CPA REVIEW SCHOOL OF THE PHILS.

THEORY OF ACCOUNTS

Accounting process 6. Which of the following statements is false?

1. Basic steps in the recording process include all of the following, except A. Entities can prepare the statement of cash flows directly from the adjusted trial balance.
A. Enter the transaction information in a journal. B. The adjusted trial balance proves the equality of total debits and total credits after all
B. Analyze each transaction for its effect on the accounts. adjustments.
C. All of the choices are correct regarding the basic steps in the recording process. C. Each adjusting entry affects one statement of financial position account and one income
D. Transfer the journal information to the appropriate account in the statement of financial statement account.
position. D. Entities can prepare the income statement and the statement of financial position directly
from the adjusted trial balance.
2. Adjustments are often prepared
A. After the statement of financial position date but dated as of that date. Conceptual framework
B. After the statement of financial position date and dated after that date. 7. The underlying theme of the conceptual framework is
C. Before the statement of financial position date but dated as of that date. A. Comparability C. Reliability
D. Before the statement of financial position date and dated after that date. B. Decision usefulness D. Understandability

3. Which of the following statements is false regarding adjusting entries? 8. What is the objective of financial reporting?
A. Adjusting entries involve accruals or deferrals. A. All of these are objectives of financial reporting.
B. Cash is neither debited nor credited as a result of adjusting entries. B. To provide information mat is useful to management.
C. Each adjusting entry affects one revenue account and one expense account. C. To provide information about those investing in the entity.
D. Each adjusting entry affects one statement of financial position account and one income D. To provide information that is useful in making investing and credit decisions.
statement account.
9. What is a major objective of financial reporting?
4. The closing entries A. To provide information that excludes claims against the resources.
A. Are posted to the appropriate general ledger accounts. B. To provide information that clearly portrays nonfinancial transactions.
B. All of the choices are correct regarding closing entries. C. To provide information that is useful to management in making decisions.
C. Include closing the dividends account to income summary. D. To provide information that is useful to assess the amounts, timing, and uncertainty of
D. Must debit or credit one income statement account and one statement of financial position perspective cash receipts.
account.
10. What is the quality of information that enables users to better forecast future operations?
5. Which of the following statements regarding reversing entries is incorrect? A. Comparability C. Relevance
A. All accruals should be reversed. B. Materiality D. Reliability
B. Adjusting entries for depreciation and bad debts are never reversed.
C. Reversing entries change amounts reported in the statement of financial position for the 11. Where is materiality not used in providing financial information?
previous period. A. Determining the level of disclosure
D. Deferrals are generally entered in statement of financial position accounts, thus making B. Applying the going concern assumption
reversing entries unnecessary. C. Applying the revenue recognition principle
D. Determining what items to include in the financial statements

12. Liabilities are

October 2015, Final Preboard Examination Page 1 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

A. Deferred credits. 18. The statement of financial position

B. Any accounts having credit balances after closing entries are made. A. Omits many items that are of financial value.
C. Obligations to transfer ownership shares to other entities in the future. B. Uses fair value for most assets and liabilities.
D. Present obligations arising from past events and result in an outflow of resources. C. Makes very limited use of judgment and estimate
D. All of the choices are correct regarding the statement of financial position.
13. Which of the following is not considered a characteristic of a liability?
A. Present obligation 19. The statement of financial position information is useful for all of the following, except
B. Arises from past events A. Assessing risk C. Evaluating financial flexibility
C. Results in an outflow of resources B. Determining free cash flows D. Evaluating liquidity
D. Liquidation is reasonably expected to require use of existing resources classified as
current assets. 20. Working capital is
A. Unappropriated retained earnings
14. Which of the following equations expresses the definition of "income"? B. Current assets less current liabilities
A. Income equals Revenue plus Gains C. Cash and receivables less current liabilities
B. Income equals Gains minus Losses D. Capital which has been reinvested in the business
C. Income equals Revenue minus Expenses
D. Income equals Revenue plus Gains minus Expenses and Losses 21. Which of the following is not a long-term investment?
A. Franchise
15. Which is not true about a conceptual framework? B. A sinking fund
A. Should enhance comparability among entities' financial statements. C. Land held for speculation
B. Should be based on fundamental truth that is derived from the law of nature. D. Cash surrender value of life insurance
C. Should allow new and emerging practical problems to be more quickly solved.
D. Should increase financial statement users' understanding and confidence in financial 22. The income statement information would help in which of the following tasks?
reporting. A. Estimate future cash flows C. Evaluate the liquidity of an entity
B. Estimate future financial flexibility D. Evaluate the solvency of an entity
Presentation of Financial Statements
16. The major financial statements include all of the following, except 23. Limitations of the income statement include all of the following, except
A. Statement of financial position A. Income measurement involves judgment.
B. Statement of changes in equity B. Items that cannot be measured reliably are not reported.
C. Statement of comprehensive income C. Only actual amounts are reported in determining net income.
D. Statement of changes in financial position D. Income numbers are affected by the accounting methods employed.

17. The statement of financial position information is useful for all of the following, except 24. Which method of income measurement is used in the preparation of the income statement?
A. To computerate of return A. Capital maintenance approach C. Income components approach
B. To assess future cash flows B. Cash-flow approach D. Transaction approach
C. To evaluate capital structure
D. To analyze cash inflows and outflows for the period

October 2015, Final Preboard Examination Page 2 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

24. The occurrence that most likely would have no effect on net income is the 31. Which of the following items will not appear in the statement of retained earnings?
A. Inventory purchased deemed worthless in the current year. A. Discontinued operations C. Net loss
B. Collection in the current year of a dividend from an investment. B. Dividends D. Prior period adjustment
C. Sale in the current year of an office building contributed by a shareholder in a prior year.
D. Correction of an error in the financial statements of a prior period discovered subsequent 32. The statement of cash flows provides answers to all of the following questions, except
to their issuance. A. What was the cash used for during the period?
B. Where did the cash come from during the period?
26. When an entity discontinues an operation and disposes of the discontinued operation, the C. What was the change in the cash balance during the period?
transaction should be reported in the income statement as D. What is the impact of inflation on the cash balance at the end of the year?
A. A prior period adjustment.
B. An other income and expense item. 33. Which of the following events would appear in the cash flows from financing activities?
C. An amount after continuing operations and before net income. A. Cash purchase of equipment.
D. A bulk sale of plant assets included in income from continuing operations. B. Cash purchase of treasury shares.
C. Cash received as repayment for funds loaned.
27. All of the following components of other comprehensive income are reclassified subsequently D. Cash purchase of bonds issued by another entity.
to profit or loss, except
A. Actuarial gain on projected benefit obligation 34. Preparing the statement of cash flows using the indirect method involves all of the following,
B. Unrealized gain on available for sale financial asset except determining the
C. Gain from translating financial statements of a foreign operation A. Cash provided by operations
D. Unrealized gain on futures contract designated of cash flow hedge. B. Change in cash during the period
C. Cash collections from customers during the period
28. Which of the following is included in comprehensive income? D. Cash provided by or used in investing and financing activities
A. Distributions to owners
B. Investments by owners 35. The full disclosure principle is best described by which of the following?
C. Changes in accounting policy A. Information about each account appearing in the statements is to be included in the
D. Unrealized gains on available for sale securities notes.
B. Disclosure of any financial facts significant enough to influence the judgment of an
29. Which of the following is an example of managing earnings down? informed reader.
A. Not writing off obsolete inventory. C. All information related to an entity's business and operating objectives is required to be
B. Reducing research and development expenditures. disclosed
C. Revising the estimated life of equipment from ten years to five years. D. Enough information should be disclosed in the financial statements so a person wishing
D. Changing estimated bad debts from higher percent to lower percent of sales. to invest in the shares of the company can make a profitable decision.
36. Accounting policies disclosed in the notes to the financial statements typically include all of the
30. Which of the following would appear first in a statement of retained earnings?
following, except
A. Cash dividends C. Prior period error
A. Significant estimates made
B. Net income D. Share dividends
B. The depreciation method used
C. The cost flow assumption used
D. Significant inventory purchasing policies
October 2015, Final Preboard Examination Page 3 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

37. Which of the following statements is incorrect regarding notes to the financial statements?
A. IFRS requires a maturity analysis for receivables.
B. All of the choices are correct regarding notes to the financial statements.
C. IFRS requires that all notes be clear, simple to understand and nontechnical in nature.
D. IFRS requires specific note disclosures including disaggregation of inventories
into classifications such as merchandise, production supplies, work in process, and
finished goods.
42. An operating segment is a reportable segment if
A. The operating profit or loss is 10% or more of the entity's combined operating profit or loss
B. The operating profit is 10% or more of the combined operating profit of profitable
segments.
C. The operating loss is 10% or more of the combined operating loss of unprofitable
segments.
D. None of these

38. Which of the following should not be disclosed in the summary of significant accounting 43. Revenue of a segment includes
policies? A. Only sales to unaffiliated customers.
A. Measurement basis B. Sales to unaffiliated customers and interest revenue.
B. Criteria for measuring cash equivalents C. Sales to unaffiliated customers and intersegment sales.
C. Maturity dates associated with long-term debt D. Sales to unaffiliated customers and other revenue and gains.
D. Basis of profit recognition on long-term construction contract
44. All of the following information about each operating segment must be reported, except
39. If a business entity entered into certain related party transactions, it would be required to A. Unusual items
disclose all of the following information, except B. Interest revenue
A. Peso amount of the transactions. C. Cost of goods sold
B. Nature of the relationship between the parties to the transactions. D. Depreciation and amortization expense
C. Amounts due from or to related parties at the end of reporting period.
D. Nature of any future transactions planned between the parties and the terms involved. Accounting changes
45. Significant accounting policies may not be
40. Which of the following events after the reporting period would require adjustment of the A. Selected on the basis of judgment.
accounts before issuance of the financial statements? B. Unusual or innovative in application.
A. Loss of plant as a result of fire C. Omitted from financial statement disclosure.
B. Loss on inventory resulting from major flood loss D. Selected from existing acceptable alternatives.
C. Changes in the quoted market prices of securities held as an investment
D. Loss on a lawsuit the outcome of which was deemed uncertain at year end. 46. Accounting changes are often made and the monetary impact is reflected in the financial
statements even though, in theory, this may be a violation of the accounting concept of
Operating Segment A. Consistency C. Objectivity
41. A segment of a business enterprise is to be reported separately when the revenue of the B. Materiality D. Prudence
segment exceeds ten percent of the
A. Total export and foreign sales. 47. Which is the best explanation why accounting changes are classified into different categories?
B. Total revenue of all the entity's industry segments. A. The materiality of the changes involved.
C. Combined net income of all segments reporting profit. B. The fact that some treatments are considered GAAP and some are not.
D. Total combined revenue of all segments reporting profit. C. A survey of managers and their need to provide a favorable profit picture.
D. Each category involves different method of recognizing changes in the financial
statements.
October 2015, Final Preboard Examination Page 4 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

48. Which of the following is not treated as change in accounting policy?
A. A change to a new IFRS requirement
B. A change from cost model to fair value model for investment property
C. A change from cost model to revaluation model for property, plant and equipment.
D. A change from direct writeoff method to allowance method of recognizing had debt
expense
49. Which of the following is required for a change from sum of years' digits to straight line?
A. Restatement of prior years' income statements
B. Recomputation of current and future years' depreciation
C. The cumulative effect on prior years, net of tax, in the current retained earnings statement
D. All of these are required.
50. Which of the following statements is correct?
A. Prior statements should be restated for changes in accounting estimates.
B. Changes in accounting policy are always handled in the current or prospective period.
C. Correction of a prior period error should be as an adjustment to current year net income.
D. A change from expensing certain costs to capitalizing these costs due to a change in the
period benefited should be handled as a change in accounting estimate.
Accounting errors
51. Each of the following errors will overstate net income of current year, except
A. Current year-end ending inventory was overstated
B. Equipment purchased in a prior year was expensed
C. Accrued wages were not recorded at current year-end.
D. Equipment purchased in the current year was expensed.
52. Prior years income statements are not restated for
A. Corrections of errors
B. Changes in accounting policy
C. Changes in accounting estimate
D. All of these require restatement of prior years mcome
Interim Reporting
53. All of the following statements are true regarding interim reporting, except
A. IFRS does not mention the integral and independent view of interim reporting.
B. IFRS requires a complete set of financial statements at the interim reporting date.
C. No accruals or deferrals in anticipating future events during the year should be reported.
October 2015, Final Preboard Examination
D. IFRS requires entities expense interim amount like advertising expenditures that could
benefit later interim periods
54. The accounting profession indicates that
A. All entities that issue an annual report should issue interim financial reports.
B. A complete set of financial statements must be presented for an interim period.
C. The integral view is the more appropriate approach for interim financial reports.
D. The same accounting principles used for the annual report should be employed for interim
reports.
Cash & Cash Equivalent
55. All of the following should be included under the heading of "cash", except
A. Checking account balance C. Money market fund
B. Currency D. Saving account balance
56. Travel advances should be reported as
A. Supplies
B. Investments
C. Receivables
D. Cash because they represent the equivalent of money
57. Which of the following statements is not true about imprest petty cash?
A. The Petty Cash account is debited when the fund is replenished.
B. The imprest petty cash system in effect adheres to the rule of disbursement by check.
C. Entries are made to the Petty Cash account only to increase or decrease the size of the
fund or to adjust the balance if not replenished at year-end.
D. All of these are not true.
58. The journal entries for a bank reconciliation
A. Are taken from the "balance per bank" section only.
B. May include a debit to accounts payable for an NSF check.
C. May include a credit to accounts receivable for an NSF check.
D. May include a debit to office expense for bank service charges.
Receivables
Page 5 of 18
CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

59. Which of the following items should be included in accounts receivable reported in the
statement of financial position? 65. Which of the following statements is true when accounts receivable are factored without
A. Notes receivable C. Allowance for doubtful accounts recourse?
B. Interest receivable D. Advances to related parties and officers A. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the
receivables.
60. Why is the allowance method preferred over the direct writeoff of accounting for bad debts? B. The financing cost should be recognized ratably over the collection period of the
A. Estimates are used. receivables.
B. Allowance method is used for tax purposes. C. The receivables are used as collateral for a promissory note issued to the factor by the
C. Improved matching of bad debt expense with revenue. owner of the receivables.
D. Determining worthless accounts under direct writeoff method is difficult to do. D. The transaction may be accounted for either as a secured borrowing or as a sale
depending upon the substance of the transaction.
61. Which of the following is a generally accepted method of determining the amount of the
adjustment to bad debt expense? Inventories
A. A percentage of sales adjusted for the balance in the allowance 66. An entity that purchases goods from suppliers for resale to customers should recognize which
B. A percentage of sales not adjusted for the balance in the allowance inventory?
C. A percentage of accounts receivable not adjusted for the balance in the allowance A. Finished goods inventory C. Work in process inventory
D. An amount derived from aging accounts receivable and not adjusted for the balance in B. Merchandise inventory D. All of the choices are correct
the allowance
67. Which of the following items should be included in inventory at year-end?
62. The advantage of relating bad debt expense to outstanding accounts receivable is that this A. Goods in transit which were purchased FOB destination
approach B. Goods received from another entity for sale on consignment
A. Best relates bad debt expense to the period of sale. C. Goods sold to a customer which are being held for the customer to call for at the
B. Makes estimate of uncollectible accounts unnecessary. customer's convenience
C. Is the only generally accepted method for valuing accounts receivable. D. None of these
D. Gives a reasonably correct statement of receivables in the statement of financial position.
68. Which method of inventory pricing best approximates specific identification of the actual flow
63. Which of the following is included in the normal journal entry to record the collection of of costs and units in most manufacturing situations?
accounts receivable previously written off when using the allowance method? A. Average cost C. Moving average
A. Debit allowance for doubtful accounts, credit bad debt expense. B. First-in, first-out D. Weighted average
B. Debit bad debt expense, credit allowance for doubtful accounts.
C. Debit accounts receivable, credit allowance for doubtful accounts. 69. The IASB prohibits which of the following cost flow assumptions for inventory?
D. Debit allowance for doubtful accounts, credit accounts receivable. A. LIFO
B. Weighted average
64. IFRS requires all of the following when classifying receivables, except C. Specific identification
A. Disclose any receivables pledged as collateral. D. Any of these cost flow assumptions is allowed as long as the entity uses it consistently.
B. Disclose all significant concentrations of credit risk arising from receivables.
C. Indicate the receivables as current and noncurrent in the statement of financial position.
D. All of these are required by IFRS when classifying receivables.
October 2015, Final Preboard Examination Page 6 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

70. When an entity builds single-family homes, which cost flow assumption will be used? 76. Net realizable value is the general rule for valuing which of the following types of inventory?
A. FIFO A. Commodities held by broker-traders.
B. Weighted-average B. Computer components held for sale to manufacturers.
C. Specific identification C. Inventories priced on an item by item basis, but not those priced on a total inventory
D. Any of these cost flow assumptions as long as the entity uses it consistently. basis.
D. All of the choices are held at NRV.
71. Valuation of inventories requires the determination of all of the following, except
A. The costs to be included in inventory. 77. Which of the following statements is incorrect regarding LCNRV?
B. The cost flow assumption to be adopted. A. In most situations, entities price inventory on a total inventory basis.
C. The physical goods to be included in inventory. B. Entities use an allowance account, the "allowance to reduce inventory to net realizable
D. The cost of goods held on consignment from other entities. value."
C. Net realizable value is the selling price less estimated cost to complete and estimated
72. Why are inventories included in the computation of net income? cost to make a sale.
A. To determine sales revenue. D. One of two methods may be used to record the income effect of valuing inventory at net
B. To determine cost of goods sold. realizable value.
C. To determine merchandise returns.
D. Inventories are not included in the computation of net income. 78. How is the gross profit method used as it relates to inventory valuation?
A. To estimate cost of goods sold.
73. Lower of cost or net realizable value as it applies to inventory is best described as the B. Verity the accuracy of the physical inventory.
A. Assumption to determine inventory flow. C. To provide an inventory value of FIFO inventories.
B. Method of determining cost of goods sold. D. Verify the accuracy of the perpetual inventory records.
C. Change in inventory value to net realizable value.
D. Reporting of a loss when there is a decrease in the future utility below the original cost. 79. Which of the following is not a basic assumption of the gross profit method?
A. Goods not sold must be on hand.
74. Which of the following is not an acceptable method of applying the lower of cost or net B. The beginning inventory plus the purchases equal total goods to be accounted for.
realizable value method to inventory? C. The total amount of purchases and the total amount of sales remain relatively unchanged
A. Groups of inventory items C. Inventory location from the comparable previous period.
B. Individual item D. Total of the inventory D. If the sales, reduced to the cost basis, are deducted from the sum of the opening
inventory plus purchases, the result is the amount of inventory on hand.
75. When inventory declines in value below original cost what is the maximum amount that the
inventory can be valued at? 80. A major advantage of the retail inventory method is that it
A. Sales price A. Hides costs from competitors and customers.
B. Historical cost B. Gives a more accurate measurement of inventory than other methods.
C. Net realizable value C. Provides a method for inventory control and facilitates determination of the periodic
D. Sales price reduced by estimated cost of disposal inventory for certain types of entities.
D. Provides reliable results in cases where the distribution of items in the inventory is
different from the items sold during the period.

October 2015, Final Preboard Examination Page 7 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

81. What condition is not necessary in order to use the retail method to provide inventory results? Biological assets
A. Retailer keeps a record of sales for the period. 87. Agricultural produce is
B. Retailer keeps a record of the total cost of goods sold for the period. A. Harvested from biological assets.
C. Retailer keeps a record of the total cost and retail value of goods purchased. B. Valued at the time of harvest at cost to produce.
D. Retailer keeps a record of the total cost and retail value of goods available for sale. C. All of the choices are correct regarding agricultural produce.
D. Valued at each reporting period at fair value less cost of disposal.
82. Which of the following is not a reason the retail inventory method is used widely?
A. For insurance information Investments in debt & equity securities
B. To defer income tax liability 88. Debt investments that meet the business model and contractual cash flow tests are reported
C. As a control measure in determining inventory shortages at
D. To permit the computation of net income without a physical count of inventory A. Fair value
B. Amortized cost
83. An inventory method which is designed to approximate inventory valuation at the lower of cost C. Net realizable value
or net realizable value is D. The lower of amortized cost or fair value
A. Conventional retail method C. Last-in, first-out
B. First-in, first-out D. Specific identification 89. Debt investments that are reported at amortized cost are
A. Trading debt investments
84. What is the effect of net markup on the cost-retail ratio when using the conventional retail B. Held for collection debt investments
method? C. Managed and evaluated based on a documented risk-management strategy
A. Increases the cost-retail ratio D. All of the these are correct
B. Decreases the cost-retail ratio
C. No effect on the cost-retail ratio 90. A "passive interest" in another entity should be accounted for
D. Depends on the amount of the net markdown A. By consolidation C. By using the fair value method
B. By using the equity method D. By using the effective interest method
85. What is the effect of freight in on the cost-retail ratio when using the conventional retail
method? 91. Under IFRS, the fair value option
A. Increases the cost-retail ratio A. Reports all gains and losses in income.
B. Decreases the cost-retail ratio B. Must be applied to all instruments the entity holds.
C. No effect on the cost-retail ratio C. May be selected as a valuation method by the entity at any time during the first
D. Depends on the amount of the net markup two years of ownership.
D. All of the choices are correct.
86. If a material amount of inventory has been ordered through a formal purchase contract at the
statement of financial position date for future delivery at firm prices 92. How will the receipt of dividends affect the investment account under the fair value method
A. This fact must be disclosed. and equity method?
B. An appropriation of retained earnings is necessary. A. No effect under both fair value method and equity method.
C. Disclosure is required only if prices have since risen substantially. B. Decrease under fair value method and no effect under equity method.
D. Disclosure is required only if prices have declined since the date of the order. C. Increase under fair value method and decrease under equity method
D. No effect under fair value method and decrease under equity method
October 2015, Final Preboard Examination Page 8 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

93. An entity that accounts for an investment in ordinary shares under the equity method should
ordinarily record a cash dividend received as
A. Share premium.
B. Dividend income.
C. An addition to the carrying amount of the investment.
D. A reduction of the carrying amount of the investment.
99. Which of the following statements regarding investment property is correct?
A. If the entity elects the fair value model, no depreciation is taken.
B. If the entity elects the cost model, depreciation should be recognized.
C. Gains and losses from fair value adjustments under the fair value model are reported in
the income statement.
D. All of these statements are correct regarding investment property.

94. Under the equity method of accounting for investments, an investor recognizes its share of the Government Grant & Assistance
earnings in the period in which the 100. The account deferred grant revenue is classified as
A. Investee pays a dividend. A. Revenue
B. Investor sells the investment. B. A noncurrent liability
C. Investee declares a dividend. C. Other income and expense
D. Earnings are reported by the investee in the financial statements. D. A separate component of shareholders' equity

95. An impairment loss is the difference between the recorded investment and the 101. If the cost of the asset is recorded net of the government grant
A. Expected cash flows A. Equity will likely be overstated. C. Liability will likely be overstated.
B. Contractual cash flows B. Asset will likely be understated. D. Net income will likely be understated.
C. Present value of the expected cash flows
D. Present value of the contractual cash flows 102. Which statement is true regarding government grant related to asset?
A. Depreciation is higher if the grant is recorded as an adjustment to the asset.
Derivatives & Hedging B. Depreciation is higher and net income lower if the grant is an adjustment to the asset.
96. An option to convert a convertible bond into ordinary shares is C. Depreciation is higher if the grant is a deferred revenue and net income is not affected.
A. Embedded derivative C. Host security D. Depreciation is higher and net income lower if the grant is recorded as deferred revenue.
B. Fair value hedge D. Hybrid security
Property, plant & equipment
97. Gains or losses on cash flow hedges are 103. Which is not a major characteristic of property, plant and equipment?
A. Ignored completely. A. Long-term in nature
B. Reported directly in net income. B. With physical substance
C. Reported directly in retained earnings. C. Acquired for use in operations
D. Recorded in equity, as part of other comprehensive income. D. All of these are major characteristics of property, plant and equipment?

Investment Property 104. Which of the following is not a capital expenditure?

98. Under IFRS, which of the following best describes investment property? A. An addition
A. Held for rental income B. A betterment
B. To be sold at a quick profit C. A replacement
C. Held for sale in the ordinary course of business D. Repair that maintains an asset in operating condition
D. Held for rental income or to be sold at a quick profit

October 2015, Final Preboard Examination Page 9 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

105. The cost of land typically includes the purchase price and all of the following costs, except 111. When a plant asset is acquired by issuance of ordinary shares, the cost is properly measured
A. Private driveway and parking lot. at
B. Grading, filling, draining and clearing cost. A. Book value of the shares C. Par value of the shares
C. Assumption of any lien or mortgage on the property. B. Fair value of the shares D. Stated value of the shares
D. Special assessment for street light, sewer and drainage system.
112. When a closely held entity issues preference shares for land, the land should be recorded at
106. The cost of land does not include the
A. Special assessments. A. Fair value of the land.
B. Cost of improvement with limited life. B. Total par value of the shares issued.
C. Cost of grading, filling, draining and clearing. C. Total book value of the shares issued.
D. Cost of removing old building to prepare the land as an investment property. D. Total liquidating value of the shares issued.

107. An entity purchased a usable hotel and the land on which it is located with the plan to tear 113. When cash is involved in an exchange having commercial substance
down immediately the hotel and build a new hotel. The allocated fair value of the old hotel A. Only gains should be recognized.
should be B. Only losses should be recognized.
A. Depreciated over the remaining useful life. C. Gains or losses are recognized in their entirety.
B. Capitalized as part of the cost of the land. D. A gain or loss is computed by comparing the fair value of the asset received with the fair
C. Capitalized as part of the cost of the new hotel. value of the asset given up.
D. Written off as loss in the year the hotel is torn down.
114. Accounting recognition should be given to the gain realized on a nonrnonetary exchange of
108. Fence and parking lot are reported in the statement of financial position as plant asset, except when the exchange has
A. Building improvements C. Land A. Commercial substance and additional cash is paid.
B. Current assets D. Land improvements B. No commercial substance and additional cash is paid.
C. Commercial substance and additional cash is received.
109. To be consistent with the historical cost principle, overhead costs incurred by an entity D. All of these cause recognition of a gain.
constructing its own building should be
A. Allocated on an opportunity cost basis. 115. A nonrecoverable purchase tax on the purchase of machinery should be charged to
B. Allocated on the basis of lost production. A. The machinery account. C. Miscellaneous tax expense.
C. Eliminated completely from the cost of the asset. B. Accumulated depreciation. D. A separate deferred charge account.
D. Allocated on a prorata basis between the asset and normal operations.
116. Which asset does not qualify for capitalization of interest incurred during construction of the
110. Plant assets purchased on long-term credit contracts should be accounted for at asset?
A. The total value of the future payments. A. Asset under construction for an entity's own use.
B. The future amount of the future payments. B. Asset financed through the issuance of long-term debt.
C. The present value of the future payments. C. Asset intended for sale or lease produced as discrete project.
D. None of these. D. Asset not currently undergoing the activities necessary to prepare for their intended use.

October 2015, Final Preboard Examination Page 10 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

117. When fund is borrowed to pay for construction of asset that qualifies for capitalization of 123. How is the account revaluation surplus reported?
interest, interest earned on temporary investments of the borrowing should be A. It is included in retained earnings.
A. Recognized as revenue of the period. B. As part of other comprehensive income.
B. Offset against interest incurred during construction. C. As other income in the income statement.
C. Used to increase the cost of asset being constructed. D. The account is not presented in the financial statements.
D. Multiplied by an appropriate interest rate to determine the interest to be capitalized.
124. The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale
118. Which of the following statements is true regarding capitalization of interest? are
A. The amount of interest capitalized during the period should not exceed the actual interest A. Greater than carrying amount C. Less than carrying amount
incurred. B. Greater than cost D. Less than current fair value
B. Interest cost capitalized in connection with the purchase of land to be used as a building
site should be debited to the land account. 125. The most common method of recording depletion is the
C. The minimum amount of interest to be capitalized is determined by multiplying a weighted A. Diminishing charge method C. Straight line method
average interest rate by the amount of average expenditures. B. Percentage depletion method D. Units of production method
D. When excess specific borrowed funds not immediately needed for construction are
temporarily invested, any interest earned should be recorded as interest revenue. 126. Which of following is not a similarity in the treatment for depreciation and depletion?
A. Both depreciation and depletion are based on time.
119. An improvement made to a machine increased fair value and production capacity by 25% B. The estimated life is based on economic or productive life.
without extending the machine's useful life. The cost of the improvement should be C. The rate may be changed upon revision of the estimated productive life.
A. Expensed. D. Assets are reported in the same classification in the statement of financial position.
B. Capitalized in the machine account.
C. Debited to accumulated depreciation. Intangible assets
D. Allocated between accumulated depreciation and the machine account. 127. Which of the following does not describe an intangible asset?
A. Classified as noncurrent asset C. Monetary asset
120. Which of the following is a realistic assumption of the straight line method of depreciation? B. Lacks physical existence D. Provides long-term benefits
A. The asset's economic usefulness is the same each year.
B. Depreciation is a function of time rather than a function of usage. 128. Which of the following is not an intangible asset?
C. The rate of return analysis is enhanced using the straight-line method. A. Copyright C. Research and development cost
D. The repair and maintenance expense-is essentially the same each period. B. Franchise D. Trade name

121. Depreciation is a variable expense if the depreciation method used is 129. Costs incurred internally to create an intangible asset are
A. Declining balance C. Sum of the years'digits A. Capitalized C. Expensed as incurred
B. Straight line D. Units of production B. Capitalized if indefinite life D. Expensed only if limited life
122. Use of the sum of the years' digits method
130. Which costs associated with a trademark would not be allowed to be capitalized?
A. Results in residual value being ignored.
A. Attorney fees C. Design costs
B. Means the carrying amount should not be reduced below residual value.
B. Consulting fees D. Research and development fees
C. Means the denominator is the number of years remaining at the beginning of the year.
D. All of these describe the sum of years' digits method.
October 2015, Final Preboard Examination Page 11 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

131. The intangible asset goodwill may be 138. Which of the following research and development related costs should be capitalized and
A. Capitalized only when purchased. depreciated over current and future periods?
B. Written off directly to retained earnings. A. Inventory used for a specific research project
C. Capitalized only when created internally. B. Administrative salaries allocated to research and development
D. Capitalized either when purchased or created internally. C. Research findings purchased to aid a research project currently in process
D. Research and development general laboratory building which can be put to alternative
132. Which of the following methods of amortization is normally used for intangible assets? use in the future
A. Double declining-balance C. Sum of the years' digits
B. Straight line D. Units of production Asset impairment
139. An entity determines that a printing press used in operations has suffered an impairment in
133. One factor that is not considered in determining the useful life of an intangible asset is value because of technological changes. An entry to record the impairment should
A. Expected action of competitor C. Provision for renewal or extension A. Include a credit to the equipment account.
B. Legal life D. Residual value B. Not be made if the equipment is still being used.
C. Recognize extra depreciation expense for the period.
134. Purchased goodwill should D. Include a credit to the equipment accumulated depreciation account.
A. Not be amortized.
B. Be written off as soon as possible as other expense. 140. All of the following are true with regard to impairment testing of long-lived assets, except
C. Be written off as soon as possible against retained earnings. A. If impairment indicators are present, the entity must conduct an impairment test.
D. Be written off by systematic charges as a regular operating expense over the period B. If the recoverable amount is lower than the carrying amount, an impairment loss is
benefited. reported.
C. The impairment test compares the carrying amount with the lower of fair value less cost of
135. Recovery of impairment is recognized for all the following, except disposal and value in use.
A. Goodwill C. Patent held for use D. If either the fair value less cost of disposal or the value in use is higher than the carrying
B. Patent held for sale D. Trademark amount, no impairment loss is recorded.

136. Which of the following costs would be capitalized?
A. Salaries of research staff.
B. Cost of research to determine whether a market for the product exists.
C. Acquisition cost of equipment to be used on current research project only.
D. Engineering costs incurred to advance the product to the full production stage.
137. Which of the following would be considered research and development costs?
A. Laboratory research aimed at discovery of new knowledge.
B. Application of research findings to a plan for a new product or process.
C. Conceptual formulation and design of possible product or process alternative.
D. All of these would be considered research and development costs.
Current liabilities, provisions & contingencies
141. Which of the following should not be classified as a current liability?
A. Unearned revenue
B. Value added taxes payable
C. Current maturities of long-term debt
D. Short-term obligations refinanced at the end of reporting period.
142. Which of the following is not acceptable for the presentation of current liabilities?
A. Listing current liabilities in order of maturity
B. Listing current liabilities according to amount
C. Showing current liabilities in order of liquidation preference.
D. Offsetting current liabilities against assets that are to be applied to their liquidation

October 2015, Final Preboard Examination Page 12 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

143. What is the relationship between current liabilities and an entity's operating cycle?
A. There is no relationship between the two.
B. Current liabilities are the result of operating transactions.
C. Current liabilities cannot exceed the amount incurred in one operating cycle.
D. Liquidation of current liabilities is reasonably expected within the operating cycle or one
year, whichever is longer.
144. Which of the following best describes the accrual method of accounting for warranty costs?
A. Expensed when paid.
B. Expensed when incurred.
C. Expensed based on estimate in year of sale.
D. Expensed when warranty claims are certain.
145. What condition is necessary to recognize an environmental liability?
A. Obligation event has occurred.
B. The entity has an existing legal obligation.
C. The entity can reasonably estimate the amount of the liability.
D. The entity has an existing legal obligation and can reasonably estimate the liability.
146. Which of the following is not considered when evaluating whether or not to record a liability for
pending litigation?
A. The type of litigation involved.
B. The probability of an unfavorable outcome.
C. Time period in which the underlying cause of action occurred.
D. The ability to make a reasonable estimate of the amount of the loss.
Notes & bonds payable
147. If the bonds were issued at a premium, this indicates that
A. The market and nominal rates coincided.
B. The nominal rate of interest exceeded the market rate.
C. No necessary relationship exists between the two rates.
D. The effective yield or market rate of interest exceeded the stated rate.
149. Bond issuance cost should be
A. Expensed in the period when the bond payable is issued.
B. Recorded as a reduction in the carrying amount of bond payable.
C. Reported as an expense in the period the bond matures or is retired.
D. Accumulated in a deferred charge account and amortized over the life of the bond.
150. A debt instrument with no ready market is exchanged for property whose fair value is currently
indeterminable. When such a transaction takes place
A. It should not be recorded until the fair value of the property becomes evident.
B. The present value of the debt instrument must be approximated using an imputed interest
rate.
C. The directors of both entities involved in the transaction should negotiate a value to be
assigned to the property.
D. The board of directors of the entity receiving the property should estimate a value for the
property that will serve as a basis for the transaction.
151. When a note payable is issued for property, goods or services, the present value of the note is
measured by
A. The fair value of the note.
B. The fair value of the property, goods or services.
C. Using an imputed interest rate to discount all future payments on the note.
D. Any of these.
152. A discount on note payable is charged to interest expense
A. Equally over the life of the note C. Only in the year the note matures
B. Only in the year the note is issued D. Using the effective interest method
153. The amortization of a premium on bonds payable
A. Increases the cash payment to bondholders.
B. Decreases the balance of the bonds payable.
C. Increases the amount of interest expense reported.
D. Decreases the carrying amount of the bonds payable.

148. If bonds are issued between interest dates, the entry of the issuing entity could include a 154. Note disclosures for long-term debt generally include all of the following, except
A. Credit to interest expense C. Credit to unearned interest A. Names of specific creditors.
B. Credit to interest receivable D. Debit to interest payable B. Assets pledged as security.
C. Restrictions imposed by the creditor.
D. Call provisions and conversion privileges.
October 2015, Final Preboard Examination Page 13 of 18

CPA REVIEW SCHOOL OF THE PHILS.
Troubled-debt restructuring
155. In a debt settlement in which the debt is continued with modified terms, a gain should be
recognized at the date of settlement whenever the
A. Carrying amount of the debt is less than the total future cash flows.
B. Present value of the debt is less than the present value of the future cash flows.
C. Present value of the debt is greater than the present value of the future cash flows.
D. Carrying amount of the debt is greater than the present value of the future cash flows.
Leases
156. All of the followings are ways in which entities avoid leased asset capitalization in devising
lease agreements, except
A. Do not write in a bargain purchase option.
B. Ensure that the lease does not specify the transfer of title of the property to the lessee.
C. Set the lease term sufficiently below the estimated economic life of the leased property.
D. Arrange for the present value of the minimum lease payments to be sufficiently more than
the fair value of the leased property.
157. Which of the following best describes current practice in accounting for leases?
A. All leases are capitalized.
B. Leases are not capitalized.
C. All long-term leases are capitalized.
D. Leases similar to installment purchases are capitalized.
158. What impact does a bargain purchase option have on the present value of the minimum lease
payments computed by the lessee?
A. No impact as the option does not enter into the transaction until the end of the lease term.
B. The lessee must increase the present value of the minimum lease payments by the
present value of the option price.
C. The lessee must decrease the present value of the minimum lease payments by the
present value of the option price.
D. The minimum lease payments would be increased by the present value of the option price
if, at the time of the lease agreement, it appeared certain that the lessee would exercise
the option at the end of the lease and purchase the asset at the option price.
159. In computing depreciation of a leased asset, the lessee should subtract
A. A guaranteed residual value and depreciate over the life of the asset.
B. A guaranteed residual value and depreciate over the term of the lease.
C. An unguaranteed residual value and depreciate over the life of the asset.
October 2015, Final Preboard Examination
THEORY OF ACCOUNTS
D. An unguaranteed residual value and depreciate over the term of the lease.
160. In a lease that is appropriately recorded as a direct financing lease by the lessor, unearned
income
A. Does not arise.
B. Should be recognized at the lease expiration.
C. Should be amortized over the period of the lease using the straight-line method.
D. Should be amortized over the period of the lease using the effective interest method.
161. The lease receivable in a direct financing lease is best defined as
A. The present value of minimum lease payments.
B. The difference between the lease payments receivable and the fair value of the leased
property.
C. The amount of funds the lessor has tied up in the asset which is the subject of the direct
financing lease.
D. The total carrying amount of the asset less any accumulated depreciation recorded by the
lessor prior to the lease agreement.
162. The initial direct costs of leasing
A. Are generally borne by the lessee.
B. Include incremental costs related to internal activities of leasing.
C. Are expensed in the period of the sale under a sales type lease.
D. All of the these are true with regard to the initial direct costs of leasing.
163. A lessor with a sales type lease involving an unguaranteed residual value available to the
lessor at the end of the lease term would report sales revenue at which of the following
amounts?
A. The present value of the minimum lease payments.
B. The minimum lease payments plus the unguaranteed residual value.
C. The cost of the asset to the lessor less the present value of any unguaranteed residual
value.
D. The present value of the minimum lease payments plus the present value of the
unguaranteed residual value.
164. In a sale-leaseback transaction where none of the four leasing criteria is satisfied, which of the
following statements is incorrect?
A. The purchaser-lessor records a gain.
B. The seller-lessee derecognizes the asset.
Page 14 of 18
CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

C. The seller-lessee records the lease as an operating lease.

D. All of these are incorrect statements.
Accounting for Income Taxes
165. Which temporary difference would result in a deferred tax asset?
A. Tax penalty or surcharge
B. Dividend received on share investment
C. Excess tax depreciation over accounting depreciation
D. Rent received in advance included in taxable income but deferred for financial accounting
166. All of the following would result to deferred tax asset, except
A. The tax base for a machine is greater than the carrying amount.
B. Interest expense is accrued but included in taxable income on a cash basis.
C. The accumulated depreciation on an asset is greater than accumulated tax depreciation
D. Development costs have been capitalized and amortized but were deducted in
determining taxable income in the period incurred.
170. Which measure requires the use of future salaries in the computation of pension obligation?
A. Accumulated benefit obligation C. Restructured benefit obligation
B. Defined benefit obligation D. Vested benefit obligation
171. The relationship between the amount funded and the amount reported for pension expense is
A. Pension expense must equal the amount funded.
B. Pension expense is less than the amount funded.
C. Pension expense is more than the amount funded.
D. Pension expense may be greater than, equal to, or less than the amount funded.
172. The computation of pension expense includes all the following, except
A. Interest income on plan assets.
B. Interest on defined benefit obligation.
C. All of these are included in the computation.
D. Service cost component measured using current salary levels.

167. Which temporary difference would result in a deferred tax liability? 173. A pension asset is reported when
A. Accrual of warranty expense A. Pension plan assets at fair value exceed the defined benefit obligation.
B. Subscription revenue received in advance B. Pension plan assets at fair value exceed the accumulated benefit obligation.
C. Interest revenue on tax exempt municipal bonds C. The accumulated benefit obligation exceeds the fair value of pension plan assets.
D. Excess tax depreciation over financial depreciation D. The accumulated benefit obligation exceeds the fair value of pension plan assets but a
past service cost exists.
168. Taxable income of a corporation
A. Is reported in the income statement. 174. What are compensated absences?
B. Is based on international financial reporting standards. A. A form of healthcare C. Payroll deductions
C. Differs from accounting income due to differences in interperiod allocation. B. Paid time off D. Unpaid time off
D. Differs from accounting income due to differences in interperiod allocation and permanent
differences. Shareholders’ equity
175. The residual interest in a corporation belongs to the
Employee benefits A. Management C. Ordinary shareholders
169. In accounting for a defined benefit plan B. Creditors D. Preference shareholders
A. The expense recognized each period is equal to the cash contribution.
B. The liability is determined based upon variables that reflect current salary levels. 176. Shares that have a fixed per-share amount printed on each share certificate are called
C. The employer's responsibility is simply to make a contribution each year based on the A. Fixed value shares C. Stated value shares
formula established in the plan. B. Par value shares D. Uniform value shares
D. An appropriate funding pattern must be established to ensure that enough money would
be available at retirement to meet the benefits promised.
October 2015, Final Preboard Examination Page 15 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

177. Categories of equity include all of the following, except Compound financial instrument
A. Treasury shares 184. When bonds are issued with detachable warrants, the amount to be recorded as share
B. Liquidating dividends premium is preferably
C. Noncontrolling interest A. Zero.
D. Cumulative other comprehensive income B. Equal to the market value of the warrants.
C. Calculated as the excess of the proceeds over the fair value of the bonds.
178. Which feature of preference shares makes the security more like debt than an equity D. Calculated as the excess of the proceeds over the face amount of the bonds.
instrument?
A. Noncumulative C. Redeemable 185. The major difference between convertible debt and share warrants is that upon exercise of the
B. Participating D. Voting . warrants
A. No share premium can be a part of the transaction.
179. When preference shares share ratably with the ordinary shareholders in any profit distribution B. The holder has to pay a certain amount of cash to obtain the shares.
beyond the prescribed rate this is known as the C. The shares involved are restricted and can only be sold by the recipient after a certain
A. Callable feature C. Participating feature period.
B. Cumulative feature D. Redeemable feature D. The shares are held by the entity for a definite period of time before they are issued to the
warrant holder.
180. An entity makes only a memorandum entry when
A. Entities issue rights to existing shareholders. 186. When convertible debt is not converted at maturity
B. Entities include warrants to make a security more attractive. A. The amount originally allocated to equity is recorded as a gain on retirement.
C. Entities give warrants to executives and employees as a form of compensation. B. The carrying amount of the bond equals face amount and it is removed from the books.
D. All of the choices are correct. C. The amount allocated to the equity component at the issuance date is recorded as a loss
on retirement.
181. The distribution of share rights to existing shareholders would increase share premium at D. A gain or loss is recorded for the difference between the carrying amount of the debt and
A. Date of exercise of rights C. Date of issuance of rights the present value of the cash flows.
B. Date of expiration of rights D. All of these are correct choices
187. The conversion of preference shares into ordinary shares requires that any excess of the par
182. When treasury shares are purchased for more than the par value of the shares and the cost value of the ordinary shares issued over the carrying amount of the preference shares
method is used to account for treasury shares, what account should be debited? converted should be
A. Share premium for the purchase price. A. Reflected currently in income
B. Treasury shares for the purchase price. B. Treated as a prior period adjustment
C. Treasury shares for the par value and share premium for the excess of the purchase price C. Treated as a direct reduction of retained earnings
over the par value. D. Reflected currently in other comprehensive income
D. Treasury shares for the par value and retained earnings for the excess of the purchase
188. The date on which to measure the compensation in a share option granted to an employee
price over the par value.
ordinarily is the date on which the employee
A. Exercises the option.
183. Which dividends do not reduce equity?
B. Is granted the option.
A. Cash dividends C. Property dividends
C. May first exercise the option.
B. Liquidating dividends D. Share dividends
D. Has performed all conditions precedent to exercising the option.
October 2015, Final Preboard Examination Page 16 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

189. In applying the treasury share method to determine the dilutive effect of share options and Consolidated financial statements
warrants, the proceeds assumed to be received upon exercise of the options and warrants 195. Which statement is incorrect concerning an acquirer?
A. Are completely disregarded. A. In a business combination effected by issuing equity interest, the acquirer is usually the
B. Are added, net of tax, to the numerator of the calculation for diluted earnings per share. entity that issues the equity interest.
C. Are used to calculate the number of ordinary shares repurchased at the average market B. The acquirer is usually the combining entity whose relative size is significantly greater
price, when computing diluted earnings per share. than that of the combining entity or entities.
D. Are disregarded in the computation of earnings per share if the exercise price of the C. If a new entity is formed to issue equity interests to effect a business combination, the
options and warrants is less than the average market price of ordinary shares. new entity formed is necessarily the acquirer.
D. In a business combination effected by transferring cash or other assets, the acquirer is
Earnings per share usually the entity that transfers the cash or other assets.
190. The earnings per share computation is not required for
A. Discontinued operation C. Income from operations 196. Which of the following is not a valid condition that will exempt an entity from preparing
B. Income from continuing operations D. Net income consolidated financial statements?
A. The parent entity's debt or equity capital is not traded on the stock exchange.
Revenue Recognition B. The ultimate parent entity produces consolidated financial statements available for public
191. Sales where the goods are delivered only when the buyer makes final payment are referred to use that comply with IFRS.
as C. The parent entity is a wholly owned subsidiary or partially owned and the other owners do
A. Layaway sales not object to the nonconsolidation.
B. Bill and hold sales D. The parent entity is in the process of filing financial statements with a securities
C. Consignment sales commission for the purpose of issuing any class of instruments in a public market.
D. Sales subject to installation or inspection
197. A subsidiary shall be excluded from consolidation when
192. Sales in which the buyer is not yet ready to take delivery but does take title are A. The investor is a venture capital organization, mutual fund, unit trust or similar entity.
A. Barter sales C. Layaway sales B. The business activities of the subsidiary are dissimilar from those of the other entities
B. Bill and hold sales D. Sales with buyback within the group.
C. The subsidiary is acquired with the intention to dispose of it within twelve months from
193. Revenue is recognized by the consignor when the date of acquisition.
A. Consignee receives the goods. D. The subsidiary is operating under severe long-term restrictions that significantly impair its
B. Goods are shipped to the consignee. ability to transfer funds to the parent.
C. Consignor receives an advance from the consignee.
Not-for-profit organization
D. Consignor receives an account sales notification from the consignee.
198. How should a nongovernmental not-for-profit organization classify gains and losses on
investments purchased with permanently restricted assets?
194. For which of the following products is it appropriate to recognize revenue at the completion of
A. Gains may not be netted against losses in the statement of activities.
production even though no sale has been made?
B. Gains and losses can only be reported net of expenses in the statement of activities.
A. Automobiles C. Precious metals
C. Unless explicitly restricted by donor or law, gains and losses should be reported in the
B. Large appliances D. Single family residential units
statement of activities as increases or decreases in unrestricted net assets.
D. Unless explicitly restricted by donor or law, gains and losses should be reported in the
statement of activities as increases or decreases in permanently restricted net assets.
October 2015, Final Preboard Examination Page 17 of 18

CPA REVIEW SCHOOL OF THE PHILS. THEORY OF ACCOUNTS

199. All of the following are classified as financing activities of a nonprofit organization, except Answer Key
A. Cash contribution to be permanently invested.
B. Cash contribution restricted by donor for faculty development 1. D 26. C 51. D 76. A 101. B 126. A 151. D 176. B
C. Cash dividend and interest to be used for the acquisition of computer equipment. 2. A 27. A 52. C 77. A 102. C 127. C 152. D 177. B
D. Cash contribution from a donor who stipulated that the money be spent in accordance 3. C 28. D 53. B 78. D 103. D 128. C 153. D 178. C
with the decision of the governing board. 4. A 29. C 54. D 79. C 104. D 129. C 154. A 179. C
5. C 30. C 55. C 80. C 105. A 130. D 155. D 180. A
Managerial accounting concepts 6. A 31. A 56. C 81. B 106. B 131. A 156. D 181. A
200. A balanced budget is 7. B 32. D 57. A 82. B 107. D 132. B 157. D 182. B
A. A budget which covers items not adequately provided or not at all included in the general 8. D 33. B 58. D 83. A 108. D 133. D 158. B 183. D
appropriation bill 9. D 34. C 59. C 84. B 109. D 134. A 159. B 184. C
B. The preparation of the national budget where the total estimated revenue must be more 10. C 35. B 60. C 85. A 110. C 135. A 160. D 185. B
than the total estimated expenditures. 11. B 36. D 61. B 86. A 111. B 136. D 161. A 186. B
C. Is a plan or program of activities together with the cost of undertaking them to meet the 12. D 37. C 62. D 87. A 112. A 137. D 162. C 187. C
goals or targets which emphasize expected results.
13. D 38. C 63. C 88. B 113. C 138. D 163. A 188. B
D. A financial plan to augment the general budget or to adjust a previous budget which is
14. A 39. D 64. D 89. B 114. B 139. D 164. A 189. C
deemed inadequate for the purpose for which it is intended.
15. B 40. D 65. A 90. C 115. A 140. C 165. D 190. C
16. D 41. B 66. B 91. A 116. D 141. D 166. D 191. A
17. D 42. D 67. D 92. D 117. B 142. D 167. D 192. B
18. A 43. C 68. B 93. D 118. A 143. D 168. D 193. D
19. B 44. C 69. A 94. D 119. B 144. C 169. D 194. C
20. B 45. A 70. C 95. C 120. B 145. D 170. B 195. C
21. A 46. A 71. D 96. A 121. D 146. A 171. D 196. D
22. A 47. D 72. B 97. D 122. B 147. B 172. D 197. C
23. C 48. D 73. D 98. D 123. B 148. A 173. A 198. C
24. D 49. B 74. C 99. D 124. C 149. B 174. B 199. D
25. D 50. D 75. C 100. B 125. D 150. B 175. C 200. B

October 2015, Final Preboard Examination Page 18 of 18