1. Identify the incorrect statement.

a. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.,

b. When an entity has departed from a requirement of a Standard or an Interpretation in a prior period , and that departure affects the amounts recognized in the financial statements for the current period, it shall disclose the (a) title of the Standard or Interpretation from which the entity has departed and the (b) impact of such departure.,

c. PAS 1 requires an entity preparing financial statements, to make an assessment of the entity's ability to continue as a going concern. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, five years from the balance sheet date.

d. In the extremely rare circumstances in which management concludes that compliance with a requirement in a Standard or an Interpretation would be so misleading that it would conflict with the objective of financial statements set out in the Framework,but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible, reduce theperceived misleading aspects of compliance by disclosing:(a) the title of the Standard or Interpretation in question and (b) for each period presented, the adjustments to each item in the financialstatements that management has concluded would be necessary to achieve afair presentation.

2. Which of the following is an example of an adjusting event?

a. Major business combination after the reporting period.,

b. Issuance of shares of stocks after the reporting period.

c. Sale of inventories after the reporting period that gives evidence to their net realizable value at the end of reporting period.

d. A building is totally razed by fire after the reporting period.

3. Which of the following items is likely to be presented in the statement of comprehensive income of a merchandising business but not of a service business?

a. Service fees

b. Cost of sales

c. Income tax expense

d. Salaries expense