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Chapter 2 - Statement of Comprehensive Income - Unlocked

This document contains 7 multiple choice questions testing knowledge of PAS 1 requirements for financial statement presentation and other comprehensive income. It also contains a case requiring preparation of a statement of profit or loss and other comprehensive income for Lunch Co. using the single statement presentation and function of expense method, along with additional disclosures.

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Jerome_Jade
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92 views2 pages

Chapter 2 - Statement of Comprehensive Income - Unlocked

This document contains 7 multiple choice questions testing knowledge of PAS 1 requirements for financial statement presentation and other comprehensive income. It also contains a case requiring preparation of a statement of profit or loss and other comprehensive income for Lunch Co. using the single statement presentation and function of expense method, along with additional disclosures.

Uploaded by

Jerome_Jade
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1. PAS 1 does not require the presentation of which of the following financial statements?

A. Balance sheet
B. Notes
C. Income statement
D. All of these are required

2. Which of the following statements correctly relate to the provision of PAS 1?


A. According to PAS 1, “cash and cash equivalents” shall always be presented as the first line item in the
balance sheet.
B. The term “balance sheet” may be used in lieu of the “statement of financial position” and the term “income
statement” may be used in lieu of the “statement of profit or loss and other comprehensive income.”
C. An entity is prohibited from presenting extraordinary items in the financial statements but may disclose
those items in the notes.
D. An entity may present its income and expenses in a single statement or in two statements.

3. Which of the following is not a component of other comprehensive income?


A. A revaluation increases in an item of property, plant and equipment during the period.
B. The difference between the return on plan assets and the interest on the plan assets.
C. A decrease in the fair value of investment in FVOCI securities.
D. The ineffective portion of a cash flow hedge.

4. In which of the following instances may an entity make a reclassification adjustment?


A. A revalued property is sold at a gain.
B. The entity amends its retirement benefit plan resulting to a decrease in the present value of defined benefit
obligation.
C. An entity sells its investment in equity securities measured at FVOCI.
D. A hedging relationship ceases and the entity transfers the related cumulative fair value changes accumulated
in equity to profit or loss.

5. Total comprehensive income includes which of the following?


A. Unrealized loss on FVOCI securities
B. Unrealized loss on FVPL securities
C. Profit or loss during the period
D. All of these

6. An entity is required to present additional disclosures if the entity present its expenses using the
A. Nature of expense method
B. Function of expense method
C. Either A or B
D. Neither A nor B

7. The records of Lunch Co. on December 31, 20x1 show the following information:
Debits Credits
Sales 22,000,000
Beginning inventory 1,700,000
Purchases 5,600,000
Purchase returns 500,000
Freight-in 400,000
Salaries of sales personnel 670,000
Interest expense 340,000
Research and development expense 320,000
Director's remuneration 180,000
Salaries of administrative personnel 2,000,000
Rent expense 520,000
Depreciation expense 280,000
C ommission expense 160,000
Impairment loss on financial assets 1,100,000
Insurance expense 190,000
Income tax expense 50,000
Unrealized gain on equity security-FVOC I 2,000,000
Gain on change in fair value - cash flow hedge 200,000
30,000

Totals 15,510,000 22,730,000

Additional information:
 Ending inventory amounts to P1,200,000
 One-half of the rent expense pertains to the sales department.
 The impairment loss on financial assets pertains to impairment of receivables recognized on contracts
with customers.
 The items of other comprehensive income are net of tax.
 The gain on change in fair value on the cash flow hedge represents the effective portion.

Requirements:
a. Prepare the statement of profit or loss and other comprehensive income of Lunch Co. using the single
statement presentation and the function of expense method. Make a proper heading for the financial
statement. Apply the general feature of “materiality and aggregation”
b. Make the additional disclosures for the breakdown of line items in the financial statement. Make proper
cross-referencing of those notes; use “Note 12” as your first cross-reference.

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