MULTIPLE CHOICE QUESTIONS

ACCOUNTING CHANGES

1. An entity that changed an accounting policy voluntarily should

a. Inform shareholders prior taking the decision
b. Treat the effect of the change as a component of other comprehensive income.
c. Treat the change prospectively and adjust the effects of the change in the current
period and future periods.
d. Account for the change retrospectively.
2. A change in the residual value of an asset arising because additional information has been
obtained is
a. An accounting change that should be reported by restating the financial statement
of all prior periods presented.
b. An accounting change that should be reported in the period of change and future
periods if the change affects both.
c. A correction of an error.
d. Not an accounting change.
3. Accounting changes are often made even though this may be a violation of the accounting
concept of
a. Consistency
b. Materiality
c. Prudence
d. Objectivity
4. A change in accounting policy requires what kind of adjustment to the financial statements?
a. Current period adjustment
b. As if adjustment
c. Current and prospective adjustment
d. None of the above
5. If it is impracticable to determine the cumulative effect of an accounting change to any of
the prior periods, the accounting change should be accounted for
a. As a future period adjustment
b. On a prospective basis.
c. As a cumulative effect change on the cash flow statement.
d. As an adjustment to impairment loss
BOOK VALUE PER SHARE

6. Which feature of preference share would most likely be opposed by ordinary shareholders?
a. Conversion
b. Callable
c. Redeemable
d. Participating
7. The features most frequently associated with preference shares include all of the following
except:
a. Convertible into ordinary shares
b. Nonvoting
c. Preference as to assets in the event of liquidation
d. All of the above are features of preference shares
8. Total shareholders' equity divided by the number of shares outstanding represents the
a. Book value per share
b. Return on profit
c. Stated value per equity raised
d. Price earnings ratio
9. Which of the following shareholder rights is commonly enhanced in an issue of preference
shares?
a. The right to vote for the BOD
b. The right to maintain proportional interest in the entity
c. The right to receive a full cash dividend before dividends are paid to ordinary
shares.
d. The right to vote on major corporate issues.
10. Preference shares participate ratably with the ordinary shareholders in any profit
distribution beyond the prescribed preference rate.
a. Cumulative feature
b. Participating feature
c. Participative feature
d. Determinant feature
EARNINGS PER SHARE

11. EPS disclosures are required for

a. Entities whose ordinary shares and potential ordinary shares are publicly traded
and entities that are in the process of issuing ordinary shares in the public market
b. Entities whose ordinary shares and potential ordinary shares are publicly traded
c. Entities that are in the process of issuing ordinary shares in the public market
d. All entities
12. When an entity issues both consolidated and separate FS, the EPS information is required
a. For both sets of financial statements
b. In neither set of financial statements
c. Only for consolidated financial statements
d. Only for separate financial statements.
13. EPS shall be reported for all of the following, except:
a. Net cash provided by operating activities
b. Continuing operations
c. Discontinued operations
d. Net income
14. In computing basic EPS, the amount of preference dividends on noncumulative preference
shares should be
a. Deducted from net income whether declared or not
b. Deducted from net income only when declared
c. Added to net income only when declared
d. Ignored
15. EPS disclosures are not
a. Required for public entities
b. Required for public entities and encouraged for nonpublic entities
c. Encouraged for private entities
d. None of the above
DILUTED EARNINGS PER SHARE

16. The purpose of dilutive EPS is to

a. Provide a comparison figure for debt holders
b. Indicate earnings shareholders shall receive in future periods
c. Show the maximum possible dilution of earnings
d. It has no purpose
17. Options and warrants are dilutive if
a. The exercise price is lower than the average market price.
b. The exercise price is higher than the average market price.
c. The option shares represent 20% of the ordinary shares outstanding.
d. The exercise price simply varies from the average market price.
18. In computing diluted EPS, dividends on convertible cumulative preference shares should be
a. Deducted from net income
b. Deducted from fair value of assets
c. Added to net income net of tax
d. Ignored
19. When there are multiple dilutive convertible securities, the one that should be used first to
calculate dilutive earnings per share is the security with the
a. Largest earnings adjustment
b. Largest earnings per share adjustment
c. Smallest earnings adjustment
d. Smallest earnings per share adjustment
20. The nature of diluted earnings per share involving adjustment for share options can be
described as
a. Proforma because it indicates potential changes in number of shares
b. Historical because it already happened
c. Historical because it depends on the company’s say-so
d. Proforma because it indicates potential changes in earnings
HYPERINFLATION

21. The unrealized holding gain for ending inventory is equal to

a. Excess of ending inventory at current cost over ending inventory at current cost.
b. Excess of ending inventory at historical cost over ending inventory at historical cost.
c. Excess of ending inventory at current cost over ending inventory at historical cost
d. Excess of ending inventory at historical cost over ending inventory at average
current cost.
22. Which of the following would indicate that hyperinflation exists?
a. People prefer to keep their wealth in nonmonetary assets or a stable foreign
currency.
b. Gut feeling of the company
c. Inflation is approaching or exceeds 20% per year.
d. Monetary items are piling up.
23. The gain or loss on the net monetary position in a hyperinflationary economy shall be
included in
a. Profit or loss and separately disclosed
b. Cash Flow Statement
c. Balance Sheet
d. Special Hyperinflation statement
24. The unrealized holding gain for non depreciable asset is equal to
a. Excess of profit and loss from the current year from last year
b. Excess of average current cost at year-end over historical cost
c. Excess of current cost at the beginning of the year over historical cost
d. Excess of current cost at year-end over historical cost
25. What is the basis of depreciation under current cost accounting?
a. Fair value of asset
b. Average current cost
c. Historical cost
d. Impairment loss
SMEs

26. An entity shall account for the transaction cost of an equity transaction as
a. A deduction from equity
b. An addition to equity
c. An item for unrealized loss
d. An expense immediately
27. A contingent liability
a. Is not recognized in the financial statement
b. Definitely exists as a liability
c. Is accrued even though not reasonably certain
d. Is the result of a loss contingency
28. An SME shall capitalize all of the following as cost of PPE, except
a. Transport Cost
b. Land Improvement cost
c. Installation cost
d. Nonrefundable purchase tax
29. All of the following are considered basic financial instruments, except
a. Cash
b. Investment in convertible preference share
c. Investment in bonds
d. Accounts receivable
30. One of the major categories of related parties which includes the parent, subsidiaries and
fellow subsidiaries.
a. Associates
b. Joint Ventures
c. Affiliates
d. Key management personnel of the entity.