Angelica Rubios: Correct Answer. 1/1p

5/28/2021 Exam.
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Angelica Rubios 2021-05-26
32/40p
1.
An entity classified a noncurrent asset accounted for under the cost model as held for sale at the current year end. Because no
offers were received at an acceptable price, the entity decided at the end of next year not to sell the asset but to continue to use it.
The asset shall be measured at the end next year at what amount?
The lower of carrying amount and recoverable amount
The higher of carrying amount and recoverable amount
The higher of carrying amount on the basis that the asset had never been classified as held for sale and
recoverable amount
The lower of carrying amount on the basis that the asset had never been classified as held for sale and
recoverable amount
Correct answer. 1/1p
2.
A change in accounting policy requires what kind of adjustment to the financial statements?
Current period adjustments
Prospective adjustment
Retrospective adjustments
Current and prospective adjustment
3.
On January 1, 2019, ABC Company purchased a machine for P2,750,000. The machine was depreciated using the sum of years’
digits method based on a useful life of 10 years with no residual value. On January 1, 2020, the entity changed to the straight line
method of depreciation. What is the depreciation for 2020?
275,000
250,000
220,000
180,000
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4.
Close family members of an individual include all of the following, except
The individual’s spouse and children
Brothers and sisters of the individual
Children of the individual’s spouse
Dependents of the individual or individual’s spouse
5.
If the fair value less cost of disposal is lower than the carrying of a noncurrent asset classified as held for sale, the difference is
Not accounted for.
Accounted for as an impairment loss
Charged to depreciation
Debited to retained earnings
6.
Based from the information below, what amount should be reported as current provision for income tax expense in the income
statement for the current year?
60,000
45,000
50,000
0.00
7.

As an inducement to enter a lease, a lessor granted a lessee twelve months of free rent under a five-year operating lease. The lease
was effective at the beginning of the current year and provides for monthly rental payments to begin at the beginning of the next
year. The lessee made the first rental payment at the end of the current year. In the income statement for the current year, the
lessor shall report rent revenue equal to
Cash received during the current year
One-fourth of the total cash received
Zero
One-fifth of the total cash to be received over the life of the lease
8.
Short term employee benefits include all except

Wages, salaries and social security contributions
Short-term compensated absences
Nonmonetary benefits, such as medical care, housing, car and free subsidized goods
Profit-sharing and bonuses payable in more than twelve months after the end of the reporting period
9.
Refer to the information below. What amount should be reported as income or loss from discontinued operations?
100,000 Loss
200,000 Loss
700,000 Income
500,000 Income
10.

In accounting for a defined benefit plan
The liability is determined based upon variables that reflect current salary
The expense recognized each period is equal to the cash contribution to the plan
The employer responsibility is simply to make a contribution each year
An appropriate funding must be established to ensure that enough fund would be available at retirement
11.
The disclosure of accounting policies is important to financial statement users in determining
Net income for the year
The value of obsolete ending inventory
Whether accounting policies are consistently applied from year to year
Whether the working capital position is adequate for future operations
12.
These are differences that will result in future taxable amount in determining taxable profit of future periods when the carrying
amount of the asset or liability is recovered or settled
Permanent differences
Deductible temporary differences
Temporary differences
Taxable temporary differences
13.
On January 1, 2018, ABC Company purchased for P4,800,000 a machine with a useful life of ten years and a residual value of
P200,000. The machine was depreciated by the double declining balance. The entity changed to the straight line method on
January 1, 2020. The residual value did not change. What is the accumulated depreciation on December 31,2020?
1,728,000
2,087,000
1,380,000
2,112,000

14.
ABC Company carried a provision of P2,000,000 in the draft financial statements for the year ended December 31, 2020 in
relation to an unresolved court case. On January 31, 2021, when the financial statements for the year ended December 31, 2020
had not yet been authorized for issue, the case was settled and the court decided the final total damages to be paid by the entity at
P3,000,000. What amount should be adjusted on December 31,2020 in relation to this event?
None
1,000,000
2,000,000
3,000,000
15.
Refer to the information below. In Chandler Company’s December 31, 2020 balance sheet, the building
Should be reported separately as noncurrent asset held for disposal and valued at P5,500,000
Should be reported separately as noncurrent asset held for sale and valued at P4,800,000
Should be included among the property, plant and equipment at P5,000,000
Should be included as property, plant & equipment valued at P4,800,000
16.
When a component of an entity was discontinued during the current year, the loss on disposal should
Include associated employee termination cost
Exclude the associated employee relocation cost
Exclude operating loss for the period
Exclude associated lease cancelation cost
17.
On September 1, 2020, ABC Company approved a formal plan to sell a business segment. The sale will occur in February 2021.
The segment had operating income of P5,000,000 form January 1 to August 31, and P1,000,000 for the remainder of the year
2020. On December 31, 2020, the carrying amount of the segment was P8,000,000 and the recoverable amount was P10,000,000.
The income tax rate is 35%. How much will be reported as income from ordinary activities of the discontinued segment, net of
tax, for the year 2020?
5,440,000
3,900,000
3,400,000
2,040,000
18.
What is the presentation of the results from discontinued operation in the income statement?
The entity shall disclose a single amount on the face of the income statement below the income from
continuing operations.
The amounts from discontinued operations shall be broken down over each category of revenue and expense
Discontinued operations shall be shown as a movement on retained earnings
Discontinued operations shall be shown as a line item after gross income with the related tax being shown as part
of income tax expense
19.
On January 1, 2020, ABC Company agreed to grant its employees two weeks vacation each year with the stipulation that vacation
earned each year can be taken the following year. For the year ended December 31, 2020, the employees each earned an average
of P10,000 per week. Two hundred vacation weeks earned in 2020 were not taken during 2020. Wage rates for employees rose by
an average of 10% by the time vacation actually were taken in 2021. What amount of wages expense related to 2020 vacation
time should be reported in 2021?
2,200,000
2,000,000
200,000
0.00
20.
An entity made a public announcement of a commitment to a voluntary redundancy plan. The entity has an obligation to pay
employees that choose voluntary redundancy a lump sum equal to twice their gross annual salary. What is the obligation to pay
employees that choose voluntary redundancy?
A postemployment benefit
Other long-term employee benefit
A short-term employee benefit
A termination benefit
21.
An entity accounted for land using the revaluation model. On October 1, 2019, the entity classified a land as held for sale. At that
date, the carrying amount of the land was P5,000,000 and the balance in the revaluation surplus was P1,500,000. At the same
date, the fair value of the land was estimated at P5,500,000. The estimated cost of disposal is P100,000. On December 31, 2019,
the fair value less cost of disposal of the land did not change. On October 1, 2020, the land was sold for P7,000,000. What amount
should be reported as gain on disposal of land in 2020?
3,600,000
3,500,000
1,500,000
1,600,000
22.
Which of the following is the most likely item to result in a deferred tax asset?
Using accelerated depreciation for tax purposes but straight line depreciation for accounting purposes
Using the cost recovery method of recognizing construction revenue for tax purposes but using percentage of
completion method for financial reporting purposes
Unearned revenue
Prepaid expense
23.
ABC Company failed to accrue warranty cost of P100,000 on December 31, 2019.In addition, a change from straight line to
accelerated depreciation made at the beginning of 2020 resulted in a cumulative effect of P60,000 on retained earnings. What
pretax amount should be reported as prior period error in 2020?
160,000
100,000
60,000
0.00
24.
At the beginning of current year, ABC Company leased a building to XYZ Company under an operating lease for ten years at
P500,000 per year payable the first day of each lease year. ABC Company paid P150,000 to a real estate broker as initial direct
cost. The building is depreciated at P120,000 per year. ABC Company incurred insurance and property tax expense totaling
P90,000 for the current year. What is the net rent income for the current year?
350,000
290,000
275,000
365,000
25.
An entity accounted for noncurrent assets using the cost model. On July 1, 2020, the entity classified an equipment as held for
sale. At that date, the carrying amount was P5,000,000, the fair value was estimated at P3,500,000 and the cost of disposal at
P100,000. On December 31, 2020, the equipment was sold for net proceeds of P2,500,000. What amount should be reported as
impairment loss for 2020?
900,000
2,500,000
1,500,000
1,600,000
26.
All of the following events would be classified as non-adjusting events after reporting period, except

Destruction of a major production plant by fire
The entity entered into an agreement to purchase the currently leased office building
The entity announced the discontinuance of the assembly operation
A mistake was discovered in the calculation of the allowance for uncollectible accounts receivable
27.
Based from the information below, what amount should be reported as accrued vacation pay at year end?
29,000
14,000
15,000
0.00
28.
How should the effect of a change in accounting estimate be accounted for?
In the period of change and future periods if the change effects both
As a prior period adjustment to beginning retained earnings
By reporting proforma amounts for prior periods
By restating amounts reported in financial statements of prior periods
29.
A change from an accounting principle that is not generally accepted to one that is generally accepted should be reported as
Component of income from continuing operations
Component of discontinued operations
An adjustment of retained earnings
Component of other comprehensive income
30.
A change in reporting entity is accounted for as
Change in accounting estimate
Change in accounting policy
Prior period error
Net an accounting change
31.
When it is difficult to distinguish between a change in accounting estimate and a change in accounting policy, the change is
treated as
Change in accounting estimate with appropriate disclosure
Change in accounting policy
Correction of an error
Change in accounting policy with appropriate disclosure
32.
A change in accounting policy includes all of the following, except
The initial adoption of an accounting policy to carry asset at revalued amount.
The change from cost model to revaluation model in measuring property, plant and equipment.
A change in the measurement basis.
A change from one method of depreciation to a different method of depreciation.
33.
Which is the first step within the hierarchy of guidance when selecting accounting policies?

Apply a standard from IFRS if it specifically relates to the transaction.
Apply the requirements in IFRS dealing with similar and related issue.
Consider the applicability of the definitions, recognition criteria and measurement concepts in the Conceptual
Framework.
Consider the most recent pronouncements of other standard setting bodies.
34.
ABC Company had two operating divisions, one manufactures machinery and the other breeds and sells horses. Both divisions are
considered separate components. The horse division has been unprofitable and on November 15, 2020, the entity adopted a formal
plan to sell the division. At December 31, 2020, the component was considered held for sale. The sale was completed on April 30,
2021. On December 31, 2020, the carrying amount of the assets of the horse division was P2,500,000. On that date, the fair value
of the assets less cost of disposal was P2,000,000. The before-tax operating loss of the horse division for the year was P750,000.
The after-tax income from continuing operations of the entity for 2020 was P4,000,000. The income tax rate is 30%.

What amount should be reported as net income for 2020?
2,250,000
2,800,000
1,925,000
3,125,000
35.
Which statement is incorrect concerning the presentation of the discontinued operation in the statement of financial position?

Assets of the component held for sale are presented separately under current assets.
Assets of the component held for sale are measured at the lower between fair value less cost of disposal and
carrying amount.
Liabilities of the component held for sale are presented separately under current liabilities.
Depreciable assets of the component held for sale shall be depreciated.
36.
During the current year, ABC Company decided to change from the FIFO method of inventory valuation to the weighted average
method. Inventory balances under each method were as follows:
FIFO Weighted average
January 1 3,600,000 3,850,000
December 31 3,950,000 4,150,000

What amount should be reported as the pretax effect of the accounting change in the statement of changes in equity for the current
year?
250,000 addition
250,000 deduction
450,000 addition
450,000 dedeuction
37.
While preparing the financial statements for 2020, ABC Company discovered computational errors in the 2018 and 2019
depreciation expense. These errors resulted in overstatement of each year’s income by P50,000, net of income tax. The net income
for 2020 is correctly reported at P1,000,000.
The following amounts were reported in the previously issued financial statements:
2019 2018
Retained earnings, January 1 1.400,000 1.000,000
Net income 300.000 400,000
Retained earnings, December 31 1,700,000 .400,000
What is the balance of retained earnings on December 31. 2020?
2,600,000
2,700,000
2,800,000
2,650,000
38.
During the year ended December 31, 2020, the following events occurred at ABC Company:
a. It was decided to write off P400,000 from inventory which was over two years old as it was obsolete.
b. Sales of P500,000 had been omitted from the financial statements for the year ended December 31, 2019.

What amount should be reported as a prior period error in the financial statements for 2020?
900,000
500,000
400,000
100,000
39.
On October 1, 2020, ABC Company approved a formal plan to sell a business segment. The sale will occur on March 31, 2021.
The segment had income of P7,500,000 from January 1 to September 30 and P1,500,000 for the quarter ended December
31,2020. On December 31, 2020, the carrying amount of the assets of the segment was P12,000,000 and the fair value less cost of
disposal was P10,500,000. The income tax rate is 30%.

What amount should be reported as income from the discontinued segment for 2020?
9,000,000
6,300,000
5,250,000
7.500.000
40.
Why is an entity permitted to change an accounting policy?
The change would allow the entity to present a more favorable profit picture.
The change would result in the financial statements providing more reliable and relevant information about
financial position, financial performance and cash flows.
The change is made by the internal auditor.
The change is made by the CPA.

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What are the key concepts covered in the exam?

What are the key concepts covered in the exam?

What are some examples of accounting changes discussed?

What are some examples of accounting changes discussed?

5/28/2021 Exam.

net - Easy-to-use and secure digital exams

Angelica Rubios 2021-05-26

The lower of carrying amount and recoverable amount

The higher of carrying amount and recoverable amount

Correct answer. 1/1p

Current period adjustments

Current and prospective adjustment

Correct answer. 0/1p

Correct answer. 1/1p

The individual’s spouse and children

Brothers and sisters of the individual

Children of the individual’s spouse

Dependents of the individual or individual’s spouse

Correct answer. 1/1p

Not accounted for.

Accounted for as an impairment loss

Debited to retained earnings

Correct answer. 1/1p

Correct answer. 1/1p

Cash received during the current year

One-fourth of the total cash received

Correct answer. 1/1p

Wages, salaries and social security contributions

Short-term compensated absences

Correct answer. 1/1p

Correct answer. 1/1p

In accounting for a defined benefit plan

The employer responsibility is simply to make a contribution each year

Correct answer. 1/1p

Net income for the year

The value of obsolete ending inventory

Whether accounting policies are consistently applied from year to year

Whether the working capital position is adequate for future operations

Correct answer. 1/1p

Deductible temporary differences

Taxable temporary differences

Correct answer. 1/1p

Correct answer. 1/1p

Correct answer. 1/1p

Should be included among the property, plant and equipment at P5,000,000

Should be included as property, plant & equipment valued at P4,800,000

Correct answer. 0/1p

Include associated employee termination cost

Exclude the associated employee relocation cost

Exclude operating loss for the period

Exclude associated lease cancelation cost

Correct answer. 1/1p

Correct answer. 0/1p

Discontinued operations shall be shown as a movement on retained earnings

Correct answer. 1/1p

Correct answer. 1/1p

Other long-term employee benefit

A short-term employee benefit