Set C

CFAS – FINALS 1ST QUIZ (PAS 20, PAS 24, PAS 28 & PAS 40) INSTRUCTION: CHOOSE THE BEST ANSWER 1. All of the following are related party transactions, except a. Took a huge bank loan. b. Sold an asset to an associate. c. Sold an entity car to the wife of the managing director. d. All of the above are consider as related party transaction. 2. Related party transactions include all, except a. Sold goods to another entity owned by the daughter of the entity’s managing director. b. A venturer sold goods to the joint venture. c. Sold an equipment to the uncle of the entity’s finance director. d. All of the above are consider as related party transaction. 3. Which of the following is not a required minimum disclosure about related party transactions? a. Doubtful debt related to the outstanding balance. b. The amount of the outstanding balance. c. The amount of related party transaction. d. None of the above. 4. Which of the following is not a mandated related party disclosure transaction? a. If neither of the entity’s parent nor the ultimate controlling entity produces financial statements available for public use, then the name of the next most senior parent that does so. b. Names of all the associates that an entity has dealt with during the year. c. Relationship between parent and subsidiaries. d. Name of the entity’s parent and, if different, the ultimate controlling party. 5. Which is not included in key management personnel compensation? a. Reimbursement of out-of-pocket cost. b. Short-term benefit. c. Share-based payment. d. Termination benefit 6. Which disclosure is not required about government grant? a. The nature and extent of government grant. b. The name of the government agency that gave the grant. c. Unfulfilled condition. d. None of the above. 7. Government assistance includes all of the following except a. Provision of guarantee. b. Government procurement policy. c. Free technical advice. d. All of the above are consider as government grant.

8. It is an action by a government designed to provide an economic benefit specific to an entity and for which the government cannot reasonably place a value a. Government assistance. b. Government grant. c. Government benefit. d. None of the above. 9. A government grant that becomes receivable as compensation for expenses or losses already incurred should be recognized as income. a. When received. b. Of the period in which it becomes receivable. c. Of the period in which it becomes payable. d. None of the above. 10. Government grant related to non-depreciable asset that requires fulfillment of certain conditions. a. Should not be recognized as income. b. Should be recognized as income immediately. c. Should be recognized as income over the periods which bear the cost of meeting the conditions. d. None of the above. 11-12. When an entity uses the cost model, transfer between investment property, owner-occupied property and inventory shall be made at a. Fair value. c. Cost. b. Carrying amount. D. Assessed value. 13-14. When an investment property under construction is completed and carried at fair value, the difference between the carrying amount and the fair value shall be a. Accounted for as revaluation of property. b. Included in retained earnings. c. Included in other comprehensive income. d. Included in profit or loss. 15-16. If an Inventory is transferred to investment property to be carried at fair value, the remeasurement to fair value is a. Accounted for as revaluation of property. b. Included in income statement. c. Included in other comprehensive income. d. Included in retained earnings. 17-18. If the owner-occupied is transferred to investment property that is to be carried at fair value, the difference between the carrying amount and the fair value shall be a. Accounted for as revaluation of property. b. Included in retained earnings. c. Included in other comprehensive income. d. Included in profit or loss. 19-20. Gain or loss from disposal of investment property shall be determined as the difference between the a. Fair value and the carrying amount of the asset. b. Gross disposal proceeds and fair value of the asset. c. Net disposal proceeds and carrying amount. d. Gross disposal proceeds and carrying amount.

SET C

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Muymoy inc. acquired a building on January 1, 2019 for P9,000,000. At that date, the building had a useful life of 30 years. On December 31, 2019, the fair value of the building was P9,600,000 and on December 31, 2020, the fair value is P9,800,000. The building was classified as an investment property and accounted for under cost model’ 21-22. What amount should be carried in the statement of financial position on December 31, 2020? a. P9,000,000 c. P8,450,000 b. P8,400,000 d. P8,700,000 23-25. What amount should be carried in the income statement on December 31, 2020? a. P300,000 expense c. No gain/loss. b. P200,000 gain d. Neither a,b, nor c Mimeow Company purchased a factory machine for P3,500,000 on January 1, 2019. The entity received a government grant of P600,000 in respect of this asset. It also has an estimated salvage value of P200,000. The accounting policy is to depreciate the asset over 6 years on a straight-line basis and to treat the grant as deferred income. 26-27. What is the carrying amount of the asset on December 31, 2020? a. P2,333,333 c. P2,533,333 b. P2,300,000 d. P2,400,000 28-30. How much will be reported on 2019 Income Statement as grant income if the approach to be use is deduction from asset approach? a. P100,000 c. P66,667 b. P550,000 d. P0 Daddy company acquired 70% of Son inc. last year. During the current year, both entities included in their financial statements the following: Mommy Sissy Officer’s expenses P500,000 P350,000 Loans to officers 400,000 250,000 Key officer’s salaries 650,000 300,000 31-32. How much should be reported to Daddy’s consolidated financial statement related party disclosure in the notes for the current year? a. P3,000,000 c. P1,450,000 b. P2,450,000 d. P1,600,000 Mingming company reported the following remuneration and other payments made to the entity’s chief executive officer during the year: Termination benefits P3,000,000 Share dividends 250,000 Other long-term benefits 1,300,000 Retirement pension 1,500,000 Short term employee benefits 750,000

33-35. How much should be disclosed as compensation to key management personnel. a. P3,500,000 c. P5,800,000 b. P6,550,000 d. P6,800,000 Psiwit enterprise invest to Mingming inc. worth P250,000 to acquire 25% of ownership. Mingming’s fair value of assets and liabilities are as follows: Cash P100,000; A/R P 350,000; Inventory P200,000; Equipment P500,000; Land P1,000,000; Accounts payable P300,000; Bonds Payable P850,000. 36-37. How much is the implied good will at the acquisition date? a. P350,000 c. P100,000 b. P50,000 d. Neither a,b nor c Cat Woman corporation purchased 35% of Batman company on January 1, 2019 for P11,200,000 when Batman’s carrying amount was P32,400,000. On that day, the market value of the net assets of Batman company equaled there carrying amount with the following exceptions: Carrying amount FMV Equipment P7,000,000 P5,600,000 Building P1,600,000 P2,600,000 The equipment has remaining useful life of 5 years, and the building has a remaining useful life of 10 years. Batman reported net income of P3,200,000 and declared cash dividend of P1,000,000 for 2019. 38-40. What is the investment income that will be reported by Cat Woman corporation for 2019? a. P987,000 c. P1,260,000 b. P1,120,000 d. P1,183,000 41. An entity that entered into a related party transaction would be required to disclose all of the following information, except a. Nature of the relationship between the parties. b. Peso amount of the transaction. c. Amount due from or to related parties at the end of the reporting period. d. All of the above are required to be disclose. 42. Which of the following enumeration describe the proper inclusion in key management personnel compensation? a. Social security contributions, postemployment benefits and dividends to shareholders. b. Social security contribution and dividends to shareholders. c. Post-employment benefits and dividends to shareholders. d. None of the above. 43. All of the following are related parties, except a. A postemployment benefit plan for the employees. b. Shareholder owning twenty eight percent. c. Joint venture in which the entity is a venture. d. None of the above. 44. Which of the following is not a related party of an entity? a. Shareholder owning twenty percent. b. Associate of an entity. c. Key management personnel of the entity. d. None of the above.

SET C

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45. Which is not required as a related party disclosure? a. An entity that has a common director with another entity b. The son of the chief executive officer of the entity c. Associate of an entity. d. An entity that has a twenty percent investment in common stock at the company. 46. When an entity holds 20% or more but less than 50% of the voting power of an investee, which statement is true? a. The investor should use fair value method unless it can be clearly demonstrated that the investor has significant influence over the investee. b. The investor must use the equity method. c. The investor must use fair value method. d. None of the above. 47. An investor shall discontinue the equity method when a. The associate operates under severe long-term restrictions. b. The business activities of the investor and associate are dissimilar. c. The investor ceases to have control over the associate. d. None of the above. 48. Which of the following statement/s is/are correct concerning the equity method? 1st. The investment in associate is increased or decreased by the investor’s share of the profit or loss of the associate after the date of acquisition. 2nd. The investor’s share of the profit or loss of the associate is recognized in the investee’s profit and loss. 3rd. The investment is initially recorded at cost. 4th. Dividends received from the investee are accounted as a return of investment. a. 1st, 2nd & 4th c. 1st, 2nd & 3rd b. 2nd, 3rd & 4th d. 1st, 3rd & 4th 49. If the investee has outstanding cumulative preference shares, the investor computes share of profit or loss a. Without regard for preference dividends. b. After adjusting for preference dividends which were actually paid during the year. c. Will be reduced by the dividends if there will be a declaration. d. None of the above shows the correct approach. 50. Goodwill arising from an investment in associate is a. Included in the carrying amount of the investment and be subjected to impairment annually. b. Included in the carrying amount of the investment and not amortized. c. Both a and b are correct. d. Neither a nor b is correct. 51. The equity method is not applicable under all of the following circumstances, except a. The ultimate parent of the investor produces consolidated financial statements. b. The investee is a wholly-owned subsidiary. c. The investor’s debt and equity instruments are not traded. d. The investor is in the process of filing financial statements with SEC for the purpose of issuing debt and equity

52. When an investment ceases to be an associate, the fair value of the investment at the date when it ceases to be an associate a. Is regarded as its cost on initial recognition as a financial asset. b. Is regarded as its fair value on initial recognition as a financial asset. c. Is regarded as its fair value on initial recognition as financial liability. d. Is regarded as its amortized cost on initial recognition as an investment. 53. Which statement best describes significant influence? a. A mutual sharing in the risks and benefits of a combined entity. b. The power to participate in the financial and operating policy decisions of an entity. c. The holding of a significant proportion of the share capital in another entity. d. The contractually agreed sharing of control over an economic entity. 54. When an investor uses the equity method to account for investment in ordinary shares, cash dividend received by the investor from the investee are recorded as a. Deduction from investment income. b. Deduction from shareholders equity. c. Dividend income. d. None of the above. 55. Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the a. Investee declares an asset dividend. b. Investor sells the investment in associates. c. Investee reported a profit. d. Investee pays dividends. 56. Which is included in government assistance? a. Improvement to the general transport and communication network. b. The provision of infrastructure in developing areas. c. The imposition of trading constraints on competitors. d. None of the above. 57. If the cost of the asset is recorded net of the grant a. Asset is understated. b. Equity is overstated. c. Liability is overstated. d. Net income is understated. 58. The deferred grant income is classified as a. Current liability. b. Noncurrent liability. c. Partly current liability and partly noncurrent liability. d. Separate component of shareholder’s equity 59. In the case of grant related to income, which of the following accounting treatment is prescribe? a. Credit the grant to sales revenue. b. Credit the grant to retained earnings. c. Credit the grant to equity. d. None of the above.

SET C

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60. In the case of grant related to asset, which of the following accounting treatment is prescribe? a. As an extra ordinary gain. b. Set up the grant as deferred income or add it in arriving at the carrying amount of asset. c. Set up the grant as deferred income or deduct it in arriving at the carrying amount of asset. d. Set up the grant as receivable or deduct it in arriving at the carrying amount of asset. +++++++NOTHING FOLLOWS++++++++ REMINDER: DO NOT SETTLE YOUR PREPARATION BY SIMPLY MEMORIZING. IT IS GOOD BUT NOT ENOUGH. PRACTICE YOUR MIND TO ANALYZE COMPLEX THING AS WELL, THEN YOU WILL HAVE A COMPLETE SET OF YOUR LEARNING BY TRAINING YOURSELF – NO ONE CAN DO IT ON YOUR BEHALF. GOD BLESS STUDS

SET C

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