5-millan-SME - Multiple choice PDF

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PROBLEM: MULTIPLE CHOICE – TEHORY The PFRS for SMEs is based on which of the following? a. IFRS for NPAEs b. IFRS for SMEs c. SFAS for SMEs d. US GAAP The PFRS for SMEs is a. To be used in conjunction with full PFRS b. A separate (stand-alone) standard c. Similar to the Conceptual Framework d. All o...

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PROBLEM: MULTIPLE CHOICE – TEHORY 1. The PFRS for SMEs is based on which of the following? a. IFRS for NPAEs b. IFRS for SMEs c. SFAS for SMEs d. US GAAP 2. The PFRS for SMEs is a. To be used in conjunction with full PFRS b. A separate (stand-alone) standard c. Similar to the Conceptual Framework d. All of the above. 3. The PFRS for SMEs is intended to apply to the a. General purpose financial statements of SMEs b. Special purpose financial statements of SMEs c. General purpose financial statements of SMEs and micro entities d. A and b 4. Which of the following entities may apply the PFRS for SMEs? a. Small and medium-sized entities (SMEs) b. Private entities c. Non-publicly accountable entities (NPAEs) d. All of these 5. Which of the following statements is incorrect regarding the application of the PFRS for SMEs? a. The PFRS for SMEs is only the minimum standard that qualifying entities need to adopt for the preparation and presentation of their financial statements. b. SMEs are prohibited from applying the full PFRSs. c. SMEs may nevertheless opt to adopt the full PFRSs. d. Publicly accountable entities do not have an option of applying the PFRS for SMEs in lieu of the full PFRSs. 6. The decision as to which entities may apply the PFRS for SMEs rests with the a. FRSC b. IASB c. Philippine SEC d. All of these 7. An entity has public accountability when (choose the incorrect statement) a. The entity’s equity securities are publicly listed. b. The entity holds assets in a fiduciary capacity for a broad group of outsiders c. The entity holds assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity, for reasons incidental to a primary business. d. The entity’s debt securities are publicly listed. 8. Micro entities (choose the incorrect statement)

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a. Are entities that have total assets or total liabilities below P3 million b. May use “another acceptable basis of accounting” c. Have the options of applying either the PFRS for SME or the full PFRSs d. All of the statements are correct. Which of the following accounting provisions has been eliminated in the PFRS for SMEs? a. Earnings per share b. Measurement of inventory at the lower of cost and NRV c. Depreciation of long-lived assets d. Classification of Land and/or buildings as investment property All of the following accounting provisions have been eliminated in the PFRS for SMEs except: a. “Held for sale” classification b. Measurement of held for trading securities at fair value c. Segment reporting d. Interim reporting If a publicly accountable entity uses the PFRS for SMEs, its financial statements a. Shall be described as conforming to the PFRS for SMEs only if law or regulation in its jurisdiction permits or requires the IFRS for SMEs to be used by publicly accountable entities. b. Shall not be described as conforming to the PFRS for SMEs if law or regulation in its jurisdictions prohibits the use of IFRS for SMEs by publicly accountable entities c. Shall be described as conforming to the PFRS for SMEs only if law or regulation in its jurisdiction permits or requires the IFRS for SMEs to be used by publicly accountable entities; provided, an explicit and unreserved statement of compliance is disclosed in the notes. d. Shall not be described as conforming to the PFRS for SMEs even if law or regulation in its jurisdiction permits or requires the IFRS for SMEs to be uses by publicly accountable entities. The major objective of the financial statements of an SME is to provide information about all of the following except a. Financial position b. Performance c. Cash flows d. Management’s stewardship This qualitative characteristic requires information to be presented in a comprehensible manner to users who have reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence. a. Faithful presentation b. Relevance c. Understandability d. Reliability Information has this qualitative characteristics if it is capable of influencing the economic the economic decisions of users by helping them evaluate past, present or future events or conforming, or correcting.

a. Faithful presentation b. Relevance c. Understandability d. Reliability 15. Entities that adopt the PFRS for SMEs a. Are not required to present comprehensive income b. Are required to present profit or loss for the year only c. Are required to present performance in a single statement only d. Permitted to present performance in single financial statement or in two financial statements PROBLEM 2: MULTIPLE CHOICE – THEORY 1. According to the PFRS for SMEs, this term best describes the arithmetical difference between all items of income and expenses, including gains and losses. a. Profit or loss b. Total comprehensive income c. Other comprehensive income d. Equity 2. Assets and liabilities are initially measured at a. Historical cost b. Fair value c. Historical cost unless the PFRS for SMEs requires initial measurement at fair value. d. Fair value unless the PFRS for SMEs requires initial measurement at historical cost. 3. According to the PFRS for SMEs, investments in quoted equity instruments or those whose fair value can otherwise be measured reliably are measured at a. Fair value with changes in fair value recognized in profit or loss (FVPL) b. Fair value with changes in fair value recognized in other comprehensive income (FVOCI) c. Amortized cost d. A or b 4. According to the PFRS for SMEs, inventories are subsequently measured at a. Cost b. Fair value c. Net realizable value d. The lower cost and selling price less costs to complete and sell. 5. According to the PFRS for SMEs, property, plant and equipment are subsequently measure at a. Historical cost less accumulated depreciation b. Revalued amount less accumulated depreciation c. The lower of depreciated cost and recoverable amount d. A or b 6. According to the PFRS for SMEs, investment property is subsequently measured at

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a. Fair value b. Cost c. A or b d. Investment property classification is not permitted According to the PFRS for SMEs, most liabilities other than financial liabilities are measured at a. Amortized cost b. The best estimate of the amount that would be required to settle the obligation at the reporting date. c. Fair value with changes in fair value recognized profit or loss; recognition in other comprehensive income prohibited d. A or c Which of the following is an example of offsetting in accordance with the standard? a. Deducting allowance for inventory obsolescence in determining the carrying amount of inventory b. Deducting allowance for uncollectability in determining the carrying amount of accounts receivable c. Deducting disposal costs from the sale price of property, plant and equipment in determining the gain or loss on disposal d. Deducting disposal costs (e.g., sale commissions and delivery expense) from the sale price of inventories sold in determining the gross profit. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, a. 1 year from the reporting date b. 24 months from the reporting date c. 3 months from the reporting date d. Any of these as a policy choice When management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall a. Not prepare financial statements based on a going concern basis b. Disclose those uncertainties c. A and b d. Not disclose those uncertainties According to the PFRS for SMEs, an entity shall present a complete set of financial statements (including comparative information) a. At least annually b. At least quarterly c. At least semi-annually d. Not disclose those uncertainties When comparative amounts are reclassified, an entity shall disclose which of the following? a. The nature of the reclassification

b. The amount of each item or class of items that is reclassified c. The reason for the reclassification d. All of theses 13. The entity may omit the statement of changes in equity and, in lieu thereof, present a single statement of income and retained earnings if the only changes to equity during the periods for which financial statement are presented arise from (choose the incorrect statement) a. Profit or loss and payment of dividends b. Issuances of share capital c. Correction of prior period errors d. Changes in accounting policy 14. An SME may present only an income statement or a statement of comprehensive income in which the ‘bottom line’ is labeled ‘profit or loss’ a. If it chooses to as a matter of an accounting policy choice b. If the only changes in its equity for the period are limited to share issuances, payment of dividends and profit or loss c. Under no circumstances d. If it has no items of other comprehensive income in any of the periods for which financial statements are presented. 15. The PFRS for SMEs does not address the presentation of all of the following except a. Comparative information b. Earnings per share c. Interim financial reports d. Segment information

PROBLEM 3: MULTIPLE CHOICE – THEORY

1. Which of the following is not included in the minimum line items in the statement of financial position of an SME? a. Investment property carried at fair value through prof loss. b. Intangible assets. c. Biological assets carried at cost depreciation and impairment, less accumulated depreciation and impairment d. Goodwill

2. Which of the following is not included in the minimum line items in the statement of financial position of an SME? a. Investments in associates

b. Deferred tax liabilities c. Non-controlling interest, presented within equity separately from the equity attributable to the owners of the parent. d. Equity attributable to the owners of the parent e. Treasury shares

3. A change from the single-statement approach to the twostatement approach, or vice versa, of presenting comprehensive income is a. a change in accounting policy accounted for retrospectively b. a change in accounting policy accounted for prospectively c. a change in accounting estimate accounted for prospectively d. prohibited

4. Which of the following is not included in the other comprehensive income of an SME? a. Some gains and losses arising on translating the financial statements of a foreign operation. b. Some actuarial gains and losses. c. Gains or losses on investments in FVOCI securities. d. Some changes in fair values of hedging instruments.

5. The statement of cash flows of an SME a. provides information about the changes in cash and cash equivalents of an entity for a reporting period, showing no separate changes from operating activities, investing activities and financing activities. b. provides information about the changes in cash and cash equivalents of an entity for a reporting period, showing separately changes from operating activities, investing activities and financing activities. c. is only an optional statement d. is required only under certain circumstances

6. An SME shall present cash flows from operating activities using a. the direct method only b. the indirect method only c. either the direct method or the indirect method d. none of these

7. When presenting a statement of cash flows, cash flows arising from transactions in foreign currency shall a. be translated to the entity’s functional currency using the exchange rate at the date of the cash flow. b. be translated to the entity’s functional currency using the exchange rate at the reporting date. c. be disclosed only d. not be presented

8. When presenting a statement of cash flows, cash flows arising - from income tax shall a. be classified as investing cash flows. b. be classified as financing cash flows unless they can be specifically identified with operating and investing activities. c. be classified as operating cash flows unless they can be specifically identified with financing and investing activities. d. not be classified as either operating, investing or financing activity.

9. Which of the following may validly form part of the cost of inventories of an SME? a. Borrowing costs directly attributable to the production of inventories that are not mass produced or routinely produced. b. Administrative overheads that do not contribute to bringing the inventories to their present location and condition. c. Advertising costs needed to market the products. d. Commissions paid to brokers on the purchase of a inventories.

10. Which of the following cost formulas is not available for an SME? a. Specific identification b. First-in, first-out (FIFO) c. Weighted average cost d. Last-in, firs-out (LIFO) 11. An SME shall account for its investment in associates using the a. Cost model b. Equity method c. Fair value model

d. Any of these as an accounting policy choice

12. If the fair value of a land and/or building that would otherwise be classified as investment property cannot be measured reliably, then the asset(s) is a. nonetheless classified as investment property’ b. nonetheless classified as investment property but with appropriate disclosures in the notes c. classified as property, plant and equipment d. b or c as an accounting policy choice

13. An SME shall measure its investment property as follows:

a. b. c. d.

Initial Cost Cost Cost or Fair value Cost

Subsequent Cost or Fair value Fair value Fair value Fair value

Changes in fair values Not recognized Profit or loss Profit or loss Profit or loss or OC

14. If a reliable measurement of fair value becomes unavailable for an investment property held by an SME, the investment property is a. reclassified to Property, plant, and equipment and shall not be reclassified again as investment property. b. nonetheless continued to be classified as investment Property with appropriate disclosures in the notes c. reclassified to property, plant, and equipment until fair value becomes available again. d. none of these

15. After initial recognition, the property, plant and equipment of an SME shall be measured at a. cost less any accumulated depreciation and any accumulated impairment loss. b. revalued amount less any accumulated depreciation and any accumulated impairment loss. c. a or b d. fair value with no depreciation recognized, but changes in fair values recognized in profit or loss.

16. How do SMEs account for research and development costs?

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Research costs Expensed ' Expensed

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Expensed

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Expensed or capitalized

Development costs Expensed Expensed, although can be capitalized in certain instances Capitalized, although can be expensed in certain instances Capitalized or expensed

17. When an SME acquires an intangible asset through an exchange that lacks commercial substance a. the intangible asset acquired is measured at the fair value of the asset given up (plus cash paid / minus cash received) b. the intangible asset acquired is measured at the fair value of the asset received. c. the intangible asset acquired is measured at the carrying amount of the asset given up (plus cash paid / minus cash received). d. whichever is the most clearly determinable of the foregoing.

18. Subsequent to initial recognition, an SME shall measure intangible assets at a. cost less any accumulated amortization and any accumulated impairment losses. b. revalued amount less any accumulated amortization and any accumulated impairment losses. c. fair value through profit or loss. d. any of these as a matter of accounting policy choice.

19. How do SMEs subsequently account for intangible assets with indefinite useful life? a. Test them for impairment at least annually. b. Test them for impairment only when there is indicator for impairment. c. Amortize them over a presumed useful life of 10 years. d. Amortize them over a presumed useful life of 20 years.

20. An SME shall classify its lease transactions as a. Operating leases only b. Financing leases only

c. a or b d. neither a nor b PROBLEM 4: MULTIPLE CHOICE – THEORY 1. Which of the following entities would most likely qualify as an SME? a. An incorporated CPA review school with total liabilities of more than P3M but less than P250M b. An unlisted rural bank c. A pawnshop with total assets of P2.9M and total liabilities of P2M. d. An incorporated ‘pyramid scheme’ company with total assets of P350M 2. Rex Collide-one Toothpick, Inc. manufacturers toothpicks. Rex’s total assets and total liabilities are both below P3M. a. Rex may use the provisions of the National Internal Revenue Code together with the Bureau of Internal Revenue rulings when preparing the income statement. b. Rex may use the PFRS for SMEs if Rex chooses to c. Rex’s accountant is a topnotch CPA. Rex has no problem applying the full PFRSs. Rex is not prohibited from applying the full PFRSs. d. Rex shall use the cash basis of accounting. 3. Darrell Joe Poothick, Inc. is an unlisted entity and does not have any fiduciary obligations. Darrell has total assets and total liabilities of P350M and P250M, respectively. Which of the following statements is true? a. Darrell may use the PFRS for SMEs but Darrell is not prohibited from applying, selectively, some provisions of the full PFRSs if Darrell chooses to do so. b. Darrell may use the PFRS for SMEs but Darrell is not prohibited from applying, selectively, some provisions of the Conceptual Framework. c. If Darrell chooses to apply the PFRS for SMEs, it shall apply that standard in its entirely without reference to any of the standards comprising the full PFRS and the Conceptual Framework except in certain instances mentioned under the PFRS for SMEs. d. Darrell cannot qualify as an SME because Darrell is big and dark. 4. Mark Expensive Peanuts, Inc. uses the PFRS for SMEs. In 20x1, current year, Mark’s total assets increases from P350M to P450M. The increase is judged to be continuing. As an accountant, what advice can you give to Mark? a. Mark should transition to the full PFRS in its 20x1 financial statement. b. Mark should transition to the full PFRS in its 20x2 financial statements. c. Mark should do nothing. d. Mark should put more garlic in his peanuts. 5. Raymund Excala, Inc. is the owner of a beauty parlor franchise. Raymund appropriately uses the PFRS for SMEs. In the previous year and current year, Raymund’s total assets and total liabilities have increased beyond the ceiling of the size criteria for an SME. As an accountant, what advice can you give to Raymund?

a. Raymund should change its current financial reporting framework if the increase is 10% or more. b. Raymund should change its current financial reporting framework if the increase is 20% or more. c. Raymund should change its current financial reporting framework if the increase is considered continuing and is 20% or more. d. Raymund should consider including hair spa in its services. 6. SMEs classify financial instruments into a. Fair value and amortized cost b. Basic and non-basic c. Regular and special d. Simple and complicated 7. Basic financial instruments are subsequently measured at a. Amortized cost b. Fair value through profit or loss c. Fair value through other comprehensive income d. Choice (a) except for those that are publicly traded or whose fair value can otherwise be measured reliably without undue cost or effort which are measured using choice (b). 8. Non-basic financial instruments are subsequently measured a a. Amortized cost b. Fair value through profit or loss c. Fair value through other comprehensive income d. Choice (b) ex...