Professional Documents
Culture Documents
1. At the balance sheet date, December 31, 2014, Electron Company carried a
receivable from MI Electronics, a major customer, at P10 million. The
authorization date of the financial statements is on February 16, 2015. MI
Electronics declared bankruptcy on Valentines day (February 14, 2015). Electron
Company will
a. reverse the sale pertaining to this receivable in the comparatives for the prior
period and treat this as an error under PAS 8
b. make a provision for this post-balance sheet event in its financial
statements (as opposed to disclosure in footnotes)
c. ignore the event and wait for the outcome of the bankruptcy because the
event took place after the year-end.
d. disclose the fact that MI has declared bankruptcy in the footnotes.
3. Under PAS 39, all of the following are characteristics of a derivative except:
a. It is settled at a future date.
b. It is acquired or incurred by the entity for the purpose of generating a
profit from short-term fluctuations in market factors
c. Its value changes in response to the change in a specified underlying
THEORY OF ACCOUNTS TEST I
4. The cash flow from operations for Petro Chemicals is P25,000 for the current
year. If the amortization expense increases by P5,000 and the other factors
remain same, under which of the following assumptions will the cash flow from
operations remain unaffected?
a. The company has an infinite life
b. A change in amortization method will not have a retrospective effect
c. The company can change the depreciation method in between a financial
year
d. The company is operating in a tax-free environment
5. Which of the following criteria do not have to be met in order for an operation to
be classified as discontinued?
a. The operation should represent a separate line of business or geographical
area
b. The operation must be sold within 3 months of the year-end
c. The operation is part of a single plan to dispose of a separate major line of
business or geographical area
d. The operation is a subsidiary acquired exclusively with a view to resale.
6. Under PAS 39, is a derivative that is embedded in another contract accounted for
separately from that other contract?
a. It depends. PAS 39 requires embedded derivatives to be accounted for
separately if and only if, the economic characteristics and risks of the
embedded derivative and the host contract are not closely related and
the combined contract is not measured at fair value with changes in fair
value recognized in profit or loss
THEORY OF ACCOUNTS TEST I
a. When the distributor sells goods to the ultimate customers and there is
no uncertainty with respect to the price protection clause or the
buyback of goods
b. When the distributors pay to EM Electronics the cost of the goods
c. When goods are sold to the distributor provided estimated additional revenue
is also booked under the protection clause based on past experience
d. When the goods are sold to the distributors
10. Bayer AG introduced a new drug in the market on December 31, 2014. Bayer
AGs financial year ends on December 31, 2014. It was the only company that
was permitted to manufacture this patented drug. The drug is used by patients
suffering from a irregular heartbeat. On March 31, 2015, after the drug was
introduced, more than 1,000 patients died. After a series of investigations,
authorities discovered that when this drug was simultaneously used to regulate
hypertension, the patients blood would clot and patient suffered a stroke. A
lawsuit for P100,000,000 has been filed against Bayer AG. The financial
statements were authorized for issuance on April 30, 2015. Which of the following
options is the appropriate accounting treatment for this post-balance sheet event
under PAS 10?
THEORY OF ACCOUNTS TEST I