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WorksheetsTOA PAST PB
Total questions: 78
Worksheet time: 39mins
An entity is performing its annual test of the impairment of goodwill for a cash generating unit. The entity has determined that the fair value of the unit exceeds the carrying amount. Which of the following statements is true concerning the test of impairment
Impairment is no indicated and no additional analysis is necessary.
Goodwill should be written down as impaired
The assets and liabilities should be valued to determine if there has been an impairment of
goodwill
. D) Goodwill should be retested at the
Which the following is an essential characteristic of a liability?
It must be an obligation to transfer assets or provide services it the future
The identity of the creditor must be known
It may be the result of future transactions
The exact amount due must be known
Which of the following costs relating to noncurrent assets should not be capitalized?
a. Replacement of a building's roof every 15 years
b. Cost of site preparation
c. Installation and assembly costs.
d. Replacement of small parts annually
The initial application of a policy to revalue assets in accordance with PAS 16, PPE or with PAS 38, Intangible Asset
a. must be accounted for as a change in accounting policy
b. must not be accounted for as a change in accounting policy
C. must be treated as an extraordinary event.
D. may be accounted for in accordance with the requirements of the Conceptual Framework.
According to the framework, which of the following is an example of expense?
a. A decrease in equity arising from a distribution to equity participants
b. A loss on the disposal of a noncurrent asset
c. A reduction in income for the accounting period
d. An increase in the economic benefits during the accounting period
Which of the following best describes the amount of cash and cash equivalents that could currently be obtained by selling an asset in an orderly disposal?
a. Fair value
b. Realizable Value
c. Residual value
d. Value in use
All of the following can be classified as cash and cash equivalents except
a. Loan notes due for repayment in 90 days
b.Equity investments
C. Redeemable preference shares acquired and due in 60 days
d. A bank overdraft
Under PAS 36, which of the following terms b'ist describes the higher of an asset's fair value less cost to sell and its value in use?
a. Recoverable amount
b. Carrying Amount
c. Depreciable amount
d. Revalued amount
Revenue from an artistic performance is recognized once
a. Cash has been received from the ticket sale
b. The audience register for the event online
c. The event takes place
d. The ticket for the concert are sold
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 loss that is reported as a prior period adjustment
According to the conceptual framework, the concept of "earnings"
a. Includes changes in market value of investments in marketable securities classified as
available for sale
b Includes foreign currency translation adjustments
c. Includes gains and losses resulting from the sale of a productive asset to another
party in an arm's-length transaction
d. Is the same as comprehensive income
Which of the following categories of expenses is subject to immediate recognition in the
income statement?
a Utilities expense for the production line of a manufacturer
bRepairs and maintenance incurred on production equipment of a manufacturer
c. The salary of the production foreman
d The salary of the entity president
An example of direct matching of an expense with revenue would be
a. Depreciation expense
b. Office salaries expense
c. Direct labor costs incurred to produce inventory sold during a period
d. Advertising expense
What is the accounting principle underlying the recognition of an estimated liability
for warranties in the period of product sale?
a. Matching
b. Materiality
c. Full disclosure
d. Conservatism
11. A change in the estimated useful life of a building
a. is not allowed by generally accepted accounting principles.
b. Affects the depreciation on the building beginning with the year of the change
c. Must be handled as sa retroactive adjustment to all accounts affected, back to the year of the acquisition of t of the building.
d. Creates a new account to be recognized in the income statement reflecting the difference in net income to the beginning of the year of the change
The use of purchase discount account implie that the recorded cost of a purchased
Inventory item is its
a. Invoice price
b. Invoice price plus the purchase discount lost
c. Invoice price less the purchase discount taken
d. Invoice price less the purchase discount allowable whether taken or not
A company using a periodic inventory system neglected to recorda purchase of merchandise on account at year-end. This merchandise was omitted from the year-end physical count. How will these errors affect inventory at year-end and cost of goods sold for the year?
INVENTORY VS COST OF GOODS SOLD
No Effect vs Understate
No Effect vs Overstate
Understate vs Understate
Undestate vs No Effect
The principles which constitute the ground rules for financial reporting are termed "generally accepted accounting principles". To qualify as "generally accepted" an accounting principle must
a. Usually guide corporate managers in preparing financial statements which will be understood by widely scattered shareholders.
b. Guide corporate managers in preparing financial statements which will be used for collective bargaining agreements with trade unions.
c. Guide an entrepreneur of the choice of an accounting entity like single proprietorship, partnership or corporation.
d. Receive substantial authoritative support
Under generally accepted accounting principles
a. Income and expenses, assets and liabilities are measured based on the occurrence of changes in the economic resources and obligations
b. Assels and liabilities are measured on the basis of their liquidation value
c. Income and expenses are recognized on the basis of cash receipts and payments, including depreciation of property, plant and equipment
d. Financial position and financial performance are measured on the basis of cash received and cash paid
Which of the following accounting theory justifies the use of historical cost method in the preparation of financial statements?
a. Conservatism
b. Objectivity
c. Relevance
d. Comparability
Which transaction indicates compliance with the
concept of objectivity?
a. The accounting transaction that furthers the objectives of the entity.
b. The accounting transaction which involves the allocation of revenue or expense items
in a rational and systematic manner,
c. An arm's length transaction between two independent parties.
d. The accounting transaction which is promptly recorded in a fixed amount
A public utility that reports noncurrent assets as the first item in its statement of financial
position is an example of
a. Improper statement presentation
b. Industry practice
c. Substance over form
d. Conservatism
An entity classifies expenses by logisticn quality control, manufacturing, plant engineering, sales and marketing, research and development, finance
and administration. The classification basis is by
á. Object of expenditure
b . Services received
c. Area of responsibility
d. Function performed
An expiration of cost which is incurred without compensation or return and not absorbedas cost of revenue is called
a. Deferred credit
b. Deferred charge
c. Loss
d. Indirect Cost
An entity changed its method of inventory pricing from weighted average to the FIFO "method. The entity should include the cumulative effect of the change on the amount of retained earnings at the beginning of the period in which the change is made in the net income of
a. Neither future periods nor the period of change
b. Only in the period of change but not future periods
c. The future periods but not the period of change
d. Both the future periods and the period of change
When using the periodic inventory method, which of the following generally would not be separately accounted for in the computation of cost of goods sold?
a. trade discounts applicable to purchases during the period
b. cash (purchase)discounts taken during the period
c. purchase returns and allowances of merchandise during the period
d. cost of transportation-in for merchandise purchases during the period
Proper application of accounting principles is most dependent upon the
a. Existence of specific guidelines
b. Oversight of regulatory bodies
c. external audit function
d. Professional judgment of the accountant
Generally accepted accounting principles
a. Are accounting adaptations based on the laws of economic science
b. Derive their credibility and authority from legal rulings and court precedents.
c. Derive their credibility and authority from the national government through the financial reporting section of the SEC.
d. Derive their credibility and authority from general recognition and acceptance by the accounting profession,
Which of the following measurement attributes is not currently used in practice?
a. Present value
b. Net realizable value
c. Current replacement cost
d. Inflation-adjusted cost
Which of the following is not a purpose of the Framework for the Preparation and Presentation of Financial Statements?
a To provide definitions of key terms and fundamental concepts
b. To provide specific guidelines for resol ing situations not covered by existing accounting standards.
c. To assist accountants and others in selecting among alternative accounting and
reporting methods
d. To assist the FRSC in the standard-setting process.
Which of the following is not a purpose of the Framework for the Preparation and Presentation of Financial Statements?
a To provide definitions of key terms and fundamental concepts
b. To provide specific guidelines for resol ing situations not covered by existing accounting standards.
c. To assist accountants and others in selecting among alternative accounting and
reporting methods
d. To assist the FRSC in the standard-setting process.
Adjusting entries normally involve
a. Real accounts only
b. Nominal accounts only
c. Real and nominal accounts
d. Liability accounts only
Which of the following is not among the first five steps in the accounting cycle?
a. Record transactions in journals
b.Record closing entries
c. Adjust the general ledger accounts
d. Post entries to general ledger accounts
The correct order to present current assets is
a. Cash, inventories prepaid items, accounts receivable
b. Cash, inventories, accounts receivable, prepaid items
c. Cash, accounts receivable, prepaid items, inventories
d. Cash, accounts receivable, inventories, prepaid items
Which of the foliowing would not be classified as a current liability on a classified
statement of financial position?
a. Unearned revenue
b. Mandatorily redeemable preference share
c. The currently maturing portion of long-term debt
d. Accrued salaries payable to managerment
Which of the following statements best describes the term going concern
When current liabilities of an entity exceed current assets
b. The ability of the entity to continue in operation for the foreseeable future
c. The potential to contribute to the flow of cay h and cash equivalents to the entity
d. The expenses of an entity exceed its income
Which of the following is the best description of. "reliability" in relation to information in
financial statements?
a. Influence on the economic decisions of users
b. Inclusion of a degree of caution
c. Freedom from material error
d. Comprehensibility to users
Are the following statements in relation to "materiality" true or false?
Statement 1 Materiality of items depends on their individual or collective influence on the economic decisions of usert
Statement 2 Materiality of an item depends on its absolute size and nature.v
False False
False True
True False
True True
Which of the following is true of the qualitative characteristic of "understandability" in relation to information in financial statements?
a. Users should be willing to study the information with reasonable diligence
b. Users are expected to have significant business knowledge
c. Financial statements should exclude complex matters
d. Financial statements should be free from material error
Which is incorrect concerning assets?
a. Physical form is not essential to the existence of an asset
b. In determining existence of an asset, the right of ownership is essential
c. Asset results from past event,
d. There is a close association between incurring an expenditure and generating asset but the two does not necessarily coincide.
Which of the following terms best describes assets recorded at the amount that represents the immediate purchase cost of an equivalent asset?
a. Historical cost
b. Realizable value
c. Present value
d. Current costs
Financial statements include a statement of financial position, statement of comprehensive income, a statement of changes in equity and a statement of cash flows. Which of the following is also included within the financial statements?
a. A statement of retained earnings
b. Accounting policies
c. An auditor's report
d. A directors' report
An entity shall clearly identify each financial statement and shall display all of the following information prominently, except
a. Name of the reporting entity or other means of identification, and any change in that information from the previous year,
b. Names of major shareholders of the entity.
c. The presentation currency and level of rounding used in presenting the financial
statements
d. Whether the financial statements cover the individual entity or a group of entities and the date of the end of reporting period or the period covered by the financial statements.
An entity shall classify an asset as current when (choose the incorrect.one)
a. The entity expects to realize the asset or intends to sell or consume it within the
entity's normal operating cycle.
b. The entity holds the asset as "available for sale" investment.
c. The entity expects to realize the asset within twelve months after the end of reporting
period.
d. The asset is cash or a cash equivalent that not restricted to settle a liability for more
than twelve months after the end of reporting period
The primary focus of financial accounting has been meeting the needs of which of the following groups?
a. Management
b. Present and potential creditors
c. National and local taxing authorities
d. Independent auditors
Financial accounting is the area of accounting that emphasizes reporting to
a. Management
b. Regulatory bodies
c. Internal auditors
d. Creditors and investors
Which of the following terms best describes the relationship of the assets, liabilities and
equity of an entity?
b. Financial position
a. Financial performance
c. Future economic benefit
d. Obligation
Which of the following is listed in the Framework as underlying assumption regarding financial statements
a. The financial statements are reliable.
b. Any changes of accounting policy are neutral.
c. The financial statements are prepared under the accrual basis.
d. The entity can be viewed as a liquidating corcem.
Which of the following terms best describes formation in financial statements that is
neutral
a. Understandable
b. Reliable
c. Relevant
d. Unbiased
Which of the following statements concerning the Framework is incorrect.
a. The Framework provides that transactions must be accounted for in accordance with their legal form.
b. Primary responsibility for the preparation and presentation of the financial statements of the entity rests with management,
c. Financial statements must not exclude complex matters in order to achieve
understandability
d. Where any conflict arises between the Framework and a PFRS, the requirements
of the PFRS prevail.
Which of the following terms best describes th, amount of cash or cash equivalents that could currently be obtained by selling an asset in an orderly disposal?
a. Fair value
b. Realizable value
c. Residual value
d. Value in use
All of the following would be regarded as financial instruments, except
a. Bank overdraft
b. Notes payable
c. Cash
d. Equipment
In order to be classified as a cash equivalent, an investment must have a maturity period of
a. Less than six months
b. Three to six months.
c. Six to twelve months
d. Three months or less
Which of the following is classified as a current liability on the balance sheet
a. Postdated checks
b. Bank overdrafts
c. Customer NSF checks
d. Travel Advances
Compensating balance agreements that do not legally restrict the amount of funds shown on the balance sheet should be reported/disclosed
a. As current liability
b. As noncurrent investment
c. As other asset
d In the notes to the financial statements
Which of the following statements conceming compensating balance agreements is not
true?
a. They reduce the amount of cash available to the borrower
b. They always involve legal restrictions on the cash received
c. They increase the effective interest rate to the borrower
d. They must be disclosed in the financial statements footnotes
Cash control system are the methods and procedures used to ensure.
a. That current obligations are met
b. That excess cash does not exist
c. The safeguarding of cash
d. That unused cash is invested
Which is not a key element of internal control over cash receipts?
a. Daily recording of all recording of all cash receipts in the accounting records
b. Daily entry in a voucher register
c. Immediate counting by the person opening the mail or using the cash register
d. Cash deposit on a regular basis.
In reconciling the bank balance with the book e ish balance, which of the following would (not cause the bank balance shown in the bank statement to be lower than the unadjusted book balance?
a. Cash on hand at the company
b. NSF checks from a customer, as reported on the bank statement
c. Interest credited to the account by the bank
d. Deposits in transit
Accounts receivable usually appear in the balance sheet
a. As current assets, combined with cash and cash equivalents
b. As current assets, immediately after cash and cash equivalents
c. As either current assets or noncurrent assets, depending on whether, the allowance method or the direct write-off method is used to account for uncollectible accounts.
d. Only if the balance sheet method of estimating uncollectible accounts is used
Accounts receivable are classified as current assets:
a. Only if convertible into cash within 60 days or sooner
b. Only if the allowance method is used to estimate the uncollectible accounts
c. Only if convertible into cash beyond one year
d Whenever the accounts receivable arise from "normal" sales of merchandise to customers, regardless of the credit terms
Which of the following accounting principles primarily supports the use of allowance for
doubtful accounts?
a Continuity principle
b. Matching principle
c. Full-disclosure principle
d. Cost principle
Which method of recording bad debt loss is consistent with accrual accounting?
a. Allowance method
b. Direct write-off method
c. Aging of receivables method
d percentage or accounts receivable method
The allowance method of recognizing bad debt expense can be applied in more than one way. What two condition must be met before the allowance method can be used?
a. Bad debts must be expected and material
b. Bad debts must be relevant and reliable
c. Bad debts must be probable and measurable
d. Bad debts must be persistent over time and the method used to estimate them is consistently applied
A company; which has an, adequate amour in its Allowance for Doubtful Accounts, writes off as uncollectible account receivable from a bankrupt customer. This action will:
a. Have no effect on total current assets
b. Reduce total current assets
c. Reduce net income for the period
d Reduce the amount of equity
Which of the following methods may not be appropriate for estimating bad debt expense?
a Individual or collective assessment of outstanding receivables
b. Percentage of outstanding accounts receivable
c. Aging of accounts receivable
dPercentage of income
Which of the following is an advantage of usin the net price method for recording cash discounts on credit sales?
a. it eases communication with customers about their balances
B. It properly reflects current period sales reverque
c. It simplifies recording of sales returns and allowances
d. It requires less record keeping than the gross method
X Cycle Shop sells a bicycle to XYZ, a customer who uses Express Charge (a national credit card, but not issued by a bank). In recording this sale, X Cycle Shop should record:
a. An account receivable from XYZ
b. A cash receipt
c. An account receivable from Express Charge
d. A small increase in the allowance for doubtful accounts
If material, deposits in foreign bank which are subject to foreign exchange restriction shall be classified
a. Separately as current asset, with appropriate disclosure.
b. Separately as noncurrent asset with appropriate risclosure.
c. Be written off as an extraordinary loss.
d. As part of cash and cash equivalents
Which of the following items would be added to the book balance on a bank reconciliation?
a. Outstanding checks
b. Check written for P63 entered as P36 in the accounting books
c. Deposits in transit
d. Interest paid by the bank
At the end of the current year, an entity had various checks and papers in its safe. Which item should not be included on in its cash account in the current year-end statement of financial position?
a. Time deposit which matures in one year.
b. Another entity's P150,000 check payable to the entity dates December 15 of the current year, post dated check
c. The entity's undelivered check payable to a supplier dated December 31 of the current year.
d. US $20,000 cash.
Which of the following statements in relation to meas rement of inventory is true?
I. Cost of factory management shall be included in the cost of inventory.
II. Maintenance expenses for an item of equipment used in the manufacturing process shall be included in the cost of inventory.
a. I only
b. Il only
c. Both I and II
d. Neither I nor II
Which of the following should not be reported as inventory?
a. Land acquired for resale by a real estate firm
b. Shares and bonds held for resale by a brokerage firm
c. Partially completed goods held by a manufacturing entity
resale-inventory
d. Machinery acquired by a manufacturing entity for use in the production process
When determining the unit cost of an inventory item, which of the following should not be
included?
a. Interest on loan obtained to purchase the item
b. Commission paid when purchased
c. Labor cost of the item when manufactured
d. Depreciation of plant equipment used in manufacturing the item
Which is incorrect concerning the maritime term FAS?
a. The seller must bear all expenses and risk in delivering the goods to the dock next to the
vessel on which they are to be shipped.
b. The buyer bears the cost of loading and cost of shipment:
c. Title passes to the buyer when the carrier takes possession of the goods.
d. Title passes upon receipt of the goods by the buyer.
Under a customer loyalty program, , if a third party supplies the awards and the entity is collecting
the consideration for the award credits as principal in the transaction
a. The entity shall not recognize revenue from the award credits.
b. The entity shall recognize initially a deferred revenue equal to the gross consideration allocated
to the award credits.
c. The entity shall recognize initially a deferred revenue equal to the difference between the consideration for the award credits and the amount paid by the entity to the third party.
d. The entity shall recognize immediately revenue equal to the gross consideration allocated to the award credits.
Goodwill should properly appear on the financial statements of a company which
a. Has purchased an entity
b. Consistently operates profitably profits
c. Maintained good customer service
d. Consistently reports above-normal
The closing process involves separate entries to close (1) expenses, (2) dividends, (3) revenues and (4) net income (or loss). The correct sequencing of the entries is
a. (4), (3), (2), (1)
b. (1), (2), (3), (4)
c. (3), (2), (1), (4)
d. (3), (1), (4), (2)
