1.) Michael owns 10% of the common stock of Maine Co. throughout the year. Maine Co. has no preferred stock outstanding. Michael as stock gives him the right to

Select one:

a. be paid 10% of the firms profits in cash each year.

b. keep the corporation from issuing any additional stock unless he is willing to buy 10% of the newly issued shares.

c. receive dividends equal to 10% of the par value each year.

d. receive dividends equal to 10% of the total dividends paid by the corporation for the year to common stockholders.

2.) Under PAS 28, adjustments to share in profit or loss of an associate may differ if the transaction is downstream or upstream. Which of the following statements is true? I. Jack Co. owns 20% interest in Old Man, Inc. During the year Old Man sold magic beans to Jack. This is an upstream transaction. II. Goldilocks Co. owns 20% interest in Papa Bear, Inc. During the year Goldilocks purchased porridge from Papa Bear. This is a downstream transaction.

Select one:

a. True, false

b. False, False

c. False, True

d. True, True

3.) An investors share in the losses of an associate equals or exceeds its interest in the associate. Which of the following cannot be undertaken by said investor?

Select one:

a. The investor shall continue recognizing its share of further losses

b. The investment is reduced to zero

c. If the associate subsequently reports profit, the investor resumes recognizing its share of profit only after its share of profit equals the share of the losses not previously recognized.

d. Additional losses shall be provided only to the extent that the investor has incurred legal or constructive obligators or made payments in behalf of the associate

4.) DEF Co. purchased a P250,000 life insurance policy on the life of one of its key officers. When is the value of this policy an asset of the company?

Select one:

a. If the policy is either ordinary life or limited payment.

b. If the premiums are paid by the company and, for income tax purposes, represent income to the officer.

c. If the company is the beneficiary and has the right to cancel the policy at its option.

d. If the officers of his heirs are the beneficiaries.

5.) An independent trustee holds cash in the sinking fund account representing the annual deposits to the fund and interest earned on these deposits. How should the sinking fund be classified in the balance sheet?

Select one:

a. The accumulated deposits only are shown as long term investment

b. The cash in the sinking fund is classified a current asset.

c. The entire balance in the sinking fund is classified as current asset

d. The entire balance in the sinking fund is classified as noncurrent asset.

6.)Significant influence is the power to control or joint control over the financial and operating policy decisions of the investee.

Select one:

a. False

b. True

7.) When the accounting policies used by the investor and the associate do not match

Select one:

a. PAS 28 does not require appropriate adjustments to the associates financial statements to conform them to the investors accounting policies for reporting like transactions and other events in similar circumstances when it was not practicable to use uniform accounting policies.

b. PAS 28 requires appropriate adjustments to the associates financial statements to conform them to the investors accounting policies for reporting like transactions and other events in similar circumstances.

c. In no instance should the accounting policies used by the investor and the associate be different.

d. PAS 28 requires the entity to discontinue the use of the equity method.

8.)

Which of the following statements is correct?

Select one:

a. According to PAS 28 Investments in Associates, a partnership cannot be an associate

b. Only investments which give the investor voting rights can be classified as Investment in Associate.

c. Only investments in ordinary shares can be classified as Investment in Associate

d. Goodwill included in the carrying amount of an investment in an associate is tested for impairment separately.