gain encompasses both income and revenue.
179. Obligations to transfer an economic resource include
d. Income encompasses revenue only. all, except
172. Which is not within the new definition of an asset? a. Obligation to pay cash
a. An asset is a present economic resource. b. Obligation to deliver goods
b. The economic resource is a right that has potential to c. Obligation to provide services
produce economic benefit.
d. Obligation to transfer an economic resource even if a
c. The economic resource is controlled by the entity as a specified future event does not occur
result of past event.
180. Which statement is not true about income and
d. Future economic benefit is expected to flow to the expense?
entity.
a. Income is increase in asset or decrease in liability that
173. Which of the following criteria need not be satisfied results in increase in equity other than contribution from
for a liability to exist? equity holders.
a. The entity has an obligation. b. Expense is decrease in asset or increase in liability that
results in decrease in equity other than distribution to
b. The obligation is to transfer an cconomic resource.
equity holders.
c. The obligation is a present obligation that exists as a
c. Income and expenses are the elements that relate to
result of a past event.
financial position.
d. The settlement is expected to result in an outflow of
d. Income encompasses revenue and gain.
economic benefit.
181. This new term refers to the statement of profit or loss
174. A present obligation exists as result of past event if
and a statement presenting other comprehensive income.
a. The entity has already obtained economic benefit.
a. Income statement
b. The entity must transfer an economic resource.
b. Statement of comprehensive income
c. Statement of financial performance d. Neither relevance nor faithful representation

d. Statement of financial position 190. It is the removal of all or part of a rocognized asset or
liability from the statement of financial position.
182. Revenue may result from
a. Writeoff b. Derecognition
a. A decrease in an asset from primary operations.
c. Extinguishment d. Retirement
b. An increase in an asset from incidental transactions.
191. Derecognition normally occurs when
c. An increase in a liability from incidental transactions.
a. An item no longer meets the definition of an asset or a
d. A decrease in a liability from primary operations. liability

183. What is the primary distinction between revenue and b. The entity loses control of the asset.
gain?
c. The entity no longer has a present obligation for the
a. The materiality of the amount liability.

b. The likelihood that the transaction will recur d. Under all of these circumstances.

c. The nature of the activity that gives rise to the 192. Generally, revenue is recognized

transaction a. At the point of sale.

d. The method of disclosing the transaction b. When cause and effect are associated.

184. The term income c. At the point of cash collection.

a. Includes revaluation of land. d. At appropriate points throughout the operating cycle.

b. Includes adjustment of prior period error. 193. Which of the following is not an accepted basis for
recognition of revenue?
c. Includes gain resulting from the sale of an asset in an
arm's length transaction. a. Passage of time

d. Is the same as retained earnings. b. Performance of service

185. A decrease in an asset arising from peripheral or c. Completion of percentage of a project

incidental transaction is called
d. Upon signing of contract
a. Capital expenditure b. Cost
194. Normally, revenue is recognized
c. Loss d. Expense
a. When the customer order is received.
186. An outflow of asset based on an activity that
represents the major operations is called b. When the customer order is accompanied by a check.

a. Loss b. Liability c. Only if the transaction will create an account receivable.

c. Expense d. Equity d. When the title to the goods changes.

187. It is the process of capturing for inclusion in the 195. Which of the following practices may not be an
financial statements an item that meets the definition of acceptable deviation from recognizing revenue at the point
the elements of financial statements. of sale?

a. Recognition b. Measurement a. Upon receipt of cash b. During production

c. Classifying d. Derecognition c. Upon receipt of order d. End of production

188. An item is recognized in the financial statements if 196. Which of the following represents the least desirable
choice for the recognition of revenue?
a. It is probable that economic benefits will flow to or from
the entity. a. Recognition of revenue during production

b. It meets the definition of an asset, liability, equity, b. Recognition of revenue when a sale ocurs
income and expense.
c. Recognition of revenue when cash is collected
c. The entity has ownership of such item.
d. Recognition of revenue when production is completed
d. It is probable that economic benefits will flow to or from
the entity and that the cost can be measured reliably. 197. Revenue recognition conventionally refers to

189. Recognition of an element is appropriate when a. The process of identifying transactions to be recorded as
information results in revenue in an accounting period.

a. Relevance b. The process of measuring and relating revenue and

expenses during a period.
b. Faithful representation
c. The earning process which gives rise to revenue
c. Both relevance and faithful representation realization.
d. The process of identifying those transactions that result 206. Which of the following would be matched with
in an inflow of assets to the entity. current revenue on a basis other than association of cause
and effect?
198. Which of the following in the most precise sense
means the process of converting noncash resources and a. Goodwill b. Cost of goods sold
rights into cash or claims to cash?
c. Sales commission d. Warranty cost
a. Allocation b. Collection
207. Why are certain costs of doing business capitalized
c. Recognition d. Realization when incurred and then depreciated or amortized over
subsequent accounting periods?
199. Gains on assets unsold are identified, in a precise
sense, by the term a. To reduce the income tax liability

a. Unrecorded b. Unrealized b. To aid management in the decision-making process

c. Unrecognized d. Unallocated c. To match the cost of production with revenue

200. The term recognized is synonymous with the term d. To adhere to the accounting concept of conservatism

a. Recorded b. Realized 208. Which of the following principles best describes the
conceptual rationale for the method of matching
c. Matched d. Allocated depreciation with revenue?

201. Which statement conforms to the realization concept? a. Associating cause and effect

a. Depreciation was assigned to product unit cost b. Systematic and rational allocation

b. Equipment was sold in exchange for a note receivable c. Immediate recognition

c. Cash was collected on accounts receivable d. Partial recognition

d. Product unit costs were assigned to cost of goods sold 209. Which of the following should be expensed under the
principle of systematic and rational allocation?
202. Which of the following is not a theoretical basis for
the allocation of expense? a. Salesmen's monthly salaries

a. Immediate recognition b. Insurance premium's

b. Systematic and rational allocation c. Transportation to customers

c. Cause and effect association d. Electricity to light office building

d. Profit maximization 210. The writeoff of a worthless patent is an example of

which of the following principles?
203. Costs that can be reasonably associated with specific
revenue but not with specific product should be a. Associating cause and effect

a. Expensed in the period incurred b. Immediate recognition

b. Allocated to the specific product based on the best c. Systematic and rational allocation
estimate of the product processing time
d. Objectivity
c. Expensed in the period in which the related revenue is
recognized 211. What is an example of cost that cannot be directly
related to particular revenue but incurred to obtain
d. Capitalized and then amortized over a reasonable period benefits that are exhausted in the period when the cost is
incurred?
204. Which of the following is an example of the cause and
effect association principle? a. Sales commissions b. Sales salaries

a. Sales commission c. Freight in d. Prepaid insurance

b. Allocation of insurance cost 212. The matching principle is best demonstrated by

c. Depreciation of property, plant and equipment a. Not recognizing any expense unless some revenue is
realized.
d. Officers' salaries
b. Associating effort with accomplishment
205. Which of the following is an application of the
systematic and rational allocation principle? c. Recognizing prepaid rent received as revenue

a. Doubtful accounts d. Establishing an appropriation for contingency

b. Research and development cost 213. Bad debt expense is recognized according to which
expense recognition principle?
c. Warranty cost
a. Direct matching
d. Amortization of intangible asset
b. Immediate recognition

c. Systematic and rational allocation

d. Critical event recognition a. Direct matching

214. What is the general approach as to when product b. Systematic and rational allocation
costs are recognized as expenses?
c. Immediate recognition
a. In the period when the expenses are paid.
d. Partial recognition
b. In the period when the expenses are incurred.
222. Which statement is true about current vslue?
c. In the period when the vendor invoice is received.
a. Fair value of an asset in the price that would be
d. In the period when the related revenue is recognized.
received to sell an asset in an orderly transaction
215. When should an expenditure be recorded as an asset
rather than an expense? between market participants at the measurement

a. Never date.

b. Always b. Value in use in the present value of the cash flows

expected to be derived from the use and ultimate disposal
c. If the amount is material of an asset.

d. When there is a right that has the potential to produce c. Fulfillment value is the present value of the cash
economic benefit expected to be transferred for the payment of liability.

216. Which accounting principle is being observed when an d. All of these statements are true about current value.
accountant charges to expense a cost that contributed to
revenue during a period? 223. The measurement bases include

a. Revenue realization b. Matching a. Historicnl cost

c. Monetary unit d. Conservatism b. Current value

217. Which of the following is not an acceptable basis for c. Assessed value
the recognition of expense?
d. Historical cost and current value
a. Systematic and rational allocation
224. Current value includes
b. Direct matching
a. Fair value and present value
c. Immediate recognition
b. Fair value and current cost
d. Cash disbursement
c. Current cost and present value
218. A cause and effect relationship is implicit in the
d. Fair value, present value and current cost
a. Realization principle
225. Which measurement attribute is not currently used in
b. Historical cost principle practice?

c. Matching principle a. Present value b. Fair value

d. Going concern assumption c. Current cost d. Inflation adjusted cost

219. An example of direct matching of an expense with 226. It is the amount of cash or cash equivalent that would
revenue would be have to be paid if the same or an equivalent asset was
acquired currently.
a. Depreciation expense
a. Historical cost b. Current cost
b. Office salaries expense
c. Realizable value d. Present value
c. Direct labor costs incurred to produce inventory sold
during a period 227. The presentation and disclosure requirement achieves
all of the following, except
d. Advertising expense
a. An effective communication tool
220. Which category of expenses is subject to immediate
recognition in the income statement? b. More relevant and faithfully represented financial
information
a. Utilities expense for the production line of a
manufacturer c. Understandability and comparability of information

b. Repairs and maintenance expense incurred on d. Financial position, financial performance and cashflows
production equipment of a manufacturer
228. It is the sorting of assets, liabilities, equity, income and
c. The salary of the production foreman expenses with similar characteristics.

d. The salary of the entity president a. Classification b. Summarization

221. Which principle best describes the rationale for c. Interpretation d. Recognition
matching distribution costs and administrative expenses
with revenue of the current period?
229. All of the following can considered appropriate 237. The major financial statements include all, except
classification, except
a. Statement of financial position
a. Current and noncurrent assets
b. Statement of changes in financial position
b. Current and noncurrent liabilities
c. Statement of comprehensive income
c. Ordinary share capital and preference share capital
d. Statement of changes in equity
d. Offsetting asset and liability
238. The major financial statements include all, except
230. Income and expenses are classified as
a. Statement of financial position
a. Profit or loss and other comprehensive income
b. Income statement
b. Profit loss and retained earnings
c. Statement of cash flows
c. Retained earnings and other comprehensive income
d. Statement of retained earnings
d. Ordinary and extraordinary
239. What is the objective of financial statements?
231. What is the new term to describe the statement of
profit or loss together with the statement showing other a. To provide information about the financial position,
comprehensive income. financial performance and changes in financial position of
an entity that is useful to a wide range of users in making
a. Income statement economic decisions.

b. Statement of profit or loss b. To present a statement of financial position and a

statement of comprehensive income.
c. Statement of other comprehensive income
c. To present relevant, reliable, comparable and
d. Statement of financial performance understandable information to investors.

232. Financial capital is defined as d. To present financial statements in accordance with all
applicable standards.
a. Net assets in monetary terms.
240. Financial statements must be prepared at least
b. Net assets in terms of physical productive capacity.
a. Annually b. Quarterly
c. Legal capital.
c. Semiannually d. Every two years
d. Share capital issued and outstanding.
241. When entity changed the end of reporting period
233. The physical capital maintenance concept requires the longer or shorter than one year, the entity shall disclose all,
adoption of which measurement basis? except
a. Historical cost b. Current cost a. Period covered by the financial statements
c. Fair value d. Present value b. The reason for using a longer or shorter period
234. Which concept is applied to net income and other c. The fact that amounts presented are not entirely
comprehensive income? comparable
a. Financial capital b. Physical capital d. The fact that similar entities have done so
c. Legal capital d. Borrowed capital 242. When there is much variability, the operating cycle is
measured at
235. Which statement regarding the term profit is true?
a. The mean vnlue b. The median value
a. Profit is any amount over and above that required to
maintain the capital at the beginning of the period. c. Twelve months d. Three years
b. Profit is equal to income minus expenses. 243. The operating cycle of an entity
c. Profit is the equivalent of net income under IFRS. a. Is the time between the acquisition of materials entering
into a process and their realization in cash.
d. All of these statements are true about the term profit.
b. Is the period of time normally elapsed in converting
236. Under the financial capital concept, net income occurs
trade receivables back into cash.
when
c. Is a period of one year.
a. The nominal amount of net assets at year-end increased.
d. Refers to the seasonal variation experienced by entities.
b. The physical productive capital at year-end increased
after excluding any distributions to and contributions from 244. An entity shall classify an asset as current under all of
owners. the following conditions, except
c. The nominal amount of net assets at year-end increased a. The entity expects to realize the asset or intends to sell
after excluding distributions to and contributions from or consume it within the entity's normal operating cycle.
owners.
b. The entity holds the asset for the purpose of trading.
d. The physical productive capital at year-end increased.
c. The entity expects to realize the asset within twelve a. When it is refinanced on a long-term basis before the
months after the reporting period. issue of financial statements

d. The asset is cash or a cash equivalent that is restricted to b. When the entity has no discretion to refinance for at
settle a liability for more than twelve months after the least twelve months.
reporting period.
c. When it is refinanced on a long-term basis after the end
245. An entity shall classify a liability as current when of reporting period.
under all of the following conditions, except
d. When it is refinanced on a long-term basis on or before
a. The entity expects to settle the liability within the the end of reporting period.
entity's normal operating cycle.
251. When an entity breaches under a long-term loan
b. The entity holds the liability primarily for the purpose of agreement on or before the end of the reporting period
trading. with the effect that the liability becomes payable on
demand, the liability is clasaified as
c. The liability is due to be settled within twelve months
after the reporting period. a. Current under all circumstances

d. The entity has an unconditional right to defer settlement b. Noncurrent under all circumstances
of the liability for at least twelve months after the
reporting period. c. Current if the lender has agreed after the reporting
period and before the issuance of the statements not to
246. Which obligations are classified as current even if demand payment as a consequence of the breach.
these are due to be settled after more than twelve months
from the end of the reporting period? d. Noncurrent if the lender agreed after the reporting
period to provide a grace period for at least twelve months
a. Trade payables and accruals for employee and other after the reporting period.
operating cost
252. In presenting a statement of financial position, an
b. Current portion of interest-bearing liabilities entity

c. Bank overdrafts a. Must make the current and noncurrent presentation.

d. Dividends payable b. Must present assets and liabilities in order of liquidity.

247. Current and noncurrent presentation of assets and c. Must choose either the current and noncurrent or the
liabilities provides useful information when the entity liquidity presentation, meaning free choice of presentation.

a. Supplies goods or services within a clearly identifiable d. Must make the current and noncurrent presentation,
operating cycle except when a presentation based on liquidity provides
information that is reliable and more relevant.
b. Is a financial institution
253. Assets to be sold, consumed or realized as part of the
c. Is a public utility normal operating cycle are

d. Is a nonprofit organization a. Current assets

248. A presentation of assets and liabilities in increasing or b. Noncurrent assets

decreasing order of liquidity provides information that is
reliable and more relevant than a current and noncurrent c. Classified as current or noncurrent in accordance with
presentation for other criteria

a. Financial institution b. Public utility d. Noncurrent investments

c. Manufacturing entity d. Service provider 254. Liabilities that an entity expects to settle within the
normal operating cycle are classified as
249. In the Philippines, the common practice is to present
in the statement of financial position a. Noncurrent liabilities

a. Current assets before noncurrent assets, current b. Current or noncurrent liabilities in accordance with other
liabilities before noncurrent liabilities and equity after criteria
liabilities.
c. Current liabilities
b. Noncurrent assets before current assets, noncurrent
liabilities before current liabilities and equity after d. Equity
liabilities.
255. In which section of the statement of financial position
c. Current assets before noncurrent assets, noncurrent should cash that is restricted for the settlement of a liability
liabilities before current liabilities and equity after due 18 months after the reporting period be presented?
liabilities.
a. Current assets b. Equity
d. Noncurrent assets before current assets, current
liabilities before noncurrent liabilities and equity after c. Noncurrent liabilities d. Noncurrent assets
liabilities.
256. In which section of the statement of financial position
250. A financial liability due within twelve months after the should employment taxes that are due for settlement in 15
reporting period shall be classified as noncurrent months' time be presented?

a. Current liabilities b. Current assets

c. Noncurrent liabilities d. Noncurrent assets d. An asset is a right that has the potential to produce
economic benefit
257. An entity has a loan due for repayment in six months'
time but the entity has the option to refinance for 264. The essential characteristics of an asset include all of
repayment two years later. The entity plans to refinance the following, except
this loan. In which section of the statement of financial
position should this loan be presented? a. The asset is a present economic resource

a. Current liabilities b. Current assets b. The economic resource is a right that has the potential
to product economic benefit
c. Noncurrent liabilities d. Noncurrent assets
c. The asset is controlled by the entity as a result of past
258. Which of the following must be included on the face event
of the statement of financial position?
d. The asset is tangible.
a. Investment property
265. Conceptually, asset valuation accounts are
b. Number of shares authorized
a. Assets
c. Contingent asset
b. Neither assets nor liabilities
d. Shares in an entity owned by that entity
c. Part of shareholders' equity
259. Which of the following is not required to be presented
as minimum information on the face of the statement of d. Liabilities
financial position?
266. Working capital is
a. Investment property
a. The group of assets needed by the entity to operate
b. Investment accounted under the equity method profitably.

c. Biological asset b. Capital which has been reinvested in business.

d. Contingent liability c. Unappropriated retained earnings.

260. Which of the following must be included as a line in d. Current assets less current liabilities.
the statement of financial position?
267. As generally used, the term net assets represents
a. Contingent asset
a. Retained earnings
b. Property, plant and equipment analyzed by class
b. Current assets less current liabilities
c. Share capital and reserves analyzed by class
c. Total contributed capital
d. Deferred tax liability
d. Total assets less total liabilities
261. Which statement about the statement of financial
position is not true? 268. Treasury shares should be reported as

a. Biological assets should be reported in the statement of a. Current asset

financial position.
b. Investment
b. The number of shares authorized for issue should be
c. Other asset
reported in the statement of financial position or the
statement of changes in equity or in the notes. d. Reduction of shareholders'equity
c. Provisions should be recognized in the statement of 269. The term "deficit" refers to
financial position.
a. An excess of current assets over current liabilities.
d. A revaluation surplus on a noncurrent asset in the
current year should be recognized in the income b. An excess of current liabilities over current assets.
statement.
c. A debit balance in retained earnings.
262. In analyzing an entity's financial statements, which
financial statement would a potential investor primarily d. A prior period error.
use to assess liquidity and financial flexibility?
270. When classifying assets as current and noncurrent
a. Statement of financial position
a. The amounts at which current assets are carried and
b. Income statement reported must reflect realizable cash value.

c. Statement of retained earnings b. Prepayments are included in other assets.

d. Statement of cash flows c. Current assets are determined by the seasonal nature.

263. Which is an essential characteristic of an asset? d. Assets are classified as current if reasonably expected to
be realized in cash or consumed during the normal
a. The claims to an asset's benefits are legally enforceable operating cycle.

b. An asset is tangible

c. An asset is obtained at a cost

271. The basis for classifying assets as current or d. There must be an obligation to pay cash in the future.
noncurrent is the period of time normally required to
convert cash invested in 277. Which statement best describes the term liability?

a. Inventory back into cash or 12 months, whichever is a. An excess of equity over current assets
shorter.
b. Resources to meet financial commitments when due
b. Receivables back into cash or 12 months, whichever is
longer. c. The residual interest in the assets of the entity after
deduction all of the liabilities
c. Property, plant and equipment back into cash or 12
months, whichever is longer. d. A present obligation arising from past event

d. Inventory back into cash or 12 months, whichever is 278. Which item is not a current liability?
longer.
a. Unearned revenue
272. Which should be classified as current asset?
b. Share dividend payable
a. Trade installment accounts receivable normally
c. The currently maturing portion of long-term debt
collectible in 18 months
d. Trade accounts payable
b. Cash designated for the redemption of callable
279. Noncurrent liabilities include
preference shares
a. Bonds payable
c. Cash surrender value of a life insurance policy
b. Short-term obligation refinanced on a long-term basis at
d. A deposit on machinery ordered, delivery of which will
the end of reporting period
be made within six months
c. Deferred tax liability
273. Which should not be considered as current asset?
d. All of these are noncurrent liabilities
a. Installment notes receivable due over 18 months in
accordance with normal trade practice 280. Which is not within the definition of a liability?
b. Prepaid taxes a. The signing of a three-year employment contract at a
fixed annual salary
c. Trading securities
b. An obligation to provide goods in the future
d. Cash surrender value of life insurance policy
c. A note payable with no specified maturity date
274. Current assets should never include
d. A present obligation that is estimated in amount
a. A receivable not collectible within one year
281. The statement of financial position is useful for
b. Current tax asset
analyzing all of the following, except
c. Goodwill arising in a business combination
a. Liquidity b. Solvency
d. Premium paid on a bond investment
c. Profitability d. Financial flexibility
275. Equity investments held to finance construction of
282. The statement of financial position is useful for all of
additional plant should be classified as
the following, except
a. Current assets
a. To compute rate of return
b. Property, plant, and equipment
b. To analyze cash inflows and outflows for the period
c. Intangible assets
c. To evaluate capital structure
d. Noncurrent investments
d. To assess future cash flows
276. Which of the following is not a noncurrent
283. What is one criticism not normally aimed at a
investment?
statement of financial position?
a. Cash surrender value of life insurance policy
a. Failure to reflect current value information
b. Franchise
b. The extensive use of separate classifications
c. Land held for speculation
c. An extensive use of estimate
d. A sinking fund
d. Failure to include items of financial value that cannot be
276. For a liability to exist recorded objectively

a. There must be a past event. 284. The statement of financial position

b. The exact amount must be known. a. Omits many items that are of financial value

c. The identity of the party to whom the liability is owed b. Makes very limited use of judgment and estimate
must be known.
c. Uses fair value for most assets and liabilities
d. All of the choices are correct a. Parenthetical comments or modifying comments placed
on the face of the financial statements.
285. Which is a limitation of a statement of financial
position? b. Disclosure notes conveying additional insights about
operations, accounting principles, contractual agreements
a. Many items that are of financial value are omitted. and pending litigation.

b. Judgment and estimate are used c. Supplemental financial statements that report more
detailed information
c. Current fair value is not reported
d. All of these are correct
d. All of these are a limitation of the statement of financial
position 294. The recognition and measurement concepts recognize
which of the following as a principle rather than an
286. The amount of time that is expected to elapse until an assumption?
asset is realized or otherwise converted into cash is
referred to as a. Time period b. Monetary unit

a. Solvency b. Financial flexibility c. Going concern d. Full disclosure

c. Liquidity d. Exchangeability 295. The full disclosure principle requires a balance

between
287. Which of the following is not an acceptable major
asset classification? a. Comparability and consistency

a. Current assets b. Relevance and cost effectiveness

b. Investments c. Reliability and neutrality

c. Property, plant, and equipment d. Timeliness and predictive value

d. Deferred charges Brock Company reported operating expenses in two

categories, namely distribution and administrative. The
288. What is an example of an item which is not an adjusted trial balance at year-end included the following
element of working capital? expense and loss accounts for current year. One-half of the
rented premises is occupied by the sales department.
a. Accrued interest on notes receivable
Accounting and legal fees 1,200,000
b. Goodwill
Advertising 1,500,000
c. Goods in process
Freight out 800,000
d. Temporary investments
Interest 700,000
289. Accrued revenue would normally appear in the
statement of financial position under Loss on sale of long-term investment 300,000
a. Noncurrent assets b. Current liabilities Ofcers'anlaries 2,250,000
c. Noncurrent liabilities d. Current assets Rent for office space 2,200,000
290. Which of the following is usually classified as a Sales salaries and commissions 1,400,000
noncurrent asset?
296. What amount should be reported as distribution
a. Plant expansion fund b. Prepaid rent costs?
c. Supplies d. Goods in process a. 4,800,000 b. 4,000,000
291. Notes to financial statements c. 3,700,000 d. 3,600,000
a. Are relatively unimportant facts that do not belong in Problem 9-6(AICPA Adapted)
the basic financial statements.
Lee Company reported the following data for the current
b. Document the source of financial statement facts. year:
c. Are an integral part of an entity's financial statements. Leral and audit fees 1,700,000
d. Are irrelevant facts that are immaterial in amount. Rent for ofice space equally shared
292. Which of the following best demonstrates the full by sales and accounting 2,400,000
disclosure principle?
Interest on inventory loan 2,100,000
a. The separate income statement
Loss on abandoned data processing
b. The auditor's report
equipment 350,000
c. The tax return
Freight in 1,750,000
d. The notes to financial statements
Freight out 1,600,000
293. To meet the needs of full disclosure, entities use
supplemental information including Officers' salaries 1,500,000
Insurance 850,000 Factory repairs and maintenance 200,000

Sales representative salaries 2,150,000 Taxes on factory building 100,000

Research and development expense 1,000,000 Depreciation-factory building 300,000

Taxes on salesroom and general office 150,000
297. What amount should be classified as administrative
expenses? Depreciation-sales equipment 50,000

a. 5,250,000 b.6,450,000 Advertising 400,000

c. 5,600,000 d. 6,250,000 Sales salaries 500,000

Problem 9-7 (IAA) Office salaries 700,000

Sheraton Company reported the following information for Utilities - 60% applicable to factory 500,000
the current year.
Beginning Ending
Ending goods in process 1,000,000
Raw materials 300,000 450,000
Depreciation on factory building 320,000
Work in process 400,000 350,000
Beginning raw materials 400,000
Finished goods 500,000 700,000
Direct Labor 1,980,000
300. What is the cost of raw materials used?
Factory supervisor's salary 560,000
a. 3,850,000 b. 4,000,000
Depreciation on headquarters building 210,000
c. 4,150,000 d. 4,750,000
Beginning goods in process 760,000
301. What is the cost of goods manufactured for the
Ending raw materials 340,000 current year?

Indirect labor 360,000 a. 7,450,000 b. 7,200,000

Purchases of raw materials 2,300,000 c. 7,100,000 d. 7,300,000

298. What is the cost of goods manufactured for the 302. What is the cost of goods sold for the current year?
current year?
a. 7,300,000 b. 6,900,000
a. 5,340,000 b. 5,580,000
c. 7,600,000 d. 8,300,000
c. 5,550,000 d. 5,820,000
Problem 9-10(AICPA Adapted)
Problem 9-8(AICPA Adapted)
Thorpe Company reported net income of P7,410,000 for
Kay Company provided the following information for the the current year which included the following amounts:
current year:
Unrealized loan on foreign currency translation (540,000)
Increase in raw materials inventory 150,000
Gain on early retirement of bonds payable
Decrease in goods in process inventory 200,000
2,200,000
Decrease in finished goods inventory 350,000
Adjustment of profit of prior year for error
Raw materials purchased 4,300,000
in depreciation, net of tax effect
Direct labor payroll 2,000,000
(750,000)
Factory overhead 3,000,000
Loss from fire
Freight out 450,000
(1,400,000)
Freight in 250,000
303. What amount should be reported as adjusted net
299. What is the cost of goods sold for the current year? income?

a. 9,950,000 b. 9,550,000 a. 6,500,000 b.€,610,000

c. 9,250,000 d. 9,150,000 c. 8,160,000 d. 8.700,000

Problem 9-9(AICPA Adapted) Problem 9-11(IAA)

Argentina Company incurred the following costs and Bangladesh Company provided the following information
expenses during the current year: for the current year:

Raw material purchases 4,000,000 Sales 50,000,000

Direct labor 1,500,000 Cost of goods sold 30,000,000

Indirect labor -factory 800,000 Distribution costs 5,000,000

General and administrative expenses 4,009,000 306. What amount should be reported as income from
continuing operations?
Interest expense 2,000,000
a. 1,550,000 b. 1,600,000
Gain on early extinguishment
c. 2,350,000 d. 1,400,000
of long-term debt 500,000 Correction
of inventory error Problem 9-14(AICPA Adapted)

net of income tax-credit 1,000,000 Vane Company provided the following information for the
current year:
Investment income-equity method 3,000,000
Debit Credit
Gain on expropriation 2,000,000
Sales 5,750,000
Income tax expense 5,000,000
Cost of goods sold 2,400,000
Dividends declared 2,500,000
Administrative expenses 700,000
304. What is the incame from continuing operations?
Sales commissions 500,000
a. 9,000,000 b. 8,000,000
Interest revenue 250,000
c. 9,500,000 d. 7,000,000
Freight out 150,000
Problem 9-12(IAA)
Uncollectible accounts expense 150,000
Rosebud Company provided the following information for
the current year: Loss on sale of equipment 100,000

Sales 5,000,000 Loss on early retirement of

Costs of goods sold 2,800,000 long-term debt 200,000

Foreign translation adjustment-credit 400,000 4,200,000 6,000,000

Selling expenses 700,000 Finished goods inventory:

Unusual and infrequent gain 400,000 January 1 4,000,000

Correction of inventory error 200,000 December 31 3,600,000

Administrative expenses 600,000 Income tax rate 30%

Income tax expense 150,000 307. What amount should be reported as cost of goods
manufactured?
Gain on sale of investment 50,000
a. 2,000,000 b. 2,150,000 c.
Proceeds from sale of land at cost 800,000 2,800,000 d. 2,950,000

Dividends paid 300,000 308. What amount should be reported as income from

305. What amount should be reported as income from continuing operations?

continuing operations?
a. 1,260,000 b. 1,295,000 c.
a. 1,200,000 b. 1,350,000 1,400,000 d. 1,470,000

c. 1,600,000 d. 2,000,000 309. It is change in equity during a period resulting from

transactions and other events, other than those changes
Problem 9-13(IAA) resulting from transactions with owners in their capacity as
owners.
Corazon Company provided the following information for
the current year: a. Profit or loss b.
Comprehensive income c.
Sales 7,000,000
Other comprehensive income d.
Sales returns and allowances 100,000 Share capital

Cost of goods sold 2,800,000 310. Comprehensive income includes

Utilities expense 1,000,000 a. Profit or loss

Interest revenue 150,000 b. Other comprehensive income

Income tax expense 800,000 c. Both profit or loss and other comprehensive income

Casualty loss due to earthquake 50,000 d. Neither profit or loss nor other comprehensive

Finance cost 200,000 income

Salaries expense 600,000 311. It is the total of income less expenses, excluding other
comprehensive income.
Loss on sale of investments 50,000
a. Comprehensive income c. Gain or loss attributable to credit risk of a financial
liability designated at FVPL
b. Profit or loss
d. All of these components of OCI should be reclassified to
c. Accounting income retained earnings

d. Economic income 318. Total comprehensive income for the period is

presented
312. It comprises items of income and expense, including
reclassification adjustments, that are not recognized in a. Showing separately the total amount attributable to
profit or loss as required or permitted by PFRS. owners of the parent and the noncontrolling interest.

a. Comprehensive income [Link] separately an analysis of expenses by function.

b. Other comprehensive income c. Showing separately an analyeis of expenses by nature.

c. Profit or loss [Link] separately profit or loss and the total of other
comprehensive income.
d. Retained profit
319. An entity shall present an analysis of expenses based
313. What is the two-statement approach of presenting on
comprehensive income?
a. The nature of expense
a. A comparative statement of comprehensive income
[Link] function of expense
b. A combined statement of comprehensive income and
retained earnings c. Either the nature of expense or the function of expense

c. A combined income statement and a statement of d. Neither the nature of expense nor the function of
changes in equity expense

d. A separate income statement and a separate statement 320. Separate line items in an analysis of expenses by
of comprehensive income nature include

314. Earnings a. Purchases, employee benefits, depreciation,

extraordinary items
a. Include certain gains excluded from comprehensive
income b. Purchases, distribution costs, employee benefits,
depreciation
b. Are the same as comprehensive income
c. Depreciation, purchases, transport costs, employee
c. Exclude certain gains and losses included in benefits
comprehensive income
d. Cost of goods sold, administrative costs, transport costs
d. include certain losses excluded from comprehensive and distribution costs
income
322. Separate line items in an analysis of expenses by
315. Other comprehensive income includes all, except function include
a. Gain and loss arising from translating the financial a. Purchases, employee benefits, depreciation,
extraordinary items
statements of a foreign operation.
b. Purchases, distribution costs, administrative costs,
b. Gain and loss from debt investment measured at fair
employee benefits
value through OCI.
c. Depreciation, purchases, employee benefits, advertising
c. Gain and loss on hedging instrument in a cash flow
costs
hedge.
d. Cost of goods sold, administrative expenses and
d. Dividend paid to shareholders.
distribution expenses
316. All of the following components of OCI should be
323. Under IFRS, the extraordinary item presentation
reclassified to profit or loss, except
a. Has not changed from current rules
a. Translation of financial statements of a foreign operation
b. Has been eliminated
b. Remeasurement of debt investment at FVOCI
c. Has been eliminated from net of tax presentation
[Link] effective portion of gain or loss on hedging
d. Has been eliminated from EPS reporting
instrument in a cash flow hedge
324. Which is not generally accepted in presenting the
d. Remeasurement of equity investment at FVOCI
income statement?
317. Which of the following components of OCI should be
a. Including prior period error in determining income
reclassifed to retained earnings?
b. The condensed income statement
a. Revaluation surplus
c. The consolidated income statement
b. Remeasurements of defined benefit plan
d. Including income tax in determining income
325. The income statement reveals a. Net loss

a. Resources and equity at a point in time. b. Prior period error

b. Resources and equity for a period of time. c. Preference share dividend

c. Net earnings at a point in time. d. Other comprehensive income

d. Net earnings for a period of time. 334. Which of the following would appear first in a
statement of retained earnings?
326. Conceptually, net income is a measure of
a. Net income b. Prior period error
a. Wealth b. Change of wealth
c. Cash dividend d. Share dividend
c. Capital maintenance d. Cash flow
335. Income determination is arrived at by
327. Which term cannot be used to describe a line item in
the statement of comprehensive income? a. Measuring the change in owners' equity

a. Revenue b. Gross income b. Identifying the change in the purchasing power.

c. Income before tax d. Extraordinary item c. Using a transaction approach

328. Items of other comprehensive income should be d. Applying the value added concept
analyzed
336. Net income equals
a. By nature
a. Assets minus liabilities
b. By function
b. Revenue minus cost of goods sold
c. Either by nature or by function
c. Revenue minus expenses
d. Neither by nature nor by function
d. Cash receipts minus cash payments
329. All of the following are components of other
337. Comprehensive income always
comprehensive income, except
a. Is the same as net income.
a. Foreign currency translation adjustment
b. Is greater than net income
b. Unrealized gain and loss on financial asset held for
trading c. Is less than net income.

c. Deferred loss on derivative financial instrument d. Could be greater than or less than net income.
designated as cash flow hedge
338. Gains are
d. Change in revaluation surplus
a. Inflows from selling a product to a customer
330. Comprehensive income includes all of the following,
except b. Increases in equity resulting from transfers of assets to
the entity from owners
a. Revenue and gain
c. Increases in equity from peripheral transactions
b. Expense and loss
d. All of these can be considered gains
c. Preference share dividend
339. Change in equity from nonowner sources is
d. Unrealized gain and loss on derivative contract
a. Comprehensive income b. Revenue
331. Comprehensive income includes all of the following,
except c. Expense d. Gain or loss

a. Dividend revenue 340. What is the purpose of reporting comprehensive

income?
b. Loss on disposal of asset
a. To report changes in equity due to transactions with
c. Investment by owners owners.

d. Unrealized gain on trading investment b. To report a mensure of overall entity performance.

332. Corrections of errors in prior period are included in c. To replace net income with a better measure.

a. Retained earnings d. To combine income from continuing operation with

income from discontinued operation.
b. Other comprehensive income
341. Which of the following changes during a period is not
c. Net income a component of other comprehensive income?

d. Share premium a. Actuarial gain on defined benefit plan

333. Which of the following does not appear in a statement b. Treasury share
of retained earnings?
c. Foreign currency tanslation adjustment
d. Unrealized gain on equity instrument measured at fair b. To provide a basis for predicting future performance.
value through other comprehensive income
c. To help assess the risk and uncertainty of achieving
342. Which of the following items would cause net income future cash flows.
to differ from comprehensive income?
[Link] evaluate the past performance of an entity.
a. Unrealized loss on equity investment measured at fair
value through other comprehensive income 349. The income statement would help in which of the
following?
b. Unrealized loss on investment held for trading
a. Assess capital structure
c. Loss on exchange of similar assets
b. Determine financial position
d. Loss on exchange of dissimilar assets
c. Estimate future cash flows
343. Which of the following is not an acceptable option in
presenting other comprehensive income? d. Estimate need for additional financing

a. In a separate income statement Problem 10-1(AICPA Adapted)

b. In a single statement of comprehensive income Lace Company provided the following information during
the current year:
c. In the notes to financial statements
Dividend received 500,000
d. In a statement of changes in equity
Dividend paid 1,000,000
344. When a complete set of financial statements is
presented, comprehensive income and its components Cash received from customers 9,000,000
should
Proceeds from issuing share capital 1,500,000
a. Appear in the statement of retained earnings
Interest received 200,000
b. Be reported net of related income tax effect, in total and
individually. Proceeds from sale of

c. Appear in a supplemental schedule in the notes to long term investments 2,000,000

financial statements.
Cash paid to suppliers and employees 6,000,000
d. Be displayed in a statement that has the same
Interest paid on long term debt 400,000
prominence as other financial statements.
Income taxes paid 300,000
345. The limitations of the income statement include all of
the following, except Cash balance,January 1 1,800,000
a. Items that cannot be measured reliably are not reported. 350. What is the net cash provided by operating activities?
b. Only actual amounts are reported in net income. a. 3,000,000 b. 3,300,000
c. Income measurement involves judgment. c. 2,700,000 d. 2,000,000
d. Income numbers are affected by the accounting method. 351. What is the net cash provided by investing activities?
346. Which of the following would represent the least likely a. 2,500,000 b.2,000,000
use of an income statement?
c. 2,200,000 d. 0
a. Use by customers to determine an entity's ability to
provide needed goods and services 352. What is the net cash provided by financing activities?

b. Use by labor unions to examine earnings closely as a a. 1,500,000 b.1,000,000

basis for salary discussions
c.500,000 d. 0
c. Use by government to formulate tax policy
353. What is the cash balance on December 31?
d. Use by investors interested in financial position
a. 6,300,000 b. 5,500,000
347. The income statement would help in which of the
following? c. 4,800,000 d. 7,300,000

a. Evaluate liquidity Problem 10-2(IAA)

b. Evaluate solvency Star Company provided the following data for the
preparation of statement of cash flows for the current
c. Estimate amount, timing and uncertainty of future cash year:
flows
Cash balance, beginning 1,500,000
d. Estimate future financial flexibility
Cash paid to purchase inventory 7,800,000
348. Investors and creditors use the income statement for
all of the following, except Cash received from sale of

a. To evaluate the future performance of an entity. trading securities 2,500,000

Cash paid for internet on bank loan 450,000 a. 4,000,000 b. 6,000,000

Cash paid to repay principal c. 3,800,000 d. 6,200,000

amount of bank loan 1,000,000 [Link] is the cash balance at year-end?

Cash collected from customers 10,000,000 a. 3,500,000 b. 9,300,000

Cash received from issuance c. 5,500,000 d. 5,800,000

of ordinary shares 1,200,000 Problem 10-4(AICPA Adapted)

Cash paid for dividend 2,000,000 On December 31,2020, Kale Company had the following
balances in the accounte maintnined at First Bank:
Cash paid for income taxes 1,350,000
Checking account #101 1,750,000
Cash paid to purchase trading securities 1,000,000
Checking account #201 (108,000)
354. What is the net cash provided by operating activities?
Time deposit 250,000
a. 1,900,000 b. 2,900,000
Money market placement 1,000,000
c. 2,350,000 d. 400,000
90-day treasury bill, due
355. What is the net cash used in financing activites?
February 28,2021 500,000
a. 3,000,000 b. 2,000,000
180-day treasury bill, due
c. 1,800,000 d. 4,200,000
March 15, 2021 800,000
356. What is the cash balance at year-end?
361. The entity classified investments with original
a. 3,400,000 b. 1,600,000 maturities of three months or less as cash equivalents. On
December 31, 2020, what amount should be reported as
c. 1,400,000 d. 2,400,000 cash and cash equivalents?
Problem 10-3(IAA) a. 3,400,000 b. 2,000,000
Fraulein Company had the following cash flows during the c. 2,400,000 d. 3,200,000
current year:
Problem 10-5(IAA)
Cash receipts from issuance
Oakwood Company provided the following data for the
of ordinary shares 4,000,000 year:
Cash receipts from customers 2,000,000 Cash balance, beginning of year 1,300,000
Cash receipts from dividends Cash flow from financing activities 1,000,000
on long-term investments 300,000 Cash flow from operating activities 400,000
Cash receipts from repayment Cash flow from investing activities (1,500,000)
of loan made to another entity 2,200,000 Total shareholders equity,
Cash payments for wages beginning of year 2,000,000
and other operating expenses 1,200,000 362. What is the cash balance at the end of current year?
Cash payments for insurance 100,000 a. 1,200,000 b. 1,600,000
Cash payment for dividends 200,000 c. 1,400,000 d. 1,700,000
Cash payments for taxes 400,000 Problem 10-6(AICPAAdapted)
Cash payment to purchase land 800,000 Alpha Company had the following activities during the
Cash balance-beginning 3,500,000 current year:
357. What is the net cash provided by operating activities? • Acquired 2,000 shares as investment for P2,600,000.
a. 600,000 b. 400,000 • Sold an investment for P3,500,000 when the carrying
c. 300,000 d. 200,000 amount was P3,300,000.
358. What is the net cash provided by investing .activities? • Acquired a P5,000,000, 4-year certificate of deposit from
a bank. During the year, interest of P375,000 was paid to
a. 2,200,000 b. 1,400,000
Alpha.
c. 3,000,000 d. 800,000
• Collected dividends of P120,000 on share investments.
359. What is the net cash provided by financing activities?
363. In the statement of cash flows, what amount should 366. What is the net cash provided by financing activities?
be reported as net cash used in investing activities?
a. 5,000,000 b. 3,500,000
a. 3,725,000 b. 3,805,000
c. 4,500,000 d. 5,500,000
c. 3,980,000 d. 4,100,000
367. What is the net cash used in investing activities?
Problem 10-7(AICPA Adapted)
a. 6,750,000 b. 3,750,000
During the current year, Beta Company had the following
activities related to financial operations: c. 1,750,000 d. 500,000

Payment for the early extinguishment 368. The primary purpose of a statement of cash flows is to
provide relevant information about
of long-term bonds payable
a. Differences between net income and associated cash
with carrying amount of P7,400,000 7,500,000 receipts and disbursements

Payment in the current year of cash b. An entity's ability to generate positive net cash flows

dividend declared in prior year 620,000 c. The cash receipts and cash disbursements of an entity
during a period
Carrying amount of convertible
d. An entity's ability to meet cash operating needs
preference shares converted into
369. Cash receipts from royalties and commissions are
ordinary shares 1,200,000
a. Cash outflows for operating activities
Proceeds from sale of treasury shares
b. Cash inflows from operating activities
with carrying amount at cost P860,000 950,000
c. Cash inflows from investing activities
364. In the statement of cash flows for the current year,
what amount should be reported as net cash used in d. Cash outflows for financing activities
financing activities?
370. Cash flows arising from trading securities are
a. 7,170,000 b. 7,160,000
a. Classified as operating activities
c. 5,970,000 d. 5,350,000
b. Classified as investing activities
Pcoblem 10-8(AICPA Adapted)
c. Classified as financing activities
Faye Company provided the following data for the current
year: d. Not reported in the cash flow statement

Proceeds from eale of equipment 100,000 371. Cash payments to acquire equity investments are

Purchase of bond investment 1,800,000 a. Cash outflows for financing activities

Dividend declared 450,000 b. Cash inflows from investing activities

Dividend paid 380,000 c. Cash outflows for investing activities

Proceeds from sale of treasury shares 750,000 d. Cash inflows from financing activities

365. What is the net cash provided by financing activities? 372. Cash receipts from issuing shares are

a. 200,000 b. 270,000 a. Cash inflows from investing activities

c. 300,000 d. 370,000 b. Cash outflows for investing activities

Problem 10-9(AICPA Adapted) c. Cash inflows from financing activities

Kollar Company provided the following data for the current d. Cash outflows for financing activities
year:
373. Interest payments to lenders are classified as
Purchase of real estate for cash 5,500,000
a. Operating activities b. Borrowing activities
Cash was borrowed from bank
c. Lending activities d. Financing activities
to purchase real estate 5,500,000
374. Dividend payments to shareholders are classified as
Sale of investment for cash 5,000,000
a. Cash outflows for investing activities
Dividend paid 6,000,000
b. Cash inflows from investing activities
Issuance of ordinary shares for cash 2,500,000
c. Cash inflows from financing activities
Purchase of patent for cash 1,250,000
d. Cash outflows for financing activities
Payment of bank loan 1,500,000
375. Interest received is classifed as cash flow from
Issuance of bonds payable for cash 3,000,000
[Link] activities [Link] activities b. Investments with original maturities of three month or
[Link] activities [Link] activities less.

376. Bank overdrafts that are repayable on demand and c. Readily convertible to known amount of cash.
the bank balance often fluctuates from positive to
overdrawn shall be classified as d. All of these are features of cash equivalents.

a. Operating activities 384. All can be classified as cash and cash equivalents,
except
b. Investing activities
a. Time deposit due in 60 days
c. Financing activities
b. Treasury bills due for repayment in 90 days
d. Component of cash and cash equivalents
c. Equity investments
377. Cash advances and loans made by a financial
institution are usually classifed as d. Bank overdraft

a. Operating activities 385. When an entity purchased a three-month Treasury

bill, how would the purchase be treated in preparing the
b. Investing activities statement of cash flows?

c. Financing activities a. Not reported

d. Component of cash and cash equivalents b. An outflow for financing activities

378. Under IFRS, an entity can report interest paid on bank c. An outflow for lending activities
loan in the statement of cash flows
d. An outflow for investing activities
a. In operating activities
386. Which of the following is not considered as a cash
b. Either in operating activities or financing activities equivalent?

c. In financing activities a. A three-year treasury note maturing on January 31 of

next year purchased by the entity on December 1 ofthe
d. In investing activities or financing activities current year

379. Under IFRS, the dividend received from b. A three-year treasury note maturing on January 31 of
shareinvestments can be classified as next year purchased by the entity on October 1 of the
current year
a. Either an operating activity or a financing activity
c. A 90-day Treasury bill
b. Either an operating activity or investing activity
d. A 60-day money market placement
c. Only as an investing activity
387. Noncash investing and financing activities are
d. Only an operating activity
a. Reported only if the direct method is used.
380. Under IFRS, dividend paid can be classified
b. Reported only if the indirect method is used.
a. Either as financing activity or operating activity
c. Disclosed in a note or separate schedule.
b. Either as operating activity or investing activity
d. Not reported.
c. Only as financing activity
PROBLEMS
d. Only as operating activity
Problem 11-1(AICPA Adapted)
381. Which classification of the cash flow arising from the
proceeds from an earthquake disaster settlement would be During 2020, Oren Company decided to change from the
most appropriate? FIFO method of inventory valuation to the weighted
average method.
a. Cash flow from operating activities
FIFO Weighted average
b. Cash flow from investing activities
January 1 7,100,000 7,700,000
c. Cash flow from financing activities
December 31 7,900,000 8,300,000
d. Does not appear in the statement of cash flows
388. ln the statement of retained earnings for 2020, what
382. Cash flows relating to asset held for rental to others amount should be reported as the pretax cumulative effect
are classified as of this accounting change?
a. Operating b. Investing a. 1,000,000 addition b. 1,000,000 deduction
c. Financing d. Either operating or investing c. 600,000 addition d. 600,000 deduction
383. Cash equivalents are Problem 11-2(AICPA .Adapted)
a. Treasury bills and money market funds. Goddard Company had used the FIFO method of inventory
valuation since it began operations in 2017:
The entity decided to change to the weighted average December 31, 2019, the entity used the following original
method for measuring inventory at the beginning of 2020. cost and useful life for the property, plant and equipment:
The following schedule shows yearend inventory balances:
Original cost Useful life
Year FIFO Weighted average
Building 15,000,000 15 years
2017 4,500,000 5,400,000
Machinery 10,500,000 10 years
2018 7,800,000 7,100,000
Furniture 3,500,000 7 years
2019 8,300,000 7,800,000
On January 1,2020, the entity determined that the
389. What pretax amount should be reported in the remaining useful life is 10 years for the building, 7 years for
statement of retained earnings for 2020 as the cumulative the machinery and 5 years for the furniture. The entity
effect of the change in accounting policy? used the straight line method of depreciation with no
residual value.
a. 500,000 decrease b. 300,000 decrease
393. What is the total depreciation for 2020?
c. 500,000 increase d. 300.000 increase
a. 2,650,000 b. 3,700,000
Problem 11-3(IAA)
c. 2,550,000 d. 3,500,000
Blue Company purchased a machine on January 1, 2017 for
P6,000,000. At the date of acquisition, the machine had a Problem 11-7(AICPA Adapted)
life of six years with no residual value. The machine was
depreciated on a straight line basis. On January 1, 2018, Brazilia Company purchased for

On January 1, 2020, the entity determined that the P4,800,000 a machine with a useful life of ten years and a
machine had a useful life of eight years from the date of residual value of P200,000. The machine was depreciated
acquisition with no residual value. by the double declining balance

390. What is the depreciation of the machine for 2020? and the carrying amount of the machine was P3,072,000
on December 31,2019.
a. 750,000 b. 600,000
The entity changed to the straight line method on January
c. 375.000 d. 500,000 1, [Link] residual value did not change.

Problem 11-4(AICPA Adapted) 394. What is the depreciation expense on this machine for
2020?
On January 1, 2017, Flax Company purchased a machine for
P5,280,000 and depreciated it by the straight line method a. 287,200 b. 384,000
using an estimated useful life of eight years with no
residual value. c. 460,000 d. 359,000

On January 1, 2020, the entity determined that the Problem 11-8(IAA)

machine had a useful life of six years from the date of
acquisition and the residual value was P480,000. On January 1,2020, Canyon Company decided to decrease
the estimated useful life of an existing patent from 10
An accounting change was made in 2020 to reflect this years to 8 years. The patent was purchased on January
additional information. 1,2015 for P3,000,000. The estimated residual value is
zero. The entity decided on January 1,2020 to change the
391. What is the accumulated depreciation for the machine depreciation method from an accelerated method to the
on December 31, 2020? straight line method. On January 1,2020, the cost of an
equipment is P8,000,000 and the accumulated
a. 2,920,000 b. 3,080,000 depreciation is P3,400,000. The remaining useful life of the
equipment on January 1, 2020 is 10 years and the residual
c. 3,200,000 d. 3,520.000 value is P200,000.

395. What is the total charge against income for 2020 as a

result of the accounting changes?
Problem 11-5(IAA)
a. 940,000 b. 960,000
On January 1,2018,Milan Company purchased an
equipment for P6,000,000. The equipment had been c. 627,500 d. 647,500
depreciated using the straight line with residual value of
P600,000 and useful life of 20 years. On January 1, 2020, Problem 11-9(IFRS)
the entity determined that the remaining
Aklan Company reported the following events during 2020:
useful life is 10 years and the residual value is P800,000.
• It was decided to write off P1,800,000 from inventory
392. What is the depreciation for 2020? which was over two years old as it was obsolete.

a. 270,000 b. 546,000 • Sales of P1,600,000 had been omitted from the financial
statements for the year ended December 31,2019.
c. 466,000 d. 582,500
396. What total amount should be reported as prior period
Problem 11-6 (IFRS) error in the financial statements for the year ended
December 31, 2020?
Acute Company was incorporated on January 1,2017. In
preparing the financial statements for the year ended a. 3,400,000 b. 1,600,000
c. 1,800,000 d. 1,000,000 d. The change is made by CPAs.

Problem 11-10(IFRS) 402. A change in accounting policy requires what kind of

adjustment to the financial statements?
Samar Company reported the following events during the
year ended December 31, 2020: a. Current period adjustment

• A counting error relating to the inventory on December b. Prospective adjustment

31,2019 was discovered. This required a reduction in the
carrying amount of inventory at that date of P280,000. c. Retrospective adjustment

• The provision for uncollectible accounts receivable on d. Current and prospective adjustment
December 31,2019 was P300,000. During 2020, an amount
of P500,000 was written off related to the December 31, 403. A change in accounting policy requires that the
2019 accounts receivable. cumulative effect of the change for prior periods should be
reported as an adjustment to
397. What adjustment is required to restate retained
earnings on January 1, 2020? a. Beginning retained earnings for the earliest period
presented.
a. 280,000 b. 300,000
b. Net income for the period in which the change occurred.
c. 580,000 d. 0
c. Comprehensive income for the earliest period presented.
[Link] in the first step within the hierarchy of guidance
when selecting accounting policies? d. Shareholders'equity for the period in which the change
occurred.
a. Apply a standard from IFRS if it specifically relates to the
transaction. 404. Which of the following is accounted for as a change in
accounting policy?
b. Apply the requirements in IFRS dealing with similar and
related issue. a. A change in the estimated useful life of property, plant
and equipment
c. Consider the applicability of the definitions, recognition
criteria and measurement concepts in the Conceptual b. A change from cash basis to accrual basis of accounting
Framework.
c. A change from expensing immaterial expenditures to
d. Consider the most recent pronouncements of other deferring and amortizing them when material
standard setting bodies.
d. A change in inventory valuation from FIFO to average
399. In the absence of an accounting standard that applies method
specifically to a transaction, what is the most authoritative
405. Which is a change in accounting policy?
source in developing and applying an accounting policy?
a. The initial adoption of an accounting policy to carry asset
a. The requirement and guidance in the standard or
at revalued amount.
interpretation dealing with similar and related issue
b. The change from cost model to revaluation model is
[Link] definition, recognition criteria and measurement of
measuring property, plant and equipment.
asset, liability, income and expense in the Conceptual
Framework c. A change in the measurement basis.
c. Most recent pronouncement of other standard-setting d. All of these are considered change in accounting policy.
body
406. Which of the following should be treated as change in
d. Accounting literature and accepted industry practice accounting policy?
400. A change in accounting policy shall be made when a. A change is made in the method of calculating the
provision for uncollectible accounts receivable.
I. Required by law.
b. A change from cost model to fair value model in
II. Required by an accounting standard.
measuring investment property.
III. The change will result in more relevant or reliable
c. An entity engaging in construction contract for the first
information about the financial position, financial
time needs on accounting policy to deal with this.
performance and cash flows of the entity.
d. All of these qualify as change in accounting policy.
a. I and lll only b. II and III only
407. When it is difficult to distinguish between a change in
c. I and II only d. I,II and I
accounting estimate and a change in accounting policy, the
401. Why is an entity permitted to change an accounting change is treated as
policy?
a. Change in accounting estimate with appropriate
a. The change would allow the entity to present a more disclosure
favorable profit picture.
b. Change in accounting policy
b. The change would result in the financial statements
c. Correction of an error
providing more reliable and relevant information about
financial position, financial performance and cash flows. d. Change in accounting estimate with no appropriate
disclosure
c. The change is made by the internal auditor.
408. How should the effect of a change in accounting 415. Prior period errors
estimate be accounted for?
a. Do not include mistake in the application of policy
a. By restating amounts reported in financial statements of
prior periods b. Do not affect presentation of financial statements

b. By reporting proforma amounts for prior periods c. Do not require further disclosure

c. As a prior period error d. Are omissions and misstatements in the financial

statements of prior periods
d. In the period of change and future periods if the change
affects both 416. An example of a correction of an error is a change

409. Which is characteristic of a change in accounting a. From FIFO inventory valuation to the average method.
estimate?
b. In the service life of property, plant and equipment.
a. It usually need not be disclosed
c. From cash basis to accrual baais of accounting.
b. It does not effect the financial statements of prior period
d. In the tax assessment related to a prior period.
c. It should be reported through the restatement of the
financial statements 417. A change from cash basis to accrual basis should be
reported
d. It makes necessary the reporting of proforma amounts
a. Retroactively as correction of an error
410. Which of the following is the proper time period to
record the effect of a change in accounting estimate? b. Retroactively as change in accounting policy

a. Current period and prospectively c. As component of income from continuing operations

b. Current period and retrospectively d. As component of other comprehensive income

c. Retrospectively 417. A change in the periods benefited by a deferred cost

because additional information has been obtained is
d. Current period
a. An accounting change that should be reported in the
411. Why is retrospective treatment of change in period of change and future periods if the change affects
accounting estimate prohibited? both.

a. A change in accounting estimate is a normal recurring b. An accounting change that should be reported by
correction or adjustment. restating the financial statements of all prior periods
presented.
b. The retrospective treatment is not allowed.
c. A correction of an error.
c. Retrospective treatment of a change in accounting
estimate is required by IFRS. d. Not an accounting change.

d. IFRS is silent on the issue. 418. A change in the residual value of an asset arising
because additional information has been obtained is
412. Which is required for a change from sum of years'
digits to straight line depreciation? a. An accounting change that should be reported in the
period of change and future periods if the change affects
a. Reported in the statement of retained earnings both.

b. Retrospective restatement b. An accounting change that should be reported by

restating the financial statements of all prior periods
c. Recomputation of depreciation for current and future presented.
years
c. A correction of an error.
d. All of these are required
d. Not an accounting change.
413. Which is not classifed as an accounting change?
419. Which statement in relation to a change in accounting
a. Change in accounting policy estimate is true?

b. Change in accounting estimate a. Change in accounting estimate is accounted for

retrospectively.
C. Error in the financial statements
b. Change in accounting estimate results from new
d. All of these are classifed as an accounting change information or new development.
414. When financial statements for a single year are being c. By very nature, the revision of an estimate relates to
presented, a prior period error should prior periods and is accounted for as a correction of an
error.
a. Be shown as an adjustment of the beginning balance of
retained earnings d. All of these statements are true in relation to a change in
accounting estimate.
b. Affect net income of the current year
420. The effect of a change in accounting policy that is
c. Be shown in the statement of changes in equity
inseparable from the effect of a change in accounting
d. Be included in other comprehensive income estimate should be reported
a. By restating the financial statements of all prior periods c. When the financial statements are filed with the
presented. regulatory agency.

b. As a correction of an error. d. When a supervisory board made solely of nonexecutives

approves the financial statements.
c. As a component of income from continuing operations in
the period of change and future periods if the change 426. Which event after the reporting period would require
affects both. adjustment?

d. As a separate disclosure after income from continuing a. Loss of plant as a result of fire
operations in the period of change and future periods if the
change affects both. b. Change in the market price of investment

421. When an entity changed the expected service life of c. Loss on inventory resulting from flood loss
an asset because additional information has been
obtained, which of the following should be reported? d. Loss on a lawsuit the outcome of which was deemed
uncertain at year-end
a. Cumulative effect of change in accounting policy
427. Events that occur after the current year-end but
b. Proforma effect of retroactive application before the financial statements are issued and affect the
realizability of accounts receivable should be
c. Prior period error
a. Discussed in the management annual report.
d. An accounting change that should be reported in the
period of change and future periods if the change affects b. Disclosed in the notes to financial statements.
both.
c. Used to record an adjustment to bad debt expense.
422. Events after the reporting period are favorable or
unfavorable events that occur between d. An adjustment directly to retained earnings.

a. The end of the reporting period and the date of the next 428. Nonadjusting events include all, except
annual financial statements.
a. A major business combination after reporting period
b. The end of the reporting period and the date of the next
b. Announcing a plan to discontinue an operation
interim or annual financial statements.
c. Expropriation of major asset after reporting period
c. The end of the reporting period and the date when the
financial statements are authorized for issue. d. Destruction of a major production plant by a fire before
the end of the reporting period
d. The end of reporting period and the date of the next
interim statements. 429. Nonadjusting events include all, except
423. Adjusting events are those that a. The entity announced the discontinuation of an
operation.
a. Provide evidence of conditions that existed at the end of
the reporting period. b. The entity entered into an agreement to purchase the
leased building.
b. Are indicative of conditions that arose after the end of
the reporting period. c. Distruction of a major production plant by fire.
c. Are indicative of conditions that arose after the approval d. A mistake in the calculation of allowance for
of the financial statements by shareholders. uncollectible accounts receivable.
d. Provide for conditions that existed after the date the 430. Which event after the end of reporting period would
financial statements were issued. generally require disclosure?
424. When after the end of reporting period an event a. Retirement of key management personnel
occurs that is indicative of conditions that arose after the
end of reporting period b. Settlement of litigation when the event that gave rise to
the litigation occurred in a prior period
a. The entity shall disclose the nature and effect of the
event in the financial statements. c. Strike of employees

b. The entity shall adjust the related amount in the d. Issue of a large amount of ordinary shares
financial statements.
431. At the end of the current reporting period, an entity
c. The entity shall disclose the nature and effect of the carried a receivable from a major customer who declared
event and adjust the related amount. bankruptcy after the end of reporting period and before
the issuance of financial statements. What should be
d. The entity shall disclose the nature but not the effect of reported at the current year-end?
the event.
a. Disclore the fact that the customer hns declared
425. Financial statements are authorized for issue bankruptcy.
a. When the board of directors reviews and authorizes the b. Make a provision for the event after reporting period in
financial statements for issue. the financial statements.
b. When the shareholders approve the financial statements c. Ignore the event and wait for the outcome of the
at their annual meeting. bankruptcy.
d. Reverse the sale pertaining to the receivable in the d. Two venturers simply because they share joint control
comparative statement for the prior period. over a joint venture

432. An entity decided to build and operate an amusement 437. A related party transaction is a transfer
park next year. The entity applied for a letter of guarantee
which was issued before the issuance of the financial a. Between related parties when a price is charged.
statements of the current year. What is the
adjustmentbrequired st the current year end? b. Between related parties, regardless of whether a price is
charged.
a. Book e long term payable for the amount of guarantee
c. Between unrelated parties when a price is charged.
b. Disclose the guarantee as a contingent liability
d. Between unrelated parties, regardless of whether a price
[Link] the contingency reserve is charged.

d. Do nothing 438. Unrelated parties include which of the following?

433. An entity built a new factory building during the a. Providers of finance in the course of their normal
current year. Subsequent to the current year-end and dealings with an entity by virtue only of those dealings.
before issuance of financial statements, the building was
destroyed by fire and the claim against the insurance entity b. Government agencies
proved futile because the cause of the fire was negligence
c. Single customer with whom an entity transacts a
on the part of the caretaker of the building. What should
significant volume of business merely by virtue of the
be reported at the current year-end?
resulting economic dependence.
a. Write off the carrying amount of the building
d. All of these are unrelated parties
b. Make a provision for one-half of the carrying amount of
439. Close family members of an individual include all,
the building
except
c. Make a provision for three-fourths of the carrying
a. The individual's spouse and children
amount of the building
b. Children of the individual's spouse
d. Disclose the nonadjusting event in the notes to financial
statements c. Dependents of the individual or individual's spouse
434. An entity deals extensively with foreign currency d. Brothers and sisters of the individual
transaction. Subsequent to the end of reporting period and
before the date of authorization of the issuance of the 440. The minimum dis closures about related party
financial statements, there were abnormal fluctuations in transactions include all of the following, except
foreign currency rate. What should be reported at the
current year-end? a. The amount of the transaction

a. Adjust the foreign exchange year-end balances to reflect b. Amount of outstanding balance
the abnormal adverse fluctuations
c. Allowance for doubtful accounts related to the
b. Adjust the foreign exchange year-end balances to reflect outstanding balance
all abnormal fluctuations and not just adverse movements
d. Nature of the relationship
c. Disclose the post-reporting period event
441. Which is not included in key management personnel
d. Ignore the post reporting period event compensation?

435. Which statement is true in relation to events after a. Short-term benefit

reporting period?
b. Share-based payment
a. Notes to the financial statements should give details of
material adjusting events included in those financial c. Termination benefit
statements.
d. Reimbursement of out-of-pocket expenses
b. Notes to the financial statements should give details of
442. Which of the following is not a mandated disclosure
material nonadjusting events which could influence the
about related party transactions?
economic decisions of users.
a. Relationship between parent and subsidiaries
c. A decline in the market value of investments would
b. Names of all the associates that an entity has dealt with
normally be classified as an adjusting event
during the year.
d. The settlement of a long-running court case would
c. Name of the entity's parent and, if different, the
normally be classified as a nonadjusting event
ultimate controlling party.
436. Related parties include all of the following, except
d. If neither the entity's parent nor the ultimate controlling
a. Parent, subsidiary and fellow subsidinries entity produces financial statements available for public
use, then the name of the next most senior parent that
b. Associates does so.

c. Key management personnel and close family members of 443. Which of the following is not a required minimum
such key management personnel disclosure about related party transaction?
a. The amount of related party transaction

b. The amount of the outstanding balance

c. The amount of similar transaction with unrelated parties

to establish that comparable related party transaction has
been entered at arm's length

d. Doubtful debt related to the outstanding balance

444. Related party transactions include all, except

a. A venturer sold goods to the joint venture.

b. Sold a car to the uncle of the entity's finance director.

c. Sold goods to another entity owned by the daughter of

the entity's managing director.

d. All of these are related party transactions.

445. All of the following are related party transactions,

except

a. Transferred goods from inventory to a subsidiary

b. Sold an entity car to the wife of the managing director

C. Sold an asset to an associate

d. Took out a huge bank loan