EASY ROUND

1. Which ONE of the following statements best describes the term 'liability'?
A An excess of equity over current assets
B Resources to meet financial commitments as they fall due
C The residual interest in the assets of the entity after deducting all its liabilities
D A present obligation of the entity arising from past events
2. Are the following statements true or false, according to IAS1 Presentation offinancial
statements?
(1) Dividends paid should be recognised in the statement of comprehensive income.
(2) A loss on disposal of assets should be recognised in the statement of changes in
equity.
Statement (1)
Statement (2)
A
False
False
B
False
True
C
True
False
D
True
True
3. The Oakes Company has a loan due for repayment in six months' time, but Oakes has
the option to refinance for repayment two years later. Oakes plans to refinance this
loan.
In which section of its statement of financial position should this loan be presented,
according to IAS1 Presentation of financial statements? (select one answer)
A Current liabilities
B Current assets
C Non-current liabilities
D Non-current assets
4. Which TWO of the following should be taken into account when determining the cost
of inventories per IAS2 Inventories?
A Storage costs of part-finished goods
B Trade discounts
C Recoverable purchase taxes
D Administrative costs
5. Which ONE of the following statements best describes the carrying amount of an
asset?
A The cost (or an amount substituted for cost) of the asset less its residual value
B The amount at which the asset is recognized in the statement of financial position
after deducting any accumulated depreciation and accumulated impairment losses
C The higher of the asset's net selling price and its value in use
D The fair value of the asset at the date of a revaluation less any subsequent
accumulated impairment losses
6. Which ONE of the following statements best describes the term 'depreciation'?
A The systematic allocation of an asset's cost less residual value over its useful life
B The removal of an asset from an entity's statement of financial position
C The amount by which the recoverable amount of an asset exceeds its carrying
amount
D The amount by which the carrying amount of an asset exceeds its recoverable
amount

7. The Mirror Company classified a non-current asset accounted for under the cost
model as held for sale on 31 December 20X6. Because no offers were received at an
acceptable price, Mirror decided on 1 July 20X7 not to sell the asset, but to continue
to use it. In accordance with IFRS5 Non-current assets held for sale and discontinued
operations, the asset should be measured on 1 July 20X7 at (select one answer)
A the lower of its carrying amount and its recoverable amount
B the higher of its carrying amount and its recoverable amount
C the lower of its carrying amount on the basis that it had never been classified as
held for sale and its recoverable amount

D the higher of its carrying amount on the basis that it had never been classified as
held for
sale and its recoverable amount
8. A brand name that was acquired separately should initially be recognized , according
to IAS38 Intangible assets, at (select one answer)
A recoverable amount
B either cost or fair value at the choice of the acquirer
C fair value
D cost
9. The Naylor Company has determined that it needs to recognise an impairment loss
on each of two non-current assets; plant and land. The relevant amounts are as
follows:
Plant
Land
Original cost
CU700,000
CU1,400,000
Previous revaluations
Nil
CU450,000
Existing carrying amount
CU700,000
CU1,850,000
Impairment loss to be recognised in year CU200,000
CU300,000
According to IAS36 Impairment of assets, how should each of the impairment losses
be recognised?
Plant
Land
A In profit or loss
In profit or loss
B In profit or loss
In other comprehensive income
C In other comprehensive income
In profit or loss
D In other comprehensive income
In other comprehensive income
10. The Snowfinch Company is closing one of its operating divisions, and the conditions
for making restructuring provisions in IAS37 Provisions, contingent liabilities and
contingent assets have been met. The closure will happen in the first quarter of the
next financial year. At the current year end, the company has announced the formal
plan publicly and is calculating the restructuring provision. Which ONE of the
following costs should be included in the restructuring
provision?
A Retraining staff continuing to be employed
B Relocation costs relating to staff moving to other divisions
C Contractually required costs of retraining staff being made redundant from the
division being closed
D Future operating losses of the division being closed up to the date of closure
AVERAGE ROUND
1. According to IAS29 Financial reporting in hyperinflationary economies, which TWO of
the following are monetary items?
a.
Trade payables
b.
Inventories
c.
Administration costs paid in cash
d.
Loan repayable at par value
2. The Hopkins Company is a manufacturing company. The cost per unit of an item of
inventory is shown on its card as follows:
PHP
Materials
30
Production labor costs
33
Production overheads
12
General administration costs
10
Marketing costs
5
According to IAS2 Inventories, what is the value of one completed item of inventory
in Hopkins's statement of financial position?
a. PHP63
b. PHP85
c. PHP75
d. PHP90

3. On 1 January 20X8 The Ebro Company commenced trading to provide key skills
education facilities in a region identified for technology development. Also on 1
January 20X8, the company received two grants from its government for setting up
its operations in this location:
Grant (a) was paid to give financial assistance for start-up costs already incurred.
Grant (b) was paid to subsidize the costs of purchasing computer software over the
five-year period. The company is almost certain to keep the facilities operational for
the next five years.
The company's accounting year end is 31 December. Are the following statements
concerning recognition of the income from the two government grants true or false,
according to IAS20 Government grants and government assistance?
(1) Income from Grant (a) should be recognized in full on receipt in 20X8.
(2) Income from Grant (b) should be recognized in full at the end of 5 years.
a
b
c
d

Statement (1)
False
False
True
True

Statement (2)
False
True
False
True

4. The Scandium Company is commencing a new construction project, which is to be

financed by borrowing. The key dates are as follows: 15 May 20X8 Loan interest
relating to the project starts to be incurred
3 June 20X8 Technical site planning commences
12 June 20X8 Expenditures on the project start to be incurred
18 July 20X8 Construction work commences
According to IAS23 Borrowing costs, from what date can Scandium
commence the capitalization of borrowing costs?
a 15 May 20X8
b 3 June 20X8
c 12 June 20X8
d 18 July 20X8
5. The Palila Company purchased a varnishing machine for PHP150,000 on 1 January
20X7.
The company received a government grant of PHP13,500 in respect of this asset.
Company policy was to depreciate the asset over 4 years on a straight-line basis and
to treat the grant as deferred income. Under IAS20 Government grants and
government assistance, what should be the carrying amounts of the machine and the
deferred income ("DI") balance at 31 December 20X8?
Carrying amount
DI balance
a
PHP75,000
PHP6,750
b
PHP112,500
PHP10,125
c
PHP81,750
PHP6,750
d
PHP75,000
PHP13,500
6. The Coral Company accounts for non-current assets using the cost model. On 20 July
20X7 Coral classified a non-current asset as held for sale in accordance with IFRS5
Non-current assets held for sale and discontinued operations. At that date the asset's
carrying amount was PHP14,500, its fair value was estimated at PHP21,500 and the
costs to sell at PHP1,450. The asset was sold on 18 October 20X7 for PHP21,200. In
accordance with IFRS5, at what amount should the asset be stated in Coral's
statement of financial position at 30 September 20X7?
A PHP20,050
B PHP21,500
C PHP21,200
D PHP14,500

7. The Markab Company has acquired a trademark relating to the introduction of

a new manufacturing process. The costs incurred were as follows:
Cost of trademark
PHP 3,500,000
Expenditure on promoting the new product
PHP
50,000
Employee benefits relating to the testing of the
proper functioning of the new process
PHP 200,000
According to IAS38 Intangible assets, what is the total cost that should be capitalized
as an intangible non-current asset in respect of the new process?
A PHP3,750,000
B PHP3,700,000
C PHP3,500,000
D PHP3,550,000
8. The Dipper Company operates chemical plants. Its published policies include a
commitment to making good any damage caused to the environment by its
operations. It has always honored this commitment. Which ONE of the following
scenarios relating to Dipper would give rise to an environmental provision as defined
by IAS37 Provisions, contingent liabilities and contingent assets?
a. On past experience it is likely that a chemical spill which would result in Dipper
having to pay fines and penalties will occur in the next year
b. Recent research suggests there is a possibility that the company's actions may
damage surrounding wildlife
c. The government has outlined plans for a new law requiring all environmental
damage to be rectified
d. A chemical spill from one of the company's plants has caused harm to the
surrounding area and wildlife
9. The White Company set up a defined benefit post-employment plan with effect from
1 January 20X7. In the first year the expected return on plan assets was PHP5,000,
the actual return on plan assets was PHP4,000, the current service cost was
PHP12,000 and White's contributions paid into the plan were PHP7,500.
What is the net expense to be recognized in profit or loss for the year ended 31
December 20X7, according to IAS19 Employee benefits?
A PHP8,000
B PHP3,500
C PHP7,000
D PHP2,500
10. The Pinder Company is completing the preparation of its draft financial statements
for the year ended 31 May 20X7. On 24 July 20X7, a dividend of PHP175,000 was
declared and a contractual profit share payment of PHP35,000 was made, both based
on the profits for the year to 31 May 20X7. On 20 June 20X7, a customer went into
liquidation having owed the company PHP34,000 for the past 5 months. No allowance
had been made against this debt in the draft financial statements. On 17 July 20X7, a
manufacturing plant was destroyed by fire, resulting in a financial loss of
PHP260,000.
According to IAS10 Events after the reporting period, which TWO amounts should be
recognized in Pinder's profit or loss for the year to 31 May 20X7 to reflect adjusting
events after the end of reporting period?
A PHP175,000 dividend
B PHP35,000 bonus
C PHP34,000 allowance for uncollectible trade receivables
D PHP260,000 loss on manufacturing plant
DIFFICULT ROUND
11. During the year ended 31 December 20X8 the following events occurred at The
Gosling Company:

(1) It was decided to write off PHP80,000 from inventory which was over two years
old as it was obsolete.
(2) Sales of PHP60,000 had been omitted from the financial statements for the year
to 31 December 20X7.
According to IAS8 Accounting policies, changes in accounting estimates and errors,
how much should be shown as a prior period adjustment in Gosling's financial
statements for the year to 31 December 20X8?
A PHP60,000
B PHP140,000
C PHP80,000
D PHP20,000
12. One of the conditions that must be satisfied in order to recognize revenue in a
transaction involving the rendering of services is that the stage of completion of the
transaction at the end of the reporting period can be measured reliably. Which TWO
of the following methods for determining the stage of completion of a contract
involving the rendering of services are specifically referred to in IAS18 Revenue, as
being acceptable?
A Costs incurred to date as a percentage of the estimated total costs of the
transaction
B Advances received to date as a percentage of the total amount receivable
C Surveys of work performed
D Revenue to date divided by total contract revenue
13. How should trade discounts be dealt with when valuing inventories at the lower of
cost and net realizable value (NRV) according to IAS2 Inventories? (select one
answer)
A Added to cost
B Ignored
C Deducted in arriving at NRV
D Deducted from cost
14. The Polyphony Company had 100,000 equity shares in issue on 1 January 20X7. On 1
July 20X7 it issued 20,000 new shares by way of a 1 for 5 bonus. On 1 October 20X7
it issued 28,000 new shares for cash at full market price. When calculating basic
earnings per share, how many shares should be divided into the profit after tax,
according to IAS33 Earnings per share?
A 100,000
B 117,000
C 148,000
D 127,000
15. On 1 July 20X7 The Otakamiro Company handed over to a client a new computer
system. The contract price for the supply of the system and aftersales support for 12
months was PHP800,000. Otakamiro estimates the cost of the after-sales support at
PHP120,000 and it normally marks up such costs by 50% when tendering for support
contracts. Under IAS18 Revenue, the revenue Otakamiro should recognize in its
financial year ended 31 December 20X7 is
A PHP620,000
B PHP800,000
C PHP710,000
D Nil
16. The Tanager Company purchased a boring machine on 1 January 20X1 for PHP81,000.
The useful life of the machine is estimated at 3 years with a residual value at the end
of this period of PHP6,000. During its useful life, the expected units of production
from the machine are:
20X1 12,000 units
20X2 7,000 units
20X3 5,000 units
What should be the depreciation expense for the year ended 31 December 20X2,
using the most appropriate depreciation method permitted by IAS16 Property, plant
and equipment?
A PHP27,000

B PHP21,875
C PHP23,625
D PHP25,000
17. On 1 January 20X7 The Hamerkop Company borrowed PHP6 million at an annual
interest rate of 10% to finance the costs of building an electricity generating plant.
Construction commenced on 1 January 20X7 and cost PHP6 million. Not all the cash
borrowed was used immediately, so interest income of PHP80,000 was generated by
temporarily investing some of the borrowed funds prior to use. The project was
completed on 30 November 20X7. What is the carrying amount of the plant at 30
November 20X7?
A PHP6,000,000
B PHP6,470,000
C PHP6,520,000
D PHP6,550,000
18. The Bentham Company purchased an investment property on 1 January 20X5 for a
cost of PHP220,000. The property had a useful life of 40 years and at 31 December
20X7 had a fair value of PHP300,000.
On 1 January 20X8 the property was sold for net proceeds of PHP290,000. Bentham
uses the cost model to account for investment properties. What is the gain or loss to
be recognized in profit or loss for the year ended 31 December 20X8 regarding the
disposal of the property,
according to IAS40 Investment property?
A PHP86,500 gain
B PHP81,000 gain
C PHP10,000 loss
D PHP70,000 gain
19. The Minor Company leased a freehold building for 20 years, the useful life of the
building, with effect from 1 January 20X7. At that date the fair value of the leasehold
interest was PHP7.5 million of which PHP6.0 million was attributable to the building.
Annual rentals of PHP800,000 are payable in advance on 1 January.
How much should Minor recognized as an operating lease expense in the year ended
31 December 20X7, according to IAS17 Leases?
A Nil
B PHP640,000
C PHP160,000
D PHP800,000
20. The Rattigan Company purchases PHP20,000 of bonds. The asset has been
designated as one at fair value through profit and loss. One year later, 10% of the
bonds are sold for PHP4,000. Total cumulative gains previously recognized in
Rattigan's financial statements in respect of the asset are PHP1,000. In accordance
with IAS39 Financial instruments: recognition and measurement, what is the amount
of the gain on disposal to be recognized in profit or loss?
A PHP1,900
B PHP900
C PHP2,000
D PHP1,000