F-ACAD-22B

ACC2 – Conceptual Framework and Accounting Standards

Final Examination
2nd Semester; AY 2018-2019

NAME: Date:

Professor: Section: Score:

PART I. MULTIPLE CHOICE

Choose the best answer. Write the letter of your answer in the following questions beside every
question number. WRITE YOUR ANSWERS IN CAPITAL LETTER.

1. The law that regulates the practice of accounting in the Philippines is the Philippine
Accountancy Act of 2004 also known as
A. R.A. Blg. 69
B. R.A No. 8299
C. R.A. No 9892
D. R.A. No. 9298

2. The Board of Accountancy (BOA) shall be composed of

A. Chairman and fifteen (15) members
B. Chairman and seventeen (17) members
C. Chairman and six (6) members for a total of seven (7) individuals
D. Six (6) members with a Chairman for a total of six (6) individuals

3. Issuing of accounting standards is the responsibility of the

A. PICPA
B. FRSC
C. AASC
D. CPE Council

4. The foundation of the conceptual framework is formed from

A. The qualitative characteristics that makes information useful to users
B. The objective of general purpose financial reporting
C. The concept of reporting entity
D. The various measurement requirements which results to fair presented financial
information

5. What is the objective of financial statements according to the conceptual framework?

A. To provide information about the financial position, performance, and changes in
financial position of an entity that is useful to a wide range of users in making
economic decisions

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B. To prepare and present a balance sheet, an income statement, a cash flow

statement, and a statement of changes in equity
C. To prepare and present comparable, relevant, reliable, and understandable
information to investors and creditors
D. To prepare financial statements in accordance with all applicable standards and
interpretations

6. Who has the primary responsibility for the preparation and presentation of the financial
statements of an entity?
A. Board of Directors
B. Management
C. Accountant
D. Shareholder

7. Which of the following is the pervasive constraint under the Conceptual Framework?
A. Timeliness
B. Cost constraint
C. Balance between qualitative charecteristics
D. All of the choices

8. One of the fundamental qualitative characteristics of financial statements is

A. Relevance
B. Timeliness
C. Neutrality
D. Completeness

9. Comparability is sometimes sacrificed for

A. Reliability
B. Conservatism
C. Objectivity
D. Relevance

10. The going concern assumption

A. Means the entity will continue to exist forever
B. Supports the valuation of assets using historical costs and fair values but do not
support valuation in a forced sale transaction
C. Requires that capital expenditures be immediately recognized as expense
D. Is always maintained by all entities

11. The assets of a liquidating entity should be shown on the balance sheet at their
A. Historical cost
B. Fair value
C. Realizable value
D. Current cost
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12. The valuation of a promise to receive cash in the future at present value on the financial
statements of a company is valid because of the accounting concept of
A. Entity
B. Materiality
C. Going concern
D. Neutrality

13. According to the framework, the objectives of financial reportingfor business entitiesare
based
A. GAAP
B. The needs of the users of the information
C. The need for conservatism
D. Reporting on management’s stewardship

14. Equipment is measured initially at

A. Fair Value
B. Realizable cost
C. Current cost
D. Historical cost

15. The particular basis of measurement financial capital maintenance concept requires the
use of
A. Historical cost
B. Current cost
C. Nominal cost
D. No particular basis

16. Inventories are assets ( choose the incorrect one )

A. Held for sale in the ordinary course of business
B. Held for use in the production or supply of goods or services
C. In the process of production for sale
D. In the form of materials or supplies to be consumed in the production process or in
the rendering of services.

17. Ownership over inventories is normally transferred to the buyer

A. When legal title to the inventories is transferred
B. When the purchase price is fully paid
C. Upon shipment of the goods by the seller to the buyer
D. Upon filling-up the sales order

18. Who owns the goods in transit under FOB shipping point?
A. buyer
B. seller
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C. either A or A
D. none

19. Costs of delivering consigned goods to the consignee should be

A. Expensed immediately
B. Capitalized and included in the inventory of the consignee
C. Capitalized and included in the inventory of the consignor
D. Recorded be the consignor through memo entry

20. Which obligations are classified as current even if these are due to be settled after more
than twelve months from the end of the reporting period?
A. Trade payables and accruals for employee and other operating cost
B. Current portion of interest-bearing liabilities
C. Bank overdrafts
D. Dividends payable

21. Current and noncurrent presentation of assets and liabilities provides useful information
when the entity
A. Supplies goods or services within a clearly identifiable operating cycle
B. Is a financial institution
C. Is a public utility
D. Is a non-profit organization

22. Which of the following components of OCI should be reclassified to retained earnings?
A. Revaluation surplus
B. Remeasurements of defined benefit plan
C. Gain or loss attributable to credit risk of a financial liability designated at fair value
through profit or loss
D. All of these components of OCI should be reclassified to retained earnings

23. The two-statement approach of presenting comprehensive income is preparing

A. A comparative statement of comprehensive income
B. A combined statement of comprehensive income and retained earnings
C. A combined income statement and a statement of changes in equity
D. A separate income statement and a separate statement of comprehensive income

24. Cash payments to acquire equity instruments are

A. Cash outflows for investing activities
B. Cash outflows for financing activities
C. Cash inflows from investing activities
D. Cash inflows from financing activities

25. Cash advances and loans made by a financial institution are usually classified as
A. Investing activities
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B. Financing activities
C. Operating activities
D. Component of cash and cash equivalents

26. Accounting changes are often made even though this may be a violation of the
accounting concept of
A. Materiality
B. Prudence
C. Consistency
D. Objectivity

27. Which is not classified as an accounting change?

A. change in accounting policy
B. change in accounting estimate
C. error in the financial statements
D. all of these are classified as an accounting change

28. a change in accounting policy requires what kind of adjustment to the financial
statements?
A. Current period adjustment
B. Prospective adjustment
C. Retrospective adjustment
D. Current and prospective adjustment

29. Which event after the reporting period would require disclosure in the financial
statement?
A. Retirement of the president
B. Issue of a large amount of ordinary shares
C. Strike employees
D. None of the choices

30. Non-adjusting events after reporting period that require disclosure include all of the
following, except
A. A major business combination after reporting period
B. Announcing a plan to discontinue an operation
C. Destruction of a major production plant by a fire before the end of the reporting
period
D. Expropriation of a major asset after reporting period

31. The financial statements are authorized for issue

A. When the financial statements are made available to shareholders.
B. When the board of directors reviews the financial statements and authorizes them for
issue.
C. When the shareholders approve the financial statements at their annual meeting
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D. When the approved financial statements are filed with a regulatory body.

32. When property is acquired by issuing equity shares, which of the following is the best
basis for establishing the historical cost of the acquired asset?
A. Historical cost of the asset to the seller
B. Historical cost of a similar asset
C. Fair value of the asset received
D. Fair value of shares issued

33. The cost of property, plant and equipment comprises the purchase price and
A. The implied interest on the debt financing
B. The fair value of any noncash asset surrendered
C. The estimated residual value of the asset
D. All directly attributable costs necessary to bring the asset to the location and
condition for the intended use

34. Which cost should be expensed immediately?

A. Administrative overhead
B. Initial operating loss
C. Cost of relocating part of an entity’s operation
D. All of these are expensed immediately

35. In an exchange with commercial substance

A. Gain or loss is not recognized
B. Gain or loss is recognized entirely
C. Only gain should be recognized
D. Only loss should be recognized

36. This is defined as assistance by government in the form of transfer of resources to an

entity in return for past or future compliance with certain conditions relating to the
operating activities of the entity.
A. Government assistance
B. Government aid
C. Government grant
D. Corruption

37. The period of time during which interest (borrowing cost) must be capitalized ends
when
A. No further interest is being incurred
B. The asset is substantially complete and ready for the intended use
C. The asset is abandoned, sold or fully depreciated
D. The activities that are necessary to get the asset ready for the intended use have
begun.

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38. Which of the following would not be considered key management personnel
compensation?
A. Reimbursement of out-of-pocket expenses
B. Termination benefits
C. Share-based payments
D. Short-term benefits

39. It is an entity over which the investor has significant influence.

A. Investee
B. Associate
C. Venture capital organization
D. Mutual fund

40. Goodwill arising from an investment in associate is

A. Charged to expense immediately
B. Charged to retained earnings
C. Included in the carrying amount of the investment and amortized over the useful life
D. Included in the carrying amount of the investment and not amortized

41. Under the equity method of accounting for investments, an investor recognizes its share
of the earnings in the period in which the
A. Investor sells the investment
B. Investee declares a dividend
C. Earnings are reported by the investee
D. Investee pays dividend

42. An interim financial report contains

A. A complete set of financial statements
B. A condensed set of financial statements
C. Either a complete set or condensed set of financial statements
D. Neither a complete set or condensed set of financial statements

43. Which statement best describes “impairment loss”?

A. The amount by which the carrying amount of an asset exceeds the recoverable
amount.
B. The removal of an asset from the statement of financial position.
C. The systematic allocation of cost of an asset less residual value over the useful life.
D. The amount by which the recoverable amount of an asset exceeds the carrying
amount.

44. After initial recognition, an intangible asset shall be measured using

A. Cost model
B. Revaluation model
C. Cost model or revaluation model
D. Cost model or fair value model

45. What is the method of amortizing intangible asset?

A. The straight line method, unless the pattern of the economic benefits can be
determined reliably
B. The double declining balance in all circumstances
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C. A subjective amount of periodic amortization

D. The straight line method in all circumstances

46. One factor that is not considered in determining the useful life of an intangible asset is
A. Provision for renewal or extension
B. Legal life
C. Expected action of competitors
D. Residual value

47. Factors in determining the useful life of an intangible asset include all, except
A. The amortization method
B. The expected use of the asset
C. Any legal or contractual provision
D. Any provision for renewal or extension of the legal life

48. Transfer from investment property (IP) to property, plant and equipment (PPE) is
appropriate
A. When there is a change in use
B. Based on the entity’s discretion
C. Only when the entity adopts the fair value model
D. Only when the entity adopts the revaluation model

49. When the entity uses the cost model, transfer between IP and owner-occupied property
shall be accounted for at
A. Fair value
B. Carrying amount
C. Cost
D. Assessed value

50. The distinguishing characteristic that identifies an investment property from other assets
of an entity is?
A. Changes in fair value of the asset is charged to other comprehensive income
B. The property does not derive cash flows separate from other entities.
C. Generates separately identifiable cash flows from other assets of the entities
D. Earns rental as part of the ordinary operation of the entity.

51. Investment property is initially recognized at

A. Cost
B. Fair value
C. Fair value plus transaction cost
D. Cost if the entity follows the cost method; fair value if the entity follows the fair value
method

52. Agricultural activity includes all of the following, except

A. Raising livestock
B. Perennial cropping
C. aquaculture
D. ocean fishing

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53. Generally speaking, biological assets relating to agricultural activity shall be measured
using
A. Historical cost
B. Historical cost less depreciation less impairment
C. Net realizable value
D. A fair value approach

54. A gain or loss arising on the initial recognition of a biological asset and from a change in
the fair value less cost of disposal of a biological asset shall be included in
A. Other comprehensive income
B. The profit or loss for the period
C. A revaluation reserve
D. Retained earnings

55. All of the following would be classified as biological asset, except

A. Dairy cattle
B. Tree
C. Chicken
D. Egg

56. It is the aggregate amount included in the determination of profit for the period in respect
of current tax and deferred tax.
A. Current tax expense
B. Income tax expense
C. Deferred tax expense
D. Deferred tax benefit

57. Which component of defined contribution cost shall be recognized through other
comprehensive income?
A. Remeasurements
B. Net interest
C. Past service cost
D. Current service cost

58. Financial accounting is concerned with

A. Special reports for inventory management
B. Special reports for income tax computation
C. General purpose reports on changes in share prices
D. General purpose reports on financial position and financial performance

59. The initial operating loss should be

A. Deferred and amortized over a reasonable period.
B. Expensed and charged to the income statement.
C. Capitalized as part of the cost of plant.
D. Charged to retained earnings.

60. Who is the incumbent Professional Regulatory Board of Accountancy Chairman?

A. Dr. Niña Macarandang
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B. Dr. Jose Rizal

C. Dr. Hernando Perez
D. Dr. Noe Quiñanola

~End of examination~

“The lord is my shepherd, I lack nothing.”

~Psalms 23:1~

Godspeed your journey in this challenging but wonderful life!J

~Clay Perez~

Prepared by: Checked by:

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Mr. Clieford T. Perez, CPA Ms. Rosalina Castillo, MBA, CPA

Instructor Department Chairperson

Approved by:

Dr. Niña B. Macarandang

Dean

Answer Key

Final Exam in ACC 2

1. D
2. C

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