Question Chapter 18 & 19 Part - 2

Which of the following Is an example of a non-adjusting event?

• Sale of inventory for less than its carrying value shortly after the reporting period

• Amounts received in respect of an insurance claim being negotiated at the period end

• Destruction of a machine by fire after the reporting period

• Bankruptcy of a major customer with a balance owing at the period end

when a public shareholding company changes an accounting policy voluntarily , it has to:

• Inform shareholders prior to taking the decision

• Account for it retrospectively

• Treat the effect of the changes as an extraordinary item

• Treat it prospectively and adjust the effect of the changes in the current period and future periods

An entity wishes to accelerate its depreciation policy because of changes in the useful life of the asset. How should the change be dealt with?

• By retrospective restatement

• By retrospective application

• By prospective application

• By disclosure of an error

An entity has a subsidiary that operates in a country where the exchange rate fluctuates constantly, and there are seasonal variations in the income and expenditure patterns. Which of the following rate of exchange would probably be used to translate the foreign subsidiary’s statement of comprehensive income?

• Year-end spot rate

• Average for the year

• Average of the quarter-end rates

• Average rates for each individual month of the year

Exchange Difference is:

• The difference between two different currencies

• The difference calculated from reporting the same number of units of a foreign currency, in the presentation currency, at different exchange rates

• The average difference between the exchange rate at the beginning and end of a period

• None of the above

The Closing Rate is:

• The average rate used in the year a firm closes down

• The spot exchange rate at the balance sheet date

• The exchange rate at which all assets and liabilities are stated

• None of the above

5% of your assets are held in Euros. Your currency loses 1% of its value against the Euro before the financial statements are approved. You need to:

• Adjust the financial statements

• Leave the financial statements, but note the details

• Issue interim financial statements to update the situation

• Ignore it

In considering any related party relationship, attention should be directed primarily to the:

• Legal form of the relationship

• Substance of the relationship

• Neither of these

• a) and b)