65 - Government Accounting PDF

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65 of the following statements is correct?If it is not clear whether an expenditure is a research or a development cost, it is treated as development cost. The development costs of an internally generate intangible asset may be capitalized if certain conditions are met. A government entity does not ...

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65.Which of the following statements is correct? If it is not clear whether an expenditure is a research or a development cost, it is treated as development cost. The development costs of an internally generate intangible asset may be capitalized if certain conditions are met. A government entity does not amortize intangible assets. Government entities amortize all of their intangible assets over a period of 2 to 10 years, unless a more appropriate estimate of useful life is available. Government entities normally assign their intangible assets a residual value of 5% of cost

22.Entity A, a government entity, records purchases of items of inventory under the “Purchases” account and freight-in under the “Freight-in” account. Which of the following statements is correct? * Entity A is compliant with the requirements of GAM for NGAs, but needs to make a note disclosure of the accounting policy choice. Entity A uses the periodic inventory system and this is okay. There are no other requirements from Entity A. Entity A is not compliant with the requirements of GAM for NGAs. Entity A is not compliant with the requirements of GAM for NGAs. This can be rectified by note disclosure.

54.On January 2, 20X5, Entity A purchased a franchise with a useful life of ten years for ₱50,000. An additional franchise fee of 3% of franchise operation revenues must be paid each year to the franchisor. Revenues from franchise operations amounted to ₱400,000 during 20X5. In its December 31, 20X5, statement of financial position, what amount should Entity A report as an intangible asset-franchise? 33,000 43,800 45,000 50,000 Option 5

56.Which of the following statement is incorrect? * Government entities and business entities use the term “obligation” or the phrase “incurrence of obligation” similarly. Option 5 The various registries maintained by government entities primarily serve as internal control for controlling and monitoring the conformance of actual results with the approved budget.

Technically, only the Journals and Ledgers are considered accounting records; the Registries are budget records. Separate accounting records and budget registries are maintained for each fund cluster.

1.According to P.D. No. 1445, government personnel entrusted with the custody of government resources (choose the incorrect statement) * are directly responsible to the public for the efficient and effective utilization therefor. are directly responsible to the head of the agency for the efficient and effective utilization therefor. are responsible for the safekeeping therefor in accordance with the law. must be properly bonded.

16.These refer to fees paid for the use of the entity’s assets such as trademarks, patents, software, and copyrights. * Option 5 Any of these Lease expense Royalties Interest

28.Entity A exchanges an item of PPE with Entity B. Assuming the exchange lacks commercial substance, how should Entity A measure the equipment received from the exchange? * at at at at

the the the the

carrying amount of the asset given up, plus cash paid or minus cash received fair value of the asset received fair value of the asset given up carrying amount of the asset given up

20.This consolidates all issued Requisition and Issue Slips (RIS) for inventories and is used in updating both the Stock Card and the Stock Ledger Card * Report Report Report Report

of Accountability for Accountable Forms on Inventory Subsidiary Ledgers (RISL) of Supplies and Materials Issued (RSMI) on the Physical Count of Inventories

52.Entity A started construction of a new office building on January 1, 20X4, and moved into the finished building on July 1, 20X5. Of the building's ₱2,500,000 total cost, ₱2,000,000 was incurred in 20X4 evenly throughout

the year. Entity A 's incremental borrowing rate was 12% throughout 20X4, and the total amount of interest incurred by Entity A during 20X4 was ₱102,000. What amount should Entity A report as capitalized interest at December 31, 20X4? * 120,000 102,000 240,000 150,000 Option 5

18.Which of the following items are classified by a government entity as Inventory Held for Consumption? * Minor tools and equipment costing less than ₱15,000. Office supplies and similar materials. Raw materials that are consumed in the production process. Rice and other welfare goods held for distribution

34.Which of the following statements is incorrect regarding investment property? * An investment property generates, or has the ability to generate, separately identifiable cash flows from the other assets of the entity. During the period, Entity A, a government entity, reclassifies a building that was previously used as office space to investment property. On the date of transfer, the building has a carrying amount of ₱1M and a fair value of ₱1.2M. Entity A will recognize a gain on transfer of ₱.2M. Transfers to or from investment property shall be made when, and only when, there is a change in use. When a government entity applies the cost model to account for its investment property subsequent to initial recognition, changes in fair values may affect the entity’s assessment of the property’s impairment.

12.The issuer of a financial instrument shall classify the instrument, or its component parts, on initial recognition as a * equity instrument any of these financial liability Option 5 financial asset

46.The third step in the Budget Preparation phase of the Budget Cycle is *

President’s Enactment Budget Call Budget Hearings President’s Budget

10.Entity A, a government entity, acquires investment in bonds for ₱100,000, equal to face amount, and incurs transaction costs of ₱10,000. At year-end, the fair value of the investment is ₱120,000. If the investment is classified under the held to maturity category, which of the following carrying amounts at the end of Year 1 would most likely not be questioned by the COA auditor? * 120,000 Option 5 100,000 Answer cannot be determined due to insufficient data, like nominal interest rate, effective interest rate, maturity, contractual terms, present value factor, amortization table, name of auditor, etc. 108,382

42.The receipt of a disbursement authority in the form of Non-Cash Availment Authority (NCAA) is debited to which of the following accounts? * Cash-Modified Disbursement System (MDS), Regular Cash-Constructive Income Remittance Accounts Payable Option 5 Subsidy from National Government

48.When does a government entity recognize dividend income? * on a time proportion basis that takes into account the effective yield on the asset when the significant risks and rewards are transferred when the entity’s right to receive payment is established when earned in accordance with the substance of the relevant agreement

23.A government entity’s biological asset has fair values less costs to sell of ₱100,000 and ₱120,000 at the beginning and end of the period, respectively. The year-end adjusting entry will most likely include * a a a a

credit to unrealized gain of ₱20,000 to be recognized in surplus or deficit credit to unrealized gain of ₱20,000 to be recognized directly in equity debit to unrealized gain of ₱20,000 to be recognized in profit or loss credit to unrealized gain of ₱20,000 to be recognized in profit or loss

9.Which of the following is an indication of impairment of investment property from internal sources? * Significant changes with an adverse effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic, or legal environment in which the entity operates, or in the market to which an asset is dedicated. Option 5 During the period, an asset’s market value has declined significantly more than would be expected as a result of the passage of time or normal use. Market interest rates or other market rates of return on investments have increased during the period, and those increases are likely to affect the discount rate used in calculating an asset’s value in use and decrease the asset’s recoverable amount materially. Significant changes with an adverse effect on the entity have taken place during the period, or are expected to take place in the near future, in the extent to which, or the manner in which, an asset is used or is expected to be used.

11.If the unadjusted balance of cash per bank statement is less than the adjusted balance and there no other reconciling items or errors, the difference is most likely caused by * Debit memo Outstanding checks Credit memo Option 5 Deposits in transit

41.No journal entry is made for a disbursement under this mode of disbursement. * eMDS Option 5 CPC None of these LDDAP-ADA

55.Which of the following statement is incorrect? * Both the ORS and RAOD are updated each time an obligation is incurred, a payable is recorded for the obligation incurred, and disbursements are made to settle the recorded payables. Option 6 The GAM for NGAs requires the Collecting Officer to issue an official receipt to acknowledge the receipt of the Notice of Cash Allocation.

A check disbursement is normally recorded as a credit to the “Cash-Modified Disbursement System (MDS), Regular” account. The entry to record the reversion of unused NCA at the end of the period is the exact opposite of the entry used to record the receipt of NCA. At the end of each year, an adjustment is made to revert any unused NCA of a government entity.

40.It is the expenditure authority derived from appropriation laws, government ordinances, and other decisions related to the anticipated revenue or receipts for the budgetary period. * Approved Budget General Appropriations Bill Allotment Notice of Cash Allocation

43.Which of the following transactions is not recorded through a credit to the “Cash-Modified Disbursement System (MDS), Regular” account? * Granting of cash advance for payroll. Constructive remittance of taxes withheld to the BIR. Reversion of unused NCA at the end of the period. Payment of accounts payable wherein the tax portion is withheld.

29.Entity A receives a donation of scientific equipment from an international body. If no condition is attached to the donation, how should entity A account for the donation? * Recognize it immediately as income measured at the equipment’s fair value at the acquisition date. Initially recognized it as a liability measured at the equipment’s fair value at the acquisition date. Recognize it as income when the expenses intended to be compensated by the donation are incurred. b and c.

50.On January 1, 20x1, Entity A acquires 5-year, 5%, ₱1,000,000 face amount bonds for ₱957,876 and classifies them as available for sale financial assets. The issuer pays annual interest every December 31. The effective interest rate is 6%. On December 31, 20x1, the bonds have a fair value of ₱980,000. Q.How much is the carrying amount of the bonds on Entity A’s December 31, 20x1 statement of financial position? *

973,270 980,000 965,349 957,867

37.Which of the following statements is incorrect? * A government entity acquires an intangible asset with indefinite useful life for ₱100. Assuming the entity uses the maximum amortization period for intangible assets under the GAM for NGAs, the appropriate annual amortization expense on the intangible asset is ₱0. The amortization of an intangible asset is credited directly to the intangible asset account, according to the GAM for NGAs. For subsequent measurement, government entities classify intangible assets into those with finite and indefinite useful lives, similar to business entities. Subsequent expenditures on recognized intangible assets are generally expensed unless it is clear that the expenditures meet the recognition criteria for intangible assets.

31.Which of the following statements is correct? * The purchases account is used in a periodic inventory system but not in a perpetual inventory system. The classification of inventories as held for distribution at no charge or at a minimal charge is not uncommon to business entities. Option 5 Government entities sometimes record the acquisition of inventories under the purchases account. Raw materials and work-in-process inventories are applicable only for business entities.

63.The receipt of an allotment is recorded by a government entity in the * ORS a and c RAPAL RAOD

35.Which of the following is included in the initial cost of an item of PPE? * Refundable purchase taxes Option 5 Cash discounts not taken Nonrefundable purchase taxes Cash discounts taken

2.The coverage of the GAM for NGAs includes all of the following, except: * basic concepts used in preparing other financial reports as may be required by laws. Option 5

basic concepts used in auditing the accounts and financial reports of government entities. basic concepts used in reporting of budgetary information. basic concepts used in preparing general purpose financial statements in accordance with the PPSAS.

45.All of the above involves the physical transfer of cash except * Option 5 Remittance Remittance Remittance Remittance

of of of of

collections of revenue to the National Treasury excess cash advance by an officer taxes through the Tax Remittance Advice employee contributions to GSIS, Pag-IBIG and PhilHealth

26.Which of the following may qualify as investment property? * Building leased from another entity under an operating lease and is leased out to various tenants under sub-operating leases. An agricultural land purchased for appreciation purposes Equipment purchased with an indeterminate purpose Machineries that are held for lease

25.Which of the following statements is correct regarding investment properties? * A commencement of owner-occupation is a change in use that triggers a transfer from PPE to investment property classification. A decision to sell an investment property is considered a change in use under the GAM for NGAs. A building being rented out to the entity’s employees who are paying rentals at market rates is not an investment property. All assets classified as investment property shall be depreciated.

53.Which of the following statements is correct? * Entity A acquires equipment from a supplier, on account. A lender settles the account of Entity A by directly paying the supplier the proceeds of a loan payable that is recorded in the BTr’s books. This transaction is called Cash Disbursement Ceiling (CDC). All disbursements shall be made through Disbursement Vouchers (DVs) or Payroll which are approved by the Head of the Requisitioning Unit. Option 6 The Non-Cash Availment Authority (NCAA) is a disbursement authority issued to government agencies with foreign service posts. No additional cash advance shall be given to any official or employee unless the previous cash advance given to him is first liquidated. Government entities are not allowed by law to make purchases using credit card.

59.Which of the following statements is incorrect? *

The main source of revenue for the government is taxes. Taxes are compulsory payments, imposed on persons, properties or activities, intended to provide revenue to the government. Taxes include fees, fines and penalties. According to the GAM for NGAs, the receipt of concessionary loans by government entities may give rise to revenue recognition. The constructive remittance of taxes withheld through the TRA gives rise to the recognition of revenue.

4.Under responsibility accounting, non-controllable costs are * costs incurred indirectly and allocated to a responsibility level. ignored when general purpose financial statements are prepared. costs that are uncertain of timing and amount. all of these Option 5

62.Which of the following is recorded in the Obligation Request and Status (ORS)? * Receipt of Notice of Cash Allocation from the DBM Receipt of notice of appropriation Receipt of allotment from the DBM Entering into employment contracts with employees Option 5

24Entity A acquires a biological asset for ₱100, equal to fair value, and incurs transaction cost of ₱10 on the purchase. The costs to sell at the acquisition date are ₱20. Which of the following statements is correct? * Entity A recognizes Entity A recognizes Entity A recognizes Entity A recognizes

a loss of ₱30 on the initial recognition of the purchased asset. a gain of ₱20 on the initial recognition of the purchased ass the purchased asset at ₱90. the purchased asset at ₱100.

3.It refers to the authority issued by an agency’s Central Office to its regional and operating units to cover the latter’s cash requirements. * Notice of Transfer of Allocation Option 5 Cash Disbursement Ceiling Notice of Cash Allocation Non-Cash Availment Authority

44.This account is credited when government entities remit collections to the National Treasury. *

Cash-Modified Disbursement System (MDS), Regular Cash-Treasury/Agency Deposit, Regular Cash-Collecting Officers Cash-Tax Remittance Advice

47.Which of the following is not one of the objects of expenditures under the GAM for NGAs? * PS All of these are objects of expenditures under the GAM for NGAs. MOOE CF Option 5

32.Select the correct statement. * Investment properties that are to be disposed of without further development are treated as investment property until they are derecognized. Investment properties being redeveloped as investment properties on behalf of third parties are investment properties. All investment properties held for capital appreciation will be classified as held for sale in the long run. Entity A’s primary line of business is leasing. Entity A shall treat all assets used in providing lease services as investment propert

39.According to the GAM for NGAs, deliberately overstating liabilities is * prohibited based on the concept of faithful representation. prohibited based on the concepts of relevance and materiality not prohibited under the prudence concept allowed because only the overstatement of assets is not acceptable

38.The GAM for NGAs is promulgated by the COA under the authority conferred to it by the * Option 5 Philippine Accounting Standards Philippine Accountancy Act State Audit Code (P.D. No. 1445) Philippine Constitution

64.The entry to record the receipt of Notice of Cash Allocation (NCA) by a government entity is: * No journal entry. The event is recorded only in the Registries. (Debit) Cash-Collecting Officer; (Credit) Subsidy from National Government

(Debit) Cash-Modified Disbursement System (MDS), Regular; (Credit) Subsidy from National Government (Debit) Cash-Modified Disbursement System (MDS), Regular; (Credit) Accumulated Surplus (Deficit)

51.Entity A purchased a machine costing ₱125,000 for its manufacturing operations and paid shipping costs of ₱20,000. Entity A spent an additional ₱10,000 testing and preparing the machine for use. What amount should Entity A record as the cost of the machine? * 155,000 145,000 135,000 125,000

33.Select the incorrect statement regarding impairments of investment properties. * Option 5 Impairments of investment properties of government entities are recognized in surplus or deficit. Impairment losses on investment properties measured under the cost model are never reversed. Compensation from third parties for investment property that was impaired or lost shall be recognized in surplus or deficit when the compensation becomes receivable and not offset with the amount of loss. Investment properties are subject to impairment.

61.Which of the following statements is correct? * The only valid modes of disbursement for a government entity are through cash or check. Under the Advice to Debit Account (ADA) mode of disbursement, payments from a government entity are directly credited to the bank acc...