CFAS Chapter 8: Statement of financial position

• Obligation


  can be either legal or constructive
• Identifiable intangible asset


  patent, franchise, copyright, lease right, trademark and computer software
• Operating cycle


  is the time between the acquisition of assets for processing and their realization in cash or cash equivalents
• Financial statements


  are the end product or main output of the financial accounting process
• the major financial statements include all, except

  
  

  a. statement of financial position

  b. statement of changes in financial position

  c. statement of comprehensive income

  d. statement of changes in equity

  b. statement of changes in financial position
• the major financial statements include all, except

  
  

  a. statement of financial position

  b. income statement

  c. statement of cash flows

  d. statement of retained earnings

  d. statement of retained earnings
• what is the objective of financial statements

  
  

  a. to provide info about the financial position, financial performance and changes in financial position of the entity that is useful to a wide range of users in making economic decisions

  b. to present a statement of financial position and a statement of comprehensive income

  c. to present relevant, reliable, comparable, and understanding info to investors

  d. to present financial statements in accordance with all applicable standards

  a. to provide info about the financial position, financial performance and changes in financial position of the entity that is useful to a wide range of users in making economic decisions
• financial statements must be prepared at least

  
  

  a. annually

  b. quarterly

  c. semiannually

  d. every two years

  a. annually
• when entity changed the end of reporting period longer or shorter than one year, the entity shall disclose all, except

  
  

  a. period covered by the financial statements

  b. the reason for using longer or shorter period

  c. the fact that amounts presented are not entirely comparable

  d. the fact that similar entities have done so

  d. the fact that similar entities have done so
• when there is much variability, the operating cycle is measured at

  
  

  a. the mean value

  b. the median value

  c. twelve months

  d. three years

  c. twelve months
• the operating cycle of an entity

  
  

  a. is the time between the acquisition of materials entering into a process and their realization in cash

  b. is the period of time normally elapsed in converting trade receivables back into cash

  c. is a period of one year

  d. refers to the seasonal variation experienced by entities

  a. is the time between the acquisition of materials entering into a process and their realization in cash
• An entity shall classify an asset as a current under all of the ff conditions, except

  
  

  a. the entity expects to realize the asset or intends to sell or consume it within the entity's normal operating cycle

  b. the entity holds the asset for the purpose of trading

  c. the entity expects to realize the asset within twelve months after the reporting period

  d. the asset is cash or a cash equivalent that is restricted to settle a liability for more than 12 months after the reporting period

  d. the asset is cash or a cash equivalent that is restricted to settle a liability for more than 12 months after the reporting period
• An entity shall classify a liability as a current when under all of the ff conditions, except

  
  

  a. the entity expects to settle the liability within the entity's normal operating cycle

  b. the entity holds the liability primarily for the purpose of trading

  c. the liability is due to be settled within twelve months after the reporting period

  d. the entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period

  d. the entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period
• which obligations are classified as current even if these are due to be settled after more than 12 months from the end of the reporting period

  
  

  a. trade payables and accruals for employee and other operating cost

  b. current portion of interest-bearing liabilities

  c. bank overdrafts

  d. dividends payable

  a. trade payables and accruals for employee and other operating cost
• current and noncurrent presentation of assets and liabilities provides useful info when the entity

  
  

  a. supplies goods or services within a clearly identifiable operating cycle

  b. is a financial institution

  c. is a public utility

  d. is a nonprofit organization

  a. supplies goods or services within a clearly identifiable operating cycle
• a presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and more relevant than current and noncurrent presentation for

  
  

  a. financial institution

  b. public utility

  c. manufacturing entity

  d. service provider

  a. financial institution
• in the Philippines, the common practice is to present in the statement of financial position

  
  

  a. current assets before noncurrent assets, current liabilities before noncurrent liabilities and equity after liabilities

  b. noncurrent assets before current assets, noncurrent liabilities before current liabilities and equity after liabilities

  c. current assets before noncurrent assets, noncurrent liabilities before current liabilities and equity after liabilities

  d. noncurrent assets before current assets, current liabilities before noncurrent liabilities and equity after liabilities

  a. current assets before noncurrent assets, current liabilities before noncurrent liabilities and equity after liabilities
• a financial liability due within 12 months after the reporting period shall be classified as noncurrent

  
  

  a. when it is refinanced on a long-term basis before the issue of financial statements

  b. when the entity has no discretion to refinance for at least 12 months

  c. when it is refinanced on a long-term basis after the end of reporting period

  d. when it is refinanced on a long-term basis on or before the end of reporting period

  d. when it is refinanced on a long-term basis on or before the end of reporting period
• when an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the lability is classified as

  
  

  a. current under all circumstances

  b. noncurrent under all circumstances

  c. current if the lender has agreed after the reporting period and before the issuance of the statements not to demand payment as a consequence of the breach

  d. noncurrent if the lender agreed after the reporting period to provide a grace period for at least 12 months after the reporting period

  c. current if the lender has agreed after the reporting period and before the issuance of the statements not to demand payment as a consequence of the breach
• in presenting a statement of financial position, an entity

  
  

  a. must make the current and noncurrent presentation

  b. make present assets and liabilities in order of liquidity

  c. must choose either the current and noncurrent or the liquidity presentation, meaning free choice of presentation

  d. must make the current and noncurrent presentation, except when a presentation based on liquidity provides info that is reliable and more relevant

  d. must make the current and noncurrent presentation, except when a presentation based on liquidity provides info that is reliable and more relevant
• assets to be sold, consumed or realized as part of the normal operating cycle are

  
  

  a. current assets

  b. noncurrent assets

  c. classified as current or noncurrent in accordance with other criteria

  d. noncurrent investments

  a. current assets
• liabilities that an entity expects to settle within the normal operating cycle are classified as

  
  

  a. noncurrent liabilities

  b. current or noncurrent liabilities in accordance with other criteria

  c. current liabilities

  d. equity

  c. current liabilities
• in which section of the statement of financial position should cash that is restricted for the settlement of a liability due 18 months after the reporting period be presented

  
  

  a. current assets

  b. equity

  c. noncurrent liabilities

  d. noncurrent asstes

  d. noncurrent asstes
• in which section of the statement of financial position should employment taxes that are due for settlement in 15 months' time be presented

  
  

  a. current liabilities

  b. current asset

  c. noncurrent liabilities

  d. noncurrent assets

  a. current liabilities
• an entity has a loan due for repayment in 6 months' time but the entity has the option to refinance for repayment two years later. the entity plans to refinance this loan. in which section of the statement of financial position should this loan be presented

  
  

  a. current liabilities

  b. current asset

  c. noncurrent liabilities

  d. noncurrent assets

  c. noncurrent liabilities
• which of the ff must be included on the face of the statement of financial position

  
  

  a. investment property

  b. number of shares authorized

  c. contingent asset

  d. shares in an entity owned by that entity

  a. investment property
• which of the ff is not required to be presented as minimum info on the face of the statement of financial position

  
  

  a. investment property

  b. investment accounted under the equity method

  c. biological asset

  d. contingent liability

  d. contingent liability
• which of the ff must be included as a line item in the statement of financial position

  
  

  a. contingent asset

  b. property, plant and equipment analyzed by class

  c. share capital and reserves analyzed by class

  d. deferred tax liability

  d. deferred tax liability
• which statement about the statement of financial position is not true

  
  

  a. biological assets should be reported in the statement of financial position

  b. the number of shares authorized for issue should be reported in the statement of financial position or the statement of changes in equity or in the notes

  c. provisions should be recognized in the statement of financial position

  d. a revaluation surplus on a noncurrent asset in the current year should be recognized in the income statement

  d. a revaluation surplus on a noncurrent asset in the current year should be recognized in the income statement
• In analyzing an entity's annual financial report, which financial statement would a potential investor primarily use to assess liquidity and financial flexibility

  
  

  a. statement of financial position

  b. income statement

  c. statement of retained earnings

  d. statement of cash flows

  a. statement of financial position
• which is an essential characteristics of an asset

  
  

  a. the claims to an asset's benefits are legally enforceable

  b. an asset is tangible

  c. an asset is obtained at a cost

  d. an asset is a right that has the potential to produce economic benefit

  d. an asset is a right that has the potential to produce economic benefit
• the essential characteristics of an asset include all of the ff except

  
  

  a. the asset is a present economic resource

  b. an asset is a right that has the potential to produce economic benefit

  c. the asset is controlled by the entity as a result of past event

  d. the asset is tangible

  d. the asset is tangible
• conceptually, asset valuation accounts are

  
  

  a. assets

  b. neither assets nor liabilities

  c. part of shareholder's equity

  d. liabilities

  b. neither assets nor liabilities
• working capital is

  
  

  a. the group of assets needed by the entity to operate profitably

  b. capita which has been reinvested in business

  c. unappropriated retained earnings

  d. current assets less current liabilities

  d. current assets less current liabilities
• As generally used, the term "net assets" represents

  
  

  a. retained earnings

  b. current assets less current liabilities

  c. total contributed capital

  d. total assets less total liabilities

  d. total assets less total liabilities
• treasury shares should be reported as

  
  

  a. current asset

  b. investment

  c. other asset

  d. reduction of shareholders' equity

  d. reduction of shareholders' equity
• the term deficit refers to

  
  

  a. an excess of current assets over current liabilities

  b. an excess of current liabilities over current assets

  c. a debit balance in retained earnings

  d. a prior period error

  c. a debit balance in retained earnings
• when classifying assets as current and noncurrent

  
  

  a. the amounts at which current assets are carried and reported must reflect realizable cash value

  b. prepayments are included in other assets

  c. current assets are determined by the seasonal nature

  d. assets are classified as current if reasonable expected to be realized in cash or consumed during the normal operating cycle.

  d. assets are classified as current if reasonable expected to be realized in cash or consumed during the normal operating cycle.
• The basis for classifying assets as current or noncurrent is the period of time normally required 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. property, plant and equipment back into cash or 12 months, whichever is longer

  d. inventory back into cash or 12 months, whichever is longer

  d. inventory back into cash or 12 months, whichever is longerSee an expert-written answer!We have an expert-written solution to this problem!
• which should be classified as current asset

  
  

  a. trade installment accounts receivable normally collectible in 18 months

  b. cash designated for the redemption of callable preference shares

  c. cash surrender value of a life insurance policy

  d. a deposit on machinery ordered, delivery of which will be made with six months

  a. trade installment accounts receivable normally collectible in 18 months