11. Which statement is true when an imprest petty cash fund is used?

a. The balance of the petty cash fund should be reported in the statement of financial position as a
long-term investment.
b. The petty cashier's summary of petty cash payments serves a journal entry that is posted as a long-
term investment.
c. The reimbursement of the petty cash fund should be credited to the cash account.
d. Entries that include a credit to the cash account should be recorded at the time the payments from the petty cash
fund are made.
12. If the cash balance in the bank statement is less than the correct cash balance and neither the entity
nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity
b. Outstanding checks
c. Deposits in transit
d. Bank charges not yet recorded by the entity
13. If the cash balance shown in the accounting records is less than the correct cash balance and neither
the entity nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity
b. Deposit in transit
c. Outstanding checks
d. Bank charges not yet recorded by the entity
14. Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in the
depositor's records and to identify bank errors. Adjustments on the part of the depositor should be
recorded for
a. Bank errors, outstanding checks and deposits in transit.
b. All items except bank errors, outstanding checks and deposits in transit.
c. Book errors, bank errors, deposits in transit and outstanding checks.
d. Outstanding checks and deposits in transit.
15. Bank statements provide information about all, of the following, except
a. Checks cleared during the period
b. NSF checks
c. Bank charges for the period
d. Errors made by the depositor
16. The ideal measure of short-term notes receivable is the discounted value of cash to be received in the
future. Failure to follow this practice usually does not make the statement of financial position
misleading because
a. Most short-term notes receivable are noninterest bearing.
b. The allowance for uncollectible accounts includes a discount element.
c. The amount of the discount is not material.
d. Most notes receivable can be sold to a bank or factor.
17. Of the approaches to record rash discounts related to accounts receivable, which is more theoretically
correct?
a. Net approach
b. Gross approach
c. Allowance approach
d. All tree approaches are theoretically correct.
18. All of the following are problems associated with the valuation of accounts receivable, except
a. Uncollectible accounts
b. Returns
c. Cash discounts under the net method
d. Allowances granted
19. Which statement is true about estimating doubtful accounts?
a. A method of estimating doubtful accounts that focuses on the income statement rather than
the statement if financial position is the allowance method based on credits sales.
b. A method of estimating doubtful accounts that emphasizes asset valuation rather than
income measurement is the allowance method based on aging accounts receivable.
c. Estimation of uncollectible accounts based on percentage of sales emphasizes bad debt
expense.
d. All of these statements are true about estimating doubtful accounts.
20. Which of the following is a generally accepted method of determining the amount of the adjustment
to bad debt expense?
a. A percentage of sales adjusted for the balance in the allowance
b. A percentage of sales not adjusted for the balance in the allowance
c. A percentage of accounts receivable not adjusted for the balance in the allowance
d. An amount derived from aging accounts receivable and not adjusted for the balance in the
allowance
21. Which method of determining annual bad debt expense best achieves the matching concept?
a. Percentage of sales
b. Percentage of ending accounts receivable
c. Percentage of average accounts receivable
d. Direct writeoff
22. Which is not permitted in accounting for uncollectible accounts receivable?
a. Percentage of accounts receivable using allowance method
b. Percentage of sales using allowance method
c. Direct writeoff method
d. All of the choices are acceptable
23. The advantage of relating an entity's bad debt expense to outstanding accounts receivable is that this
approach
a. Gives a reasonably correct statement of accounts receivable in the statement of financial position.
b. Best relates bad debt expense to the period of sale.
c. Is the only generally accepted method for valuing accounts receivable.
d. Makes estimates of uncollectible accounts unnecessary.
24. Which concept relates to the allowance method in accounting for accounts receivable?
a. Bad debt expense is an estimate dial is based on historical and prospective information.
b. Bad debt expense is based on the actual amounts determined to be uncollectible.
c. Bad debt expense is an estimate that is based only on an aging of accounts receivable
d. Bad debt expense is management's determination of which accounts will be sent to the
attorney for collection.
25. Which method of determining bad debt expense does „fit properly match expense and revenue?
a. Charging bad debts with a percentage of sales under the allowance method.
b. Charging bad debts using a percentage of accounts receivable under the allowance method..
c. Charging bad debts using accounts receivable under the allowance method.
d. Charging bad debts as accounts are written off as uncollectible.
26. Why is the allowance method preferred over the direct writeoff method of accounting for bad debts?
a. Allowance method is used for tax purposes
b. Estimates are used
c. Determining worthless accounts under writeoff method is difficult to do
d. Improved matching of bad debt expense with revenue.
27. An entity uses the allowance method for recognizing doubtful accounts. The entry to record the
writeoff of a specific uncollectible account
a. Affects neither net income nor working capital
b. Affects neither net income nor accounts receivable
c. Decreases both net income and working capital
d. Decreases both net income and accounts receivable
28. When the direct writeoff method is used, the entry to write off a specific customer account would
a. Increase net income
b. Have no effect on net income
c. Increase both accounts receivable and net income
d. Decrease both accounts receivable and net income
29. When the allowance method of recognizing had debt expense is used, the entries at the time of collection of
an account previously written off would
a. Decrease the allowance for doubtful accounts
b. Increase net income
c. Have no effect on the allowance for doubtful accounts
d. Have no effect on net income
30. Why would an entity sell accounts receivable to another entity?
a. To improve the quality of its credit granting process
b. To limit its legal liability
c. To accelerate access to amounts collected
d. To comply with customer agreement
31. All but one are required before a transfer of receivables can be recorded as a sale.
a. The transferred receivables are beyond the reach of the transferor and its creditors.
b. The transferor has not kept effective control over the transferred receivables through a repurchase
agreement
c. The transferor maintains condoning involvement
d. The transferee can pledge or sell the transferred receivables
32. Accounts receivable hypothecated against borrowings should be
a. Disclosed in the notes
b. Excluded from the total receivables, with disclosure
c. Excluded from the total receivables, with no disclosure
d. Excluded from the total receivables and a gain or loss is recognized.
33. Which of the following is treated as a sale of accounts receivable?
a. Factoring without recourse in exchange for cash
b. Pledging accounts receivable in exchange for a loan
c. Assignment of accounts receivable
d. Discounting without recourse
34. Which statement is true when accounts receivable are factored without recourse?
a. The transaction may be accounted for either as a secured borrowing or as a sale.
b. The accounts are used as collateral for a promissory note issued to the factor.
c. The factor assumes the risk of collectability and absorbs any credit losses in collecting
the accounts receivable.
d. The financing cost should be recognized ratably over the collection period.
35. When an entity factored accounts receivable without recourse with a bank, the transaction is best
described as
a. Bank loan collateralized by the accounts receivable.
b. Bank loan to be repaid by the proceeds from the accounts retained by the entity.
c. Sale of the accounts receivable to the bank, with risk of uncollectible accounts retained by the
entity.
d. Sale of the accounts receivable to the bank, with the risk of uncollectible accounts transferred
to the bank.
36. If financial assets are exchanged for cash and other consideration but the transfer does not meet the
criteria for a sale, the transaction should be accounted for as
a. Secured borrowing
b. Pledge of collateral
c. Both secured borrowing and pledge of collateral
d. Neither secured borrowing nor pledge of collateral
37. Accounting for the imputed interest on a noninterest bearing note receivable is an example of what
aspect of accounting theory?
a. Matching.
b. Verifiability
c. Substance over form
d. Accounting entity
38. What is imputed interest?
a. Interest based on state interest rate
b. Interest based on implicit interest rate
c. Interest based on average interest rate
d. Interest rate based on bank prime rate
39. A note receivable bearing a reasonable interest rate is sold to a bank with recourse. At the
date of the discounting transaction, the note receivable discounted account should be
a. Decreased by the proceeds from the discounting transaction
b. Increased by the proceeds from the discounting transaction
c. Increased by the face amount of the note
d. Decreased by the face amount of the note
40. Notes receivable discounted with recourse should be
a. Included in total receivables with disclosure of contingent liability
b. Included in total receivables without disclosure of contingent liability
c. Excluded from total receivables with disclosure of contingent liability
d. Excluded from total receivables without disclosure of contingent liability
41. Inventories are assets defused by all of the following, except
a. Held for sale in the ordinary course of business
b. In the process of production for such sale
c. In the form of materials or supplies to be consumed in the production process or the rendering
of services
d. Used in the production or supply of goods and services for administrative purposes
42. Entities must allocate the cost of all goods available le for sale between
a. The cost of goods on hand at the beginning and the cost of goods acquired during the period.
b. The cost of goods on hand at the end and the cost of goods acquired during the period.
c. The income statement and the statement of financial position
d. All of the choices are correct.
43. Why are inventories included in the computation of net income?
a. To determine cost of goods sold
b. To determine sales revenue
c. To determine merchandise returns
d. Inventories are not included in the computation of net income
44. When inventory is misstated, its presentation lacks
a. Relevance
b. Faithful representation
c. Comparability
d. All of the choices are correct
45. Which of the following costs should not be included as part of the cost inventory?
a. Abnormal freight
b. Import duties
c. Conversion costs
d. All of the choices are included as part of the cost of inventory.
46. When allocating costs to inventory produced for the period, fixed overhead should be based u pon
a. The actual use of production facilities.
b. The normal capacity of production facilities
c. The highest production levels in the last three periods.
d. The lowest production levels in the last three periods
47. How should unallocated fixed overhead costs be treated?
a. Allocated to finished goods and cost of goods sold
b. Allocated to raw materials, goods in process and finished goods.
c. Recognized as an expense in the period when incurred.
d. Allocated to goods in process, finished goods and cost of goods sold.
48. Variable production overheads are allocated to each unit of production on the basis of
a. Normal capacity of the production facilities
b. Actual use of the production facilities
c. Either the normal capacity or the actual use of production facilities, whichever is
appropriate
d. Neither the normal capacity nor the actual use of production facilities
49. Theoretically, cash discounts permitted on purchased raw materials should be
a. Added to other income, whether taken or not
b. Added to other income, only if taken
c. Deducted from inventory, whether taken or not
d. Deducted from inventory, only if taken
50. Which of the following generally would not be separately accounted for in the computation of cost of goods
sold?
a. Trade discounts applicable to purchases
b. Cash discounts taken
c. Purchase returns and allowances
d. Cost of transportation for merchandise purchased
51. The use of purchase discount account implies that the recorded cost of a purchased inventory is
a. Invoice price
b. Invoice price plus purchase discount lost
c. Invoice price plus purchase discount taken
d. Invoice price less purchase discount allowable whether taken or not
52. The use of discount lost account implies that the recorded cost of an inventory is
a. Invoice price
b. Invoice price plus the purchase discount lost
c. Invoice price less the purchase discount taken
d. Invoice price less the purchase discount allowable whether taken or not

53. When a portion of inventory has been pledged as security on a loan

a. The value of the portion pledged should be subtracted from the debt.
b. An equal amount of retained earnings should be appropriated.
c. The fact should be disclosed but the amount of current assets should not be affected.
d. The cost of the pledged inventory should be transferred from current to noncurrent asset.
54. If a material amount of inventory has been ordered through a formal purchase contact at the statement of
financial position dale for future delivery at firm prices
a. This fact must be disclosed.
b. Disclosure is required only if prices have declined since the date of the order.
c. Disclosure is required only if prices have since risen substantially.
d. An appropriation of retained earnings is necessary.
55. The credit balance that arises when a loss on purchase commitment is recognized should be
a. Presented as a current liability
b. Subtracted from ending inventory
c. Presented as an appropriation of retained earnings
d. Presented in the income statement
56. The cost of inventories that are not ordinarily interchangeable and goods produced and segregated for
specific projects shall be measured using specific identification method. Which is the reason why the
specific identification method may be considered ideal?
a. The potential for manipulation of income is reduced.
b. There is no arbitrary allocation of cost.
c. The cost flow matches the physical flow.
d. It is applicable to all types of inventory.
57. Which of the following is likely to be a circumstance where the specific identification criteria can be met?
a. Unit per price is low.
b. Inventory turnover is low.
c. Inventory quantities are large.
d. All of the choices are circumstances where the criteria are likely to be met.
58. Which method of inventor, pricing best approximates specific identification of the actual flow of costs and
units in most manufacturing situations?
a. Average cost.
b. First-in, first-out
c. Moving average
d. Weighted average
59. In a period of rising prices, the inventory method which tends to give the highest net income is
a. Moving average
b. First-in, first-out
c. Specific identifications
d. Weighted average
60. The pricing of issues tram inventory must be deferred until the end of the accounting period under which of
the following method of inventory valuation?
a. Moving average
b. Weighted average
c. Specific identification
d. FIFO
61. Why are inventories measured at lower of cost and net realizable value?
a. To report a loss when there is a decrease in the future utility.
b. To be conservative.
c. To report a loss when there is a decrease in the future utility below the original cost.
d. To permit future profit to be recognized.
62. Which statement is true about the LCNRV method of measuring inventory?
a. The LCNRV is always either the net realizable value or cost
b. The LCNRV gives the lowest valuation if applied to individual items of inventory.
c. When the cost of goods sold method is used to record inventory at net realizable value, the NRV
is substituted for cost and the loss is buried in the cost of goods sold.
d. All of these statements are true about LCNRV method.
63. Which statement is true regarding inventory writedown and recovery of writedown?
a. Recovery of inventory writedown is prohibited under IFRS.
b. IFRS requires separate reporting of reversal of inventory writedown.
c. IFRS requires entities to record writedown in a separate loss account.
d. All of the choices are true.
64. Commodity broker-traders
a. Produce or raise commodities such as rice, com or precious metals.
b. Hold inventory primarily to sell the commodities in the near term and generate a profit from
price fluctuation.
c. Value inventories at LCNRV.
d. All of the choices are correct regarding broker-traders.
65. Situations in which net realizable value is used to value inventory include
a. Agricultural produce
b. Minerals and mineral products
c. Commodities held by broker-traders
d. All of these are measured at net realizable value
66. Which of the following is a characteristic of a perpetual inventory system?
a. Inventory purchases are debited to a purchases account.
b. Inventory records are not kept for every item
c. Cost of goods sold is recorded each time a sale is made.
d. Cost of goods sold is determined as the amount of purchases less the change in inventory.
67. When the FIFO inventory cost flow method is used, a perpetual inventory system would
a. Not be permitted
b. Result in a higher ending inventory than a periodic inventory system
c. Result in the same ending inventory as a periodic inventory system
d. Result in a lower ending invent, than a periodic inventory system
68. When the conventional retail inventory method is used, a markdowns are commonly ignored in the
computation of the cost to retail ratio because
a. There may be no markdowns in a given year.
b. This tends to give a better approximation of the lower of cost and net realizable value.
c. Markups are also ignored.
d. This tends to result M the showing of a normal profit margin in a period when no markdown
goods have been sold.
69. Which of the following is not a reason the retail inventory method is used widely?
a. As a control measure in determining inventory shortages
b. For insurance information
c. To permit the computation of net income without a physical count of inventory
d. To defer income tax liability
70. What condition is not necessary when using the retail inventory method?
a. A record of total cost of goods sold for the period
b. A record of total cost and retail value of goods purchased
c. A record of total cost and retail value of goods available for sale
d. A record of sales for the period
71. The use of the gross profit method assumes
a. The amount of gross profit is the same as in prior years.
b. Sales and cost of goods sold have not changed from previous years.
c. Inventory value has not increased from previous years.
d. The relationship between selling price and cost of goods sold is similar in prior years.
72. How is the gross profit method used as it relates to inventory valuation?
a. Verify the accuracy of the perpetual inventory records.
b. Verity the accuracy of the physical inventory.
c. To estimate cost of goods sold.
d. To provide an inventory value under LIFO.
PAS 41 – AGRICULTURE

73. Biological assets

a. Are found only in Biotech entities.
b. Are living animals or living plants and must be .disclosed as a separate line item in the statement
of financial position
c. Must be valued at cost
d. Do not generally have future economic benefits
74. Agricultural activity includes all of the following, except
a. Raising livestock
b. Annual perennial cropping
c. Floriculture and aquaculture, including fishing
d. Ocean fishing
75. All of the following must be satisfied before a biological asset can be recognized, except
a. The entity controls the asset as a result of past event.
b. It is probable that future economic benefits relating to the asset will flow to the entity.
c. An active market for the asset exists.
d. The fair value or cost of the asset can be measured reliably.
76. Which statement is true about biological assets?
a. Biological assets are measured at fair value less cost of disposal.
b. When fair value cannot be determined reliably, the biological asset shall be measured at cost less
accumulated depreciation and impairment loss.
c. Where there is production cycle of more than one year for biological asset, separate disclosure is
encouraged for physical change and price change
d. All of these statements are true about biological assets.
77. A bearer plant is a living plant that
a. Is used in the production or supply of agricultural produce.
b. Is used to bear produce for more than one period
c. Has a remote likelihood of being sold as agricultural produce, except for scrap sales.
d. Must possess all of these characteristics.
78. All of the following can be considered bearer plant, except
a. Coconut tree
b. Grape tree
c. Rubber tree
d. Tree in a forest plantation to be harvested and sold as log or lumber
79. A living plant with a dual use is classified as
a. Bearer plant
b. Biological asset
c. Investment property
d. Inventory
80. Agricultural produce as it grows on bearer plant is measured at the end each reporting period prior to harvest
at
a. Fair value
b. Fair value less cost of disposal
c. Fair value plus cost of disposal
d. Fair value less cost of disposal at the point of harvest
81. Agricultural produce harvested from better plant is accounted for as inventory and measured at
a. Fair value less cost of disposal at the point of harvest
b. Historical cost of the harvest
c. Historical cost less impairment
d. Market value
82. Under IFRS, bearer plants are accounted for as
a. Biological assets with disclosure
b. Biological assets without disclosure
c. Property, plant and equipment
d. Noncurrent investment
83. Under IFRS, bearer animals are accounted for as
a. Biological assets
b. Property, plant and equipment
c. Investment property
d. Agricultural produce
84. Animals related to recreational activities are accounted for under what standard?
a. IAS 41 — Agriculture
b. IAS 16 — Property, plant and equipment
c. IAS 40 — Investment property
d. Either IAS 41 or IAS 16
85. Land that is related to agricultural activity is measured
a. At fair value
b. At fair value in combination with the biological asset that is being grown on the land.
c. At the resale value separate from the biological asset that is being grown on the land.
d. In accordance with IAS 16 Property, plant and equipment or IAS 40 Investment property.

END