1.Which of the following qualifies for classification as an investment
property? *
Property that is leased out to another entity under a finance lease
Option 5
Property that is currently being developed for future use as investment property
Building being rented from another entity under an operating lease and leased out under
various operating leases.
Investment property that is currently being developed for future use as owner-occupied
property
2.Select the correct statement. *
Investment properties being redeveloped as investment properties on behalf of third
parties are investment properties. X
All investment properties held for capital appreciation will be classified as held for sale in
the long run.
Option 5
A leasing company should treat all assets used in providing lease services as investment
property. X
Investment properties that are to be disposed of without further development are
treated as investment property until they are derecognized.
3.Select the incorrect statement regarding impairments of investment
properties.
Investment properties are subject to impairment.
Impairments of investment properties of government entities are recognized in surplus or
deficit.
Compensation from third parties for investment property that was impaired or lost shall
be recognized in surplus or deficit when the compensation becomes receivable and not
offset with the amount of loss.
Impairment losses on investment properties measured under the cost model are
never reversed.
Option 5
4.Derecognition of investment property is not required when *
Option 5
it becomes the subject of an operating lease.
it becomes the subject of a finance lease.
it is sold.
the property is assessed to have no future economic benefits.
5.Which of the following assets may be classified as investment property? *
Option 5
Land held for long-term capital appreciation
Intangible asset held for lease
Equipment held for lease
Building and Equipment held for lease
6.Which of the following properties falls under the definition of investment
property? I. Land held for long-term capital appreciation II. Property occupied
by an employee paying market rent. III. Property being constructed on behalf
of third parties IV.A building owned by an entity and leased out under an
operating lease *
II, III, IV
I, IV
Option 5
II, IV
I, II
7.Which of the following measurement bases is acceptable for the
subsequent measurement of an investment property held by a government
entity? *
fair value less costs to sell
cost less accumulated impairment losses
none, all of these are unacceptable.
Option 5
fair value
8.The distinguishing characteristic that identifies an investment property from
the other assets of an entity is? *
Changes in fair value of the asset is recognized in surplus or deficit.
The property does not derive cash flows separate from the other assets of the entity.
Earns rental as part of the ordinary operations of the entity.
Generates separately identifiable cash flows from the other assets of the entity.
9.Which of the following statements is correct regarding investment
property? *
When a government entity applies the fair value model to account for its investment
properties subsequent to initial recognition, changes in fair values are recognized in
surplus or deficit rather than a direct adjustment to equity.
An entity may classify assets other than land and/or building as investment property.
Transfers to or from investment property shall be made when, and only when,
there is a change in use.
During the period, Entity A, a government entity, reclassifies a building that was
previously used as office space to investment property. Entity A will recognize a gain if
the fair value of the asset exceeds its carrying amount on the date of transfer.
10.Under this model, investment properties are measured at cost less
accumulated depreciation and accumulated impairment losses. *
Gorgeous model
Fair value model
Cost model
Option 5
Impairment loss model
11.All of the following are directly attributable costs in the acquisition or
construction of an item of PPE except *
Costs of site preparation
Broker’s commission
Cost of staff training
Costs of employee benefits arising directly from the construction or acquisition of PPE
12.All of the following are expensed outright and do not form part of the cost
of an item of PPE except *
Administration and other general overhead costs.
Professional fees incurred in the training of staff who will be operating the machinery
acquired.
Installation and assembly costs after the asset is in the location and condition intended
by management.
Insurance costs while a purchased equipment is in-transit.
13.Which of the following is included in the initial cost of an item of PPE? *
Present value of the estimates of decommissioning and restoration costs
Refundable purchase taxes
Trade discounts
Cash discounts not taken
14.According to the GAM for NGAs, the costs incurred during the
construction of an asset are *
capitalized in a construction in progress account.
Option 5
expensed in the period incurred.
capitalized in the building account or other account.
initially recorded in the registries and recorded in the journals only when the construction
is complete and the asset is turned over and accepted by the government entity.
15. Government entities recognize depreciation *
only at year-end.
on a monthly basis.
on a weekly basis.
any of these as a matter of accounting policy choice.
16-17 Use the following information for the next two questions: Entity A
exchanged equipment with Entity B. Pertinent data are shown below: Entity
A Entity B Carrying amount A 85,000 B130,000 Fair value A 95,000 B
115,000 . Cash paid by Entity A to Entity B 15,000 Q.16. If the exchange has
commercial substance, how much is the initial measurement of the
equipment received by Entity B? *
130,000
100,000
95,000
115,000
Carrying amount
Fair Value
CASH PAID BY A TO B
ENTITY A ENTITY B
85,000
130,000
95,000
115,000
15,000
115,000 – 15,000 = 100,000
17.If the exchange has commercial substance, how much is the gain (loss)
recognized by Entity B in the exchange? *
10,000
(10,000)
(15,000)
15,000
115,000 – 130,000 = (15,000)
18.Entity A, a government entity, acquires an equipment on December 16,
20x1. Which of the following is correct? *
The equipment will be classified as inventory if it has a cost of less than ₱25,000.
The equipment will only be depreciated for 2 weeks in the current year.
The equipment will not be depreciated in the current year.
The equipment will be assigned a residual value of 15%.
Option 5
19-20.Use the following information for the next two questions:At year-end,
Entity A determines an indication that an equipment with a carrying amount
of ₱400,000 is impaired. This equipment was acquired 5 years earlier and
was originally estimated to have a useful life of 10 years and a 5% residual
value. Entity A determines the following information:
Fair value less costs to sell…………….₱320,000
Replacement cost……………………….₱700,000
Assume the indication of impairment is physical damage to the equipment.
Entity A estimates that it would cost ₱10,000 to restore the equipment’s
service potential to the level before the physical damage. How much is the
impairment loss under the
Restoration Cost
Replacement Cost
700,000
Approach? *
Acc. Depreciation (700k x 95% x 5/10)
(332,500)
42,667
47,500
50000
42500
Depreciated Replacement Cost - VALUE IN USE
367,500
Depreciated Replacement Cost
Less. Restoration Cost
VALUE IN USE
367,500
(10,000)
357,500
Recoverable Service Amount
Carrying Amount
357,500
400,000
IMPAIRMENT LOSS
(42,500)
20.Assume the indication of impairment is a significant decline in the
expected output of the equipment, which Entity A estimates to be 10%. How
much is the impairment loss under the Service Units Approach? *
62,667
62,500
50,000
69250
Depreciated Replacement Cost
VALUE IN USE
367,500
90%
330,750
Recoverable Service Amount
Carrying Amount
330,750
400,000
IMPAIRMENT LOSS
(69,250)
21.According to the GAM for NGAs, to qualify as intangible asset, an item
must possess all of the following elements except *
Identifiability
Held for distribution
Existence of future economic benefits or service potential
Control over a resource
22.According to the GAM for NGAs, an intangible asset is identifiable when
it *
a. is separable, i.e., capable of being separated and divided from the entity and sold,
transferred, licensed, rented, or exchanged, either individually or together with a related
contract, identifiable asset or liability, regardless of whether the entity intends to do so.
a or b
a and b
b. arises from binding arrangements including contractual or other legal rights, regardless
and obligations.
23.An active market is a market in which all the following conditions exist,
except *
the price is most advantageous
the items traded in the market are homogeneous
willing buyers and sellers can normally be found at any time
prices are available to the public
24.It is the systematic allocation of the depreciable amount of an intangible
asset over its useful life. *
Depreciation
Option 5
Impairment
Amortization
Cost allocation concept
25.It refers to the application of research findings or other knowledge to a
plan or design for the production of new or substantially improved materials,
devices, products, processes, systems, or services before the start of
commercial production or use. *
Internal generation
Research
Development
Option 5
R & D activities
26.A government entity acquires an intangible asset with finite useful life for
₱100. Assuming the entity uses the maximum amortization period and the
estimate of residual value allowed under the GAM for NGAs, the appropriate
annual amortization expense on the intangible asset is *
₱9.5
₱10 100/ 10 YEARS
none of these
₱50
27.A government entity acquires an intangible asset with finite useful life for
₱100,000 on October 20, 20x1. The intangible asset is estimated to have a
useful life of 5 years. The accumulated amortization on December 31, 20x1
is *
5,000
20,000
0
Option 5
3,333
Amount
Divide by
Depreciation per Year
multiply
Divide by
100,000
5 years
20,000
2 months
12
3,333.33
28.Goodwill is considered an unidentifiable asset because *
it has physical substance.
it does not arise from contractual rights.
It cannot be sold separately and does not arise from contractual gifts
it cannot be sold separately and therefore not separable.
29.At the beginning of Year 1, a government entity acquires an intangible
asset for ₱100,000. The intangible asset has a useful life of 10 years. At the
end of Year 3, the entity determines an indication of impairment and makes
the following estimates: Fair value less costs to sell 60,000 Value in use
50,000 How much is the impairment loss? *
0
30,000
10,000
20,000
Intangible Asset
`7/10
LESS: FVCS
Impairment Loss
100,000
0.70
70,000
(60,000)
10,000
30.Use the information in #29 above. At the end of Year 6, Entity A
determines an indication that the previous impairment may no longer exist
and makes the following estimates: Fair value less costs to sell 42,000 Value
in use 45,000 How much is the gain on the reversal impairment loss? *
10,714
0
8,714
5,714
Option 5
Recoverable Amount (VIU-higher)
CA has no IL been recognised in previous period
100,000
CA after the Impairment Loss
(60,000)
GAIN ON REVERSED OF IL (40,000 - 34,286)
45,000
0.40
40,000
0.57
(34,286)
5,714
31.For government entities, inventories are assets (choose the incorrect
one) *
Held for sale, consumption, distribution, or exchange.
In the form of materials or supplies to be consumed in the production process or in the
rendering of services.
In the process of production for sale, consumption, distribution or exchange.
Option 5
Used in the production of goods.
32.Entity A, a government entity, purchases office supplies. Entity A would
most likely record the purchase *
by debiting the Purchases account
by debiting the Office Supplies Expense account
as Inventory Held for Distribution
as Inventory Held for Consumption
Option 5
33.Who owns the goods in transit under FOB shipping point? *
seller
either buyer or seller
none
buyer
34.Which of the following documents is prepared when issuing semiexpendable property to end-users? *
Waste Materials Report
Inventory Custodian Slip
Supplies Ledger Card (SLC)
Requisition and Issue Slip (RIS)
35.The carrying amount of inventory is not recognized as expense in this
type of event or transaction. *
The inventory is sold.
The inventory is used in the production of another asset.
The inventory is written-off.
Option 5
The inventory is consumed by end users in providing service.
36.Which of the following is subsequently measured at the lower of cost and
current replacement cost? *
Inventories held for sale
None of these.
Inventories that are undergoing manufacturing process for completion as finished goods
for sale.
Option 5
Inventories held for distribution
37.The supply or property office of a government entity uses this to record
and monitor the movements and balances of inventories. *
Stock Ledger Card
Option 5
Inventory Listing
Registry of Inventory
Stock Card
38.The following information is available from Entity A’s (a government
entity) accounting records: Purchases ............................................₱530,000
Purchase discounts ...................................10,000 Beginning inventory
..................................160,000 Ending inventory
.....................................215,000 Freight-out
..........................................40,000 Entity A’s cost of sales is *
505,000
475,000
585,000
465,000
Purchases
Purchases Disco
Inventory
Ending Inventory
COST OF SALES
530,000
(10,000)
160,000
(215,000)
465,000
39.Entity A, a government entity and a manufacturer of military equipment,
had inventories at the beginning and end of its current year as follows:
Beginning End Raw materials 11,000 15,000
Work in process 20,000 24,000
Finished goods 12,500 9,000
During the year, the following costs and expenses were incurred: Raw
materials purchased 150,000 Direct labor cost 60,000 Indirect factory labor
30,000 Taxes and depreciation on factory building 10,000 Taxes and
depreciation on sales room and office 7,500 Sales salaries 20,000 Office
salaries 12,000 Utilities (60% applicable to factory, 20% to sales room, and
20% to office) 25,000 Entity A's cost of sales for the year is *
261,000
257,000
260,500
269,500
BEG
PUCHASES
RAW MATERIAL
11,000
15,000
150,000
146,000 USED
BEG
USED
DIRECT LABOR
FACTORY OVERHEAD
WIP
20,000
146,000
60,000
55,000
BEG
CGM
FINISHED GOODS
12,500
9,000 END
257,000
260,500 COGS
24,000 END
257,000 CGM
40.Entity A, a government entity, is a wholesaler of Product A, a non-unique
good. The activity for Product A during July is shown below:
Balance/DateTransaction UnitsCost July 1 Inventory2,000 ₱36.00 July7
Purchase 3,000 @37.00 July 12 Sales3,600 July 21 Purchase5,000 @37.88
July22 Sales3,800 July 29 Purchase1,600 @38.11 How much is the ending
inventory on July 31? *
153,400
156,912
Answer cannot be determined due to insufficient information
158,736
July 1 Inventory
July 7 Pur
TOTAL
Sales 3600
July 21 Purch
TOTAL
Sales 3800
Pur
TOTAL
2,000
3,000
5,000
(3,600)
5,000
6,400
(3,800)
1,600
4,200
36
37
36.60
36.60
37.88
37.60
37.60
38.11
37.79
72,000
111,000
183,000
(131,760)
189,400
240,640
(142,880)
60,976
158,736