PAS 1 PRESENTATION OF FINANCIAL STATEMENTS

1. Which of the following reports is not a component of the financial statements according
to IAS 1?
a. Statement of financial position.
b. Statement of changes in equity.
c. Director’s report.
d. Notes to the financial statements.
Answer: (c)
2. XYZ Inc. decided to extend its reporting period from a year (12-month period) to a 15-
month period. Which of the following is not required under PAS 1 in case of change in
reporting period?
a. XYZ Inc. should disclose the reason for using a longer period than a period of 12
months.
b. XYZ Inc. should change the reporting period only if other similar entities in the
geographical area in which it generally operates have done so in the current year;
otherwise its financial statements would not be comparable to others.
c. XYZ Inc. should disclose that comparative amounts used in the financial statements
are not entirely comparable.
d. The entity should disclose the period covered by the financial statements.
Answer: (b)
3. Which of the following information is not specifically a required disclosure of IAS 1?
a. Name of the reporting entity or other means of identification, and any change in that
information from the previous year.
b. Names of major/significant shareholders of the entity.
c. Level of rounding used in presenting the financial statements.
d. Whether the financial statements cover the individual entity or a group of entities.
Answer: (b)
4. Which one of the following is not required to be presented as minimum information on
the face of the balance sheet, according to IAS 1?
a. Investment property.
b. Investments accounted under the equity method.
c. Biological assets.
d. Contingent liability.
Answer: (d)
5. When an entity opts to present the income statement classifying expenses by function,
which of the following is not required to be disclosed as “additional information”?
a. Depreciation expense.
b. Employee benefits expense.
c. Director’s remuneration.
d. Amortization expense.
Answer: (c)
6. The objective of general purpose financial statements is to provide information about
I. the financial position, financial performance and cash flows of an entity that is useful
to a wide range of users in making economic decisions.
II. results of management’s stewardship of the resources entrusted to it.
a. I only b. II only c. Both I and II d. Neither I nor II
c
7. Which statement is incorrect concerning financial statements?
a. Financial statements do not show the results of management’s stewardship of
resources entrusted to it.
b. Financial statements are prepared at least annually and are directed toward the
common information needs of a wide range of users.
c. The objective of general-purpose financial statements is to provide information about
the financial position, performance and cash flows of an enterprise that is useful to a
wide range of users in making economic decisions.
 d. The management of an enterprise has the primary responsibility for the preparation
and presentation of financial statements.
a
8. Which is correct regarding the overall considerations in preparation and presentation of
financial statements?
a. Assets and liabilities, and income and expenses, when material should be offset
against each other.
b. Financial statements should be prepared on liquidity concern basis.
c. Each material item should be presented separately in the financial statements.
Immaterial amounts of similar nature and function should be grouped or condensed
as one line item in the financial statements.
d. The presentation and classification of financial statement items should not be
uniform from one accounting period to the next.
c
9. How might users of IAS 1 apply the information provided in the presentation of IFRS
financial statements?
a. To make economic decisions regarding the company’s financial position, financial
performance, and cash flows
b. To make economic decisions regarding the company’s financial performance, cash
flows, and hiring guidelines
c. To make economic decisions regarding the company’s cash flows, hiring guidelines,
and environmental position
d. To make economic decisions regarding the company’s financial performance,
environmental position, and community service
a
10. What predictions regarding company might be made through using IFRS financial
statements?
a. Predictions related to the company’s future financial position, as well as market
timing and certainty
b. Predictions related to the company’s future financial performance, as well as their
competitors’ financial performance
c. Predictions related to the company’s future inventory flows, as well as inventory
timing
d. Predictions related to the company’s future cash flows, as well as cash flow timing
and certainty
c
11. If you plan to review a complete set of IFRS financial statements, what would be included
in the set?
a. A statement of financial position, statement of comprehensive income, a statement of
changes in equity, and a statement of cash flows
b. A statement of financial position, statement of comprehensive income, a statement of
changes in equity, and a statement of cash flows, and notes comprising a summary of
significant accounting policies and other explanatory notes
c. A statement of financial position, statement of comprehensive income, a statement of
changes in equity, and a statement of cash flows, a financial review by management,
and notes comprising a summary of significant accounting policies and other
explanatory notes
d. A statement of financial position, statement of comprehensive income, a statement of
changes in equity, and a statement of cash flows, a financial review by management,
value-added statements, and notes comprising a summary of significant accounting
policies and other explanatory notes
b
12. Financial statements are required to present fairly the financial position, financial
performance, and cash flows of an entity. What does a fair presentation require?
 I. The faithful representation of the effects of transactions, other events, and conditions
in accordance with the definitions and recognition criteria for assets, liabilities, income
and expenses set out in the Framework
II. Selecting and applying accounting policies in accordance with IAS 8: Accounting
Policies, Changes in Accounting Estimates and Errors
III. Presenting information, including accounting policies, in a manner that provides
relevant, reliable, comparable, and understandable information
IV. Providing additional disclosures when the compliance with the specific requirement in
International Financial Reporting Standards is insufficient to enable users to
understand the impact of particular transactions or other events on the entity’s
financial position and financial performance
a. I and II b. I, II and III c. I, II III and IV d. I, II, and IV
C. IAS 1 notes that in virtually all circumstances, a fair presentation is achieved by
compliance with applicable International Financial Reporting Standards. Inappropriate
accounting policies are not rectified by disclosure of the accounting policies used, or by notes
or explanatory material.

13. Which of the following companies would use IAS 1?

I. Profit-oriented III. Non-profit
II. Public sector IV. Government
a. I only b. I and II only c. All of the above d. I, II and III
C. all of the companies listed might use IAS 1. IAS 1 uses terminology that is suitable for a
profit-oriented company, including public sector companies. Entities with not-for-profit
activities in the private sector, public sector or government seeking to apply this Standard
may need to amend the descriptions used for particular line items in the financial statements
and for the financial statements themselves

14. What other items might be added to a complete set of financial statements?
I. A financial review by management
II. Environmental reports
III. Value-added statements
a. I, II and III b. I only c. I and III only d. I and II only
A. financial review by management, as well as environmental reports and value-added
statements, is often added. The financial review describes and explains the main features of
the entity’s financial performance and financial position and the principal uncertainties it
faces.

15. What is disclosed when departing from an international accounting standard?

I. The Title of the Standard or Interpretation from which it has departed
II. The nature of the departure, and the treatment the Standard or Interpretation would
require
III. The reason why that treatment would be so misleading
IV. The treatment adopted
V. The financial impact of the departure on the financial statements (for each period
presented)
a. I and II only c. I, II and III only
b. I, II III and V only d. all of the above
d
16. Which of the following transactions or events might trigger the need to change the
presentation of financial statements?
I. A change in a Standard or Interpretation
II. A review of the financial statement presentation
III. A significant acquisition or disposal
IV. When the board of directors required the change
a. I and II only b. I, II and III only c. all of the above d. I and III only
b
17. What would you primarily consider when assessing whether an omission or misstatement
could influence economic decisions of users (and so be material)?
I. The combined risk assessment
II. The prior-year financial statements
III. The characteristics of those users
a. I and II only b. III only c. all of the above d. I and III only
b
18. When disclosing financial statement information using IAS 1, which of the following items
would not be disclosed?
a. The name of the reporting entity or other means of identification and any change
from the preceding balance sheet date
b. Immaterial items of a dissimilar nature or function
c. Whether the financial statements cover the individual entity or a group of entities
d. The presentation currency and the level of rounding used in presenting the amounts
b
19. An entity shall present the following on the face of its statement of changes in equity
except;
a. The profit or loss for the period
b. Each item of income and expense for the period, that, as required by other standards
or interpretations, is recognizes directly in equity, and the total of these items.
c. The total income and expenses for the period, showing separately the total amounts
attributable to equity holders of the parent and to minority interest
d. The effects of changes in accounting estimates
d
20. An entity deals extensively with foreign entities, and its financial statements reflect these
foreign currency transactions. Subsequent to the balance sheet date, and before the
“date of authorization” of the issuance of the financial statements, there were abnormal
fluctuations in foreign currency rates. The entity should
a. Adjust the foreign exchange year-end balances to reflect the abnormal adverse
fluctuations in foreign exchange rate.
b. Adjust the foreign exchange year-end balances to reflect all the abnormal adverse
fluctuations in foreign exchange rates and not just adverse movements
c. Disclose the post-balance sheet event in footnotes as a nonadjusting event.
d. Ignore the post-balance sheet event.
c
21. The balance in the retained earnings account is affected by the transfer to that account
of:
I. Issued share capital;
II. Dividends paid or provided for.
III. Transfers to or from other reserve accounts.
IV. Changes in accounting policies and errors.
V. Interest paid to debenture holders.
a. I, II and III only; c. I, II, III and IV only;
b. II, III and IV only; d. II, III and V only.
b
22. IAS 1 Presentation of Financial Statements, requires the following items to appear on the
face of the statement of changes in equity:
I. The net amount of cash from the issue of any securities during the period.
II. The cumulative effect of changes in accounting policy and the correction of errors.
III. Each item of income or expenses that is required to be recognized directly in
equity.
IV. Profit or loss for the period.
a. I, II, III and IV; c. II, III and IV only;
b. I, III and IV only; d. II and IV only.
c
23. The components of equity generally recognized by companies in a statement of financial
position are:
I. Provisions. IV. Other reserves.
II. Debentures V. Accumulated profits.
III. Share capital.
a. I, II and III only; c. I, III, IV and V only;
b. II, III and V only; d. III, IV and V only.
d
24. The components of the financial statements include all, except
a. Statement of financial position, statement of comprehensive income and statement of
cash flows
b. Statement of changes in equity or statement of recognized gains and losses
c. Notes, comprising a summary of significant accounting policies and other explanatory
notes
d. Additional statements such as environmental reports and value added statements
d
25. Which is incorrect concerning fair presentation of financial statements?
a. In virtually all circumstances, a fair presentation is achieved by compliance with
applicable Philippine Financial Reporting Standards.
b. Financial statements shall present fairly the financial position, performance and cash
flows of an enterprise.
c. An enterprise whose financial statements comply with PFRS shall make an explicit and
unreserved statement of such compliance in the notes.
d. Inappropriate accounting treatments are rectified either by disclosure of the
accounting policies used or by note or explanatory material.
d
26. Which is incorrect concerning the overall considerations in the preparation and
presentation of financial statements?
a. An enterprise shall prepare its financial statements, except for cash flow information,
under the accrual basis of accounting.
b. The presentation and classification of items in the financial statements shall be
retained from one period to the next.
c. Assets and liabilities, income and expenses, shall not be offset unless required or
permitted by another PFRS.
d. Comparative information need not be disclosed in respect of the previous period for
all numerical information in the financial statements.
d
27. Which is incorrect concerning the concept of materiality and aggregation?
a. Materiality depends on the size and nature of the item judged in the particular
circumstances of its omission or misstatement.
b. Materiality provides that the specific disclosure requirements of a PFRS must be met
even if the resulting information is not material.
c. Items of a dissimilar nature or function shall be presented separately unless they are
immaterial.
d. Information is material if its nondisclosure could influence the economic decisions of
users taken on the basis of the financial statements.
b
28. An asset shall be classified as current when it satisfies any of the following criteria
(choose the incorrect one).
a. It is expected to be realized in or is intended for sale or consumption in the entity’s
normal operating cycle.
b. It is held primarily for the purpose of being traded.
c. It is expected to be realized in more than twelve months after the balance sheet date.
 d. It is cash or a cash equivalent which is unrestricted from being exchanged or used to
settle a liability for at least twelve months after the balance sheet date.
c
29. The operating cycle of an enterprise
a. Is set by the industry’s trade association usually on an average length of time for all
firms which are members of the association.
b. Is the time between the acquisition of assets for processing and their realization in
cash or cash equivalents.
c. Is the period of time normally elapsed from the time the enterprise expends cash to
the time it converts trade receivables back into cash.
d. Causes the distinction between current and noncurrent items to depend on whether
they will affect cash within one year.
b
30. A liability shall be classified as current when it satisfies any of the following criteria
(choose the incorrect one)
a. It is expected to be settled in the entity’s normal operating cycle.
b. It is held primarily for the purpose of being traded.
c. It is due to be settled within twelve months after the balance sheet date.
d. The entity has an unconditional right to defer settlement of the liability for at least
twelve months after the balance sheet date.
d
31. Which can be classified as current liabilities even if they are due to be settled after more
than twelve months from balance sheet date?
a. Bank overdrafts
b. Dividends payable
c. Income taxes payable
d. Trade payables and accruals for employee and other operating costs
d
32. A long-term debt that is due to be settled within twelve months after the balance sheet
date is classified as noncurrent when
I. An agreement to refinance or reschedule payment on a long-term basis is completed
after balance sheet date and before the financial statements are authorized for issue.
II. The entity has the discretion to refinance or roll over the obligation for at least twelve
months after the balance sheet date under an existing loan facility.
a. I only b. II only c. Both I and II d. Neither I nor II
b
33. When an entity breaches a covenant under a long-term loan agreement on or before the
balance sheet date with the effect that the liability becomes payable on demand, the
liability is classified as noncurrent when
I. The lender has agreed on or before the balance sheet date to provide a grace period
ending at least twelve months after the balance sheet date.
II. The lender has agreed after the balance sheet date and before the financial
statements are authorized for issue not to demand payment as a consequence of the
breach.
a. I only b. II only c. Both I and II d. Neither I nor II
a
34. Which statement is incorrect?
a. As a minimum, the face of the balance sheet shall include line items that are
sufficiently different in nature or function to warrant separate presentation.
b. The standard does not prescribe the order or format in which the line items are to be
presented.
c. Additional line items, headings and subtotals shall be presented on the face of the
balance sheet when such presentation is relevant to an understanding of the entity’s
financial position.
 d. When entity presents current and noncurrent captions, it shall classify deferred tax
assets and deferred tax liabilities as current.
d
35. The notes to financial statements should be presented in what order?
I. Statement of compliance with PFRS
II. Summary of significant accounting policies
III. Supporting computations for items presented on the face of the statements
IV. Other disclosures, including contingent liabilities, unrecognized contractual
commitments and nonfinancial disclosures
a. I, II, III and IV c. II, III, IV and I
b. IV, I, II and III d. No specific order
a
36. Which statement is incorrect concerning the presentation of the income statement?
a. The nature of expense method means that expenses are aggregated according to
their nature and are not reallocated among various functions within the enterprise.
b. The cost of sales method means that expenses are classified according to their
function as cost of sales, distribution or administrative activities.
c. PAS 1 requires the use of the cost of sales method because this presentation often
provides more relevant information to the users than the nature of expense method.
d. The choice between the functional and natural presentation depends on historical and
industry factors and the nature of the entity
c
37. Financial accounting is concerned with
a. General purpose reports on financial position and results of operations
b. Specialized reports for inventory management and control
c. Specialized reports from income tax computation and recognition
d. General-purpose reports on changes in stock prices and future estimates of market
position
a
38. Preparation of consolidated financial statements when a parent-subsidiary relationship
exist is an example of the
a. Economic entity assumption c. Comparability characteristic
b. Relevance characteristic d. Neutrality characteristic
a
39. During the lifetime of an entity, accountants produce financial statements at arbitrary
points in time in accordance with which basic accounting concept?
a. Cost benefit constraint c. Conservatism constraint
b. Periodicity assumption d. Matching principle
b
40. The residual interest in a corporation belongs to the
a. Management c. Creditors
b. Common stockholders d. Preferred stockholders
b
41. Of the following items, the only one which should not be classified as a current liability is
a. Current maturities of long-term debt
b. Sales taxes payable
c. Short-term obligations expected to be refinanced
d. Unearned revenues
c
42. Under job order costing, application of FOH would be reflected in the general ledger as an
increase in
a. Factory overhead control c. Work in process control
b. Finished goods control d. Cost of goods sold
c
43. Financial accounting can be broadly defined as the area of accounting that prepares
 a. General purpose financial statements to be used by parties internal to the business
enterprise only
b. Financial statements to be used by investor only
c. General purpose financial statements to be used by parties both internal and external
to the business enterprise
d. Financial statements to be used primarily by management
c
44. Which of the following is not an internal event?
a. Depreciation
b. Using raw materials in the production process
c. Dividend declaration and subsequent payment
d. All of these are internal transactions
c
45. Which of the financial statement should an investor primarily use to assess the amounts,
timing, and uncertainty of investing and financing activities of ABC Company?
a. Statements of operations c. Statement of financial position
b. Statement of changes in equity d. Statement of cash flows
d
46. Which of the following statements is not an objective of financial reporting?
a. Provide information that is useful in investment and credit decisions
b. Provide information about enterprise resources, claims to those resources, and
changes to them
c. Provide information on the liquidation value of an enterprise
d. Provide information that is useful in assessing cash flow prospects
c
47. A company uses straight-line depreciation for financial reporting purposes, but uses the
accelerated depreciation for tax purposes. Which of the following account balances would
be lower in the financial statements used for tax purposes than it would be in the general
purpose financial statements?
a. Accumulated depreciation c. Cash
b. Retained earnings d. Gross fixed assets
b
48. Financial accounting standards developed by the International Accounting Standards
Board(IASB)
a. Must be followed by business firms in all developed countries
b. Must be followed by government enterprise worldwide
c. Guide the development of accounting principles for government enterprise in centrally
planned economies
d. Are recognized as acceptable “world class” accounting principles for business firms
d
49. An exception to the general rule that costs should be charged to expense in the period
incurred is
a. Factory overhead costs incurred on a product manufactured but not sold during the
current accounting period
b. Interest costs for financing of inventories that are routinely manufactured in large
quantities on a repetitive basis
c. General and administrative fixed costs incurred in connection with the purchase of
inventory
d. Sales commission and salary costs incurred in connection with the sale of inventory
a
50. Which of the following is not a generally practiced method of presenting the income
statements?
a. Including prior period adjustments in determining net income
b. The single-step income statement
c. The consolidated statement of income
 d. Including gains and losses from discontinued operations of a segment of a business in
determining net income
a
51. Which one of the following types of losses is excluded from the determination of net
income in income statement?
a. Material losses resulting from transaction in the company’s investments account
b. Material losses resulting from unusual sales of assets not acquired for resale
c. Material losses resulting from the write-off of intangibles
d. Material losses resulting from correction of errors related to prior periods
d
52. What are the conditions for offsetting (net presentation) of financial assets and financial
liabilities.
a. A legal right of set-off
b. A legal right of set-off and an intention to settle net or simultaneously.
c. The existence of a clearing mechanism or other market mechanism for net settlement
and an expectation of net settlement
d. A netting agreement and an expectation of net settlement.
b
53. Which of the following characteristics may result in the classification of a liability as
current?
a. Short-term obligations refinanced with long-term debt on balance sheet date
b. Debts to be liquidated from funds that have been accumulated and are reported as
noncurrent assets
c. Violation of provisions of a debt agreement
d. Obligations for advance collections that involve long-term deferment of the delivery of
goods or services
c
54. The transaction approach in determining income is a concept in which
a. Income is measured as the amount that an entity could consume during a period and
be as well off at the end of that period as it was at the beginning.
b. Market values adjusted for the effects of inflation or deflation are used to calculate
income
c. The financial statement effects of business events are classified as revenue, gains,
expenses, and losses, which are used to measure and define income.
d. Income equals the change in market value of the firm’s outstanding common stock
for the period.
c
55. The most conceptually appropriate method of valuing a liability under the historical cost
basis is to
a. Discount the amount of expected cash outflows that are necessary to liquidate the
liability using the market rate of interest at the date the liability was initially incurred
b. Discount the amount of expected cash outflows that are necessary to liquidate the
liability using the market rate of interest at the date financial statements are
prepared subsequent to issuance.
c. Record as a liability the amount of cash or cash equivalent value that the company
would be required to pay to eliminate the liability in the ordinary course of business
on the date of the financial statements
d. Record as liability the amount of cash or cash equivalent proceeds actually received
when a liability was incurred.
d
56. When the presentation or classification of items in the financial statements is amended
a. Comparative amounts for comparative reporting need not be reclassified
b. Comparative amounts for comparative reporting should be reclassified in all cases
c. Comparative amounts for comparative reporting should be reclassified unless it is
impracticable to do so
 d. Nothing should be done
c
57. Financial information does not demonstrate consistency when
I. Firms in the same industry use different accounting methods to account for the same
type of transaction
II. A company changes its estimate of the salvage value of a fixed assets
III. A company fails to adjust its financial statements for changes in value of the
measuring unit
a. I only b. I and II only c. I and III only d. I, II and III
a
58. The level of rounding used in the financial statements refers to
a. The truncation of the amounts presented
b. The abbreviation of words used
c. The shortening of the notes by removing comparative numbers
d. The presentation of a concise financial report rather than a full financial report
a
59. PAS 1 Presentation of Financial Statements, requires that an entity must disclose the
following information in its financial statements
I. A description of the entity’s operations
II. The legal form of the entity
III. The name of the entity’s ultimate parent
IV. The address of the registered office
a. none of these b. All of these c. II and IV only d. I, II and IV only
b
60. The information provided by general purpose financial statements include the following,
except
a. an enterprise’s financial position as of a given date
b. an enterprise’s performance for a specific period of time
c. an enterprise’s cash flow for a specific period of time
d. an enterprise’s economic decisions
d
61. Which financial statements must be prepared before the others?
a. statement of comprehensive income
b. statement of financial position
c. statement of cash flows
d. statement of changes in equity
a
62. Statement of financial position analysis is useful in assessing a firm’s solvency, which is
the ability to
a. Satisfy short-term obligations
b. Meet all obligations as they come due
c. Maintain past levels of preferred and common dividends
d. Survive a major economic downturn
b
63. The basis for classifying asset as current or non-current is the period of time normally
required by the accounting entity to convert cash invested in
a. Inventory back into cash, or 12 months, whichever is shorter
b. Receivables back into cash, or 12 months, whichever is longer
c. Tangible fixed assets back into cash, or 12 months, whichever is longer
d. Inventory back into cash, or 12 months, whichever is longer
d
64. The operating cycle
a. Measure the time elapsed between cash disbursement for inventory and cash
collections of the sales price
b. Refers to the seasonal variations experienced by business enterprise
 c. Should be used to classify assets and liabilities as current if it is less than one year
d. Cannot exceed one year
a
65. Which of the following is a current assets?
a. Cash surrender value of a life insurance policy of which the company is the
beneficiary
b. Investment in marketable securities for the purpose of controlling the issuing
company
c. Cash designated for the purchase of tangible fixed assets
d. Trade installment receivables normally collectible in 18 months
d
66. Which of the following statements is correct?
a. A company may exclude a maturing long-term obligation under current liabilities if
the firm intends to refinance the obligation on a long-term basis
b. A company may exclude a maturing long-term obligation from current liabilities if the
firm can demonstrate an ability to consummate refinancing on a long-term basis
c. A company shall classify its financial liability as non-current if the entity has the
discretion to refinance or roll over an obligation for at least 12 months after the
balance sheet date under an existing loan facility, even if the obligation would
otherwise be due within a shorter period
d. A company should continue to classify its long-term liabilities as non-current, even
when they are due to settled within one year, if based on financial status of the
company, refinancing is considered inevitable.
c
67. In relation to ‘Retained earnings’, PAS 1 Presentation of Financial Statements, mandates
the following disclosures:
I. Any charges during the reporting period.
II. The related tax adjustments in respect to any changes during the period.
III. The beginning balance
a. I, II, and III c. II and III only
b. I, and III only d. I only
b
68. PAS 1 Presentation of Financial Statements, requires the following note disclosures in
relation to dividends of an entity. The:
a. Amount of any cumulative preference dividends not recognized;
b. Names of the recipients of the dividends;
c. Addresses of all shareholders who are entitled to receive the dividends;
d. A schedule of cumulative dividends paid in prior periods.
a
69. Under which of the following conditions would hurricane damage be considered an
extraordinary item for financial reporting purposes?
a. Under no circumstances hurricane damage should be classified as an extraordinary
item.
b. Only if hurricanes are unusual in nature and infrequent in occurrence in the
geographic area.
c. Only if hurricanes are normal in the geographic area but do not occur frequently
d. Only if hurricanes occur frequently in the geographic area but have been insured
against.
a
70. The natural ordering of items in the income statement would be best illustrated by which
of the following?
a. Extraordinary items, cumulative effects, income from continuing operations,
discontinued operations, net income
b. Income from ordinary activities, extraordinary items, net income
c. Income from continuing operations, discontinued operations, net income
 d. Discontinued operations, income from continuing operations, extraordinary items,
cumulative effects, net income
c
71. The preparation of the statement of changes in equity is
a. Optional
b. In lieu of the balance sheet
c. Required
d. In lieu of the income statement
c
72. Which of the following is not shown in the statement of changes in equity?
a. Net income or loss for the period
b. Cumulative effects of changes in accounting policies
c. Extraordinary gains or loss, net of tax
d. Dividends declared during the period
c
73. Which of the following would not be reported in the stockholders’ equity section of the
statement of financial position?
a. Retained earnings appropriated for plant expansion
b. Cash dividends declared but not yet paid on preferred stock
c. Paid in capital in excess of par value
d. Deficit (debit balance in accumulated profits)
b
74. Which of the following information should be disclosed in the summary of significant
accounting policies
a. Criteria for determining which investments are treated as cash equivalents
b. Guarantee of indebtedness of others
c. Business combination after reporting date
d. Rrefinancing of debt subsequent to the reporting date
a
75. Disclosure of accounting policies include
a. Lease-operating lease and finance lease
b. Equity capital analyzed as paid in capital, additional paid in capital and reserves
c. Composition of property, plant and equipment
d. Classification of inventories such as merchandise production supplies, materials, work
in process and finished goods
a
76. The notes to financial statements should not be used to
a. Present disclosures required by generally accepted accounting principles
b. Describe the accounting policies adopted by the enterprise
c. Correct an improper financial statement presentation
d. Describe the basis for resolving uncertainties in the financial statements
c