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1. When analyzing changes in stockholders' equity, which of the following
would not be considered a contributing factor?
 A) Issued share capital
 B) Retained earnings
 C) Treasury stock transactions
 D) Cash flow from operating activities
 Answer: D) Cash flow from operating activities
 Rationale: Cash flow from operating activities affects the company's
liquidity but does not directly affect the stockholders' equity.
2. In terms of cost measurement and flow assumptions, which method is
not accepted under International Financial Reporting Standards (IFRS)?
 A) First-In, First-Out (FIFO)
 B) Last-In, First-Out (LIFO)
 C) Weighted Average Cost
 D) Specific Identification
 Answer: B) Last-In, First-Out (LIFO)
 Rationale: LIFO is not permitted under IFRS because it can distort the
cost of goods sold and inventory balances.
3. Which of the following is not a criterion for revenue recognition under
the accrual basis of accounting?
 A) Performance obligation is
 B) Payment is received
 C) Transfer of control of goods or services
 D) It is probable that economic benefits will flow to the entity
 Answer: B) Payment is received
 Rationale: Revenue can be recognized when control of goods or services
has been transferred, regardless of payment receipt.
4. Special valuation issues in accounting often involve:
 A) Market value adjustments
 B) Historical cost maintenance
 C) Lower of cost or market rule
 D) Revenue recognition timing
 Answer: C) Lower of cost or market rule
 Rationale: This rule requires that inventory and other assets be reported
at the lower of cost or market value for conservatism
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