91. Which of the following is a true statement concerning research and development (R&D) costs?

a. All R&D costs, without exception, must be charged to expense when incurred.

b. R&D costs can only be amortized over a life of 40 years or more.

c. Almost any treatment is acceptable for handling R&D costs.

d. Financial statements must disclose total R&D costs charged to expense in the period.

92. Which of the following items usually includes professional fees, incorporation fees and stock certificate costs?

a. Stock issuance costs

b. Goodwill

c. Organization costs

d. Copyrights

93. A corporation which incurs costs in defending a patent in an infringement suit should:

a. Expense currently the costs of all suits.

b. Capitalize only the costs of unsuccessful suits.

c. Capitalize only the costs of successful suits.

d. Capitalize the costs of all kinds of suits.

94. When a lessee under a long-term lease makes expenditures for such items as sidewalks, landscaping, building, and similar long-term items that becomes an integral part of the property, the costs should be:

a. Debited to leasehold improvements account and amortized over the estimated life of the asset or the lease term, whichever is shorter.

b. Debited to retained earnings immediately.

c. Expensed when incurred.

d. Accounted for as an asset and not amortized, then at the time the lease expires or is abandoned, written off in their entirety.

95. In a case of a patent infringement suit, the suit may either be successful or lost. The results of the legal decision are accounted for as follows:

a. If successful, debit the cost of the lawsuit to patent expense.

b. If lost, debit the cost of the lawsuit to extraordinary loss.

c. If lost, write the balance in the patent account,

d. After recognizing the results of the lawsuit as an expense, amortize the remaining balance in the patent account over its remaining economic life.

96. Which of the following should be expensed as incurred by the franchisee for a franchise with estimated useful life of ten years?

a. Legal fees paid to the franchisees lawyers to obtain the franchise.

b. Periodic payments to the franchiser based on the franchisees revenues.

c. Amount paid to the franchiser for the franchise.

d. Periodic payments to a company, other than the franchiser, for the companys franchise.

97. Should the following fees associated with the registration of an internally developed patent be capitalized?

Legal Fees Registration Fees

a. No No

b. No Yes

c. Yes No

d. Yes Yes

98. A purchased patent has a remaining legal life of 15 years. It should be:

a. Expensed in the year of the acquisition

b. Amortized over 15 years regardless of its useful life.

c. Amortized over its useful life if less than 15 years.

d. Not amortized

99. Which of the following assets typically are amortized?

Patents Trademarks

a. No No

b. Yes Yes

c. No Yes

d. Yes No

100. What is the proper time or time period over which to match the costs of an intangible asset with revenues if its likely that the benefits of the asset will last for an indefinite period?

a. Forty years

b. Fifty years

c. Immediately

d. At such time as reduction in value can be quantitatively determined.

101. Which of the following is not a common feature of biological activity?

a. Capability to change

b. Management of change

c. Determination of change

d. Measurement of change

102. Due to the abundance of wild animal resources in the Province of Abra, Hunters Company established a hunter encampment in the remote forest of Tineg. Transportation was the main issue so choppers were used to carry carcass to the Bangued processing plant. The hunting could not however classify as a biological activity under PAS 41 primarily because:

a. There was no change involved

b. There is no management activity involved.

c. There is no measurement involved.

d. There is no development involved.

103. Changes in asset by biological transformation could be, except:

a. Growth

b. Degeneration

c. Procreation

d. Aggregation

104. Biological assets should be recognized initially at:

a. Net realizable value

b. Fair value less estimated point of sale costs

c. Fair value

d. Cost

105. The cost of biological assets may approximate fair value when:

a. Little biological transformation has taken place

b. The impact of biological transformation on price is not expected to be material

c. A or B

d. Neither a nor b

106. Before the financial year-end, there were many calves born. Which of the following reflects the proper valuation of the calves under PAS 41?

a. There will be a re-allocation of the costs of the bearer biological asset to the offspring.

b. There is no cost or value allocation necessary. The fact will be disclosed in the financial statements.

c. The fair value of the calves will be determined and will be recognized as a gain on initial recognition of the calves.

d. The fair value of the calves will be determined and credited to revaluation reserves to be closed to profit only upon sale of the related assets.

107. Northern Luzon Planters Incorporated is an agricultural corporation established in Pangasinan. Its principal produce is corn. What is the appropriate method of accounting for Northern Luzon Planters to follow for its corn assets?

a. Recognize all costs of planting, weeding, fertilization, pest and biological control as cost of the corn.

b. All costs related to planting, weeding, fertilization, pest and biological control will be expensed; the fair value of the biological asset will be determined for every reporting period or at harvest.

c. The biological asset will have no value in the financial statements until harvest regardless of any intervening balance sheet date to the point of harvest.

d. Any of the above is allowed alternative treatment.

108. When there is no reliable measure of fair value, then:

a. The biological asset will be carried at cost

b. The biological asset will be carried at cost less accumulated depreciation and accumulated impairment losses.

c. Either a or b

d. Neither a nor b

109. Consider the following statements:

I. Once a biological asset meets the criteria for held for sale, it is presumed that fair value can be measured reliably.

II. In all cases, an entity measures its biological assets at fair value less estimated point of sale costs at the point of harvest.

a. I is true

b. II is true

c. I and II is true

d. I and II are not true

110. Which of the following is more likely correct upon the initial recognition of a biological asset that was acquired at fair value?

a. Loss is likely to be reported on initial recognition

b. Gain is likely to be reported on initial recognition

c. Acquisition never affects income or expense hence the question is non-sense.

d. The biological asset should be accounted at fair value

111. Which of the following will generally result in income on initial recognition?

Birth of an Offspring Harvest of Fruits Unconditional Biological asset grant @ fv Conditional biological asset grant

a. Yes Yes Yes Yes

b. Yes Yes Yes No

c. No No No No

d. Yes No Yes No

112. Which of the following is not a required disclosure regarding biological assets?

a. Information about biological assets whose title are restricted or are pledged as security.

b. Commitment for development or acquisition of biological assets.

c. Fair value of agricultural produce harvested during the period.

d. A distinction between consumable and bearer biological assets or between mature and immature biological assets.

113. Select the correct statement:

a. Branches of trees are bearer biological assets

b. Grape vine is a consumable biological asset.

c. A tree can either be consumable or bearer biological asset

d. Bearer biological asset relates only to living plants

114. Which of the following is not a required disclosure regarding biological assets?

a. Disclosure of the component of change in fair value less estimated point of sale cost between those attributable to physical change and price change.

b. Financial risk management strategies for biological assets.

c. A reconciliation of changes in the carrying amount of biological assets showing the effects of various factors.

d. The carrying amount of biological assets.

115. According to PAS 40 Investment Property, all of the following are examples of investment property, except:

a. A building that is vacant but is held to be leased out under one or more operating lease.

b. Land held for long-term capital appreciation

c. Property that is being leased to another entity under a finance lease.

d. Land held for a currently undetermined future use.

116. Which of the following statements regarding investment property is (are) true?

I. An investment property should be initially measured at its cost.

II. Transaction costs shall be included in the initial measurement of investment property.

III. With certain exceptions, an entity shall choose as its accounting policy either the fair value model or the cost model and shall apply such policy to all its investment property.

a. I and II

b. I and III

c. II and III

d. I, II and III

117. Gain or loss arising from a change in the fair value of investment property shall:

a. Be recognized in the profit or loss for the period in which it arises

b. Be recognized directly to equity in the period in which it arises

c. Be recognized as an adjustment to retained earnings at the beginning of the year.

d. Not be recognized in the accounts.

118. In a transfer from investment property carried at fair value to owner-occupied property or inventory, the propertys deemed cost for subsequent accounting shall be:

a. Its carrying value at the date of change in use.

b. Its fair value at the date of change in use.

c. Its net realizable value at reporting date.

d. The carrying value or its fair value at the date of change in use whichever is higher.

119. The initial cost of a property interest held under a lease classified as an investment property shall be:

a. The fair value of the property.

b. The present value of the minimum lease payments.

c. The lower of the fair value of the property and the present value of the minimum lease payments.

d. The fair value of the property or the present value of the minimum lease payments at the option of the entity.

120. The cost of an investment property includes which of the following?

a. Start-up costs

b. Professional fees for legal services incurred in the acquisition of the property.

c. Abnormal amounts of waste material, labor and other resources incurred in constructing, financing or developing the property.

d. Operating losses incurred before the investment property achieves the planned level of occupancy.