1.

Property, plant and equipment are defined as

a.Tangible assets held to earn rentals or for capital appreciation.
b.Tangible assets expected to be used more than one period.
c.Tangible assets held for sale in the ordinary course of business.
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 ne reporting period.

2. Which of the following is not a characteristic of property, plant, and equipment?

a.The property, plant and equipment are expected to be used over a period of more than one year.
b.The property, plant and equipment are tangible assets.
c.The property, plant and equipment are subject to depreciation.
d.The property, plant and equipment are used in business operations

3. Which of the following can be classified as property, plant and equipment?

     I.        Land held for an undetermined use.
   II.        Land held for future plant site.
 III.        Building held for sale in the ordinary course of business.
  IV.        Equipment used in the production of goods.
    V.        Major spare parts
a.II, III, IV and V
b.II and IV
c.I and III
d.II, IV and V

4. Which of the following forms part of the initial cost of property, plant and equipment?
a.Import duties and non-refundable purchase taxes
b.Cost directly attributable to bringing the asset to the location and condition necessary for it to operate in the
manner intended by the management.
c.Purchase price
d.All these forms part of the initial cost of property, plant, and equipment.

5. Which of the following may not form part of property, plant and equipment’s directly attributable costs?
a.Installation and assembly costs
b.Maintenance costs
c.Handling costs
d.Testing costs

6. Property, plant and equipment are presented under which section of the statement of financial position?
a.equity
b.other assets
c.non-current assets
d.current assets
7. Which of the following should be expensed outright instead of capitalizing as part of the property, plant
and equipment’s cost?
a.Relocation cost as part of the company’s operation
b.All options should be expensed outright
c.Cost of opening new facility
d.Advertising costs

8. An entity purchased a property under a deferred payment contract. The agreement was to pay P500, 000
at the time of purchase and P100, 000 at the end of each year for the next five years. The property is
initially measured at
a.P500, 000
b.P1, 000, 000
c.P500, 000 plus the present value of P100,000 annuity for five years at an imputed rate.
d.P1,000, 000 plus imputed interest

9. A property can also be acquired through issuance of bonds. Which of the following is not to be considered
in valuing the property acquired through issuance of bonds?
a.Fair value of the bonds payable.
b.Fair value of the property received.
c.Carrying value of the asset received.
d.Face amount of the bonds payable.

10. Which of the following asset exchanges has a commercial substance?

a.Asset exchange with a differential in future cash flows.
b.Asset exchange with no impact in future cash flows.
c.Asset exchange between companies in the same industry.
d.Asset exchange that keeps the entities in substantially the same financial position.

11. An item of PPE acquired in an exchange with commercial substance is measured at the
a.Fair value of asset given up plus cash paid or minus cash received.
b.Fair value of asset given up.
c.Fair value of asset received plus cash paid or minus cash received.
d.Fair value of asset given up minus cash paid or plus cash received.

12. An item of PPE acquired in an exchange with no commercial substance is measured at the
a.Carrying value of asset given up plus cash paid or minus cash received.
b.Carrying value of asset received.
c.Carrying value of asset given up.
d.Carrying value of asset given up minus cash paid or plus cash received.

13. Which of the following is capitalizable to land account?

a.Escrow fees
b.Land survey costs
c.Unpaid taxes up to the date of acquisition assumed by the buyer
d.All options are chargeable to land

14. Which of the following costs is not capitalizable as cost of land?

a.Real property taxes after date of acquisition.
b.Fees for registration and transfer of title.
c.Legal fees and other costs for establishing clean title.
d.Special assessments.

15. Which of the following statements most accurately explains the term depreciation?
a.The deletion of an asset from the statement of financial position.
b.The systematic distribution of an asset’s cost less residual value across its useful life.
c.The amount by which an asset’s carrying value exceeds its recoverable value.
d.The amount by which an asset’s recoverable value exceeds its carrying value.

16. Which of the following statements about depreciation is correct?

a.An asset’s complete cost must be depreciated at some point.
b.A depreciable asset must be depreciated from the date of purchase.
c.The annual depreciation charge must be the same every year.
d.Depreciation is not recognized if the carrying amount of an asset is less than its residual value.

17. All of the following factors are considered in determining the useful life of an asset, except
 
a.residual value.
b.technical obsolescence.
c.expected physical wear and tear.
d.expected usage of the asset.

18. Which of the following is true?

a.An entity shall choose between cost model or revaluation model in valuing its PPE on the initial recognition phase,
such accounting policy should be applied to entire class of PPE.
b.An entity shall choose between cost model or revaluation model in valuing its PPE subsequent to its recognition,
such accounting policy-should be applied to entire class of PPE.
c.An entity shall choose between cost model or revaluation model in valuing it PPE subsequent to its recognition,
such accounting policy should be applied to individual class of PPE.
d.An independent third party shall choose between cost model or revaluation model in valuing the PPE of another
company subsequent to its recognition, such accounting policy should be applied to entire class of PPE.

19. Which word best illustrates the elimination of property, plant and equipment’s carrying amount from the
statement of financial position?
a.derecognition
b.impairment
c.write-off
d.depreciation

20. When do we remove the carrying amount of property, plant and equipment from the financial statements?
a.When no further economic benefits are foreseen from the utilization of the asset.
b.Upon disposal of the PPE.
c.At the time of acquisition of the asset.
d.At the time of disposal and when no further economic benefits are foreseen from the asset’s use.

21. Which of the following is an example of employee benefits?

a.All of the above
b.Free or subsidized goods and services
c.Termination benefits
d.Disability benefits

22. The benefits, other than termination benefits, which are payable within twelve months period from the end
of the year in which employee has provided the services are termed as
a.short-term employee benefits.
b.post—employment benefits.
c.other long-term employee benefits.
d.termination benefits.

23. If the payment of employees’ compensation for future absences is probable, the amount can be reasonably
estimated and the obligation relates to rights that accumulate, the compensation should be
a.accrued if attributable to employees’ services not yet rendered.
b.recognized only when actually paid.
c.accrued if attributable to employees’ services whether already rendered or not.
d.accrued if attributable to employees’ services already rendered.
24. Which of the following statements is/are correct about employee benefits?
a.All of these statements are correct about employee benefits.
b.Employee benefits are recognized as expense when employees have rendered services, except to the extent that the
employee benefits form part of the cost of another asset.
c.Any short-term benefits paid in advance shall be recognized as an asset to the extent, that it will lead to a reduction
in future payments or a cash refund.
d.Any unpaid short-term benefits at the end of the reporting period shall be recognized as accrued expense.

25. These are entitlements to compensate or paid absences that are carried forward and can be used in future
periods and the employees are entitled to a cash payment for unused entitlement upon leaving the entity-
employer.
a.Non-accumulating and non-vesting
b.Accumulating and vesting
c.Non-accumulating and vesting
d.Accumulating and non-vesting

26. These are entitlements to compensated or paid absences that are not carried forward in future periods.
a.non-vesting
b.vesting
c.non-accumulating
d.accumulating

27. The benefits which are payable after the formal retirement of an employee are termed a
a.Other long-term employee benefits
b.Short-term employee benefits
c.Post-employment benefits
d.Termination benefits

28. Established by the employer to provide benefits to one or more employees after the formal retirement are
termed as
a.post-employment benefit plan
b.termination benefits
c.post-employment benefits
d.pension fund.

29. Under this plan, both the employer and the employee share in the retirement benefit cost.
a.Contributory plan
b.Unfunded plan
c.Funded plan
d.Non-contributory plan

30. The benefits which are payable as a result of termination of employee’s employment either because of
entity’s decision to terminate the employee or employee’s own decision to accept termination in return for
certain benefits.
a.Other long-term employee benefits
b.Short-term employee benefits
c.Termination benefits
d.Post-employment benefits

31. Which of the following gives an accurate definition of government grants under PAS 20?
a.It pertains to assistance by government in the form of transfer of resources to an entity in return for part or future
compliance with certain conditions relating to the operating activities of the entity.
b.It pertains to assistance to government in the form of transfer of resources by an entity in return for part or future
compliance with absolutely no condition relating to the operating activities of the entity.
c.It pertains to assistance to government in the form of transfer of resources by an entity in return for part or future
compliance with certain conditions relating to the operating activities of the entity.
d.It pertains to assistance by government in the form of transfer of resources to an entity in return for part or future
compliance with absolutely no condition relating to the operating activities of the entity.
Question 2
32. Which of the following is the most accurate?
a.Government grants, including nonmonetary grant at fair value, shall be recognized when there is reasonable
assurance that the grant will be received.
b.Government grants, including nonmonetary grant at fair value, shall be recognized when there is reasonable
assurance that the entity will comply with the conditions attaching to the grant and the grant will be received.
c.Government grants, including nonmonetary grant at fair value, shall be recognized when there is reasonable
assurance that the entity will comply with the conditions attaching to the grant or the grant will be received.
d.Government grants, including nonmonetary grant at fair value, shall be recognized when there is reasonable
assurance that the entity will comply with the conditions attaching to the grant.

33. The grant in recognition of specific expenses shall be

a.recognized as income shorter than the period of the related expenses.
b.recognized as income in excess of the period of the related expenses.
c.Not be recognized as income.
d.recognized as income over the period of the related expenses.

34. If a grant is awarded to an entity to perform an obligation which is to purchase a depreciable asset, which
of the following is true?
a.Income is recognized immediately when the grant is received.
b.Income is recognized based on the deferred income divided by the useful life of the depreciable asset.
c.Income is recognized immediately when the asset is purchased.
d.Income is recognized proportionate to the amount of depreciation incurred annually.

35. How much income should be recognized in the year when an entity received a financial support in the form of a
government grant with no further related cost?
a.Equal to the amount received.
b.Depends on the conditions stated by the donor.
c.No income should be recognized in this case.
d.Equal to the half of the amount received.

36. Government grant related to non-depreciable asset that requires fulfillment of certain conditions
a.should be recognized as income immediately.
b.should not be recognized as income.
c.should be recognized as income over the periods which bear the cost of meeting the conditions.
d.should be recognized as income over a fixed period of 25 years.

37. A government grant that becomes receivable as compensation for expenses or losses already incurred or
for the purpose of giving immediate financial support to the entity with no future related costs
a.is recognized directly in the retained earnings of the period in which it becomes receivable.
b.is recognized in the equity of the period in which it becomes receivable.
c.is recognized in profit or loss of the period in which it becomes receivable.
d.is recognized in other comprehensive income of the period in which it becomes receivable.
38. In the case of grant related to an asset, which of the following accounting treatment is prescribed?
a.Record the grant at a nominal value in the first year and write it off in the subsequent year.
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.Record the grant at fair value in the first year and take it to income in the subsequent year.
d.Either set up the grant as deferred income or deduct it in arriving at the carrying amount of the asset.

39. In the case of grant related to income, which of the following accounting treatment is prescribed?
a.Either set up the grant as deferred income or deduct it in arriving at the carrying amount of the asset.
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 OCI.
d.Record the grant at fair value in the first year and take it to income in the subsequent year.

40. The repayment of government grant is treated as

a.change in accounting policy.
b.change in accounting cycle.
c.change of heart.
d.change in accounting estimate.

41. Government grants

a.includes the form of grants which cannot reasonably have a value placed upon them.
b.excludes the form of grants which cannot reasonably have a value placed upon them.
c.given in return for favor that is unconstitutional.
d.assistance provided by a government of another country.

42. Which of the following is the correct definition of borrowing costs in accordance with IAS 23 Borrowing
Costs?
a.Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.
b.Borrowing costs are interest costs computed under the nominal interest method.
c.Borrowing costs are interest costs that an entity incurs in connection with the borrowing of funds.
d.Borrowing costs are interest costs computed under the effective interest method.

43. Borrowing costs include which of the following?

     I.        Interest expense calculated using the effective interest method.
   II.        Interest in respect of finance lease liabilities.
 III.        Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an
adjustment to interest costs.
  IV.        Cost of equity.
a.III and IV
b.I, II and III
c.I and II
d.I, II, III, and IV

44. Which of the following statements is true concerning the capitalization of borrowing costs?
     I.        Borrowing costs that are directly attributable to a qualifying asset shall be capitalized as part of the cost of that
asset.
   II.        Borrowing costs that are not directly attributable to a qualifying asset shall be capitalized as part of the cost of
that asset.
 III.        Borrowing costs that are directly attributable toa a qualifying asset shall be expensed as incurred.
  IV.        Borrowing costs that are not directly attributable to a qualifying asset shall be capitalized as part of the cost of
that asset shall be expensed as incurred.
    V.        Borrowing costs, whether or not directly attributable to a qualifying asset, shall be capitalized as part of the
cost of that asset.
  VI.        Borrowing costs, whether or not directly attributable to a qualifying asset, shall be expensed as incurred.
a.II and III
b.V only
c.VI only
d.I and IV

45. Which of the following assets may be treated as a qualifying asset for the purpose of capitalizing
borrowing costs?
a.Investments in debt securities
b.Investment property
c.Investments in equity securities
d.Inventory that is manufactured in large quantities on a repetitive basis and takes a substantial period of time to get
ready for sale.

46. Which of the following may not be considered a qualifying asset?

a.A manufacturing plant that normally takes two years to construct.
b.A machine that will be purchased from a vendor.
c.All of these may be considered a qualifying asset.
d.A power generation facility that normally takes more than a year to construct.

47. If the qualifying asset is financed by specific borrowing, the capitalizable borrowing cost is equal to
a.zero.
b.actual borrowing cost incurred.
c.actual borrowing cost incurred up to the completion of the asset.
d.actual borrowing cost incurred up to the completion of the asset minus any investment income from the temporary
investment of the borrowing.

48. If the qualifying asset is financed by general borrowing, the capitalizable borrowing cost is equal to
a.actual borrowing cost incurred up to the completion of the asset minus any investment income from the temporary
investment of the borrowing.
b.total expenditures on the asset multiplied by a capitalization rate.
c.actual borrowing costs incurred.
d.average expenditures on the asset multiplied by a capitalization rate or actual borrowing cost incurred, whichever
is lower.

49. Capitalization of borrowing costs as part of the cost of a qualifying asset shall begin when the entity
a.undertakes activities that are necessary to prepare the asset for its intended use or sale.
b.All of these conditions must be met.
c.incurs borrowing costs.
d.incurs expenditures for the asset.

50. Which of the following statements concerning the suspension of capitalization of borrowing costs is true?
a.Capitalization of borrowing costs can be suspended when a temporary delay is a necessary part of the process of
getting an asset ready for its intended use or sale, depending on the circumstances.
b.Capitalization of borrowing costs may be suspended, depending on the accounting policy of the entity.
c.Capitalization of borrowing costs shall never be suspended.
d.Capitalization of borrowing costs shall be suspended during extended period in which active development of a
qualifying asset is suspended.

51. Capitalization of borrowing costs shall cease when

a.the asset is abandoned or dispose.
b.no further interest is being incurred.
c.all the activities necessary to prepare the qualifying asset for its intended use or sale are substantially complete.
d.in no case capitalization of borrowing costs shall cease.

52. Which of the following best describes that two parties are related for purposes of PAS 24?
a.One party is larger than the other.
b.The parties are a parent and a subsidiary.
c.One party is in the private sector and the other is a government regulatory body.
d.One party has the ability to affect the financial and operating decisions of the other party through control,
significant influence or joint control.

53. Which of the following is not a required disclosure under PAS 24?
a.Key management personnel compensation.
b.Related party transactions (in the separate financial statements)
c.Relationships between parents and subsidiaries.
d.Related party transactions (in the consolidated financial statements)

54. According to PAS 24, related party disclosures are necessary

a.
because related party transactions may have resulted to assets and liabilities that were recognized in the financial
statements of the reporting entity.
b.
to indicate the possibility that an entity’s financial position and performance might have been affected by the existence of
such relationship.
c.
to notify users of financial statements of the fact that related party transactions may not have been made on arm’s length
basis.
d.
order to eliminate or minimize the effects of related party transactions on the financial statements of the reporting entity.

55. What is the overriding consideration when determining the existence of a related party relationship?
a.The presence of relationship either by consanguinity or affinity.
b.The presence of a significant interest by one party over the other.
c.The ability of one party to affect decisions of another party regarding relevant activities through the existence of
control, joint control or significant influence.
d.The presence of significant business transactions and economic dependence between the parties.

56. What method of accounting is used to account for investments in associate?

a.Consolidation method.
b.Equity method
c.Cost method
d.Fair value method

57. According to the equity method, an investor recognizes its share of earnings in the period in which
a.the investor disposes the investment in its associate.
b.the investee pays dividends.
c.the investee declares dividends.
d.the investee reports its earnings for the period.

58. An investor uses the equity method to account for its investment in ordinary shares. Which of the following
is the correct accounting for cash dividends receive from the investee?
a.Cash dividends received shall be recorded as dividend income.
b.Cash dividends received shall be recorded as a deduction from the shareholders’ equity of the investor.
c.Cash dividends received shall be recorded as a deduction from the investment account of the investor.
d.Cash dividends received shall be recorded as a deduction from the investor’s share of the investee’s earnings.

59. An investor shall discontinue the use of the equity method when
a.the investor ceases to have control over the associate.
b.the investor ceases to have significant influence over the associate.
c.the associate operates under severe long-term restrictions.
d.the investor disposes partial holdings of its investment in the associate.
60. Investments in associate are normally presented under
a.current assets.
b.non-current assets.
c.
short-term investments.
d.fixed assets.

61. According to PAS 28, significant influence is presumed to exist when the investor
a.Holds 10% or more of the voting power of the investee.
b.Has the ability to appoint a majority of the investee’s board of directors.
c.Holds 51% or more of the voting power of the investee.
d.Holds 20% or more of the voting power of the investee.

62. When an investment ceases to be an associate and is accounted for in accordance with IFRS 9, the fair
value of the investment at the date when it ceases to be an associate is regarded as
a.its cost on initial recognition as an investment.
b.its fair value on initial recognition as an investment.
c.its fair value on initial recognition as a financial asset.
d.its cost on initial recognition as a financial asset.

63. When the investor loses its significant influence over the associate, the investor shall recognize in profit or
loss any difference between
a.The carrying value of any retained interest, any proceeds from disposing of a part interest in the associate and the
carrying amount of the investment at the date the investor ceases to have significant influence over the associate.
b.The fair value of any retained interest and the carrying amount of the investment at the date the investor ceases to
have significant influence over the associate.
c.The fair value of any retained interest, any proceeds from disposing of a part interest in the associate and the
carrying amount of the investment at the date the investor ceases to have significant influence over the associate.
d.Any proceeds from disposing of a part interest in the associate and the carrying amount of the investment at the
date the investor ceases to have significant influence over the associate.

64. In cases where an associate has outstanding cumulative preference shares, the investor determines its share
of profit or loss
a.After adding dividends on preference shares whether declared or not.
b.After deducting dividends on preference shares whether declared or not.
c.After deducting dividends on preference shares only when declared.
d.Without regard for dividends on preference shares.

65. PAS 29 Financial Reporting in Hyperinflationary Economies applies only in case of

a.foreign operation.
b.deflation.
c.inflation.
d.hyperinflation.
66. According to PAS 29, which of the following are restated in case an entity’s functional currency is that of a
hyperinflationary economy?
a.Physical assets
b.Monetary items
c.Intangible assets
d.Nonmonetary items

67. Which of the following is within the scope of PAS 32?

a.Financial assets in the form of investments ins subsidiaries, associates and joint ventures.
b.Contracts for the delivery or receipt of commodity and other non-financial items that can be settled net in cash or
other financial assets.
c.Physical assets, such as inventories and PPE.
d.Liabilities arising from constructive obligations.

68. A contract that evidences a residual interest in the entity’s assets after deducting all of its liabilities is
classified as
a.a or b
b.a financial liability.
c.Neither a nor b
d.an equity instrument.

69. A contract that will be settled by the entity (receiving or) delivering a fixed number of its own equity
instruments in exchange for a fixed amount of cash or another financial asset is most likely to be classified
by the issuer as
a.Neither a nor b
b.a financial liability.
c.a or b
d.an equity instrument.

70. Which of the following is classified as an equity instrument rather than a financial liability?
a.A contract that is settled by the delivery of a fixed number of the entity’s own equity instruments in exchange for a
variable amount of cash or another financial asset.
b.A contract that is settled by the delivery of a variable number of the entity’s own equity instruments in exchange
for a fixed amount of cash or another financial asset.
c.Shares issued but were subsequently reacquired.
d.Preference shares that are mandatorily redeemable.