CHAPTER 10
10-1
1. Interim financial reports shall be published
A. Once a year at any time during the year.
B. Within a month of the half year-end.
C. On a quarterly basis.
D. Whenever the entity wishes.
2. If an entity does not prepare interim financial reports
A. The year-end financial statements are deemed not to
comply with IFRS.
B. The year-end financial statements' compliance with
IFRS is not affected.
C. The year-end financial statements shall not be
acceptable under local jurisdiction.
D. Interim financial reports shall be included in the
year-end financial statements.
3. Interim financial reports shall include as a minimum
A. A complete set of financial statements.
B. A condensed set of financial statements and selected
notes.
C. A condensed statement of financial position and an
income statement.
D. A condensed statement of financial position, income
statement and statement of cash flows.
4. Which statement is true regarding interim reporting?
A. The independent view is required for interim financial
statements.
B. Interim reports are required on a quarterly basis.
C. Interim reports are not required.
D. Interim reports require the preparation of only a
statement of comprehensive income and a statement
of financial position.
5. Which statement about an interim report is true?
A. An interim financial report must consist of a complete
set of financial statements.
B. An interim financial report must consist of a
condensed set of financial statements.
C. An interim financial report may consist of a
condensed set or complete set of financial statements.
D. An interim financial report shall include a summary
of accounting policies and explanatory notes.
10-2
1. Interim financial statements are usually presented on a
A. Monthly basis
B. Quarterly basis
C. Semiannual basis
D. Nine-month basis
2. For interim reporting, an inventory loss from a market
decline in the second quarter shall be recognized
A. In the fourth quarter
B. Proportionately in each of the second, third and fourth
quarters
C. Proportionately in each of the first, second, third and
fourth quarters
D. In the second quarter
3. It is appropriate to use estimated gross profit rate to
determine the cost of goods sold for
A. Interim reporting
B. Year-end reporting
C. Interim reporting and year-end reporting
D. Neither interim reporting nor year-end reporting
4. For interim financial reporting, an expropriation gain
occurring in the second quarter shall be
A. Recognized ratably over the last three quarters
B. Recognized ratably over all four quarters
C. Recognized in the second quarter
D. Disclosed in the second quarter
5. Which statement about interim reporting is true?
A. All entities that issue an annual report must issue interim
financial report.
B. The integral view is the appropriate approach in
preparing
interim financial report.
C. A complete set of financial statements must be
presented
for an interim period.
D. The same accounting principles used for the annual
report
should be employed for an interim report.
10-3
1. An interim financial report shall include as a minimum
all of the following components, except
A. Condensed statement of financial position and
statement of comprehensive income
B. Condensed statement of cash flows
C. Condensed statement of changes in equity
D. Accounting policies and explanatory notes
2. There is a presumption that anyone reading interim
financial reports shall
A. Understand all International Financial Reporting
Standards,
B. Have access to the records of the entity.
C. Have access to the most recent annual report.
D. Not make decisions based on the report.
3. When the business is seasonal, what does IFRS
suggest?
A. Additional notes be written in the interim reports
about seasonal nature of the business
B. Disclosure of financial information for the latest
12- month period and comparable 12-month prior
period in addition to the interim report
C. Additional disclosure in the accounting policy note
D. No additional disclosure
4. Interim financial reporting should be viewed
A. As a type of reporting that need not follow IFRS
B. As useful only if activity is evenly spread throughout
the year so that estimates are unnecessary.
C. As reporting for an integral part of an annual period.
D. As reporting for a separate accounting period.
5. Interim statements can be described as emphasizing
A. Timeliness over reliability
B. Reliability over relevance
C. Relevancy over comparability
D. Comparability over neutrality
CHAPTER 11
3. Which quantitative threshold is not a requirement in
qualifying a reportable segment?
A. The segment revenue, both external and internal, is
10% or more of the combined external and internal
revenue of all operating segments.
B. The segment profit or loss is 10% or more of the greater
and combined loss of unprofitable segments.
C. The segment assets are 10% or more of the combined
assets of all operating segments.
D. The segment assets are 20% or more of the combined
åssets of all operating segments.
4. An operating segment is considered reportable when any
of the following conditions is met, except
A. Segment revenue is 10% or more of the combined
revenue of all of the entity's segments.
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's profit or loss is 10% or more of the combined
profit of all segments that did not incur a loss.
5. Which 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.
11-1
1. 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. The consolidated financial statements only
C. Both the separate and consolidated financial statements
D. Neither the separate nor the consolidated financial
Statements
2. An operating segment is a component of an entity
A. That engages in business activities from which it may
earn revenue and incur expenses.
B. Whose operating results are regularly reviewed by
the entity's chief operating decision maker.
C. For which discrete information is available.
D. All of these characterize an operating segment.
6. The term chief operating decision maker
A. Refers to a manager with a specific title,
B. Must be disclosed by title in the financial reporting
for segments.
C. Must be described in the disclosures for the financial
reporting for segments.
D. Refers to a function of allocating resources to the
operating segments and assessing their performance
.
7. Which statement is not true with respect to a chief
operating decision maker?
A. The term chief operating decision maker identifies a
function and not necessarily a manager with a specific title.
B. In some cases, the chief operating decision maker
could be the chief operating officer.
C. The board of directors acting collectively could qualify
as the chief operating decision maker.
D. The chief internal auditor would generally qualify as
chief operating decision maker.
8. In financial reporting for operating segments, an entity
shall disclose all of the following, except
A. Type of product and service from which each reportable
segment derives revenue.
B. The title of the chief operating decision maker.
C. Factors used to identify the reportable segments.
D. The basis of measurement of segment profit or loss
and segment assets.
9. Operating segments that do not meet any of the
quantitative
thresholds
A. Cannot be considered reportable.
B. May be considered reportable and separately disclosed
if management believes that information about the
segment would be useful to the users of the financial
statements.
C. May be considered reportable and separately disclosed
if the information is for internal use.
D. May be considered reportable and separately disclosed
if this is the practice within the economic environment
in which the entity operates.
10. Which of the following is a required disclosure regarding
external customers?
A. The identity of any external customer considered to
B. The identity of any external customer providing 10%
or more of a particular operating segment revenue
C. Information on major customers is not required in
segment reporting
D. The fact that transactions with a particular external
customer constitute at least 10% of the total entity
external revenue
11-2
1. For segment reporting purposes, which test must be
applied to determine if a component is a reportable
operating segment?
A .. Revenue test and asset test
B. Revenue test, asset test and profit or loss test
C. Revenue test, asset test and expense test
D. Revenue test, asset test and cash flow test
4. Segment revenue includes
A. Sales to unaffiliated customers
B. Sales to unaffiliated customers and intersegment sales
C. Sales to unaffiliated customers and interest revenue
D. Sales to unaffiliated customers and other income
5. Which entity is required to report on business segments?
A. Publicly traded
B. Not for profit
C. Joint venture
D. Nonpublic
CHAPTER 12
12-1
1. A derivative instrument is best described as
A. A contract that conveys to a second entity a right to
future collections on accounts receivable from a first
entity.
B. Evidence of an ownership interest in an entity.
C. A contract that has its settlement value tied to an
underlying and a notional amount.
D. A contract that conveys to a second entity a right to
receive cash from a first entity.
2. All of the following are characteristics of a derivative,
except
A. It is acquired for the purpose of generating a gain from
short-term fluctuation in market price.
B. The value changes in response to an underlying.
C. It requires no initial investment or an initial small
investment.
D. It is settled at a future date.
3. All of the following are characteristics of a derivative,
except
A. The instrument has one or more underlying and an
identified payment provision.
B. The instrument requires a large investment at the
inception of the contract.
C. The instrument requires or permits net settlement.
D. All of these are characteristics of a derivative.
2. What may be considered as the practical limit to the
number of reportable operating segments?
A. Five segments
B. Ten segments
C. Six segments
D. Four segments
4. Which is not a characteristic of a derivative?
A. Terms that require or permit net settlement
B. Must be highly effective throughout the life
. No initial net investment D. An underlying and a notional amount
3. The approach used in segment reporting is known as
A. Segment approach
B. Revenue approach
C. Management approach
D. Enterprise approach
5. Which is not considered a derivative instrument?
A. Currency futures
B. Call option
C. Bank certificate of deposit
D. Interest rate swap
CHAPTER 13
13-1
1. Which type of contract is unique in that it protects the
allowing the owner to benefit from favorable movement?
A. Interest rate swap
B. Forward contract
C. Futures contract
D. Option
2. Which of the following provides the holder the right to
sell at an exercise or strike price anytime during a
specified period a gain accrues to the holder as the market
price of the underlying falls below the strike price?
A. Forward contract
B. Put option
C. Swaption
D. Call option
3. What is the amount initially paid for a call option?
A. Option premium
B. Notional amount
C. Strike price
D. Intrinsic value
4. In exchange for the right inherent in an option contract,
the owner of the option will typically pay a price
A. Only when a call option is exercised.
B. Only when a put option is exercised.
C. When either a call option or a put option is exercised.
D. At the time the option is received regardless of
whether the option is exercised or not.
5. Which statement is incorrect concerning an option?
A. A call option is the right to purchase an asset at a
specified price at some future time.
B. A put option is the right to sell an asset at a specified
price during a definite period at some future time.
C. An option is a right and not an obligation .
D. An option requires no payment. x
6. It is a contract giving the owner the right but not the
obligation to buy an asset at a specified price in the future.
A. Interest rate swap
B. Forward contract
C. Futures contract
D. Call option
7. If the market price is greater than the strike or exercise
price, the call option is
A. At the money
B. In the money
C. On the money
D. Out of the money
8. If the market price is lower than the option price, the call
option is
A. In the money
B. At the money
C. On the money
D. Out of the money
9. If the market price is equal to the option price, the call
option is
A. Out of the money
B. On the money
C. At the money
D. In the money
10. All of the following are based on a highly probable
forecast
transaction, except
A. Forward contract
C. Option
D. Interest rate swap
13-2
1. Which term best describes a component of a hybrid
instrument?
A. Financial asset at fair value through other
comprehensive income
B. An embedded derivative
C. Held for collection investment
D. Financial asset held for trading
2. The process of bifurcation
A. Protects an entity from loss.
B. Includes entering into an agreement between two
counterparties to exchange cash flows.
C. Is the measurement of an embedded derivative.
D. Separates an embedded derivative from the host
Contract.
3. An embedded derivative shall be bifurcated from the host
contract under the following conditions, except
A. The economic characteristics and risks of the host
contract and the embedded derivative are not closely
related.
B. A separate instrument with the same terms as the
embedded feature would meet the definition of a
derivative.
C. The host contract is measured at fair value through
other comprehensive income.
D. The host contract is measured at fair value through
profit or loss.
4. If not separated, the host contract is measured at
A. Amortized cost
B. Fair value through profit or loss
C. Fair value through other comprehensive income
D. Amortized cost, fair value through profit or loss or
fair value through the comprehensive income
5. Which is not an embedded derivative?
A. Equity conversion option in a convertible bond
B. Redemption option in an investment in redeemable
preference share
C. Interest payment on bond investment linked to the
price of gold
D. Share warrant attached to bond payable
CHAPTER 15
15-1
1. Biological Assets
A. Are found only in Biotech entities
B. Are living animals or living plants and must disclosed
as a separate line item in the statement of financial
position.
C. Must be measured at cost.
D. Do not generally have future economic benefit.
2. Biological assets are measured at
A. Fair value less cost of disposal
B. Fair value plus cost disposal
C. Cost
D. Cost less accumulated depreciation
3. Agricultural activity includes all of the following, except
A. Raising livestock
B. Perennial cropping
C. Aquaculture
D. Ocean fishing
4. Agricultural produce is
The harvested product from biological asset accounted
for as inventory.
B. Measured at the time of harvest at the cost of production.
C. Measured at each reporting period at fair value.
D. Presented as biological asset
5. Agricultural produce harvested is measured at
A. Fair value
B. Fair value less cost of disposal at the point of harvest
C. Cost less cost of disposal
D. Fair value plus cost of disposal at the point of harvest
15-2
1. Generally speaking, biological assets relating to
agricultural
activity shall be measured using
A. Historical cost
il, Historical cost less depreciation less impairment
A fair value approach
D. Net realizable value
2. A gain or loss arising on the initial recognition of a
biological
asset and from a change in the fair value less cost of
disposal
of a biological asset shall be included in
A. Net income or net loss for the period
B. Other comprehensive income
C. A revaluation reserve
D. Retained earnings
3. Where there is a dong aging or maturation process after
harvest, the harvested product shall be accounted for as
A. Biological asset
B. Inventory
C. Property, plant and equipment
D. Investment property
4. Which of the following criteria must not be satisfied
before a biological asset is recognized?
A. The entity controls the asset as a result of past events.
B. It is probable that future economic benefits relating
the asset will flow to the entity.
C. An active market for the asset exists.
D. The fair value can be measured reliably.
5. Land that is related to agricultural activity is measured
A. At fair value.
B. In the same manner as Property, Plant and Investment
Property.
C. At fair value in combination with the biological asset.
D. At the resale value separate from the biological asset.
15-3
1. A bearer plant is a living plant that
A. Is used in the production or supply of agricultural
produce.
B. Is used to bear produce for more than one period.
C. Has a remote likelihood of being sold as agricultural
produce, except for incidental scrap sales.
D. Must possess all of these characteristics.
2. All of the following can be considered bearer plant except
A. Coconut tree
B. Grape vine
C. Rubber tree
D. Tree in a forest plantation to be harvested and sold as
Jog or lumber
3. According to IASB, bearer plants are accounted for as
A. Biological assets with disclosure
B. Biological assets without disclosure
.C. Property, plant and equipment
D. Noncurrent investment
4. According to IASB, bearer animals are accounted for as
A. Biological assets
B. Property, plant and equipment
C. Investment property
D. Agricultural produce
5. Animals related to recreational activities are classified as
A. Biological asset
B. Property, plant and equipment
C. Investment property
D. Intangible asset
15-4
1. All would be classified as biological asset, except
A. Dairy cattle
B. Chicken
C. Egg
D. Tree
2. Which would be classified as agricultural produce?
A. Lumber
B. Carpet
C. Butter
D. Apple.
3. All are classified as agricultural produce, except
A. Sugar
B. Wool
C. Felled tree
D. Milk
4. Which would be classified as a product after harvest?
A. Cotton
B. Harvested cane
C. Banana
D. Cheese
5. All would be classified as product after harvest, except
A. Carpet
B. Logs
C. Sausage
D. Carcass
CHAPTER 16
16-1
1. Under 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. Precede or coincide with but never follow the period in
which revenue and expenses are recognized.
C. Coincide with or follow but never precede the period in
which revenue and expenses are recognized.
D. Only coincide with the period in which revenue and
expenses are recognized.
2. Which statement regarding accrual basis versus cash
basis
of accounting is true
The cash basis is appropriate for smaller entities.
The cash basis is less useful in predicting the timing
and amount of future cash flows of an entity.
C. Application of the cash basis results in an income
statement reporting revenue and expenses.
D. The cash basis requires a complete set of double entry
Records.
3. Under cash basis of accounting
A. Revenue is recorded when earned.
Accounts receivable would be recorded.
C. Depreciation is not recognized.
D. The matching principle is ignored
4. Under the cash basis of accounting, revenue is recorded
A. When earned and realized
B. When earned and realizable
C. When earned
D. When realized
5. Total net income over the life of an entity is
A. Higher under the cash basis than under the accrual basis
B, Lower under the cash basis than under the accrual basis
The same under the cash basis as under the accrual basis
D. Not susceptible to measurement
6. Under IFRS
A. The cash basis of accounting is accepted.
B Events are recorded in the period the events ocurred
C. Net income is lower under the cash basis than accrual
basis.
D. Net income is lower under accrual basis than cash
Basis.
7. Accrual accounting adheres to which of the following?
A. Matching principle
B. Historical cost principle
C. Matching principle and historical cost principle
D. Neither matching principle nor historical cost
8. Under accrual accounting, which statement does not
describe a deferral?
A. Deferral of revenue occurs when cash is received and
recognized in financial income.
B. Deferral typically results in the recognition of a
liability or prepaid expense.
C. Cash collected in advance of services being rendered.
D. Cash paid up front for a one-year insurance policy.
9. Under accrual, a deferral is a transaction that impacts
A. Cash and the income statement at the same time
B. The income statement before impacting cash
C. Cash before impacting the income statement
D. The statement of financial position before impacting cash
10. Which statement is true about accrual and cash basis?
A. Under accrual, if the earning process is not complete,
revenue is nevertheless recorded.
B. Under cash basis, if cash has been collected revenue
is recorded regardless of the earning process.
C. Under cash basis, revenue is recognized when the
receivable is initially recorded.
D. Under accrual basis, doubtful accounts are not
Recognized.
16-2
1. The premium on a three-year insurance policy expiring
on
December 31, 2026 was paid in total on January 1, 2024. If
the entity has six month operating cycle, then on December
31, 2024, the prepaid insurance reported as a current asset
would be for
A. 6 months
B. 12 months
C. 18 months
D. 24 months
2. The premium on a three-year insurance policy expiring
on December 31, 2026 was paid in total on January 1,
2024. The original payment was initially debited to a prepaid
asset account. The appropriate adjusting entry had been
recorded on December 31, 2024. The balance in the
prepaid asset account on December 31, 2024 should be
A. Zero
B. The same as it would have been if the original payment
had been debited initially to an expense account
C. The same as the original payment
D. Higher than if the original payment had been debited
initially to an expense account
3. The premium on a three-year insurance policy expiring
on December 31, 2026 was paid in total on January 1,
2024. If the original payment was recorded as a prepaid
asset, how would total assets and shareholders' equity be
affected during 2024?
A. Total assets would decrease and shareholders' equity
would increase
B. Both total assets and shareholders' equity would
decrease
C. Both total assets and shareholders' equity would
increase
D. Neither total assets nor shareholders' equity would
change
4. The premium on a four-year insurance policy expiring on
December 31, 2025 was paid in total on January 1, 2022. If
the original payment was recorded as a prepaid asset, the
balance in prepaid asset on December 31, 2025 would be
A) Lower than the balance on December 31, 2024
B. Lower than the balance on December 31, 2026
C. The same as the balance on December 31, 2026
D. The same as the original payment
5. 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. An expense only
B. A current asset and an expense
C. A current asset and noncurrent asset
D. A noncurrent asset
CHAPTER 18
18-1
1. If ending inventory is understated, the effect is to
A. Overstate the net purchases
B. Overstate the gross margin
C. Overstate the cost of goods available for sale
D. Overstate the cost of goods sold
2. If beginning inventory is overstated, the effect is to
A. Overstate net purchases
B. Overstate gross margin
C. Overstate cost of goods available for sale
D.Understate cost of goods sold
3. The overstatement of ending inventory in the current year
would cause
A. Retained earnings to be understated in the current
year-end statement of financial position
B. Cost of goods sold to be understated in the income
statement of next year.
C. Cost of goods sold to be overstated in the income
statement of the current year.
D. Statement of financial position not to be misstated in
the next year-end.
4. At the middle of the year, an entity paid for insurance
premium for the current year and debited the amount to
prepaid insurance. At year-end, the bookkeeper forgot to
record the amount expired. In the financial statements
prepared at year-end, the omission
A. Overstates owners' equity
B. Understates assets
C. Understates net income
D. Overstates liabilities
5. If at end of current reporting period, an entity erroneously
excluded some goods from ending inventory and also
erroneously did not record the purchase of these goods,
these errors would cause
A. The ending inventory to be overstated
B. The retained earnings to be understated
C. No effect on net income, working capital and retained
earnings
D. Net income to be understated
6. When the current year's ending inventory is overstated
A. The current year's cost of goods sold is overstated.
B. The current year's total assets are understated.
C. The current year's net income is overstated.
D. The next year's net income is overstated.
7. An overstatement of ending inventory in the current
period would result in income of the next period being
A. Overstated
B. Understated
C. Correctly stated
D. The answer cannot be determined from the information
8. Which would result if the current year's ending inventory
is understated in the cost of goods sold calculation?
A. Cost of goods sold would be overstated
B. Total assets would be overstated
C. Net income would be overstated
D. Retained earnings would be overstated
9. If the beginning inventory in the current year was
overstated, the income for the current year would be
A. Understated and assets are correctly stated.
B. Understated and assets are overstated.
C. Overstated and assets are overstated.
D. Understated and assets are understated.
10, Which of the following would cause income to be
overstated in the period of occurrence?
A. Overestimating bad debt expense
B. Understating beginning inventory
C. Overstated purchases
D. Understated ending inventory
18-2
1. Failure to record the expired amount of prepaid rent
expense would not
A. Understate expense
B. Overstate net income
C. Overstate owners' equity
D. Understate liabilities
2. Failure to record accrued salaries at year-end results in
A. Overstated retained earnings
B. Overstated assets
C. Overstated liabilities
D. Understated retained earnings
3. Failure to record depreciation at year-end results in
A. Understated income
B. Understated assets
C. Overstated expenses
D. Overstated assets
4. Which of the following is a counterbalancing error?
A. Understated depletion expense
B. Bond premium under-amortized
C. Prepaid expense adjusted incorrectly
D. Overstated depreciation expense
5. Which error will not self-correct next year?
A. Accrued expense not recognized at year-end
B. Accrued revenue not recognized at year-end
C. Depreciation expense overstated for the year
D. Prepaid expense not recognized at year-end
18-3
1. At year-end, an entity ordered merchandise for resale.
The merchandise was shipped f.o.b. shipping point at
year-end and the goods arrived early next year. The entity
did not record the purchase in the current year and did not
include the goods in ending inventory. The effects on the
financial statements for the current year were
A. Income and owners' equity were correct, liabilities were
incorrect, assets were correct.
B. Income and owners' equity were correct, assets and
liabilities were incorrect.
C. Income, assets, liabilities and owners' equity were
correct.
D. Income, assets, liabilities and owners' equity were
Incorrect.
2. Which of the following should not be reported
retroactively?
A. Use of an unacceptable accounting principle and
changing to an acceptable accounting principle.
B. Correction of an overstatement of ending inventory made
in prior year
C. Use of an unrealistic accounting estimate and changing
to a realistic estimate
D. Change from a good faith but erroneous estimate to a
new estimate
3. At the end of the current year, special insurance costs,
incurred but unpaid, were not recorded. If these insurance
costs were related to goods in process, what is the effect of
the omission on accrued liabilities and retained earnings,
respectively in the current year-end statement of financial
position?
A. No effect and No effect
B. No effect and Overstated
C. Understated and No effect
D. Understated and Overstated
4. Which of the following errors could result in an
overstatement of both current assets and shareholders'
equity?
A. An understatement of accrued sales commissions
B. Noncurrent note receivable principal is misclassified
as current asset
C. Annual depreciation on manufacturing machinery is
understated
D.Holiday pay expense for administrative employees is
misclassified as manufacturing overhead
5. At the end of the current year, an entity failed to accrue
sales commissions during the current year but paid in
the next year. The error was not repeated in the next
year. What was the effect of the error on current year-end
working capital and retained earnings, respectively?
A. Overstated and Overstated
B. No effect and Overstated
C. No effect and No effect
D. Overstated and No effect
CHAPTER 19
19-1
1. All can be classified as cash and cash equivalents,
except
A. Redeemable preference shares due in 60 days
B. Treasury bills due for repayment in 90 days
C. Equity investments
D. A bank overdraft
2. Which classification of the cash flow arising from the
proceeds from an earthquake disaster settlement would be
most appropriate?
A. Cash flows from operating activities
B. Cash flows from investing activities
C. Cash flows from financing activities
D. Does not appear in the statement of cash flows
3. Under IFRS 18, an entity must report interest paid in the
statement of cash flows
A. In operating activities
B. Either in operating activities or financing activities
C. In financing activities
D. In investing activities or financing activities
4. Under IFRS 18, the dividend received and interest,
received
from investments must be classified as
A. Either an operating activity or a financing activity
B. Either an operating activity or investing activity
C. An investing activity
D. An operating activity
5. What is the treatment of a three-month treasury bill?
A. Not reported
B. An outflow for financing activities
C. An outflow for lending activities
D. An outflow for investing activities
19-2
1. How should a gain from sale of equipment for cash be
reported
in a statement of cash flows using the indirect method?
A. In investing activities as a reduction of the cash inflow
from the sale
B. In investing activities as a cash outflow
C. In operating activities as a deduction from operating
income
D. In operating activities as an addition to operating income
2. How should a loss on sale of machinery be presented in
a statement of cash flows using an indirect method?
A. deduction from operating income
B. An addition to operating income
C. An inflow and outflow of cash
D. An outflow of cash
3. In a statement of cash flows using indirect approach for
operating activities, an increase in inventory is presented as
A. Outflow of cash
B. Inflow and outflow of cash
C. Addition to operating income
D. Deduction from operating income
4. In a statement of cash flows, depreciation is treated as an
adjustment to operating income because depreciation
A. Is a direct source of cash
B. Reduces operating income but does not involve cash
outflow
C. Reduces operating income and involves an inflow of cash
D. Is an inflow of cash for replacement of asset
5. Dividends received from an equity investee should be
presented in the statement of cash flows ns
A. Deduction from cash flows from operating activities
B. Addition to cash flows from investing activities
C. Addition to cash flows from operating activities
D. Deduction from cash flows from investing activities
19-3
1. In a statement of cash flows, if used equipment is sold at
a gain, the amount shown as a cash flow from investing
activities equals the carrying amount of the equipment
A. Plus the gain
B. Plus the gain and less the amount of tax
C. Plus both the gain and the amount of tax
D. With no addition or subtraction
2. In a statement of cash flows, if used equipment is sold at
a loss, the amount shown as a cash inflow from investing
activities equals the carrying amount of the equipment
A. Less the loss and the amount of tax
B. Less both the loss and the amount of tax
C. Less the loss
D. With no addition or subtraction
3. Making and collecting loans are
A. Operating activities
B. Investing activities
C. Financing activities
D. Liquidity activities
4. Noncash investing and financing activities are
A. Reported only if the direct method is used.
B. Reported only if the indirect method is used.
C. Disclosed in a note or separate schedule accompanying
the statement of cash flows.
D. Not reported.
5. An entity purchased a building and paid partly in equity
shares and partly in debentures. The transaction shall be
treated as which of the following?
A. The purchase of the building is investing and the
issuance of shares and debentures is financing.
B. The purchase of the building is investing and the
issuance of shares and debentures is not reported.
C. The transaction shall be disclosed only in the notes
D. The transaction shall be ignored totally.
19-4
1. When preparing a statement of cash flows using the indirect
method, the amortization of patent is reported as
A. Increase in cash flows from investing activities.
B. Reduction in cash flows from investing activities.
C. Increase in cash flows from operating activities.
D. Reduction in cash flows from operating activities.
2. The goodwill impairment loss is presented in statement of
cash flows as
A. Inflow and outflow of cash
B. Outflow of cash
C. Deduction from operating income
D. Addition to operating income
3. Under indirect method, cash flows from operating
activities
A. Are always equal to accrual accounting income.
B. Are calculated as the difference between revenue and
expenses.
C. Can be calculated by appropriately adding to or
deducting from operating income those items that do
not affect cash.
D. Can be calculated by appropriately adding to or deducting
from operating income those items that affect cash.
4. Which of the following is not disclosed in the statement of
cash flows prepared under the direct method?
A. The major classes of gross cash receipts and gross cash
B. The amount of income taxes paid.
payments.
C. A reconciliation of net income to net cash flow from
operations.
D.A reconciliation of ending retained earnings to net cash
flow from operations.
5. Which statement is true about the method of preparing
the statement of cash flows?
A. The indirect method starts with income before income
tax.
B. The direct method is known as the reconciliation method
C.The direct method is more consistent with the primary
purpose of the statement of cash flows.
D. The indirect method is not permitted under IFRS.
CHAPTER 20
20-1
1. Which of the following shareholder rights is most
commonly enhanced in an issue of preference shares
A. The right to vote for the board of directors.
B. The right to maintain one's proportional interest
C. The right to receive a full cash dividend before
dividends are paid to other classes of share capital
D. The right to vote on major corporate issues.
2. Preference shares participate ratably with the ordinary
shareholders in any dividend distribution beyond the prescribed
preference rate.
A. Cumulative feature
B. Participating feature
C. Callable feature
D. Redeemable feature
3. Which feature of preference share would most likely be
opposed by ordinary shareholders?
A. Convertible
B. Callable
C. Redeemable
D. Participating
4. Noncumulative preference dividends in arrears
A. Are not paid and not disclosed.
B. Must be paid before any other cash dividends can be
distributed
C. Are disclosed as liability until paid.
D. Are paid to preference shareholders if sufficient funds
remain after payment of ordinary dividend.
5. How should cumulative preference dividends in arrear
be reported?
A. Note disclosure
B. Increase in shareholders' equity
C. Increase in current liabilities
D. Increase in noncurrent liabilities
CHAPTER 21
21-1
1. EPS disclosures are required for
A. Entities whose ordinary shares and potential ordinary
shares are publicly traded.
B. Entities that are in the process of issuing ordinary shares
in the public market.
C. All entities.
D. Entities whose ordinary shares and potential ordinary
shares are publicly traded and entities that are in the
process of issuing ordinary shares in the public market.
·2. EPS disclosures are
A. Required for all public and nonpublic entities
B. Required for public entities and encouraged for
nonpublic entities
C. Encouraged for public entities and required for
nonpublic entities
D. Encouraged for all entities
3. When an entity issues both consolidated and separate
financial statements, the EPS information is required
A. For both sets of financial statements
B. In neither set of financial statements
C. Only for consolidated financial statements
D. Only for separate financial statements
4. Earnings per share shall be computed on the basis of
A. The number of shares outstanding at the end of the year
B. A weighted average of the number of shares outstanding
during the year regardless of the extent of fluctuations
C. A weighted average of the number of shares outstanding
during the year except that minor fluctuations in the
number of shares may be disregarded
D. The number of shares outstanding at the middle of year
5. Earnings per share shall be reported for all of the following.
except
A. Continuing operations
B. Discontinued operations
C. Net income
D. Net cash provided by operating activities
6. In computing basic earnings per share, if the prefer
shares are cumulative, the amount that should be dedu
an an adjustment to the numerator is the
A. Preference dividends in arrears
B. Preference dividends paid during the year
C. Annual preference dividend
D. Annual ordinary dividend
7. In computing basic earnings per share, the amount
preference dividends on noncumulative preference
shares should be
A. Deducted from net income whether declared or not
B. Deducted from net income only when declared
C. Added to net income only when declared
D. Ignored
8. In computing basic earnings per share, the full amount
of the required annual preference dividends on cumulative
preference shares for the period should be
A. Ignored
B. Deducted from net income only when declared
C. Deducted from net income whether declared or not
D. Added to net income whether declared or not
9. In computing basic loss per share, the annual preference
dividend on cumulative preference shares should be
A. Ignored
B. Deducted from the net loss whether declared or not
C. Added to the net loss whether declared or not
D. Added to the net loss only when declared
10. In the computation of weighted average number of shares
when there is a share split, the additional shares are
A. Weighted by the number of days outstanding.
B. Weighted by the number of months outstanding.
C. Considered outstanding at the beginning of the year.
D. Considered outstanding at the beginning of the earliest
year reported
5. If a new issue of shares for cash is made between the
year-end
and the date the financial statements are authorized for issue
A. The EPS both for the current and the previous year
are adjusted.
B. The EPS for the current year only is adjusted.
C. No adjustment is made to EPS.
D. Diluted EPS only is adjusted.
6. The weighted average number of shares outstanding
during the period for all periods should be adjusted for
A. Any change in the number of ordinary shares without
a change in resources.
B. Any prior period adjustment.
C. Any new issue of shares for cash.
D. Any convertible instruments settled in cash.
7. Ordinary shares issued as part of a business combination
are included in the EPS calculation from
A. The beginning of the accounting period.
B. The date of acquisition.
C. The end of the accounting period.
D. The midpoint of the accounting year.
21-2
1. Earnings per share information is calculated before
accounting for which of the following?
A. Preference dividend for the period
B. Ordinary dividend
C. Taxation
D. Minority interest
2. Which figure for earnings does EPS information use?
A. Net income attributable to ordinary equity holders
and preference shareholders of the parent
B. Income before taxation
C. Income from continuing operations
D. Net income attributable to ordinary equity holders of
the parent
3. When an entity issues a share split
A. The previous year's EPS is not adjusted for the issue.
B. The previous year's EPS is adjusted for the issue.
C. Only a note of the effect on the previous year's EPS is
made.
D. Only the diluted EPS for the previous year is adjusted.
4. If a bonus issue occurs between the year-end and the date
the financial statements are authorized for issue
A. The EPS both for the current and the previous year
are adjusted
B. The EPS for the current year only is adjusted
C. No adjustment is made to EPS
D. Diluted EPS only is adjusted
8. Shares issued to settle a liability are included in the EPS
calculation from
A. Date of the contract for services
B. Halfway through the rendering of services
C. The completion of services
D. The settlement date
9. Shares issued upon the conversion of a mandatorily
convertible instrument are included in the calculation
of basic earnings per share from
A. The date of the contract for the shares
B. Halfway through the period
C. The date of conversion
D. The issue of the share certificate
10. Under IFRS, where ordinary shares are issued but not
fully paid, the ordinary shares are treated in EPS
A. In the same way as fully paid ordinary shares.
B. As a fraction of an ordinary share to the extent that the
subscribed shares are entitled to participate in dividends.
C. In the same way as warrants or options.
D. Are ignored.
CHAPTER 22
22-1
1. The calculation of diluted EPS assumes that share
options
were exercised and that the proceeds were used to
A. Buy ordinary shares as an investment
B. Retire preference shares
C. Buy treasury shares
D. Increase net income
2. Options and warrants are dilutive if
A. The exercise price is lower than the average market
price.
B. The exercise price is higher than the average market
price.
C. The exercise price is equal to the average market price.
D. The option shares represent 20% of ordinary shares.
3. When applying the treasury share method for diluted
EPS, the market price of the ordinary share used for the
assumed acquisition of treasury shares is the
A. Market price at the end of the year
B. Average market price during the year
C. Market price at the beginning of the year
D. Average market price over a two-year period
3. If a share option is converted on March 31
A.The potential ordinary shares are included in diluted
EPS up to March 31, and in basic EPS from the date
converted to the year-end, both weighted accordingly.
B. The ordinary shares are not included in diluted EPS.
C. The ordinary shares are not included in basic EPS.
D. The effects of the share option are included only in
previous year's EPS calculation.
4. In calculating whether potential ordinary shares are
dilutive, the income figure used as the control number is
A. Net income including discontinued operations
B. Income from continuing operations
C. Income before tax including discontinued operations
D. Retained earnings for the year after dividends
4. In applying the treasury share method of computing
diluted earnings per share, when is it appropriate to use
the average market price of ordinary share during the
year as the assumed repurchase price?
A. Always
B. When the average market price is higher than the
exercise price
C. Never
D. When the average market price is lower than the
exercise price
5. The nature of diluted earnings per share involving
adjustment for share options can be described as
A. Historical because earnings are historical
B. Historical because it indicates an entity's valuation
C. Proforma because it indicates potential changes in
number of shares
D. Proforma because it indicates potential changes in
earnings
5. Under the treasury share method, the number of potential
ordinary shares is equal to
A. Option shares
B. Option shares minus assumed treasury shares
C. Assumed treasury shares
D. Option shares actually issued during the year
1. Antidilutive securities
A. Should be included in the computation of diluted
earnings per share but not basic earnings per share.
B. Are those whose inclusion in earnings per share
computation would cause basic earnings per share to
exceed diluted earnings per share.
C. Include share options and warrants whose option
the price is less than the average market price.
D. Should be disregarded in all EPS computations.
22-2
1. All of the following must be disclosed in relation to
earnings
per share, except
A, Forecast earnings per share for the following year.
B. Instruments that could potentially dilute basic earnings
per share in the future but not included in the diluted
EPS because they are antidilutive in the current period.
C. The weighted average number of ordinary shares used.
D. The earnings figures used in calculating EPS.
2. Dilution of EPS is defined as
A. Decrease in earnings per share when any financial
instrument is converted to any form of share capital.
B. Decrease in share capital.
C. Decrease in earnings per share when convertible
instruments are converted to ordinary shares.
D. Decrease in earnings per share when share capital is
converted to debt capital.
22-3
2. In calculating diluted earnings per share, which of the
should the following not be considered?
A. The weighted average number of ordinary shares
outstanding
B. The amount of dividends declared on cumulative
preference shares
The amount of cash dividends on ordinary shares
D. The number of ordinary shares resulting from the
assumed conversion of bonds payable outstanding
3. In determining diluted earnings per share, dividends on
nonconvertible cumulative preference shares should be
A. Disregarded
B. Added back to net income whether declared or not
C. Deducted from net income only if declared
D. Deducted from net income whether declared or
4. The "if converted" method of computing earnings per share
assumes conversion of convertible bonds payable at
A. Beginning of the earliest period reported or at time of
issuance, if later.
B. Beginning of the earliest period reported regardless of
time of issuance.
C. Middle of the earliest period reported regardless of the
time issuance
D. Ending of the earliest period reported regardless of the
time of issuance
5. In determining diluted EPS, interest expense, net of income
tax, on dilutive convertible bond payable should be
A. Added back to weighted average shares outstanding
for diluted earnings per share.
B. Added back to net income for diluted EPS.
C. Deducted from net income for diluted EPS.
D. Deducted from weighted shares outstanding for diluted
EPS
CHAPTER 24
24-1
1. All would indicate that hyperinflation exists, except
A. The general population regards monetary amounts in
terms of relatively stable foreign currency
B. The cumulative inflation rate over three years in
approaching or exceeding 100%.
C. Inflation rates have exceeded interest rates in three
successive years
D. The general population prefers to keep its wealth in
nonmonetary assets.
2. Which would indicate that hyperinflation exists?
A: Sales on credit are at lower prices than cash sales.
B. Inflation is approaching or exceeds 20% per year.
C. Monetary items do not increase in value.
D. People prefer to keep their wealth in non monetary
assets or a stable foreign currency.
3. An entity that wishes to present information about the
effect of changing prices in a hyperinflationary economy
should report this information in
A. The body of the financial statements
B. The notes to the financial statements
C. Supplementary schedule
D. Management report to shareholders
4. The financial statements in a hyperinflationary economy
shall be stated in terms of
A. Historical cost
B. Current cost
C. Fair value
D. Measuring unit current at the end of reporting period
5. The gain or loss on the net monetary position in a
hyperinflationary economy shall be reported in
A. The income statement as gain or loss and separately
disclosed
B. Retained earnings
C. Equity
D. Other comprehensive income
24-2
1. When of the following is classified as nonmonetary:
A. Allowance for doubtful accounts
B. Accumulated depreciation
C. Premium on bonds payable
D. Advances to unconsolidated subsidiaries
2. Which of the following is classified as nonmonetary?
A. Warranty liability
B. Accrued expense
C. Unamortized discount on bonds payable
D. Refundable deposit
3. Which of the following is classified as nonmonetary?
A. Cash surrender value
B. Long-term receivable
C. Accrued liability on firm purchase commitment
D. Inventory
4. Which of the following is classified as monetary?
A. Goodwill
B. Equipment
C. Patent
D. Allowance for doubtful accounts
5. Purchasing power gain or loss results from
A. Monetary asset only
B. Monetary liability only
C. Both monetary asset and monetary liability
D. Nonmonetary asset and non monetary liability
6. During a period of inflation, an account balance remains
constant. With respect to this account, a purchasing
power loss will be recognized if the account is a
A. Monetary asset
B. Monetary liability
C. Nonmonetary asset
D. Non Monetary liability
7. During a period of inflation, an account balance remains
constant. With respect to this account, a purchasing
power gain will be recognized if the account is a
Al Monetary liability
B. Monetary asset
C. Non Monetary liability
D. Nonmonetary asset
8. During a period of deflation in which a liability account
balance remains constant, which of the following occurs?
A. A purchasing power loss if the item is a nonmonetary
liability.
B. A purchasing power gain if the item is a nonmonetary
liability.
C. A purchasing power loss if the item is a monetary
liability
D. A purchasing power gain if the item is a monetary
Liability.
9. During a period of inflation in which a liability account
balance remains constant, which of the following occurs?
A. A purchasing power loss if the item is a nonmonetary
liability.
B. A purchasing power gain if the item is a nonmonetary
liability.
C. A purchasing power loss if the item is a monetary
liability.
D. A purchasing power gain if the item is a monetary
Liability.
10. During a period of deflation, an entity would have the
greatest gain in general purchasing power by holding
A. Cash
B. Property, plant and equipment
C. Finance lease liability
D. Mortgage payable
24-3
1. Financial statements that are expressed under a stable
monetary unit are
Constant peso financial statements
Nominal peso financial statements
Current cost financial statements
D. Fair value financial statements
2. A general price level statement of financial position is
prepared and presented in terms of
A. The general purchasing power at the latest year-end.
B. The general purchasing power in the base period.
C. The average general purchasing power of the peso.
D. The general purchasing power at the date of issue.
3. Which method of reporting attempts to eliminate the
effect of the changing value of the peso?
A. Discounted present value of future cash flows
B. Historical cost restated for change in the price level
C. Replacement cost
D. Exit value
4. The restatement of historical peso financial statements
to reflect the general price level change results in
presenting assets at
A. Lower of cost or net realizable value
B. Fair value
C. Cost adjusted for purchasing power change
D. Current replacement cost
5. Which argument in favor of price level adjusted financial
Are statements not valid?
A. Price level financial statements use historical cost.
B. Price level financial statements compare uniform
purchasing power among various periods.
C. Price level statements measure assets and liabilities
at current value.
D. Price level statements measure earnings in terms of
a common peso.