Decision makers vary widely in the types of decisions This comprises all “non-owner changes in equity.

” It
they make, the methods of decision making they excludes owner changes in equity, such as subscription,
employ, the information they already possess or can issuance, and reacquisition of share capital and
obtain from other sources, and their ability to process declaration of dividends. *
information. Consequently, for information to be useful
a. Other comprehensive income
there must be a linkage between these users and the
decisions they make. This link is b. Changes in equity
a. relevance. c. Total comprehensive income
b. reliability. d. Profit or loss
c. understandability. carrying amont
d. materiality. According to PFRS 14, rate-regulation is *

a. a framework for establishing the prices that can be

charged to customers for goods or services and that
According to the Conceptual Framework, physical count
framework is subject to oversight and/or approval by a
of inventory is an example of *
rate regulator.
a. direct verification.
b. the balance of any expense (or income) account that
b. indirect verification. would not be recognized as an asset or a liability in
accordance with other Standards, but that qualifies for
c. timeliness.
deferral because it is included, or is expected to be
d. relevance. included, by the rate regulator in establishing the rate(s)
that can be charged to customers.

c. an authorized body that is empowered by statute or

Which of the following are not considered transaction regulation to establish the rate or a range of rates that
costs or costs to sell? * bind an entity. The rate regulator may be a third-party
a. commissions to brokers body or a related party of the entity, including the
entity’s own governing board, if that body is required by
b. levies by regulatory agencies and commodity statute or regulation to set rates both in the interest of
exchanges the customers and to ensure the overall financial
c. transfer taxes and duties viability of the entity.

d. transport costs d. all of these

PAS 1 requires an assessment of the entity’s ability to There is no principal market for the financial asset.
continue as a going concern each time financial What is the fair value of the asset? *
statements are prepared. Who is responsible in making Captionless Image
this assessment? *
a. 71
a. Accountant
b. 72
b. Auditor
c. 74
c. Management
d. 76
d. Government regulatory body
Which of the following is not one of the general a. relevance.
features of financial statements under PAS 1? *
b. reliability.
a. Fair presentation and compliance with PFRSs
c. consistency.
b. Going Concern
d. comparability.
c. Cash Basis

d. Materiality and aggregation

How does Entity B account for the insurance contract
with Entity A? *

Information is considered relevant when it * a. General model

a. can be depended on to represent the economic b. Premium Allocation Approach

conditions and events that it is intended to represent.
c. a or b
b. is capable of making a difference in a decision.
d. Not accounted for under PFRS 17
c. is understandable by reasonably informed users of
accounting information.
According to PFRS 16, lease liabilities are presented in
d. is verifiable and neutral.
the lessee’s statement of financial position *

a. separately from the other liabilities of the lessee.

General-purpose financial statements are *
b. together with other liabilities, with disclosure of the
a. those statements that cater to the common and line items that include the lease liabilities.
specific needs of a wide range of external users.
c. a or b
b. those statements that cater to the common needs of
d. not presented in the lessee’s financial statements but
a wide range of external users and internal users.
only in the lessor’s financial statements
c. those statements that cater to the common needs of
a limited range of external users.
Tech Co. and Robotics Co. are joint venturers of Mecha
d. those statements that cater to the common needs of
Co., a producer of high tech machinery. Tech and
a wide range of external users
Robotics, each have a 50% interest in the net assets of
Mecha Co. During the year, Tech Co. earns revenue of
₱1,000,000 from its own operations while Mecha Co.
The Filipino adage “Aanhin mo pa ang damo pag patay
reports revenue of ₱400,000. How much total revenue
na ang kabayo” relates to which of the following
shall be reported in Tech Co.’s statement of profit or
qualitative characteristics? *
loss for the year? *
a. Relevance
a. ₱1,000,000
b. Timeliness
b. ₱1,200,000
c. Faithful representation
c. ₱1,400,000
d. Comparability
d. Either a or b

When information about two different entities has been

prepared and presented in a similar manner, the
information exhibits the characteristic of *
What is the basic purpose of accounting? * c. investments measured at fair value through other
comprehensive income.
a. To provide quantitative financial information about
economic activities. d. investments accounted for under the equity method.

b. To provide all information that users need in making

economic decisions.
The primary objective of financial reporting is to provide
c. To provide qualitative financial information about
a. information about economic resources, claims to
economic activities intended to be useful in making
these resources, and changes in them.
economic decisions.
b. information useful for investment and credit
d. To provide quantitative financial information about
decisions.
economic activities intended to be useful in making
economic decisions. c. information useful in predicting future cash flows.

d. all of these
Which of the following is not one of the criteria when
determining whether a contract is or contains a lease? *
Which of the following is considered a qualitative factor
a. Identified asset in making materiality judgments? *
b. Identified liability a. the context of an item in relation to the current
economic state of the environment where the entity
c. Right to obtain substantially all of the economic
operates.
benefits from use of an identified asset throughout the
period of use b. 10% of profit or loss, in absolute terms
d. Right to direct the use of the identified asset c. 5% of total revenues
throughout the period of use
d. 1% of total assets

According to PFRS 16, right-of-use assets are presented

in the lessee’s statement of financial position * In making an economic decision, an investor needs
information on the amounts of an entity’s economic
a. separately from the other assets of the lessee. resources and claims to those resources. That investor
would most likely refer to which of the following
b. together with other assets as if they were owned,
financial statements? *
with disclosure of the line items that include the right-
of-use assets. a. Statement of financial position
c. a or b b. Statement of comprehensive income
d. not presented in the lessee’s financial statements but c. Statement of cash flows
only in the lessor’s financial statements
d. Statement of changes in equity

PFRS 12 applies to *
The revised Conceptual Framework defines an asset as *
a. contracts relating to post-employment benefit plans.
a. a resource controlled by the entity as a result of past
b. interest in joint arrangements that does not give the events and from which future economic benefits are
entity joint control or significant influence over the expected to flow to the entity.
arrangement.
b. a present economic resource controlled by the entity
as a result of past events. An economic resource is a
right that has the potential to produce economic b. showing only the net debit or the net credit balance
benefits. of the accounts.

c. a physical object that can produce economic benefits c. a or b, as a matter of accounting policy choice
for the entity.
d. An entity shall not present regulatory deferral
d. All of these. accounts in the statement of financial position, but only
disclose them in the notes.

These are the end product of the financial reporting

process and the means by which information gathered Which of the following statements is correct regarding
and processed is periodically communicated to users. * the accounting for leases? *

a. Financial reporting a. The lessor depreciates the leased asset under a

finance lease.
b. Financial statements
b. The lessee depreciates the leased asset under a
c. Financial products
“short-term” or a “low-valued asset” lease.
d. Accounting statements
c. When discounting lease payments the lessor and the
lessee use the interest rate implicit in the lease.

The overall objective of financial reporting is to provide d. An entity can never be both a lessor and a lessee of
information * the same leased asset.

a. about an entity's assets, liabilities, and equity.

b. about an entity's financial performance during a It is the accounting process of assigning numbers,
period. commonly in monetary terms, to the economic
transactions and events. *
c. that is useful to primary users in making economic
decisions about providing resources to the entity. a. analyzing

d. that allows owners to assess management's b. measuring

performance.
c. classifying

d. interpreting
Information is neutral if it *

a. provides benefits which are at least equal to the costs

According to PFRS 12, interest in another entity refers
of its preparation.
to *
b. can be compared with similar information.
a. only contractual involvement that exposes an entity
c. has no impact on a decision-maker. to variability of returns from the performance of
another entity.
d. is free from bias toward a predetermined result.
b. only non-contractual involvement that exposes an
entity to variability of returns from the performance of
According to PFRS 14, an entity presents regulatory another entity.
deferral accounts in the statement of financial position c. contractual and non-contractual involvement that
* exposes an entity to variability of returns from the
a. showing those with debit balances separately from performance of another entity.
those with credit balances. d. a typical customer-supplier relationship.
 a. economic entity assumption.

Which of the following is most likely to result in the b. monetary unit assumption.
recognition of a liability? *
c. conservatism assumption.
a. Customers become entitled to rebates for their past
d. going concern.
purchases.

b. Intention to acquire inventories in a future period.

c. Entering into a purchase contract for future delivery.

The “excess of the acquirer’s interest in the net fair
d. Agreeing on an irrevocable future commitment that is
value of acquiree’s identifiable assets, liabilities, and
not burdensome at present.
contingent liabilities over cost” (formerly known as
negative goodwill) should be *

Materiality judgment is least likely to be applied in a. Amortized over the life of the assets acquired.
which of the following? *
b. Reassessed as to the accuracy of its measurement
a. in determining whether an item warrants separate and then recognized immediately in profit or loss.
presentation in the financial statements or is to be
c. Reassessed as to the accuracy of its measurement
aggregated with other items
and then recognized in retained earnings.
b. in determining whether the information could
d. Carried as a capital reserve indefinitely.
influence the decisions of users, and therefore, must be
presented in the financial statements

c. in determining whether the cost of processing and Which of the following is considered an agricultural
communicating information exceeds the benefits produce? *
expected to be derived from it
a. eggs to be hatched into chicks
d. whether additional information needs to be provided,
including the level of detail and conciseness of the b. condensed milk
information’s presentation c. dairy cow

d. felled trees
Certain criteria must be met before a contract with a
customer is accounted for under PFRS 15. Which of the
following precludes a contract from being accounted for Biological assets and agricultural produce are
under PFRS 15? * recognized when all of the following are present except

a. The consideration is collected in advanced. a. control

b. The contract is made orally. b. probable future economic benefits

c. The contract does not result to a change in the risk, c. probable future event
timing or amount of the entity’s future cash flows. d. fair value or cost can be measured reliably
d. The contract is neither oral nor written but rather
implied by the entity’s business practices.
According to PAS 38, which of the following may be
recognized as cost of intangible asset? *
The assumption that a business enterprise will not be a. Research costs incurred in self-generating an
sold or liquidated in the near future is known as the * intangible asset
b. Costs of an internally generated customer lists c. its carrying amount is less than its value in use.

c. Purchase cost of an externally acquired publishing d. its fair value less disposal costs exceeds its
title recoverable amount.

d. Abnormal amount of wasted labor in self-generating

an intangible asset
This type of difference will give rise to deferred tax
liability. *

Which of the following qualifies for classification as an a. Taxable temporary difference

investment property? *
b. Permanent difference
a. Property that is currently being developed for future
c. Deductible temporary difference
use as investment property
d. Deferred difference
b. Investment property that is currently being
developed for future use as owner-occupied property

c. Property that is leased out to another entity under a On January 1, 20x1, Entity A registers a patent for a
finance lease total registration and legal costs of ₱600,000. Entity A
estimates that the patent has a remaining useful life of
d. Building being rented from another entity and leased
25 years. How much is the amortization expense for
out under various operating sub-leases
20x1? *

a. 30,000
The acquisition date is *
b. 24,000
a. the date on which the acquirer obtains control of the
c. 16,000
acquiree.
d. 0
b. the opening date.

c. the date the acquirer transfers to the acquiree the

consideration in a business combination. Under this model, an investment property is measured
at cost less accumulated depreciation and accumulated
d. any of these
impairment losses. *

a. Impairment loss model

PFRS 1 requires an entity to prepare and present an *
b. Cost model
a. opening PFRS financial statements.
c. Fair value model
b. opening PFRS statement of financial position.
d. Gorgeous model
c. opening PFRS statement of profit or loss and other
comprehensive income.
Which of the following best describes the term
d. opening notes to the financial statements.
‘significant influence’ as used under PAS 28? *

a. The holding of 20% interest in an investee.

According to PAS 36, an asset is impaired if *
b. The ability to control an investee’s relevant activities
a. its carrying amount exceeds its recoverable amount. through holding of significant portion of the investee’s
voting rights.
b. its recoverable amount exceeds its carrying amount.
c. The power to participate in the financial and c. Financing activities
operating policy decisions of an entity.
d. Not reported
d. The contractually agreed sharing of profits and losses
in an investee.
Entity A acquires 50% interest in a joint venture for ₱1M
and appropriately records the transaction under an
According to PFRS 5, gains and losses on investment account. At the end of the period, the joint
remeasurement of assets held for sale are * venture reports profit of ₱1M and makes a total
distribution of ₱600,000 to the owners. How much is
a. recognized in profit or loss.
the net effect of the transaction in Entity A’s profit or
b. recognized in other comprehensive income. loss for the current year? *

c. recognized only for impairment losses. a. ₱.5M

d. not recognized. b. ₱.3M

c. ₱.2M

According to PAS 36, when measuring an asset’s value d. 0

in use, the discount rate to be used in discounting the
estimated cash flows should be the *
An entity that presents its first PFRS financial
a. pre-tax rate that reflects current assessments of the
statements is referred to under PFRS 1 as a *
time value of money and risks.
a. first-timer.
b. post-tax rate that reflects current assessments of the
time value of money and risks. b. first-time adopter.

c. pre-tax rate that reflects current assessments of c. PFRS novice.

market-based risks for similar replacement assets.
d. first-time PFRSer.
d. post-tax rate that reflects current assessments of
According to PAS 37, provisions are (choose the
market-based risks for similar replacement assets.
incorrect statement) *

a. presented in the statement of financial position

PAS 24 requires the disclosure of key management separately from other types of liabilities.
personnel compensation. Which of the following is not
b. recognized and disclosed.
included in this disclosure? *
c. necessarily estimated because their settlement
a. short-term employee benefits
amount is not certain.
b. termination benefits
d. disclosed only, unless their expected occurrence is
c. share-based payment remote.

d. reimbursements of officers’ out-of-pocket expenses

The date to transition to PFRSs is *

Entity A acquires equipment by issuing shares of stocks. a. the beginning of the earliest period for which an
How should Entity A report the transaction in the entity presents full comparative information under
statement of cash flows? * PFRSs in its first PFRS financial statements.

a. Operating activities

b. Investing activities
b. the end of the earliest period for which an entity c. Agricultural produce is harvested product from a
presents full comparative information under PFRSs in its biological asset before any processing.
first PFRS financial statements.
d. PAS 41 is used to account for both consumable and
c. the beginning of the first PFRS reporting period. bearer plants.

d. the end of the first PFRS reporting period.

Which of the following statements is true regarding the

accounting treatment of costs to sell under PFRS 5? *
Which of the following is considered an inventory rather
than an agricultural produce at the point of harvest? * a. Costs to sell are added to the fair value when
determining the measurement basis for an asset held
a. Harvested cotton
for sale.
b. Harvested cane
b. Costs to sell are never discounted because held for
c. Tea sale assets should be sold within one year.

d. Picked leave c. Costs to sell are discounted if it is expected that the

sale will be made beyond one year.

d. a and c
Exploration and evaluation assets are exploration and
evaluation expenditures recognized as *

a. assets in accordance with the entity’s accounting Under PFRS 1, the early application of PFRSs that have
policy. not yet become effective as of the current reporting
period *
b. expenses in accordance with applicable PFRSs.
a. is required.
c. assets in accordance with (a) above, subject to the
limitations provided under PAS 8 Accounting Policies, b. is permitted, but not required.
Changes in Accounting Estimates and Errors.
c. is required, but not permitted.
d. any of these
d. is prohibited.

According to PAS 36, if an asset’s fair value less disposal

Elizabeth, a public limited company, has granted 100
costs cannot be determined, its recoverable amount
share appreciation rights to each of its 1,000 employees
would be its *
in January 20X4. The management feels that as of
a. carrying amount. December 31, 20X4, 90% of the awards will vest on
December 31, 20X6. The fair value of each share
b. replacement cost. appreciation right on December 31, 20X4, is P10. What
c. value in use. is the fair value of the liability to be recorded in the
financial statements for the year ended December 31,
d. current cost. 20X4? *

a. P300,000
Which of the following statements is incorrect regarding b. P10 million
the accounting for biological assets? *
c. P100,000
a. Agricultural land used in growing agricultural produce
can never qualify for recognition as biological asset. d. P90,000

b. biological asset is living animal or plant.

The distinguishing characteristic that identifies an
investment property from the other assets of an entity
According to PAS 37, a present obligation that is
is *
possible and can be measured reliably is *
a. changes in fair value of the asset is recognized in
a. recognized.
profit or loss.
b. recognized and disclosed.
b. the property does not derive cash flows separate
from the other assets of the entity. c. disclosed only.
c. it generates separately identifiable cash flows from d. ignored.
the other assets of the entity.

d. it earns rental as part of the ordinary operations of

the entity.
If plotted on a graph (X-axis: time; Y-axis: ₱), the
depreciation charges under the straight-line method
Exploration and evaluation assets are initially measured would show *
at *
a. a straight-line.
a. cost.
b. an upward line sloping to the right.
b. revalued amount.
c. a downward line sloping to the left.
c. fair value.
d. a curvilinear line sloping here and there.
d. a or b

On January 1, 20x1, ABC Co. acquired 60% interest in

Many shares and most share options are not traded in XYZ, Inc. for ₱2,000,000 cash. ABC Co. incurred
an active market. Therefore, it is often difficult to arrive transaction costs of ₱100,000 in the business
at a fair value of the equity instruments being issued. combination. ABC Co. elected to measure NCI at the
Which of the following option valuation techniques NCI’s proportionate share in XYZ, Inc.’s identifiable net
should not be used as a measure of fair value in the first assets. The fair values of XYZ’s identifiable assets and
instance? * liabilities at the acquisition date were ₱6,000,000 and
₱3,500,000, respectively. How much is the goodwill
a. Black-Scholes model.
(gain on a bargain purchase)? *
b. Binomial model.
a. 500,000
c. Monte-Carlo model.
b. 478,000
d. Intrinsic value.
c. (500,000)

d. (478,000)
The essential elements of an intangible asset do not
include *
According to PAS 34, measurements in the interim
a. identifiability.
period are made on *
b. probable outflow of resources embodying economic
a. a discrete basis.
benefits.
b. a year-to-date basis.
c. control.
c. an item-by-item basis.
d. future economic benefits.
d. a or b, as matter of accounting policy choice. d. a, b or c, whichever is most appropriate

Pas 8 Entity A changes its inventory cost formula from FIFO to

weighted average. How should Entity A account for this
According to P'AS 8, in the absence of a PFRS that
change?
specifical deals with a transaction, management shall

a. refer to the concepts under the Conceptual

Framework. b. adopt the provisions of the US GAAP. a. by retrospective restatement, as a change in
accounting policy
C. use its judgment in developing and applying an
accounting policy that results in information that is b. by prospective application, as a change in accounting
relevant and reliable. estimate

d. consider the applicability of relevant accounting c. by retrospective application, as a change in

literature. accounting policy

d. as a correction of prior period error

According to PAS 8, a change in accounting policy is

accounted for
Pas 12
a. using a transitional provision, if any.
If it is probable that recovery or settlement of a carry
b. retrospectively. amount of an asset or liability will make future tax
payment larger than they would be if such recovery or
c. prospectively, if retrospective application is
settlement were to have no tax consequences, an entity
impracticable.
shall recognize a
d. a, b or c, whichever is most appropriate

a. deferred tax asset.

This refers to applying a new accounting policy
b. deferred tax liability.
transactions, other events and conditions as if that
policy always been applied. c. a or b

A. Retrospective application d. neither a nor b

B. Prospective application

C. Retrospective restatement These are consequences. differences that do not have

future tax
D. Impracticable application
a. Permanent differences

c. Taxable differences
According to PAS 8, a change in accounting estimate is
accounted for b. Temporary differences

d. Deductible differences

a. using a transitional provision, if any.

b. retrospectively. This type of difference will give rise to deferred tax

asset.
c. prospectively.
a. Taxable temporary difference
b. Deductible temporary difference accrue at the end of the current year for unused
entitlements?
c. Permanent difference
a. 0
d. No difference
b. 75.600

c, 90, 000
Income computed using PFRSs is P100,000 while income
computed using tax laws is P80,000. The P20,000 d, 94,500
difference is a
[(20 employees x 1 day x 12 months) - 150 days] x
a. Taxable temporary difference P1,000 x 105% = 94,500.

b. Deductible temporary difference Under its post-employment benefit plan, Entity A agrees
to make annual contributions of P500,000 to a
c. Permanent difference
retirement fund. When an employee retires, he or she is
d. No difference entitled to a lump sum payment and monthly pension
payments to be determined based on the level of
contributions and the investment performance of the
During the period, deferred tax assets increase by 500 fund.
while deferred tax liabilities increase by P600. The net
change of 100 is a
In 20x1, due to cash flow problems, Entity A was only
able to contribute half of the agreed contributions. In
a. deferred tax expense 20x2, Entity A contributed P900,000 to the fund. How
much retirement benefit expenses should Entity A
b. deferred tax income recognize in 20x1 and 20x2, respectively?
c. deferred tax liability A. 200k and 900k
d. deferred tax B. 200k and 500k

C. 500k and 600k

D. 500k and 500k

Pas 19

Pas 20
Entity A has 20 employees who are each entitled to one Non-monetary grants are measured at
day paid vacation leave for each month of service
rendered. Unused vacation leaves are carried forward a. the fair value of the non-monetary asset.
and can be used in future periods if the current period's b. nominal amount.
entitlement is not used in full. Moreover, employees are
entitled to a cash payment for unused entitlement c. the amount of cash received or receivable.
when they leave the entity. All the employees have
d. a or b
rendered service throughout the current year and have
taken a total of 150 days of vacation leaves. The
average daily rate of the employees in the current
Pas 32
period is P1,000. However, a 5% increase in the rate is
expected to take into effect in the following year. Based A contract that will be settled by the entity (receiving
on Entity A's past experience, the average annual or) delivering a fixed number of its own equity
employee turnover rate is 20%. How much will Entity A instruments in exchange for a fixed amount of cash or
another financial asset is most likely to be classified by a. Entity A reacquires its own shares for P10,000. The
the issuer as shares were originally issued for $4,000. Entity A
recognizes a loss of P6,000.

b. Gains and losses arising from a financial liability are

a. a financial liability
recognized in directly in equity.
b. an equity instrument
c. Entity A declares dividends. Entity A will recognize the
c. A or B amount of the dividends as expense in profit or loss.

d. Neither a nor b d. Entity A settles a liability with carrying mount of

P100,000 for P85,000. This transaction results to a
P15,000 gain that is recognized in profit or loss.
Which of the following is classified as an equity
instrument rather than a financial liability?
PAS 37
a. Preference shares that are mandatorily redeemable
According to PAS 37, a provision is
b. A contract that is settled by the delivery of a variable
number of the entity's own equity instruments in a. a present obligation that cannot be measured
exchange for a fixed amount of cash or another financial reliably.
asset.
b. a possible obligation that arises from past events.
c. A contract that is settled by the delivery of a fixed
c. a liability of uncertain timing or amount.
number of the entity's own equity instruments in
exchange for a variable amount of cash or another d. all of these
financial asset.

d. Shares issued but were subsequently reacquired.

According to PAS 37, contingent liabilities are

a. recognized and disclosed.

Entity A issues convertible bonds with face amount of
b. always disclosed.
$2,000,000 for $2,600,000. Each 1,000 bond is
convertible into 10 shares with par value of 60 per c. disclosed only, if their expected occurrence is
share. On issuance date, the bonds are selling at 102 probable.
without the conversion option. What is the value
allocated to the equity component on initial d. not disclosed if their expected occurrence is remote.
recognition?

Which of the following statements is correct?

a. 2,040,000 a. A provision is recognized only when it represents a
b. 560,000 present obligation.

c. 540,000 b. An event or transaction that meets both the

"probable outflow of economic benefits" and "reliable
d. 460,000 measurement" criteria is always recognized.

c. A contingent asset that is possible is ignored.

Treasury shares, Interest, Dividends, Losses and Gains d. A contingent liability that is possible is ignored.
Which of the following statement is correct?

Pas 38
On January 1, 20x1, Entity A registers a patent for a to a. Land held for long-term capital appreciation rather
registration and legal costs of P600,000. Entity A than for short-term sale in the ordinary course of
estimates that the patent has a remaining useful life of business
25 years. How much is the carrying amount of the
b. Land held for a currently undetermined future use.
patent on December 31, 20x1? 1
c. A building owned by the entity (or held by the entity
under a lease) and leased out under one or more
a. 576,000 operating leases.

b. 570,000 d. Property that is leased to another entity under a

finance lease
c. 564,000

d. 580,000
According to PAS 40, an investment property is
Legal life of patent is maximum of 20 years
measured as follows:
600,000/20=30k
a. cost Cost Model or Fair value Model
600k-30k=570k
b. cost Cost Model

c. fair value Fair value Model

If it is not clear whether an expenditure is research or a
d. fair value Cost Model of Fair value Model
development cost, it is treated as a (an)

a. research cost.
Derecognition of investment property is not required
b. development cost.
when
c. regular expense.
a. it becomes the subject of an operating lease.
d. ignored.
b. it is sold.

C. it is assessed to have no future economic benefits.

d. it becomes the subject of a finance lease.

PAS 40
PAS 41
Which of the following assets may be classified as
Which of the following is outside the scope of PAS 41?
investment property?
a. dairy cattle used in the production of milk
a. Land held for long-term capital appreciation
b. chickens used in the production of meat
b. Fuipment held for lease
C. rice plants and other crops that produce agricultural
c. Intangible asset held for lease
products only once
d. Building held for lease
d. mango trees and other plants that produce
e. a and d only agricultural products repeatedly over a long period of
time

2. Which of the following is not classified as investment

property? Which of the following is considered a biological asset?
a. Carcass a. joint operation.

b. Ham b. jointly controlled asset.

c. Pig c. joint venture.

d. Piggy bank d. none of these

3. Which of the following is considered an agricultural Read Co. and Learn Co. are publishers of textbooks.
produce? Read and Learn enters into a contract to put up a
bookstore which shall be named Knowledge Bookstore.
a. fruit cocktail
Knowledge will have its own assets, incur its own
b. fruit tree liabilities, and earn and incur its own revenues and
expenses. Read and Learn will each have a 50% interest
c. picked or harvested fruit in the net assets and profits of Knowledge. The
d. dried fruit arrangement between Read and Learn is most likely a

a. joint operation.

According to PAS 41, biological assets are measured as b. jointly controlled net assets.
follows: c. joint venture.
a. initial: fair value less cost to sell and Subsequent: fair d. none of these
value less cost to sell
PAS 12

Which of the following is outside the scope of PFRS 12?

5. Which of the following statements is correct
regarding the measurement of assets related to a. Investment in associate
agricultural activities?
b. Investment in subsidiary
a. Biological assets are initially and subsequently
c. Investment in joint venture
measured at fair value.
d. Held for trading securities

2. According to PFRS 12, interest in another entity refers

b. No gain or loss can arise on the initial recognition of a
to
biological asset.
a. contractual and non-contractual involvement that
C Agricultural produce is initially and subsequently
exposes an entity to variability of returns from the
measured at fair value less costs to sell.
performance of another entity.
d The gain or loss arising from the initial measurement
b. a typical customer-supplier relationship.
of biological asset or agricultural produce is recognized
in profit or loss c. interests that give the holder control over an
investee.
PFRS 11
d. all of these
Read Co. and Learn Co. are national distributors of
textbooks. Read and Write enters into a contract to
acquire a warehouse in a particular region. Each party
PFRS 13
will use the warehouse to store its own inventories. The
parties agree to share in the costs of acquiring and According to PFRS 13, what is the best evidence of fair
maintaining the warehouse. The arrangement between value of an asset?
Read and Learn is most likely a
 d. change its accounting policy to start recognizing
regulatory deferral account balances.
a. Its quoted price in active market, if one exists.

b. A price determined based on observable data,

maximizing the use of external data. According to PFRS 14, regulatory deferral accounts are
classified in the statement of financial position as
c. Its estimated value determined using management's
estimation. a. current items.

d. The present value of future cash flows to be derived b. noncurrent items.

from the asset.
c. a or b

d. neither a nor b
Which of the following statements is incorrect regarding
PFRS 15
the inputs that can be used to measure fair value?
Arrange the following steps of revenue recognition in
I. Level I inputs are the most reliable fair value
accordance with PFRS 15.
measurements and Level III inputs are the least reliable.
I. Identify the performance obligations in the contract
II. Level III measurements are quoted prices in active
markets for identical assets or liabilities. II. Recognize revenue when (or as) the entity satisfies a
performance obligation
III. A fair value measurement based on management
assumptions only (no market data) would not be III. Determine the transaction price
acceptable under current standards.
IV. Identify the contract with the customer
IV. The level in the fair value hierarchy of a fair value
measurement is determined by the level of the highest V. Allocate the transaction price to the performance
level significant inpu obligations in the contract *

a. I only. a. IV, I, V, III, II

b. I, II and IV. b. IV, I, III, V, II

c. II, III and IV. c. III, IV, I, V, II

d. I, II, III and IV. d. IV, III, I, V, II

PFRS 16

Pas 14 On January 1, 2021, Entity A leases out an equipment to

Entity B. Information on the lease is as follows: Lease
term - 3 years; Gross Investment in the lease is 502,500;
Interest rate implicit in the lease is 10%. The lease
When a first-time adopter chooses to apply PFRS 14, it
provides for the transfer of ownership of the equipment
is required to
to the lessee at the end of the lease term. The PV of
a. derecognize the regulatory deferral account balances ordinary annuity of P1 @ 10%, n = 3 is 2.48685. How
that it has recognized under its previous GAAP. much is the unearned interest income? (round your
final answer to whole number. Example (189,767)
b. change its accounting policy and account for
regulatory deferral account balances in accordance with ANSWER 85,953
the recognition and measurement principles of PFRS 14.
Solution:
C. continue to apply its previous GAAP to account for its
Gross Investment = Lease Payments + Unguaranteed
regulatory deferral account balances.
residual value
502,500 = Lease Payments s + 0 b. policyholder pays the issuer for the transfer of risk

Lease Payments = 502,500 c. issuer indemnifies the policyholder for losses when
the insured event occurs
Lease payments = Fixed Lease payment x Lease term
d. transfer of significant insurance risk from the issuer
502,500 Fixed Lease payment x 3
to the policyholder
Fixed Lease payment = 502,500/3

Fixed Lease payment = 167,500

Under the general model of PFRS 17, a group of
Fixed Lease payment x PV of ordinary annuity Net insurance contracts is initially measured at
Investment 67, 500 * 2.48685 = 416, 547
a. the fulfillment cash flows.
Gross Investment - Net Investment = Unearned Interest
b. the contractual service margin.
Income
c. a or b, as an accounting policy choice
502,500 - 416,547 = 85,953
d. sum of a and b

According to PFRS 17, an insurance contract is not

derecognized when
On January 1, 2021, Entity A leases out an equipment to
a. it is extinguished.
Entity B. Information on the lease is as follows: Lease
term - 3 years; Gross Investment in the lease is 502,500; b. it has expired.
Interest rate implicit in the lease is 10%. The lease
c. its terms have been modified and the modification is
provides for the transfer of ownership of the equipment
substantive.
to the lessee at the end of the lease term. The PV of
ordinary annuity of P1 @ 10%, n=3 is 2.48685. What is d. its terms have been modified and the modification is
the amount of fixed lease payments? not substantive.
ANSWER = 167,500

Solution:

Gross Investment = Lease Payments + Unguaranteed

residual value

502,500 = Lease Payments + 0 Lease Payments =

502,500

Lease payments = Fixed Lease payment x Lease term

502,500 = Fixed Lease payment x 3 Fixed Lease payment
= 502,500/3

Fixes Lease payment = 167,500

PFRS 17

Which of the following is not one of the characteristics

of an insurance contract?

a. transfer of significant insurance risk from the

policyholder to the issuer