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KEZIA, CPA | 1
FATHER SATURNINO URIOS UNIVERSITY
FINANCIAL ACCOUNTING AND REPORTING
REVIEW MATERIAL #5
d. Other asset 28. What is the interest rate written on the face of the bond?
19. Which of the following is the proper way to report a a. Coupon rate
probable contingent asset? b. Nominal rate
a. As an asset c. Stated rate
b. As deferred revenue d. Coupon rate, nominal rate, stated rate
c. As a disclosure only 29. What is the rate of interest actually incurred?
d. No disclosure or accrual required a. Market rate
20. Which is the proper way to report a contingent asset, b. Yield rate
receipt of which is virtually certain? c. Effective rate
a. As an asset d. Market, yield or effective rate
b. As unearned revenue 30. It is a contract in which the unavoidable costs of meeting
c. As a disclosure only the obligations under the contract exceed the economic
d. No disclosure only benefits to be received under the contract
21. It is an event that create a legal or constructive obligation a. Onerous contract
because the entity has no other realistic alternative but to b. Executory contract
settle the obligation c. Executed contract
a. Event after reporting period d. Sale contract
b. Adjusting event 31. The unavoidable costs under an onerous contract
c. Nonadjusting event represent the least net cost of exiting from the contract
d. Obligating event which is equal to the
22. Where there is a continuous range of possible outcomes a. Cost of fulfilling the contract
and each point in that range is as likely as any other, the b. Penalty arising from failure to fulfil the contract
range to be used is the c. Lower of cost fulfilling the contract or the
a. Minimum penalty from failure to fulfil the contract
b. Maximum d. Higher of cost fulfilling the contract or the
c. Midpoint penalty from failure to fulfil the contract
d. Summation of the minimum and maximum 32. A structured program that is planned and controlled by the
23. When the provision involves a large population of items, management that materially changes the scope of a
the best estimate of the amount business or the manner in which that business in
a. Reflects the weighting of all possible outcomes conducted
by their associated probabilities a. Restructuring
b. Is determined as the individual most likely b. Liquidation
outcome c. Recapitalization
c. Is the individual most likely outcome adjusted for d. Corporate revamp
the effect of other possible outcomes 33. Events that qualify as restructuring include all of the
d. Midpoint of the possible outcomes following, except
24. When the provision arises from a single obligation, the a. Sale or termination of business
best estimate of the amount b. Closure of business location or relocation of
a. Reflects the weighing of all possible outcomes by business from one location to another
their associated probabilities c. Change in management structure such as
b. Is determined as the individual most likely elimination of a layer of management
outcome d. Fundamental reorganization that has an
c. Is the individual most likely outcome adjusted immaterial and insignificant impact on
for the effect of other possible outcomes operations
d. Midpoint of the possible outcomes 34. Which is a cost of restructuring?
25. Which statement is incorrect where some or all of the a. Cost of retraining or relocating continuing staff
expenditure required to settle a provision is expected to be b. Marketing or advertising cost
reimbursed by another party? c. Investment in new system and distribution
a. The reimbursement shall be recognized only network
when it is virtually certain that the d. Cost if relocating business activities from one
reimbursement would be received if the entity location to another
settles the obligation 35. A bond convertible by the holder into a fixed number of
b. The amount of the reimbursement shall not ordinary shares of the entity is
exceed the amount of the provision a. A compound financial instrument
c. The expense relating to the provision may be b. A primary financial instrument
presented net of the reimbursement c. A derivative financial instrument
d. The reimbursement shall not be treated as a d. An equity
separate asset and therefore netted against the 36. A compound financial instrument shall be classified as
estimated liability for the provision a. Financial liability
b. Equity
26. After initial recognition, bonds payable shall be measured c. Either financial liability or equity based on
at predominant characteristics
a. Amortized cost using the effective interest method d. Separately as financial liability and equity
b. Fair value through profit or loss 37. How are the proceeds from issuing a compound
c. Either amortized cost using the effective interest instrument allocated between the liability and equity
method or fair value through other comprehensive component?
income a. First, the liability component is measured at fair
d. Either amortized cost using the effective interest value, and then the remainder of the proceeds
method or fair value through profit or loss is allocated to the equity component
27. The amortized cost of bonds payable means b. The proceeds are allocated to the liability and
a. Face amount plus premium on bonds payable equity based on relative fair value
b. Face amount minus discount on bonds payable c. The proceeds are allocated to the liability and
c. Face amount minus bond issue cost equity based on carrying amount
d. Face amount plus premium on bonds payable, d. The proceeds are not allocated because the
minus discount on bonds payable and minus bond compound instrument is accounted for either as
issue cost liability or equity
KEZIA, CPA | 2
FATHER SATURNINO URIOS UNIVERSITY
FINANCIAL ACCOUNTING AND REPORTING
REVIEW MATERIAL #5
38. These instruments provide the holder with the contractual d. Date of commitment to the provision of the
right to receive payments on account of interest at fixed lease
dates extending into the indefinite future, either with a 49. Which of the following dates is used to identify the
right or no right to a return of principal inception of the lease?
a. Perpetual debt instruments a. The date of the lease agreement
b. Compound financial instruments b. The date of the commitment by the parties to
c. Derivative financial instruments the principal provisions of the lease
d. Financial instruments c. The earlier of the date of the lease agreement
39. The proceeds from the sale of a bond will be equal to and the date of commitment by the parties to
a. The face amount of the bond the principal provisions of the lease
b. The present value of the face amount of the d. The later of the date of the lease agreement and
bond plus the present value of the interest the date of commitment by the parties to the
payments principal provisions of the lease
c. The face amount of the bond plus the present 50. Which of the following statements is correct regarding the
value of the interest payments lease capitalization criteria?
d. The sum of the face amount of the bond and the a. The lease transfers ownership of the underlying
periodic interest payments asset to the lessor
40. Which is true when the effective interest method of b. The lease contains a purchase option
amortizing bond discount is used? c. The lease term is equal to at least 75% of the
a. Interest expense varies from period to period economic life of the underlying asset
b. Interest expense remains constant for each d. The lease payments are at least 90% of the fair
period value of the underlying asset
c. Interest expense increases each period 51. All of the following would normally lead to a finance lease,
d. The interest rate decreases each period except
41. Under the effective interest amortization, the periodic a. The lease transfers ownership of the asset to the
interest expense us equal to lessee at the end of the lease term
a. The stated rate of interest multiplied by the face b. The lessee has the option to purchase the asset
value of the bonds at a price that is expected to be approximately
b. The market rate of interest multiplied by the face equal to the fair value at exercise date
value of the bonds c. The lease term is for a major part of the
c. The stated rate multiplied by the beginning economic life of the asset even if the title is not
carrying amount of bonds payable transferred
d. The market rate multiplied by the beginning d. The present value of the minimum lease
carrying amount of bonds payable payments amounts to at least substantially all
42. Bearer bonds are of the fair value of the asset at the inception
a. Bonds for which the owners names are not date of the lease
registered with the issuer 52. All of the following could lead to a finance lease, except
b. Bonds that are unsecured a. The leased asset is of specialized nature such
c. Bonds that pay no interest unless the issuer is that only the lessee can use it without major
profitable modifications
d. High-risks and high-yield issued by heavily b. If the lessee cancels the lease, the lessors losses
indebted or weak entities associated with the cancelation are borne by the
43. Under IFRS, a lessee is required to recognize lessee
a. Right of use asset and lease liability c. Gains and losses from the fluctuation in the fair
b. Right of use asset only value of the residual fall to the lessee
c. Lease liability only d. The lessee has the ability to continue the lease
d. Right of use asset and sometimes a lease liability for a secondary period at a rent which is
44. The lessee may apply the operating lease model under substantially the same as the market rent
a. Short term lease 53. The lessee shall recognize a finance lease as asset and
b. Low value lease liability at an amount equal to the
c. Both short term lease and low value lease a. Fair value at the leased asset
d. Under all circumstances b. Present value of the minimum lease payments
45. The right of use asset is reported as c. Fair value of the leased asset or present value
a. Noncurrent as separate line item of the minimum lease payments, whichever is
b. PPE lower
c. Intangible asset d. Fair value of the leased asset or present value of
d. Investment property the minimum lease payments, whichever is
46. The accounting concept that is principally used to classify higher
leases into operating and finance is 54. It is that portion of the lease payments that is not fixed in
a. Substance over form amount but is based in the future amount of a factor that
b. Prudence changes other than the passage of time
c. Neutrality a. Contingent rent
d. Completeness b. Executory cost
47. It is a contract that transfers substantially all the risks and c. Bargain purchase option
rewards incidental to ownership of an asset, although title d. Accrued rent
may or may not eventually be transferred 55. The minimum lease payments include all of the following,
a. Lease except
b. Finance lease a. Rental payments over the lease term
c. Operating lease b. Any amount guaranteed by the lessee or by a
d. Lease purchase party related to the lessee
48. It is the date on which the lessee is entitled to exercise its c. Payment required to exercise an option on the
right to use the leased asset part of the lessee to purchase the asset at a price
a. Inception of the lease which is expected to be sufficiently lower than
b. Commencement of the lease the fair value at the exercise date
c. Date of lease agreement d. Costs for services and taxes to be paid by and
reimbursed to the lessor
KEZIA, CPA | 3
FATHER SATURNINO URIOS UNIVERSITY
FINANCIAL ACCOUNTING AND REPORTING
REVIEW MATERIAL #5
56. It is that portion of the residual value of the leased asset, d. Fair value of the leased asset or present value of
the realization of which by the lessor is not assured or is the minimum lease payments accruing to the
guaranteed solely by a party related to the lessor lessor, whichever is higher
a. Residual value 65. Lease payments under an operating lease shall be
b. Guaranteed residual value recognized as expense using the
c. Unguaranteed residual value a. Cash method
d. Minimum lease payment b. Sum of years digits method
57. Initial direct cost incurred by the lessee in a finance lease c. Declining balance method
are d. Straight line method, unless another systematic
a. Expensed immediately basis is representative of the time pattern of
b. Added to the amount recognized as an asset the users benefit
c. Added to the finance lease liability 66. Initial direct costs incurred by a lessor in an operating lease
d. Charged to retained earnings should be
58. A lessee with a finance lease containing a bargain purchase a. Added to the carrying amount of the leased
option should be depreciate the leased asset over the asset and recognized as expense over the lease
a. Assets remaining economic life term in the same basis as lease income
b. Term of the lease b. Expensed immediately
c. Life of the asset or the term of the lease, c. Capitalized as cost of the leased asset and
whichever is shorter depreciated over the life of the asset
d. Life of the asset or the term of the lease, d. Capitalized as cost of the leased asset and
whichever is longer depreciated over the lease term
59. A cancellable lease is deemed noncancelable under all of 67. It is the net profit or loss for a period before deducting tax
the following conditions, except expense
a. The lease can be cancelled only upon the a. Accounting profit
occurrence of a remote contingency b. Taxable profit
b. The lease can be cancelled without the c. Gross profit
permission of the lessor d. Net profit
c. The lessee, upon cancelation, enters into a new 68. It is the profit for a period determined in accordance with
lease for the same or an equivalent asset with the rules established by taxation authorities upon which
the same lessor income taxes are payable
d. The lease can be cancelled only upon payment of a. Accounting profit
a penalty if such magnitude that the lessee shall b. Taxable profit
be discourage from cancelling the lease c. Net profit
60. Initial direct costs incurred by a lessor in a sales type lease d. Accounting profit before tax
are 69. It is the amount of income taxes payable in respect of
a. Charged to unearned income in the first period taxable profit
of the lease term a. Current tax expense
b. Charged to expense immediately when the b. Tax expense
selling profit is recognized c. Deferred tax expense
c. Deferred and allocated over the lease term in d. Deferred tax benefit
proportion to the recognition of rent revenue 70. It is the aggregate amount included in the determination
d. Deferred and allocated over the lease term on a of profit or loss for a period in respect of current tax and
straight line basis deferred tax
61. Under a sales type lease, what is the meaning of gross a. Tax expense
investment in the lease? b. Current tax expense
a. Present value of minimum lease payments c. Deferred tax expense
b. Present value of minimum lease payments and d. Deferred tax benefit
unguaranteed residual value 71. It is the amount attributed to an asset or liability for tax
c. Absolute amount if the minimum lease payment purposes
d. Aggregate if minimum lease payments and a. Carrying amount
unguaranteed residual value b. Tax base
62. Lessors shall recognized asset held under a finance lease as c. Measurement
a receivable at an amount equal to d. Taxable amount
a. Gross investment in the lease 72. It is the income tax payable on future periods in respect of
b. Net investment in the lease taxable temporary differences
c. Gross rentals a. Deferred tax liability
d. Residual value, whether guaranteed or b. Deferred tax asset
unguaranteed c. Current tax liability
63. The interest rate implicit in the lease is the discount rate d. Current tax asset
that causes the aggregate of the present value of the 73. Deferred tax asset is the amount of income tax recoverable
minimum lease payments and the unguaranteed residual in future periods in respect of
value to equal the a. Deductible temporary differences only
a. Fair value of the leased asset b. Permanent differences
b. Fair value of the leased asset and initial direct c. Carryforward of unused tax losses
cost of the lessor d. Deductible temporary differences and carryforward
c. Fair value of the leased asset and initial direct of unused tax losses
cost to the lessee 74. A deferred tax asset shall be recognized when
d. Gross investment in the lease a. It is probable that taxable income will be available
64. The sales revenue recognized at the commencement of against which the deferred tax asset can be used
the lease by a manufacturer or dealer lessor is equal to the b. It is probable that accounting income will be available
a. Fair value of the leased asset against which the deferred tax asset can be used
b. Present value of the minimum lease payments c. It is possible that accounting income will be available
accruing to the lessor against which the deferred tax asset can be used
c. Fair value of the leased asset or present value d. It is possible that taxable income will be available
of the minimum lease payments accruing to the against which the deferred tax asset can be used
lessor, whichever is lower
KEZIA, CPA | 4
FATHER SATURNINO URIOS UNIVERSITY
FINANCIAL ACCOUNTING AND REPORTING
REVIEW MATERIAL #5
75. An entity shall offset a deferred tax asset and deferred tax
liability
a. When the deferred tax asset and deferred tax liability
relate to income taxes levied by the same taxing
authority
b. When the entity has a legal enforceable right to offset
a current tax asset against a current tax liability
c. When the deferred tax asset and deferred tax
liability relate income taxes levied by the same
taxing authority and the entity has a legal
enforceable right to offset a current tax asset against
current tax liability
d. Under all circumstances
76. Initial direct costs incurred by a lessor in an operating lease
should be
e. Added to the carrying amount of the leased asset
and recognized as expense over the lease term in the
same basis as lease income
f. Expensed immediately
g. Capitalized as cost of the leased asset and
depreciated over the life of the asset
h. Capitalized as cost of the leased asset and
depreciated over the lease term
77. Which is correct about deferred tax assets and liabilities?
a. Current deferred tax assets are netted against current
deferred tax liabilities
b. All noncurrent deferred tax assets are netted against
noncurrent deferred tax liabilities
c. Deferred tax assets are never netted against deferred
tax liabilities
d. Deferred tax assets are netted against deferred tax
liabilities if the relate to the same tax authority
78. Justification for the method of determining periodic
deferred tax expense is based on the concept of
a. Matching of periodic expense to periodic revenue
b. Objectivity in the calculation of periodic expense
c. Recognition of asset and liability
d. Consistency of tax expense measurement with actual
tax planning strategies
KEZIA, CPA | 5