Pcu - Cfas - 1ST Quiz - Midterm - 2ND Sem 2019-2020

PHILIPPINE CHRISTIAN UNIVERSITY - DASMA
CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS
IST QUIZ - MIDTERM
CHOOSE THE BEST ANSWER. WRITE YOUR ANSWERS ON A YELLOW PAD. DO NOT
FORGET TO WRITE YOUR NAME.
1. Which statement is true regarding the accounting for government grant related to an asset?
a. Depreciation is higher and net income lower if the grant is recorded as deferred income.
b. Depreciation is higher and net income lower if the grant is accounted for as an adjustment
to the asset.
c. Depreciation is higher if the grant is recorded as deferred income but net income is the
same under the deferred income approach and deduction from asset approach.
d. Depreciation is higher if the grant is recorded as an adjustment to the asset.
2. The deferred grant income is classified as
a. Separate component of shareholders’ equity
b. Noncurrent liability
c. Other income
d. Partly current and partly noncurrent liability
3. If the cost of the asset is recorded net of the grant
a. Equity is overstated.
b. Liability is overstated.
c. Asset is understated.
d. Net income is understated.
4. Which statement is incorrect when a government provides an interest-free loan to an entity.
a. No interest expense is recognized.
b. The loan payable is initially reported at the present value.
c. The interest element is amortized over the term of the loan using the effective interest
method.
d. The deferred grant income is amortised over the term of the loan using the straight line
method.
5. Government assistance includes all the ff., except
a. Free technical advice
b. Provision of guarantee
c. Government procurement policy that is responsible for a portion of the entity’s sale.
d. Improved irrigation water system for the benefit of an entire local community.
6. Which of the following is included in government assistance?
a. The construction of infrastructure in developing areas
b. The imposition of trading constraints on competitors
c. Improvement to the general transport and communication network
d. None of these can be included in government assistance
7. A forgivable loan from a government or the benefit of a government loan at NIL or below
market interest rate is accounted for as
a. Government grant
b. Government assistance
c. Both government grant and government assistance
d. Neither government grant nor government assistance
8. The amount of benefit in a zero-interest governmental loan is measured as the difference

between
a. Face amount and present value of loan
b. Face amount and fair value of loan
c. Fair value and present value of loan
d. Fair value and face amount of loan
9. In the case of a non monetary grant, which of the following accounting treatment is
prescribed?
a. Record the asset at replacement cost and the grant at a nominal value
b. Record the grant at a value estimated by management.
c. Record both the grant and the asset at fair value of the non monetary asset
d. Record only the asset at fair value and not recognise the fair value of the grant.
10. In the case of grant related to income, which of the following accounting treatment is
prescribed?
a. Credit the grant of equity.
b. Present the grant in the income statement as other income or as a separate line item, or
deduct it from the related expense.
c. Credit the grant to retained earnings.
d. Credit the grant to sales.
11. For which of the following products it is appropriate to recognise revenue at the completion
of production even though no sale has been made?
a. Automobile
b. Large appliance
c. Residential unit
d. Precious metal
12. An entity has come out with an offer to refund the cost of purchase within one month after
the sale if the customer is not satisfied with the product. When should the entity recognize the
revenue?
a. When goods are sold to the customers.
b. After one month of sale.
c. Only if goods are not returned by the customers after the period of one month.
d. At the time of sale with an offset to revenue of the lability of same amount for the possibility
of the return.
13.What is consigned inventory?
a. Goods that are shipped and title transfers to the consignee.
b. Goods that are sold but payment is not required until the goods are sold.
c. Goods that are shipped but title remains with the consignor.
d. Goods that have been segregated for shipment to a customer.
14. Freight and other handling charges incurred in the transfer of goods from the consignor to
consignee are
a. Expense on the part of the consignor.
b. Expense on the part of the consignee
c. Inventoriable by the consignor.
d. Inventoriable by the consignee.
15. Valuation of inventory requires the determination of all of the following, except
a. The costs to be included in inventory.
b. The physical goods to be included in inventory.
c. The cost of goods held on consignment.
d. The cost flow assumption.
16. Entities are encouraged to disclose all of the following in relation to property, plant and
equipment, except
a. The carrying amount of temporarily idle property, plant and equipment.
b. The gross carrying amount of fully depreciated property, plant and equipment still in use.
c. The carrying amount of property, plant and equipment as her for sale.
d. The fair value of property, plant and equipment that is not materially different from carrying
amount when the cost model is used.
17. The initial operating loss should be
a. Deferred and amortised over a reasonable period.
b. Expensed and charged to the income statement.
c. Capitalized as part of the cost of plant.
d. Charged to retained earnings.
18. An entity imported machinery to be installed in the new factory premises before year-end.
What is the proper treatment of freight and interest on the loan to fund the cost of machinery?
a. Both freight and interest are capitalised.
b. Interest may be capitalised but freight is expensed.
c. Freight is capitalized but interest cannot be capitalized.
d. Both freight and interest are expensed.
19. Property, plant and equipment are defined as
a. Tangible assets held for sale in the ordinary course of business.
b. Tangible assets held to earn rentals or for capital appreciation.
c. Tangible assets held for use in the production or supply of goods or services or for
administrative purposes.
d. Tangible assets held for use in the production or supply of goods or services, for rental to
others, or for administrative purposes and expected to be used during more than one
reporting period.
20. Which of the following is not a characteristic of property, plant and equipment?
a. The property, plant and equipment are tangible assets.
b. The property, plant and equipment are used in business.
c. The property, plant and equipment are expected to be used over a period of more than one
year.
d. The property, plant and equipment are subject to depreciation.

Pcu - Cfas - 1ST Quiz - Midterm - 2ND Sem 2019-2020

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PHILIPPINE CHRISTIAN UNIVERSITY - DASMA

CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS

IST QUIZ - MIDTERM

d. Depreciation is higher if the grant is recorded as an adjustment to the asset.

2. The deferred grant income is classified as

a. Separate component of shareholders’ equity

d. Partly current and partly noncurrent liability

3. If the cost of the asset is recorded net of the grant

d. Net income is understated.

4. Which statement is incorrect when a government provides an interest-free loan to an entity.

a. No interest expense is recognized.

b. The loan payable is initially reported at the present value.

5. Government assistance includes all the ﬀ., except

a. Free technical advice

6. Which of the following is included in government assistance?

a. The construction of infrastructure in developing areas

b. The imposition of trading constraints on competitors

c. Improvement to the general transport and communication network

d. None of these can be included in government assistance

c. Both government grant and government assistance

d. Neither government grant nor government assistance

8. The amount of benefit in a zero-interest governmental loan is measured as the diﬀerence

a. Face amount and present value of loan

b. Face amount and fair value of loan

c. Fair value and present value of loan

d. Fair value and face amount of loan

b. Record the grant at a value estimated by management.

a. Credit the grant of equity.

c. Credit the grant to retained earnings.

d. Credit the grant to sales.

a. When goods are sold to the customers.

b. After one month of sale.

13.What is consigned inventory?

a. Goods that are shipped and title transfers to the consignee.

d. Goods that have been segregated for shipment to a customer.

a. Expense on the part of the consignor.

b. Expense on the part of the consignee

c. Inventoriable by the consignor.

d. Inventoriable by the consignee.

a. The costs to be included in inventory.

b. The physical goods to be included in inventory.

c. The cost of goods held on consignment.

d. The cost flow assumption.

a. The carrying amount of temporarily idle property, plant and equipment.

17. The initial operating loss should be

a. Deferred and amortised over a reasonable period.

b. Expensed and charged to the income statement.

c. Capitalized as part of the cost of plant.

d. Charged to retained earnings.

a. Both freight and interest are capitalised.

b. Interest may be capitalised but freight is expensed.

c. Freight is capitalized but interest cannot be capitalized.

d. Both freight and interest are expensed.

19. Property, plant and equipment are defined as

a. Tangible assets held for sale in the ordinary course of business.

b. Tangible assets held to earn rentals or for capital appreciation.

a. The property, plant and equipment are tangible assets.

b. The property, plant and equipment are used in business.

d. The property, plant and equipment are subject to depreciation.

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