Free Printable Provisions

1.

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting:

a)

a. Legal Expense.

b)

b. a Loss on Intangibles account.

c)

c. the Patent account.

d)

d. an operating expenditure account.

2.

Which of the following is an intangible asset that has a finite life?

a)

a. goodwill

b)

b. patent

c)

c. trademark

d)

d. franchise

3.

Development costs:

a)

a. are always expensed when incurred.

b)

b. cannot be recorded separately from research costs.

c)

c. can be capitalized if it can be shown that the costs will provide future benefits.

d)

d. are intangible assets that are not amortized.

4.

Research and development costs should be

a)

recorded as an asset

b)

recorded as expenses

c)

added to the cost of the new product developed

d)

always paid with cash

5.

1 October 2009 : property Cost $2,500

life : 20 years

1 oct 2013 : revalued property to $4,000

30 September 2014: the property was sold for $4,500

profit on disposal that should be included in profit or loss for the year ended 30 September 2014.

(a)

6.

An entity can only recognise a provision for restructuring costs if it has a constructive obligation

to carry out the restructuring.

Which of the following must apply if an entity has a constructive obligation?

a)

The restructuring is planned to take place within the next six months

b)

The business affected has been sold or terminated

c)

The business affected is a separate operating segment

d)

The entity has raised a valid expectation that it will carry out the restructuring

7.

Which condition must apply before an asset can be classified as ‘held-for-sale’?

a)

The asset may be available for immediate sale in its present condition

b)

The company’s shareholders must have formally approved the sale

c)

The asset must be actively marketed at a reasonable price

d)

The asset must be part of a disposal group

8.

Which of the following statements regarding provisions and contingent liabilities is NOT

correct?

a)

A provision is recognised only if a reliable estimate can be made of the amount of the

obligation

b)

If an entity has a present obligation as a result of a past event, it recognises a provision

c)

If the amount of an obligation cannot be precisely measured, an entity discloses a

contingent liability

d)

A present obligation can result in a provision being recognised, even where it is not

legally binding

9.

Which, if any, of the following statements regarding IAS 10 Events after the Reporting Period is/are correct?

(1) 'Events after the reporting period' are deemed to be all events from the date the

financial statements are authorised for issue up until the date of the annual meeting with

the shareholders

(2) Non-adjusting events do not need to be reflected in any part of an entity's financial

statements or annual report

a)

1 only

b)

2 only

c)

Both 1and 2

d)

Neither 1 nor 2

10.

Fume Co undertakes drilling activities and has a widely publicised environmental policy stating

that it will incur costs to restore land to its original condition once drilling activities have been

completed.

Drilling commenced on a particular piece of land on 1 July 20X8. At this time, Flute Co estimated

that it would cost $3m to restore the land when drilling was completed in five years’ time. Flute

Co’s cost of capital is 7% and the appropriate present value factor is 0.713.

At what amount will the provision for restoration costs be measured in Fume Co’s statement

of financial position as at 31 December 20X8?

a)

$2.14m

b)

$3m

c)

$2.29m

d)

$2.21m

Provisions

Total questions: 10

Worksheet time: 16mins

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