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WorksheetsActg Elec 2 - Final Exam
Total questions: 65
Worksheet time: 1hrs 9mins
The following properties fall under the definition of investment property, except
Land held for long-term capital appreciation
Property occupied by an employee paying market rent
Land held for a currently undetermined use
A building owned by an entity and leased out under an operating lease
In case of property held under an operating lease and classified as investment property
The entity has to account for the investment property under the cost model only.
The entity has to use the fair value model only
The entity has a choice between the cost model and fair value model.
The entity needs only to disclose the fair value and can use the cost model
Transfers from investment property to property, plant and equipment are appropriate
When there is change of use.
Based on the entity’s discretion.
Only when the entity adopts the fair value model.
The entity can never transfer property into another classification once it is classified as investment property.
When the entity uses the cost model, transfer between investment property, owner-occupied property and inventory shall be accounted for at
Carrying amount
Either at fair value or carrying amount
Fair value
Neither at fair value nor carrying amount
The internal sources of information indicating possible impairment include all of the following, except
Evidence of obsolescence or physical damage of an asset
Significant change in the manner or extent in which the asset is used with an adverse effect on the enterprise
Evidence that the economic performance of an asset will be worse than expected
Significant decrease or decline in the market value of the asset
Costs of disposal are deducted in determining fair value less cost to sell. Examples of disposal costs include all of the following, except
Legal costs
Stamps and similar transactions taxes
Costs of removing the asset
Finance costs
Recovery of impairment is recognized for all the following except:
Patent held for sale.
Patent held for sale.
Trademark.
Goodwill.
What is the allocation of an impairment loss recognized for a cash generating unit.
First, to any goodwill, and the balance to the other assets on a prorata basis based on carrying amount.
Across the assets of the unit based on carrying amount.
First, to any goodwill, and the balance to the other assets on a prorata basis based fair value.
Across the assets of the unit based on fair value.
Which of the following statements is true?
The capitalizable costs of patents are legal fees and other registration costs.
An identifiable tangible asset developed internally is never recognized in the accounts as an asset.
Intangible assets usually have a residual value that must be considered in the amortization of cost.
An intangible asset is usually amortized by a credit to an income account.
In accordance with the PFRSs, which of the following methods of amortization is normally not recommended for intangible assets?
Units of production
Declining balance
Effective interest method
Straight line
An entity that incurs costs in defending a patent in an infringement suit should
expense the costs of all suits in the period in which they are incurred.
capitalize only the costs of unsuccessful suits.
capitalize only the costs of successful suits.
capitalize the cost of all suits regardless of the outcome.
A change in the amortization rate for an intangible asset should be accounted for
by retrospective restatement.
by retrospective application.
on a prospective basis.
on a current basis.
Paolo Company had a plantation forest at Baguio City that is taken care of Yen Company as a friend. The said forest is likely to be harvested and sold in 10 years. How should the income be accounted for?
The plantation forest should be valued every five years and the increase in value should be shown in the income statement of recognized gains and losses
Income should be measured annually and reported using a fair value approach that recognizes and measures biological growth.
The eventual proceeds from sale should be estimated and matched to the profit and loss account over the 10-year period.
No income should be reported until first harvest and sale in 10 years.
When agricultural produce is harvested, the harvest should be accounted for by using PAS 2 Inventories or another applicable standard. Cost at the point of harvest is deemed to be
Its fair value less cost to sell
The historical cost of the harvest
The historical cost less accumulated impairment losses
The market value
Which of the following is not dealt with by PAS 41 Agriculture?
The accounting for biological assets
The initial measurement of agricultural produce at the point of harvest
The initial measurement of agricultural produce at the point of harvest
The accounting treatment of unconditional government grants related to biological asset
If a government grant is conditional on certain events, then the grant should be recognized as
Income when the conditions attached to the grant are met
Income when the grant has been approved
A deferred income when the conditions attached to the government grant are met
A deferred income when the grant is approved
Which of the following costs are not included in costs to sell?
Commissions to brokers and dealers
Levies by regulatory bodies
Transfer taxes and duties
Transport and other costs necessary to get the asset to a market
When the provision involves a large population of items, the best estimate of the amount
Reflects the weighting of all possible outcomes by their associated probabilities.
Is determined as the individual most likely outcome
May be the individual most likely outcome adjusted for the effect of other possible outcomes.
Midpoint of the possible outcomes
Which is the proper way to report a probable contingent asset?
As an accrued amount
As deferred revenue
As a disclosure only
No disclosure or accrual required
An entity sells machines that include a three-year warranty. Service calls under the warranty are performed by an independent mechanic under a contract with the entity. Warranty costs are expected to be incurred for each machine sold. The warranty costs should be recognized
Evenly over the life of the warranty
When the machines are sold
When the service calls are performed
When payments are made to the mechanic
General contingencies or unspecified risks should
Be accrued in the financial statements and disclosed in the notes
Not be accrued in the financial statements and need not be disclosed in the notes.
Not be accrued in the financial statement but should be disclosed in the notes.
Be accrued in the financial statements but need not be disclosed in the notes
According to PAS 36 Impairment of Assets, which of the following terms is defined as: "The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets"?
Non-current assets
A cash-operating unit
An operating segment
A cash-generating unit
An entity is considering whether to apply an impairment test to an individual asset or to the cash-generating unit to which that asset belongs. Are the following statements true or false, according to PAS 36 Impairment of assets?
1) If the individual asset does not generate cash inflows that are largely independent of those from other assets, then the cash-generating unit should be identified.
2) If the individual asset generates an insignificant proportion of the cash inflows of the entity as a whole, then the cash-generating unit should not be identified.
Both statements are true
Statement 1: True
Statement 2 : False
Both statements are false
Statement 1: False
Statement 2 : True
According to PAS 36 Impairment of assets, which of the following are relevant in determining a non-current asset's 'value in use'?
I. The expected future cash flows from the asset
II. The carrying amount of the asset
III. The future annual depreciation expense in respect of the asset
IV. The time value of money
I, II, III
II, III, IV
I, IV
I, II, IV
Which is the correct definition of a provision?
A possible obligation arising from past events
A liability of uncertain timing or uncertain amount
A liability which cannot be easily measured
An obligation to transfer funds to an entity
Under PAS 36 Impairment of Assets, which of the following statements best describes 'value in use'?
The present value of estimated future cash flows expected to arise from the continuing use of an asset and from its ultimate disposal.
The amount of cash or cash equivalents that could currently be obtained by selling an asset in an orderly disposal.
The net amount which an entity expects to obtain for an asset at the end of its useful life.
The amount at which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.
For interim financial reporting, a loss from earthquake occurring in the second quarter should be
Recognized in the second quarter
Recognized ratably over all four quarters with the first quarter being restated
Disclosed by a note only in the second quarter
Recognized ratably over the last three quarters
PAS 34 presumes that anyone reading the interim financial reports will
Understand all Philippine Financial Reporting Standards
Have access to the most recent annual financial statements
Not make decisions based on the reports
Have access to the record of the entity
An inventory loss from a market price decline occurred in the first quarter. However, in the third quarter, the inventory had a market price recovery that exceeded the market decline that occurred in the first quarter. For interim financial reporting, the amount of inventory should:
Decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of the market price recovery
Decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of decrease in the first quarter
Not be affected in the first quarter and increase in the third quarter by the amount of the market price recovery
Not be affected in either the first quarter or the third quarter
Which statement is incorrect regarding interim financial reporting?
The integral and independent view are the two approaches of interim financial reporting
A complete set of financial statements at the interim reporting date is required
Interim amount like advertising that could benefit later interim periods is expensed immediately
No accruals or deferrals in anticipation of future events during the year should be reported
When the provision arises from a single obligation, the best estimate of the amount
Reflects the weighting of all possible outcomes by their associated probabiliti
Is determined as the individual most likely outcome
Is the individual most likely outcome adjusted for the effect of other possible outcome
Midpoint of the possible outcome
All of the following would be classified as biological asset, except
Dairy cattle
Chicken
Egg
Tree
Derecognition of investment property is not required when
it becomes a subject of an operating lease
it is sold
it is assessed to have no future economic benefits
it becomes the subject of a finance lease
According to PAS 40, transfers to or from investment property shall be made only when there is a
change in management's intention.
change in use.
change in business model.
change in classification.
An entity that selects the cost model shall measure all of its investment property in accordance with PAS 16's requirements for that model, except
those classified as held-for-sale in accordance with PFRS 5 Non-Current Assets Held for Sale and Discontinued Operations.
those properties held for undetermined purpose.
a hotel owned by the entity and for which ABC Inc. provides security services for its guests' belongings.
a vacant building to be leased out under an operating lease
When a property under construction is completed and transferred to investment property to be carried at fair value, the measurement to fair value is recognized in profit or loss.
True
False
A property that is being constructed or developed for future use as investment property should be initially classified as property, plant, and equipment and reclassified to investment property upon completion
True
False
Statement I: Entities often enter into contracts to sell their biologic al assets or agricultural produce at a
future date. Contract prices may be used i n measuring fair value.
Statement II: A gain o r loss arising on initial recognition o f a biological asset at f air value less costs to
sell and from a change in fair value less costs to sell of a biological asset shall be included in the other
comprehensive income for the period in which it arises.
Both statements are true
Statement 1: True
Statement 2: False
Statement 1: False
Statement 2: True
Both statements are false
Statement I: In all cases, an entity measures agricultural produce at t he point of harvest at its fair value less costs to sell .
Statement II: A biological asset is a living animal or plant.
Both statements are true
Statement I: True
Statement II: False
Statement I: False
Statement II: True
Both statements are false
If an entity issues a complete set of financial statements in the interim report, those financial
statements should comply those financial statements should comply with PAS 1 Presentation of
Financial Statements instead of PAS 34 Interim Financial Reporting.
True
False
PAS 34 advanced the notion that materiality for interim reporting purposes may differ from that
defined in the context of an annual period.
True
False
PAS 34 requires disclosure of earnings per share (EPS) (both basic EPS and diluted EPS) on the face
of the interim statement of comprehensive income for covered entities under PAS 33 Earnings per
Share.
True
False
The International Accounting Standards Board (IASB) requires publicly traded entities to provide
interim financial reports at least at the end of the half year, and such reports are to be made available not later than 60 days after the end of the interim period.
True
False
An outflow of resources is regarded as probable if the event is more likely
than not to occur, meaning, the probability that the event will occur is greater than the
probability that it will not occur
True
False
Owner-occupied property is considered as an Investment Property.
True
False
Animals related to recreational activities, for example, game parks and zoos, including the natural breeding of animals in zoos, shall be accounted for under what standard?
PAS 41
PAS 40
PAS 16
d. Either PAS 41 or PAS 16
Where there is a long aging or maturation process after harvest of agricultural produce, the accounting for such products should be dealt with by
PAS 41
PAS 2
PAS 16
PAS 40
All of the following are classified as agricultural produce, except
Sugar
Wool
Cotton
Milk
For external reporting purposes, it is appropriate to use estimated gross profit rates to determine the cost of goods sold for
Interim financial reporting
Should not be reported
Year-end Financial Reporting
Both Interim Financial Reporting and Year-end Financial Reporting
PAS 34 presumes that anyone reading the interim financial reports will
Understand all Philippine Financial Reporting Standards
Have access to the most recent annual financial statements
Not make decisions based on the reports
Have access to the record of the entity
During the second quarter of 2020, ABC Co. sold a piece of equipment at a gain of P120,000. What portion of the gain should ABC report on its statement of comprehensive income for the second quarter of 2020?
P60,000
P40,000
P0
P120,000
ABC Co. has calculated that total depreciation expense for the year ending December 31, 2020 will amount to P600,000 and that 2020 year-end bonuses to employees will total P1,200,000. In ABC Co.’s interim statement of comprehensive income for the six months ended June 30, 2020, what is the total amount of expense relating to these two items that should be reported
P900,000
P1,800,000
P0
P300,000
ABC Co. incurs cost unevenly throughout the financial year. Advertising costs of P2million were incurred on February 29, 2020 and staff bonuses are paid at yearend based on sales. Staff bonuses are expected to be around P30million for the year. Of this amount, P7million would relate to the quarter ending March 31, 2020. What cost should be included for the quarter ended March 31, 2020?
Advertising cost – P0.5million ; Staff bonuses – P7.5million
Advertising cost – P0.5million ; Staff bonuses – P7.0million
Advertising cost – P2million ; Staff bonuses – P7.5million
Advertising cost – P2million ; Staff bonuses – P7.0million
In March 2020, ABC Co. estimated that its year-end bonus to executives would be P320,000 for 2020. The actual obligation paid for the yearend bonus for 2019 was P290,000. The estimate for 2020 is subject to yearend adjustment. What amount, if any, of expense should be reflected in ABC’s quarterly financial statement of comprehensive income for the three months ended March 31, 2020?
P 320,000
P 0
P 72,500
P 80,000
A building previously occupied by Grand Company with a cost of P10 million and an accumulated depreciation of P5.5 million is reclassified as investment property. At the time of reclassification, the building has a fair value of P5 million.
Using the fair value model, upon reclassification to investment property, at what amount should Grand record the investment property and what amount of gain is recognized in profit or loss, respectively?
P4.5 million and P500,000
P5 million and P0
P5 million and P500,000
P4.5 million and P0
Safe Ladies’ Home, Inc. owns a three-storey building along Asturias. The whole building, divided into smaller rooms, is being rented out to various lady bed spacers comprising of students, reviewees and employees. The building cost is P5,000,000 with accumulated depreciation of P1,500,000 as of December 31,2021. On this date, the building has a fair value of P5,500,000.
A new building constructed by another entity adjacent to the building of Safe Ladies’ Home, Inc. during 2021. Safe Ladies’ Home rented the fourth floor of the new building under operating lease and subleased the whole area to various bed spacers. At December 31,2021, the fair value of this fourth floor is P2,000,000 and Safe Ladies’ Home chose to report it as an investment property.
At what total amount should Safe Ladies’ Home report its investment property at December 31,2021?
P0
P3,500,000
P5,500,000
P7,500,000
Which of the following incorrectly describes the accounting for reversal of impairment?
An impairment loss recognized for an asset in prior years shall be reversed if its recoverable amount is higher that its current carrying amount, however, the increased carrying amount of the asset shall not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years.
If the asset is carried at revalued amount, any reversal of impairment shall be recognized in profit or loss only to the extent it reverses an unrecovered revaluation decrease and any excess is credited to revaluation surplus.
Reversal of impairment is usually recognized by debiting the related accumulated depreciation of the asset.
Reversal of impairment is never recognized in accounting.
The estimates of future cash flows in calculating the value in use include all the following, except
Future cash inflows from the continuing use of the asset
Future cash outflows to be incurred to generate the cash inflows from the continuing use of the asset.
Net cash flow received on the disposal of the asset at the end of its useful life
Future payments of income taxes
Naih Company is a producer of coffee. The entity is considering the valuation of harvested coffee beans. Industry practice is to value the coffee beans at market value and uses as reference a local publication “Accounting for Successful Farms”
On December 31, 2024, the entity has harvested coffee beans costing P3, 000,000 and with fair value less cost of disposal of P3, 500,000 at the point harvest.
Because of long aging and maturation process after harvest, the harvested coffee beans were still on hand on December 31, 2025. On such date, the fair value less cost of disposal is P3, 900,000 and the net realizable value is P3, 200,000.
2. What is the measurement of the coffee beans inventory on December 31, 2024?
P3,000,000
P3,500,000
P3,200,000
Answer not given
An impairment that relates to an asset that is carried at revalued amount shall
Be recognized in profit or loss
Be recognized in other comprehensive income
Be charged to the revaluation surplus account that relates to the asset.
First be charged to the revaluation surplus account that relates to the asset and any amount in excess of the related revaluation surplus shall be recognized in profit or loss.
The following information is made available by Robby Farms of its dairy livestock:
Carrying amount, January 1, 2023 P450,000
Fair value less cost to sell of livestock purchased
during the year 250,000
Increase in fair value less cost to sell attributable
to physical changes 220,000
Increase in fair value less cost to sell attributable
to price changes 64,000
Total selling price less cost to sell of livestock
sold during the period 290,000
At what amount should the biological assets on the statement of financial position be reported at December 31, 2023?
P1,274,000
P764,000
P694,000
P630,000
Silverchair Airlines purchased airline gate rights from Tomorrow International Airport for ₱2,000,000. The rights have a legal life of five years; however, Silverchair can extend the rights for another ten years over an indefinite number of extensions at a nominal cost. Silverchair intends and has the ability to make the extensions. Other owners of similar rights have made the right extensions in the past. Over what period of time should Silverchair amortize the gate rights?
5 years.
15 years
40 years.
The rights should not be amortized.
Which of the following is not dealt with by PAS 41 Agriculture?
The accounting for biological assets
The initial measurement of agricultural produce at the point of harvest
The processing of agricultural produce after harvesting
The accounting treatment of unconditional government grants related to biological assets
General contingencies or unspecified risks should
Be accrued in the financial statements and disclosed in the notes
Not be accrued in the financial statements and need not be disclosed in the notes.
Not be accrued in the financial statement but should be disclosed in the notes.
Be accrued in the financial statements but need not be disclosed in the notes.
In 2020, ABC Company started operations with an inventory costing P200,000. For the first quarter of 2020, the purchases and sales were as follows:
The goods are sold at 25% above cost. For interim statement purposes, the inventory at the end of January, February, and March, respectively are
P58,000; P30,000; P130,000
P70,000; P94,000; P0
P192,000; P408,000; P604,000
P187,500; P70,000; P207,750
