1.

On October 1, 2014, AAA Company leased office space at a monthly rental of P350,000 for ten years expiring on
September 30,2024. Payment is made at the start of every month. As an inducement to enter into the lease, the
lessor permitted the lessee to occupy the premises rent-free from October 1, 2014 to December 31, 2014. On
December 31, 2015, what amount should be recognized as accrued rent payable?
a. 4,095,000 b. 1,023,750 c. 918,750 d. Zero
2. On January 1, 2014, AAA Company leased a building to a lessee under an operating lease for ten years at
P500,000 per year, payable the first day of each lease year. The lessor paid P150,000 to a real estate broker as a
finder fee. The building is depreciated P120,000 per year. The entity incurred insurance and property tax expense
totaling P90,000. What is the net rental income for 2014?
a. 365,000 b. 350,000 c. 290,000 d. 275,000
3. AAA Company leased machine on January 1, 2014 with the following information:
Annual rental payable at the beginning of each lease year P 400,000
Lease term 10 years
Useful life of machine 12 years
Implicit interest rate 14%
PV of an annuity of 1 in advance for 10 periods at 14% 5.95
PV of 1 for 10 periods at 14% 0.27
The entity has the option to purchase the machine on January 1, 2024 by paying P500,000 which approximates the
fair value of the machine on option exercise date. What amount should be recognized initially as lease liability?
a. 2,515,000 b. 2,380,000 c. 2,245,000 d. Zero
4. On January 1, 2014, AAA Company sold a computer system to Finance Company for P5,000,000 and immediately
leased the computer system back. The computer was carried on AAA’s books at a value of P4,400,000. The term
of the non-cancelable lease is 10 years and title will transfer to the lessee at the end of the lease term. The lease
agreement required equal rental payments of P830,000 at the end of each year. The implicit rate is 10%. The
computer has a fair value of P5,000,000 on January 1, 2014, and an estimated economic life of 12 years. AAA
Company paid executory costs of P100,000 for the year. What is the deferred gain on December 31, 2014?
a. 600,000 b. 550,000 c. 540,000 d. 440,000
5. AAA Company lease equipment with a ten-year useful life, from BBB Company on January 1, 2014 for an eight-year
period expiring December 31, 2022. Equal annual payments under the lease are P800,000 and are due on January
1 of each year. The first payment was made on January 1, 2014. The rate of interest contemplated by AAA and
BBB is 8%. The cash selling price of the equipment is P4,965,000 and the cost of the equipment on BBB’s
accounting records was P4,200,000. The lease provide for a bargain purchase option on the part of the lessee
upon the lease expiration. What total amount of expense should AAA recognize for the year ended December 31,
2014?
a. 953,825 b. 893,700 c. 829,700 d. 496,500
6. AAA Company reported the following information on December 31, 2014:
Ordinary share capital, P3 par P 600,000
Share premium 800,000
Treasury shares, at cost 50,000
Net unrealized loss on available-for-sale securities 20,000
Retained earnings appropriately for uninsured earthquake loss 150,000
Retained earnings unappropriated 200,000
What amount should be reported as total shareholders’ equity on December 31, 2014?
a. 1,820,000 b. 1,780,000 c. 1,720,000 d. 1,680,000
7. On January 1, 2010, Guess Company had 300,000 ordinary shares outstanding, P 100 par or a total par value of P
30,000,000. During 2010, Guess issued rights to acquire one ordinary share at P 100 in the ratio of one share for
every 5 shares held. The rights are exercised on March 31, 2010. The market value of each ordinary share
immediately prior to March 31, 2010 was P 160. The net income for 2010 was P 6,000,000.
What amount should be reported as basic earnings per share.
a. 18.75 b. 17.39 c. 17.14 d. 16.67
8. On December 31, 2014, AAA Company had 300,000 ordinary shares and 5%, 100 par value 10,000 cumulative
preference shares outstanding. No dividends were declared on either the preference or ordinary shares in 2014 or
2015. On January 30, 2016, prior to the issuance of financial statements for 2015, the entity declared a 100%
share dividend on ordinary shares. Net income for 2015 was P950,000. What amount of basic earnings per share
should be reported in the 2015 financial statements?
a. 3.17 b. 3.00 c. 1.58 d. 1.50
9. AAA Company sustained heavy losses for several years and underwent quasi-reorganization via recapitalization on
December 31, 2014. The entity provided the following information:
Fair Carrying
value amount
Inventory P 5,700,000 P 6,000,000
Equipment 7,200,000 8,000,000
The share capital is P6,000,000 with a P6 par value, share premium is P1,500,000 and the deficit is P6,200,000
before the adjustments. The par value is reduced by 1/3 of the original amount. What amount must the
shareholders contribute in order to eliminate the deficit?
a. 6,200,000 b. 3,800,000 c. 1,800,000 d. Zero
10. AAA Company sells products in reusable containers. The customer is charged a deposit for each container
delivered and receives a refund for each container returned within two years after the year of delivery. The entity
accounts for the containers not returned within the time limit as being retired by sale at the deposit amount.
Information for 2014 is as follows:
Container deposits on December 31, 2013 from deliveries in
2012 P 150,000
2013 430,000 P 580,000
Deposits for containers delivered in 2014 780,000
Deposits for containers returned in 2014 from deliveries in:
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 2012 90,000
2013 250,000
2014 286,000 626,000
On December 31, 2014, what amount should be reported as liability for deposits on returnable containers?
a. 734,000 b. 674,000 c. 584,000 d. 494,000
11. AAA Company offers a three-year warranty on its products. The entity previously estimated warranty costs to be
2% of sales. Due to a technological advance in production at the beginning of 2016, the entity now believes 1% of
sales to be a better estimate of warranty costs. Warranty costs of P80,000 and P96,000 were reported in 2014 and
2015, respectively. Sales for 2016 were P5,000,000. What is the warranty expense for 2016?
a. 138,000 b. 100,000 c. 88,000 d. 50,000
12. After three profitable years, AAA Company decided to offer a bonus to the branch manager of 25% of income over
P2,000,000 earned by the branch. The income for the branch was P3,500,000 before tax and before bonus for the
current year. The bonus is computed on income in excess of P2,000,000 after deducting the bonus but before
deducting tax. What is the bonus for the current year?
a. 700,000 b. 400,000 c. 375,000 d. 300,000
13. During 2014, AAA Company is the defendant in a patent infringement lawsuit. The lawyers believe there is a 30%
chance that the court will dismiss the case and the entity will incur no outflow of economic benefits. However, if
the court rules in favor of the claimant, the lawyers believe that there is a 20% chance that the entity will be
required to pay damages of P200,000 and an 80% chance that the entity will be required to pay damages of
P100,000. Other outcomes are unlikely. The court is expected to rule in late December 2015. There is no
indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability-weighted
expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An
appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95. What is the
measurement of the provision for lawsuit?
a. 89,880 b. 85,396 c. 36,594 d. Zero
14. On January 1, 2014, AAA Company issued 9% bonds in the amount of P500,000 which mature on January 1, 2024.
The bonds were issued for P469,500 to yield 10%. Interest is payable annually on December 31. The entity uses
the interest method of amortizing bond discount and does not elect the fair value option for reporting financial
liabilities. On June 30, 2014, what amount should be reported as bonds payable?
a. 500,000 b. 471,025 c. 470,475 d. 469,500
15. On January 1, 2014, AAA Co., acquired transportation equipment by paying cash of P400,000 and issuing a
noninterest-bearing note payable of P4,000,000 due on January 1, 2017. There is no cash price equivalent for the
equipment. The prevailing rate of interest for this type of note is 12%. How much is the interest expense in 2014?
a. 334,357 b. 341,656 c. 389,654 d. 480,000
16. On January 1, 2015, AAA Co. borrowed 10%, P4,000,000 loan from BBB Bank. Principal is due on January 1, 2018
but interests are due annually starting January 1, 2016. AAA was charged by the bank a 3% nonrefundable loan
origination fee representing service fee. How much is the carrying amount of the loan on initial recognition?
a. 3,720,00 b. 3,840,234 c. 3,880,000 d. 3,947,608
17. On January 1, 2015, AAA Co. issued 10%, P12,000,000 bonds at 105. Transaction costs incurred amounted to
P177,096. Principal on the bonds mature in three equal annual installments. Interest payments are also made
annually at each year-end. How much is the carrying amount of the bonds on December 31, 2015?
a. 8,216,735 b. 8,312,341 c. 8,793,368 d. 8,844,635
18. On January 1, 2015, AAA Co. issued 3-year, 10%, 1,000, P4,000 bonds at 97. Each bond has one detachable share
warrant entitling the holder to buy 10 shares of AAA with par value of P400 at P480 per share. Shortly after
issuance, the bonds are selling at 95 ex-warrants. Assuming half of the warrants were exercised on September 21,
2015, the net credit to “share premium” account is
a. 312,579 b. 400,000 c. 412,465 d. 440,000
19. On December 31, 20x1, AAA Co. issued 10,000 shares with par value of P400 per share in settlement of a
P4,000,000 loan payable with a related unamortized discount of P80,000, and accrued interest of P360,000. On
December 31, 20x1, the shares are selling at P480 per share and the prevailing rate for similar debt is 18%. How
much is the gain (loss) on the extinguishment of the debt?
a. 520,000 gain b. Zero c. 520,000 loss d. 880,000 loss
20. AAA Company declared and distributed a 15% share dividend with fair value of P5,000,000 and par value of
P4,000,000 and a 30% share dividend with a fair value of P10,000,000 and par value of P7,000,000. What amount
should be recognized as share premium from share dividend?
a. 4,000,000 b. 3,000,000 c. 1,000,000 d. Zero

21. AAA Company reported that assets decreased by P9,000,000 and liabilities also decreased by P16,000,000 in the
current year. It was determined that a financial asset at FVTOCI decreased by P400,000 due to fair value change
and an investment in associate increased by P600,000 due to share in the net income of the associate. The entity
received equipment valued at P500,000 from a shareholder as donation and corrected prior period error resulting
from an overstatement of ending inventory for P1,500,000. What is the net income for the current year?
a. 8,400,000 b. 8,000,000 c. 7,800,000 d. 6,900,000
22. AAA Company provided the following data for the year ended December 31, 2014:
Retained earnings unappropriated, January 1 P 200,000
Over-depreciation of 2013 due to prior period error 100,000
Net income for 2014 1,300,000
Retained earnings appropriated for treasury shares (original balance
is P500,000 but reduced by P200,000 by reason of reissuance
of the treasury shares) 300,000
Retained earnings appropriated for contingencies (beginning balance
P700,000, but increased by current appropriation of P100,000) 800,000
Cash dividends paid to shareholders 500,000
Change in accounting policy from FIFO to average – credit adjustment 150,000
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 What is the balance of unappropriated retained earnings on December 31, 2014?
a. 1,950,000 b. 1,750,000 c. 1,350,000 d. 1,150,000
23. AAA Company issued 20,000 ordinary shares of P5 par at P10 per share. On December, 2014, the retained
earnings amounted to P300,000. In March 2015, the entity reacquired 5,000 shares at P20 per share. In June
2015, the entity sold 1,000 of these shares to corporate officers for P25 per share. The cost method is used to
record treasury shares. Net income for 2015 was P60,000. On December 31, 2015, what amount should be
reported as retained earnings?
a. 380,000 b. 375,000 c. 360,000 d. 365,000
24. Kathleen Company prepared the following reconciliation for the first year of operations:
Pretax financial income for 2014 P 9,000,000
Tax-exempt interest revenue ( 750,000 )
Temporary difference ( 2,250,000 )
Taxable income 6,000,000
The temporary difference will reverse evenly in 2015 and 2016 at an enacted tax rate of 35% in 2015, and 32% in
2016. The tax rate for 2014 is 30%. What amount should be reported as deferred tax asset or liability on
December 31, 2014?
a. 753,750 liability b. 720,000 liability c. 753,750 asset d. 720,000 asset
25. AAA Company implemented a defined benefit plan on January 1, 2014. The following data are provided on
December 31, 2014:
Projected benefit obligation P 103,000
Plan assets at fair value 78,000
Net periodic pension cost 90,000
Employer’s contribution 70,000
What amount should be recorded as pension liability on December 31, 2014?
a. 45,000 b. 25,000 c. 20,000 d. Zero
26. AAA Company reported the following data on January 1, 2014 based on PAS 19R:
Projected benefit obligation 10,000,000
Fair value of plan asses 9,000,000
During the current year, the actuary determined the current service cost at P2,000,000 and interest cost at
P1,000,000. The interest income on plan assets was P900,000 while actual return on plan assets was P600,000.
There was a decrease in the projected benefit obligation due to changes in actuarial assumptions of P200,000.
The average remaining service period of the employees is 10 years. What is the defined benefit cost for the
current year?
a. 2,500,000 b. 2,200,000 c. 2,100,000 d. 2,000,000
27. On December 31, 2014, AAA Company reported fair value of plan assets P9,000,000 and project benefit obligation
P9,400,000. On December 31, 2015, the entity reported fair value of plan assets P9,900,000 and projected benefit
obligation P11,100,000. During 2015, contribution was P1,260,000 and benefits paid were P1,125,000. The
discount rate for 2014 and 2015 were 10% and 9%, respectively. What is the remeasurement gain or loss
attributable to plan assets for 2015?
a. 135,000 gain b. 45,000 gain c. 45,000 loss d. 135,000 loss
28. On January 1, 2014, before adoption of PAS 19R, AAA Company had a projected benefit obligation of P4,350,000
and pension plan assets with a fair value of P2,650,000. The entity had unrecognized past service cost of
P450,000 and an unrecognized actuarial gain of P150,000. The entity decided to adopt PAS 19R on January 1,
2014. What is included in the journal entry to effect the initial adoption on January 1, 2014 of PAS 19R?
a. Debit prepaid/accrued benefit cost P450,000 c. Debit expense P300,000
b. Debit retained earnings P300,000 d. No entry is necessary
29. Ella Company kept all cash in a checking account. An examination of the accounting records and bank statement
for the month ended June 30, 2017 revealed the following information:
 The cash balance per book on June 30 is P8,500,000.
 A deposit of P1,000,000 that was placed in the bank's night depository on June 30 does not appear on the bank
statement.
 The bank statement shows on June 30, the bank collected note for Ella and credited the proceeds of P950,000
to the entity's account.
 Checks outstanding on June 30 amount to P300,000.
 Aries discovered that a check written in June for P200,000 in payment of an account payable, had been
recorded in the entity's records as P20,000.
 Included with the June bank statement was NSF check for P250,000 that Ella had received from a customer on
June 26.
 The bank statement shows a P20,000 service charge for June.
What amount should be reported as cash in bank on June 30, 2017?
a. 9,360,000 b. 9,180,000 c. 9,000,000 d. 8,300,000
30. Ingente Company provided the following data for the year ended December 31, 2017:
Purchases on account P 3,900,000
Sales on account 3,600,000
Payments to creditors 3,200,000
Collections received to settle accounts 2,450,000
Notes received to settle accounts 400,000
Discounts allowed by creditors 260,000
Notes given to creditors in settlement of accounts 250,000
Collections received in settlement of notes 180,000
Payments on notes payable 100,000
Provision for doubtful accounts 90,000
Merchandise returned to suppliers 70,000
Discounts taken by customers 40,000
Accounts receivable determined to be worthless 25,000
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 Merchandise returned by customer 15,000
What is the net realizable value of accounts receivable on December 31, 2017?
a. 890,000 b. 825,000 c. 670,000 d. 605,000
31. On December 31, 2017, Park Company sold used equipment and received a noninterest-bearing note requiring
payment of P500,000 annually for ten years. The first payment is due December 31, 2018 and the prevailing rate
of interest for this type of note at date of issuance is 12%. The present value of an ordinary annuity of 1 at 12% for
10 periods is 5.65. On December 31, 2017, what is the carrying amount of the note receivable?
a. 5,000,000 b. 2,825,000 c. 2,175,000 d. 1,610,000
32. Kew Company reported accounts payable on December 31, 2017 at P2,200,000 before considering the following
data:
 On December 27, 2017, a vendor authorized Kew to return, for full credit, goods shipped and billed at P70,000
on December 3, 2017. The returned goods were shipped by Kew on December 28, 2017. A P70,000 credit
memo was received and recorded by Kew on January 5, 2018.
 Goods shipped to Kew F.O.B. shipping point on December 22, 2017, were lost in transit. The invoice cost of
P40,000 was not recorded by Kew. On January 7, 2018, Kew filed a P40,000 claim against the common carrier.
 On December 31, 2017, Kew has a P500,000 debit balance in accounts payable to Ross, a supplier, resulting
from a P500,000 advance payment for goods to be manufactured.
What amount should be reported as accounts payable on December 31, 2017?
a. 2,730,000 b. 2,680,000 c. 2,670,000 d. 2,170,000
33. On April 1, 2013, Crystal and Hannah Company purchased P5,000,000 face value 9%. Treasury notes for
P4,962,500 including accrued interest of P112,500. The notes mature on July 1, 2014 and pay interest
semiannually. Crystal and Hannah intends to hold the notes to maturity. In its October 31, 2013 balance sheet, the
carrying amount of this investment should be
a. P4,975,000 b. P4,930,000 c. P4,920,000 d. P4,850,000
34. Dyela and Josel Company received dividends from its common stock investments during the year 2013 as follows:
 A stock dividend of 20,000 shares from A Company when the market price of A’s shares was P30 per share.
 A cash dividend of P2,000,000 from B Company in which Dyela and Josel owns a 20% interest.
 A cash dividend of P1,500,000 from C Company in which Dyela and Josel owns a 10% interest.
 10,000 shares of common stock of D Company in lieu of cash dividend of P20 per share. The market price of D
Company’s shares was P180. Dyela and Josel holds originally 100,000 shares of D Company common stock.
Dyela and Josel owns 5% interest in D Company.
What amount of dividend revenue should Dyela and Josel report in its 2013 income statement?
a. 2,500,000 b. 3,300,000 c. 3,500,000 d. 5,300,000
35. Neil and Gayla Company purchased trading equity securities. The cost and market value at December 31, 2013
were:
Security Cost Market
A – 20,000 shares P 2,000,000 P 2,500,000
B – 40,000 shares 4,000,000 3,000,000
C – 60,000 shares 6,000,000 5,500,000
Neil and Gayla sold 60,000 shares of Security C on January 31, 2014, for P5,000,000, incurring P100,000 in
brokerage commission and taxes. On the sale, Neil and Gayla should report a realized loss of
a. P500,000 b. P600,000 c. P1,000,000 d. P1,100,000
36. Information about Michelle and Princess Company’s portfolio of investment in equity securities classified as FVOCI
is:
Aggregate cost – December P9,000,0
31, 2014 00
Unrealized gains– December 500,000
31, 2014
Unrealized losses – December 2,000,00
31, 2014 0
Net unrealized gains during 300,000
2014
On January 1, 2014 Michelle and Princess reported an unrealized loss of P400,000 as a component of stockholders’
equity. In its December 31, 2014 stockholders’ equity, Michelle and Princess should report what amount of
unrealized loss?
a. P1,100,000 b. P1,200,000 c. P1,500,000 d. P2,000,000
37. On January 1, 2013, Emie and Cesar Co. purchased 25% of Marichen Corp.'s ordinary shares; no goodwill resulted
from the purchase. Emie and Cesar appropriately carries this investment at equity and the balance in Emie and
Cesar’s investment account was P480,000 at December 31, 2013. Marichen reported net income of P300,000 for
the year ended December 31, 2013, and paid dividends totaling P120,000 during 2013. How much did Emie and
Cesar pay for its 25% interest in Marichen?
a. P435,000 b. P510,000 c. P525,000 d. P585,000
38. On July 1, 2013, Kath and Aira, Inc, paid P1,000,000 for 100,000 ordinary shares (40%) of Almira Corporation. At
that date the net assets of Almira totaled P2,500,000 and the fair values of all of Almira's identifiable assets and
liabilities were equal to their book values. Almira reported net income of P500,000 for the year ended December
31, 2013, of which P300,000 was for the six months ended December 31, 2013. Almira paid cash dividends of
P250,000 on September 30, 2013. Kath and Aira does not elect the fair value option for reporting its investment in
Almira. In its income statement for the year ended December 31, 2013, what amount of income should Kath and
Aira report from its investments in Almira?
a. P80,000 b. P100,000 c. P120,000 d. P200,000
Use the following to answer the next two questions
Fantasy Company has the following capital structure at the beginning of 2013
6% Cumulative, fully-participating preferred stock, P50 par value, 50,000 shares authorized, 12,000
shares issued and outstanding P
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 600,00
0
Common stock, P10 par value, 200,000 authorized; 147,500 issued and outstanding 1,475,0
00
Additional paid-in capital in excess of par – preferred 180,00
0
Additional paid-in capital in excess of par – common 1,180,0
00
Retained earnings (P2,500,000 appropriated for plant expansion) 4,500,0
00
7,935,000

During 2013 the following transactions occurred:

February 11 Fantasy Company acquired 6,000 preferred shares at P70 per share and 40,000 common
shares at P22 per share. Fantasy Company is using the cost-method in recording treasury
shares
March 31 Issued 2,000 preferred treasury shares at P73 per share
April 7 Issued 15,000 common treasury shares at P25 per share
July 1 Issued 1,500 preferred treasury shares at P68 per share & 20,000 common treasury shares
at P19 per share
August 15 Retired the remaining preferred and common treasury shares
September 1 Plant expansion was completed
November 22 Board of directors appropriated P2,000,000 for plant expansion in Mactan, Cebu. Likewise,
the Board issued a 3-year, 10% P1,500,000 face value bonds to partially fund the
construction. A sinking fund was set-up for the extinguishment of the bonds at their
maturity
December 31 Net income for the period P1,400,000. Total cash dividend declared and paid P500,000. No
dividends have been declared in 2012. A property dividend was likewise declared, the
distribution of which is on January 6, 2014. The carrying amount of the property declared as
dividend was P800,000; the fair value of which was P1,000,000
39. The total stockholders’ equity at December 31, 2013 is
a. 8,038,000 b. 7,738,000 c. 7,538,000 d. 7,118,000
40. Upon the retirement of the common shares, retained earnings shall be debited by
a. 20,000 b. 17,000 c. 14,000 d. 0
41. According to PAS 37, Provisions, contingent liabilities and contingent assets for which of the following should a
provision be recognized?
a. Future operating losses c. Obligations under insurance contracts
b. Obligation for plant decommissioning costs d. Reduction in fair value of financial instruments
42. Proceeds from an issue of debt securities having share warrants should not be allocated between debt and equity
features when
a. The fair value of the warrants is not readily available.
b. Exercise of the warrants within the next few fiscal periods seems remote.
c. The warrants issued with the debt are non-detachable.
d. Proceeds should be allocated between debt and equity for all of these.
43. Which of the following is the best description of the current PFRS approach to inter-period tax allocation?
a. The asset-liability method c. Partial allocation
b. The enacted method d. An application of the matching concept
44. ABC Company’s financial reporting basis of its plant assets exceeded the tax basis because it uses a different
method of reporting depreciation for financial reporting purposes and tax purposes. If there is no other temporary
differences, ABC should report a
a. current tax asset b. current tax payable c. deferred tax asset d. deferred tax liability
45. The following are based on PAS 12 (Income Taxes):
Statement 1. A deferred tax asset shall be recognized for the carry forward of unused tax losses and unused tax
credits to the extent that it is probable that future taxable profit will be available against which the unused tax
losses and unused tax credits can be utilized.
Statement 2. Current tax liabilities (assets) for the current and prior periods shall be measured at the amount
expected to be paid (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been
enacted or substantially enacted by the end of the reporting period.
Statement 3. Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to
the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period.
a. False, true, true b. True, false, true c. True, true, false d. True, true, true
46. The basic accounting issue for a lessor is
a. revenue recognition during the lease term c. computing depreciation over the lease term
b. expense recognition during the lease term d. determination of the cost of the leased asset
47. Which of the following best describes current practice in accounting for leases?
a. All leases are capitalized.
b. Leases are not capitalized.
c. All long-term leases are capitalized.
d. Leases similar to installment purchases are capitalized.
48. Solar Company leases a warehouse with adjoining land for a period of 15 years. The fair values of the leasehold
interest in the land and of the warehouse are P502,000 and P251,000, respectively. The land has an indefinite
economic life whereas the warehouse has a useful life of 15 years. Title to the land is not expected to pass at the
end of the lease. Under PAS 17, Leases, what is the accounting treatment of these leased assets?
Land Warehouse Land Warehouse
a. Finance Finance c. Operating Finance
b. Finance Operating d. Operating Operating
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 49. One characteristic of a corporation is
a. unlimited liability of its owners c. the ease with which ownership is transferred
b. dissolution upon the death of an owner d. shareholders acting as corporate agents
50. Preference share that has the most restrictive feature is
a. Fully participating, nonvoting c. Noncumulative, nonparticipating, nonvoting
b. Nonparticipating, cumulative, nonvoting d. Noncumulative, fully participating, nonvoting
51. Company A issues preference shares to Company B, the terms of which entitle party B to redeem the preference
shares for cash if Company A’s revenues fall below a specified level. From Company A’s perspective the
preference shares are
a. a financial liability c. an equity instrument
b. a financial asset d. a compound financial instrument
52. Younger Company has outstanding both ordinary shares and nonparticipating, non-cumulative preference shares.
The liquidation value of the preference shares is equal to its par value. The book value per share of the ordinary
shares is unaffected by
a. The declaration of a share dividend on ordinary shares payable in ordinary shares when the market price of the
ordinary shares is equal to its par value.
b. The declaration of a share dividend on preference payable in preference shares when the market price of the
preference is equal to its par value.
c. The payment of a previously declared cash dividend on the ordinary shares.
d. A 2-for-1 split of the ordinary shares.
53. Which of the following would be most indicative of a simple capital structure?
a. Equity represented materially by liquid assets
b. Earnings derived from one primary line of business
c. Ownership interests consisting solely of common stock
d. Common stock, preferred stock, and convertible securities outstanding
54. A note receivable bearing a reasonable interest rate is sold to a bank with recourse. The note receivable
discounted account was appropriately credited. The note receivable discounted account should be reported as
a. Contra asset account for the proceeds from the discounting transaction
b. Liability account for the proceeds from the discounting transaction
c. Contra asset account for the face amount of the note
d. Liability account for the face of the note
55. Which of the following methods of determining bad debt expense most closely matches expense to revenue?
a. Charging bad debts with a percentage of sales for that period
b. Charging bad debts only as accounts become worthless or uncollectible
c. Estimating the allowance for doubtful accounts by aging the accounts receivable
d. Estimating the allowance for doubtful accounts as a percentage of accounts receivable
56. When a specific customer’s account is written off as un-collectible, what will be the effect under each method of
providing bad debts?
a. increase in expense; decrease in current assets under allowance method
b. increase in expense; no effect on current assets under allowance method
c. no effect on income; decrease in current assets under direct method
d. decrease in income; decrease in current assets under direct method
57. Which one is not a financial asset?
a. Cash
b. An equity instrument of another enterprise
c. To deliver cash or other financial asset to another enterprise
d. A contractual right to exchange financial instrument with another enterprise under conditions that are
potentially favorable
58. “Trading securities” are
a. Debt securities acquired with the positive intent and ability of holding them until maturity.
b. Financial assets with fixed or determinable payments that are not quoted in an active market.
c. Debt and equity securities acquired by the enterprise with the intent of selling them in the “near term” or very
soon
d. Debt and equity securities that are purchased and held indefinitely and will be available to be sold in response
to liquidity needs.
59. Which of the following are regarded as financial instruments:
I. Raw materials inventories;
II. Deposits held by a financial institution;
III. Ordinary shares;
IV. Accounts receivable and accounts payable.
V. Property, plant and equipment.
a. I, II, IV and V only b. II, III and IV only c. I, II and V only d. I, IV and V only
60. PFRS requires that financial investment be initially measured at:
a. Fair value c. Discounted future cash outflows
b. Fair value plus transaction costs d. Discounted future net cash flows
61. Which category includes only debt securities?
a. Unquoted equity securities
b. Financial assets at amortized cost
c. Financial assets at fair value through profit or loss
d. Financial assets at fair value through comprehensive income
62. If the price of the underlying is greater than the strike or exercise price of the underlying, the call option is
a. At the money b. In the money c. On the money d. Out of the money
63.study
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 a.Separates an embedded derivative from its host contract
b.Protects an entity from loss by entering into a transaction
c.Is the interaction of the price or rate with an associated or liability
d.Includes entering into agreements between two counterparties to exchange cash flows over specified period of
time in the future
64. PAS 19 does not prescribe the accounting treatment for
a. contributions to defined contribution post-employment benefit funds.
b. contributions received by a defined contribution post-employment benefit fund.
c. assets arising from defined benefit post-employment benefit plans from the perspective of the employer.
d. liabilities arising from defined benefit post-employment benefit plans from the perspective of the employer.
65. Under PAS 19, which of the following terms best describes benefits which are payable as a result of an entity’s
decision to end an employee’s employment before the normal retirement date?
a. Defined benefit plans c. Retrenchment benefits.
b. Post employment benefits d. Termination benefits.
66. The vested benefits of an employer represent benefits
a. accumulated in the hands of an independent trustee.
b. to be paid to the retired employee in the current year.
c. to be paid to the retired employee in the subsequent year.
d. that are not contingent on the employer’s continuing in the serve of the employer.
67. An employer’s obligation for post-retirement health benefits that are expected to be provided to an employee must
be fully accrued by the date the
a. benefits are paid c. benefits are utilized
b. employee retires d. employee is fully eligible for benefits
68. Benefits paid to members of a defined contribution post-employment fund are based on
I. the level of contributions made to the fund. III. number of years service.
II. remuneration levels while employed. IV. investment returns generated by the fund.
a. I and II only b. I and IV only c. II and III only d. III and IV only
69. Which of the following methods is used in PFRS to account for defined benefit pension plans?
a. Accumulated benefits method c. Projected-unit-credit method
b. Benefit-years-of-service method d. Vested years of service method
70. Under revised PAS 19, “service cost” comprises
a. current service cost only.
b. current service cost and past service cost.
c. current service cost and gain or loss on settlement.
d. current service cost, past service cost and any gain or loss on settlement.
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