1. Entity A had the following balances at December 31, 20x1: PROBLEM 2: MULTIPLE CHOICE 35,000 75,000 350,000 400,000 Cash in bank Cash in 90-day money market account Treasury bill, purchased 11/1/x1, maturing 1/31/x2 Treasury bill, purchased 12/1/x1,maturing 3/31/x2 5 How much is the cash and cash equivalents to be reported in Entity A's December 31, 20x1 statement of financial position? a. 110,000 C. 460,000 b. 385,000 d. 860,000 2. Which of the following cash flows is presented in the operating activities section of a statement of cash flows? a. cash receipts from issuing shares or other equity instruments and cash payments to redeem them b. cash receipts from issuing notes, loans, bonds and mortgage payable and other short-term or long-term borrowings, and their repayments Statement of Cash Flotes 181 c cash receipts from the sale of goods, rendering of services, or other forms of income d. cash payments by a lessee for the reduction of the outstanding liability relating to a lease 3. In the statement of cash flows of a non-financial institution, interest expense paid is presented under a. operating activities. c. financing activities, b. investing activities. d. a orc 4. Which of the following is presented in the activities section of the statement of cash flows? a. Purchase of a treasury bill three months before its maturity date. b. Exchange differences from translating foreign currency denominated cash flows. c. Acquisition of equipment through issuance of note payable. d. Bank overdrafts that can be offset. 5. Entity A acquires equipment by paying a 10% down payment and issuing a note payable for the balance. How should Entity A report the transaction in the statement of cash flows? Down payment Note payable a. Investing activities None b. Investing activities Financing activities c. Financing activities None None d. None 193 PROBLEM 2: FOR CLASSROOM DISCUSSION 1. According to PAS 8, in the absence of a PFRS that specifically deals with a transaction, management shall a refer to the concepts under the Conceptual Framework b. adopt the provisions of the US GAAP. use its judgment in developing and applying an accounting policy that results in information that is relevant and reliable. d. consider the applicability of relevant accounting literature. c. 2. According to PAS 8, a change in accounting policy is accounted for a. using a transitional provision, if any. b. retrospectively c prospectively, if retrospective application is impracticable. d. a, b or c, whichever is most appropriate 3 1 3. This refers to applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied. c. Retrospective application c. Prospective application d. Retrospective restatement d. Impracticable application 4. According to PAS 8, a change in accounting estimate is accounted for a. using a transitional provision, if any. b. retrospectively. c prospectively. d. a, b or c, whichever is most appropriate 5. Entity A changes its inventory cost formula from FIFO to weighted average. How should Entity A account for thus change? a. by retrospective restatement, as a change in accounting policy 194 PAS 8 b. by prospective application, as a change in accounting estimate c. by retrospective application, as a change in accounting policy d. as a correction of prior period error
