PAST Presentation of Financial Statements 143 which PROBLEMS a sing income, PROBLEM 1: TRUE OR FALSE statement 1. The application of PERSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. of incom 2. According to PAS 1, an entity shall make an explicit and that an unreserved statement of compliance with the PERSs in the nitted by notes only if the entity complies with all the requirements of surplus PERSs. y (asset) 3. PAS 1 encourages, but does not require, the presentation of ents, (d the preceding year's financial statements as comparative and te information to the current year's financial statements. nents in According to PAS 1, assets and liabilities or income and expenses are offset, unless separate presentation is required or d from permitted by a PERS. 5. According to PAS 1, PFRSs apply to financial statements as well as to other information presented in an annual report, a regulatory filing, or another document. ranges 6. According to PAS 1, the line item "Cash and cash equivalents" ensive should always be presented first in the statement of financial position." ments 7. PAS 1 prescribes an order or format of presenting items in the financial statements. ense 8. An entity may omit the notes when presenting general re is purpose financial statements. 9. If profit or loss is P100 while other comprehensive income is s in P20, total comprehensive income must be P130, 10. PAS 1 encourages, but does not require, the disclosure of an entity's domicile and legal form, its country of incorporation ed and the address of its registered office and a description of the nature of its operations and its principal activities.PAS2 163 Inventories n the ordinary for such sale PROBLEMS consumed in PROBLEM 1: TRUE OR FALSE 1. According to PAS 2, inventories are measured at net realizable cost and net value. 2. According to PAS 2, net realizable value and fair value less urchase, costs costs to sell are the same, bringing the 3. Storage costs of part-finished goods may be included in the cost of inventory, but not storage costs of finished goods. are deducted Trade discounts are added to the cost of inventories. 5. Import duties, freight-in and non-refundable purchase taxes form part of the cost of inventories. of inventory 6. Raw materials inventory is not written down below cost if the Administrative finished goods to which they will be incorporated are expected to be sold at or above cost. (a) specific 7. Reversals of inventory write-downs may exceed the amount of the original write-down previously recognized. 's which are 8. The cost of factory management is included in the cost of inventory. price in the 9. The maintenance costs of a machine used in the ed costs of manufacturing process are not included in the cost of inventories. ake the sale 10. If the cost of an inventory is 98 while its net realizable value is an item by P6, the amount of write-down is $2. cost if the orated are PROBLEM 2: MULTIPLE CHOICE 1. Which of the following is not included as part of the cost of an exceed the inventory? Purchase cost, net of trade discount b. Direct labor cost c. Freight in d. Selling costPAST 144 PROBLEM 2: MULTIPLE CHOICE 1. The objective of PAS 1 is a to ensure comparability by prescribing the basis for presentation of general purpose financial statements. G to ensure the faithful representation of financial statements. C. to ensure the relevance of information presented in the financial statements. d. to prescribe the recognition and measurement principles applicable to assets, liabilities, income and expenses. 2. Entity A's financial statements in the current period is comparable with Entity A's financial statements in the previous period. This type of comparability is called a. Inter-comparability c. Extra-comparability b. Intra-comparability d. Intro-comparability 3. The scope of PAS 1 is a. the preparation and presentation of general purpose financial statements. b. the recognition, measurement and disclosure requirements for specific transactions and other events. c. the presentation of general purpose financial statements as well as all other information contained in an entity's annual report. d. all of these 4. The statement of financial position is also called a. balance sheet. b. income statement. c. positions statement. d. all of these 5. When preparing financial statements, PAS 1 requires management to assess the entity's ability to continue as going concern. The assessment covers a minimum period of a. at least one year from the end of the reporting period. b. at least two years from the end of the reporting period166 Conversion costs do not include which of the following cous c. Production a. Direct materials d. All of these are included b. Direct labor 3. These deal with the computation of cost of sales and cost of ending inventory, c. cost formulas a. net realizable value b. perpetual inventory system d. costing 4. Entity A's inventories consist of items that are ordinarily interchangeable. According to PAS 2, which of the following cost formulas shall Entity A use? a. Specific identification c. Weighted Average b. FIFO d. bore 5. Which of the following statements is incorrect regarding the use of cost formulas? a. PAS 2 requires the use of specific identification of costs for inventories that are not ordinarily interchangeable. b. Entities may choose between the FIFO and the Weighted Average cost formulas for inventories that are ordinarily interchangeable. c. Different cost formulas may be used for each class of inventory with dissimilar nature and use. d. Only one formula shall be used for all inventories regardless of differences in their nature and use. Entity A's buys and sells two types of products - Product A and Product B. Items of Product A are not ordinarily interchangeable while items of Product B are ordinarily Interchangeable. According to PAS 2, what cost formula shall average "WA') Entity A use? (specific identification 'St', first-in Urst out FIFO'. weighted Product A SI Product B b. SI, FIFO or WA FIFO or WA SI, FIFO or WAPresentation of Financial Statements 149 ete d. continuing and discontinued operations 10. When an entity changes the end of its reporting period and the presents financial statements for a period longer or shorter than one year, an entity shall disclose all of the following except the a. the period covered by the financial statements. b. the reason for using a longer or shorter period. me c. the fact that amounts presented in the financial statements are not entirely comparable. d. a quantification of the possible adjustments that would eliminate the effects of the longer or shorter reporting period. it or the ome PROBLEM 4: FOR CLASSROOM DISCUSSION Scope 1. PAS 1 applies to which of the following? (Page 17) a. The preparation and presentation of general purpose financial stateme recognition casurement of specific assets, ities, incor enses. disclosure its for specific transactions and onal events, if these. and der tures etrop cation of an le informationPresentation of Financial Statements an a. classified presentation c. combination of a and b b. unclassified presentation. d. none of these ting a tion of 3. Which of the following is a current asset? a. Deferred tax asset expected to reverse within 3 months idity from the reporting date b. Property, plant and equipment Non-trade note receivable due in 13 months normal d, Accounts receivable it takes 4. Which of the following statements is incorrect regarding the provisions of PAS 1? se raw a. An entity is required to present separate sections of profit goods. or loss and other comprehensive income. it takes b. Presenting an income statement or statement of profit or se raw loss in addition to a statement of other comprehensive ods on income is permitted when an entity elects to use the "two- statement" presentation. it takes Presenting an income statement or statement of profit or unt and loss alone without a statement of other comprehensive income is allowed. it takes d. Presenting comprehensive income as a note disclosure d collect only is prohibited. 5. When a separate statement of profit or loss (income statement) is presented, a. it shall be displayed immediately before the statement presenting comprehensive income. tation of PERSs? b. it shall be displayed immediately after the statement presenting comprehensive income. C. it shall be displayed alone. The entity may opt not to body present information on comprehensive income. d. Any of these. ted either or based 6. Which of the following is not correct when an entity opts to use the "two-statement presentation" of income and expenses?146 d. Explanatory material and other information that disclosed in the notes to the financial statements. This is the most commonly used method of presenting a Statement of financial position. It facilitates the computation of liquidity and solvency ratios. Classified presentation c. Classified as to liquidity b. Unclassified presentation d. Based on liquidity 10. Which of the following best reflects the definition of normal operating cycle under PAS 1? a. For a manufacturing entity, this is the usual time it takes for the entity to acquire raw materials, process those raw materials into finished goods, and sell the finished goods. b. For a manufacturing entity, this is the usual time it takes for the entity to acquire raw materials, process those raw materials into finished goods, sell the finished goods on account, and collect the receivables. C. For a manufacturing entity, this is the usual time it takes for the entity to acquire raw materials on account and settle the account. d. For a manufacturing entity, this is the usual time it takes for the entity to sell finished goods on account and colled the receivables. PROBLEM 3: MULTIPLE CHOICE 1. Who is responsible for the preparation and fair presentation of an entity's financial statements in accordance with the PFRS? a, Accountant b. Management c. Auditor d. Government regulatory body 2. The statement of financial position may be presented either showing currenton-current distinction (classified) or based on liquidity (unclassified). PAS 1 encourages a(an)165 Inventories dinary PROBLEMS ch sale med in PROBLEM 1: TRUE OR FALSE 1. According to PAS 2, inventories are measured at net realizable id value. net 2. According to PAS 2, net realizable value and fair value less costs to sell are the same. costs 18 the 3. Storage costs of part-finished goods may be included in the cost of inventory, but not storage costs of finished goods. Trade discounts are added to the cost of inventories, ducted 5. Import duties, freight-in and non-refundable purchase taxes form part of the cost of inventories. ntory 6. Raw materials inventory is not written down below cost if the trafive finished goods to which they will be incorporated are expected to be sold at or above cost. pecific 7. Reversals of inventory write-downs may exceed the amount of the original write-down previously recognized. h are 8. The cost of factory management is included in the cost of inventory. 9. The maintenance costs of a machine used in the n the ts of manufacturing process are not included in the cost of inventories. sale 10. If the cost of an inventory is P8 while its net realizable value is m by P6, the amount of write-down is $2. if the are PROBLEM 2: MULTIPLE CHOICE 1. Which of the following is not included as part of the cost of an the inventory? cost, net of trade discount or cost UPAS1 145 Presentation of Financial Statements at least five years from the end of the reporting period. basis for d. there is no such requirement. nts. financial Which of the following is not considered an appropriate application of offsetting under PAS 1? ed in the a. Presenting a gain from the sale of a noncurrent asset net of the related selling expenses. principles b. Deducting foreign exchange losses from foreign exchange es. gains and presenting only the net amount. c Deducting unrealized losses from unrealized gains from trading securities and presenting only the net amount. period is d. Deducting accumulated depreciation from the equipment in the account and presenting only the carrying amount. lity 7. PAS 1 requires an entity to provide an additional balance lity sheet dated as of the beginning of the preceding period if certain instances occur. Which of the following is not one of those instances? (Assume all of the following has a material purpose effect) a. Retrospective application of an accounting policy. irements b. Retrospective restatement c. Reclassification of items in the financial statements ments as d. Change in the frequency of reporting entity's 8. The PERSs apply to which of the following? a. A management's review of the entity's financial performance during the period vis-a-vis its targets for that period contained in the entity's annual report, which also includes the entity's financial statements. ent. b. Schedules, reconciliations and returns required by the Bureau of Internal Revenue (BIR) to be filed together with the financial statements. requires C. Environmental reports required by the Department of nue as a Environment and Natural Resources (DENR) that are riod of included in the entity's annual report. od.167 PASS llowing cost WA are included & FIFO d. SI 's and costa 7. Entity A is a distributor of oil. Entity A's inventories are ordinarily interchangeable. Entity A maintains a specific level of inventory such that the latest purchases are the ones dispatched first to the sales outlets. Consequently, the latest purchases are sold first. Which of the following cost formulas e ordinanh shall be used by Entity A? c. Weighted Average he following Last-in, First-out (LIFO) b. FIFO d. bor c erage 8. In which of the following instances is a write-down of inventories to net realizable value may not be required? a. the inventories are damaged garding the b. the inventories have become wholly or partially obsolete c. the estimated costs to complete or costs to sell have of costs for increased le. d. selling prices are rising because demand has increased Weighted ordinarily 9. Write-downs of inventories to their net realizable value are recognized class of a. in profit or loss b. in other comprehensive income c. directly in equity d. any of these ventories 10. Inventories are usually written-down to net realizable value a. on an item by item basis. oduct A on the basis of their classification, for example, as all rdinarily finished goods, all work in process and all raw materials dinarily and supplies. ala shall every year. weighted on the basis of their relative stand-alone selling prices.PAST Presentation 148 The separate income statement forms part of a complete set of financial statements and shall be displayed immediately before the statement presenting 10. Whe comprehensive income. prese b. The profit or loss section is not presented anymore in the than statement presenting comprehensive income. exce The profit or loss section is required to be presented in the statement presenting comprehensive income. d. The separate statement presenting comprehensive income begins with the amount of profit or loss. 7. Entity A reclassifies a gain that was previously recognized in other comprehensive income to the current period's profit of loss, According to PAS 1, how should Entity A present the reclassification adjustment in the other comprehensive income section of the statement of comprehensive income? PROBL as an addition c. only at net of tax Scope b, as a deduction d. none of these 1. PA 8. Which of the following is a current liability? a. Deferred tax liability b. An obligation for which the entity has an unconditional right to defer. c A long-term obligation that becomes payable on demand because of a breach of loan agreement but the lender agrees before the balance sheet date to provide a grad period for the lender to rectify the breach. Genera d. An obligation for which the entity has a conditional right S to defer. acc 9: According to PAS 1, items of other comprehensive income are pre presented according to the following groupings inf a. ordinary and extraordinary items b. by nature and by furiction tog those that are subsequently reclassified to profit or loss and those that are not PA