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In presenting a statement of financial position, an entity a. Must make the current and noncurrent presentation. b. Must present assets and liabilities in order of liquidity. c. Must choose either the current and noncurrent or the liquidity presentation, meaning free choice of presentation. d. Must ...

Description

1. In presenting a statement of financial position, an entity

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a. Must make the current and noncurrent presentation. b. Must present assets and liabilities in order of liquidity. c. Must choose either the current and noncurrent or the liquidity presentation, meaning free choice of presentation. d. Must make the current and noncurrent presentation, except when a presentation based on liquidity provides information that is reliable and more relevant. An entity has loan due for repayment in six months’ time but the entity has the option to refinance for repayment two years later. The entity plans to refinance this loan. In which section of the statement of financial position should this loan be presented? a. Current liabilities b. Current assets c. Noncurrent liabilities d. Noncurrent assets When classifying asset as current and noncurrent for reporting purposes a. The amounts at which current assets are carried and reported must reflect realizable cash value. b. Prepayments for items such as insurance or rent are included in other assets rather than as current assets. c. The time period by which current assets are distinguished from noncurrent assets is determined by the seasonal nature of the business. d. Assets are classified as current if these are reasonably expected to be realized in cash or consumed during the normal operating cycle. An entity records all sales using the installment method of accounting. Installment sales contracts call for 36 equal monthly cash payments. The amount of deferred gross profit relating to collections 12 months beyond the reporting period shall be reported in the a. Current liability section as a deferred revenue b. Noncurrent liability section as a deferred revenue c. current asset section as a contra account d. Noncurrent asset section as a contra account The term “deficit” refers to a. An excess of current assets over current liabilities b. An excess of current liabilities over current assets c. A debit balance in retained earnings d. A prior period error Which of the following characteristics may result in the classification of a liability as current? a. Short-term obligation refinanced with long-term debt at the end of reporting period b. Debt to be liquidated from fund that has been accumulated and reported as noncurrent asset c. Violation of provisions of a debt agreement

d. Obligation for advance collection that involves long-term determent of the delivery of good 7. Which of the following accounting bases may be used to prepare financial statements in conformity with a comprehensive basis of accounting other than generally accepted accounting principles? a. Income tax basis of accounting b. Cash receipts and disbursements basis of accounting c. Income tax basis and cash receipts and disbursements basis of accounting d. Neither income tax basis nor cash receipts and disbursement basis of accounting 8. Total comprehensive income for the period is presented a. Showing separately the total amount attribute to owners of the parent and the noncontrolling interest. b. Showing separately an analysis of expenses by function. c. Showing separately an analysis of expenses by nature. d. Showing separately profit or loss and the total of other comprehensive income. 9. Separate line items in an analysis of expenses by function include a. Purchases, transport costs, employee benefits, depreciation, extraordinary items. b. Purchases, distribution costs, administrative costs, employee benefits, depreciation, taxes. c. Depreciation, Purchases, transport costs, employee benefits and advertising costs. d. Cost of sales, administrative and distribution costs. 10. What is the purpose of reporting comprehensive income? a. To report transactions with owners. b. To report a measure of overall entity performance. c. To replace net income with a better measure. d. To combine income from continuing operations with income from discontinued operations. 11. Which of the following changes during a period is not a component of other comprehensive income? a. Remeasurement of defined benefit plan b. Treasury share, at cost c. Foreign currency translation adjustment d. Unrealized gain on equity instrument measured at fair value through other comprehensive income 12. Accumulated other comprehensive income should be reported as component of a. Retained earnings b. Share premium c. Retained earnings and share premium d. Neither retained earnings nor share premium 13. Which of the following would represent the least likely use of an income statement?

a. Use by customers to determine an entity’s ability to provide needed goods and services. b. Use by labor unions to examine earnings closely as a basis for salary discussions. c. Use by government agencies to formulate tax and economic policy. d. Use by investors interested in the financial position of the entity. 14. The income statement would help in which of the following? a. Evaluate liquidity b. Evaluate solvency c. Estimate amount, timing and uncertainly of future cash flows d. Estimate future financial flexibility 15. A transaction that is material in amount, unusual in nature and infrequent in occurrence shall be presented separately as a. Component of income from continuing operations, but not net of applicable income tax b. Component of income from continuing operations, net of applicable income tax c. Component of income from discontinued operation, net of applicable income tax. d. Prior period error, net of applicable income tax. 16. Items of dissimilar nature or function a. b. c. d.

Must always be presented separately. Must not be presented separately. Must be presented separately in financial statements if these items are material. Must be presented separately in financial statements even if these items are immaterial.

17. Materiality depends on a. The nature of the omission or misstatement. b. The absolute size of the omission or misstatement. c. The relative size and nature of the omission or misstatement judged in the surrounding circumstances. d. The judgement of management. 18. An entity must disclose comparative information for a. The previous comparable period for all amounts reported. b. The previous comparable period for all amounts reported and for all narrative and descriptive information. c. The previous comparable period for all amounts reported and for all narrative and descriptive information when it is relevant to an understanding of the financial statements of the current period.

d. The previous two comparable periods for all amounts reported. 19. When the classification of items in the financial statements is changed, the entity a. Must not reclassify the comparative amounts. b. Can choose whether to reclassify the comparative amounts. c. Must reclassify the comparative amounts, unless it is impracticable to do so. d. Must reclassify the current year amounts only. 20. An entity shall present a. The statement of cash flows more prominently than the other statements. b. The statement of financial position more prominently than the other statements. c. The statement of comprehensive income more prominently than the other statements. d. Each financial statement with equal prominence. 21. In order for a noncurrent asset to be classified as held for sale, the sale must be highly probable. What is the meaning of highly probable? a. The future sale is likely to occur. b. The future sale is more likely than not to occur. c. The sale is certain. d. The probability is higher than more likely than not. 22. How should the assets and liabilities of a disposal group classified as held for sale be reported in the statement of financial position? a. The assets and liabilities shall be offset and presented as a single amount? b. The assets of the disposal group shall be reported separately from other assets and the liabilities of the disposal group shall be reported separately from other liabilities. c. The assets and liabilities shall be presented as a single amount and as a deduction from equity d. There should be no separate disclosure of assets and liabilities that form part of a disposal group. 23. An entity acquired a subsidiary exclusively with a view to selling it. The subsidiary met the criteria to be classified as held for sale. At the end of reporting period, the subsidiary has not yet been sold and six months have passed since the acquisition. How will the subsidiary be measured in the statement of financial position at the date of the first financial statements after acquisition? a. At fair value b. At the lower of cost and fair value less cost of disposal c. At carrying amount d. In accordance with applicable PFRS 24. Which of the following statements in relation to an asset classified as held for sale is true?

I.

An asset that meets the criteria for classification as held for sale after the end of the reporting period but before the authorization of the financial statements shall be measured at the lower of carrying amount and fair value less cost of disposal.

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To be classified as an asset held for sale, the sale must be expected to be completed within twelve months from the end of the financial year.

a. b. c. d.

I only II only Both I and II Neither I or II

25. An entity classified a noncurrent asset accounted for under the cost model as held for sale at the current year-end. Because no offers were received at an acceptable price, the entity decided at the end of next year not to sell the asset but to continue to use it. The asset shall be measured at the end of next year at what amount?

a. The lower of carrying amount and recoverable amount b. The higher of carrying amount and recoverable amount c. The lower of carrying amount on the basis that the asset had never been classified as held for sale and recoverable amount. d. The higher of carrying amount on the basis that the asset had never been classified as held for sale and recoverable amount.

26. which of the following statements in relation to discontinued operations is true? a. Discontinued operations are reported as the item in the income statement. b. The discontinued operations consist only of the gain or loss on disposal of the discontinued component. c. The discontinued operations consist only of the income or loss from operating the discontinued component. d. The discontinued operations consist of the income or loss from operating the discontinued component as well as the gain or loss on disposal of the discontinued component. 27. The results of operations of a component of an entity that either has been disposed of or classified as held for sale shall be reported in discontinued operations when a. The operations and cash flows of the ongoing operations of the entity as a result of the disposal transactions. b. The entity continues to have a significant continuing involvement in the operations of the component after the disposal transaction.

c. The entity outsources the manufacturing operations of a component and sells the manufacturing facility of the component but continues to sell the product previously manufactured by the facility sold. d. All of these would quality as discontinued operation. 28. When an entity discontinued an operation and disposed of the discontinued operation, the transaction should be reported in the income statement as a. A prior period error b. Other income and expense item c. An amount after income from continuing operation and before net income d. A bulk sale of plant assets included in income from continuing operations 29. A single amount should be disclosed within the income statement for a. The post-tax profit or loss on discontinued operation and the pre-tax gain or loss on the disposal of discontinued operation assets. b. The pre-tax profit or loss on discontinued operation and the post-tax gain or loss on the disposal of discontinued operation assets. c. The pre-tax profit or loss on discontinued operation and the pre-tax gain or loss on the disposal of discontinued operation assets. d. The post-tax profit or loss on discontinued operation and the post-tax gain or loss on the disposal of discontinued operation assets. 30. Which of the following most likely would be considered a discontinued operation? a. Shifting production or marketing function from one location to another. b. A sporting goods manufacturer that has a bicycle division decided to outsource the manufacture of the bicycles. c. The unprofitable brands of a beauty products component of an entity that manufacturers and sells consumer products are discontinued. d. An entity that is a franchisor in the quick-service restaurant business also operates entity-owned restaurants that are unprofitable in a certain region and, as a result, the entity decides to exit both the quick-service business as well as the entity-owned restaurants in that region.

31. ABC Co. a seller of concrete aggregates, enters into the following contracts: i. A contract with Delta Co. to deliver goods. Payment is due one month after delivery. ii. A contract with Echo Co. for sale of 300 units of each of products X and Y. The contracts states that the price of product Y will be retrospectively reduces by 50% if Echo Co. makes a cumulative purchase of at least 1,000 units of Product X within 6 months. iii. A contract with Fafa Co. to deliver goods. At contract inception, Fafa Co. is broke. ABC Co. expects that it can only collect 50% of the consideration. iv. A contract with Gamma Co. an entity which is also engaged in the concrete aggregates business, to exchange inventory of facilitate sales of customers in different geographical areas of operations. Identify the contracts to which PFRS 15 revenue from contract with customers may not be applied. A. B. C. D.

Delta and Echo Fafa and Gamma Fafa Gamma

32. Certain criteria must met before a contract with a customer is accounted for under PFRS 15. Which of the following precludes a contract from being accounted for under PFRS 15? A. The consideration is collected in advanced B. The contract is made orally C. The contract does not result to a change in the risk, timing or amount of the entity’s future cash flows. D. The contact is neither oral nor written but rather implied by the entity’s business practices. 33. ABC Co. enters into a contract with XYZ. Inc. to deliver 2 apples, 3 mangoes, and 5 potatoes for a total consideration of ₱100. In accounting for the contract, which of the following is probably not true? A. ABC Co. identifies three performance obligations in the contract. B. ABC Co. allocates the ₱100 transaction price over the promises to deliver the apples, mangoes and potatoes on the basis of relative stand-alone selling prices of those goods C. The allocation of the transaction price may result to the identification of a discount. D. No revenue is recognized until all of the 2 apples, 3 mangoes and 5 potatoes are delivered even though the 2 apples were delivered first before the mangoes and potatoes.

34. ABC Co. a manufacturer and dealer of printing machines, had the following transactions during the period. I. ABC Co. receives an order for the manufacture of a customized machine for a customer. The customer pays half of the consideration at contract inception. The manufacturing lead time is 1 year. ABC Co. subcontracts a portion of the manufacturing to XYZ, inc. another manufacturer. II. ABC Co. receives an order for a standard machine. Payment is due only after ABC Co. has delivered and installed the machine. Additionally, the contract requires ABC Co. to perform free maintenance services over a 3-month period after the machine is installed ABC Co. completes the delivery and installation by the end of the reporting period: however the maintenance period is not yet over. III. ABC Co. receives an order for 2 machines. The first machine is delivered at contract inception but the second machine will be delivered after two months. Payment is due only after both machines are delivered. By the end of the reporting period. the second machine is not yet delivered and the consideration is not yet collected. Identify the contracts to which PFRS 15 revenue from contract with customers may be applied. A. Contract 1 B. Contract 3 C. Contract 1, 2 and 3 D. None of these 35. It is an agreement between two or more parties that creates enforceable rights and obligations. a) Obligation b) Contract c) Revenue d) Any of these 36. According to PFRS 15 revenue from contracts with customers’ contracts with customers are. a) Written b) Oral c) Implied d) Any of these 37. The best evidence for the stand-alone selling price of a good or service is a) The list price of the good and service b) The contractually stated price of the good or service c) The observable price at which the good or service can be sold separately under similar circumstances and to similar customers d) The entity’s estimate of the stand-alone selling price

38. Revenue is recognized when (or as) the entity satisfies a performance obligation. According to PFRS 15 revenue from contracts with customers. Revenue is measured at a) The fair value of the consideration received or receivable b) The transaction price c) The stand-alone selling price of the good or service transferred d) The amount of the transaction price allocated to the performance obligation satisfied. 39. During the period ABC Co. transfers good to XYZ, Inc. Which of the following does not indicate that the transaction is a consignment arrangement? a) ABC Co. retains legal over the goods until XYZ, Inc sells them to third parties. b) ABC Co. can require the return of any unsold goods within 60 days. c) If XYZ, Inc. is not satisfied with the goods, XYZ, Inc. has the right to return them to ABC Co. d) ABC Co. can require XYZ, Inc. to transfer the goods to 123 corporation. e) XYZ, Inc. is not obligated to remit any payment to ABC Co. unless XYZ, Inc. sells the goods 40. A non-refundable upfront fee that relates to administrative tasks to set up a contract is most likely accounted for as a) A prepayment and recognized as revenue only when the related goods or services are transferred to the customer. b) A contract asset that is presented separately from contact liability in the statement of financial position c) As an outright expense d) All of these 41. One of the conditions that must be satisfied in order to recognize revenue in a transaction involving the rendering of services over a contractual period is that the stage of completion of the transaction at the end of the reporting period can be measured reliably. Which of the following methods for determining the stage of completion of a contract involving the rendering of services are specifically referred to in PFRS 15 as being acceptable? I. Costs incurred to date as a percentage of the estimated total costs of the transaction II. Advances received to date as a percentage of the total amount receivable III. Surveys of work performed IV. Revenue to date divided by total contract revenue A. I. III, IV

B. I, III C. I, II, IV D. I, II, III 42. The Grand Company placed an order with The Little Company for new specialist machinery. The order was non-cancellable once signed and Grand agreed to pay for the machinery at the time the order was signed on 1 February 20X1. Little held the machinery to Grand's order from 1 June 20X7, the date on which it was completed. Grand commenced using the machinery on 1August 20X7 when Little completed the installation process. The installation is not distinct. Little had staff on standby to deal with any operating problems until the warranty period ended on 1 November 20x7. The warranty does not provide service in addition to assurance that the machinery complies with agreed-upon specifications. Under PFRS15 Revenue, Little should recognize the revenue from the sale of this specialist machinery on 1 August 2007 1 November 20X7 1 February 20X7 1 June 20X7 43. Which is incorrect concerning recognition of revenue? Revenue from rendering of services over an extended contractual period shall be recognized by reference to the stage of completion of the transaction at balance...