Acctg 201a Midterm Exam 1st Sem 20-21 Questions

CORDILLERA CAREER DEVELOPMENT COLLEGE College of Accountancy Buyagan, Poblacion, La Trinidad, Benguet Accounting 201A – Theory of Accounts Integration I Midterm Examination INSTRUCTION: 1. Prepare an ANSWER SHEET , with the following format: Five Columns at 20 numbers (items) per column as follows: Column 1 (items 1-20); Column 2 (items 21-40); Column 3 (items 41-60), etc. 2. Write yours answer on each item indicating the LETTER of your choice, such A; B; C; D; or E. 3. Upload your answers to the school LMS . Don’t forget to write your NAMES. 1. The objective of PAS 1 is to prescribe the basis for presentation of general purpose financial statements, to ensure a. Intra-comparability b. Inter-comparability c. Faithful representation d. A and B 2. General purpose financial statements are those statements that cater to the a. Common and specific needs of wide range of external and internal users b. Common needs of a wide range of external and internal users c. Common needs of a wide range of external users d. Specific needs of a wide range of external users 3. The purpose of general purpose financial statements is to provide information about the a. Economic resources and obligations of an entity that is useful to a wide range of users in making economic decisions b. Financial position and financial performance of an entity that is useful to a wide range of users in making economic decisions c. Financial position, financial performance and cash flows of an entity that is useful to a limited range of users in making economic decisions d. Financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions 4. A complete set of financial statements includes a. Director’s report c. Notes b. Income tax return d. All of these 5. An additional statement of financial position as at the beginning of the preceding period is prepared when the entity makes (choose the incorrect statement) a. Retrospective application b. Retrospective restatement c. Prospective application d. Makes reclassification adjustment 6. Presenting separate statement of profit or loss or income statement is a. Required under PAS 1 presentation of financial statements b. Required under PAS 1 to be presented together with the statement of financial position c. Permitted as a substitute for a statement of comprehensive income is still presented d. Permitted provided a statement of comprehensive income is still presented 7. According to PAS 1 the general features of financial statements include all of the following, except a. Fair presentation and compliance with PFRS b. Comparability of presentation c. Materiality and aggregation d. Comparative information 8. According to PAS 1, inappropriate accounting policies are a. Rectified either by disclosure of the accounting policies used or by notes or explanatory material b. Not rectified either by disclosure of the accounting policies used or by notes or explanatory material c. Permitted as long as they are used consistently from period to period d. Disclosed in the notes only 9. When an entity changes the end of its reporting period and presents financial statements for a period longer or shorter than one year, an entity shall disclose all of the following, except a. The period covered by the financial statements b. The reason for using a longer or shorter period c. The fact that amounts presented in the financial statements are not entirely comparable d. A quantification of the possible adjustments that would eliminate the effects of the longer or shorter reporting period 10. The statement of financial position may be presented either showing current/noncurrent distinction or based on liquidity. PAS 1 encourages the

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a. Classified presentation b. Unclassified presentation c. Combination of a and b d. None of these In a classified statement financial position PAS 1 requires deferred tax asset and deferred tax liabilities to be presented as a. Current items c. Either a or b b. Noncurrent items d. None of these PAS 1 a. Prescribes the order or format in which the entity present items in the financial statements b. Does not prescribe the order or format in which the entity presents items in the financial statements c. Prescribes some order of some format in which the entity present items in the financial statements d. Does not deal with the presentation of items in the financial statements According to PAS 1, an entity shall present all items of income and expense recognized in period a. In a single statement of profit or loss and other comprehensive income b. In two statements- an income statements and a statement of comprehensive income c. In a single statement of changes in equity d. A or B Other comprehensive income comprises items of income and expenses that are a. Not recognized in profit or loss as required or permitted by the other PFRSs b. Recognized in profit or loss as required or permitted by other PFRSs c. A or B d. None of these Which of the following is not one of the components of OCI a. Changes in revaluation surplus b. unrealized gains and losses on FVPL c. translation gains and losses on foreign operations d. effective portion of gains and losses on hedging instruments in a cash flow hedge according to PAS 1, reclassification adjustments are a. assets and expenses reclassified to other asset accounts in the current period b. amounts reclassified to OCI in the current period that were recognized in profit or loss in the current or previous periods c. amounts reclassified to profit or loss in the current period that were recognized in the other comprehensive income in the current or previous periods d. A and B Other comprehensive income, including reclassification adjustments are presented a. Net of related tax b. Gross of related tax c. A or B d. Not affected by taxes Total comprehensive income comprises a. All non-owner changes in equity b. All owner changes in equity c. Some non-owner changes in equity d. A or B Comprehensive income comprises a. Revaluation surplus and re-measurements of net defined benefit liability(asset) only b. Revaluation surplus, actuarial gains and some other items c. Both owner and non-owner changes in equity d. Profit or loss and other comprehensive income Presenting extraordinary items in the financial statements a. Is prohibited on the face of the financial statements but is permitted in the notes b. Is prohibited on both face of the financial statements and in the notes c. Is permitted in some areas d. Makes the financial statements totally useless According to PAS 1, expenses are presented using a. Nature of expense method b. Function of expense method c. A or B d. Classified and unclassified Additional disclosure is required when expenses are presented under the a. Nature of expense method c. A or B b. Function of expense method d. Classified and unclassified Dividends are disclosed in the a. Statement of changes in equity

b. Notes c. Statement of financial position d. A or B 24. Which of the following statements is correct in relation to the provision of PAS 1 a. Owner changes in equity are presented in the statement of profit or loss and other comprehensive income b. Non-owner changes in equity are presented in the statement of changes in equity c. A and B d. None of these 25. The note is an integral part of the financial statements. It presents all of the following except a. Information regarding the basis of presentation of financial statements b. Information required by the PFRS c. Auditor’s opinion d. All of these are presented in the notes 26.Bank overdrafts, if material, should be a. Reported as a deduction from the current asset section. b. Reported as a deduction from cash. c. Netted against cash and a net cash amount reported. d. Reported as a current liability. 27.The journal entries for a bank reconciliation a. Are taken from the "balance per bank" section only. b. May include a debit to Office Expense for bank service charges. c. May include a credit to Accounts Receivable for an NSF check. d. May include a debit to Accounts Payable for an NSF check. 28.When preparing bank reconciliation, bank credits are a. Added to the bank statement balance. b. Deducted from the bank statement balance. c. Added to the balance per books. d. Deducted from the balance per books. 29. Deposits in foreign countries which are subject to a foreign exchange restrictions should be a. Valued at current exchange rates and shown as current assets b. Valued at historical exchange rates and presented as noncurrent assets c. Valued at current exchange rates and presented as current/noncurrent assets depending on the restriction d. Valued at historical exchange rates and presented as current assets 30. Adjusting and correcting entries in the books of the company are necessary for a. Book reconciling items b. Errors committed by the bank c. Bank reconciling items d. a and c 31. In preparing the bank reconciliation, certified checks should be excluded from outstanding checks. The rationale for this treatment is a. the bank, when certifying checks, draws the check in its account b. the bank, when certifying checks, automatically debits the company’s account c. the bank, when certifying checks, automatically credits the company’s account d. the bank, when certifying checks, assumes the obligation to pay the drawee, when the check is presented for payment 32. Unless otherwise stated, reconciling items are presumed to have been taken up in the or taken up by the bank a. during the month the bank statement is prepared b. in the immediately following month c. in the immediately preceding month d. in the immediately following or preceding reporting period, on a case to case basis 33. In preparing the bank reconciliation using the adjusted balance method, the first item listed in the bank reconciliation report for reconciling the balance of cash in bank per books to the adjusted balance is the a. balance of cash in bank per books as of the end of the month b. balance of cash in bank per books as of the beginning of the month c. balance of cash in bank per bank statement as of the end of the month d. balance of cash in bank per bank statement as of the beginning of the month 34. Securities which could be classified as financial assets measured at amortized cost are a. investment in stocks c. municipal bonds. b. warrants. d. treasury stock. 35. Which of the following is not correct in regard to held for trading securities? a. They are held to be sold in a short period of time. b. Unrealized holding gains and losses are reported as part of profit or loss. c. Any discount or premium is not amortized. d. All of these are correct.

36. A debit balance in the account Fair Value Adjustment--FVOCI Securities at the end of a year should be interpreted as a. the net unrealized holding gain for that year. d the net realized holding gain to date. b the net realized holding gain for that year. . . 1. c. the net unrealized holding gain to date. 37. A debit balance in the account Fair Value Adjustment-Held for Trading Securities at the end of a year should be interpreted as a. the net realized holding gain to date. d the net unrealized holding gain for that year. b the net unrealized holding gain to date. . . 2. c. the net realized holding gain for that year. 38. Unrealized holding gains or losses which are recognized in profit or loss are from securities classified as a. amortized cost. c. held for trading. b. FVOCI. d. designated and held for trading. 39. An unrealized holding gain on a company's FVOCI securities should be reflected in the current financial statements as a. an extraordinary item shown as a direct increase to retained earnings. b. a current gain resulting from holding securities. c. a note or parenthetical disclosure only. d. other comprehensive income and included in the equity section of the balance sheet. 40. Changes in fair values of an investment measured at fair value through other comprehensive income a. Must be recognized in net profit or loss. b. Must be recognized directly in equity. c. May be recognized in net profit or loss or directly in equity. d. Must be recognized in other comprehensive income; the accumulated net fair value changes is presented in equity 41. At initial recognition, an entity may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of PFRS 9 that is not held for trading. In accounting for such financial instruments, all of the following is true, except a. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss. b. The entity may transfer any cumulative fair value gains or losses within equity. c. Dividends on such investments are recognized in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. d. Cumulative fair value gains or losses are transferred to profit or loss when the financial asset is derecognized. 42. An entity sells its investment in FVPL during the year. The realized gain or loss on the sale is computed as a. the difference between the sale price and the carrying amount of the investment as at the date of sale b. the difference between the sale price and the original acquisition cost of the investment. c. the difference between the net proceeds received from the sale and the carrying amount of the investment as at the date of sale d. the difference between the net proceeds received from the sale and the carrying amount of the investment as at the date of sale adjusted for any accumulated fair value gains or losses recognized since the investment was acquired. 43. For which type of investments would unrealized increases and decreases be accumulated in an owners' equity account? a. Equity method securities d Held-to-maturity securities b FVOCI securities . . 3. c. Held for Trading securities 44. If the combined fair value of held for trading securities at the end of the year is less than the fair value of the same portfolio of held for trading securities at the beginning of the year, the difference should be accounted for by a. reporting an unrealized loss in security investments in the stockholders' equity section of the balance sheet. b. reporting an unrealized loss in security investments in the income statement. c. a footnote to the financial statements. d. a debit to Investment in Held for Trading Securities. 45. Securities classified as financial asset measured at amortized cost are reported at a. acquisition cost. b. acquisition cost plus amortization of a discount. c. acquisition cost plus amortization of a premium. d. fair value. 46. In accounting for investments in debt securities that are classified as held for trading securities, a. a discount is reported separately. b. a premium is reported separately. c. any discount or premium is not amortized. d. none of these. 47. According to PFRS 9 Financial Instruments, investments in debt securities that are classified at amortized cost are generally recorded at a. cost including accrued interest. b. maturity value.

c. cost including brokerage and other fees. d. fair value at initial recognition plus brokerage and other fees. 48. Pippen Co. purchased ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principal by the table value for a. 10 periods and 10% from the present value of 1 table. b. 10 periods and 8% from the present value of 1 table. c. 20 periods and 5% from the present value of 1 table. d. 20 periods and 4% from the present value of 1 table. 49. Solo Co. purchased ₱300,000 of bonds for ₱315,000. The securities are to be held until maturity to collect the contractual cash flows. The entry to record the investment includes a. a debit to Held-for-Trading Securities at ₱300,000. b. a credit to Premium on Investments of ₱15,000. c. a debit to Investment in bonds measured at amortized cost for ₱315,000. d. none of these. 50. When an investment in a debt security measured at amortized cost is transferred to held for trading security, the carrying amount assigned to the held for trading security should be a. its original cost. b. its fair value at the date of the transfer. c. the lower of its original cost or its fair value at the date of the transfer. d. the higher of its original cost or its fair value at the date of the transfer. 51. When an investment in equity securities irrevocably elected on initial recognition to be subsequently measured at FVOCI is transferred to held for trading because the company anticipates selling the stock in the near future, the carrying amount assigned to the investment upon entering it in the trading portfolio should be a. its original cost. b. its fair value at the date of the transfer. c. the higher of its original cost or its fair value at the date of the transfer. d. None of these 52. According to PFRS 9 Financial Instruments, investments in debt securities classified under the amortized cost measurement category should be recorded on the date of acquisition at a. lower of cost or market. b. market value. c. fair value plus brokerage fees and other costs incident to the purchase. d. face value. 53. Which of the following is correct about the effective interest method of amortization? a. The effective interest method applied to investments in debt securities is different from that applied to bonds payable. b. The amortization of a discount decreases from period to period. c. The amortization of a premium decreases from period to period. d. The effective interest method produces a constant rate of return on the book value (carrying amount) of the investment from period to period. 54. A debt security is purchased at a discount. The entity wants to classify the investment as a financial asset measured at FVOCI. The entry to record the amortization of the discount includes a a. debit to investment account. c. debit to Interest Revenue. b. debit to the discount account. d. none of these. 55. PAS 28 generally applies when the level of ownership of another company is at what percentage? a. Less than 20% c. 20%-50% b. 20%-30% d. More than 50% 56. When an investor uses fair value accounting to account for investments in common stock, cash dividends received by the investor from the investee should normally be recorded as a. a deduction from the investment account. b. dividend revenue. c. an addition to the investor's share of the investee's profit. d. a deduction from the investor's share of the investee's profit. 57. Under the equity method in PAS 28, goodwill amortization a. reduces the investment account. c. reduces both investment income and the b. increases the investment account. investment account. d. is not recorded. 58. The equity method of accounting for an investment in the common stock of another company should be used when the investment a. is composed of common stock and it is the investor's intent to vote the common stock. b. ensures a source of supply such as raw materials. c. enables the investor to exercise significant influence over the investee. d. gives the investor voting control over the investee. 59. When an investor uses the equity method to account for investments in common stock, the investment account will be increased when the investor recognizes

a. b. c. d.

a proportionate share of the net income of the investee. a cash dividend received from the investee. periodic amortization of the goodwill related to the purchase. depreciation related to the excess of fair value over carrying amount of the investee's depreciable assets at the date of purchase by the investor. 60. When an investor uses the equity method to account for investments in common stock, cash dividends received by the investor from the investee should be recorded as a. an increase in the investment account. d. a deduction from the investor's share of the b. a deduction from the investment account. investee's profits. c. dividend revenue. 61. Dane, Inc., owns 35% of Marin Corporation. During the calendar year 2004, Marin had net earnings of ₱300,000 and paid dividends of ₱30,000. Dane mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively? a. Understate, overstate, overstate c. Overstate, overstate, overstate b. Overstate, understate, understate d. Understate, understate, understate 62. Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the a. investor sells the investment. d. earnings are reported by the investee in its b. investee declares a dividend. financial statements. c. investee pays a dividend. 63. When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies? a. The investor should always use the equity method to account for its investment. b. The investor should use the equity method to account for its investment unless circum-stances indicate that it is unable to exercise "significant influence" over the investee. c. The investor must use the fair value method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. d. The investor should always use the fair value method to account for its investment. 64. Byner Corporation accounts for its investment in the common stock of Yount Company under the equity method. Byner Corporation should ordinarily record a cash dividend received from Yount as a. a reduction of the carrying value of the c. an addition to the carrying value of the investment. investment. b. additional paid-in capital. d. dividend income. 65. Which of the following is not dealt with by PAS 41? a. The accounting for biological assets. b. The initial measurement of agricultural produce harvested from the entity’s biological assets. c. The processing of agricultural produce after harvesting. d. The accounting treatment of government grants received in respect of biological assets. 66. Where there is a long aging or maturation process after harvest, the accounting for such products should be dealt with by a. PAS 41. c. PAS 16, Property, Plant, and Equipment. b. PAS 2, Inventories. d. PAS 40, Investment Property. 67. Generally speaking, biological assets relating to agricultural activity should be measured using a. Historical cost. b. Historical cost less depreciation less impairment. c. A fair value approach. d. Net realizable value. 68. The accounting resources are measured in the balance sheet under cost and revaluation model using several permitted value. There is indicated impairment on an item of PPE if the carrying value is higher than a. exit value which is lower than value in use c. net realizable value which is higher than value in b. the future net cash inflow from the PPE use d. the Original cost of acquisition 69. Property, plant and equipment include a. Facilities which have been idle for an extended period b. Property which has been abandoned but not physically retired c. Facilities owned but no longer adopted for use in business d. Improvement to leased facilities, if material in amount and the terms of lease extend over a long period. 70. What is the treatment of borrowing cost? a. recognized as period’s expense regardless of how borrowings are applied b. deferred and subsequently amortized c. capitalized regardless of how borrowings are applied d. capitalized if directly attributable to the acquisition, construction or production of a qualifying asset 71. Which is not true concerning revaluation of property, plant and equipment?

a. The depreciation should be based on historical cost and it should be computed from the date of appraisal. b. The appraisal should be made by an independent expert or specialist c. The revaluation increment is classified as an equity item. d. The necessary disclosures should be made in the financial statements. 72. Value in use of an asset is equal to the A. Discounted future net cash flows from the use and eventual disposition of the asset. b. Undiscounted future net cash flows from the use of the asset c. Undiscounted future net cash flows from the use and eventual disposition of the asset d. Discounted future net cash flows from the use of the asset. 73. Which OF the following is/are correct? 1) All items of Property, plant and equipment are tangible assets. 2) All items of Property, plant and equipment are depreciable. 3) An item of asset should be recognized as property, plant and equipment when the cost is measured reliably and the expected future economic benefits from the asset is probable. a. all b. i and ii only c. i and iii only d. ii and iii only 74. Which of the following is /are correct? 1) When payment for item of property, plant and equipment is deferred beyond normal credit, terms, the difference between the cash price equivalent and the total payments should be recognized as interest expense over the estimated life of the asset. 2) The cost of an item of property, plant and equipment acquired in non-monetary exchange which indicate commercial substance is measured at the carrying value of the asset given up. 3) When an item of PPE is acquired through self-construction, the cost of abnormal amount of wasted material, labor and other resources incurred are to be part of its capitalized cost. a. all b. i and ii only c. i and iii only d. none 75. Which of the following is/are not correct? 1) When land and building were acquired, with the intention of tearing down the building so that land can be used for the construction of factory building, the cost of tearing down the building is added to the cost of factory building. 2) If the qualifying asset is financed through general borrowings, the capitalized borrowing cost is equal to average expenditures on the asset constructed multiplied by the capitalization rate, or the actual borrowing cost incurred whichever is higher. a. none b. i only c. ii only d. i and ii 76. Which of the following is /are correct? 1) If an item of PPE is acquired as government grant, such should be credited to income over the periods necessary to match them with the related costs. 2) If an item of PPE is acquired as government grant, such should be credited to donated capital upon assurance that this will be received and the entity will comply with the conditions attached to the grant. 3) The government grant that becomes receivable as compensation for expenses already incurred, with no further related costs should be recognized as income for the period in which it becomes receivable. a. all b. i & ii only c. ii and iii only d. i and iii only 77. Which of the following is least likely to be reported as part of in property, plant and equipment? a. Land b. land improvements c. natural resources d. land held for sale 78. Which of the following cost generally would be capitalized to a PPE? a. interest on debt incurred to purchase the PPE b. property taxes related to period after acquisition of PPE c. import duties incurred on purchase of PPE d. freight in, FOB destination for transportation of PPE 79. PPE received as donation should a. be depreciated based on their market value at date of donation b. be expensed at date upon receipt as donation c. be depreciated based on their book value at the time the donation d. should not be depreciated 80. Which of the following is not correct regarding an Idle or abandoned property which are not physically retired although not currently in use a. classified as other non-current assets b. are carried at net realizable value or net carrying value whichever is higher c. are not included under PPE d. are carried at net realizable value or net carrying value whichever is lower 81. The value of wasting asset may increase due to any of the following except one. Which is the exemption? a. due to accretion b. due to discovery value c. due to natural growth of wasting asset d. due to tangible development 82. Which of the following is reported in the income statement? a. impairment loss b. revaluation surplus c. net appreciation d. appreciation minus corresponding depreciation

83. Investment property includes all of the following, except a. Land held for long-term capital appreciation b. Land held for currently undetermined use c. Building owned by the reporting entity or held by a finance lessee leased out under one or more operating leases. d. Property held for sale in the ordinary course of business or in the process of construction for such sale. 84. Which of the following is an investment property? a. Property being constructed or developed on behalf of third parties. b. Property that is being constructed and developed as investment property. c. Property held for future development and subsequent use as owner-occupied property. d. Owner-occupied property awaiting disposal. 85. Which statement is correct if the property is partly investment and partly owner-occupied? I. If the investment and owner-occupied portions could be sold or leased out separately, the portions shall be accounted for separately as investment property and owner-occupied property. II. If the investment and owner-occupied portions could not be sold or leased out separately, the property is investment property if only an insignificant portion is held for manufacturing or administrative purposes. a. I only c. Both I and II b. II only d. Neither I nor II 86. If an entity owns and manages a hotel, services provided to guests are a significant component of the arrangement as a whole. In such a case, the hotel is classified as a. Investment property b. Owner-occupied property c. Partly investment property and partly owner-occupied property d. Neither investment property nor owner-occupied property 87. An investment property is recognized when I. It is probable that the future economic benefits that are associated with the investment property will flow to the entity. II. The cost of the investment property can be measured reliably. a. Both I and II c. I only b. Neither I nor II d. II only 88. Which statement is incorrect concerning initial measurement of an investment property? a. The investment property shall be measured initially at fair value. b. The cost of the purchased investment property includes its purchase price and any directly attributable expenditure. c. The initial cost of a property interest held under a lease and classified as an investment property shall be the lower of the fair value of the property and the present value of the minimum lease payments. d. If payment for an investment property is deferred, its cost is the cash price equivalent. 89. Directly attributable expenditures related to investment property include a. Professional fees for legal services, property transfer taxes and other transaction costs. b. Startup costs. c. Initial operating losses incurred before the investment property achieves the planned level of occupancy. d. Abnormal amounts of wasted material, labor and other resources incurred in constructing or developing the property. 90. Subsequent to initial recognition, the investment property shall be measured at a. Fair value b. Cost less any accumulated depreciation and any accumulated impairment losses c. Revalued amount d. Either fair value or cost less any accumulated depreciation and any accumulated impairment losses 91. What is the best evidence of fair value of an investment property? a. Current price in an active market for similar property in the same location and condition. b. Current price in an active market for property of different nature, condition and location adjusted to reflect those differences. c. Recent price of similar property in less active market. d. Discounted cash flow projection based on reliable estimate of future cash flows. 92. The cost of property acquired by direct cash purchase includes the invoice cost and a. All directly attributable costs necessary to bring the asset to working condition for its intended use. b. The implied interest on the debt to finance the purchase c. The market value of any noncash asset surrendered to acquire the asset d, The estimated salvage value of the asset 93. The cost of fully depreciated asset remaining in service and the related accumulated depreciation. a. Should be removed from the accounts and excluded from property, plant and equipment. b. Should not be removed from the accounts and therefore included in property, plant and equipment with disclosure. c. Should not be removed from the accounts and therefore included in property, plant and equipment without disclosure.

d. Should be adjusted to conform with the new estimated useful life. 94. Incidental cost to be capitalized as land do not include a. Legal fees for establishing clean title b. Commission paid to to broker c. cost of permanent improvement such as grading, leveling, and other landscaping d. Expenditures for fences, water system, sidewalk and paving. 95. Which is not true concerning revaluation of property, plant and equipment? a. The depreciation should be based on historical cost and it should be computed from the date of appraisal. b. The appraisal should be made by an independent expert or specialist c. The revaluation increment is classified as an equity item. d. The necessary disclosures should be made in the financial statements. 96. If an appraised property is disposed of, the revaluation increment pertaining to the asset is preferably transferred to a. Income summary if all nominal accounts are already closed b. Retained earnings c. Income d, Additional paid in capital 97. In an exchange with commercial substance, X surrendered its equipment to B in exchange for equipment located in the area where X has business operation. The fair values of both the equipment are clearly determinable. The accounting for the exchange should be based on the a. fair value of asset received b. fair value of the asset surrendered c. recorded amount of the asset surrendered. d. recorded amount of the asset received 98. When an entity acquires land with building on it and immediately tears down the existing building to give way to the construction of new building, the cost to tear down the existing building should be a. added to the cost of the land b. added to the cost of the new building c. charged as current expensed d. allocated between land and new building’s cost based on relative fair values. 99. Which of the following is not correct? a. All items of Property, plant and equipment are tangible assets. b. Part of cost of some items of PPE are reported in the income statement through depletion cost c. All items of Property, plant and equipment are depreciable. d. An item of asset should be recognized as property, plant and equipment when the cost is measured reliably and the expected to be received future economic benefits from the asset is probable. 100. The initial cost of an item of PPE will include the following, except a. Purchase price, net of cash discount and volume discount, if any b. Cost to make the asset ready for its intended use c. Freight, FOB destination, collect. d. Estimated cost of dismantling, removing the item and restoring of the site.

“Patience cannot be acquired overnight. It’s just like building up a muscle, every day you need to work on it”. – Eknath Easwaran. ----END OF EXAMINATION------