Financial Reporting MCQs

ABC Ltd. sells software subscriptions for ₹12,000 annually, with payments collected upfront. If the company follows Ind AS 115 (Revenue from Contracts with Customers), how much revenue should it recognize monthly?

• ₹12,000 in the month of receipt

• ₹1,000 per month over the subscription period

• ₹6,000 every six months

• ₹12,000 at the end of the year

A company enters into a 3-year lease agreement for office space with annual payments of ₹5 lakh, starting from April 1, 2023. If the company classifies the lease as a finance lease, which of the following should be recorded on April 1, 2023?

• Expense of ₹5 lakh in the first year

• Right-of-use asset and lease liability at the present value of lease payments

• Only lease liability of ₹15 lakh

• No journal entry is required until payments begin

ABC Ltd. purchases debentures of XYZ Ltd. with an intent to sell them within 3 months. How should the debentures be classified in ABC Ltd.'s financial statements?

• Financial asset measured at amortized cost

• Financial asset measured at fair value through other comprehensive income (FVOCI)

• Financial asset measured at fair value through profit or loss (FVTPL)

• Non-current investment

XYZ Ltd. follows Ind AS 12 and has the following data for the year: Accounting Profit: ₹50 lakh Taxable Profit: ₹40 lakh Tax Rate: 30% What is the Deferred Tax Liability (DTL) or Deferred Tax Asset (DTA) recorded?

• DTL of ₹3 lakh

• DTA of ₹3 lakh

• DTL of ₹6 lakh

• No deferred tax impact

ABC Ltd. owns 75% shares of XYZ Ltd. and prepares consolidated financial statements. During the year, XYZ Ltd. reports a profit of ₹10 lakh. How much of this profit should be attributable to the non-controlling interest (NCI)?

• ₹7.5 lakh

• ₹2.5 lakh

• ₹10 lakh

• ₹0 lakh

A company has: Net Profit: ₹50 lakh Weighted Average Shares Outstanding: 10 lakh Outstanding Convertible Debentures: 1 lakh (convertible into 2 lakh shares) If the interest expense on debentures is ₹5 lakh (tax rate: 30%), what is the diluted EPS?

• ₹5.00

• ₹4.50

• ₹4.35

• ₹4.76

XYZ Ltd. acquired a business for ₹50 lakh, which includes Goodwill of ₹10 lakh. At year-end, the recoverable amount of the acquired business is ₹45 lakh. How much impairment loss should be recorded?

• ₹5 lakh on goodwill

• ₹10 lakh on goodwill

• ₹0 (No impairment required)

• ₹5 lakh on other assets

A company purchases inventory from the USA for $10,000 when the exchange rate is ₹80/$. At year-end, the rate changes to ₹85/$. What is the impact on financial statements?

• Increase in inventory value by ₹50,000

• Loss of ₹50,000 recorded in profit and loss account

• No impact as the purchase was made earlier

• Gain of ₹50,000 recorded in profit and loss account

XYZ Ltd. has the following details: Current Ratio: 3.0 Quick Ratio: 1.2 Industry Average Current Ratio: 2.0 What does this indicate about XYZ Ltd.?

• The company has strong liquidity and sufficient cash reserves

• The company has excessive inventory levels

• The company is struggling to meet short-term obligations

• The company has low inventory levels, affecting liquidity

ABC Ltd. reports: EBIT: ₹50 lakh Interest Expense: ₹10 lakh Its competitor, DEF Ltd., has an Interest Coverage Ratio of 10. What does ABC Ltd.'s Interest Coverage Ratio suggest if it is 5?

• ABC Ltd. is financially stronger than DEF Ltd.

• ABC Ltd. is more leveraged and at higher risk than DEF Ltd.

• ABC Ltd. has a lower tax burden

• ABC Ltd. has a lower operating profit than DEF Ltd.