Cash, Receivables, Inventory, Biological Assets, PPE
Source: CPA Review Schools
Choose the best answer.
1. Bank overdraft , if material, should be
A. Reported as deduction from current asset
section
B. Reported as deduction from cash
C. reported as current liability
D. Netted against cash and a net cash amount
reported
2. The petty cash fund account under the
imprest fund system is debited
A. Only when the fund is created
B. When the fund is created and every time it is
replenished
C. When the fund is created and when the size
f the fund is increased
D. When the fund is created and when the fund
is decreased
3. If the cash balance in an entity’s bank
statement is less than the correct cash balance
and neither the entity nor the bank has made
any error, there must be
A. Deposits credited by the bank but not yet
recorded by the entity
B. Outstanding checks
C. Bank charges not yet recorded by the entity
D. Deposits in transit
4. If the cash balance shown in an entity’s
accounting records is less than the correct cash
balance and neither the entity nor the bank has
made any error, there must be
A. Deposits credited by the bank but not yet
recorded by the entity
B. Outstanding checks
C. Bank charges not yet recorded by the entity
D. Deposits in transit
5. Which is true when a petty cash fund is
used?
A. The petty cash fund balance should be
reported as investment
Kirby Pecson Quimat, CPA Theory of Accounts - Integration
B. The reimbursement of the petty cash fund
should be credited to the cash account
C. The petty cashier’s summary of petty cash
payments serves as a journal entry that is
posted to the appropriate general ledger
account
D. Entries that include a credit to the cash
account should be recorded at the time
payments from the petty cash fund are made
6. Which of the following should be considered
cash?
A. Postdated checks
B. Certificates of deposit
C. Money market checking accounts
D. Money market savings certificates
7. Bank statements provide information about
all of the following, except
A. Checks cleared during the period
B. NSF checks
C. Bank charges for the period
D. Errors made by the depositor entity
8. Subsequent to initial recognition, loans and
receivables are measured at
A. Cost
B. Amortized cost using straight line method
C. Amortized cost using effective interest
method
D. Fair value
9. All of the following are characteristics of loans
and receivables, except
A. They have fixed and determinable payments
B. The holder has demonstrated a positive
intention and ability to hold them to maturity
C. They are unquoted.
D. The holder can recover substantially all of its
investment unless there has been credit
deterioration
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10. If there is an evidence that an impairment 15. When direct writeof method is used, the
loss on loan receivable has been incurred, the entry to write of a specific customer account
amount of the loss is equal to the would

A. Excess of the principal amount of the loan
over its carrying amount
B. Excess of the carrying amount of the loan
over the principal amount of the loan
C. Excess of the present value of cash flows
related to the loan over the carrying amount of
the loan receivable
A. Increase the net income
B. Have no efect on net income
C. Increase both accounts receivable and net
income
D. Decrease both accounts receivable and net
income

D. Excess of the carrying amount of the loan 16. Which of the accounting principles primarily
receivable over the present value of the cash supports the use of allowance for doubtful
flows related to the loan accounts?

11. Credit balances in accounts receivable A. Continuity principle

should be classified as
B. Full disclosure principle
A. Part of accounts payable
C. Matching principle
B. Noncurrent liability
D. Conservatism
C. Current liability
17. Which of the following is a method to
D. Deduction from accounts receivable generate cash from accounts receivable?

12. A method of estimating doubtful accounts A. Assignment only

that focuses on the income statement rather
B. Factoring only
than the statement of financial position is the
allowance method based on C. Both A and B
A. Credit sales D. Neither A nor B
B. Direct write of 18. If financial assets are exchanged for cash
and other consideration but the transfer does
C. Aging of accounts receivable
not meet the criteria for a sale, the transferor
D. balance of accounts receivable and the transferee should account for
transaction as
13. Estimation of uncollectible accounts
receivable based on a percentage of sales i. Secured borrowing

A. Emphasizes measurement of NRV of accounts ii. Pledge of collateral

receivable
A.I only
B. Emphasizes measurement of total assets
B. II only
C. Emphasizes measurement of bad debt
C. Both I and II
expense
D. Neither I nor II
D. Is only acceptable for tax purposes
19. if receivables are hypothecated against
14. Which method of recording uncollectible
borrowings, the amount of receivables involved
accounts expense is consistent with accrual
should be
accounting?
A. Disclosed in the notes
A. Allowance method only
B. Excluded from the total receivables, with
B. Direct writeof only
disclosure
C. Both A and B
C. . Excluded from the total receivables, with no
D. Neither A nor B disclosure

Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 2

D. Excluded from the total receivables and a
gain or loss is recognized between the face
value and the amount of borrowings
20. Notes receivable discounted with recourse
should be
A. Included in total receivables with disclosure
of contigent liability
B. . Included in total receivables without
disclosure of contigent liability
C. Excluded from total receivables with
dislclosure of contingent liability
D. Excluded from total receivables without
dislclosure of contingent liability
21. Accounting for the interest in a
noninteresting bearing note receivable is an
example of what aspect of accounting theory?
A. Matching
B. Verifiability
C. Substance over form
D. Accounting entity
22. A note receivable bearing a reasonable
interest rate is sold to bank with recourse. At
the date of the discounting transaction, the
note receivable discounted account should be
A. Decreased by the proceeds from discounting
transaction
B. Increased by the proceeds from the
discounting transaction
C. Increased by the face amount of the note
D. Decreased by the face amount of the note
23. Inventories are assets (choose the correct
one)
A. Held for sale in the ordinary course of
business.
B. In the process of production for sale.
C. In the form of materials or supplies to be
consumed in the production process or in the
rendering of services.
D. Held for use in the production or supply of
goods or services.
24. Which of the following should not be taken
into account when determining the cost of
inventories?
A. Storage costs of part-finished goods
Kirby Pecson Quimat, CPA Theory of Accounts - Integration
B. Trade discounts
C. Recoverable purchase taxes
D. Import duties on shipping of inventory
inward
25. Fixed production overheads include all of
the following, except
A. Indirect materials and indirect labor
B. Depreciation of factory building
C. Maintenance of factory equipment
D. Cost factory management and administration
26. Variable production overheads are allocated
to each unit of production on the basis of the
A. Normal capacity of the production facilities
B. Actual use of the production facilities
C. Either the normal capacity or the actual use
of production facilities
D. Neither the normal capacity nor the actual
use of production facilities
27. When manufacturing inventory, what is the
accounting treatment for abnormal freight in
costs?
A. Charge to expense for the period.
B. Charge to the finished goods inventory.
C. Charge to raw materials inventory.
D. Allocate to raw materials, work in process
and finished goods.
28. The costs of inventories of a service provider
include all of the following, except
A. Labor and other costs of personnel directly
engaged in providing the service.
B. Compensation of supervisor personnel
directly engaged in providing the service.
C. Attributable overhead incurred in providing
the service.
D. Profit margin factored into the price charged
against the customer by the service provider.
29. The inventories of a service provider may
simply be described as
A. Work in progress
B. Contract in progress
C. Unbilled services
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D. Inventory of a service provider 35. Inventories shall be measured at

30. Theoretically, freight and warehousing costs A. Cost

incurred in the transfer of consigned goods from
the consignor to the consignee should be B. Net realizable value
considered
C. Lower of cost and net realizable value
A. An expense by the consignor
D. Higher of cost and net realizable value
B. An expense by the consignee
36. Net realizable value is the
C. Inventoriable by the consignor

D. Inventoriable by the consignee A. Estimated selling price

31. The credit balance that arises when a loss B. Estimated selling price less cost to sell
on purchase commitment is recognized should
be C. Estimated selling price less cost to complete

A. Presented as a current liability D. Estimated selling price less cost to complete

and cost to sell
B. Subtracted from ending inventory
37. What is the method of accounting for
C. Presented as an appropriation of retained
inventory in which the cost of goods sold is
earnings
recorded each time a sale is made?
D. Presented in the income statement
A. Periodic system
32. The cost of inventories that are not
ordinarily interchangeable and goods or services B. Perpetual system
produced and segregated for specific projects
shall be measured using C. Professional system

A. FIFO D. Accounting system

B. Average method 38. During periods of rising prices, when the

FIFO inventory cost flow method is used, a
C. LIFO
perpetual inventory system would
D. Specific identification
A. Not be permitted
33. The cost of inventories shall be measured
using B. Result in a higher ending inventory than a
periodic inventory system
A. FIFO
C. Result in the same ending inventory as a
B. Average method
periodic inventory system
C. LIFO
D. Result in a lower ending inventory than a
D. Either FIFO or average method periodic inventory system.
34. Under the weighted average cost formula,
39. In applying the retail method, the standard
the cost of each item is determined from the
requires the use of
I. Weighted average of the cost of similar items
at the beginning of a period and the costs of A. Conservative retail
similar items at the end of the period.
B. Average cost retail
II. Weighted average of the cost of similar items
at the beginning of a period and the costs of C. FIFO retail
similar items purchased or produced during the
period. D. LIFO retail

A. I only 40. To produce an inventory valuation using the

B. II only average retail inventory method, the
C. Either I or II computation of the ratio of cost to retail should
D. Neither I nor II
Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 4
A. Include markups but not markdowns D. Ocean fishing

B. Include markups and markdowns 46. Biological assets are measured at

C. Ignore both markups and markdowns A. Cost

B. Lower of cost or net realizable value

D. Include markdowns but not markups
C. Net realizable value
41. At the certain stages of production,
inventories of agricultural, forest and mineral D. Fair value less cost to sell
products are measured at
47. Agricultural produced is harvested product
A. Net realizable value of an entity’s biological assets and measured at

A. Fair value
B. Cost
B. Fair value less cost to sell at the point of
C. Standard cost harvest
D. Relative sales price C. Net realizable value

42. The commodities of broker-traders are D. Net realizable value less normal profit margin
measured at
48. Where the fair value of the biological asset
A. Fair value cannot be determined reliably, the biological
asset shall be measured at
B. Fair value less cost to sell
A. Cost
C. Net realizable value
B. Cost less accumulated depreciation.
D. Lower at cost or market C. Cost less accumulated depreciation and
accumulated impairment losses.
43. Biological assets are
D. Net realizable value.
A. Living animals only
49. A gain or loss arising on the initial
B. Living plants only recognition of biological asset and from a
change in fair value less cost to sell of a
C. Both living animals and living plants biological asset shall be included.
D. Neither living animals nor living plants A. The profit or loss for the period

44. The following provides examples of B. Other comprehensive income.

biological assets, agricultural produce and
C. A separate revaluation reserve
products that are the result of processing after
the harvest. Which is an incorrect combination? D. A general reserve

Biological asset Agricultural produce Product after harvest 50. It is the present value of the cash flows an
entity expects to arise from the continuing use
A.Trees Felled trees Logs,lumber of an asset and from its disposal at the end of
its useful life or expects to incur when settling a
B. Dairy Cattle Cheese Milk liability.
C. Pigs Carcass Sausage A. Entity-specific value

D. Vines Grapes Wine B. Fair value

45. Agricultural activity includes all of the C. Value in use

following, except
D. Discounted value
A. raising livestock
51. Major space parts and stand-by equipment
B. Annual perennial cropping which an entity expects to use over more the
one period would qualify as
C. Floriculture and aquaculture, including fishing

Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 5

A. Inventory
B. Property, plant and equipment
C. Deferred charge
D. Expense
52. Cost directly attributable to bringing the
asset to the location and condition for its intend
use include all of the following, except
A. Cost of employee benefits not arising
directly from the construction and acquisition
of property, plant and equipment.
B. Cost of site preparation
C. Initial delivery and handling cost
D. Installation and assembly cost
53. Cost that are not included in the carrying
amount of an item of property, plant and
equipment but expensed immediately include
all of the following, except
A. Cost of opening a new facility
B. Cost of introducing a new product or service,
including cost of advertising and promotional
activities
C. Cost of conducting business in a new
location, including cost of staf training
D. Cost of testing whether the asset is
functioning properly
54. The cost of an item of property, plant and
equipment that is acquired in exchange for
combination of monetary and nonmonetary
asset is measured at the
A. Fair value of the asset given up pus the
amount of any cash or cash equivalent
transferred.
B. Fair value of the asset received plus the
amount of any cash or cash equivalent
transferred
C. Carrying amount of the asset given up plus
the amount of any cash or cash equivalent
transferred
D. Carrying amount of the asset received plus
the amount of any cash or cash equivalent
transferred
55. If an entity is able to determine reliably the
fair value of either the asset received or the
asset given up, which is used in measuring the
cost of the asset received?
A. Fair value of asset given up
Kirby Pecson Quimat, CPA Theory of Accounts - Integration
B. Fair value of asset received
C. Carrying amount of asset given up
D. Either fair value of asset given up or fair value
of asset received
56. Which is incorrect concerning self-
constructed asset?
A. The cost of self-constructed asset is
determined using the same principles as for an
acquired asset.
B. Any internal profits from construction are
eliminated in arriving at the cost self-
constructed asset.
C. The cost of abnormal amounts of wasted
material, labor or other resources incurred in
the production of a self-constructed asset is
included in the cost of asset.
D. If an entity makes similar assets for sale in
the normal course of business, the cost of the
asset is usually the same as the cost of
constructing an asset.
57. The useful life of an asset is
I. The period over which an asset is expected to
be available for use by an entity
II. The number of production of similar units
expected to be obtained from the asset by an
entity.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
58. A variety of depreciation methods can be
used to allocate the depreciable amount of an
asset over its useful life. Which statement is
incorrect?
A. Straight line depreciation results in a constant
charge over the useful life if the assets residual
value does not change.
B. The diminishing balance method results in a
decreasing charge over the useful life.
C. The units of production method results in a
charged based on the expected use or output.
D. The sum of year’s digits method results in an
increasing charge over the useful life.
59. Gain or loss from disposal of an item of
property, plant and equipment is equal to the
diference between
A. Fair value of the asset on balance sheet date
and its carrying amount
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B. Net realizable value on balance sheet date
and its carrying amount

C. Net proceeds from disposal and the cost of

the asset

D. Net proceeds from disposal and the carrying

amount of the asset

60. For items of property, plants and equipment

with insignificant changes in fair value,
revaluations are necessary only every

A. Five years

B. Ten years

C. Three to five years

D. Five to ten years

61. Which statement is incorrect concerning the

class of property, plant and equipment to be
revalued?

A. When an item of property, plant and

equipment is revalued, the entire class property,
plant and equipment to which that asset
belongs shall be revalued.

B. A class of property, plant and equipment is a

grouping of assets of a similar nature and use in
an entity’s operation.

C. The items within a class of property, plant

and equipment are revalued selectively

D. A class of assets may be revalued on a rolling

basis provided revaluation of the class of assets
is completed within a short period of time and
provided the revaluations are kept up to date.

Kirby Pecson Quimat, CPA Theory of Accounts - Integration Page 7