The Review School of Accountancy

First Pre-Board Examination

21 July 2012 B:00 AM - 9r30 AM

{freory of Accounts
INSIBlfgIlgNS: Select the correct answer for each of the following
questions. Mark only one answer for each item by shading the box
corresponding to the letter of your choice on the answer sheet provided.
STF.ICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.

SEt B

). The'fair val-ue less costs to sell'is least likely to be used as

' measurement valuation for
a, Biological assets
i:. Agricultural produce
c. Commodities of broker-traders
i .i.'l rnvestment in held-in-maturity securities fmofftzdCcs-{

2a f n-'rentory purchases are always r:ecorded

Net of cash discouni:
Net of trade discount
Gross of cash discount
Gross of trade discount

V: According to tire 2C10 Conceptual i'::arnework, the usefulness of

' f ,rrrancial information is err:raricett i f
r-a ] Comoarable
\:/
verifiable, timely and understandable
sv+v

b . Comparabl-e, consi-stent, timely and verif iabl-e'

'

c. Consistent, reliable, relevant and veri fiable

d. Consistent, verifiable, timely and understandable
4. PAS 24 defines related party transaction as a transfer of resources,
obligations and services between
a. Related parties when a price is charged
b. Unrelated parties when a price is not charged
G.i Related parties regardless of whether a price is charged or
'./ not
d. Unrelated parties regardless of whether a price is charged or
not
q
If the fair value less cost to sell is higher than the carrying
arnount on initial classification of a noncurrent asset as held for
sale, the accounting treatrnent for the dif ference 1s: rv\.,rghgef J;bnlft
G) Not accounted for C\i 1rV
b- Accgunted for as an impairment loss
c. Deferrecl gain as component of equity 7v{et/ --+ tf|paif Mufi Latt
d. Gain to be recorded in profit cr: loss st-atement
,6. Which is not a characteristic of financial account.ing?
a. Historical in nature
b. Prepares general purpose reports
c. Uses different measurement bases
('Jl Uses subjective data and int.erpretations if refevant
.J
1 Which of the followinq is usual-Ly not tL:eaLeC retrospectively?
a.. Correction of prior period err:or:s
(lr) Revision in depreciable asset's useful Life
-c. Change in reporting entity and measurement basis
C. Change from weighted average to FIEO method for inventory'
 THEORY OF ACCOUNTS
First Pre-Board Examination (October 2012 Batch)
21 iuly 2012:8:00 AM to 9:30 AM Page 2
The Conceptual Eramework of Accounting deals with
a. Tax l-aws and regulatrorrs
li" SEC rules and regulations
c. Code of Ethlcs f or professional- account.ant..j
itD Concepts of capiIa1 and capital maintenance

$zo' "lf an entity pubJi"sires a: clirr1;,e.:1.,.. ;tei- c,f- ijnar,t-:i-,.r.i :::r,_,:ti-:.:l1iifLi,s i.ir iLs
j.Liierim f inancial reportT t-ht: i i.,'rn rr.r-l rji-.ril,.: rrt. sili,ii l- ccr:f oi:rn to the
; r I ii rernertS of
., IT 1. (Presentation of Financial Statements)F"r.q 0F pffS34 *compl&C se1
h. PAS 34 (Interim Financial Reporting)
r. PFRS 3 (Business Combinations)
,r. Conceptual Framework of 2010

trO. Tlie entit.y solcl appliances wi-th 2-year warranty during the current
pe-:i.od and recognized the related vrarranty expense and Iiability.
T:'is t.ransaction is an example of expense recognition based cn
.i. Immediate recognition
Q) Cause and effect association
:'" Systematic and rational al-l-ocation
,l. None of the choices
(..
Yl -i Frr a non-current-misfTe
asset to be classif ied as "helci for sale" under
IIFRS Il, th T available for immediafe sale 'in its present
r:ondi i i cn and the Eale_ mug!_be.
;i. Probable
l'S rliohly probable
c. Hiqhly possible
.l . Reasonably Possible

lZ - The cos*L of inventor:ies that ai e ili '. iri-e r chal..q,.:.ii:,i.r: an,J segreqateC
1

for specific pr"ojecLs, regardlr::: s r,rf v,'i; L ne ]: ire )' have been bought or
r.r 1.,

produced, sha1l be assigned by using

a. Weighted average method
b. Last-in, first out methoci
c- I.rrst-in, firsl- ouL rnethod
\-/ Specific idenrificar.ion me1-hod
f;j:)
A Under PFRS 9, which type of financia,l instrument is subject to
W,. . &qq j,,-!e:l {{?'Je.. !.enrt- ancl rl,?"s11 .f,.i!ll,r: ij4L,ir.:.i:lrLr._r-ti:.s_ Lest
?
fa l, ;Lnl- se ru-rities
tr-F. Uquicy securities
c. Derivative sricuriLies
C. Debt and equity secr:rities
.-*"
l) t\
L/ {\ I1r. [rii',: r:irr:: lo! p4rr of the f 1ti4_Ilctq! ieBoqltryr _.p_Lqqdeld sq!tllrq prqces,s
v ri: tl-,c Phi:ippines?
;i . ,Approva1 by Elrrancial Reporti ng Standards Council (FRSC) arrd
eventua.l-]y by Professional Regurations commission (pRC)
b. creation of a task force by the standard setting bocly to
study the proposed accounting stanclarcl
i..). Distribution of the exposure draf t f or comment to cpA
professional.s and other int.erest-ed parties
rLi) Publication i.n the PRC effic_ial Gazett_e and in a Belgipqpel <l
generai c i rculaLion
r .+
(r /\15. Which of the following r tems 1s not accounted for: under rAJ A1
(Agriculture) ?
d, v!(rua
b. Milk
ftj'
d.
sugar
Vines
 THEORY OF ACCOUNTS
First Pre-Board Examination (October 2Ot2 Batch)
21 Jnly 2AL2 t 8:00 AM to 9:30 AM Page 3

Lg:Adjusting entries are. needed

s" Whenever expenses are not paid in cash
h; ir'ilenever revenues are not received in cash
c " P: imarily t-o correct errors in the initlal recording of
i-.us iness Lransactions
{,,i Whenever transactions affect the revenues or expenses of more
rhan one accounting period

/" tor ,)urposes of bank reconcil-iation, credit. memos are

e" Added to the bank balance
l-,. Deducted f rom the bank balance
(e) Actdeci to the book balance
Y. Deducted from the book balance
which of the following is nq! a .Ie_qq1_red entily:wide
it. fnformation about major customers
ir. Information about geoqraphical areas
d, Information about intefqeq rg
tJ. lnformation about products and services

r'JD.
B.:sed on the Conceptual Eramework of Accounting, which of the
following arises in the course of the ordinqry regular activities of
an entity and is referred to by a variety of different names
including sales, interest, dividends and royalties?
a- Gain
b. Profit
q, Revenue
d. fncome
il ^-
AI \trI'20.According to PAS 10, events after the balance sheet date are
' /'\ Statement I: Those events that. provide evidence of condi-tions that
existed at the balance sheet date Vl
State.ment II: Those events that are indicative of condi-tions 'that
arose after the balance sheet date.
A Both statements are true
\/
X Only statement I is true
c. Only statement II is true
d. Both statements are faLse
f1. Which of the following is a characteristic (s) of going concern
_ underlying assumption?
X St, tement f: Management intends to liquidate the entity
$tatenent II: The entity recognized accruals and deferrals in its
- -financial statements
'{: Statement III: Management has no real-istic alternpLive but to cease
the entity's operations
a9 Statement II only
b. Statement fII only
c. Statements I and IIf
d. St.atements 1, II and IIT
lZ,FOn destination point and freight prepaid means
a. The sel1er actually paid the freight charges but is not
responsible for the same
b. The buyer actually paid the freight charges but is not
^ responsible for the same
@
,V
The sel-ler actually paid for t.he f reight charges and is.
responsible for the same
d. The buyer actually pai-d fcr the freight charges and is
responsible for the same
 #*11 rHEoRy oF ACCouNrs
k$?i
\arl
First Pre-Board Examination (October 2012 Batch)
21 Juty 2At2 . B:00 AM to 9:30 AM Deaa d.

a" entity sha1l disclose on the face of the income statement t.he
?8-
- a Prof it or loss of discorrti.nued operati ons, and fqr b PresS
,'Gain or ross::ecognizecl on the measurement to fair value 1es s
costs to sel l or on the disposa] of the assets o' disposal qroup
constitul_ing the discontinuecl operation.
. As a single amount (based on the Lot_a1), net of tax
As a sing_le amount (basecl on Lhe total-), gross of tax
As separate amountsr nt, of tax
d. As separate amounts, qross of tax

)4 rt refers to the residuar interest in the assets of the entity after

deducting all its liabilities
@ Net assets (financj-a1 positron element)
b. Net profit (performance element)
c. Prof it (performarr.ce elenent )
d. Assets (flnancial position element)
26 Under PAS 34, the preparati-on of interim reports generally wirl
requi re
a. No use of estimation niethods
b. Lesser use of estimation methods than annua]- f inancia_L
report s
Y_J
Greater use of estimatior: methods than annuar financial
reports
d. The same amount of estimation methods with annual financial
reports
\F,O
v\ -" under the Framework for Preparapion and Presentation of Einancial
$ .Statements, 1t is the process of incol:poratiqq fn lhe hg]erlg9__!!_gst
or-tl+$:ietement an it-eL that ryeers at" o"ri"ttinn
und
a . Ili sclosure
(h) Recogn-L Eion
Y. Measurement
d. PresenLation
/l ' wnut stat.ements are intended Lo meet the needs of users who are not
in a position to require an entity to prepare -reports tailored to
their particular information needs ?
a, Separate financial_ staLements
b. Consolidated financial staLements
c. Business ent-ity f inancial statement.s
fd) General purpose financial statemenrs
\-/
?8. The following statements are based on PFRS 5 (Non*current Assets tiel<J
for Saie and Discontinued Operati-ons):
,Statement I: An entity shall classify a non-current asset as held for
I sale if j ts. carrying amount wil I be recovered principally
through
c-e-n:Elnqr.nq qse . .sfyl<
StaLement
.l ,._ held tor An entityshall measure a non-cu::rent asset classified
I, -rr: sale at i ts carrying amount, if higher than the faj r
value less cosrs ro seli. whiclrW,i ii lonrr
.bs
.Statement II I.' An entity shal,l present a non*current asset classi f ied
held for sale separately from other assets in the s.atement of
financial position-
a. Only statemenl f is false
b. OnIy statement If is true
C Only statement III is true
d. A11 of the statements are fal-se
 THEORY OF ACCOUNTS
First Pre-Board Examination (October 2012 Batch)
21 july ZOIZ c 8:00 AM to 9:30 AM Page 5
'2
9 . Ltnder PA.S 2 (Inventories ) , the allocation of f ixed producllion
tfverheads
* to the conversion costs is na
a. Il-]eoretj-cal capacity of production facilities
b" Ii'xpected capacity of production facilities
.:.. Miaximum capacity of production facilities
:'.,t i'iormal capacitv of prociuction facilities
'L i:e following statements ref er to Interim F inancial Reporting (PAS
l,j;: flfiS il{
::i!-.atetner)t I: Revenues that ' are received seasonally, cycIically, or
f-',rcas j-ona11y within a f inancial year shal] not be anticipated or
;ieferred as of an interim date if anticipation or deferral would not
r)e appropriate at the errd of the entity's financial year. porAl
.::iatement II: Costs that are incurred unevenly during 'an entity's
.i.inanr-'ial year shall be anticipated or deferred for interim reporting
irur:pises if , and only if , it. is also appropriate to anticipate or
,rT,1. tyle of cost at the end of the financial year. p,
:h"!
True, true U
Gj
b" True, false
c. False, true
d. False, false

J{. rhis qr-ralitative characteristic enables users to identify and

unde::siand similarities in, and differences among, items.
' ;_. Comparability
b. Reliability
c. Consistency
d. Neutrality
. Whlch of the following falls withi-n the definition of related parties
*, as defined in PAS 24?
a. Gor,'erninent deparLment and agencies
b. A supplier with whom the reporting enti_ty has a one-year
contract for the suppllr of raw materials
c. P;:cviders of finance in the course of their normaf "dealings
i'.t' Ii;nr??r"ll'loli?i,
, u,,} rinanciat orricer who has the authority ro
p1an, direct and control the acti.rities of the entity
. _l-,
[} /.\::. Which of these items i-east resembles a t-ypical ad;usting ent-ry?
'J a. Debit an asset, cred-it a revenue
G) Debit an asset, credit a liab.itj.ty
c. Debit an expense, credit a J.iability
d. Debit a revenue, cr:ecl j t a iiabi -Lily

L W,u whr:n an entit.y breaches an undertaking under a rongr-term loan

.
agreement on or before the balance sheet date with the effect that
the Liability becomes payable on demand, the tiability is:
Ftatement I: Current, even 1f the fender agreed after the reporting
."'period and before the authorization of financial statements for issue
not to demand paymenL
statement rr: Non-current if the lender agreed by the end of the
,,'ieporting period to provide a grace period for at least lZ months
after the balance sheet date within which the entity can rectify the
breach
\'statement rrr: current or Noncurrent depending on the agreement
,"between the entity and the lender before the fi.nancial statemenLs are
authorized for issue
a. Only statement I is true
b. OnIy statement fI 1s Lrue
(c-lj Statements I and II are true
Y. A11 of the statements are true
 THEORY OF ACCOUNTS
First Pre-Board Examination (October 2012 Batch)
21 July 2012 o 8:00 AM to 9:30 AM
Page 6

/ad. wi'ti.t"t event after the balance shee t- date will_ require an entity to
ad ri-rs c the amounts"recognized in its f inanc:Lal- statement?
.;=\ The
receipt
\__,' i.ndicating
of information aft-er the balance sheet date
that an asset was impaired at the balance sheet_
ilat-e
b Major ordinary share transactions and po[ential ordinary share
transacLions af ter the bal.ance sheet clate
(: Commencing major litigation arising soJ-ely out of events 1-hat
occurred after the balance sheet date
C] Declaration of divi_dends to holclers of equity instruments
after the balance sheet date
=$r" i6 staterrent r: An entity shal1 disclose the profit or loss for the
J\ pe:ricrci and the, total cc,mprehensive i ncome attrrbutable to non-
,lirltroiling interests and owners of Lhe parent
l)tatement ri: An entity shali presenr all items of income and expense
r6l(-:ognized in a period in a single profit or l_oss statement . only
a. Both statements are true
\., ) On Ly statement I is true
,:i. Cnly statement II is true
ri. Bot.h staternents ai:e fafse
-ft:, I'he ef fect of closing entries is to
tl . Change assets
.ji., Change liabilities
\,) Change retained carnings
i". Change debit balances of all accounts into credit and vice
versa
rt/ -^--
/^\ l8 j-nvested
SlaLement r: The financjal- capilal concepL, such as invested money or
purchasing power, requires the adopt:-on of the current cost
b;rsis measurement
:j|atement rr: under a physical capital concept., such as operati-ng
r:ai;abi1ity, capital is regarded as the productive capacity of th;
e,:Ll_ i ty
.l . Both st.atement-s are true
ir. Only statemenL f is true
r. Only statement ff rs t.rue
ir:) Both statements are false
\----l'

)4. wl',icli of the following losses shouid not be taken Lo. prof it or loss?
Unrealized loss on [he change in value of AFS securities
unreal-ized loss on inltial recogni tion of bioJ-ogical asset
!- Loss on conversj-on of investmenL properties tr: inventories
rl unrea]-ized loss on the change in value of tradinq securiLies
D
'J/
*]r2,, 'i'he following statement-s rel-ate
t'o j-nventories under pAS 2:
sfriement r: The car:rying amount of sold inventories shalI be
recognj-zed as expense in the period in which the related revenue js
recogni zed.
lit-atenent rr: The amount. of any write-down of inventories to nel
::eali zabi,e value and al l l-osse s of inventories shall be recogni zed as
ai:r expense in t.he period the wr:ite-down or 10ss occurs.
statement rrr: The amount of any reve::sa1 of a write_down of
iiiventories, arising f rom j,ncrease in the net real j-zab1e value, shall
bo recognized as a reciuction in the amount. of jnventories recognized
es an expense in which the reversal occurs. ?ar 34 PN a
a. Only statement I is true I
L.
Only stdtement I1 is false
,:. Cnl.y statement III is false
("'l Al1 of the statement_s ar<l tnte
7R THE.RY oF AccouNrs
7.{ 6("Hl)J ririt Pre-Board Examination (octob er 2aL2 Batch)
\d/ 21 Juty 2ot2 t B:oo AM to 9:30 AM Page 7

g,{. wnicn of the following is not an ingredient of faithful

/ representation according to Conceptual Framework for Financial
Reportinq 20702
q-._ Freedom from error
M) Feedback value
Y Completeness
d. Neutrality
I
-1Yqz . Under PFRS B (Operating Segments), if revenues from transactions with
r.\ a single external cusLomer amount to 10 percent or more of an ftl\
entity's revenue (i.e., malor customer), the entity shall discfose, 'Vf,$
I) The total amount of revenues from each such customer
II) The ldentity of the segments reporting the revenues
III) The identi-ty of the major customers
IV) The amount of revenues that each segment reports from major
customer.
a,
., -\
I only
&, I and II
c. I, II and III
d. T, If, III and IV
43'. Biological transformation results in the following types of outcomes,
' exeepL
lG:) Detachment of produce from a biological asset or cessation of
\'') biologicaf assets' life processes
b. Decrease in quant.ity or deterioration in quality of an animal
or plant
c. Production of agricultural- produce such as tea leaf
d. Improvement in quality of an animal or plant
method of accounl-ing is specifically required for
2{.Tlr:.equity
' Investment in associates
@
b. fnvestment in trading debt securities
c. Investment in available-for-sale securities
d. Investment in held-to-maturity debt securities
t
-,$aS. which of the followinq is not a component of ot,her comprehensi-ve
i'n income ?
F. Changes in revaluation surplus
on Foreigin currency !,ransacEiqqF 11*61pfi'on
@ Gains/lossesgains/losses
;. Unrealized on availdbl-e fo:: sale securities
d. Actuarial gains/losses on remeasurement of defined benefit
obligation under a defined benefit plan
-finu''he interim financial teport is intended to
fr ld.t Provide an update on the latest complete set of annual
financial staLements
b. Correct error discovered subsequent to the release of the
financial statements
c. Provide additional information not disclosed previously in the
annual financial statements
d. Provide information that are requested by the investors in
relation to a planned initial public offerings
,t:1 . w hen the allowance method is used, the entry which is appropriate
hen a particular account is written off as uncolfectible should
i nclude a 'l]:"
a. Credit to sales revenue i
b. Credit to bad debt expense
c. Debit to accounts receivabl-e
r*dl Debit to all-owance for doubtful account:;
 THEORY OF ACCOUNTS
First Pre-Board Examination (October 2A72 Batch)
21 July 2012 o 8:00 AM to 9:30 AM
Page B
qA. LipLif i ties and stockholders' equity are
^
TF
\4 Scurces of f i nanc i r:g for econom i c resoul-ces
'ir. Economic resources used by a business entity
c. Shown on the income st-atement. in calculatj-ng net income
d. lncreases in assets resulting from profitabls operations

9,4.
wnat is the proper time perioci (s ) ro record the ef f ects of a chanqe
in agcounting esLimaLe?
@ Curreni period and prospectively
b. Current period and retr:ospectively
c- Retrospectively onty
d. Current period only
W-G"X:a1-purpose financral statements are the product of
(a)
v
Financial accorrnting
b-. Managerial accounling
c. Both financial. and managerial accounting
d. Neither financj-al nor manaqerial accounting
*
,x st The underlying theme of tlre conceptual Framework is
@ Decisron usefulness
b. Understandability
c. Comparability
d. Reliability
is the correct order: of the steps in the accounting cycle
D the accounting period?
T ransaction analysis, journal entries, trial ba-l-arrce
T ransaction arralysis, postingr to the ledger, journal entries
T ransaction analysis, po.stinq t-o the ledger, adjusting
t.he
. accounts ;olE?FAi,
W Transaction anaI ysis,, journal entries, posting to the*IE6-ger
The required approach for hanclllng unusual ltems in interim financi.al
reports is to
a. Prorate t_hem over afl four. quarters
b. Prorate t-hem over the current and remaining quarters
(9 charge or credit t-he loss or gain in the quarter that they
v occrur
-* Disclose them only i, the serected explanatory noLes
*
fSA. Cred:t terms of 2/70, n/30 indicate that a
a. Two percent discount for early payment is available if the
invoice is paid be f o::e the tenth clay of the month f ollowing
the month to of sale
6 Two percent discount for early payment is availab]e within Len
ciays from the date of sale
c- Ten percent discount for early payment 1s available if the
,i nvoice is paici wj thin two days f rom the date of t.he invoice
H- Two percent rliscount for early payment is available if the
invoice is paid afLer the tenth duy, but before the thirtieth
day of the invoice rlate
S{assets are defined as
/ a. Resources with posBrible future economic benefits owed by an
/ ent_ity as a resul t 6f past t-r.rnsacti;ns
B)
(/ Re^sources with probable fr-tture economic benefits owned by an
\J entity as a resu1t of past t.ransactions
c. Resources with probable fu1-ure eccnornic benefits owned by an
enti Ly as a result of fut-uie transactions
d. Resources with possi.ble fuLure economic benefits owerl by an
enti-ty as a result of futu_re transact.i ons
 THEORY OF ACCOUNTS
First Pre-Board Examination (October 2AL2 Batch)
2L luly 2Ot2 t 8:00 AM to 9:30 AM Page 9

Presenti-ng consolidated financial statements this year when

c*'. sLatements of individual companies were presented l-ast year is
a. A correction of an error
b. An accounting change that shoufd be repor:ted prospectively
An account j-ng chanqe that should be report.ed by restating the
\-/) financial statements of all prior perlods presented
re

..d'. not an accounting chang

5l Jenny Co. is involved in a lawsuit. The liabLlit.y which could arise
as a result of this lawsuit should be recorded on the books if the
probability of Jenny co. owing money as a resu.Lt of the lawsuit is
a. Remote and the amount can be reasonably estimated
,b) Probable and the amount can be reasonably estimated
\i. Reasonably possible and the amount can ber reasonably estimated
d. Probable and the amount cannot be reason.rbly estimated
?4'. Under the instal-lment meLhod, revenue is recog:rized when the customer
a. orders the merchandi-se
b. receives the merchandise
c. receives the bil}
\J makes a cash paymenl
1da
)5- Under the percentage-of-completion method, revr:nue is recognized
a when construction begins on the project
b. _ when the project is complete
(s) throughout the project, based upon the amount of work
completed each year
throughout the project, based upon the arnount of cash recej,ved
from the customer
,g6. h which account are post-dated checks receive<l classified?
G) Receivables
b. Prepaid expenses
c. Cash
d. PayabJ-es
y7.Wn"n a deposit.or receives a bank statement indicating a "NSF check,,,
the depos.itor shouf d' W
/A) credit the cash account for the amount ol' the check
(t'
(.)h
'b. record the amount as an expense of the crrrrent period
c. credit a special receivable for t.he amount of the check
d. debit sales revenue
yz If you wanted to know what accounting rules a company follows related
to its inventory, where would you look?
a. The statement of financial positlon
b. The statemenL of comprehensive income
c. The statement of chanqes in equity
\_-/ The notes to the financiaf statements
,{)
the income statement, the amount of sales returns and allowances
'*.On
is normally
a. Added into selling expenses
b. Subtracted from gross margin to determine net sales
c_._zAdded in the calculation of cost of goodl; sold
6l
\J
Subtracted from gross sales to determine net sales
6S/. Why would a company se1l receivabl-es to another company?
I quality of its credit granting process
^. To limj-t itsthelegal liability
To improve
b.
t) To accelerate access to amounts collectecl
d. To comply with customer agreements
 THEORY OF ACCOUNTS
First Pre-Board Examination (October 2012 Batch)
21 July 2At2 o 8:00 AM to 9:30 ,AM
Page 10
h5 conservatism requires that. special ca-re must be taken Lo avoid
a' overstatjng asseLs and liabilltjes and understating revenues
and expenses
b' understal-ing assets and l-iabjlities and overstatlng revenues
and expenses
overstatrng assets and rever'utes and understatinq. liabilities
and expenses
d- understating assets and revenues and orrerstating Iiabilities
and expen.ses
\
uncier PAS 3f , tire appropriat.e account-ing treatment for f,u_t*ure
C 71 66' operating losses is to
,a-.-* o6f6-ilnr-fi-e a reasonable est-imaLe of rhe cost and provide for
the future liability
b - Determine the coSt and charge it clirectJ-y against retained
earn].ngs
r-) Not recognize such i-tems in the financial statements
\:-,
.'7!

d. Measure on the basis of estimated future cash fiows

x
- 67. The" di.f ference between the account.ing process and the accounting
.B
\'/ /',r\\ cYcJ-c is
r] - The accounting plocess results in the preparaLion of
f inancial,
statements, whereas the acccunting cycle is concerned with
recording business t.ransactions
in) The account-ing cycle represents the steps taken to accomplish
the accounting process
The
P{ accomplish accounting process represents the st-eps taken to
the accountinq cycle
d' merely semantic, because both concepts refer to the same thing
6.8-A company operat-ing at a proflt sha1l expect the balance sheet debit
' column -') in the worksheet to be
..\E. Greater than the balance sheet credit co.lumn
"

b. Smaller than t.he balance sheet credit column

c. Great.er 1-han the income statement debit corumn
d. Smalrer than the income statemeni- clebit column

fr which is not considered in determining whether a Iiabitity shall be

classified as current lj_ability?
a. The maturity ciate of the liability
b'. The length of the normal.operating cycie
c. Any unconditional right to postpone the sett,lement of the
liabrlity for at least 12 months after balance sheet date
The composition
v payment of currentofobligation
lij) current assets that are avail-abl-e for
-Jr-
fuhro. A deficiency in cash corrtrol
manipulating accounts
that may conceal cash shr:rt.age by way of
_receivable f roir ciGtomers,-
.: ]JaDDlno
/D\
\-/
c. -., : ',
K]-tl_ng
d. Defalcation \
L
/tL.Wl\ich of the following is, an example of revenue or expense recoqni-zed
in the current perioci's i:ncome stat_ement ?
a. Cash received from a client hre.fore the lawyer represents them
in court-
b. Inventor:y purchased by a ::etai l- store
e-41 wage costs owed to employees who worked cirrring t-he period.
d. Cash collected from an accounts receivable
7@ THEORY OF ACCOUNTS
First Pre-Board Exannination (October ZOt2 Batch)
21 July 2012 c 8:00 AM to 9:30 AM
Page 11
,, i{hjch is not an ltem of income statement presented under .nature of
Df expense'method?
- tltll,,
-!"'--ru.;;."; j-n invenrory
b. Supplies expense t'
g; Net purchases
,d\ Cos u of sales
,N,,= Which is not. a required supplemental disclosurr: for balance sheet?
t'.' a.. Contingencies
alX

, Financial forecasts
c. Acccunting policies
d. Contractuaf situations
/ what- is the preferable presentation of ac:ounts receivable
officers, employees, or affil-i.ated companies or-) a balance sheet? from
a. As offsets to capital K
bi By means of fooLnotes only .,{
if) As assets but separately from other rece,.vables
\J- As t.rade notes and accounts recej-vab,:e if they otherwise
qualify as current assets)
!b'-What capital. maintenance concept r:equires that asseLs and liabilities
',/ of a tl-rm i:e measured at current cost?
Nominal financial capital
b. Financial capital
/A- Physical capital
V
Real capital
,/
y'g'chanles in t.he fair val-ue of biological assets should be recognized
{*) In profit or loss
V. rn other comprehensive income 1't:4i:-:t'
c. In the statement of cash f l-ows t.; 'i
*o.,t ini":
d. In the stat.ement of changes in equity t"

1l unrealenished petty
',/ ' adlustments to avoid cash vouchers at balance sheet date will require
a. Overst.atement of both asset and expense
b. Under"statement of both asset and expense :xP {y
c. Understatement of asset and overstatemenl- of expense tt-r

a:9. Overstatement of asset and understat.emenl of expense

1j. Prror period errors are
a. Errors committed and
b. Errors corffnit.ted and
Errors committed and
Errors committed i-n
the current period
discovered in prior: peri.ods
di-scovered in the crrrrent_ period
discovered in currerlt and prior. periods
prior periods but are discovered only in

7x'wnicn would most 1ikeIy use the reLail i-nvento:y method?

a. A farm supply company
b. A TV repair company
c- A dealer in heavy machinery
\J A men, s clothlng shop
{d)
1,t0. which of the following organizations is represented j-n the 15-mernber
g Commission on Audit (COA)
b. Commission on Higher Education (CHEd)
c. Department of Budget and Management {DBM)
d- Junior philippine rnstitute of Accountant_s (JprA)
- END of EXAMINATION *
IA M5 012 tch
ANSWERS to ALL ITEMS with SOLUTIONS to SELECTED MS ITEMS

t- of Accounts (TA
Uerc@
1 D 31 A 61 A 1. Breakeven sales: 960,000 + 600/o = P 1.6 M
2 B 32 D 62 D 3. CM per hours: Al (11), 82 (10), C3 (14)
'7
_l A 33 B 63 D 5. 620,000 + 45,000 + 70,000 - 150,000
4 C 34 C 64 c 7. CM: 200,000 (2.4) = P 480,000
r
.,t A 35 A 65 C 9. tZA= P + 0.15 P+ 0.06 (1.15 P)
11. (3,800 - 2,800x) 15.2 xSH = 800 (3.5)
{" t) 36 B 66 C
13. 1 + 1.2 + 0.8 + 0.75 + (4,000 + 10,000)
B 37 C 67 B 15. Wtd. Ave CMtl: 4Ao/o(600/o) + l5o/o(4Oo/o) = 0.3
I D 38 C 6B A BES-caru: {[150,000 (1.3)+ 9,000] +0.3] 40olo
6 A 39 A 69 D 17. Seli: P 24,40A Process: P 48,900 - P 24,500
10 B 40 D 70 B 19. AFOH (V): 4O,74O BAAH (V): 2,100 x 19.8
11 B 41 B 7t c 21. DL variance: 400 U = 3,500 F + LRV
D 42 B 72 D
22. LRV: 3,900 U = 6,500 (AR - 5)
23. LEV: 3,500 P = (6,500 - SH) 5 SH = 7,2O0
_t5 A. 43 A 73 B Actual production: 7,200 hours + 2
4A
L"t D 44 A 74 C 24. MPV: (AQ x AP) - (AQ x SP)
15 C 45 B 75 C 5,960 U :65,560 - AQ (4) AQ = 14,900
16 D 46 A 76 A 25. DM variance: 27,36A U = 5,960 U + MQV
77 C 47 D 77 D MQV: 16,4099= (14,900-SQ)4 SQ= 10,800
1B C 48 A 7B D
28. SH: 10,275 (2) FR: 45,000 + 22,5O0 = 2
29. AFOH (F):46,275 BASH (F): 45,000
le C 49 A 79 D
30. BASH (F): 45,000 SHSR (F): 20,550 (2)
7A A 50 A 80 A 32. Equation 1: 420 = 3 a + 60 b
21 A 51 A Equation 2: 8,800 = 60 a + 1,400 b
22 C 52 D Variable cost per unit (b): P 2.00
23 A 53 c 34. (7,OOO x 8) + 30,000
24 A 54 B 35. P > S: Av > VJ Ay = AInventoryxFFOH/u
(- Ay = (10,000 - 7,000) x (70,000 + 10,000)
25 55 B
36. 10,000 (20) + 70,000
26 B 55 C 3B. UnitVC: (2,150 - 1,450) + (75 - 40) = 29
27 D 57 B Total FC: 1,450 - 20 (40)
28 C 58 D 40. AR collections in June:
29 D 59 C > May sales: 357,000 x 600/o x 97o/o
30 A 60 A ! May sales: 357,000 x 25o/o
P April sales: 363,000 x 9olo
NOTE: Sales are billed at the end of month.
41. July purchases = CGS + Inv, end + Inv, beg
!!q44gement Services (M S)
12,000 + 1.3(12,200) - 1.3 (12,000) = L2,26O
1 A 26 B 42. (77,25O* x 2O x 54a/o)+ (11,840^ x 2O x 460/o)
2 B 27 A * May: 11,900 + 1.3 (11,400) - 1.3 (11.900)
3 D 28 B ^ April: 12,10O + 1.3 (11,900) - 1.3 (12,100)
4 C 29 A 43. (49,300* x 54o/a) + .(51,550xx x 45olo)
*June: (15olo x 342,000) - 2,000 = 49,300
5 A 30 C
xxMay: (15o/o x 357,000) - 2,000 = 51,550
6 B 31 A
44. Unit CM; 405,000 + 1,800 = 225
7 C 32 B
45. [2,100 (225) - 245,000] x 600/o
B B 33 D 46. { [ 1,500 (225) + 1, 500 ( 1 75)) * 247,5OO] x 6Oq/o
9 C 34 B 47.(5OO-300)X=61,500
10 A 35 A 48. (247,500 + 157,5OO) = 3Oo/o
11 C 36 B 50.
72 B 37 C llake Buy
(- DM 17.80
13 3B B
DL 19.00
L4 D 39 B VFOH 1.00
15 A 40 B FFOHX 8.90 :
16 C 41 C ocx* 3.90
17 A 42 A PP
Total P 50.60
- P 48.50
4q.s0_
1B A 43 A
19 c 44 A * Avoidable FFOH: 17.10 - 8.20
20 D 45 B xx Opportunity cost: 273,OOO + 70,000
2l B 46 A
22 B 47 B - END.
23 D 4B C
24 A 49 A
25 c 50 D