PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

2011 ACCOUNTANCY WEEK CELEBRATION

MOCK BOARD EXAMINATION – THEORY OF ACCOUNTS

1. Under SEC rules, which of the following entity may qualify as a SME?
B a. ReSA Life, a life insurance company
b. ReSA Store, a supermarket operating in Quezon City
c. ReSA Banking Corporation, a BSP-registered commercial bank
d. ReSA Waters, a water utility company servicing Metro Manila

2. Failure to accrue wages payable to office personnel will

D a. Overstate company loss
b. Overstate company liability
c. Understate distribution costs
d. Understate administrative costs

3. Under PAS 7 (statement of cash flows), which of the following items is not being added to profit
under the indirect method of computing operating cash flows?
D a. Bad debt losses
b. Depreciation expense
c. Loss on sale of equipment
d. Increases in trade receivable

4. Under PAS 33, treasury shares are considered as anti-dilutive because

C a. They decrease the basic earnings per share
b. They decrease the diluted earnings per share
c. They decrease the number of common shares outstanding
d. They increase the income available to common shareholders

5. Under PAS 36, an asset is said to be impaired if:

I. Fair value less costs to sell
II. Value in use
III. Carrying amount
C a. I is lowest among the three
b. II is lowest among the three
c. III is highest among the three
d. I is highest among the three

6. The following statements are based on PAS 41 (Agriculture):

Statement I: Biological assets and agriculture produce are initially
measured at cost.

Statement II: Any gain or loss on the initial recognition of

biological assets at fair value less costs to sell and any changes in
the fair value less costs to sell of biological assets are included
in profit or loss.

Statement III: Any gain or loss on the initial recognition of

agricultural produce at fair value less costs to sell shall be
included in the other comprehensive income.
B a. Only statement I is true
b. Only statement II is true
c. Only statement III is true
d. Only statement III is false

7. The following statements are based on PFRS for SMEs:

Statement I: Listed companies may not use PFRS for SMEs no matter how
small they are.

Statement II: If a publicly accountable entity uses PFRS for SMEs,

its financial statements shall not be described as conforming to the
PFRS for SMEs – even if law or regulation in its jurisdiction permits
or requires PFRS for SMEs to be used by publicly accountable
entities.
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Statement III: A subsidiary whose parent uses full PFRS is not

prohibited from using this PFRS for SMEs in its own FS if that
subsidiary by itself does not have public accountability.
A a. True, true, true
b. False, true, true
c. True, false, false
d. False, false, true

8. According to IFRS Framework (2010), which of the following is

considered a fundamental characteristic of accounting information?
B a. Timeliness
b. Faithful representation
c. Comparability
d. Understandability

9. The proceeds from a bond issued with detachable share warrants should
be accounted for as follows:
A a. Fair value is assigned to the bonds with any excess proceeds
allocated to the share warrants
b. Fair value is assigned to the share warrants with any excess
proceeds allocated to the bonds
c. Proceeds shall be allocated on a pro-rate basis to the bonds
and share warrants based on their relative fair values
d. Proceeds shall be assigned entirely to the bonds and no equity
component for the share warrant is to be recognized

10.Financial assets at fair value through other comprehensive income

refer to
C a. Trading securities
b. held-to-maturity securities
c. Available-for-sale securities
d. Trading and available-for-sale securities

11.Under PAS 19, which is deducted in computing the pension expense?

D a. Prior service costs
b. Current service costs
c. Actual return on plan assets
d. Expected return on plan assets

12.When 20% stock bonus issue is declared and issued,

B a. There is no effect on contributed capital, earned capital and
total shareholders’ equity
b. Contributed capital increases, earned capital decreases, but
total shareholders’ equity is unaffected
c. Contributed capital decreases, earned capital increases, but
total shareholders’ equity is unaffected
d. Contributed capital increases, earned capital increases, and the
total shareholders’ equity increases

13. Under PAS 17, ‘unearned rent’ account is used by the lessor under the
A a. Operating lease
b. Operating lease and sales type lease
c. Operating lease and direct financing lease
d. Operating lease, sales type lease and direct financing lease
14.The following statements are based on PAS 16 (Property, Plant &
Equipment):
Statement I: After recognition of an asset, an item of property,
plant and equipment shall be carried at its cost less accumulated
depreciation and any accumulated impairment losses.
Statement II: After recognition of an asset, an item of property,
plant and equipment whose fair value can be measured reliably shall
be carried at a revalued amount, being its fair value at the date of
revaluation, less any subsequent accumulated depreciation and
subsequent accumulated impairment losses.

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Statement III: Revaluations shall be made with sufficient regularity

to ensure that the carrying amount does not differ materially from
that which would be determined using fair value at the end of
reporting period.
A a. All of the statements are true
b. Only statement I is true
c. Only statement II is false
d. Only statement III is false

15.Under PAS 21, both foreign currency transaction gains and foreign
currency translation losses can be generally presented in the
D a. Statement of income
b. Statement of cash flows
c. Statement of financial position
d. Statement of comprehensive income

16.Under SEC rules, a company is classified as a “Small & Medium Entity”

(SME) when its total assets are between
B a. P 3 million and P 250 million
b. P 3 million and P 350 million
c. P 5 million and P 250 million
d. P 5 million and P 250 million

17. Under PAS 7 (statement of cash flows), dividend payments to shareholders are classified as part of
either
D a. Operating activities (under the benchmark treatment) or
investing activities (under the allowed alternative treatment)
b. Financing activities (under the benchmark treatment) or
investing activities (under the allowed alternative treatment)
c. Operating activities (under the benchmark treatment) or
Financing activities (under the allowed alternative treatment)
d. Financing activities (under the benchmark treatment) or
Operating activities (under the allowed alternative treatment)

18.A company issues financial statements in which there is an assumed

conversion of warrants and options into common stock. Moreover, there
is an assumed repayment of debt relating to the assumed conversion.
This scenario is most closely associated with which of the following?
B a. Computation of contingent liability disclosure
b. Computation of diluted earnings per share
c. Extraordinary items and cumulative effect changes
d. Retroactive-effect changes and common stock

19.Under PAS 17, which of the following situations would lead to a lease being classified as an
operating lease?
C a. Transfer of ownership to the lessee at the end of the lease
term
b. Option to purchase at a value below the fair value of the
asset
c. The lease term is at least 50% of the asset’s economic life
d. The present value of the minimum lease payments is 90% of the
fair value of the asset
20.The following statements are based on PFRS 2 (Share-based payment):
Statement I: For equity-settled share-based payment transactions, the
entity shall measure the goods or services received, and the
corresponding increase in equity, directly at the fair value of the
goods or services received.
Statement II: For equity-settled share-based payment transactions, if
the entity cannot estimate reliably the fair value of the goods and
services received, the entity shall measure their value by reference
to the fair value of the equity instruments granted.
Statement III: For cash-settled share-based payment transactions, the
entity shall measure the goods or services acquired and the liability incurred at the fair value of the
goods or services received.
D a. All of the statements are true

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b. Only statement I is true

c. Only statement II is false
d. Only statement III is false

21.Deposits in foreign banks subject to foreign exchange restrictions

should be
C a. Valued at closing rates and shown as current assets
b. Valued at historical rates and presented as current assets
c. Valued at closing rates and presented as noncurrent assets
d. Valued at historical rates and presented as noncurrent assets

22.Bonds issued at a premium will have

D a. Higher interest expense compared to bonds issued at face
b. Higher interest expense compared to bonds issued at a discount
c. Same interest expense compared to bonds issued at face
d. Same interest payments compared to bonds issued at a discount

23.Which of the following should be disclosed in the summary of

significant accounting policies?
A a. Valuation method used for work in process inventory
b. Borrowing cost capitalized for the period
c. Adequacy of pension plan assets in relation to vested benefits
d. Depreciation charges for the period

24.The statement of financial position of nonprofit organization

displays the organization’s
B a. Assets, liabilities and equity
b. Assets, liabilities and net assets
c. Assets, liabilities and fund balance
d. Excess of assets over liabilities

25. Which of the following accounting treatments is not allowed under PFRS for SMEs?
D a. Goodwill being amortized over a period of 10 years
b. Borrowing costs related to a qualifying asset being expensed
c. Investment in associates accounted by cost or fair value model
d. Property, plant and equipment accounted for under the
revaluation model

26.Which is the correct order of the following four steps in the

accounting cycle?
Step 1: Prepare adjusting journal entries
Step 2: Take a post-closing trial balance
Step 3: Prepare an adjusted trial balance
Step 4: Prepare reversing entries
A a. 1,3,2,4
b. 4,1,3,2
c. 1,3,4,2
d. 1,2,3,4
27.The following statements are based on PFRS 3 (Business Combinations):
Statement I: An entity shall account for each business combination by
applying the acquisition method
Statement II: The acquirer shall measure the identifiable assets
acquired and the liabilities assumed at their acquisition date fair
values.
Statement III: For each business combination, the acquirer shall measure any non-controlling
interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of
the acquiree’s identifiable net assets.
A a. All of the statements are true
b. Only statement I is true
c. Only statement II is false
d. Only statement III is false

28.Where the provision being measured involves a large population of

items, the obligation is estimated by
D a. Getting the minimum of the range

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b. Getting the maximum of the range

c. Getting the mid-point of the range
d. Weighing all possible outcomes by their associated
probabilities

29.Management of a bank concluded that there is no longer reasonable

assurance of collection of the full amount of principal and interest
from the bank’s largest borrower.

What is the impact of that conclusion on the bank’s financial statements?

D a. No accounting or disclosure of a possible loss in value is
necessary
b. A contingency note disclosure of a possible loss in value is
required
c. The carrying amount of the loan should be reduced, with a
charge directly to retained earnings
d. The carrying amount of the loan should be reduced, with a
charge to the income statement

30.Under SEC rules, a company is classified as a “Small & Medium Entity”

(SME) when its total liabilities are between
A a. P 3 million and P 250 million
b. P 3 million and P 350 million
c. P 5 million and P 250 million
d. P 5 million and P 250 million

31.As a result of the uncertainties in business activities, many items

in financial statements cannot be measured with precision but can
only be estimated. For example, estimates may be required in all of
the following, except:
A a. Debts to the bank
b. Fair value of biological assets
c. Useful lives of depreciable assets
d. Warranty obligations or provisions

32.The following reconciling items are added to the adjusted book

balance of cash in order to arrive at the unadjusted bank balance of
cash, except
B a. Outstanding checks
b. Deposits in transit
c. Proceeds of note collected by the bank
d. Interests on note collected

33.The following statements are based on PFRS for SMEs:

Statement I: If an entity’s normal operating cycle is not clearly
determinable, its duration is assumed to be twelve (12) months.
Statement II: If an entity is unable to make a reliable estimate of
the useful life of an intangible asset, the life shall be presumed to
be twenty (20) years.
Statement III: An entity shall recognize all borrowing costs as an
expense in profit or loss in the period in which they are incurred.
B a. True, true, true
b. True, false, true
c. True, false, false
d. False, false, false

34.A cable television company receives deposits from customers, which

are refunded when service is terminated. The average customer stays
with the company eight years. How should these deposits be shown on
the financial statements?
D a. Operating revenue
b. Other revenue
c. Paid-in capital
d. Liability

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35.Which government body is responsible for the design, preparation and

approval of accounting systems of government agencies?
A a. Department of Budget and Management
b. Commission on Audit
c. Bureau of Treasury
d. Government Agencies

36.Under which of the following depreciation methods is it possible for

depreciation expense to be higher in the later years of an asset’s
useful life?
B a. Straight-line
b. Activity method based on units of production
c. Sum-of-the-years’ digits
d. Declining balance

37. Given a hyperinflationary economy under PAS 29, which price index is used in (A) restating financial
statements and (B) measuring inflation?
D a. (A) General price index (B) General price index
b. (A) Consumer price index (B) Consumer price index
c. (A) Consumer price index (B) General price index
d. (A) General price index (B) Consumer price index

38.The basic purpose of derivative financial instruments is to manage

some kind of risk such as all of the following, except
D a. Stock price movement
b. Currency fluctuations
c. Interest rate variations
d. Uncollectibility of accounts receivable

39. A company uses straight-line depreciation for financial reporting purposes, but uses the accelerated
depreciation for tax purposes. Which of the following account balances would be lower in the
financial statements used for tax purposes than it would be in the general purpose financial
statements?
C a. Accumulated depreciation
b. Cash
c. Retained earnings
d. Gross fixed assets

40.The following statements are based on PAS 40 (Investment Property):

Statement I: An investment property is a property held to earn
rentals or for capital appreciation or both.
Statement II: An investment property shall be measured initially at
costs. Transaction costs shall be excluded in the initial
measurement.
Statement III: Under the cost model, a gain or loss arising from a
change in the fair value of investment property shall be recognized
in profit or loss for the period in which it arises.
B a. All of the statements are true
b. Only statement I is true
c. Only statement II is false
d. Only statement III is false

41.Which of the following is not an appropriate basis for measurement

the historical cost of fixed assets?
B a. The purchase price, freight costs, and installation costs of a
productive asset should be included in the asset’s cost
b. Proceeds obtained in the process of readying land for its
intended purpose, such as from the sale of cleared timber,
should be recognized immediately in income
c. The costs of improvement to equipment incurred after its
acquisition should be added to the asset’s cost if they provide
future service potential
d. All costs incurred in the construction of a plant building,
from excavation to completion of a plant building, from
excavation to completion, should be considered as part of the

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asset’s cost

42.Which of the following is an internal user of a company’s financial

information?
C a. A holder of the company’s bonds
b. A holder of the company’s stocks
c. A member of the board of directors
d. A member of the family of an incorporator

43.Which of the financial statement should an investor primarily use to

assess the amounts, timing, and uncertainty of investing and
financing activities of ABC Company?
D a. Statement of comprehensive income
b. Statement of financial position
c. Statement of changes in equity
d. Statement of cash flows

44.Under the National Government Accounting System (NGAS), allotments of

the government general appropriation are recorded in the registries
D a. At the beginning of the year
b. At the end of the year
c. Semiannually
d. Quarterly

45.When it is impracticable to determine the effect of an error for all

prior periods, the entity
C a. Restates comparative information prospectively from the
earliest date practicable
b. Restates comparative information prospectively up to the
latest date practicable
c. Restates comparative information retrospectively from the
earliest date practicable
d. Restates comparative information retrospectively up to the
latest date practicable
46.The following statements are based on PAS 38 (Intangible Assets):
Statement I: Internally generated goodwill shall not be recognized as
an asset.
Statement II: No intangible asset arising from research or research
phase of an internal project shall be recognized.
Statement III: Internally generated brands, mastheads, publishing
titles, customer lists and items similar in substance shall be
recognized as intangible assets
D a. All of the statements are true
b. Only statement I is true
c. Only statement II is false
d. Only statement III is false

47.To calculate net sales, (List A) must be (List B) cash receipts from
customers.
List A List B
A a. An increase in accounts receivable Added to
b. An increase in accounts receivable Subtracted from
c. An increase in accounts payable Added to
d. An increase in accounts payable Subtracted from

48. A call option on a common share is more valuable when there is a lower
B a. Market value of the underlying share
b. Exercise price on the option
c. Time to maturity on the option
d. Variability of market price on the underlying share

49. A direct labor overtime premium is charged to a specific job when the overtime is caused by
B a. Increased overall level of activity
b. Customer’s requirement for early completion of job
c. Management’s failure to include the job in the production

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schedule
d. Management’s requirement that the job be completed before the
annual factory vacation closure

50. The physical capital maintenance concept is consistent with

D a. Historical cost/nominal peso and historical cost/constant peso
b. Historical cost/nominal peso and current cost/constant peso
c. Current cost/nominal peso and historical cost/constant peso
d. Current cost/nominal peso and current cost/constant peso

51.What is the purpose of the following journal entry?

Supplies xxx
Supplies expense xxx
B a. To recognize supplies used, if purchases of supplies are
recorded in supplies
b. To recognize supplies on hand, if purchases of supplies are
recorded in supplies expense
c. To record the purchase of supplies during or at the end of the
period
d. To close the expense account for supplies at the end of the
period

52.The amortization of intangible assets over their useful lives is

justified by the
B a. Economic entity assumption
b. Going concern assumption
c. Monetary unit assumption
d. Historical cost assumption
53.The following statements are based on PFRS for SMEs:
Statement I: If an entity has no items of other comprehensive income,
it may present only an Income Statement.
Statement II: If an entity has no items of other comprehensive
income, it may present a Statement of Comprehensive Income in which
the bottom line is “profit or loss.”
Statement III: If only changes to equity arise from profit or loss,
payments of dividends, corrections of prior period errors, and
changes in accounting policy, the entity may present a single
Statement of Income and Retained Earnings.
A a. True, true, true
b. True, true, false
c. True, false, true
d. False, true, false

54.In the statement of cash flows, the purchase of fixed assets appears
in the (List A) activities section as a (List B) of cash.
List A List B
C a. Operating Source
b. Financing Use
c. Investing Use
d. Investing Source

55.In calculating diluted earnings per share (EPS), which of the

following should not be considered?
C a. The weighted number of shares outstanding
b. The amount of dividends declared on cumulative preference
shares
c. The amount of cash dividends declared on ordinary shares
d. The number of ordinary shares resulting from the assumed
conversion of debentures outstanding

56.A bank reconciliation is prepared monthly in order for the enterprise

to
A a. Arrive at the correct cash balance
b. Unearth any undetected cash fraud
c. Correct bank errors

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d. Correct book errors

57.The publisher of a popular magazine offers a special discounted price

for a three-year subscription. At the balance sheet date, the
revenue, which has already been collected but pertains to future
periods, is best to referred to as
B a. Accrued subscription revenue(an asset account)
b. Unearned subscription revenue (a liability account)
c. Earned subscriptions revenue (a revenue account)
d. Precollected subscriptions receivable (a deferred asset account)

58.From the viewpoint of the investor, which of the following securities

provides the least risk?
A a. Mortgage bond
b. Subordinated debenture
c. Income bond
d. Debentures

59.The measurement basis often used to report a long-term payable

requiring a commitment to pay money at a determinable future date is
D a. General price level
b. Current cost
c. Net realizable value
d. Present value of future cash flows

60.Which of the following statements is true for a defined contribution

pension plan?
A a. The employer is required to contribute a certain amount each
period based on the plan’s formula
b. The employer bears the risk of the plan’s investment
performance
c. Retirement benefits received by employees are defined by the
plan’s formula
d. The employer and employees are required to contribute equal
amounts to the pension fund

61.Which of the following steps in the accounting cycle is completed

later than the others?
A a. Adjustments
b. Journalizing
c. Posting
d. Identification and measurement of transactions

62.In reconciling net income on an accrual basis to net cash provided by

operating activities. What adjustment is needed to net income because
of (1) an increase during the period in prepaid expenses, and (2) the
periodic depreciation expense of company properties?
C a. (1) Add (2) Add
b. (1) Add (2) Deduct
c. (1) Deduct (2) Add
d. (1) Deduct (2) Deduct

63.This accounting objective emphasizes the importance of the Income

Statement as it is geared toward proper income or performance
determination of the enterprise.
A a. Entity theory
b. Proprietary theory
c. Residual equity theory
d. Fund theory

64.An automobile manufacturer should normally recognize revenue when an

C a. Automobile comes off of the assembly line
b. Order is received from a dealer
c. Automobile is shipped to a dealer on a non-consignment basis
d. Automobile is financed by a dealer to consumer

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65.Jon Company uses the equity method to account for its investment in
Lee Company common stock. How should Jon record a 2% stock dividend
received from Lee?
D a. As dividend revenue at Lee’s carrying value of the stock
b. As dividend revenue at the market value of the stock
c. As a reduction in the total cost of stock investment
d. As a memorandum entry reducing the unit cost of stock investment

66.In accounting for a business combination, which of the following

intangibles should not be recognized as an asset apart from goodwill?
C a. Trademarks
b. Lease agreements
c. Employee quality
d. Patents

67.The application of factory overhead costs under job order costing

would be reflected in the general ledger as an increase in
C a. Factory overhead control
b. Finished goods control
c. Work in process control
d. Cost of goods sold
68.For international investors, which of the following is not a
potential benefit of the development and adoption of International
Financial Reporting Standards across various countries?
C a. Improved ability to make comparisons across enterprises
b. Greater freedom in the flow of capital across borders
c. Greater risk premiums for international investors
d. Fewer competitive advantage due to varying treatments of items
affecting reported earnings

69.Which of the following errors is not self-correcting over two

accounting periods?
B a. Failure to record accrued wages
b. Failure to record depreciation
c. Overstatement of inventory
d. Failure to record prepaid expenses

70.If the price of the underlying is greater than the strike or exercise
price of the underlying, the call option is said to be
B a. At the money
b. In the money
c. On the money
d. Out of the money

71.In a defined benefit plan, a formula is used which

B a. Requires that the risk of loss from assets contributed to the
pension be borne by the employee
b. Defines the benefits that the employee will receive at the
time of retirement
c. Requires that pension expense and the cash contribution to the
fund should be the same
d. Defines the contribution the employer has to make; no promise
is made concerning the ultimate benefits to be paid out to
employees

72.If sales are accounted for using the installment method, which of the
following is (are) only recognized in proportion to the cash
collected on the sales during the period?
B a. Sales
b. Sales and cost of sales
c. Sales and cost of sales and selling expenses
d. Sales and cost of sales and administrative expenses

73.An absolute transfer of receivables, without recourse, for cash shall

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D a. Not be recorded until all of the receivable have been collected

b. Be disclose in the notes as a contingent transaction
c. Be recorded as a borrowing transaction
d. Be recorded as a sale of receivables

74.Which of the following is the most likely item to result in a

deferred tax asset?
B a. Prepayment of insurance
b. Rentals received in advance
c. Interest revenue on government bonds
d. Using straight-line depreciation for the books and accelerated
depreciation for tax

75.Financial accounting is the area of accounting that emphasizes

reporting to
A a. Lenders
b. Management
c. Internal auditors
d. Securities and Exchange Commission
76.If a company employs the sum-of-the-years’ digits (SYD) method of
depreciation for an asset with an estimated useful life of four
years, the percentage of the total depreciable cost that will be
expensed in the third year is
C a. 10%
b. 25%
c. 20%
d. 90%

77.Preparation of consolidated financial statements when a parent-

subsidiary relationship exist is an example of the
A a. Economic entity assumption
b. Relevance characteristic
c. Comparability characteristic
d. Neutrality characteristic

78.The holding loss in an available-for-sale debt investment is measured

by the difference between the fair value and the
B a. Original cost
b. Amortized cost
c. Discounted value
d. Net realizable value

79. The cost of materials has risen steadily over the year. Which of the following methods of estimating
the ending balance of the materials inventory account will result in the highest net profit, assuming
all other variables remain constant?
B a. Last-in, first-out (LIFO)
b. First-in, first-out (FIFO)
c. Weighted average
d. Specific identification

80.What is the objective of financial statements according to the

Framework?
A a. To provide information about the financial position,
performance, and changes in financial position of an entity
that is useful to a wide range of users in making economic
decisions.
b. To prepare and present a balance sheet, an income statement, a
cash flow statement, and a statement of changes in equity.
c. To prepare and present comparable, relevant, reliable, and
understandable information to investors and creditors.
d. To prepare financial statements in accordance with all
applicable Standards and Interpretations.

81.Accounting for nonprofit organizations is essentially

A a. Fund accounting

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b. State accounting
c. Commercial accounting
d. Managerial accounting

82.If Progress Billing (PB) account for a project is lower than the
Construction-in-Progress (CIP) account, then
A a. It should be presented as CIP (net of PB) under current asset
section
b. It should be presented as CIP (net of PB) under non-current
asset section
c. It should be presented as PB (net of CIP) under current
liability section
d. It should be presented as PB (net of CIP) under non-current
liability section

83.The failure to record an accrued expense at year-end will result in

overstatement errors of
Net income Working capital Cash
D a. No No Yes
b. No Yes No
c. Yes No No
d. Yes Yes No

84.When should an item that meets the definition of an element be

recognized, according to the Framework?
D a. When it is probable that any future economic benefit
associated with the item will flow to or from the entity.
b. When the element has a cost or value that can be measured with
reliability.
c. When the entity obtains control of the rights or obligations
associated with the item.
d. When it is probable that any future economic benefit
associated with the item will flow to or from the entity and
the item has a cost or value that can be measured with
reliability.

85.Preference share that has no claim on any prior year dividends that
were not declared is described as
C a. Cumulative
b. Participating
c. Non-cumulative
d. Non-participating

86.Which of the following items is a noncash charge to earnings?

D a. Administrative expense
b. Interest expense
c. Income tax expense
d. Depreciation expense

87.Which of the following would differ most between a partnership and a

corporation?
D a. Asset section of a balance sheet
b. Expense section of an income statement
c. Liability section of a balance sheet
d. Equity section of a balance sheet

88. Which will not be considered as an investment property?

C a. Land held for long-term capital appreciation
b. Land held for a currently undetermined future use
c. Property that is leased to another entity under a finance
lease
d. Building that is vacant but is held to be leased out under one
or more operating leases

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89.Which is not a basis of the quantitative thresholds that an operating

segment has to meet to be considered reportable?
B a. Segment assets
b. Segment liabilities
c. Segment revenue
d. Segment profit

90.Which of the following can be best described as a “residual equity”?

D a. Mortgage payable
b. Unsecured loans payable
c. Preferred stock issued
d. Common stock issued
91.Which of the following is not specifically excluded from the purview of PAS 20 on
government grant?
D a. Government participation in ownership of the entity
b. Government grant covered by PAS 41 (Agriculture)
c. Government assistance provided in the form of tax benefits
d. Forgivable loan from the government

92.If a dividend is declared after the balance sheet date but before the
financial statements are authorized for issue, the dividend is:
B a. recognized as a liability at the balance sheet date
b. not recognized as a liability at the balance sheet date
c. recorded as a direct reduction of equity at the balance sheet
date
d. recorded as a reduction against the asset ‘cash’ at balance
sheet date.

93.Gains or losses on the purchase and resale of treasury shares is

reflected in
B a. Paid-in capital only
b. Paid-in capital and retained earnings
c. Income, paid-in capital and retained earnings
d. Income and paid-in capital

94.According to the IFRS Framework (2010), all of the following are

considered as enhancing characteristics of accounting information,
except
A a. Timeliness
b. Verifiability
c. Comparability
d. Faithful Representation

95. The body authorized by law to promulgate rules and regulations affecting the practice of
accountancy in the Philippines is the
A a. Board of Accountancy
b. Financial Reporting Standards Council
c. Auditing and Assurance Standards Council
d. Philippine Institute of Certified Public Accountants

96. The issuer should charge retained earnings for the par value of shares issued in
C a. 1 for 6 stock dividend
b. 3 for 16 stock dividend
c. 2 for 7 stock dividend
d. 2 for 15 stock dividend

97. The modified accrual basis under NGAS prescribes that

D a. Expenses are recognized as paid
b. Expenses are recognized as paid except when a specific law
requires otherwise
c. Expenses are recognized as incurred
d. Expenses are recognized as incurred except when a specific law
requires otherwise

98. The costs of company start-up activities, including fees of attorneys, should be

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D a. Capitalized, but not amortized, because of the indefinite life

of the business
b. Capitalized and amortized
c. Capitalized and deferred until liquidation of the business
d. Expensed when incurred

99.Cash control and voucher systems are methods and procedures used to
C a. Ensure that current obligations are met
b. Ensure that excess cash does not exist
c. Ensure the safeguarding of cash
d. Ensure that unused cash is invested

100.Cash dividends are paid on the basis of the number of shares

C a. Authorized
b. Issued
c. Outstanding
d. Outstanding less the number of treasury shares

- END of EXAMINATION –

THEORY OF ACCOUNTS – MOCK BOARD EXAMINATION