Final 11 October 2018, questions PDF

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SCHOOL OF BUSINESS ACCOUNTANCY AND TECHNOLOGYIntermediate Accounting I Comprehensive Examination 2 nd semester, 2018- Test QuestionDirections: Read the question very carefully. You have 3 hours to answer the test question. Place your answer on the Answer Sheet provided. Make sure that there are no i...

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SCHOOL OF BUSINESS ACCOUNTANCY AND TECHNOLOGY Intermediate Accounting I Comprehensive Examination 2nd semester, 2018-2019 Test Question Directions: Read the question very carefully. You have 3 hours to answer the test question. Place your answer on the Answer Sheet provided. Make sure that there are no items that were left unshaded. DO NOT WRITE ANYTHING ON THIS TEST QUESTION. A separate solution sheet will be provided. Good luck! 1. Boyhugot Company suffered a P500,000 loss from a recent volcanic eruption occurred in the middle of December and charged the whole amount to profit or loss statement for the year ended December 31, 2016. What expense recognition principle did the company exemplify from the above transaction? a. cause and effect association b. systematic and rational allocation c. immediate recognition d. materiality 2. Which of the following items is not matched correctly with its basis of valuation for purposes of reporting on the statement of financial position? a. short-term interest bearing note -> face value b. loan receivable -> amortized cost c. inventories of broker traders -> lower of cost or NRV d. agricultural produce from a bearer plant -> fair value less cost to sell 3. When an entity sold some of its office machineries on account, the entity enters the transaction in the a. sales journal b. general journal c. cash receipts journal d. cash payments journal 4. Which of the following is not related to fundamental qualitative characteristics under the new version of conceptual framework for financial recognition? a. feedback value b. neutrality c. comparability d. completeness 5. Share a. b. c. d.

premium could not arise from issuance of non-convertible bonds receipt of donated asset from a shareholder issuance of bonds with detachable share warrants distribution of “small” bonus issue

6. Which is true concerning the rules of debit and credit? a. The left side of an account is always the debit side and the right side is always the credit side. b. The normal balance of any account appears on the side used for recording decreases. c. Increases in assets and expenses are debit entries, and decreases in liabilities, owner’s equity and revenue are credit entries. d. The word “debit” means to increase and the word “credit” means to decrease. 7. Which a. b. c. d.

of the following items should be included from a company’s reported inventory? goods purchased subject to a buyback agreement goods still in transit sold under FOB buyer goods still in transit purchased under FOB buyer goods out on consignment sold by the consignee at the balance sheet date

8. In a period of rising prices, which of the following inventory cost flow method would result in the highest income? a. first-in, first-out method b. moving average method c. weighted average method d. last-in, last-out method 9. Which of the following is false about the preparation of statement of comprehensive income? a. income from operation excluded finance cost b. income from continuing operation plus income from discontinued operation equals total profit or loss c. income tax related to discontinued operation shall be disclosed on the face of income statement d. other comprehensive income shall be disclosed on the face of income statement after tax 10. What is a “discount: as it relates to zero-interest-bearing notes receivable?

a. b. c. d.

The The The The

discount discount discount discount

represents represents represents represents

the the the the

lender’s costs to underwrite the note. credit quality of the borrower. cost of borrowing of the borrower. allowance for uncollectible amounts.

11. When the allowance method of recognizing bad debts expense is used, the entry to record collection of accounts previously written off would increase a. account receivable b. allowance for bad debts c. net income d. working capital 12. Which of the following is true about erroneous bank credit? a. Cash balance per book is overstated b. Receipts per bank is overstated c. It should be recorded as a credit to cash in bank account d. It should be added to balance per bank in preparing bank reconciliation 13. Which of the following items are true about premium on notes receivable? I. Face value of note > Present value of note II. Face value of note < Present value of note III. Nominal rate > Effective rate IV. Nominal rate < Effective rate a. I and III b. I and IV c. II and III d. II and IV 14. Which of the following would result to a net income for the period? a. Debit balance in the income summary account after closing income and expense account b. Credit balance exceeded debit balance in the balance sheet column of worksheet c. The difference between the debit and credit in the income statement column is extended to debit balance of balance sheet column of worksheet d. The difference between the debit and credit in the income statement column in extended to credit balance of balance sheet column of worksheet 15. Which of the following adjusting entries will affect both the balance sheet and income statement? a. accrued interest b. prepaid insurance using the expense method c. unearned rent using the liability method .d all of the above 16. Which of the following would be classified as a non-current asset? a. Goods which are in process of production for sale in the ordinary course of business b. Debt and equity securities acquired principally for the purpose of generating a profit from short-term fluctuations in price or dealer’s margin c. Cash funds that are set aside for payment of equipment to be delivered a month after the reporting period d. Amounts due from customers within a period of 12 to 18 months extended within the usual credit terms of the enterprise 17. Which of the following is a non-current liability on December 31, 2016 statement of financial position? a. Bonds payable maturing on March 2017 which were refinanced in 2017 before issuance of the 2016 financial statements b. Mortgage note payable due March 15, 2017, which was rolled over in 2017 after the issuance of the 2016 financial statements c. Mortgage note payable due March 15, 2017, which was converted into shares of the company’s ordinary share capital in 2017 before the issuance of 2016 financial statements d. Mortgage note payable due March 15, 2017, in which the entity has the intention and discretion to roll over for a period of at least 24 months from the original maturity date 18. Which body authors a. International b. International c. International d. International

the present International Financial Reporting Standards? Accounting Standards Board Financial Reporting Standards Board Accounting Standards Committee Accounting Standards Council

19. Which of the following will result if the current year’s ending inventory amount is understated? a. cost of goods sold will be overstated b. gross profit will be overstated c. net income will be overstated d. retained earnings will be overstated

20. Statement I: When the goods or services are exchanged or swapped for goods or services which are of a similar nature and value, the exchange is not regarded as a transaction which generates revenue. Statement II: When goods are sold and services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction that generates revenue. a. Only statement I is true b. Only statement II is true c. Both statements are true d. Both statements are false 21. Which is correct concerning measurement of property, plant and equipment? Statement I: the cost model means that property, plant and equipment are carried at cost less any accumulated depreciation and any accumulated impairment loss. Statement II: The revaluation model means that property plant and equipment are carried at revalued amount, being the fair value at date of revaluation less any prior and subsequent accumulated depreciation and accumulated impairment loss. a. Only statement I b. Only statement II c. Both statements I and II d. Both statements are false 22. The following statements are based on PAS 38 (Intangible Assets): Statement I: Internally generated goodwill shall not be recognized as an asset. Statement II: No intangible asset arising from research or research phase of an internal project shall be recognized. Statement III: Internally generated brands, mastheads, publishing titles, customer lists and items similar substance shall be recognized as intangible assets. a. All of the statements are true b. Only statement I is true c. Only statement II is false d. Only statement III is false 23. The following statements refer to the use of special journals: Statement I: Transactions that cannot be appropriately recorded in a special journal are recorded in the general journal. Statement II: Sales of merchandise on account are recorded in the sales journal while cash sales are recorded in the cash receipts journal. Statement III: Purchases of any items on account are recorded in the purchase journal while acquisition of any items for cash is recorded in the cash disbursements journal. a. Only statement I is true b. Only statement II is false c. Only statement III is false d. All of the statements are true 24. The following statements are based on cash and trade discounts: Statement I: Inventories purchased for cash are always recorded net of trade discounts. Statement II: Properties purchased on account are always recorded net of cash discounts. Statement III: Properties purchased for cash are always recorded net of trade discounts. a. Only statement I is true b. Only statement II is true c. Only statement III is false d. All of the statements are true 25. In the cash flow statement, alternatively, interest received and dividend received may be classified as cash flows from a. operating activities b. investing activities c. financing activities d. revenue activities 26. Which cash item should be reported as current asset? a. cash segregated for payment of long-term bonds payable b. cash set aside for the acquisition of furniture and fixtures c. restricted compensating balance fort which the related loan is short-term d. restricted compensating balance for which the related loan is long-term 27. A 180-day, 10% interest-bearing note receivable is discounted to a bank at 12% after being held for 30 days. The proceeds received from the bank upon discounting would be the: a. maturity value less the discount at 10% b. maturity value less the discount at 12% c. maturity value plus the discount at 10% d. maturity value plus the discount at 12% 28. Which of accounts a. FOB c. FOB

the following terms would result to recognizing freight-out and a decrease in receivable by the seller? destination point, freight collect b. FOB destination point, freight prepaid shipping point, freight collect d. FOB shipping point, freight prepaid

29. Which of the following organizations is not represented in the 15-member of Financial Reporting Standards Council (FRSC)? a. Commission on Higher Education (CHEd) b. Bangko Sentral ng Pilipinas (BSP) c. Bureau of Internal Revenue (BIR) d. Commission on Audit (CoA) 30. According to the definition provided in PAS 38 Intangibles, activities undertaken in the ‘research’ phase of the generation of an asset my include: a. the application of knowledge to a design for the production of new materials b. original and planned investigation with the prospect of gaining new scientific knowledge c. the use of research findings to create substantially improved product d. using knowledge to materially improve a manufacturing device 31. Under PAS 16, the depreciation charge for a period reflects: a. the fall in the fair value of the asset across the period b. a change in the re-sale value of the asset that has occurred over the period c. the consumption of economic benefits over the period d. a reduction in the estimated market value of the asset across the period 32. Which of the following is not recognized as an expense in accordance with PAS 2? a. cost of goods sold b. write-downs of inventories to net realizable value c. reversal of write downs to net realizable value d. inventory items used by an entity as components in self-constructed property, plant or equipment 33. Which of the following transactions will cause both the left and right side of the accounting equation to increase? a. cash purchase of machinery b. obtaining a loan from a bank c. collection from customer for goods sold on account d. payment to vendor for inventories bought on account 34. Under the allowance method of recording bad debts, the ‘allowance’ account is not affected by: a. provision for bad debts b. writing of uncollectible accounts c. collection of a previously written-off account d. hypothecation of receivables against borrowings 35. General Purpose Financial Statements a. are only necessary for users who do not have the power to obtain information in addition to that contained within the general purpose financial statement b. focus on disclosing information relevant to assessing the ability of an entity to generate future cash flows c. provide all the information that users may need to make economic decisions d. meet the information needs that are common to all users 36. Under the Conceptual Framework for Financial Reporting, which of the following is considered as primary users of financial accounting information? a. employees b. customers c. suppliers d. potential lenders 37. Determine the incorrect statement regarding the Conceptual Framework for Financial Reporting. a. The Framework defines the principles for accounting recognition, measurement and disclosure. b. The Framework defines the basic elements of financial statements and the concepts for recognizing and measuring them in financial statements. c. The Framework defines the objective of financial statements. d. The Framework identifies the qualitative characte4ristics that make information in financial statements useful. 38. When inventory declines in value below original (historical) cost, what is the maximum amount that the inventory can be valued at? a. sales price b. net realizable value c. historical cost d. sales price reduced by estimated costs to sell 39. According to PAS 1, a required format for the presentation of a statement of financial position is? a. not prescribed but guidance is provided in the standard for a suitable format b. not prescribed and no guidance is provided in the standard c. prescribed by the standard d. not prescribed by the standard but details are founds in the Corporations Act

40. Which of the following errors may be detected by preparing a trial balance? a. omission of journal entry b. non-posting of a journal entry c. posting a correct debit to debit of a wrong account d. omission of an account from trial balance 41. Shareholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders? a. are entitled to a dividend every year in which the business earns a profit b. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership c. have the rights to specific assets of the business d. can negotiate individual contracts on behalf of the enterprise 42. How is a significant amount of financial position? a. The inventory is combined financial position. b. The inventory is combined financial position c. The inventory is reported position d. The inventory is reported position

consignment inventory reported in the statement of with other inventory on the consignor’s statement of with other inventory on the consignee’s statement of separately on the consignor’s statement of financial separately on the consignee’s statement of financial

43. The application of Philippine Financial Reporting Standards with additional disclosure where necessary is presumed to result in financial statements that: a. contain only material items b. will result in fair presentation c. are free from error and misstatement d. are unbiased 44. Which of the following is correct about the effective-interest method of amortization? a. Amortization of a discount decreases from period to period. b. The effective-interest method applies the effective-interest rate to the beginning carrying amount for each interest period. c. The effective-interest method applied to debt investments is different from that applied to bonds payable. d. Amortization of a premium decreases from period to period. 45. An optional step in the accounting cycle is the preparation of? a. closing entries b. a statement of cash flows c. adjusting entries d. a post-closing trial balance 46. Which of the following is an ethical concern of accountants? a. industry practices b. conservative accounting c. earnings manipulation d. none of the choices 47. The journal entry to record the factoring of a customer receivable normally includes a. Cash (debit) and Receivable from Factor (credit) b. Receivable from Factor (debit) and Cash (credit) c. Accounts Receivable (debit) and Cash (credit) d. Cash (debit) and Accounts Receivable (credit) 48. Property developed must classify properties that it held for sale in the ordinary course of business as a. property, plant and equipment b. inventory c. financial assets d. investment property 49. Information that is able to confirm or correct past evaluations that have been made by users of financial information is an example of information that satisfies which of the following characteristics of financial information identified in The Framework? a. understandability b. faithful representation c. comparability d. relevance 50. Capitalization of borrowing costs shall be suspended a. Only during temporary periods of delay b. Only during extended periods of delay in which active development is delayed c. Only upon agreement by management and the construction company d. At no instance at all as capitalization has already commenced 51. Beloved Corporation’s trial balance contained the following account balances at December 31, 2014: Investment to profit or loss securities 150,000 How much is the total Prepaid insurance 30,000 current assets in...