Assessment Task 10

I.Multiple Choice (PFRS 6: Exploration and Evaluation of Mineral Resources)

1.

Exploratory drilling for minerals on site 2,000,000

Road and infrastructures to access exploration site 3,500,000

Expenditures relating to subsequent development of resources 3,400,000

Harry Company is involved in the exploration for mineral rights. During the current year, the entity incurred the following expenditures:

What amount should be initially recognized as exploration asset? a. 2,000,000

b. 5,400,000

c.5,500,000

d. 8,900,000

2.During the current year, Long Company incurred P5,000,000 in exploration cost for each of 20 oil wells drilled in the current year in West Mindanao. Of the 20 wells drilled, 14 were dry holes. The entity used the successful effort method of accounting. None of the oil found is depleted in the current year.

What oil exploration expense should be reported in the income statement for the current year?

a. 50,000,000

b. 30,000,000

c. 70,000,000

d. 0

3.Exploration and Evaluation expenditures are incurred

a.When searching for an area that may warrant detailed exploration even though the entity has not yet obtained the legal rights to explore a specific area.

b.When the legal right to explore a specific area has been obtained but the technical feasibility and commercial viability of extracting mineral resource are not yet demonstrable

c.When a specific area is being developed and preparations for commercial extraction are being made

d.In extracting mineral resource and processing the resource to make it marketable or transportable

4.When is an entity required to recognize exploration and evaluation expenditure as an asset?

a.When such expenditure is recoverable in future periods

b.When the technical feasibility and commercial viability of extracting the associated mineral resource have been demonstrated.

c.When required by the entity's accounting policy for recognizing exploration and evaluation asset.

d.Such expenditure is always expensed as incurred.

5.Which measurement model applies to exploration and evaluation of asset subsequent to initial recognition?

a.Cost Model

b.Revaluation Model

c.Cost Models and Revaluation Model

d.Recoverable amount model

II.Multiple Choice - Theories (PFRS 8: Operating Segments)

6.PFRS 8 shall apply to

a.Separate financial statements of an entity only.

b.Consolidated financial statements of a group only.

c.Both the separate financial statements of an entity and the consolidated financial statements of a group.

d.Neither the separate financial statements of an entity nor the consolidated financial statements of a group

7.If a financial report contains both the consolidated financial statements of a parent and the parent's separate financial statements, segment information required in

a.The separate financial statements only

b.The consolidated financial statements only

c.Both the separate and consolidated financial statements

d.Neither the separate nor the consolidated financial statements

8.An operating segment is a component of an entity

I.That engages in business activities from which it is may earn revenue and incur expenses, including revenue and expenses relating to transactions with other components of the same entity.

II.Whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

III.For which discrete information is available.

a.I only

b.II only

c.I and III only

d.I, II and III

9.Which may be considered an operating segment?

a.Start-up operations before earning revenue

b.Corporate headquarters that earn revenue

c.Functional department

d.Postemployment benefit plans

10.What is the function of the chief operating decision maker?

a.To allocate resources to the operating segments only.

b.To assess the performance of the operating segments only.

c.To provide general information to financial statement users about operating segments

d.To allocate resources to the operating segments and assess their performance.

11.Who could be the chief operating decision maker?

a.Chief operating officer

b.Chief executive officer

c.Group of executive directors

d.All those mentioned depending on who within the organization is responsible for the allocation of resources and assessing the performance of operating segments.

12.What is the approach prescribed by PFRS 8 in identifying an operating segment?

a.Management approach

b.Risks and rewards approach

c.Matrix approach

d.Geographical segment approach

13.An entity shall disclose information about an operating segment when

a.Its reported external and internal revenue is 10% or more of the combined external revenue of all operating segments

b.Its reported external revenue is 10% or more of the combined external and internal revenue of all operating segments

c.Its reported external revenue is 10% or more of the combined external revenue of all operating segments

d.Its reported external revenue is 10% or more of the combined internal revenue of all operating segments

14.What is the quantitative requirement for the revenue that must be reported by reportable operating segments?

a.The total external and internal revenue of all reportable segments is 75% or more of the entity external revenue.

b.The total external revenue of all reportable segments is 75% or more of entity external and internal revenue.

c.The total external revenue of all reportable segments is 75% or more of the entity external revenue.

d.The total internal revenue of all reportable segments is 75% or more of the entity internal revenue.

15.Operating segments that do not meet any of the quantitative thresholds

a.Cannot be considered reportable.

b.May be considered reportable and separately disclosed if management believes that information about the segment would be useful to the users of the financial statements

c.May be considered reportable and separately disclosed if the information is for internal use only.

d.May be considered reportable and separately disclosed if this is the practice within the economic environment in which the entity operates.

III.Multiple Choice - Computation (PFRS 8: Operating Segments)

16.Ariana Company and its divisions provided the following information for the current year:

Sales to unaffiliated customers 20,000,000

Intersegment sales of products similar to those sold to unaffiliated

customers 6,000,000

Interest earned on loans to other operating segments 400,000

Ariana Company and all of its divisions are engaged solely in manufacturing operations.

What is the minimum amount of segment revenue in order that a division can be considered a reportable segment?

a. 2,640,000

b. 2,600,000

c.2,040,000

d. 2,000,000

Questions 17 and 18 are based on the following information:

Groom Company, a publicly owned entity, is subject to the requirements of segment reporting. In the income statement for the year ended December 31, 2018, the entity reported revenue of P50,000,000, excluding intersegment sales of P10,000,000, expenses of P47,000,000 and net income of P3,000,000. Expenses included in payroll costs of P15,000,000. The combined identifiable assets of all operating segments on December 31, 2018 totaled P40,000,000.

17.In the financial statements, the entity should disclose major customer data if sales to any single customer to at least

a. 5,000,000

b. 4,000,000

c. 6,000,000

d. 4,700,00

18.External revenue of reportable operating segments must be at least

a. 22,500,000

b. 30,000,000

c. 33,750,000

d. 37,500,000

19.Cloy Company has three lines of business, each of which was determined to be reportable segment. The entity sales aggregated P7,500,000 in the current year, of which Segment No. 1 contributed 40%.

Traceable costs were P1,750,000 for Segment No. 1 out of a total of P5,000,000 for the entity as a whole.

For external reporting, the entity allocated common costs of P1,500,000 based on the ratio of a segment's income before common costs to the total income before common costs.

In the financial statements for the current year, what amount should be reported as profit for Segment No. 1?

a. 1,250,000

b. 1,000,000

c.650,000

d. 500,000

20.

Total revenue 7,680,000

Total profit and loss 406,000

Swift Company, a publicly owned entity, assess performance and makes operating decisions using the following information for the reportable segments:

The total profit and loss included intersegment profit of P61,000. In addition, the entity ha P5,000 of common costs for the reportable segments that are not allocated in reports reviewed by the chief operating decision maker. What amount should be reported as segment profit?

a. 350,000

b. 345,000

c.411,000

d. 406,000

IV.Multiple Choice - Theories (PFRS 13: Fair Value Measurement)

21.Fair value of an asset should be based upon

a.The replacement cost of an asset.

b.The price that would be received to sell the asset at the measurement date.

c.The original cost of the asset.

d.The price that would be paid to acquire the asset

22.Which of the following best describes a principal market for establishing fair value of an asset?

a.The market that has the greatest volume and level of activity for the asset

b.Any broker or dealer market

c.The most observable market

d.The market in which the amount received would be maximized

23.Which statement is true for measuring an asset at a fair value?

a.The price of the asset should be adjusted for transaction cost.

b.The fair value of the asset should be adjusted for cost of disposal.

c.The fair value is based upon an entry price to purchase the asset

d.The price should be adjusted for cost to transport the asset to principal market.

24.Which of the following would meet the qualifications as market participants?

a.A liquidation market in which sellers are compelled to sell

b.A subsidiary of the reporting unit interested in purchasing assets similar to those being valued.

c.An independent entity that is knowledgeable about the asset.

d.A broker or dealer that wishes to establish a new market.

25.Valuation techniques for fair value that include the Black-Scholes formula, a binomial model, or discounted cash flow are examples of which valuation technique?

a.Income approach

b.Market approach

c.Cost approach

d.Exit value approach