WorksheetsAC C11 - IFRS 15, IAS 37 & IAS 8
Total questions: 10
Worksheet time: 5mins
1) What are the five steps in the revenue recognition?
I) Identify the Contract.
II) Identify Performance Obligations.
III) Identify the Costs.
IV) Determine the Transaction Price.
V) Allocate the Transaction Price.
VI) Collecting the Transaction Price.
VII) Recognize Revenue.
I, II, III, IV and V
I, II, IV, V and VII
I, II, III, VI and VIII
I, II, III, V and VI
An entity enters into a contract with a customer to provide services for two years. Either party can terminate the contract by compensating the other party. What is the duration of the contract?
Two year
Zero year
Beyond two year
One year
The price at which an entity would sell promised good or service separately to a customer.
Transaction price
Stand-alone price
Contract price
Performance price
Which industry is possible to recognise revenue over time? (select all that applicable)
education
shipping
construction
trading with local customer
which indicators can support that control has transferred to customer? (select all that applicable)
Customer has physical possession of the asset
Customer has significant risks and rewards of ownership
Customer had paid for the asset
All of the above
Hopewell sells a line of goods under a six-month warranty. Any defect arising during that period is repaired free of charge. Hopewell has calculated that if all the goods sold in the last six months of the year required repairs the cost would be $2 million. If all of these goods had more serious faults and had to be replaced the cost would be $6 million.
The normal pattern is that 80% of goods sold will be fault-free, 15% will require repairs and 5% will have to be replaced.
What is the amount of the provision required?
(0.1) million
(0.6) million
(0.3) million
(0.0) million
During the year A Co., Ltd acquired an iron ore mine at a cost of $6 million. In addition, when all the ore has been extracted (estimated ten years' time) the company will face estimated costs for landscaping the area affected by the mining that have a present value of $2 million. These costs would still have to be incurred even if no further ore was extracted.
How should this $2 million future cost be recognised in the financial statements?
Provision $2 million and $2 million capitalised as part of cost of mine
Provision $2 million and $2 million charged to operating costs
Accrual $200,000 per annum for next ten years
Should not be recognised as no cost has yet arisen
B Company sells a line of goods under a six-month warranty. Any defect arising during that period is repaired free of charge. B Company has calculated that:
- if all the goods sold in the last six months of the year required repairs the cost would be $3 million.
- If all of these goods had more serious faults and had to be replaced the cost would be $8 million.
The normal pattern is that 80% of goods sold will be fault-free, 15% will require repairs and 5% will have to be replaced.
What is the amount of the provision required?
$2 million
$0.85 million
$6 million
$0.6 million
D is being sued by a customer for $2 million for breach of contract over a cancelled order. D has obtained legal opinion that there is a 20% chance that Dwill lose the case. Accordingly D has provided $400,000 ($2 million × 20%) in respect of the claim. The unrecoverable legal costs of defending the action are estimated at $100,000. These have not been provided for as the case will not go to court until next year.What is the amount of the provision that should be made by D in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets ?
$2,000,000
$2,100,000
$500,000
$100,000
When should a company change its accounting policies?
Never
Every financial year
if required by statute or a new/revised accounting standard
if required by statue or a new/revised accounting standard or if the change gives more relevant and reliable information
