CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS
MAY 2025 LECPA BATCH 97
INVESTMENTS
1. Financial assets include all of the following, except
A. Cash in bank
B. Trade accounts and notes receivable
C. Equity investments
D. Inventory, equipment, intangible assets and prepaid expenses
2. The irrevocable election to present in OCI changes in fair value of financial asset is applicable to
A. An investment in equity instrument held for trading.
B. An investment in equity instrument not held for trading.
C. A financial asset measured at amortized cost
D. A financial asset measured at fair value through profit or loss.
3. A debt investment shall be measured subsequently at amortized cost
A. By irrevocable designation
B. When the debt investment is managed and evaluated on a document risk-management strategy.
C. When the debt investment is held for trading
D. When the business model is to collect contractual cash flows that are solely principal and interest.
4. A debt investment shall be measured at fair value through other comprehensive income
A. When the debt investment is held for trading
B. When the debt investment is not held for trading.
C. By irrevocable designation
D. When the business model is to collect contractual cash flows and also to sell the financial asset.
5. Under the fair value option, an entity may
A. Irrevocably designate a debt investment as measured at fair value through profit or loss even if the
amortized cost or FVOCI measurement is satisfied.
B. Irrevocably designate a debt investment as measured at FVOCI.
C. Revocably designate a debt investment as measured at FVPL.
D. Designate all instruments as measured at fair value through profit or loss.
6. Goodwill arising from an investment in associate is
A. Included in the carrying amount of the investment and amortized over the useful life.
B. Included in the carrying amount of the investment and not amortized.
C. Excluded from carrying amount of the investment but accounted for separately.
D. Excluded from carrying amount of the investment but charged to expense immediately.
7. What should happen when the financial statements of an associate are not prepared at the same date as that of
the investor?
A. The associate should prepare financial statements for use by the investor at the same date as that of the
investor.
B. The financial statements of the associate prepared at a different date will be used.
C. Any major transactions between the date of the financial statements of the investor and that of the associate
should be accounted for.
D. As long as the gap is not greater than three months, there is no problem.
8. An investor shall discontinue the use of the equity method when
A. The investor ceases to have significant influence over the associate.
B. The associate operates undue severe long-term restrictions.
C. The investor ceases to have control over the associate.
D. Under all of these circumstances
9. When an investment ceases to be an associate, the fair value of the investment at the date when it
ceases to be an associate is regarded as its
A. Cost on initial recognition as a financial asset
B. Fair value on initial recognition as a financial asset
C. Fair value on initial recognition as a financial liability
D. Amortized cost on initial recognition as an investment
10. The equity method is not applicable under all of the following circumstances, except
A. The investor is a wholly-owned subsidiary
B. The investor’s debt and equity instruments are not traded
C. The investor is in the process of filing statements with a regulatory body for the purpose of issuing debt
and equity instruments in a public market
D. The ultimate parent of the investor produces consolidated financial statements.3
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11. An entity used the equity method of accounting for its 30% ownership of an investee. An investor has a
receivable from the investee. How is receivable reported in investor’s financial statements?
A. None of the receivable should be reported, but the entire receivable should be offset against the
investee’s payable to the investor
B. Seventy percent should be separately reported, with the balance offset against 30% of the
investee’s payable to investor
C. The total receivable should be included as part of the investment in associate
D. The total amount of the receivable should be disclosed separately
12. Which statement best describes investment property?
A. Property held for sale in the ordinary course of business
B. Property held for use in production of goods and property held for administrative purposes
C. Property held to earn rentals or for capital appreciation
D. Property held for capital appreciation
13. Subsequent to initial recognition, the investment property shall be measured using
A. Fair value model or revaluation model
B. Fair value model through OCI
C. Cost model or fair value model
D. Cost model or revaluation model
14. Gain or loss from disposal of investment property is the difference between the
A. Gross disposal proceeds and fair value of the asset
B. Net disposal proceeds and carrying amount of the asset
C. Gross disposal proceeds and carrying amount of the asset
D. Fair value and carrying amount of the asset
15. An investment property is derecognized when
A. It is disposed to a third party
B. It is permanently withdrawn from use
C. No future benefits are expected from the disposal
D. In all of these cases
16. Which additional disclosure must be made when an entity chooses the cost model?
A. The fair value of the property
B. The present value of the property
C. The value in use of the property
D. The net realizable value of the property
17. Which disclosure shall be made when the fair value model has been adopted?
A. Depreciation method used
B. The amount of impairment loss recognized
C. Useful life
D. Net gain or loss from fair value adjustments
18. Transfers between investment property and property, plant and equipment and inventory are appropriate
A. When there is change of use
B. Based on the entity’s discretion
C. Only when the entity adopts the fair value model
D. The entity can never transfer property into another classification once.
19. A transfer from investment property carried at fair value to property, plant and equipment shall be
accounted for at
A. Fair value which becomes the deemed cost of property, plant and equipment
B. Carrying amount
C. Historical amount
D. Fair value less cost of disposal
20. If owner-occupied property is transferred to investment property to be carried using the fair value model,
the difference between the carrying amount and fair value shall be recognized
A. In profit or loss
B. In other comprehensive income
C. In retained earnings
D. As revaluation of property, plant and equipment
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