ABO Royce Stephen CFAS Activities Answers PDF

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Name: Abo, Royce Stephen D. Section: Sec 9 CFAS ACTIVITY NOTE: Sir I Bold all of my answers. PROBLEM 1: TRUE OR FALSE TRUE 1. All events and transactions of an entity are recognized the books of accounts. FALSE 2. The accounting process of assigning. numbers, commonly in monetary terms, to the econo...

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Name: Abo, Royce Stephen D. Section: Sec 9 CFAS ACTIVITY NOTE: Sir I Bold all of my answers. PROBLEM 1: TRUE OR FALSE TRUE 1. All events and transactions of an entity are recognized the books of accounts. FALSE 2. The accounting process of assigning. numbers, commonly in monetary terms, to the economic transactions and events is referred to as classifying. TRUE 3. The basic purpose of accounting is to provide information about economic activities intended to be useful in making economic decisions. TRUE 4. Financial accounting is the branch of accounting that focuses on general purpose reports of financial position and operating results known as the financial statements. TRUE 5. General purpose financial statements are those statements that cater to the common and specific needs of a wide range of external users. TRUE 6. The financial statements are the only source of information when making economic decisions. TRUE 7. All information presented in the financial statements are sourced from the accounting records of the entity. TRUE 8. Entity A's accounting period starts on July 1 and ends on June 30 of the following year. Entity A uses a fiscal year period. FALSE 9. Once promulgated, accounting standards are never changed. FALSE 10. The entity's management is responsible for the selection of appropriate accounting policies, not the accountant.

PROBLEM 2: MULTIPLE CHOICE

1. The concept of recognition is applied in which of the following instances? a. An entity includes the effects of an event in the financial statements through a journal entry. b. An entity removes the effects of an event from the financial statements through a journal entry. c. An entity discloses only an event in the notes, rather than including the effects of the event in the monetary totals in the financial statements.

d. An entity records an event through a memorandum entry.

2. Which of the following events is not considered an exchange or reciprocal transfer? a. purchase of inventory on account b. lending money to another entity c. payment of a loan payable d. payment of taxes

3. Which of the following events is considered a nonreciprocal transfer? a. sale of an asset b. donation

c. loss from a calamity

d. production of finished goods

4. To be useful, accounting information should be presented using a. monetary amounts. c. historical costs. b. a common denominator.

d. fair values.

5. Which of the following violates the historical cost concept? a. Recording purchases of merchandise inventory at the purchase price. b. Recording a building at the total construction costs. c. Measuring inventories at net realizable value. d. Recording an equipment acquired in an installment purchase at the cash price equivalent.

6. Entity A values its fixed assets at their historical costs and does not restate them for changes in the purchasing power of the Philippine pesos due to inflation. Entity A is applying which of the following accounting concepts? a. prudence

c. stable monetary unit

b. accrual basis

d. time period

7. Entity A engages in importing and exporting activities. At the end of the period, Entity A has assets and liabilities denominated in foreign currencies. When preparing its financial statements, Entity A translates these assets and liabilities to pesos. Entity A is most likely' to be applying which of the following accounting concepts? a.

double entry c. stable monetary unit

b.

accrual basis d. time period

8. Preparing financial statements at least annually is application of which of the following accounting concepts? a.

historical cost c. stable monetary unit

b.

accrual basis d. time period

9. Entity A acquires merchandise inventory. Entity A initially records the acquisition cost of the inventory as asset rather than an outright expense. When the inventory is subsequently sold, Entity A recognizes the cost of the inventory sold as expense, in the same period the sale revenue is recognized. This is an application of which of the following accounting concepts? a.

stable monetary unit c. matching

b.

materiality

d. proprietary

10. On Day 1, a customer buys goods from Entity A and promises to pay the sale price on Day 30. Entity A recognizes sales revenue on Day 1 rather than on Day 30. This is an application of which of the following accounting concepts? a.

prudence

b.

accrual basis

c. consistency d. materiality

PROBLEM 3: MULTIPLE CHOICE

1. All the following are considered internal events, except a.

transfer of goods from work-in-process to finished goods inventory

b.

losses from flood, earthquake, fire and other calamities

c.

transformation of biological assets from immature to mature

d.

vandalism committed by the entity's employees

2. Which of the following is considered an internal user of Entity A's financial reports? a. Entity B, a bank, requires Entity A to submit audited financial statements in conjunction to a loan being applied for by Entity A. b. Mr. I is deciding whether to invest in Entity A. Mr. I uses Entity A's financial statements in making its investment decision. c. Ms. S, a shareholder of Entity A, is deciding whether to hold or sell her shareholdings in Entity A. Ms. S uses Entity A's financial statemenTSTnriakingits "hold or sell" decision. d. Mr. X, a member of Entity A's board of directors, uses financial reports to make decisions regarding the financial and operational affairs of Entity A.

3. When resolving accounting problems not specifically addressed by current standards, an entity shall be guided by the hierarchy of financial reporting standards. The correct sequence of the hierarchy of financial reporting standards in the Philippines is I.

PASs, PFRSs and Interpretations

H. Conceptual Framework. III.

Judgment

IV.

Pronouncement of other standard-setting bodies

a. I, HI, II and IV

c. I, IV, 11 and 111

b. I, H, IV and III c. I, IV, 11 and 111 d. I, H, III and IV

4. The proper application of accounting principle is most dependent upon the a. management b. accountant c. auditor d. chief executive officer

5. Which of the following statements is correct?

a.

Accounting provides quantitative information only.

b. Accounting is considered an art because it requires the use of creative skills and judgment. c.

The only acceptable measurement basis in accounting is historical cost.

d.

Qualitative information can be found only in the notes to the financial statements.

6. Which of the following statements is correct? a.

All quantitative information are also financial in nature.

b. The accounting process of assigning peso amounts to economic transactions and events is measuring. c. The economic activity that involves using current inputs to increase the stock of resources available for output is called savings. d. The economic activity of using the final output of the production process is called income distribution.

7. Which of the following statements is incorrect regarding accounting concepts? a. Under the Accrual Basis of accounting, revenues are recognized when earned and expenses are recognized when incurred, not when cash is received and disbursed. b. Under the Going concern concept, the business entity is assumed to carry on its operations for an indefinite period of time. c.

Under the Business entity/ Separate entity/ Entity/

Accounting entity Concept, the business is treated separately from its owners. d.

Under the Time Period/ Periodicity/ Accounting Period

concept, the life of the business is divided into series of reporting periods. e.

Under the Cost-benefit concept, the cost of processing and

communicating information should exceed the benefits derived from it.

8. Which of the following statements is incorrect? a. Financial reporting standards may at times be influenced by legal, political, business and social environments. b.

General-purpose financial statements must be prepared by a Certified Public Accountant.

c. General purpose financial statements are prepared primarily for the use of external users. d.

The PFRSs are issued by the Financial Reporting Standards Council.

9. Mr. John Doe, CPA, is a professor in a university where he teaches mainly home economics, music and physical education. Those subjects require that the teacher must be awesome. Mr. Doe is also frequently invited as a judge in beauty pageants and singing contests and as a referee in mixed martial arts competitions. Mr. Doe is considered to be practicing accountancy in which of the following sectors? a.

Academe

c. Commerce and industry

b.

Public accounting

d. None of these

10. Changes to reporting standards response to a.

government regulations.

b.

users' needs.

c.

global modernization

d.

all of these

PROBLEM 4: FOR CLASSROOM DISCUSSION 1. Entity A buys bananas and converts them into banana chips. The conversion of bananas into banana chips is a (an) a.

non-accountable event .

c. non-reciprocal transfer.

b.

external event. d. internal event.

Valuation by fact or opinion 2. Which of the following is considered valued by fact rather than by opinion? a.

Depreciation d. Retained earnings

b.

Cost of goods sold

c. Discount on share capital

Measurement Bases 3. Which of the following is not one of the several measurement bases used in accounting? a.

historical cost c. present value

b.

fair value

d. all of these are used

Accounting Concept 4. Entity A is owned by Mr. X and Ms. Y. Which of the following transactions does not violate the separate entity concept and therefore is appropriately recorded in the accounting records of Entity A? a.

Mr. X purchases groceries for his home consumption.

b.

Mr. X gives Ms. Y chocolate and flowers on Valentine's Day.

c.

Ms. Y provides capital to Entity A.

d.

Ms. Y provides capital to Entity B, another business entity

5. Mr. A is assessing the ability of Entity A to generate future cash and cash equivalents. In making the assessment, Mr. A uses not only the statement of cash flows but also the other components of a complete set of financial statements. This is because of which of the following concepts? a.

Going concern

b.

Time period

c. Intercalation

d. Articulation

6. Entity A acquires a stapler. Instead of recognizing the cost of the stapler as an asset to be subsequently depreciated, Entity A immediately charges it as expense. This is an application of • which of the following concepts? a.

Prudence

c. Cost-benefit

b.

Materiality

d. b and c

Common branches of accounting 7. What type of users' needs is catered by general purpose financial statements? a.

common needs

c. a and b

b.

specific needs d. neither a nor b

Four sectors in the practice of accountancy 8. Which of the following is not among the Four Sectors in the practice of accountancy as enumerated in R.A. 9298 also known as the "Philippine Accountancy Act of 2004"? a.

Practice in Commerce and Industry

b.

Practice in the Government

c.

Practice in Education/Academe

d.

Practice of Private Accountancy

Accounting standards

9. The Philippine Financial Reporting Standards (PFRSs) comprise: I.

Philippine Financial Reporting Standards

II.

Philippine Accounting Standards

III.

Interpretations

IV.

Accounting Practice Statements and Implementation Guidance

a.

I, II and III

b.

I, II, III and IV

c. I and II d. I and HI

PROBLEMS PROBLEM 1: TRUE OR FALSE TRUE 1. All changes in an entity's economic resources and claims to those resources result from the entity's financial performance. TRUE 2. The qualitative characteristics of useful information apply only to the financial information provided in the financial statements. TRUE 3. According to IFRS® Practice Statement 2 Making Materiality Judgments, cost is an important consideration when making materiality judgments. TRUE 4. When making materiality judgments, a quantitative assessment alone is not always sufficient to conclude that an item of information is not material. FALSE 5. Materiality judgments apply only to items that are recognized but not to those that are unrecognized. FALSE 6. The more significant the qualitative factors are, the lower the quantitative thresholds will be. Thus, an item with a zero amount can be material in light of qualitative thresholds. FALSE 7. When making materiality judgments, an entity should judge an item's materiality only on its own and not in combination with other information in the complete set of financial statements. FALSE 8. The Conceptual Framework and the Standards specify a uniform quantitative threshold for materiality. TRUE 9.To meet the objectives of general-purpose financial reporting, a Standard sometimes contains requirements that depart from the Conceptual Framework. TRUE 10.The Conceptual Framework is concerned with the provision of financial information to both external users and-internal users.

PROBLEM 2: TRUE OR FALSE FALSE 1. The Conceptual Framework may be revised from time to time Revisions in the Conceptual Framework automatically result to changes in the Standards. TRUE 2. According to the revised Conceptual Framework, the asset is the right, while the liability is the obligation, rather than the ultimate inflows or outflow; of economic benefits resulting from the asset or liability. TRUE 3. Legal enforceability of a right, for example ownership, necessary for control over an economic resource to exist. TRUE 4. According to the revised Conceptual Framework, an asset can exist even if the probability that it will provide inflows of future economic benefits is low, and even if the asset is subject to a high measurement uncertainty. FALSE 5.According to the revised Conceptual Framework, what the entity controls is the right, and not the ultimate inflows of future economic benefits that the economic resource may produce. TRUE 6.The Conceptual Framework defines income and expenses in terms of changes in assets and liabilities. TRUE 7. Not all items that meet the definition of a financial statement element are recognized; they are recognized only if recognizing them will also result in relevant and faithfully represented information. TRUE 8. Measuring an asset at historical cost will always' result in the same carrying amount of the asset from period to period. TRUE 9. According to the Conceptual Framework, amortized cost measurement relates to historical cost, rather than current value. FALSE 10. Although the use of a single measurement basis improves the understandability of the financial statements, this may not always lead to useful information. Thus, the Standards require different measurement bases for different assets, liabilities, income and expenses.

PROBLEM 3: MULTIPLE CHOICE

1. According to the Conceptual Framework, these are the qualitative characteristics that make information useful to users. a.

Fundamental c. Relevance

b.

Enhancing

d. Comparability

2. Information that is capable of making a difference in the decisions made by users has this qualitative characteristic. a.

Relevance

c. Timeliness

b.

Faithful representation

d. Verifiability

3. When making materiality judgments, the overriding consideration is a.

the ability of the item being judged to influence users' decisions.

b.

the size of the impact of the item being judged.

c.

the characteristics of the item being judged.

d.

c and d

4. This qualitative characteristic is unique in the sense that it necessarily requires at least two items. a.

Verifiability c. Timeliness

b.

Faithful representation

d. Comparability

5. Which of the following enhances the comparability of information? a.

Making unlike things look alike.

b.

Making like things look different.

c.

Using different methods to account for similar transactions from period to period.

d.

Consistent application of accounting policies from period to period.

6. Information has this qualitative characteristic if different, knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation. a.

Relevance

c. Verifiability

b.

Faithful representation

d. Comparability

7. The Conceptual Framework uses the term "claims" against the reporting entity to refer to a.

expenses.

b.

liabilities.

8. Entity A is assessing whether an item meets the definition of a financial statement element. Entity A considers the transaction's substance and economic reality rather than merely its legal form. Entity A is applying which of the following accounting concepts? a.

Substance over form

b.

Form over substance

9. Which of the following is not one of the aspects in the revised definition of an asset? a.

Right

b.

Potential to produce economic benefits

c.

Probability of the expected inflows of economic benefits from the asset

d.

Control

10. The new definition of an asset (a liability) focuses on the asset (liability) being a. a present right (obligation) that has resulted from past events and has the potential to produce (cause a transfer of) economic benefits. b. the expected inflows (outflows) of economic benefits that are both probable and can be measured reliably.

c.

a physical object (a duty to pay cash or other resources).

d.

All of these.

11. Which of the following is not an indication of an economic resource's potential to produce economic benefits?

a. The economic resource can be used in combination with other resources to produce goods for sale. b.

The economic resource can be used to pay liabilities.

c.

The economic resource can be distributed to the owners.

d.

The resource has no use in the entity's operations and has no resale value.

12.

Which of the following does not meet the definition of an asset?

a. Equipment that the entity intends, and is very certain, to acquire in the future. b. Inventories purchased and received ...