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WorksheetsFAR THEORY
Total questions: 61
Worksheet time: 31mins
If the total external revenue reported by operating segments constitutes less than 75 per cent of the entity's revenue, additional operating segments must be identified as reportable segments (even if they do not meet the quantitative thresholds set out above) until at least 75 per cent of the entity's revenue is included in reportable segments.
a. True
b. False
c. Either A or B
d. Neither A nor B
Cash receipts from royalties and commissions are
a. Cash outflows for operating activities.
b. Cash inflows from operating activities
c. Cash inflows from investing activities
d. Cash outflows for financing activities.
The components of defined benefit cost include all, except:
b. Net interest
c. Remeasurements
c. Remeasurements
d. Contribution to the plan.
Financing activities that arises from the transactions between the equity and the owners.
a. Equity financing
b. Debt financing
c. Loan financing
d. Trade financing
It is known as a possible asset. Circumstances at the balance sheet date may indicate the existence of certain rights or claims that could materialize as valuable assets depending upon the favorable outcome of certain events. In the absence of legal right to the properties at that time, these can be viewed only as
a. Contingent liabilities
b. Contingent asset
c. Deferred charges
d. Estimated charges
It include assets held by a long-term benefit fund and qualifying insurance policies.
a. Interest Receivables.
b. Past Service Cost.
c. Actuarial gain or loss.
d. Plan assets
A lease that transfers substantially all the risk and rewards incidental to ownership of an underlying asset is
a. Finance lease
b. Operating lease
c. Short term lease
d. Low value lease
Interest revenue and interest expense must be reported separately unless a majority of segment revenue is from interest.
a. True
b. False
c. Either a or b
d. Neither a or b
Postemployment benefits include: I. Retirement benefits, such as pensions and lump sum payments on retirement II. Postemployment life insurance III. Termination benefit
a. I only
b. II and III
c. II only
d. I and II
Land “held for sale” is classified as:
a. Current Assets
b Non current assets
d. Non-current liabilities
d. Non-current liabilities
Operating activities are derived primarily from the principal revenue producing activities of the entity. Investing activities are derived from the acquisition and disposal of long-term assets and other investments not included in cash equivalent.
a. Yes, Yes
b. No, No
c. Yes, No
d. No, Yes
Why do you need not to include permanent difference in computing deferred tax expenses?
a. It was need to include in computing deferred tax expenses.
b. Because it is having different tax rates.
c. Because permanent differences are not taxable.
d. Because deferred tax expenses has a choice whether to include permanent difference or not.
For an operating segment to be considered a reporting segment under the “reported revenue” threshold, its reported revenue must be 10% or more of
a. The combined enterprise revenues, eliminating all relevant intracompany transfers and balances
b. The combined revenues, excluding intersegment revenues, of all operating segments.
c. The combined revenues, including intersegment revenues, of all operating segments
d. The consolidated revenue of all operating segments.
Investing activities include cash flows from transactions involving
a. Operating assets
b. Non-operating assets
c. Trading assets
d. Financing assets
In determining deferred tax liability and deferred tax asset, what tax rates shall be used, respectively?
a. Future enacted tax rates; Current tax rates
b. Future enacted tax rates; Future enacted tax rates
c. Current tax rates; Current tax rates
d. Current tax rates; Future enacted tax rates
Lease income shall be recognized on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished
a. Finance lease on the part of lessor
b. Finance lease on the part of lessee
c. Operating lease on the part of lessor
d. Operating lease on the part of lessee
The actuarial gain and loss arising from remeasurement of projected benefit obligation are recognized in
a. Retained earnings
b. Other comprehensive income
d. Interest income
d. Interest income
Which of the following is deducted from the net income to compute the cash provided (used) by operating activities when indirect method was used to prepare the operating section of statement of cash flows?
a. Decrease in accounts receivable
b. Amortization of patent.
c. Gain on sale of land
d. All of the above are deducted from net income to arrive at cash flow from operating activities
Which statement in relation to expense is true?
a. Expenses encompasses both expenses and losses
b. Expenses encompasses losses only
c. Expenses encompasses expenses only
d. None of the above
A pension liability is reported when
a. The defined benefit obligation exceeds the fair value of plan assets
b. The accumulated benefit obligation is less than the fair value of plan assets
c. The pension expense for the period is greater than the funding amount for the same period.
d. Cumulative other comprehensive income exceeds the fair value of plan assets
The balance sheet contributes to financial reporting by providing a basis
a. Computing rates of return.
b. Evaluating the capital structure of the enterprise.
c. Determining the increase in cash due to operations
d. Assessing the liquidity and financial flexibility of the enterprise
A lessee is permitted to make an accounting policy election to apply the operating lease accounting and not recognize an asset and lease liability in two optional exemptions
a. Short term lease and low value lease
b. Long term lease and low value lease
c. Short term lease and high value lease
d. None of the above
The Statement of Comprehensive Income starts with
a. Profit as shown in the income statement plus the components of other comprehensive income
b. Loss as shown in the income statement minus the components of other comprehensive income
c. Profit or loss shown in the income statement plus or minus the components of other comprehensive income
In a lease that is recorded as a sales type lease by the lessor, interest revenue
a. Does not arise
b. Shall be recognized over the lease term using the interest method
c. Shall be recognized over the lease term using the straight line method
d. Shall be in full as revenue at the inception of the lease
All forms of consideration given to an employee by an entity in exchange for services rendered by them.
a. Employee benefits
b. De minimis Benefits
c. Nontaxable Benefits
d. None of the above
Other comprehensive income includes the following, except
a. unrealized gain or loss on equity investment at FVOCI
b. unrealized gain or loss on equity investment at FVPL
c. revaluation surplus
d. remeasurements, including actuarial gain or loss
If the temporary differences resulted to a higher taxable income, then there is a:
a. Deferred tax asset
b. Deferred tax liability
c. Higher current tax expense
d. None of the above
All of the following components of OCI should be reclassified as profit or loss, except
a. Translation of financial statements of a foreign operation.
b. Remeasurement of debt instrument at FVOCI
c. The effective portion of gain or loss on hedging instrument in a cash flow hedge
d
It is received by the lessor from the lessee that is recognized as unearned rent income to be amortized over the lease term
a. Security deposit.
b. Lease bonus
c. Initial direct cost
d. None of the above.
Which of the following is not a permanent difference?
a. Surcharges paid due to negligence
b. Passive income that has different tax rates
c. Expenses related to nontaxable revenue
d. Depreciation expense
Gains or losses on cash flow hedges are
a. ignored completely.
b. recorded in equity, as part of other comprehensive income.
c. reported directly in net income.
d. reported directly in retained earnings
A discount on bond payable is charged to interest expense
a. Equally over the life of the bond
b. Only in the year the bond is issued
c. Using effective interest method.
d. Only in the year the bond matures
Use of the accrual method in accounting for product warranty costs
is required for income tax purposes
. is frequently justified on the basis of expediency when warranty costs are immaterial
finds the expense account being charged when the seller performs in compliance with the
. represents accepted practice and should be used whenever the warranty is an integral and
How will you distinguish direct financing lease to a sales type lease?
a. Direct financing lease recognizes only interest income while sales type lease recognizes both interest income and gross profit on sale.
b. Direct financing lease recognizes both interest income and gross profit on sale while sales type lease recognizes only interest income.
c. Direct financing lease and sales type lease are the same because they recognize both the interest income and gross profit on sale
d. none of the above
Under what condition/s can the lessee be permitted to apply for an operating lease model?
a. Long-term lease and low value lease
b. Short-term lease and high value lease
c. Long-term and high value lease
d. Short-term and low value lease
If an inventory is transferred to investment property that is to be carried at fair value, the remeasurement to the fair value is
a. Included in profit or loss.
b. Included in equity
c. Included in retained earnings
d. Accounted for as revaluation of inventory
When the entity uses the cost model, transfer between investment property, owner-occupied property and inventory shall be accounted for at
a. Cost
b. Fair Value
c. Assessed Value
d. Carrying amount
In asset swap debt restructuring, the gain on extinguishment is equal to:
a. Excess of the carrying amount of the debt over the carrying amount of the asset
b. Excess of the fair value of the asset over its carrying amount
c. Excess of the fair value of the asset over the carrying amount of the debt
d. Excess of the carrying amount of the debt over the fair value of the asset
It refers to an exclusive right granted by the government to the author, composer or artist enabling to publish, sell or otherwise benefit from his literacy, musical and artistic work
a. Copyright
b. Patent
c. Goodwill
d. Trademark
It is a customer database containing the name, contract information, order history and other vital and social statistics, such as birth, death and even sickness.
a. Customer software
b. Copyright
c. Customer list.
d. Patent
Which of the following do not comprise as the cost of right of use asset?
a. Initial lease liability.
b. Lease bonus.
c. Initial direct cost
d. Depreciation.
Which of the following is a current liability?
a. Preference dividends in arrears
b. A dividend payable in the form of additional shares
c. A cash dividend payable to preference shareholders
d. All of these
A transaction whereby a debtor and creditor may renegotiate the terms of a financial liability with the result that the liability is fully or partially extinguished by the debtor issuing equity instruments to the creditor.
a. Asset swap
b. Equity swap
c. Liability swap
d. Modification of terms
Santo Corporation declares and distributes a cash dividend that is a result of current earnings. How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods?
a. Fair Value Method - No Effect, Equity Method - Decrease.
b. Fair Value Method - Increase, Equity Method - Decrease
c. Fair Value Method - No Effect, Equity Method - No Effect
d. Fair Value Method - Decrease, Equity Method - No Effect
It is a practice of opening the books of accounts beyond the close of the reporting period for the purpose of showing a better financial position and performance
a. Window dressing
b. Lapping.
c. Kiting
Imprest system
Transfer from investment property to property, plant and equipment is appropriate
a. Only when the entity adopts the fair value model.
b. The entity can never transfer property into another classification once it is classified as investment.
c. When there is a change of use.
d. Based on the entity's discretion.
The proceeds from the bonds payable issued will always be
a. Dependent upon the market interest rate
b. Greater than the face amount
c. Lesser than the face amount
d. Equal to the face amount
Steven Co. issues 10,000 shares of 10 par value convertible preference shares for 12 cash per share. Each share is convertible into 4 ordinary shares. On this date the 1 par value ordinary shares are selling for 3 per share. Approximately 2 years later, Steven’s shareholders convert their preference shares into ordinary shares. On the date of conversion the preference shares are selling for 16 and the ordinary shares are selling for 5 per share. The journal entry on the date of conversion will include which of the following?
a. Credit Share Capital—Preference 20,000.
b. Credit Share Premium—Ordinary 80,000.
c. Credit Share Capital—Ordinary 100,000.
d. Credit Share Premium—Ordinary 160,000.
If management wishes to "capitalize" part of the earnings, it may issue a
a. Cash Dividend
b. Stock Dividend
c. Property Dividend
d. Liquidating Dividend
Bank statements provide information about all of the following except
a. Checks declared during the period
b. NSF checks
c. Bank charges for the period
d. Errors made by the depositor
The pre-emptive right of a common stockholder is the right to
a. share proportionately in corporate assets upon liquidation.
b. share proportionately in any new issues of stock of the same class.
c. receive cash dividends before they are distributed to preferred stockholders
d. exclude preferred stockholders from voting rights
Share dividends distributable should be classified on the
a. income statement as an expense.
b. statement of financial position as an asset.
c. statement of financial position as a liability
d. statement of financial position as an item of equity.
An unrealized holding gain or loss on a trading debt investment is the difference between the investment’s
a. fair value and original cost.
b. face value and amortized cost
c. fair value and amortized cost
d. face value and original cost.
The cost of agricultural produced harvested from biological assets is:
a. cost
b. fair value
c. lower of cost or net realizable value
d. fair value less estimated point of sale costs at the point of harvest
If an entity owns and manages a hotel, services provided to guests are a significant component of the arrangement as a whole. In such a case, the hotel is classified as
a. Investment property
b. Owner-occupied property
c. Partly Investment property and partly Owner-occupied property
d. Neither Investment property and Owner-occupied property
It is an original and planned investigation undertaken with the prospect of gaining scientific or technical knowledge and understanding
a. Research.
b. Development
c. Research and Development
d. None of the above
The amount of any writedown of inventory to net realizable value and all losses of inventory shall be:
a. recognized as operating expenses in the period the writedown or loss occurs
b. recognized as other expense in the period the writedown or loss occurs
c. recognized as component of cost of sales in the period the writedown or loss occurs
d. deferred until the related inventory is sold
The difference between the carrying amount of the financial liability extinguished and the fair value of equity instruments issued shall be recognized in
a. Retained earnings
b. Other comprehensive income
c. Profit or loss
d. General reserve
Fences and parking lots are reported on the balance sheet as
current assets.
b. land improvements
c. land.
d. property and equipment.
Which of the following is true about exchange without commercial substance?
a. Acquired asset is measured at the Carrying amount of the asset given
b. Gain or loss is recognized
c. Any cash involved is not added to the carrying amount on the part of the payor
d. Any cash involved is not deducted to the carrying amount on the part of the recipient
When bonds are issued with share warrants, the equity component is equal to
a. Zero
b. The excess of the proceeds over the fair value of the bonds without the share warrants
c. The market value of the share warrants.
d. The excess of the proceeds over the face amount of the bonds
