University of San Carlos

School of Business and Economics

Department of Accountancy

AC503 Long Quiz Wendell Ang, CPA

Theories

Instructions: The questionnaire has 14 pages. Do not ask me any questions. Choose the BEST
answer. Write your family name first. Good luck! (nx1)

1. Jairus was walking along memory lane when he saw the words Reliability and Relevance.
Which of these two is a fundamental qualitative characteristic of useful financial
information according to the conceptual framework?
a. Reliability c. Both a and b
b. Relevance d. Neither a and b
2. Mirzi’s Corporation paid for the services it incurred in 2015 on 2016. When will the
entity record a decrease of liabilities based on such transaction?
a. 2015 c. Never
b. 2016 d. Both in a and b
3. In a discussion between Vaechell, Khecia, Francis and Lyka, several statements were
said. Which of these statements is incorrect?
a. Vaechell, with conviction, exclaimed that the enhancing qualitative characteristics
may be dispensed with and the financial information would still be useful.
b. Khecia stated that the enhancing qualitative characteristics of useful
financial information according to the conceptual framework are
verifiability, consistency, understandability and timeliness.
c. Francis interjected that verifiability helps assures users that information faithfully
represents the economic phenomena it purports to represent.
d. Lyka explained that consistency refers to the use of the same methods for the
same items.
4. Statement 1: IAS 1 Presentation of Financial Statements mandates that an entity prepares
its financial statements using the accrual basis for all of its financial statements.
Statement 2: IAS 1 Presentation of Financial Statements allows an entity not to provide a
specific disclosure if it is immaterial, even if the disclosure is required by an IFRS.
a. 1 is true; 2 is true c. 1 is false; 2 is false
b. 1 is false; 2 is true d. 1 is true; 2 is false
5. When asked whether they could name an account that is not listed in IAS 1 as line items,
Alyssa replied “cash and cash equivalents”, John Robert answered “trade and other
receivables”, Shenna replied “bonds payable” and Chelsea anwered “trade and other
payables”. Which of them is correct?
a. Alyssa c. John Robert
b. Shenna d. Chelsea
6. Which one should never be classified as a current asset?
a. Deferred tax asset c. Inventory

1
 b. Property, plant and equipment d. Investment in bonds
7. Which one is needed so that an entity can recognize a financial liability?
a. When it is probable that the future economic benefits will flow to the entity
b. The amount at which the settlement will take place can be measured reliably
c. When an entity is not a party to the contractual provisions of the instrument
d. When it is possible that the future economic benefits will flow to the entity
8. Which one is the correct definition of a financial instrument?
a. It is any contract that gives rise to a financial asset of one entity and a financial
liability and equity instrument of another entity.
b. It is any contract that gives rise to a financial liability of one entity and a financial
asset or equity instrument of another entity.
c. It is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
d. It is any contract that gives rise to a financial liability of one entity and a financial
asset and equity instrument of another entity.
9. Which of the following may be classified as a financial asset at amortized cost?
a. A 5-year interest-bearing bond payable which the entity intends to sell in the near
future
b. A 3-year note payable which does not bear interest and the entity intends to hold
to maturity.
c. A 2-year note receivable which does not bear interest and the entity intends
to collect after 2 years.
d. A 10-year investment in bond which yield interest semi-annually that the entity
intends to use only as collateral of its payable.
10. Which one is a characteristic that will not qualify a financial asset to be classified as a
financial asset at fair value through other comprehensive income?
a. An equity instrument
b. A debt instrument
c. The intention is to hold the asset to collect the cash flows and sell the asset
d. The intention is to sell the asset
11. An entity has equity instruments which are not held for trading. How should these be
classified?
a. Financial Asset at fair value through profit and loss
b. Financial Asset at fair value through other comprehensive income
c. Financial Asset at amortized cost through profit and loss
d. Financial Asset at amortized cost through other comprehensive income
12. How are financial liabilities at fair value through profit and loss initially measured?
a. Fair Value
b. Fair Value and in some circumstances, adjusted by the transaction costs
c. Fair Value and adjusted by the transaction costs
d. Present Value
13. How are financial assets at fair value through other comprehensive income subsequently
measured?
a. Fair Value
b. Fair Value and in some circumstances, adjusted by the transaction costs
c. Fair Value and adjusted by the transaction costs

2
 d. Present Value
14. Where are changes in the fair value of a financial asset at amortized cost carried to?
a. Through profit and loss
b. Through other comprehensive income
c. Through total comprehensive income
d. They are not carried to income
15. A gold bar is properly classified as a(n):
a. Cash c. Other asset
b. Cash Equivalent d. Liability
16. In a bank reconciliation made by Josine Mae, the balance per bank was reconciled to the
balance per book ending with the latter. How should debit memos be treated in such a
bank reconciliation?
a. Added c. Ignored
b. Deducted d. It depends
17. When does the cash in bank account become a liability?
a. When it is legally restricted
b. When it is not legally restricted
c. When the withdrawals are greater than the deposits
d. When the deposits are greater than the withdrawals
18. Which account is to be debited when the entity makes a withdrawal from its bank
deposits?
a. Cash in Bank c. Withdrawals
b. Cash d. Finance Expense
19. Using the direct write-off method, which is an effect of collection of a previously written-
off account?
a. Decrease in a contra-asset account
b. Increase in a contra-asset account
c. Increase in an asset account
d. Decrease in an asset account
20. Jeremy entered into a finance arrangement with Ma. Erica. Ma. Erica pinpointed her
receivables from Anne Patricia and Nonito to secure the loan extended by Jeremy. What
type of arrangement was made by Jeremy and Ma. Erica?
a. Pledging c. Factoring
b. Assignment d. Discounting
21. Vienice granted a loan to Rodah. The interest received was lower than the interest income
recorded. Which of the following statements is correct?
a. Rodah paid proceeds of the loan greater than its face value.
b. Rodah paid proceeds of the loan less than its face value.
c. Vienice paid proceeds of the loan greater than its face value.
d. Vienice paid proceeds of the loan less than its face value.
22. Francis granted a loan to Jules. The interest received was greater than the interest income
recorded. Which of the following statements is correct?
a. The stated rate is greater than the market interest rate
b. The stated rate is less than the market interest rate
c. Jules paid proceeds of proceeds of the loan less than its face value.
d. Jules paid proceeds of proceeds of the loan greater than its face value.

3
23. Jude granted a loan to Martin. This was properly classified as financial asset at fair value
through other comprehensive income. The market rate was equal to the stated interest rate
but payment of direct origination costs and direct origination fees were agreed upon.
Which of the following is correct at initial recognition of the loan?
a. Jude will record an amount greater than the face value of the loan.
b. Jude will record an amount less than the face value of the loan.
c. Martin will record an amount greater than the face value of the loan.
d. Martin will record an amount less than the face value of the loan.
24. In June 30, 2015, Gwyneth bought bonds issued by Jerd from Stiffany. The bond
provides for annual payments of interest and principal every December 31. In December
31, 2015, who is entitled to receive the payment from the bond?
a. Gwyneth c. Jerd
b. Stiffany d. Half to Gwyneth and Half to Stiffany
25. When can an impairment loss on a loan that was restructured be recorded?
a. If the loss is less than 10% of the carrying amount of the loan
b. If the loss is at least 10% of the carrying amount of the loan
c. If the loss is greater than 10% of the carrying amount of the loan
d. At all times
26. What is assumed that the users of financial reports have of business and economic
activities for them to be able to understand such report?
a. Reasonable Knowledge c. Extraordinary Knowledge
b. Ordinary Diligence d. Ordinary Knowledge
27. Which is a noncurrent asset for an entity that has a normal operating cycle of 8 months?
a. Cash that is readily available to be withdrawn.
b. Inventory that is expected to be sold within 8 months after the reporting period.
c. Trade Receivables that are expected to be collected 15 months after the reporting
period.
d. All of the above are current assets.
28. A bank reconciliation is prepared monthly in order for the enterprise to
a. Arrive at the correct cash balance
b. Unearth any undetected cash fraud
c. Correct bank errors
d. Correct book errors
29. The effective interest method of amortizing discount provides for:
a. Increasing amortization and increasing interest income.
b. Increasing amortization and decreasing interest income.
c. Decreasing amortization and increasing interest income.
d. Decreasing amortization and decreasing interest income.
30. Which is not an item of other comprehensive income according to IAS 1?
a. Changes in Revaluation Surplus
b. Actuarial gains and losses on defined benefit plans
c. Gains and losses arising from translations of a foreign operation
d. All are items of other comprehensive income
31. Gebb was not able to record interest expense using the effective interest method. It
simply recorded as interest expense the interest it paid. Which of the following is correct
if the face value of the loan was less than the proceeds?

4
 a. Carrying amount of the loan is overstated; interest expense is understated
b. Carrying amount of the loan is overstated; interest expense is overstated
c. Carrying amount of the loan is understated; interest expense is understated
d. Carrying amount of the loan is understated; interest expense is overstated
32. Stock rights held by the shareholder are its financial assets. Which type of financial asset
is it?
a. cash
b. an equity instrument of another entity
c. a contractual right to receive cash or another financial asset from another entity
d. a contractual right to exchange financial assets or financial liabilities with another
entity under conditions that are potentially favorable to the entity
33. What are rights but not obligations given to bondholders to purchase a share of the
issuing corporation for a certain amount?
a. Share Warrants c. Put Options
b. Stock Rights d. Convertibility Features
34. How should a compound financial instrument be accounted for?
a. Equity c. Partly equity and partly liability
b. Asset d. Partly asset and partly equity
35. An entity recorded a large dividend at its fair value which is higher than its par value.
Which of the following is correct?
a. Shareholder’s Equity is understated; Ordinary Share Capital is understated
b. Shareholder’s Equity is overstated; Ordinary Share Capital is overstated
c. Shareholder’s Equity is correctly stated; Ordinary Share Capital is correctly
stated
d. None of the above is correct
36. What are shares that are originally issued at below par?
a. Watered Shares c. Below-par Shares
b. Treasury Shares d. Founder’s Shares
37. Which may not be accounted for as equity?
a. Share Dividends Distributable c. Subscriptions Receivable
b. Treasury Stock d. Additional paid-in capital
38. Rianne bought shares of Princess Corporation from Rochelle. If these shares do not grant
Rianne significant influence, control nor joint control, how should these shares be
subsequently measured?
a. Fair Value c. Equity Method
b. Amortized Cost d. Either a and b
39. Grazchelle bought shares of Judy Corporation from Claire Diane at a price above the par
value of the shares and above the fair value recorded by Claire Diane at her books on the
time of acquisition. If these shares do not grant Grazchelle significant influence, control
nor joint control, how much gain should Judy Corporation recognize from the transaction
between Grazchelle and Claire Diane?
a. It does not recognize any gain but rather it recognizes additional share premium.
b. It does not recognize any gain but it directly credits retained earnings for such
transaction.
c. It does not recognize any gain nor does it recognize anything in equity.
d. It will recognized gain at the amount in excess of the price given by Grazchelle

5
 from the fair value recorded by Claire Diane
40. Joan bought shares of Shane Corporation from Lino. The acquisition grants Joan the
power to participate and the power to govern the financial and operating policy decisions
of Shane Corporation. How should Joan treat Shane Corporation as?
a. As an associate c. Both as a and b
b. As a subsidiary d. Either as a and b, at her election
41. Christy-lyn and John Clyde owned shares of Jicaac Corporation. Christy-lyn owned 25%
of the shares of Jicaac Corporation. From the given above, which one is true?
a. Christy-lyn has significant influence.
b. John Clyde may have significant influence.
c. John Clyde owns 75% of Jicaac Corporation.
d. Christy-lyn does not have significant influence.
42. Should there be upstream and downstream transactions between the investor and
associate, how should they be treated in finding the investment income of the investor?
a. Upstream transactions should be eliminated but downstream transactions should
not be.
b. Downstream transactions should be eliminated but upstream transactions should
not be.
c. Both should not be eliminated.
d. Both should be eliminated.
43. Creschia Belle Corporation owned shares of Mitcherose Corporation that gives the
former significant influence. Dividends in arrears were declared by Creshia Belle
Corporation to its shareholders holding its cumulative preference shares. How should the
amount declared as dividends be treated in finding the investment income of the investor?
a. Ignored
b. Deducted for only one year’s worth of preference dividends
c. Added for the entire amount due to the preference dividends.
d. Deducted for the entire amount due to the preference dividends.
44. Which one is not part of the definition of a derivative?
a. A financial instrument or other contract within the scope of IFRS 9
b. its value changes in response to the change in the underlying
c. it requires no initial net investment or an initial net investment that is smaller than
would be required for other types of contracts that would be expected to have a
similar response to changes in market factors.
d. it is settled at a past or future date.
45. Company A, a listed company, has an obligation to deliver to Company B as many of
company A’s own ordinary shares as will equal P1,000,000. Company A’s financial
instrument will be classified as
a. Financial asset c. Equity instrument
b. Financial liability d. Compound financial instrument
46. Which statement is incorrect regarding convertible bonds?
a. The proceeds from issuance of convertible bonds must be allocated to the
liability and equity components pro rata based on fair values.
b. The equity component is not remeasured until the bond is either converted or
redeemed.
c. If the bond is converted, the remaining liability component is transferred to

6
 equity.
d. If the bond is not converted, the equity component remains in equity despite
redemption.
47. Which statement is incorrect regarding the recognition of losses in excess of investment?
a. If an investor's share of losses of an associate equals or exceeds its "interest in the
associate", the investor discontinues recognizing its share of further losses.
b. After the investor's interest is reduced to zero, additional losses are recognized by
a provision (liability) only to the extent that the investor has incurred legal or
constructive obligations or made payments on behalf of the associate.
c. If the associate subsequently reports profits, the investor resumes
recognizing its share of those profits immediately.
d. The "interest in an associate" is the carrying amount of the investment in the
associate under the equity method together with any long-term interests that, in
substance, form part of the investor's net investment in the associate.
48. When goodwill is acquired by an investor in an associate, the amortization of goodwill is:
a. spread evenly across the useful life of the investment;
b. not permitted;
c. included in the determination of the investor’s share of the associate’s profit or
loss;
d. included in the revaluation of the investment.
49. Which statement is incorrect regarding identification of significant influence?
a. A holding of 20% or more of the voting power (directly or through subsidiaries)
will indicate significant influence unless it can be clearly demonstrated otherwise.
b. If the holding is less than 20%, the investor will be presumed not to have
significant influence unless such influence can be clearly demonstrated.
c. Potential voting rights are a factor to be considered in deciding whether
significant influence exists.
d. A substantial or majority ownership by another investor does necessarily
preclude an investor from having significant influence.
50. The term used for bonds that are unsecured as to principal is
a. junk bonds c. indebenture bonds
b. debenture bonds d. callable bonds
51. The covenants and other terms of the agreement between the issuer of bonds and the
lender are set forth in the
a. bond indenture c. registered bond
b. bond debenture d. bond coupon
52. The rate of interest actually incurred by bondholders is called the
a. stated rate c. effective rate
b. yield rate d. effective, yield, or market rate
53. If bonds are initially sold at a discount and the straight-line method of amortization is
used, interest expense in the earlier years will
a. exceed what it would have been had the effective interest method of
amortization been used.
b. be less than what it would have been had the effective interest method of
amortization been used.
c. be the same as what it would have been had the effective interest method of

7
 amortization been used.
d. be less than the stated (nominal) rate of interest.
54. Under the effective interest method of bond discount or premium amortization, the
periodic interest expense is equal to
a. the stated (nominal) rate of interest multiplied by the face value of the bonds.
b. the market rate of interest multiplied by the face value of the bonds.
c. the stated rate multiplied by the beginning-of-period carrying amount of the
bonds.
d. the market rate multiplied by the beginning-of-period carrying amount of
the bonds.
55. When the effective interest method is used to amortize bond premium or discount, the
periodic amortization will
a. increase if the bonds were issued at a discount.
b. decrease if the bonds were issued at a premium.
c. increase if the bonds were issued at a premium.
d. increase if the bonds were issued at either a discount or a premium.
56. If bonds are issued between interest dates, the entry on the books of the issuing
corporation could include a
a. debit to Interest Payable. c. credit to Interest Expense.
b. credit to Interest Receivable. d. credit to Unearned Interest.
57. When the interest payment dates of a bond are May 1 and November 1, and a bond issue
is sold on June 1, the amount of cash received by the issuer will be
a. decreased by accrued interest from June 1 to November 1.
b. decreased by accrued interest from May 1 to June 1.
c. increased by accrued interest from June 1 to November 1.
d. increased by accrued interest from May 1 to June 1.
58. The residual interest in a corporation belongs to the
a. management. c. common stockholders.
b. creditors. d. preferred stockholders.
59. When treasury stock is purchased for more than the par value of the stock and the cost
method is used to account for treasury stock, what account(s) should be debited?
a. Treasury stock for the par value and paid-in capital in excess of par for the excess
of the purchase price over the par value.
b. Paid-in capital in excess of par for the purchase price.
c. Treasury stock for the purchase price.
d. Treasury stock for the par value and retained earnings for the excess of the
purchase price over the par value.
60. How should a "gain" from the sale of treasury stock be reflected when using the cost
method of recording treasury stock transactions?
a. As ordinary earnings shown on the income statement.
b. As paid-in capital from treasury stock transactions.
c. As an increase in the amount shown for common stock.
d. As an extraordinary item shown on the income statement.
61. The cumulative feature of preferred stock
a. limits the amount of cumulative dividends to the par value of the preferred stock.
b. requires that dividends not paid in any year must be made up in a later year

8
 before dividends are distributed to common shareholders.
c. means that the shareholder can accumulate preferred stock until it is equal to the
par value of common stock at which time it can be converted into common stock.
d. enables a preferred stockholder to accumulate dividends until they equal the par
value of the stock and receive the stock in place of the cash dividends.
62. Pryor Corporation issued a 2-for-1 stock split of its common stock which had a par value
of P10 before the split. At what amount should retained earnings be capitalized for the
additional shares issued?
a. There should be no capitalization of retained earnings0
b. Par value
c. Market value on the declaration date
d. Market value on the payment date
63. If management wishes to "capitalize" part of the earnings, it may issue a
a. cash dividend. c. property dividend
b. stock dividend. d. liquidating dividend
64. Dividends are not paid on
a. noncumulative preferred stock. c. treasury common stock.
b. nonparticipating preferred stock. d. Dividends are paid on all of these.
65. Adjustments made for the purpose of calculating the incremental adjustment to the share
of profit of an associate are:
a. recognized in the books of the investor;
b. recognized in the books of the investee;
c. notional adjustments and not included in the books of the investee;
d. relate to realized transactions and so are recognized directly by the investee.
66. The following are regarded as factors indicating the existence of significant influence
over another entity:
I. representation on the board of directors
II. participation in decisions about dividends
III. interchange of managerial personnel
IV. ability to control the investee’s operating policies
a. Yes, No, No, No c. Yes, Yes, No, No
b. Yes, Yes, Yes, Yes d. Yes, Yes, Yes, No
67. The degree to which changes in the fair value or cash flows of a hedge item that are
attributable to a hedge risk are offset by the changes in the fair value or cash flows of a
hedging instrument, describes:
a. transaction exposure; c. hedge effectiveness;
b. hedge ineffectiveness; d. transaction variability.
68. The formal documentation of a hedging relationship must include identification of:
I. The hedging instrument
II. The hedged item
III. The nature of the risk being hedged
IV. How the entity will assess hedge effectiveness
a. No, No, No, No c. Yes, Yes, Yes, Yes
b. No, Yes, Yes, No d. Yes, No, Yes, No
69. When accounting for a cash flow hedge, hedge ineffectiveness is:
a. recorded in profit or loss; c. recorded separately as a financial liability;

9
 b. separately recorded in equity; d. capitalized as a deferred asset.
70. When a fair value hedge instrument expires it:
a. must be transferred within equity to retained earnings;
b. remains permanently in equity;
c. must be discontinued retrospectively;
d. must be discontinued prospectively.
71. The bonus issue of shares has the following impact on the equity of a company;
a. total equity increases;
b. total equity decreases;
c. one equity account increases and another equity account decreases by an equal
amount;
d. only the amount of issued share capital changes.
72. The components of equity generally recognized by companies in a balance sheet are:
I. Provisions. III. Share Capital. V. Retained Earnings.
II. Debentures IV. Other reserves
a. I, II and III only; c. II, III and V only;
b. I, III, IV and V only; d. III, IV and V only.
73. The dividends declared account is a nominal account and
a. Carried forward to the next accounting period
b. Closed directly to retained earnings
c. Closed directly to income summary
d. Closed directly to capital
74. The basic purpose of derivative financial instruments is to manage some kind of risk. Which of
the following is the least risk manageable by derivatives?
a. Stock price movement c. Interest rate variations
b. Currency fluctuations d. Uncollectibility of Accounts Receivable
75. Total equity represents
a. A claim to specific assets contributed by the owners.
b. The maximum amount that can be borrowed by the enterprise.
c. A claim against a proportion of the total assets of an enterprise.
d. Only the amount of earnings that have been retained in the business.
76. If equity securities are acquired in an exchange, which would be the priority in the reference for
the determination of their acquisition cost?
a. Fair value of asset given
b. Fair value of asset received
c. Carrying amount of asset given
d. Carrying amount of asset received
77. When the shares are sold ex-dividend, which of the following is correct?
a. The right to the shares belong to the buyer but the right to receive dividends belong to
the seller.
b. The right to the shares belong to the buyer and the right to receive dividends too.

10
 c. The right to the shares belong to the seller but the right to receive dividends belong to
the buyer.
d. The right to the shares belong to the seller but the right to receive dividends too.
78. When should dividends be recognized as revenue?
a. on the date of record
b. on the date of declaration
c. when the right to receive payment is established
d. on the date of payment
79. Which of the following represents return on invested capital?
a. Cash Dividend c. Stock Warrants
b. Liquidating Dividend d. Stock Rights
80. When cash dividends are declared but stocks are given, should there be income recorded by the
investor?
a. Yes, at the market value of the stocks given.
b. Yes, at the market value of the stocks given if it is a large dividend.
c. Yes, at the market value of the stocks given if it is a small dividend.
d. No, only the cost per share is reduced.
81. What is the IAS term for a stock right?
a. Bonus issue c. Preemptive right
b. Stock split d. Stock issue
82. When is a stock right considered to be selling right-on?
a. Between the dates of declaration and record
b. Between the dates of record and payment
c. Between the dates of declaration and payment
d. At any time before the date of payment
83. In the investor’s point of view, would there be a loss in the expiration of a stock right?
a. No, there would only be a transfer from one equity account to another.
b. Yes, the loss is equal to the carrying amount of the stock rights that expired.
c. No, only a memorandum entry is made.
d. No, the cost per share will only be increased.
84. What would be included in the entry to be made in the investors books to record the
adjustment to investment income to amortize the “excess of cost” attributable to the
undervaluation of depreciable assets of the associate as it is being depreciated?
a. Debit to investment income
b. Debit to Depreciation Expense
c. Credit to Depreciation Expense
d. Debit to Investment in Associate
85. Which is not included in the carrying amount of the investment in associate?
a. The balance of the account “investment in associate”
b. Long-term loans from the associate
c. Trade receivables
d. Unsecured long-term receivables from the associate

11
86. When an associate has outstanding noncumulative preference shares, the investor shall:
a. Compute its share of earnings after deducting the preference dividends only when not
declared.
b. Compute its share of earnings after deducting the preference dividends only when
declared.
c. Compute its share of earnings after deducting the preference dividends even when not
declared.
d. Compute its share of earnings but never adjusted for preference dividends.
87. In any case, the difference between the reporting date of the associate and that of the investor
for the recognition of income shall be not more than:
a. 3 months c. 1 year
b. 1 month d. 3 years
88. What is defined as cash and other assets set aside for a specific purpose either by reason of the
action of management or by virtue of a contract or legal requirement?
a. Reserves c. Compensating balance
b. Fund d. Underlying
89. What is defined as the amount which the insurance will pay upon the surrender and cancelation
of the life insurance policy?
a. Sinking Fund c. Insurance fund
b. Cash surrender value d. Redemption fund
90. What type of financial risk is defined as the uncertainty about future interest rates and their
impact on cash flows and the fair value of the financial instrument?
a. Price Risk c. Interest Rate Risk
b. Credit Risk d. Foreign Currency Risk
91. Which of the following correctly defines an option?
a. It gives the issuer the right but not the obligation to purchase or sell an asset at a
specified rate during a definite period at some future time.
b. It gives the issuer the right and the obligation to purchase or sell an asset at a specified
rate during a definite period at some future time.
c. It gives the holder the right but not the obligation to purchase or sell an asset at a
specified rate during a definite period at some future time.
d. It gives the holder the right and the obligation to purchase or sell an asset at a specified
rate during a definite period at some future time.
92. What is Bifurcation?
a. the process of separating the two asset components of a compound financial
instruments
b. the process of separating an embedded derivative from the host contract
c. the process of separating the equity and liability component of a compound financial
instrument
d. the process of allocating the cost between the two asset components of a compound
financial instruments
93. Which of the following correctly describes a convertible bond?

12
 a. those which give the issuer the right to convert their bondholding into share capital or
other securities of the issuing entity.
b. those which give the holders the right to convert their bondholding into share capital
or other securities of the issuing entity .
c. those which give the holders the obligation to convert their bondholding into share
capital or other securities of the issuing entity.
d. those which give the issuer the obligation to convert their bondholding into share
capital or other securities of the issuing entity.
94. It is a fund set aside for the liquidation of a long-term debt.
a. Insurance Fund c. Preference Share Redemption Fund
b. Contingency Fund d. Sinking Fund
95. It is a fund set aside for the redemption of preference shares.
a. Insurance Fund c. Preference Share Redemption Fund
b. Contingency Fund d. Sinking Fund
96. It is a fund set aside in anticipation of future replacement of depreciable assets.
a. Insurance Fund c. Replacement Fund
b. Contingency Fund d. Expansion Fund
97. It is a fund set aside in anticipation of future acquisition of additional property.
a. Insurance Fund c. Replacement Fund
b. Contingency Fund d. Expansion Fund
98. It is a fund set aside for the purpose of meeting obligations that may arise from lawsuits.
a. Insurance Fund c. Replacement Fund
b. Contingency Fund d. Expansion Fund
99. It is a fund set aside for the purpose of meeting obligations that may arise from certain risks not
insured against.
a. Insurance Fund c. Replacement Fund
b. Contingency Fund d. Expansion Fund
100. Which of the following is not required for the cash surrender value to arise?
a. The insured should die.
b. The policy is a life policy.
c. Premiums for three full years must have been paid.
d. The policy is surrendered.

13
 University of San Carlos
School of Business and Economics
Department of Accountancy
AC503 4th Exam
Name:_____________________________________
1. ____________________________
2. ____________________________
3. ____________________________
4. ____________________________
5. ____________________________
6. ____________________________
7. ____________________________
8. ____________________________
9. ____________________________
10. ____________________________
11. ____________________________
12. ____________________________
13. ____________________________
14. ____________________________
15. ____________________________
16. ____________________________
17. ____________________________
18. ____________________________
19. ____________________________
20. ____________________________
21. ____________________________
22. ____________________________
23. ____________________________
24. ____________________________
25. ____________________________
26. ____________________________
27. ____________________________
28. ____________________________
Wendell Ang, CPA
Date:________________________
29. ____________________________
30. ____________________________
31. ____________________________
32. ____________________________
33. ____________________________
34. ____________________________
35. ____________________________
36. ____________________________
37. ____________________________
38. ____________________________
39. ____________________________
40. ____________________________
41. ____________________________
42. ____________________________
43. ____________________________
44. ____________________________
45. ____________________________
46. ____________________________
47. ____________________________
48. ____________________________
49. ____________________________
50. ____________________________
51. ____________________________
52. ____________________________
53. ____________________________
54. ____________________________
55. ____________________________
56. ____________________________
14
57. ____________________________
58. ____________________________
59. ____________________________
60. ____________________________
61. ____________________________
62. ____________________________
63. ____________________________
64. ____________________________
65. ____________________________
66. ____________________________
67. ____________________________
68. ____________________________
69. ____________________________
70. ____________________________
71. ____________________________
72. ____________________________
73. ____________________________
74. ____________________________
75. ____________________________
76. ____________________________
77. ____________________________
78. ____________________________
79. ____________________________
80. ____________________________
81. ____________________________
82. ____________________________
83. ____________________________
84. ____________________________
85. ____________________________
86. ____________________________
87. ____________________________
88. ____________________________
89. ____________________________
90. ____________________________
91. ____________________________
92. ____________________________
93. ____________________________
94. ____________________________
95. ____________________________
96. ____________________________
97. ____________________________
98. ____________________________
99. ____________________________
100. ___________________________
15