EXERCISE 6 – INTERIM FINANCIAL REPORTING

1. An interim financial report contains

a. neither a compete set nor condensed set of financial statements

b. either a complete set or condensed set of financial statements
c. a condensed set of financial statements
d. a complete set of financial statements

2. Which statement in relation to an interim financial report is true?

a. An interim financial report must consist of condensed set of financial statements

b. An interim financial report must consist of a complete set of financial statements
c. All of these statements are true
d. An interim financial report may consist of a condensed set or compete set of financial statements

3. Which statement is true regarding interim reporting?

a. Interim reports require the preparation of only a statement of earnings and a statement of financial position
b. Interim reports are required on a quarterly basis
c. The independent view is required for interim financial statements
d. Interim reports are not required

4. Choose the correct statement concerning GAAP as it relates to interim reports for business enterprises.

a. Interim reports are required for business enterprises

b. Reports for four interim periods must be published if any interim reports are published
c. Interim reports are optional for many enterprises. But are subject to PFRS if published
d. Interim reports must be 3 months long

5. Which entries are required by PAS 34 to present interim financial reports?

I - Publicly listed entities

II - Private entities

a. I only
b. Both I and II
c. Neither I nor II
d. II only

6. Interim financial reports shall be published

a. On a quarterly basis
b. Within a month of the half year-end
c. Once a year at any time during the year
d. Whenever the entity wishes

7. Which statement about interim reporting is true?

a. A complete set of financial statements must be presented for an interim period

b. The same accounting principles used for the annual report should be employed for interim report
c. The integral view is the appropriate approach in preparing interim financial report
d. All entities that issue an annual report should issue interim financial report

8. Which statement is incorrect regarding interim financial reporting?

a. A complete set of financial statements at the interim reporting date is required

b. No accruals or deferrals in anticipation of future events during the year should be reported
c. The integral and independent view are the two approaches of interim financial reporting
d. Interim amount like advertising that could benefit later interim period is expensed immediately
9. An opted not to prepare interim financial reports. This means that

a. The year-end financial statements are deemed not to comply with IFRS
b. The year-end financial statements shall not be acceptable under local jurisdiction
c. Interim financial reports shall be included in the year-end financial statements
d. The yearend financial statements compliance with IFRS is not affected

10. Conceptually, interim financial statements can be described as emphasizing

a. Comparability over verifiability

b. Relevance over comparability
c. Timeliness over reliability
d. Timeliness over relevance

11. Non-compliance with IAS 34 Interim Financial Reporting indicates that the entity does not comply with the requirement of IAS 1 Presentation of
Financial Statements.

IAS 34 Interim Financial Reporting requires entities whose equity or debt securities are traded in a public capital market to publish interim reports at
least as of the end of the first half of their financial year

a. True, True
b. True, False
c. False, True
d. False, False

12. Publicly traded entities are encouraged to provide interim financial reports

a. Within a month of the half year-end

b. Whenever the entity wishes
c. At least at the end of the half year and within 60 days of the end of the interim period
d. On a quarterly basis

13. Interim period is a financial reporting period for

a. A period longer than one year

b. Six months
c. A period of any length of time
d. A period shorter than one year

14. Interim financial statements are usually presented on a

a. Monthly basis
b. Quarterly basis
c. Semiannual basis
d. Nine-month basis

15. Which statement is true regarding interim financial statements?

a. If interim financial statements are presented, the four condensed financial statements and selected explanatory notes are required
b. Interim financial statements must be presented with the most recent annual financial statements
c. Interim financial statements are required
d. If interim financial statements are presented, only a statement of financial position and a statement of comprehensive income are required

16. Interim financial reports shall include as a minimum

a. A condensed statement of financial position and income statement

b. A condensed statement of financial position, income statement, and statement of cash flows
c. A complete set of financial statements
d. A condensed set of financial statements and selected explanatory notes
17. An interim financial report shall include as a minimum all of the following components, except

a. A condensed statement of financial position and statement of comprehensive income

b. Accounting policies and explanatory notes
c. Condensed statement of cash flows
d. Condensed statement of changes in equity

18. The entity has an option to public a complete set of financial statements in its interim financial report, in that case, such interim financial report
shall conform to the requirements of

a. PFRS 1
b. PFRS 8
c. PAS 34
d. PAS 1

19. If the entity publishes a set of condensed financial statements in its interim financial report, those condensed statements shall include

a. headings and subtotals that were included in its most recent annual financial statements
b. all events and updates to the information that was reported in the notes in the most recent annual financial report
c. auditor’s report
d. most recent annual financial statements

20. “Condensed” means

a. Only changes during the interim period from the last reports are included in the report
b. Only financial position and profit or loss are presented
c. Each of the headings and subtotals presented in the entity’s most recent annual financial statements is required but there is no requirement
to include greater detail unless specifically required
d. Summary of the most recent annual financial statements is required to be included in the interim financial reports

21. There is a presumption that anyone reading interim financial reports shall:

a. Have access to the records of the entity

b. Understand all International Financial Reporting Standards
c. Have access to the most recent annual report
d. Not make decisions based on the report

22. It is designed to provide an explanation of significant events and transactions arising since the last annual financial statements?

a. condensed statement of comprehensive income

b. condensed statement of cash flows
c. selected explanatory notes
d. condensed statement of financial position

23. What are the events and transactions for which disclosures would be required even if they are not significant?

a. declaration of dividends made in the subsequent period

b. the write down of inventories to net realizable value and the reversal of such a write down
c. the reversal of any provisions for the costs of restructuring
d. related party transactions

24. An entity is preparing interim financial statements for six months ended June 30, 2020. In the interim financial statements for six months, a
statement of financial position on June 30, 2020, and a statement of comprehensive income for six months ended June 30, 2020, shall be presented.
In addition, all of the following shall be presented, except

a. Statement of financial position on June 30, 2019

b. Statement of cash flows for six months ended June 30, 2019
c. Statement of comprehensive income for six month ended June 30, 2019
d. Statement of financial position on December 31, 2019
25. Salty adopts the calendar year as its reporting period and published interim financial reports for the quarter ended September 30, 2020. Which of
the following financial reports does not bear a correct date/period?

a. Statement of financial position as of September 30, 2020 and as of December 31, 2019.
b. Statement of comprehensive income for the quarter ended September 30, 2020 and for the quarter ended September 30, 2019
c. Statement of financial position of as September 30, 2020 and as of September 30, 2019
d. Statement of comprehensive income for the nine months ended September 30, 2020 and for the nine months ended September 30, 2019.

26. Not a required statement when an entity presents quarterly interim reports for 2020

a. Statement of comprehensive income for the 6 months ending June 30, 2020 and June 30, 2019
b. Statement of financial position at June 30, 2020 and December 31, 2019
c. Statement of cash flows for the 3 months ending June 30, 2020 and June 30, 2019
d. Statement of comprehensive income for the 3 months ending June 30, 2020 and June 30, 2019

27. An entity owns a number of farms that harvest produce seasonally. Approximately 80% of the sales are in the period August to October. Because
the business is seasonal, what does the standard suggest?

a. Additional disclosure in the accounting policy note

b. No additional disclosure
c. Additional notes be written in the interim reports about seasonal nature of the business
d. Disclosure of financial information for the quarter and comparative 12-month period in addition to the interim report

28. How are revenues recognized for interim reports?

a. On the same basis as for the annual period

b. Revenues are anticipated or deferred as of an interim date
c. In interim reports, revenues are recognized when cash is received, then, year-end adjustments are made for the annual financial reports
d. Monthly revenue equals expected annual revenues divided twelve

29. Revenues received seasonally, cyclically, or occasionally within a financial year

a. Shall be anticipated as of an interim date and the revenue should be recognized equally over the interim periods
b. Shall be disclosed, but revenue shall be recognized when earned applying the accounting policies as in annual
c. Shall be deferred and recognized as revenue during the final interim period of the financial year
d. Shall not be disclose, and revenue shall be recognized when earned applying the accounting policies as in annual

30. If the business is seasonal, in addition to the current interim period financial statements, the entity is encouraged to disclose financial information

I - for the latest 12 months

II - comparative information for the prior comparable 12-month period

a. Both I and II
b. II
c. I
d. Neither I nor II

31. For interim reporting, dividend revenue shall be recognized

a. When declared
b. When collected
c. When the investee earns income
d. When highly predictable based on last year’s action of the investee

32. For interim reporting, an inventory loss from a market decline in the second quarter shall be recognized as a loss

a. In the fourth quarter

b. Proportionately in each of the first, second, third, and fourth quarters
c. Proportionately in each of the second, third and fourth quarters
d. In the second quarter
33. For external reporting purposes, it is appropriate to use estimated gross profit rate to determine the cost of goods sold for

a. Interim reporting
b. Interim reporting and year-end reporting
c. Neither interim reporting nor year-end reporting
d. Year-end reporting

34. An inventory loss from a market price decline occurred in the first quarter. Hover, 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

a. 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.
b. Decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the decrease in the first quarter.
c. Not be affected in either the first quarter of the third quarter
d. Not affected in the first quarter and increase in the third quarter by the amount of the market price recovery that exceed the amount of the
market price decline

35. Due to a decline in market price in the second quarter an entity incurred an inventory loss. The market price is expected to return to previous level
by the end of the year. at the end of the year, the decline had not reversed. When should the loss be reported in the interim income statement?

a. In the fourth quarter

b. Ratably over the third and fourth quarters
c. In the second quarter
d. Ratably over the second, third and fourth quarters

36. Which of the following is an acceptable practice as it relates to interim financial reporting?

a. Delayed recognition of inventory market declines until year end

b. Delayed recognition of unplanned standard cost system variance until year end
c. Use of variable costing inventory method for determining inventory cost
d. Used of the grossed profit method to determine interim inventory accounts

37. Which of the following methods of inventory valuation is allowable at interim dates but not at year-end?

a. Estimated gross profit rates

b. Retail method
c. Weighted average
d. Specific identification

38. For external reporting purpose, it is appropriate to use estimated gross profit rates to determine the cost of goods sold for

I - Interim financial reporting

II - Year-end financial reporting

a. II only
b. Neither I nor II
c. Both I and II
d. I only

39. Which of the following inventory procedures cannot be applied for interim reporting?

a. Earnings per share presentation

b. Delayed recognition of temporary inventory market declines
c. Estimation of inventory using gross profit method
d. Delayed recognition of permanent losses from inventory market declines

40. For external reporting purposes, it is appropriate to use estimated gross profit rate to determine the cost of goods sold for Interim financial
reporting and Year-end financial reporting, respectively.

a. Yes, No
b. No, No
c. Yes, Yes
d. No, Yes
41. For interim financial reporting, an extraordinary gain occurring in the second quarter shall be

a. Disclosed in the second quarter

b. Recognized ratably over all four quarters with the first quarter restated
c. Recognized ratably over the last three quarters
d. Recognized in the second quarter

42. When preparing an interim period, unusual or non-recurring items should be

a. Recognized in full in the interim period in which they occurred

b. Ignored because the focus of interim reporting is on recurring items
c. Deferred and recognize in the last interim period of the fiscal year in which they occurred
d. Apportioned over the interim period in which first recognized subsequent interim periods of the fiscal year

43. Cost not directly associated with revenue

a. Should be recognized in the year of incurrence if they cannot be allocated among interim periods on a reasonable basis
b. Should be allocated in a pro rata basis to all interim periods from the date of incurrence to the end of fiscal year
c. Can be recognized in any interim period provided they are recognized in the year of incurrence
d. May be treated as if they were annualized cost

44. The following costs or expenses should be anticipated for interim reporting, except

a. Year-end bonuses
b. Paid vacation and holiday leave
c. Cost of planned major periodic maintenance
d. Provision for warranty

45. Advertising costs incurred shall be deferred to provide an appropriate expense in each period for

a. Interim reporting
b. Neither interim reporting nor year-end reporting
c. Interim reporting and year-end reporting
d. Year-end reporting

46. Rental costs may be accrued or deferred to provide an appropriate expense in each period for Interim financial reporting and Year-end financial
reporting, respectively.

a. No, No
b. No, Yes
c. Yes, Yes
d. Yes, No

47. For interim financial reporting, a loss form flash flood occurring in the third quarter should be

a. Recognized equally during the third and fourth quarters

b. Disclosed by a note only in the third quarter
c. Recognized in the third quarter
d. Deferred and recognized during the last quarter of the year

48. Choose the correct statement concerning recognition of expense in interim reports.

a. Interim period expense recognition follows PFRS for annual periods for all cost
b. Some cost can be allocated arbitrarily to any of the interim periods reported within the year
c. Cost which are directly associated with revenue should be matched against that revenue in the interim period
d. All interim period costs must be associated with revenue in the interim period

49. Most interim periods gain and losses, for the purpose of interim disclosure

a. Are allocated ratably over remaining interim periods

b. Are deferred until year end
c. Are recognized in the interim period of incurrence
d. Are followed to be offset against each other
50. If annual major repairs made in the first quarter and paid for in the second quarter clearly benefit the entire year, when should they expensed?

a. In full in the first quarter

b. An allocated portion in each quarter of the year
c. In full in the second quarter
d. All expenses affecting more than one quarter should be recognized in the last year of the fiscal year

51. For interim financial reporting, the income tax expense for the second quarter should be computed by using the

a. Statutory tax rate for the year

b. Effective tax rate expected to be applicable for the full year as estimated at the end of the second quarter
c. Effective tax rate expected to be applicable for the full year as estimated at the end of the first quarter
d. Effective tax rate expected to be applicable for the second quarter

52. How is income tax expense for the third quarter interim period computed?

a. The annual rate multiplied by the third quarter pretax earnings

b. The rate applicable during the third quarter multiplied by four times the third quarter pretax earnings
c. The estimated tax for the first three quarters based on an annual rate less a similar estimate for the first two quarters
d. One-half of the difference between total estimated annual income tax expense and the income tax for the period first two quarters

53. Which of the following statements is true concerning interim financial reporting?

a. The income tax rate to be used for an interim period is based on the estimated income tax and return on annual income
b. The results of a disposal of a business segment maybe considered material for the interim period but not for the annual period
c. No income tax effect will be recognized in an interim period that incur a loss
d. An extraordinary is defined as being material based on the relationship of the item to the interim period results

54. XYZ changed its inventory costing method from FIFO to weighted average during the second quarter of the year. for interim reporting purposes,
this change shall be reflected

a. At the beginning of the first quarter of the current financial year

b. At the beginning of the first quarter in the earliest comparative period presented by restating the financial statements of prior interim
periods and the prior interim periods of the current financial year
c. At the beginning of the third quarter of the current financial year
d. At the beginning of the second quarter of the current financial year

55. Entities should disclose all of the following in interim financial report, except

a. Change in accounting policy

b. Seasonal revenue, cost or expenses
c. Basic and diluted earnings per share
d. Events after the end of the reporting period

56. Minimum disclosure requirements for companies using interim financial information will include which of the following?

a. The contribution margin by product line for current quarter and the current year to date
b. An interim statement of financial position
c. Sales and cost of goods sold for the current quarter and the current year to date
d. Primary and fully diluted EPS for each period presented

57. Which of the following need not be disclosed in interim financial statements?

a. Changes in accounting principles

b. Seasonal revenue
c. Components of cost of goods sold
d. EPS
58. On March 31, 2020, end of the first quarter, Christian, Inc. estimated that its first year-end bonus to executives would be P300,000 for 2020. The
actual obligation paid for the year-end bonus for 2019 was P250,000. The estimate for 2020 is subject to year-end adjustment.

What amount of expense, if any, should be reflected in Christian’s quarterly statement of comprehensive income for the three months ended March
31, 2020?

a. P62,500
b. P75,000
c. P0
d. P300,000

59. In January 2020, Victor, Inc. paid property taxes on its factory building for the calendar year 2020 in the amount of P240,000. In the first week of
April 2020, Victor made an advertising campaign and paid P600,000. These advertisements are expected to benefit operations for the remainder of
the calendar year.

How should these expenses be reflected in Victor’s quarterly interim financial reports: 1st Quarter, 2nd Quarter, 3rd Quarter, 4th Quarter,
respectively?

a. P60,000, P260,000, P260,000, P260,000

b. P210,000, P210,000, P210,000, P210,000
c. P60,000, P660,000, P60,000, P60,000
d. P240,000, P600,000, P0, P0

60. For interim statement purposes, compute the inventory at the end of January, February, and March, respectively.

In 2020, Old Spice Company started operations with an inventory costing P200,000. The goods are sold at a gross profit of 20% of sales. For the first
quarter of 2020, the purchases and sales were as follows:

January February March Total

Purchases 50,000 380,000 704,000 1,134,000
Sales 240,000 510,000 755,000 1,505,000

a. P58,000; P30,000; P130,000

b. P187,500; P70,000; P207,750
c. P70,000; P94,000; P0
d. P192,000; P408,000; P604,000

61. New Company 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 P1,500,000.

In New Company’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?

a. P1,050,000
b. P300,000
c. P0
d. P2,100,000

62. During the second quarter of 2020, Square Company sold a piece of equipment at a loss of P60,000. What portion of the loss should Square
report on its statement of comprehensive income for the second quarter of 2020?

a. P20,000
b. P0
c. P40,000
d. P60,000
63. X Corporation incurs costs unevenly throughout the financial year. advertising costs of P2 million were incurred on February 28, 2020, and staff
bonuses are paid at year-end based on sales. Staff bonuses are expected to be around P30 million for the year, based on sales of P300 million. Total
sales for the quarter ending March 31, 2020, were P70 million.

What costs should be included for the quarter ended March 31, 2020, for Advertising Costs and Staff Bonuses, respectively?

a. P2.0 million; P7.5 million

b. P0.5 million; P7.0 million
c. P2.0 million; P7.0 million
d. P0.5 million; P7.5 million

64. An entity prepares quarterly interim financial reports in accordance with PAS 34. The entity sells goods that are subject to warranty. The
company made a provision for warranty in the first quarter of the year 2020 at 5% of sales, as the company in the past experience a 5% claim on
warranty based on sales. However, in the second quarter, a modification in the design of the product resulted to a design fault and the company
expected the warranty claims to increase to 10% for the whole year 2020. Sales in the first and second quarters were P10 million and P15 million,
respectively.

What would be the warranty expense charged in the second quarter’s interim financial statements?

a. P2.0 million
b. P1.25 million
c. P1.5 million
d. P0.75 million

65. An entity’s reporting year ends on December 31, and it's currently preparing interim financial statements for the six months ending June 30, 2020.
The price of its product tends to vary. On June 30, 2020, it has inventories of 100 units, at a cost per unit of 14. The net realizable on June 30, 2020,
is P12 per unit. The expected net realizable value of these inventories on December 31, 2020, is P15.50 per unit.

At what amount should these inventories be presented in the interim statement of financial position at June 30, 2020?

a. P1,550,000
b. P1,400,000
c. P1,200,000
d. P1,375,000
EXERCISE 7 – SEGMENT REPORTING

1. The objective of PFRS 8 is

a. to prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity
prepares separate financial statements.
b. to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities.
c. to ensure that an entity’s financial statements contain the disclosures necessary to draw attention to the possibility that its financial position
and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances, including
commitments, with such parties.
d. to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the
economic environments in which it operates.

2. Segment reporting shall apply to

a. Neither the separate financial statements of an entity nor the consolidated financial statements of a group
b. Both the separate financial statements of an entity and the consolidated financial statements of a group
c. Consolidated financial statement of a group only
d. Separate financial statements of an entity only

3. If a financial report contains both the consolidated financial statements of a parent and the parent’s separate financial statements, segment
information is required in

a. The separate financial statements only

b. Both the separate financial statements of an entity and the consolidated financial statements of a group
c. The consolidated financial statements only
d. Neither the separate financial statements of an entity nor the consolidated financial statements of a group

4. Which of the following entities are required to report on business segments?

a. Not for profit entities

b. Joint ventures
c. Nonpublic entities
d. Publicly traded entities

5. Segment reporting shall apply to the separate or individual and consolidated financial statements of entities whose equity or debt instruments are
traded in a public market.

If a financial report contains both the consolidated and the separate financial statements of the parent, segment information must be presented on both
the consolidated and separate financial statements.

a. True, False
b. False, False
c. False, True
d. True, True

6. Which of the following statements are true regarding reporting by operating segments?

I - Operating segments are identified based on the management structure for internal reporting purposes
II - Some components of an entity ay be grouped together to form one operating segment
III - Reporting by operating segments is encouraged for enterprises in which equity or debt securities are publicly traded
IV - A segment that is not identified as reportable may be combined with other similar segments or may be presented as part of an unallocated
reconciling item

a. I, II, III, IV
b. I, II, IV
c. I, II, III
d. II, III, IV
7. An operating segment is a component of an entity

a. All of these characterize an operating segment

b. That engages in business activities from which it may earn revenue and incur expenses
c. Whose operating results are regularly reviewed by the entity’s chief operating decision maker
d. For which discrete information is available

8. A component of an entity should earn revenues before it can be classified as an operating segment.

Every part of an entity is necessarily an operating segment or part of an operating segment

a. True, True
b. False, True
c. True, False
d. False, False

9. Under IFRS 8, Operating Segments, which of the following is not necessarily a characteristic of an operating segment?

a. It is one whose operating results are reviewed by the entity’s chief operating decision maker
b. A major portion of its revenue is derived from sales to outsiders
c. It is a component of an entity for which discrete financial information is available
d. It is engaged in business activities from which it may earn revenues and incur expenses

10. The term chief operating decision maker

a. Refers to a function of allocating resources to the operating segments and assessing their performance.
b. Must be described in the disclosures for the financial reporting for segments
c. Must be disclosed by title in the financial reporting for segments
d. Refers to a manager with a specific title

11. Which statement is not true with respect to a chief operating decision maker?

a. In some cases, the chief operating decision maker could be the chief operating officer
b. The board of directors acting collectively could qualify as the chief operating decision maker
c. The term chief operating decision maker identifies a function and not necessarily a manager with a specific title
d. The chief internal auditor who reports to the board of directors usually plays a very important role and would generally qualify as chief
operating decision maker.

12. The following can be a chief operating decision maker, except

a. Chief internal auditor

b. Group executive directors
c. Chief executive officer
d. Chief operating officer

13. One who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial
results, forecasts, or plans for the segment.

a. Segment Manager
b. Chief Operating Decision Maker
c. Chief Executive Officer
d. Single Manager

14. The approach used in segment reporting is known as

a. Enterprise approach
b. Management approach
c. Segment approach
d. Revenue approach
15. Management approach means

a. That the financial effects of business events are classified as revenues and expenses which are used to measure and define income
b. That if detailed information on revenues and expenses is not available, the profit or an enterprise using single-entry accounting system is
determined by analysis of changes in owners’ equity during an accounting period.
c. That the operating segments are identified on the basis of internal reports about components of an entity that are regularly reviewed by the
chief operating decision maker in order to allocated resources to the segment and to assess its performance
d. That a profit is earned when the amount of the capital at the end of the period exceeds the amount of capital at the beginning of the period,
after excluding the effects of transactions with owners.

16. Operating segments are identified based on the components of the entity that are considered to be important for internal management reporting
purposes.

A component of entity that sells primarily or exclusively to other operating segments is included in the definition of an operating segments.

a. True, False
b. False, False
c. True, True
d. False, True

17. Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle of PFRS
8, and the segments are similar in each of the following respects: (choose the exception)

a. The nature of the production processes

b. The type or class of customer for their products or services
c. The nature of the products and services
d. Proximity of operations

18. Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle of PFRS
8, and the segments are similar in each of the following respects: (choose the exception)

a. the type or class of customer for their products or services

b. geographical locations
c. the methods used to distribute their products or provide their services
d. the nature of the regulatory environment

19. For segment reporting purposes, which tests must be applied to determine if a component is a reportable operating segment

a. Revenue test, asset test, and expense test

b. Revenue test, asset test, and profit or loss test
c. Revenue test and asset test
d. Revenue test, asset test, and cash flow test

20. An entity shall disclose for each reportable segment a measure of all of the following except

a. Net assets
b. Total liabilities if such amount is regulatory provided to the chief operating decision maker
c. Total assets if such amount is regularly provided to the chief operating decision maker
d. Profit or loss

21. An industry segment is considered reportable when any of the following condition is met, except

a. Absolute amount of a segment profit or loss is 10% or more of the combined profit of all segments that did not incur a loss
b. Segment assets are 10% or more of the combined assets of all segments
c. Segment liabilities are 10% or more of the combined liabilities of all segments
d. Segment revenue is 10% or more of the combined revenue of all segments
22. Under IFRS 8, Operating Segments, a segment is reportable if

a. Total revenue is 10% or more of the combined external revenue of all segments
b. Liabilities are 10% or more of total liabilities
c. Total revenue is 10% or more of total revenue, internal and external, of all operating segments
d. Assets are 5% of more of total liabilities

23. A segment of a business enterprise is to be reported separately when the revenues of the segment constitute 10 percent or more of the:

a. total combined revenues of all segments reporting profits

b. total revenues of all the enterprises industry segments
c. total export and foreign sales
d. combined net income of all segments reporting profits

24. ABC Corp. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. ABC should report segment
financial information for each division meeting which of the following criteria?

a. Segment revenue is 10% or more of consolidated revenue

b. Segment profit or loss is 10% or more of consolidated profit or loss
c. Segment profit or loss is 10% or more of combined profit or loss of all company segments
d. Segment revenue is 10% or more of combined revenue of all the company segments

25. An operating segment is a reportable segment if

a. the absolute amount of its operating profit or loss is 10% or more of the company’s combined operating profit or loss
b. its operating loss is 10% or more of the combined operating losses of segments that incurred an operating loss
c. its operating profit is 10% or more of the combined operating profit of profitable segments
d. the absolute amount of its operating profit or loss is 10% or more of the greater, in absolute amount, of the combined reported profit of all
operating segments that did not report a loss and the combined reported loss of all operating segments that reported a loss.

26. An operating segment is a reportable segment if

a. Its assets are 10 per cent or more of the company’s total assets
b. Its assets are 10 per cent or more of the combined assets of all operating segments reporting revenues
c. Its assets are 10 per cent or more of the combined assets of all operating segments.
d. Its assets are 10 per cent or more of the entity’s net assets

27. Which quantitative threshold is not a requirement in qualifying a reportable segment?

a. The segment assets are 20% or more of the combined assets of all operating segments
b. The segment profit or loss is 10% of more of the greater between the combined profit of profitable segments and combined loss of
unprofitable segments
c. The segment revenue, both external and internal, is 10% or more of the combined external and internal revenue of all operating segments.
d. The segment assets are 10% or more of the combined assets of all operating segments

28. Operating segments that do not meet any of the quantitative thresholds

a. May be considered reportable and separately disclosed if management believes that information about the segment would be useful to the
statement users
b. May be considered reportable and separately disclosed if the information is for internal use only
c. May be considered reportable and separately disclosed if this is the practice within the economic environment
d. Cannot be considered reportable
29. Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if management
believes that information about the segment would be useful to users of the financial statements.

An entity may combine information about operating segments that do not meet the quantitative thresholds with information about other operating
segments that do not meet the quantitative thresholds to produce a reportable segment only if the operating segments have similar economic
characteristics and share any of the aggregation criteria.

a. False, True
b. True, True
c. False, False
d. True, False

30Which statement is true concerning the 75% overall size test for reportable segments?

a. The total external and internal revenue of all reportable segments is 75% or more of the entity’s external revenue
b. The total external revenue of all reportable segments is 75% or more of the entity’s external and internal revenue.
c. The total external revenue of all reportable segments is 75% or more of the entity’s external revenue
d. The total internal revenue of all reportable segments is 75% or more of the entity’s internal revenue

31. Under IFRS 8, separate segments of an entity must be identified as reportable segments until at least

a. 80% of total entity assets are included

b. 75% of total external revenue is included
c. 70% of total entity assets are included
d. 100% of total entity revenue is included

32. What is the proper course of action if the total external revenues of reported operating segment constitute less than 75% of the entity’s revenue?

a. additional operating segments shall be identified as reportable segments if they meet the aggregation criteria until at least 75 per cent of the
entity’s revenue is included in reportable segments
b. additional operating segments shall be identified as reportable segments insofar as they meet the aggregation criteria
c. additional disclosure shall be made that the total external revenue of the reported segments is less than 75% of the entity’s revenue
d. additional operating segments shall be identified as reportable segments even if they do not meet the aggregation criteria until at least 75
per cent of the entity’s revenue is included in reportable segments

33. What are the situations where segment may be reported even if it no longer meets the criteria for reportability?

a. If an operating segment is identified as a reportable segment in the current period, segment data for a prior period presented for
comparative purposes shall be restated
b. If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing
significance
c. All of these
d. if management believes that information about the segment would be useful to users of the financial statements

34. An entity is engaged in the manufacturing industry and has recently purchased an 80% holding in a retail sales group. This group does not meet
any of the quantitative criteria for a reportable segment. Can the entity disclose the retail sales group as a separate operating segment?

a. Yes, if management believes that the retail sales group is a distinguishable component of the entity
b. No, because it does not meet any of the quantitative criteria
c. No, because the retail sales group is not engaged in the manufacturing industry
d. No, because the entity holds only 80% equity in the retails sales group

35. What is the practical limit to the number of reportable operating segments?

a. Ten segments
b. Five segments
c. Four segments
d. Six segments
36. Segment result is described as

a. Total segment income

b. Segment profit after any adjustments for non-controlling interest
c. Segment revenue less segment expenses
d. Segment profit after any adjustments for income tax

37. Revenue of a segment includes

a. Revenue derived from sales to unaffiliated customers and other revenue and gains
b. Revenue derived from sales to unaffiliated customers and interest revenue
c. Revenue derived from transactions with unaffiliated customers only
d. Revenue derived from transactions with unaffiliated customers and from other operation segments of the entity

38. What are the disclosures required in relation to operating segments?

a. Reconciliations of total segment revenue, total segment profit or loss, total segment assets and total segment liabilities to the corresponding
amounts in the entity’s financial statements.
b. All of these are required to be disclosed
c. General information about the operating segment
d. Information about segment profit or loss, including specified revenue and expenses included in profit or loss, segment assets and segments
liabilities

39. An entity shall disclose which of the following general information?

I Factors used to identify the reportable segments

II Types of products and services
III Judgements made by management in applying the aggregation criteria
IV Names of the board directors

a. II, III, IV
b. I, III
c. I, II, III
d. I, II, III, IV

40. In financial reporting for operating segments, an entity shall disclose all of the following, except

a. The title of the chief operating decision maker

b. Types of products and services from which each reportable segment derives its revenue
c. The basis of measurement of segment profit or loss
d. Factors used to identify the reportable segments

41 . In financial reporting for segments of a business, an enterprise shall disclose all of the following exceptImmersive Reader

a. The basis of measurement of segment profit or loss and segment assets

b. The title of the chief operating decision maker of each reportable segment
c. Factors used to identify the enterprises reportable segments
d. Types of products and services from which each reportable segment derives its revenues

42. What are the examples of factor used identify the entity’s reportable segments?

a. regulatory environments
b. differences in products and services
c. all of these
d. geographical areas

43. An entity shall disclose for each reportable segment all of the following specified amounts included in the measure of profit or loss, except

a. Revenue from transactions with other operating segments of the same entity
b. Interest revenue
c. Gain on disposal of investment
d. Revenue from external customers
44. An entity shall disclose for each reportable segment all of the following specified amounts included in the measure of profit or loss, except

a. General corporate expenses

b. The entity’s interest in the profit or loss of associate and joint venture accounted for by the equity method
c. Depreciation and amortization
d. Income tax expense

45. An entity must disclose all of the following about each reportable segment if the amounts are used by the chief operating decision maker, except

a. Income tax expense

b. Unusual items
c. Intersegment revenue
d. Cost of goods sold

46. An entity must disclose all of the following about each reportable segment if the amounts are used by the chief operating decision maker, except

a. Depreciation expense
b. Interest expense
c. Income tax expense
d. Allocated expense

47. When may the chief operating decision maker report interest revenue net of interest expense?

a. When interest revenue is greater than interest expense, then the chief operating decision maker must report interest revenue net of interest
expense, otherwise, an entity shall report interest revenue separately from interest expense
b. When interest expense is not material, the chief operating decision maker may offset interest expense with interest revenue
c. When a majority of the segment’s revenues are from interest and the chief operating decision maker relies primarily on net interest revenue
to assess the performance of the segment
d. Interest revenue must always be reported net of interest expense

48. Segment reporting requires that an entity should provide reconciliations of segment information. Which is not a required reconciliation?

a. The total of the reportable segments’ revenue to the entity revenue

b. The total of the reportable segment’s profit or loss to the entity profit or loss before tax expenses and discontinued operations
c. The total of the reportable segments’ assets to the entity assets
d. The total number of major customers of all segments to the total number of major customers of the entity

49. Entity-wide disclosures are for publicly held entities with

a. At least ten segments

b. More than one reportable segment
c. One reportable segment and more than reportable segment
d. One reportable segment

50. Entity wide disclosure include all, except

a. Information about geographical areas

b. Information about products and services
c. Information about major customers
d. Information about intersegment sales

51. Enterprise-wide disclosures include disclosures about: (A) Geographic areas; (B) Allocated costs

a. Yes, Yes
b. No, Yes
c. No, No
d. Yes, No
52. Which of the following shall the entity disclosure regarding revenue from products and services?

a. Total revenues of operating segments

b. Revenue from external customers for each product and service
c. Revenue from internal customers for each product and service
d. Revenue from external and internal customers for each product and service

53. An entity shall disclose the following geographical information, except

a. Separate disclosure of material revenue from internal customers in an individual foreign country
b. Revenue from external customers in the entity’s country of domicile
c. Separate disclosure of material revenue from external customers in an individual foreign country
d. Revenue from external customers in all foreign operations in total

54. Major customer means

a. one providing revenue which amounts to 10% or more of combined external revenue of all operating segments
b. one providing revenue which amounts to 10% or more of entity’s revenue
c. one providing revenue which amounts to 10% or more of combined internal revenue of all operating segments
d. one providing revenue which amounts to 10% or more of combined external and internal revenue of all operating segments

55. Which of the following is a required enterprise-wide disclosure regarding external customers?

a. The identity of any external customer providing 10% or more of a particular operating segment revenue
b. The fact that transactions with a particular external customer constitute at least 10% of the total entity revenue
c. The identity of any external customer considered to be a major by management
d. Information on major customers is not required in segment reporting

56. Which statement is true about major customer disclosure?

a. All of these statements are true about major customer disclosures

b. The entity shall disclose the total amount of revenue from major customers
c. Major customer is defined as one providing revenue which amounts to 10% or more of combined external revenue of all operating
segments
d. The identities of major customers need not be disclosed

57. Which of the following statements regarding a major customer is incorrect?

a. A major customer is defined as one providing revenue which amounts to 10% or more of combined external revenue of all operating
segments
b. The entity shall disclose the total amount of revenue from major customers and the identity of the segment reporting the revenue
c. The identities of major customers should be disclosed
d. The entity shall disclose the fact that revenues from transactions with a single external customer amount to 10% or more of an entity’s
revenue

58. The following information pertains to Blue Company and its divisions for the year ended December 31, 2020:

Sales to unaffiliated customers – P1,000,000

Intersegment sales of products similar to those sold to unaffiliated customers – P300,000
Interest revenue (reviewed by chief operating officer) – P20,000

Blue and all of its divisions are engaged solely in manufacturing operations.

Blue is a reportable segment if that segment’s revenue is at least

a. P132,000
b. P130,000
c. P102,000
d. P100,000
59. Green company reports operating profit as to industry segments in its supplementary financial information annually. What should be the
operating profit for Segment 2 for 2020 given the following information?

Information on additional expenses:

Indirect operating expenses – PP240,000

General corporate expenses – P180,000
Interest expense – P96,000

Green allocates common costs based on the ratio of a segment’s sales to total sales.

Segment information for 2020:

Sales Traceable Costs

Segment 1 750,000 450,000
Segment 2 500,000 225.000
Segment 3 250,000 125,000
1,500,000 800,000
500,000/1,500,000 = 33.33%
240,000*33.33% = 80,000
80,000+225,000=305,000 (cost)
500,000-305,000 = 195,000 (profit)

a. P195,000
b. P135,000
c. P163,000
d. P103,000

60. Purple Company operates in six different industries, each of which is appropriately regarded as an operating segment. Purple’s 2020 combined
sales for all segments aggregated P10 million. Segment No. 4 had sales of P2.0 million and traceable costs of P900,000. Combined common costs for
all segments totaled P3.0 million. Common costs are allocated among the six segments on the basis of each segment’s percentage of Purple’s total
sales, which is an acceptable allocation method.

How much should be reported as Segment No. 4’s operating profit for 2020?Immersive Reader

a. P1,400,000
b. P1,100,000
c. P1,220,000
d. P500,000

2,000,000/10,000,000 = 20%
3,000,000*20% = 600,000
600,000+900,000 = 1,500,000
2,000,000-1,500,000 = 500,000
61. Yellow Company has five business divisions. It does not adopt the practice of reporting interest expense to the chief operating officer of the
enterprise.

Given the following data with regard to its operating segments (all of which are engaged in manufacturing) for the year ended December 31, 2020,
Yellow Company shall consider a segment reportable if its operating profit is at least
(1 Point)

Division Sales Costs and Expenses Interest Expense

1 40,000,000 30,000,000 1,000,000
2 38,000,000 32,000,000 2,000,000
3 14,000,000 20,000,000
4 51,000,000 42,000,000 3,000,000
5 10,000,000 16,000,000
Total 153,000,000 140,000,000 6,000,000

a. P1,900,000
b. P2,500,000
c. P570,000
d. P1,300,000

Division 1 = 40M-30M = 10M

Division 2 = 38M-32M = 6M
Division 3 = 14M-20M = (6M)
Division 4 = 51M-42M = 9M
Division 5 = 10M-16M = (6M)

Profit (base)
10M+6M+9M=25M
25M*10%=2.5M

62. Billy Company, a corporation listed on the stock exchange, reports operating results from its Segment X activities to its chief operating decision
maker. The segment information for the year and the information for the enterprise follow:

Segment X

Revenue – P3,500,000
Profit (all segments reported profit) – P900,000
Assets – P1,800,000
Number of employees – 2,500

Total for the Entity

Revenue – P40,000,000
Profit (all segments reported profit) – P9,600,000
Assets – P17,500,000
Number of employees – 20,000

Which piece of information determines for Billy Company that Segment X is a reportable operating segment?

a. Assets
b. Profit
c. Revenue
d. Number of employees
FOR NUMBERS 63-65:

63. Pepe Smith Company was organized in 2017 operating only in Metro Manila. Since 2019, however, it operates in different geographic areas. The
following information pertains to Pepe Smith Company’s operating for the year 2020.

Applying the 10% threshold for asset test, which segments qualified as reportable?Immersive Reader
(1 Point)

Geographical Identifiable REVENUE Profit

Segment Assets External Internal Total Loss
A 10M 8M 5M 13M 7M
B 4M 6M 2M 8M (3M)
C 4M 2M 1M 3M 1M
D 20M 4M 1M 5M (0.9M)
E 11M 8M 1M 9M 3M

a. A, B, C, and D
b. A, D, and E
c. A, B, C, D, and E
d. A, B, D, and E

10M+4M+4M+20M+11M = 49M
49M*10% = 4.9M
SEGMENTS A, D, E

64. Use the information in no. 63. Applying the 10% threshold for operating result test, which segments qualified as reportable?Immersive Reader

a. A, C and D
b. A, B, C, D, and E
c. A, D, and E
d. A, B, and E

7M+1M+3M = 11M
11M*10% = 1.1M
SEGMENTS A, B, E

65. Use the information in no. 63: Applying all the appropriate thresholds, which of the above operating segments are deemed reportable?

a. A, B, D, and E
b. A, D, and E
c. A, B, and E
d. A, B, C, D, and E

63.SEGMENTS A, D, E
64.SEGMENTS A, B, E
SEGMENTS A, B, D, E
Conceptual Framework and Accounting Standards
EXERCISE 8

RELATED PARTY DISCLOSURE

1. What is the objective of related party disclosures?

a. to ensure that an entity’s financial statements contain the disclosures necessary to draw attention to the possibility that its financial position
and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances, including
commitments, with such parties.
b. to prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity
prepares separate financial statements.
c. to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities.
d. to prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in
accounting policies, changes in accounting estimates and corrections of errors.

2. PAS 24, Related Party Disclosure, shall be applied in

I - identifying related party relationships and transactions;

II - identifying outstanding balances, including commitments, between an entity and its related parties;

III - identifying the circumstances in which disclosure of the items in (I) and (II) is required; and

IV - determining the disclosures to be made about those items.

a. I, II
b. III, IV
c. I, II, III, IV
d. II, III, IV

3. Related Party Disclosure shall be made in

a. Individual financial statements

b. All of the choices
c. Consolidated financial statements
d. Separate financial statements or a parent

4. Related party transactions and outstanding balances with other entities in a group are disclosed in an entity’s financial statements.

Intragroup related party transactions and outstanding balances are eliminated in the preparation of consolidated financial statements of the group.

a. False, True
b. True, False
c. True, True
d. False, False

5. Which of the following gives significance to related party disclosure?

a. The profit or loss and financial position of an entity may be affected by a related party relationship even if related party transactions do not
occur.
b. knowledge of an entity’s transactions, outstanding balances, including commitments, and relationships with related parties may affect
assessments of its operations by users of financial statements, including assessments of the risks and opportunities facing the entity.
c. All of these situations show importance of related party disclosures
d. transactions between related parties may not be made at the same amounts as between unrelated parties.
6. A person or entity that is related to the entity that is preparing its financial statements

a. Immediate family
b. Third party
c. Relative party
d. Related party

7. A person or a close member of that person’s family is related to a reporting entity if that person (choose the exception):

a. is a member of the key management personnel of the reporting entity or of a parent of the reporting entity
b. has control or joint control of the reporting entity
c. has significant influence over the reporting entity
d. provides significant funds to the entity

8. An entity is related to a reporting entity if any of the following conditions applies:

I-The entity and the reporting entity are members of the same group

II- One entity is an associate or joint venture of the other entity

III-Both entities are joint ventures of the same third party

IV-One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

V -The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity

VI-The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of
the reporting entity

a. I, II, III, IV, V, VI

b. I, III, IV, VI
c. II, IV, VI
d. VI only

9. An entity is related to a reporting entity if the entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or
an entity related to the reporting entity.

If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

a. False, False
b. True, True
c. False, True
d. True, False

10. Related parties include all of the following, except

a. Two entities that have a common director

b. Affiliates
c. Associates
d. Individuals owning, directly or indirectly, an interest in the voting power of the reporting entity that gives them significant influence over
the entity

11. Which of the following is not a related party as envisaged by PAS 24?

a. A director of the entity.

b. The parent company of the entity
c. A shareholder of the entity that holds 1% stake in the entity
d. The son of the chief executive officer of the entity
12. Which of the following is not a related party of an entity?

a. An associate of the entity

b. The son of the chief executive officer of the entity
c. Director of the entity
d. A bank providing loan to the entity

13. Which of the following is not a related party of an entity?

a. An associate of the entity

b. A shareholder of the entity owning twenty percent
c. A customer of the entity that accounts for 51% of the entity’s revenues
d. Key management personnel of the entity

14. All of the following fall within the definition of an entity’s related party, except

a. Joint venture in which the entity is a venture

b. A post-employment benefit plan for the benefit of the employee
c. The partner of a key manager is a major supplier of the entity
d. An executive director of the entity

15. Unrelated parties include which of the following?

a. Providers of finance in the course of their normal dealings with an entity by virtue only of those dealings
b. Single customer with whom an entity transacts a significant volume of business merely by virtue of the resulting economic dependence
c. All of these are unrelated parties
d. Government agencies that regulate the actions of the entity such as BIR, BSP, SEC

16. Unrelated parties include all of the following except

a. Key management personnel

b. Providers of finance in the course of their normal dealings with an entity by virtue only of those dealings
c. Single customer with whom an entity transacts a significant volume of business merely by virtue of the resulting economic dependence
d. Two venturers simply because the share joint control over a joint venture

17. It refers to the power to participate in the financial and operating policy decision of an entity but not the power to direct which polices the entity
should adopt.

a. Management contract
b. Key management
c. Control
d. Significant influence

18. Significant influence may be evidenced by

a. All of the choices

b. Representation in the board of directors
c. Participation in policy making process
d. Material intercompany transactions

19. Significant influence may be evidenced by the following, except

a. Interchange of managerial personnel

b. Ownership of 1% shares of stocks amounting to P1,000,000
c. Participation in policy making process
d. Dependence on technical information
20. A transaction conducted on such terms and conditions as between a willing buyer and a willing seller who are unrelated and are acting
independently of each other and pursuing their own best interests.

a. Related party disclosures

b. Arm’s length transaction
c. Key management compensation
d. Related party transaction

21. This refers to a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is
charged.

a. Related party disclosures

b. Key management compensation
c. Related party transaction
d. Arm’s length transaction

22. Which of the following is a related party transaction?

a. Took out a huge bank loan

b. Sold goods to another entity owned by the daughter of the entity’s managing director
c. Sold a car to the uncle of the entity’s finance director
d. All of these are related party terminations

23. All of the following are related party transactions, except

a. Paid a huge bank loan

b. Sold an entity’s property to the wife of the entity’s president
c. Sold an asset to an associate
d. Transferred goods from inventory to a subsidiary

24. Which of the following transactions most likely would be a related party transaction requiring disclosure?

a. The entity borrowed P2,000,000 from Northwest Bank at a rate significantly above the prevailing market rate.
b. The entity borrowed P500,000 from Eastwest Bank with no scheduled terms for how or when funds will be repaid
c. All of these would be disclosed as related party transactions
d. The entity borrowed P1,000,000 from Southwest Bank issuing a noninterest-bearing note.

25. Those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

a. Relatives within fourth degree of consanguinity

b. Close neighbors of the family
c. Close members of the family
d. Immediate members of the family

26. Close family members of an individual include all of the following except

a. Children of the individual’s spouse

b. Brothers and sisters of the individual
c. The individual’s spouse and children
d. Dependents of the individual or individual’s spouse

27. Those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly,
including any director (whether executive or otherwise) of that entity.

a. Key management personnel

b. Key minimum wage earners
c. Key notes in conceptual framework and accounting standards
d. Key rank and file employees
28. Key Management Personnel Compensation includes

I short term employee benefits

II post-employment benefits
III other long term employee benefits
IV termination benefits
V share-based payment

a. I, II, III, IV, V

b. I, III, V
c. I, III
d. I, II, III, V

29. Which of the following would not be considered key management personnel compensation?

a. Termination benefits
b. Reimbursement of out-of-pocket expenses
c. Short-term benefits
d. Share-based payments

30. Short term employee benefits include

a. social security contributions

b. post employment life insurance
c. Pensions
d. long service leave

31. Post employment benefits include

a. Salaries
b. Pensions
c. Profit sharing and bonuses
d. Wages

32. Which of the following is included in key management personnel compensation?

a. Social security contribution and postemployment benefit

b. Neither social security contribution nor postemployment
c. Postemployment benefit
d. Social security contribution

33. Which of the following is not included in key management personnel compensation?

a. Dividends
b. Profit‑sharing and bonuses
c. Fringe Benefits
d. Stock Options

34. Relationships between a parent and its subsidiaries shall be disclosed irrespective of whether there have been transactions between them.

Compensation paid or payable by the management entity to the management entity’s employees or directors shall be disclosed by the reporting entity
in total and for the each of the required categories.

a. True, True
b. False, False
c. True, False
d. False, True
35. Which is not mandated related party disclosure?

a. If neither the entity’s parent nor the ultimate controlling entity produces financial statements available for public use, then the name of the
next most senior parent that does so
b. Names of all the associates that an entity has dealt with during the year
c. Relationship between parent and subsidiaries
d. Name of the entity’s parent and the ultimate controlling party

36. Which is not a required minimum related party disclosure?

a. The amount of the related party transaction

b. Allowance for doubtful accounts related to the outstanding balance
c. The amount of the outstanding balance
d. The amount of similar transaction with unrelated parties to establish that comparable related party transactions have been entered into at
arm’s length

37. An entity that entered into a related party transaction would be required to disclose all of the following information, except

a. Amount due from or to related parties at the end of reporting period

b. Nature of any future transactions planned between the parties and the terms involved
c. Peso amount of the transaction
d. Nature of the relationship between the parties

38. The parent company and its subsidiary have no transaction during the current reporting period. Which of the following would be disclosed in the
notes to financial statements?

a. The nature of future transactions that the parties may enter

b. Nature of the relationship between the parties
c. The cumulative amount of related party transactions since the existence of the related party relationships
d. No disclosure is required

39. Which of the following is not specified as a separate related party disclosure?

a. The parent of the entity

b. An entity that has a common director with the entity
c. Joint venture in which the entity is a venture
d. Entity with joint control or significant influence over the entity

40. Which is not a required related party disclosure?

a. The name of the next most senior parent of the entity if the ultimate controlling party does not provide financial statements for public use
b. Daughter of the chief executive officer of the entity
c. Entity’s agent with whom an entity transacts a significant volume of business, as a result the entity has economic independence to
d. Salaries given to entity’s president

41. Financial statements shall include disclosure of material transactions between related parties, except

a. Non-monetary exchange by affiliates

b. Sales of inventory by a subsidiary to the parent when consolidated financial statements are prepared
c. Expense allowance for executives which exceed normal business practice
d. An entity’s agreement to act as surety for a loan to the chief executive officer

42. Which should be disclosed as related party transaction in the entity’s separate financial statements?

a. Sales to affiliated entities

b. Key management personnel compensation and sales to affiliated entities
c. Key management personnel compensation
d. Neither key management personnel compensation nor sales to affiliated entities
43. Examples of transactions that are disclosed if they are with a related party includes

a. purchases or sales of property and other assets

b. all of these transactions are subject to disclosures if with a related party
c. transfers of research and development
d. purchases or sales of goods (finished or unfinished)

44. The minimum disclosures about a related party transaction include all of the following except

a. Nature of the relationship

b. The amount of the transaction
c. The amount of outstanding balance
d. Allowance for doubtful accounts related to the outstanding balance

45. An entity has consigned the mortgage note on the home of its president guaranteeing the indebtedness in the event that the president should
default. The entity considers the likelihood of default to be remote. How should the guarantee be treated in the financial statements?

a. Accrued only
b. Neither accrued nor disclosed
c. Disclosed only
d. Accrued and disclosed

46. An entity that entered into a related party transaction would be required to disclose all, except

a. Peso amount of the transaction

b. Nature of any future transactions planned between the parties and the terms involved
c. Amount due from or to related parties
d. Nature of the relationship between the parties

47. Which of the following is exempt from disclosure requirement under paragraph 18 of IAS 24?

a. Participation by a parent or subsidiary in a defined benefit plan that shares risks between group entities.
b. Amounts incurred by the entity for the provision of key management personnel services that are provided by a separate management entity
shall be disclosed.
c. Relationships between a parent and its subsidiaries with no transaction during the reporting period
d. Related party transactions and outstanding balances with a government that has control or joint control of, or significant influence over, the
reporting entity.

48. Which of the following is exempt from providing the normal disclosure?

a. Other entities controlled, jointly controlled or significantly influence by the same government.
b. Name of the next most senior parent that produces financial statements available for public use if the ultimate controlling party does not
c. Amounts incurred by the entity for the provision of key management personnel services that are provided by a separate management entity
shall be disclosed.
d. Relationships between a parent and its subsidiaries with no transaction during the reporting period

49. Transactions exempt from normal related party disclosures are nevertheless required to disclose

a. details of any guarantees given or received

b. the name of the government and the nature of its relationship with the reporting entity
c. the expense recognized during the period in respect of bad or doubtful debts due from related parties.
d. provisions for doubtful debts related to the amount of outstanding balances

50. If the entity transacts with government entities that exercise control over the entity, it shall provide information in sufficient detail

a. a qualitative or quantitative indication of the extent of significant transaction

b. the amount of transactions only
c. the nature and amount of each individually significant transaction
d. the amount of transactions and outstanding balances, including commitments, whether significant, collectively or individually.
CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS
EXERCISE 9

CASH TO ACCRUAL AND SINGLE ENTRY SYSTEM

1. Revenue is recognized when cash is received, and expenses are recognized when cash is paid. This does not recognize accruals and deferrals.

a. Single-entry basis
b. Modified cash basis
c. Pure cash basis
d. Accrual basis

2. Under the cash basis of accounting

a. The matching principles is ignored

b. Depreciation of assets having an economic life of more than one year is not recognized = should be recognized
c. Accounts receivable should be recognized = should not be recognized
d. Revenue is recorded when earned= Recorded when paid

3. Under the cash basis revenue is recorded

a. When earned and realized

b. When earned
c. When earned and realizable
d. When realized

4. Under the cash basis, revenues are recognized when they are

a. Earned
b. Earned and collected
c. Collected
d. Earned and become measurable

5. Which is not correct regarding the pure cash basis of accounting?

a. It is simple and less costly

b. It does not required adjustments at the end of the reporting period
c. Expenditures having benefits of more than one year are capitalized as assets and depreciated or amortized over their respective useful lives.
d. It does not require estimated and judgments

6. Recognizes the effects of transaction and other events when they occur, rather than when cash or its equivalent is received or paid.

a. Modified cash basis

b. Accrual basis
c. Single-entry basis
d. Pure cash basis

7. Under the accrual basis, revenues are recognized when they are

a. Collected
b. Earned and become measurable
c. Earned
d. Earned and collected

8. Under the IFRS

a. The cash basis method of accounting is accepted

b. All of the choices are correct
c. Net income will be lower under the cash basis than accrual basis accounting
d. Events are recorded in the period in which the event occurs
9. Under the cash basis, expenses are recognized when

a. They are paid by the entity

b. The revenues are recognized that the expenses help to produce
c. Cash is received from revenues that the expenses help to produce
d. The costs expire or assets are used

10. The recognition of expenses, under accrual accounting, is based on three principles: direct matching, systematic and rational allocation and
immediate recognition. The direct matching principle requires that expenses be recognized

a. When they are paid by the enterprise

b. In the same period in which the revenues are recognized that the expenses help to produce
c. In the same period that the costs expire or assets are used
d. In the same period that the revenue is received that the expenses help to produce

11. Under the accrual basis of accounting, cash receipts and disbursements may

a. Precede, coincide with, or follow the period in which revenue and expenses are recognized
b. Coincide with or follow but never precede the period in which revenue and expenses are recognized
c. Only coincide with the period in which revenue and expenses are recognized
d. Precede or coincide with but never follow the period in which revenue and expenses are recognized

12. What is the main distinction of cash and accrual basis of accounting?

a. The type of entity that selects the basis of accounting

b. The time frame in which revenue and expenses are recorded
c. The total net income over the life of the entity
d. The total expense over the life of the entity

13. A mixture of cash basis and accrual basis where revenue is reported in the year of cash receipts, prepaid expenses are deferred but accruals are
not recognized. Under this set up, expenditures having benefits of more than year are capitalized as assets and depreciated.

a. Accrual basis
b. Pure cash basis
c. Single-entry basis
d. Modified cash basis

14. What is/are the significant features of the modified cash basis?

I - Revenue is reported in the year of cash receipts;

II - Expenditures having benefits of more than one year are capitalized as assets and depreciated or amortized over their respective useful lives.
III - Accrued expense is not recognized, and expenses are recorded only when paid in a subsequent period

a. I, III
b. I, II
c. II, III
d. I, II, III

15. Which is true regarding accrual basis of accounting?

a. It recognizes impact of business transactions when it occurs

b. It does not require estimated and judgments
c. It records revenue in the year of cash and receipts
d. It is simple and less costly

16. Accrual basis of accounting is preferred over cash basis because of the following reasons, except

a. Adjustments are made at the end of the period to update certain assets, liabilities, revenues, and expenses
b. Revenues are recognized when earned, and expenses are recognized when incurred, irrespective of when cash is received or paid
c. It does not report receivables, payables, and deferrals
d. Accrual basis provides more complete set of information than does the cash basis.
17. Which statement regarding accrual versus cash basis of accounting is true?

a. The cash basis requires a complete set of records

b. The cash basis is appropriate for some smaller entities
c. Application of the cash basis results in an income statement reporting revenue and expenses
d. The cash basis is less useful in predicting the timing and mounts of future cash flows

18. Total net income over the life of an entity is

a. The same under the cash basis than under the accrual basis
b. Lower under the cash basis than under the accrual basis
c. Not susceptible to measurement
d. Higher under the cash basis than under the accrual basis

19. Over the life of the enterprise

a. Total profit using the accrual basis would either be more than or less than the total profit using the cash basis
b. Total profit using the accrual basis would be less than the total profit using the cash basis
c. Total profit using the accrual basis would be equal the total profit using the cash basis
d. Total profit using the accrual basis would be more than the total profit using the cash basis

20. Accrual basis profit is most useful for

a. Determining the amount that will be paid as interest to creditors and dividends to shareholders
b. Predicting the performance of an entity for the succeeding reporting period
c. Determining the amount of income tax payable to the government
d. Predicting the long-term performance of an enterprise

21. Companies maintaining their accounting records using the cash basis of accounting should prepare their financial statements using the cash basis.

The conversion of cash basis information of accrual accounting focuses on the recognition of accruals and deferrals.

a. True, True
b. False, True
c. True, False
d. False, False

22. The procedure in the conversion of cash basis information to accrual basis almost parallel those of converting single-entry system to double-entry
system.

The conversion from cash basis to accrual basis is exactly the opposite of the procedures undertaken when preparing the statement of cash flows.

a. True, False
b. False, True
c. False, False
d. True, True

23. How are total sales determined under the cash basis?

a. Cash sales less collection of trade receivables.

b. Cash sales less sales on account.
c. Cash sales plus sales on account.
d. Cash sales plus collection of trade receivables.

24. How are total sales determined under the accrual basis?

a. Cash sales less sales on account.

b. Cash sales plus sales on account.
c. Cash sales plus collection of trade receivables.
d. Cash sales less collection of trade receivables.
25. How are total purchases determined under the cash basis?

a. Cash purchases plus purchases on account.

b. Cash purchases plus payment to trade creditors.
c. Cash purchases less payment to trade creditors.
d. Cash purchases less purchases on account.

26. How are total purchases determined under the accrual basis?

a. Cash purchases less payment to trade creditors.

b. Cash purchases plus payment to trade creditors.
c. Cash purchases less purchases on account.
d. Cash purchases plus purchases on account.

27. If ending balances of accounts receivable exceeds the beginning balance of accounts receivable

a. Cash collections during the period exceeds the amount of revenue earned
b. No cash was collected during the period
c. Net income for the period under accrual basis is less than the amount of cash basis income
d. Cash collections during the year are less than the amount of revenue earned

28. Under the cash basis, how are bad debts determined

a. The difference between the beginning allowance for doubtful accounts and adjusted balance
b. A percentage of sales on account
c. No bad debts are recognized because trade receivables are not recognized.
d. Doubtful accounts are treated as bad debts.

29. Which of the following is the correct formula in converting sales under cash basis to accrual basis?

a. Cash receipts from customers + Accounts receivable, end + Sales returns, discounts, and allowances + Accounts written off as worthless +
Accounts receivables, beg. + Customer advances, beg. + Customer advances, end
b. Cash receipts from customers - Accounts receivable, end - Sales returns, discounts, and allowances - Accounts written off as worthless -
Accounts receivables, beg. - Customer advances, beg. - Customer advances, end
c. Cash receipts from customers + Accounts receivable, end + Sales returns, discounts, and allowances + Accounts written off as worthless -
Accounts receivables, beg. + Customer advances, beg. - Customer advances, end
d. Cash receipts from customers - Accounts receivable, end + Sales returns, discounts, and allowances + Accounts written off as worthless +
Accounts receivables, beg. + Customer advances, beg. - Customer advances, end

30. When converting from cash basis to accrual basis of accounting, which of the following adjustments should be made to cash collections from
customers to determine accrual basis service revenue?

a. Add ending accounts receivable

b. Add cash sales
c. Subtract beginning unearned service revenue
d. Subtract ending accounts receivable

31. Which of the following is the correct formula in converting purchases under cash basis to accrual basis?

a. Cash paid for purchases + Accounts payable, end - Accounts payable, beg
b. Cash paid for purchases + Accounts payable, end + Accounts payable, beg
c. Cash paid for purchases - Accounts payable, end + Accounts payable, beg
d. Cash paid for purchases - Accounts payable, end - Accounts payable, beg

32. If the company provides you with information on net purchases under accrual basis, how are you going to compute cost of goods sold?

a. Net purchases - Inventory, beg - Inventory, end

b. Net purchases + Inventory, beg + Inventory, end
c. Net purchases - Inventory, beg + Inventory, end
d. Net purchases + Inventory, beg - Inventory, end
33. The inventory and accounts payable balances increased. Should these increases be added to or deducted from cash payments to supplies to arrive
at cost of goods sold for the current year?

a. Deducted, Added =Inventory increase (deduct); AP increase (add)

b. Deducted, Deducted
c. Added, Deducted
d. Added, Added

34. A company’s merchandise inventory decreased during the period, while its accounts payable increased during the period. How would these
increase or decrease be added to or deducted from cash payment to merchandise suppliers to arrive at accrual basis cost of goods sold?

a. Added, Deducted
b. Deducted, Added
c. Deducted, Deducted
d. Added, Added =Inventory decreased (Add); AP increase (add)

35. When converting from cash basis to accrual basis of accounting, which of the following adjustments should be made to cash paid for operating
expense to determine accrual basis operating expenses?

a. Subtract beginning prepaid expense = prepaid expense, beg is added

b. Subtract interest expense = not included. It has its own formula
c. Add beginning accrued liabilities =beginning accrued liabilities are deducted
d. Subtract ending prepaid expense

36. When converting from cash basis to accrual basis of accounting, which of the following adjustments should be made to cash paid for operating
expense to determine accrual basis operating expenses?

a. Add beginning prepaid expense

b. Add beginning accrued liabilities = beginning accrued liabilities are deducted
c. Subtract beginning prepaid expense = prepaid expense, beg is added
d. Subtract interest expense = not included. It has its own formula

37. An entity wants to convert the financial statement from accrual basis to cash basis. Both supplies inventory and office salaries payable increased.
To obtain cash basis net income, how should these increases be added to or deducted from accrual basis net income?

a. Added, Added = Inventory increased (add); Expense increased ()

b. Deducted, Added
c. Deducted, Deducted
d. Added, Deducted

38. Compute rent revenue from cash received for rent

a. Cash received for rent + Unearned rent, beg - Unearned rent, end
b. Cash received for rent - Accrued rent, beg + Accrued rent, end
c. Cash received for rent + Unearned rent, beg - Unearned rent, end - Accrued rent, beg + Accrued rent, end
d. Cash received for rent - Unearned rent, beg + Unearned rent, end + Accrued rent, beg - Accrued rent, end

39. What is the correct way to compute interest revenue from cash received for interest?

a. Cash received for interest - Amortization of discount + Amortization of premium

b. Cash received for interest + Interest receivable, end - Interest receivable, beg + Amortization of discount - Amortization of premium
c. Cash received for interest - Interest receivable, end + Interest receivable, beg - Amortization of discount + Amortization of premium
d. Cash received for interest - Interest receivable, end + Interest receivable, beg
40. Convert cash paid for income tax to income tax expense under accrual basis

a. Cash paid for income tax - Income tax payable, end - Income tax payable, beg - Deferred tax asset, beg - Deferred tax asset, end - Deferred
tax liability, end - Deferred tax liability, beg
b. Cash paid for income tax + Income tax payable, end - Income tax payable, beg + Deferred tax asset, beg - Deferred tax asset, end +
Deferred tax liability, end - Deferred tax liability, beg
c. Cash paid for income tax + Income tax payable, end + Income tax payable, beg - Deferred tax asset, beg - Deferred tax asset, end -
Deferred tax liability, end + Deferred tax liability, beg
d. Cash paid for income tax + Income tax payable, end + Income tax payable, beg + Deferred tax asset, beg + Deferred tax asset, end +
Deferred tax liability, end + Deferred tax liability, beg

41. Compared to the accrual basis of accounting, the cash basic understated income by the net decreased during the accounting period of

a. Neither accounts receivable nor of accrued expenses

b. Accrued expenses but not of accounts receivable
c. Accounts receivable but not of accrued expenses
d. Both accounts receivable and accrued expenses

42. Compared to cash basis net income for the current year, an entity’s accrual basis net income increased when it

a. Wrote off more accounts receivable than it reported as uncollectible accounts expense in the current year
b. Sold used equipment for cash at a gain in the current year
c. Declared a cash dividend in the prior year that it paid in the current year
d. Had lower accrued expenses at the end of the current year than at the beginning of year

43. Prior to the current year, an entity used the cash basis of accounting. At the current year-end, the entity charged to the accrual basis. The entity
cannot determine the beginning balance of supplies inventory.

What is the effect of the inability to determine beginning supplies inventory on the accrual basis net income and year-end accrual basis owner’s
equity?

a. No effect, Overstated
b. No effect, No effect
c. Overstated, No effect
d. Overstated, Overstated

44. The premium on a three-year insurance policy expiring on December 31, 2022, was paid in total on January 1, 2020. If the entity has a six-month
operating cycle, then on December 31, 2020, the prepaid insurance reported as a current asset would be for

a. 6 months
b. 24 months
c. 12 months
d. 18 months

45. The premium on a three-year insurance policy expiring on December 31, 2022 was paid in total on January 1, 2020. The original payment was
initially debited to a prepaid asset account. The appropriate adjusting entry had been recorded on December 31, 2020. The balance in the prepaid
asset account on December 31, 2020 should be

a. Higher than if the original payment had been debited initially to an expense account
b. The same as it would have been if the original payment had been debited initially to an expense account
c. Zero
d. The same as the original payment

46. The premium on a three-year insurance policy expiring on December 31, 2022, was paid in total January 1, 2020. If the original payment was
recorded as a prepaid asset, how would total assets and shareholders’ equity be affected during 2020?

a. Both total assets and shareholders’ equity would decrease

b. Neither total assets nor shareholders’ equity would change
c. Both total assets and shareholders’ equity would increase
d. Total assets would decrease, and shareholders' equity would increase
47. The premium on a four-year insurance policy expiring on December 31, 2023 was paid in total on January 1, 2020. If the original payment was
recorded as a prepaid asset, the balance in the prepaid asset on December 31, 2021 would be

a. Lower than the balance on December 31, 2020

b. The same as the original payment
c. Lower than the balance on December 31, 2022
d. The same as the balance on December 31, 2022

48. At the beginning of the current year, an entity signed a 5-year contract enabling it to use a patented manufacturing process beginning in the
current year. a royalty is payable for each product produced, subject to a minimum annual fee. Any royalties in excess of the minimum will be paid
annually. On the contract date, the entity prepaid a sum equal to two years’ minimum annual fees. In the current year, only minimum fees were
incurred. The royalty prepayment shall be reported in the current year-end financial statement as

a. A current asset and an expense

b. A noncurrent asset
c. An expense only
d. A current asset and noncurrent asset

49. A system of recording transactions in a way that maintains the equality of the accounting equation: Assets = Liabilities + Equity

a. Triple-entry system
b. Single-entry system
c. Double-entry system
d. Double-ruled system

50. A system or set of procedures that does not provide for a debit-credit analysis of transactions. Transactions are recorded in a chronological order
and in descriptive manner.

a. Double-entry system
b. Double-ruled system
c. Triple-entry system
d. Single-entry system

51. Single-entry accounting system uses cash basis of accounting.

Single-entry accounting system maintains the equation: Assets = Liabilities + Equity

a. False, True
b. False, False
c. True, True
d. True, False

52. What is the typical set of books kept under the single-entry system?

a. Debtors’ and creditors’ ledger

b. Cash book
c. All of these
d. Day book

53. Day book

a. Records transactions in chronological order in narrative format

b. provides a debit-credit analysis of transaction
c. is used in posting transactions affecting account of the debtor or creditor
d. records all transactions affecting cash

54. Cash book

a. Records transactions in chronological order in narrative format

b. records all transactions affecting cash
c. provides a debit-credit analysis of transaction
d. is used in posting transactions affecting account of the debtor or creditor
55. Debtors’ and Creditors’ ledger

a. records all transactions affecting cash

b. provides a debit-credit analysis of transaction
c. is used in posting transactions affecting account of the debtor or creditor
d. Records transactions in chronological order in narrative format

56. Which of the following statement is true regarding single-entry accounting system?

a. Transactions are analyzed in terms of debits and credits

b. The single-entry method of determining profit is the transaction approach
c. It is adopted by organization with complex and numerous transactions
d. It is also called incomplete records because only minimal accounting records are kept without the benefit of a complete accounting system

57. The use of single-entry accounting system provides incomplete set of accounting records. What is the possible source of cash account balances
that will be listed in the statement of financial position?

a. Official receipts, deeds, cancelled checks

b. Cash on hand as counted and cash records reconciled with bank statements
c. Records, documents, and confirmation from creditors
d. Total assets less total liabilities

58. In using single-entry accounting system, what is the possible source of account receivable account balances that will be listed in the statement of
financial position?

a. Physical count and inventory purchases invoices

b. Official receipts, deeds, cancelled checks
c. Reference to supporting documents, independent evidence, and confirmation from suppliers
d. Unpaid sales invoices, confirmation from customers

59. In using single-entry accounting system, what is the possible source of Property, Plant, and Equipment account balances that will be listed in the
statement of financial position?

a. Physical count and inventory purchases

b. Documents, records, or memoranda on file and verification by outside parties
c. Official receipts, deeds, cancelled checks, physical observation
d. Unpaid sales invoices, confirmation from customers

60. In using single-entry accounting system, what is the possible source of Accumulated depreciation account balances that will be listed in the
statement of financial position?

a. Determined from plant assets

b. Documents, records, or memoranda on file and verification by outside parties
c. Official receipts, deeds, cancelled checks, physical observation
d. Records, documents, and confirmation from creditors

61. The net worth method, otherwise known as the capital maintenance approach, is a concept in which

a. The financial statement effects of business events classified as revenues, gains, expenses, and losses, which are used to measure and define
profit
b. Fair values adjusted for the effects of inflation or deflation are used to measure profit
c. Profit is measured as the amount that an enterprise could distribute to its owners and be as well off at the end of the period as it was at the
beginning of the period
d. Profit equals the change in fair value of the net assets during a period

62. Company using single-entry accounting system may compute profit using the capital maintenance approach. However, it is necessary to recast
the single-entry accounting information into the double entry framework providing information of profit using the transaction approach because

a. Transaction approach is the only acceptable method for financial reporting.

b. All of these are correct.
c. Transaction approach provides a more complete picture of operations showing revenues and expenses
d. The transaction approach provides detailed information required by the users to evaluate effectively the performance of an entity.
63. In converting into transaction approach, the starting point of the conversion is

a. Analysis of the recorded information in the cash book

b. Supporting documents/sources of accounts balances
c. Statements of Financial position
d. Total assets and liabilities

64. ABC Corp. maintains a medical and dental clinic and keeps limited accounting records. Its assets and liabilities at the beginning and end of the
current year are as follows:

Beginning
P12,000 – Cash in Bank BEGINNING ENDING
P68,000 – Accounts Receivable ASSET (B: 12+68+30+150) 260,000 205,000
P30,000 – Medical Supplies (E: -5+70+15+125)
P40,000 – Accounts Payable LIABILITY (B: 40+20) (60,000) (45,000)
P20,000 – Notes Payable – Bank (E: 20+25)
P150,000 – Medical equipment (net) CAPITAL 200,000 160,000

Ending
(P5,000) – Cash in Bank CAPITAL, ENDING 160,000
P70,000 – Accounts Receivable ADD: WITHDRAWALS 12,000
P15,000 – Medical Supplies TOTAL 172,000
P20,000 – Accounts Payable LESS: CAPITAL, BEG (200,00)
P25,000 – Notes Payable – Bank LESS: INVESTMENTS (50,000)
P125,000 – Medical equipment (net) NET LOSS (78,000)

During the year, the owner withdrew cash of P12,000 and made an additional investment of P50,000. The profit (loss) of ABC Corp. for the year is

a. P8,000
b. (P2,000)
c. (P68,000)
d. (P78,000)

65. The following information pertains to Three-Tree Company’s 2020 sales

Cash Sales
Gross – P80,000
Returns and Allowances – P4,000

Credit Sales
Gross – P120,000
Discounts – P6,000

On January 1, 2020, customers owned Three-Tree P40,000. On December 31, 2020, customers owned Three-Tree P30,000. Three-Tree uses the
direct write-off method for bad debts. No bad debts were recorded in 2020.

Under the cash basis, the net revenue to be reported for 2020 is

a. P76,000
b. P170,000
c. P190,000
d. P200,000

Cash sales (80k+4k) 84,000

Credit sales (120k+6k) 126,000
AR, End 30,000
AR, Beg (40,000)
200,000
66. Bear Brand, Inc. owns an office building and leases the officers under a one-year rental agreement. Not all tenants make timely payments for their
rent. Bear Brand’s statement of financial position contained the following data:

2019
Rentals Receivable – P96,000
Unearned Rentals – P320,000

2020
Rentals Receivable – P124,000
Unearned Rentals – 240,000

During 2020, Bear Brand received P800,000 cash from tenants.

The amount of rental revenue for 2020 is

a. P692,000
b. P748,000
c. P852,000
d. P908,000

INCOME RECEIVED: 800,000

ADD: DI, BEG (UNEARNED) 320,000
AI, END (RECEIVABLE) 124,000
LESS: DI, END (UNEARNED) (240,000)
AI, BEG (RECEIVABLE) (96,000)
RENTAL REVENUE 908,000

67. The accrual profit or loss of Carnation, Inc. included the following expenses for 2020:
Depreciation expense – P65,000
Salaries and wages – P189,000
Interest expense – P36,000.

The following statement of financial position reported the following related accounts:

12/31/20
Accumulated depreciation – P96,000
Accrued salaries and wages – P8,000
Accrued interest payable – P10,500

12/31/19
Accumulated depreciation – P154,000
Accrued salaries and wages – P12,000
Accrued interest payable – P7,000

Considering only the data above, a pure cash basis income statement would report expenses for 2020 of

a. P225,000
b. P243,500
c. P224,500
d. P231,000

EXPENSES – CASH 225,500

ADD: ACCRUAL, END 18,500
LESS: ACCRUAL, BEG (19,000)
EXPENSES – ACCRUALS 225,000
68.The following data relate to store equipment of Progress Company for 2020:

2019
Store Equipment – P145,000
Accumulated Depreciation – P58,000

2020
Store Equipment – P175,000
Accumulated Depreciation – P60,000

Store equipment costing P30,000 was sold for P21,000 resulting in a gain of P3,000.

The depreciation expense on store equipment for 2020 is

a. P14,000
b. P8,000
c. P10,000
d. P11,000

STORE EQ. NET OF AD, BEG (175K-58K) 117,000

STORE EQ. NET OF AD, END (145K-60K) (85,000)
COST OF EQUIPMENT SOLD (21,000)
GAIN ON THE SALE OF EQUIPMENT 3,000
DEPRECIATION EXPENSE 14,000

69. Milkmaid, Inc. maintains its accounting records on the cash basis but restates its financial statements to the accrual method of accounting.
Milkmaid had P600,000 cash basis pretax income for 2020.

The following information pertains to Milkmaid for the years ended December 31, 2020 and 2019.

2020
Accounts receivable – P400,000
Accounts payable – P150,000

2019
Accounts receivable – P200,000
Accounts payable – P300,000

Under the accrual method, Milkmaid should report in its 2020 profit or loss, a pretax profit of

a. P650,000
b. P550,000
c. P950,000
d. P250,000

Sales:
AR, END: 400,000
(AR, BEG): (200,000)
SALES: 200,000

Cogs:
AP, END: 150,000
(AP, BEG): (300,000)
COGS: (150,000)

SALES: 200,000
PRETAX INCOME: 600,000
(COGS): (-150,000)
PROFIT: 950,000
70. The current year’s operations of Cerelar, Inc. showed the following data:

December 31
Accounts receivable – P51,000
Accounts payable – P60,000
Collections from customers – P794,000
Total cash payments – P715,000

January 1
Accounts receivable – P45,000
Accounts payable – P33,000
Accrued wages – P7,000

Selling expenses of P144,000 are 45% of gross profit. administrative expenses are 15% of sales. This amount includes depreciation which is 20% of
administrative expenses. There are no unpaid selling and administrative expenses as of December 31. Inventory per physical count at year-end totaled
P125,000.

Total sales for the period is

a. P788,000
b. P800,000
c. P705,000
d. P725,000

SALES:
COLLECTIONS: 794,000
AR, END: 51,000
(AR, BEG): (45,000)
SALES: 800,000

71. Use the same information in the preceding number. Total purchases for the period is

a. P495,000
b. P504,600
c. P496,000
d. P499,000 : PWEDENG ITO KUNG NADULING SI SIR

PURCHASES:
CASH PAYMENTS: 715,000
AP, END: 60,000
(AP, BEG): (33,000)
PURCHASES: 742,000

72. Use the same information given in the preceding number. The cost of goods sold for the period is

a. P445,000
b. P480,000
c. P468,000
d. P400,000

Selling Expense: 144,000/45%

Gross Profit: 320,000

Sales: 800,000
Cogs: (480,000)
Gross Profit: 320,000
73. The following changes in Alaska Company’s account balances occurred during 2020:

Increase
Assets – P890,000
Liabilities – P270,000
Share Capital – P600,000
Share Premium – P60,000

Except for the P130,000 dividend payment and the year’s earnings, there were no changes in retained earnings for 2020.

What was Alaska’s profit for 2020?

a. P90,000
b. P170,000
c. P40,000
d. P130,000

Increase in:
Asset: ADD 890,000
Liabilities: LESS (270,000)
Share Capital: LESS (600,000)
Share Premium: LESS (60,000)
ADD: DIVIDEND PAID: 130,000
PROFIT: 90,000

74. For Numbers 74-77.

Following are data relating to the operations of Centrum Company for six months which started on July 1, 2020.

Cash receipts:
Investment by owner – P250,000
Collections on sales account – P310,000
Cash sales – P85,000
Proceeds of a note payable dated October 1, 2020 and due October 1, 2021, discounted at 18% – P24,600

Cash disbursements:
Purchase of land and buildings on July 1, 2020 – P240,000
20% down payment on furniture and fixtures purchases on installment on July 1, 2020 – P4,000
On Accounts Payable – P280,000
For other operating expenses – P45,000

Of the sales on account, P4,000 was returned because of poor quality and there was a purchase return of P5,000. On December 31, 2020, the
following balances were available:
Accounts Receivable, P66,000; Accounts Payable, P67,000; Accrued other operating expenses, P3,500.

The land has an allocated cost of P40,000. Annual depreciation is 4% on the building and 10% of the furniture and fixtures.

Inventory on December 31, 2020, is P21,700.

Gross sales for the period amounted to

a. P376,000
b. P465,000
c. P380,000
d. P461,000

GROSS SALES:
CASH SALES: 85,000
COLLECTIONS ON ACCOUNT: 310,000
RETURNS 4,000
AR, END: 66,000
GROSS SALES: 465,000
75. Use the same information in the preceding number. Gross purchases for the period amounted to

a. P377,000
b. P352,000
c. P347,000
d. P382,000

GROSS PURCHASES:
PAYMENT: 280,000
RETURNS: 5,000
AP, END: 67,000
GROSS PURCHASES: 352,000

76. Use the same information in the preceding number. Cost of Sales for the period is

a. P320,300
b. P350,000
c. P355,300
d. P325,300

GROSS PURCHASES: 352,000

PURCHASE RETURS: (5,000)
INVENTORY, END: (21,700)
COST OF SALES: 325,300

77. Use the same information in the preceding number. The total operating expenses for the period is

a. P58,500
b. P48,500
c. P53,500
d. P46,500

Other Operating Expenses:

Expenses Paid: 45,000
Accrued OPEX, End 3,500
48,500
Depreciation:
Building: 240,000 – 40,000 = 200,000
200,000 x 4% = 8,000
8,000 x 6/12 = 4,000

Furniture: 4,000 / 20% = 20,000

20,000 x 10% = 2,000
2,000 x 6/12= 1,000

TOTAL OPERATING EXPENSES

Depreciation (Building): 4,000
Depreciation (Furniture): 1,000
Other Operating Expenses: 48,500
53,500
78. Nan keeps single-entry records for his business. The accounts payable per files on May 1 was P110,000, and on May 31 was P140,000. During
the month, P45,000 was paid for cash purchases; P22,500 was allowed on purchase returns; P280,000 was paid on accounts payable; and P10,000
was paid for freight-in. The inventory on May 1 was P50,000 and on May 31 was P60,000.

What is the cost of sales for the month of May?

a. P175,000
b. P355,000
c. P365,000
d. P345,000

PURCHASES:
CASH PURCHASES: 45,000
PAID ON AP: 280,000
AP, END: 140,000
RETURNS: 22,500
AP, BEG: (110,000)
377,500

COST OF SALES:
INVENTORY, BEG: 50,000
PURCHASES: 377,500
(RETURNS) (22,500)
FREIGHT IN 10,000
INVENTORY, END: (60,000)
355,000

79. Neslac, Inc. owns an office building and leases the offices under a one-year rental agreement. Not all tenants make timely payments of their rent.
During 2020, Neslac received P800,000 cash from tenants. The Company’s statement of financial position at December 31, 2019 reported rent
receivable of P96,000 and unearned rent revenue of P320,000. The statement of financial position at December 31, 2020 and the statement of
comprehensive income for the year ended December 31, 2020 reported rent receivable and rent revenue of P124,000 and P908,000, respectively.

How much was Neslac, Inc.’s unearned rent revenue at December 31, 2020?

a. P908,000
b. P240,000
c. P112,000
d. P168,000

INCOME
CASH RECEIVED: 800,000
ADD: UNEARNED INCOME, BEG: 320,000
RECEIVABLE, END: 124,000
LESS: UNEARNED INCOME, END 240,000
RECEIVABLE, BEG: (96,000)
RENT INCOME 908,000

80. The following data are obtained from the single entry set of books kept by the proprietor of Promil Company for 2020:

December 31
Trade Notes receivable – P1,200,000
Accounts receivable – P2,000,000

January 1
Trade Notes receivable – P400,000
Accounts receivable – P1,600,000

The cashbook shows the following receipts:

Accounts receivable (after sales discount of P100,000) – P2,000,000

Trade Notes receivable – P960,000
Cash sales – P800,000
Rent income – P80,000
Sale of equipment costing P200,000 and a book value of P100,000 – P120,000
Investment by the owner – P600,000

Accounts receivable of P120,000 were written off as uncollectible returns of P320,000 were made on merchandise sales and an allowance of P80,000
was received on merchandise purchases.

The gross sales for 2020 amounted to

a. P5,620,000
b. P5,500,000
c. P5,440,000
d. P5,580,000

GROSS SALES:
NR, END: 1,200,000
AR, END: 2,000,000
CASH RECEIVED FR. AR: 2,100,000
CASH RECEIVED FR. NR: 960,000
CASH SALES: 800,000
WRITE OFF: 120,000
RETURNS: 320,000
NR, BEG: (400,000)
AR, BEG: (1,600,000)
5,500,000

81. Nido Corporation provided you with the following summary of total assets and liabilities on January 1, 2020, and on December 31, 2020:

Assets
January 1, 2020 – P9,000,000
December 31, 2020 – 12,000,000

Liabilities
January 1, 2020 – P3,200,000
December 31, 2020 – P4,500,000

During 2020, Nido issued 10,000 shares of its P100 par ordinary share at P150 per share and declared dividends of P280,000. There were no other
changes affecting the equity accounts.

The profit for 2020 is

a. P80,000
b. P480,000
c. P420,000
d. P980,000

BEGINNING CAPITAL:
ASSET, BEG: 9,000,000
LIABILITY, BEG: (3,200,000)
5,800,000
ENDING CAPITAL:
ASSET, END: 12,000,000
LIABILITY, END: (4,500,000)
7,500,000
NET INCOME:
CAPITAL, END: 7,500,000
SHARE DIVIDEND: (10K x 150) (1,500,000)
CASH DIVIDEND: 280,000
CAPITAL, BEG: (5,800,000)
480,000
82. Maxwell Company’s total equity increased by P320,000 during 2020. New shareholder investment during the year totaled P650,000. Total
revenues during the year were P5,000,000 and total expenses were P4,600,000. Cash increased by P75,000 during the year.

What amount of dividends did Maxwell Company declare during 2020?

a. P730,000
b. P655,000
c. P330,000
d. P737,500

DIVIDENDS:
INCREASE IN EQUITY 320,000
LESS: INVESTMENT (650,000)
ADD: DIVIDENDS 730,000
NET INCOME (5M-4.6M): 400,000

83. During 2020, Kopiko Company, a service organization, had P200,000 in cash sales and P3,000,000 in credit sales. The accounts receivable
balances were P400,000 and P485,000 at December 31, 2019 ad 2020, respectively.

If Kopiko desires to prepare a cash basis income statement, how much should be reported as sales for 2020 on a cash basis?

a. P3,200,000
b. P3,115,000
c. P2,915,000
d. P3,285,000

SALES:
CASH SALES: 200,000
CREDIT SALES: 3,000,000
(INCREASE IN AR): (85,000)
3,115,000

84. The changes in the account balances and the following additional information are taken from the accounts of Great Taste Corporation for the year
2020:

Increase (Decrease)
Cash – P142,500
Accounts receivable – P(30,000)
Inventory – P202,500
Buildings and equipment, net – P630,000
Accounts payable – P(172,500)
Bonds payable – P375,000
Share capital – P300,000
Share premium – P45,000

Dividends for 2020 were P82,500. There were no transactions affecting retained earnings other than dividends and profit.

The profit for 2020 is

a. P480,000
b. P1,410,000
c. P562,500
d. P397,500

PROFIT:
CASH: 142,500
AR: (30,000)
INVENTORY: 202,500
BUILDING & EQUIP: 630,000
AP: 172,500
BONDS PAYABLE: (375,000)
 SHARE CAPITAL: (300,000)
SHARE PREMIUM: (45,000)
ADD: DIVIDENDS 82,500
480,000

85. Under the accrual basis, rental income of Macho Company for the calendar year 2020 is P60,000. Additional information regarding rental income
during 2020 follows:

January 1, Unearned rental income – P5,000

December 31, Unearned rental income – P7,500
January 1, Accrued rental income – P3,000
December 31, Accrued rental income – P4,000

How much actual cash rental was received by Macho Company in 2020?

a. P58,500
b. P65,500
c. P61,500
d. P62,500

INCOME:
CASH RECEIVED 61,500
ADD: UNEARNED, BEG: 5,000
ACCRUED, END: 4,000
LESS: UNEARNED, END: (7,500)
ACCRUED, BEG: (3,000)
60,000