MULTIPLE CHOICE QUESTION

1. The cumulative balance of unrealized gains or losses which are recognized separately in

the Equity section of the Statement of Financial Position are from securities classified as

a. FVPL only

b. FVPL and FVOCI

c. FVOCI and Investment in Associate

d. FVOCI only

2. An entity has 20% investment in ordinary share and 25% investment in preference share

over the investee. Which of the following is true?

a. Only the cash dividend received related to 20% is treated as dividend income

b. Only the cash dividend received related to 25% is treated as dividend income

c. Cash dividend received for both investments should be treated as dividend income

d. Cash dividend received for both investments should be treated as a deduction from

investment

3. If an associate has a preference share, the proper way of computing the share in net income

of an associate for the current year assuming the preference share is cumulative would be

a. Deduct the preference dividend for the current year only, whether declared

or not

b. Deduct the preference dividend for the current year, if declared only

c. Deduct the preference dividend for the current year including any previous

undeclared preference dividend

d. Deduct both the preference and ordinary dividend for the current year only, whether

declared or not

4. Which of the following items should be treated as dividend income?

a. Reverse stock split

b. Same class of share dividend

c. Different class of share dividend

d. Cash dividend under equity method

5. Which of the following is true with regards to the accrued interest on investment in debt

securities that are sold between interest dates?

a. The accrued interest is computed using the effective rate

b. The accrued interest will be paid to the seller when the bonds mature

c. The accrued interest is extra income to the buyer and treated as bond issue cost of

the buyer

d. The accrued interest is added to the issue price of the bond to determine

the total cash payments from bond acquisition

6. If a bond investment is purchased between interest payment dates, the buyer should pay,

in addition to the purchase price of the bonds, the amount of accrued interest computed

a. From the date of acquisition to the nearest interest payment date

b. From the last interest payment date to the date of acquisition

c. From the last interest payment date to the next interest payment date

d. None of the above

7. The carrying value of the investment in debt securities at amortized cost purchased at an

amount which exceeds its face value, is ___________________ by the amount of the

___________________.

a. Increased; premium amortization

b. Decreased; premium amortization

c. Increased; discount amortization

d. Decreased; discount amortization

8. Which of the following is true assuming the debt securities designated initially as FVPL was

reclassified to FVOCI?

a. Gain or loss on remeasurement on reclassification date is reported in profit or loss

b. Initial carrying value of FVOCI is the amortized cost on reclassification date

c. Interest income subsequent to reclassification date is the nominal interest

d. UG/UL taken to equity subsequent to reclassification date is the difference

between the amortized cost and fair value

9. Which of the following is true about equity method in accounting for investment in

associate?

a. Investment should be carried at the balance sheet date at fair value less cost to sell

b. Impairment loss shall be recognized if recoverable value is lower than carrying

amount

c. Transaction cost should be expensed outright at initial recognition

d. Dividend received is reported in the income statement

10. The following statements are based on PAS 28 (Investment in Associates):

Statement I: An investment in an associate shall be accounted for using the equity method

(benchmark) or cost method (alternative).

Statement II: An investor shall discontinue the use of equity method from the date when

it ceases to have significant influence over an associate and shall account for the

investment in accordance with PFRS 9.

Statement III: On the loss of significant influence, the investor shall measure at historical

cost any investment the investor retains in the former associate.

a. Only statement I is false

b. Only statement II is true

c. Only statement III is true

d. All of the statements are false

11. Which of the following statements is true concerning recognition of unrealized gains and

losses?

a. Unrealized gains and losses on financial assets held for trading shall be included in profit or loss.

b. Unrealized gains and losses on financial assets measured at amortized cost are not recognized.

c. Unrealized gains and losses on financial assets at fair value through other comprehensive

income are not recognized in the income statement.

d. All of the above statements are true.

12. The bonds issued in June 1 of the current year have interest payment dates of April 1 and

October 1. Bond interest