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WorksheetsF7 TỔNG HỢP
Total questions: 161
Worksheet time: 2hrs 38mins
The Conceptual Framework deals with the qualitative characteristics of financial
statements. Is this statement true or false?
True
False
The Conceptual Framework normally prevails over International Financial
Reporting. Standards where there is a conflict between the two. Is this statement true
or false?
True
False
Are the following statements true or false, according to IAS1 Presentation of financial statements ?
Statement 1: Biological assets should be shown in the statement of financial position.
Statement 2 : The number of shares authorised for issue should be shown in the statement of financial position or the statement of changes in equity or in the notes.
Statement 1: False, Statement 2: False
Statement 1: False, Statement 2: True
Statement 1: True, Statement 2: False
Statement 1: True, Statement 2: True
Are the following statements true or false, according to IAS1 Presentation of financial statements ?
Statement 1: An entity presenting a single statement of comprehensive income should present a statement of changes in equity
Statement 2: An entity presenting a separate income statement and a statement of comprehensive income should present a statement of changes in equity
Statement 1: False, Statement 2: False
Statement 1: False, Statement 2: True
Statement 1: True, Statement 2: False
Statement 1: True, Statement 2: True
Are the following statements true or false in respect of a lessee accounting for a lease, according to IFRS 16 Leases?
1. Any initial direct costs incurred by a lessee are added to the amount of the liability recognised in the statement of financial position.
2. Any initial direct costs incurred by a lessee are added to the amount of the asset recognised in the statement of financial position.
1.False
2. False
1.False
2 . True
1.True
2.False
1.True
2. True
Under the principles of IAS 16 Property, plant and equipment, which two of the
following should be included in the cost of an item of property, plant and equipment?
Installation and assembly costs
Costs of training staff on the new asset
Apportioned general overhead costs
Initial delivery and handling costs
Are the following statements regarding the cost of an asset true or false, according to IAS 16 Property, plant and equipment?
1. The cost includes cash equivalents paid to acquire an asset.
2. The cost includes the fair value of any non-monetary consideration given to acquire an asset.
1.False
2. False
1.False
2. True
1.True
2. False
1.True
2. True
Whether the following statement is TRUE or FALSE in accordance with IAS 40
Investment Property? An investment property is initially measured at cost, including
transaction costs
True
False
According to IFRS 15, which one of the following criteria must be satisfied before
revenue from the sale of goods should be recognised in profit or loss?
The customer has no rights to return
The outcome of the transaction is certain
A performance obligation has been met
The transaction price has been settled in full by the customer
Under IFRS 15 Revenue from contracts with customers, which of the following is
not given as a method that can be used to establish the stand alone selling price of the
separate performance obligations in a contract?
Adjusted market assessment approach
Simple cost approach
Expected cost plus a margin approach
Residual approach
The Hogbean Company is a construction company that has the following costs on its contracts:
1) Project managers' costs
2) Purchase of supplies for construction work
3) Payments to subcontractors.
According to IFRS 15 Revenue from contracts with customers, which costs may be included within contract costs?
Cost (2) and cost (3) only
Costs (1), (2) and (3)
Cost (1) and cost (3) only
Cost (1) and cost (2) only
According to IAS 12 Income taxes, is the following statement in relation to deferred
tax liabilities true or false? "Deferred tax assets are the amounts of income taxes
recoverable in future periods in respect of deductible temporary differences."
True
False
Is the following statement regarding the classification of items under IAS 12
Income taxes true or false? "Where accumulated depreciation on an asset is greater
than accumulated tax depreciation, the amount should be classified under deductible
temporary differences."
True
False
According to IAS 37 Provisions, contingent liabilities and contingent assets, which
two of the following best describe the sources of a legal obligation?
A legal obligation is an obligation that derives from:
a contract
an established pattern of past practice
a published policy
legislation
Are the following statements true or false, according to IAS1 Presentation of financial statements ?
Statement 1: Provisions should be recognised in the statement of financial position.
Statement 2: A revaluation surplus on non-current assets should be recognised in the statement of
changes in equity.
Statement 1: False, Statement 2: False
Statement 1: False, Statement 2: True
Statement 1: True, Statement 2: False
Statement 1: True, Statement 2: True
Are the following statements in relation to development true or false, according to IAS38 Intangible assets ?
Statement 1: The products being developed should have already been put into commercial production or use.
Statement 2: Development involves the application of research findings
Statement 1: False, Statement 2: False
Statement 1: False, Statement 2: True
Statement 1: True, Statement 2: False
Statement 1: True, Statement 2: True
Under IAS36 Impairment of assets, which ONE of the following
terms best describes the higher of an asset's fair value less costs to sell and its
value in use?
Recoverable amount
Revalued amount
Depreciable amount
Carrying amount
Under IAS36 Impairment of assets, which ONE of the following
statements best describes the term 'impairment loss'?
The removal of an asset from an entity's statement of financial position
The amount by which the carrying amount of an asset exceeds its
recoverable amount
The systematic allocation of an asset's cost less residual value over its useful
life
The amount by which the recoverable amount of an asset exceeds its carrying
amount
According to IAS36 Impairment of assets, which ONE of the
following terms is defined as: "The smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from
other assets"?
Non-current assets
An operating segment
A cash-operating unit
A cash-generating unit
IAS36 Impairment of assets should be applied in accounting for
the impairment of which ONE of the following types of asset?
Assets arising from construction contracts
Non-current assets held for sale
Investment properties measured at fair value
Non-current assets measured at cost
According to IAS36 Impairment of assets, which TWO of the
following are relevant in determining a non-current asset's 'value in use'?
The expected future cash flows from the asset
The carrying amount of the asset
The future annual depreciation expense in respect of the asset
The time value of money
An entity is considering whether to apply an impairment test to an individual asset or to the cash-generating unit to which that asset belongs. Are
the following statements true or false, according to IAS36 Impairment of assets ?
Statement 1: If the individual asset does not generate cash inflows that are largely independent of those from other assets, then the cash-generating unit
should be identified.
Statement 2: If the individual asset generates an insignificant proportion of the cash inflows of the entity as a whole, then the cash-generating unit should
not be identified
Statement 1: False, Statement 2: False
Statement 1: False, Statement 2: True
Statement 1: True, Statement 2: True
Statement 1: True, Statement 2: False
On 1 January 20X4 The Prosper Company acquired a non-current asset with an estimated useful life of 8 years for CU320,000. Non-current assets
are accounted for under the cost model and depreciation is charged by the straight-line method. On 1 January 20X9 an impairment review identified an
impairment loss of CU10,000 and the remaining useful life was revised to four years. Are the following statements true or false, according to IAS36
Impairment of assets ?
Statement 1: Future depreciation expenses should be measured by reference to the carrying amount after deducting the impairment loss.
Statement 2: Future depreciation expenses should be measured by reference to the new estimate of the remaining useful life.
Statement 1: False, Statement 2: False
Statement 1: False, Statement 2: True
Statement 1: True, Statement 2: False
Statement 1: True, Statement 2: True
Are the following statements in relation to a contingent liability true or false, according to IAS 37 Provisions, contingent liabilities and contingent assets?
1. An obligation as a result of the entity creating a valid expectation that it will discharge its responsibilities is a contingent liability.
2. A present obligation that arises from past events but cannot be reliably measured is a contingent liability.
1.False
2. False
1.False
2. True
1.True
2. False
Which of the following is NOT classified as inventory?
Raw materials
An office building
Work in progress
Finished goods
According to IAS 02 - Inventories, which of the following should be included in
the cost of an inventory?
Settlement discounts received
Storage costs of finished goods
Import duties of inventories inwards
Trade discount allowed
Profit is any amount over and above that required to maintain the capital at the beginning of
the period.
True
False
Specific identification method, first in first out (FIFO) and average cost (AVCO)
are inventory valuation methods. Which of the following statements is correct?
Average cost is recomputed following every dispatch or issue of inventory.
Specific identification method is used when items of inventory are individually
distinguishable and of high value.
FIFO accounting method assumes that the latest items bought are the first items to
be sold.
In a period of rising purchase costs, FIFO usually gives a lower taxable income
than AVCO and therefore.
Which of the following is not included as part of the definition of control under
IFRS 10 Consolidated Financial Statements?
Exposure, or rights, to variable returns from its investment
The ability to use its power over the investee to affect the returns received
Ownership of more than 50% of the share capital of the investee
Power over the investee
The Fluming Company and The Talgarth Company own 60% and 40% respectively of the equity of The Hoophorn Company. Fluming and Talgarth have signed an agreement whereby all the strategic decisions in respect of Hoophorn are to be taken with the agreement of them both. Are the following statements true or false, according to relevant IFRSS?
1. Fluming should classify its investment in Hoophorn as an investment in a subsidiary.
2. Talgarth should classify its investment in Hoophorn as an investment in an associate
1.False
2. False
1.False
2. True
1.True
2. False
1.True
2.True
Are the following statements or false, according to IAS 1 Presentation of financial statements?
1. Dividends paid should be recognised in the statement of profit or loss and other comprehensive income.
2. A loss on disposal of assets should be recognised directly in the statement of changes in equity.
1.False
2. False
1.False
2. True
1.True
2. False
1.True
2. True
According to IAS 1 Presentation of financial statements, the notes within the
financial statements contain information in addition to that presented in which two of
the following?
Statement of financial performance
Chairman's statement
Report on sustainability
Statement of financial position
Which one of the following is the best description of faithful representation' in
relation to information in financial statements?
Inclusion of a degree of caution
Complete, neutral and free from error
Influence on the economic decisions of users
Comprehensibility to users
Which two of the following are included in a complete set of financial statements,
according to IAS 1 Presentation of financial statements?
Summarised statements of financial position for the last five years
A statement of changes in equity
A statement of cash flows
A statement by the board of directors of compliance with local legislation
According to IAS 1 Presentation of financial statements, which two of the
following must be included in an entity's statement of financial position?
Deferred tax
Share capital and reserves analysed by class
Property, plant and equipment analysed by class
Cash and cash equivalents
In a period of rising prices, applying the FIFO method to determine the cost of inventories will
give a lower gross profit figure than AVCO method.
True
False
The Scandium Company is commencing a new construction project, which is to be financed by borrowing. The key dates are as follows:
15 May 20X9 Loan interest relating to the project starts to be incurred
3 June 20X9 Technical site planning commences
12 June 20X9 Expenditures on the project start to be incurred
18 July 20X9 Construction work commences
According to IAS 23 Borrowing costs, from what date can Scandium commence the capitalisation of borrowing costs?
12 June 20X9
18 July 20X9
3 June 20X9
15 May 20X9
According to current guidance within IAS 23 Borrowing costs, which of the
following treatments are required for borrowing costs incurred that are directly
attributable to the construction of a qualifying asset?
Treatment 1: Recognise as an expense in the period incurred.
Treatment 2: Capitalize as part of the cost of the asset.
Treatment 2 only
Either Treatment 1 or Treatment 2
Neither Treatment 1 nor Treatment 2
Treatment 1 only
Closing inventory is a debit in the statement of profit or loss.
True
False
Are the following statements regarding the classification of items under IAS 12 Income taxes true or false?
1. Interest expense accrued but included in taxable profit on a cash basis should be classified under deductible temporary differences.
2. Where accumulated depreciation on an asset is greater than accumulated tax
depreciation, the amount should be classified under deductible temporary differences.
1.False
2. False
1.False
2. True
1.True
2. False
1.True
2. True
What will be the appropriate accounting treatment to unsold goods held at the year
end?
Recording them as expense for the year
Recording them as liability for the year
Recording them as fixed asset for the year
Recording them as current asset for the year
A business has opening inventory of £7,200 and closing inventory of £8,100.
Purchases for the year were £76,500, carriage inwards was £50 and carriage outwards
was £180.
The figure for cost of sales is:
£75,550
£75,650
£75,830
£77,450
M Co sets up his demolition business from scratch on 1 January 20X0. Which
items should be represented as capital expenditure?
Rents office premises
Buys three wrecking machines
Repairs the warehouse roof
Writes off a damaged machine
M Co sets up his demolition business from scratch on 1 January 20X0. Which
items should be represented as capital expenditure?
Pays legal expenses on the purchase of PPE
Rents office premises
Repairs the warehouse roof
Writes off a damaged machine
M Co sets up his demolition business from scratch on 1 January 20X0. Which
items should be represented as revenue expenditure?
Pays legal expenses on the purchase of PPE
Buys three wrecking machines
Builds an extension to the warehouse
Repairs the warehouse roof
Which of the following is NOT shown as intangible non-current assets in the
financial position of PEN Co at 31 December 20X1?
PEN Co decided to spend $17,000 on researching a new process to raise the
quantity of product made. The research is expected to lead to a new process in 3
years' time.
PEN Co purchased a patent for $500,000.
PEN Co spent $40,000 on the development of new techniques that will be put in
place shortly to reduce production cost.
A brand name of Summer Co purchased by PEN Co for $10 mil.
Are the following statements true or false, according to IAS 38 Intangible assets?
1. Expenditure during the research phase of a project may sometimes be capitalised
as an intangible asset.
2. Expenditure during the development phase of a project may sometimes be
capitalised as an intangible asset
1.False
2. False
1.False
2. True
1.True
2. False
1.True
2. True
Are the following statements true or false, according to IAS 38 Intangible assets?
1. Intangible assets cannot be treated as having an indefinite useful life.
2. Intangible assets with a finite useful life should be measured at cost and tested
annually for impairment
1.False
2. False
1.False
2. True
1.True
2. False
1.True
2. True
Which one is NOT indicators of impairment of impairment under IAS 36 Impairment of Assets?
Advances in the technological environment in which an asset is employed has an adverse impact on its future use
An increase in interest rates which increases the discount rate an entity uses
The estimated net realisable value of inventory has been reduced due to fire damage although this value is greater than its carrying amount
The carrying amount of an entity's net assets is lower than the entity's number of shares in issue multiplied by its share price
Under IAS 36 Impairment of assets are the following statements relating to an
active market true or false?
1. Willing buyers and sellers are usually found.
2. Prices are available to the public
1.False
2. False
1.False
2. True
1.True
2. False
1.True
2. True
Profit is the residual amount that remains after expenses have been deducted from
income
True
False
How should import duties be dealt with when valuing inventories at the lower of
cost and net realisable value (NRV) according to IAS 2 Inventories?
Ignored
Deducted from cost
Deducted in arriving at NRV
Added to cost
Which one of the following terms best describes financial statements whose basis
of accounting recognises transactions and other events when they occur?
Accrual basis of accounting
Cash basis of accounting
Invoice basis of accounting
Going concern basis of accounting
Using the definitions in the IASB Conceptual Framework for Financial Reporting,
which two of the following are examples of 'expenses'?
A decrease in economic benefits during the accounting period
A decrease in equity arising from a distribution to equity participants
A reduction in income for the accounting period
A loss on the disposal of a non-current asset
According to IAS 2 Inventories, which one of the following lists consists only of
items which may be included in the cost of inventories?
Supervisor's wages, carriage outwards, raw materials
Raw materials, carriage inwards, plant depreciation
Plant depreciation, carriage outwards, raw materials
Carriage outwards, raw materials, Supervisor's wages, plant depreciation
M Co sets up his demolition business from scratch on 1 January 20X0. Which
items should be represented as capital expenditure?
Writes off a damaged machine
Rents office premises
Pays wages
Buys a warehouse
Which of the following is NOT classified as inventory?
Raw materials
A car held for resale
Work in progress
A plant
According to IAS 2 Inventories, which two of the following should be accounted
for in the cost of an inventory item?
Trade discounts received on purchase of inventories
Storage costs of finished goods
Import duties on shipping of inventories inwards
Material wasted due to a machine breakdown
IAS 16 Property, Plant and Equipment requires an asset to be measured at cost on
its original recognition in the financial statements. CARLING used its own staff,
assisted by contractors when required, to construct a new warehouse for its own use.
Which one is recognized as expense:
Clearance of the site prior to commencement of construction
Professional surveyor fees for managing the construction work
CARLING's own staff wages for time spent working on construction
A proportion of CARLING's administration costs, based on staff time spent
Are the following statements true or false, according to IAS 2 Inventories?
1. Cost of factory management should be included in the cost of inventories.
2. Maintenance expenses for an item of equipment used in the manufacturing process
should be included in the cost of inventories.
1.False & 2. False
1.False & 2. True
1.True & 2. False
1.True & 2.True
Which one of the following terms best describes assets recorded at the amount that
represents the immediate purchase cost of an equivalent asset?
Realisable value
Present value
Current cost
Historical cost
According to the IASB Conceptual Framework, which two of the following
characteristics are described as fundamental qualitative characteristics that make the
information provided in financial statements useful to users?
Comparability
Understandability
Relevance
Faithful
Financial statements include a statement of financial position, a statement of profit
or loss and other comprehensive income and a statement of changes in equity.
According to the Preface to International Financial Reporting Standards, which two of
the following are also included within the financial statements?
A directors' report
An auditor's report
A statement of cash flows
Accounting policies
Under IFRS 16 Leases, which two of the following dates are used to identify the
inception of a lease?
The date of the commitment by the parties to all of the provisions of the lease
The date of the commitment by the parties to the principal provisions of
the lease
The date when title to the asset is transferred
The date of the lease agreement
According to IFRS 15 Revenue from contracts with customers, which of the
following factors is not taken into account when establishing the transaction price of a
contract?
Variable consideration in contract price
Non-cash consideration
Financing components
Customer credit quality
How should trade discounts be dealt with when valuing inventories at the lower of cost and net realisable value (NRV) according to IAS2 Inventories?
Ignored
Deducted from cost
Deducted in arriving at NRV
Added to cost
How should sales staff commission be dealt with when valuing inventories at the lower of cost and net realisable value (NRV), according to IAS2 Inventories?
Ignored
Added to cost
Deducted in arriving at NRV
Deducted from cost
According to IAS 12 Income taxes, are the following statements in relation to
deferred tax liabilities true or false?
1. Deferred tax liabilities are the amounts of income taxes payable in future periods in
respect of taxable temporary differences.
2. Deferred tax assets are the amounts of income taxes recoverable in future periods in
respect of deductible permanent differences
1.False
2. False
1.False
2. True
1.True
2. False
1.True
2. True
Which two of the following are examples of deferred tax assets?
Deferred tax assets are the amount of income taxes recoverable in future periods in
respect of
permanent differences
taxable temporary differences
the carryforward of unused tax losses
deductible temporary differences
Inventory should be valued at the lowest of cost, net realisable value and replacement cost
TRUE
FALSE
Under this accounting principle, a business is not expected to end its operations in
the near term
Accounting entity
Going concern
Accrual basis
Materialit
The personal transactions of the business owner that do not involve the business
are not recorded in the books of accounts of the business. This relates to the concept of
Business entity concept
Accounting currency
Accrual basis
Accounting period
The information includes everything necessary to reflect what happened for all of
the business activities for which the firm is reporting.
completeness
neutrality
freedom from error
verifiability
“Aaccording to IAS 37 Provisions, an onerous contract is a contract in which
__________ of meeting the obligations under the contract __________ the economic
benefits expected to be received under it.”
Sunk costs; exceed
Unavoidable costs; exceed
Opportunity costs; are less than
Avoidable costs; are less than
Whether the following statement is TRUE or FALSE in accordance with IAS 40
Investment Property?
“Transfer to or from investment property should only be made when there is a
change in their use”
TRUE
FALSE
According to IFRS 16 Leases, which one of the following is not included in the
definition of lease payments?
The exercise price of a purchase option that the lessee is reasonably certain to
exercise
Required payments (fixed and variable) over the lease term
Penalties for terminating the lease
Contingent rent
Which one of the following is not required to be disclosed in a lessee's financial
statements in relation to its leases, to comply with the requirements of IFRS 16
Leases?
Interest expense on lease liabilities
A reconciliation between the total of future minimum lease payments and
their present value
Total cash outflow for leases
Income from sub-leasing right of use assets
The Hook Company entered into two new lease arrangements on 1 January 20X9:
1. A lease of a large piece of plant with an 18 month term, so that there were only six months left to run by the year end of 31 December 20X9.
2. A lease of a colour printer for the Chief Executive's office.
Which of the leases would qualify for a recognition exemption under IFRS 16 Leases?
The plant lease only
The printer lease only
Both of the leases
Neither of the leases
“An entity should treat any difference between the measurement of an IAS 16
property and the measurement of an IAS 40 Investment Property at the date of
transfer as an expense to the profit or loss”
True
False
Whether the following statement is TRUE or FALSE in accordance with IAS 40
Investment Property ?
“Transfer from investment property to an IAS 16 property must be made at the FV of
the IP at the date of the transfer
True
False
Under IAS 36 Impairment of assets which one of the following statements best
describes 'value in use'?
The amount of cash or cash equivalents that could currently be obtained by
selling an asset in an orderly disposal
The present value of estimated future cash flows expected to arise from the
continuing use of an asset and from its ultimate disposa
The net amount which an entity expects to obtain for an asset at the end of its
useful lif
The amount at which an asset could be exchanged between knowledgeable,
willing parties in an arm's length transaction
Which of the following statements about inventory for the purposes of the statement of
financial position is correct?
AVCO and LIFO are both acceptable methods, under IAS 2, Inventories, of arriving at the cost of inventories ( Not accaptable LIFO, Only accaptable FIFO and AVCO)
The cost of inventories of finished goods may include labour and materials cost only, without including overheads ( Included production OH can be change per unit)
Inventories should be included at the lowest of cost, net realisable value and replacement
cost ( lower between cost and NRV, Not having replacement)
It may be acceptable for the cost of inventories to be based on selling price less estimated
profit margin
Which two of the following may be included when arriving at the cost of finished goods
inventory for inclusion in the financial statements of a manufacturing company?
Delivery inwards
Delivery outwards
Production line wages
Depreciation of delivery vehicles
Finished goods storage costs
Are the following statements in relation to materiality true or false, according to IAS1 Presentation of financial statements?
Statement 1: Materiality of items depends on their individual or collective influence on the economic decisions of users.
Statement 2: Materiality of an item depends on its absolute size and nature.
Statement 1: False, Statement 2: False
Statement 1: False, Statement 2: True
Statement 1: True, Statement 2: False
Statement 1: True, Statement 2: True
Are the following statements true or false, according to IAS12 Income taxes?
Statement 1: Development costs have been capitalised and will be amortised, but were deducted in determining taxable profit in the period in which they were incurred. This will give rise to a deferred tax asset
Statement 2: The tax base for a machine for tax purposes is greater than the carrying amount in the financial statements up to the end of the reporting period. This will give rise to a deferred tax asset.
Statement 1: False, Statement 2: False
Statement 1: False, Statement 2: True
Statement 1: True, Statement 2: False
Statement 1: True, Statement 2: True
How should an asset be initially recognised in the financial statements?
Measure at market value
Measure at cost
Measure at net realisable value
Measure at fair value
Which of the following is not an asset that falls under the scope of IAS 16?
Tangible assets
Assets held for the production or supply of goods or services
Assets held for sale in the normal course of business
Assets expected to be used for more than one period
The "carrying amount" of an item of property, plant and equipment generally refers to:
The amount at which the item is recognised in the financial statements
Which of the following would not be included in the cost of an item of property, plant and
equipment?
Delivery and installation charges
Testing costs
Refundable value added tax
Site preparation costs
Depreciation is defined as the fall in value of an asset during an accounting period. True or False?
TRUE
False
Which ONE of the following terms best describes the cost (or an amount substituted for
cost) of an asset less its residual value?
Revalued amount
Carrying amount
Recoverable amount
Depreciable amount
Which ONE of the following statements best describes 'residual value'?
The estimated net amount currently obtainable if the asset were at the end of its useful life
The present value of estimated future cash flows expected to arise from the continuing use of the asset and from its ultimate disposal
The amount at which the asset could be exchanged between knowledgeable, willing parties in an arm's length transaction
The amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal
Which ONE of the following statements best describes the term 'depreciation'?
The systematic allocation of an asset's cost less residual value over its useful life
The removal of an asset from an entity's statement of financial position
The amount by which the recoverable amount of an asset exceeds its carrying amount
The amount by which the carrying amount of an asset exceeds its recoverable amount
Which TWO of the following must be disclosed separately, according to IAS12 Income
taxes?
The tax bases of major items on which deferred tax has been calculated
The amount of deductible temporary differences for which no deferred tax asset is
recognised
Estimates of future tax rates
The amount of income tax relating to each component of other comprehensive income
In which section of the statement of financial position should cash
that is restricted to the settlement of a liability due 18 months after the reporting
period be presented, according to IAS1 Presentation of financial statements ?
Current assets
Equity
Non-current liabilities
Non-current assets
In which section of the statement of financial position should
employment taxes that are due for settlement in 15 months' time be presented,
according to IAS1 Presentation of financial statements ?
Current liabilities
Current assets
Non-current liabilities
Non-current assets
The Oakes Company has a loan due for repayment in six months'
time, but Oakes has the option to refinance ( taí cấp vốn) for repayment two
years later. Oakes plans to refinance this loan. In which section of its statement
of financial position should this loan be presented, according to IAS1
Presentation of financial statements ?
Current liabilities
Current assets
Non-current liabilities
Non-current assets
According to IAS23 Borrowing costs, which ONE of the following statements about the
capitalisation of borrowing costs as part of the cost of a qualifying
If funds come from general borrowings, the amount to be capitalised is based on the weighted average cost of borrowing
Capitalisation always continues until the asset is brought into use
Capitalisation always commences as soon as expenditure of the asset is incurred
Capitalisation always commences as soon as interest on relevant borrowings is being
incurred
On 1 April 20X8 The Arrakis Company took out a loan to finance the construction of a
building. Work on the building commenced on 1 July 20X8 and was completed on 31
March 20X9. The building was brought into use on 1 July 20X9.
According to IAS23 Borrowing costs, what is the period over which borrowing costs relating
to the project should be capitalised?
1 April 20X8 - 31 March 20X9
1 April 20X8 - 30 June 20X9
1 July 20X8 - 31 March 20X9
1 July 20X8 - 30 June 20X9
Which of the following statements about IAS 2 Inventories are correct?
Production overheads should be included in cost on the basis of a company's actual level of activity in the period.
In arriving at the cost of inventories, FIFO and weighted average cost formulas are acceptable.
It is permitted to value finished goods inventories at materials plus labour cost only, without adding production overheads.
In arriving at the net realisable value of inventories, settlement discounts must be
deducted from the expected selling price
Geek is developing a new product and expects to be able to capitalise the costs.
Which one of the following would preclude capitalisation of the costs?
No sales contracts have yet been signed in relation to the product.
It has not been possible to reliably allocate costs to development of the product
Development of the product is not yet complete.
No patent has yet been registered in respect of the product.
Which one of the following would be recognised as an investment property under
IAS 40 in the consolidated financial statements of Buildco?
A property intended for sale in the ordinary course of business
A property held by Buildco as a right-of-use asset and leased out under a sixmonth lease
A property owned by Buildco and leased out to a subsidiary
A property being constructed for a customer
Which one of the following is NOT TRUE concerning the treatment of investment
properties under IAS 40?
Following initial recognition, investment property can be held at either cost or
fair value.
If an investment property is held at fair value, this must be applied to all of
the entity's investment property.
An investment property is initially measured at cost, including transaction
costs
A gain or loss arising from a change in the fair value of an investment property
should be recognised in other comprehensive income.
Which one of the following would NOT be valid grounds for a provision?
A company has a policy of cleaning up any environmental contamination
caused by its operations, but is not legally obliged to do so.
A company is leasing an office building for which it has no further use. However, it is tied into the lease for another year.
A company has acquired a machine which requires a major overhaul every
three years. The cost of the first overhaul is reliably estimated at $120,000
A company is closing down a division. The Board has prepared detailed closure
plans which have been communicated to customers and employees
Which of the following statements are correct in accordance with IAS 37 Provisions, contingent liabilities and contingent assets?
1. Provisions should be made for both constructive and legal obligations
2. Discounting may be used when estimating the amount of a provision.
3. A restructuring provision must include the estimated costs of retraining or relocating continuing staff
4. A restructuring provision may only be made when a company has a detailed plan for the restructuring and has communicated to interested parties a firm intention to carry it out.
All four statements are correct
(i), (iii) and (iv) only
(ii) and (iii) only
(i), (ii) and (iv) only
Are each of the following factors relevant, according to IAS38
Intangible assets, in determining the annual amortisation expense on an intangible asset?
(1) The cost.
(2) The amortisation method.
(1) Not relevant ;
(2) Not relevant
(1) Not relevant ;
(2) Relevant
(1) Relevant ;
(2) Not relevant
(1) Relevant ;
(2) Relevant
A brand name that was acquired separately should initially be
recognised, according to IAS38 Intangible assets, at
recoverable amount
either cost or fair value at the choice of the acquirer
fair value
cost
According to IAS38 Intangible assets, amortisation of an
intangible asset with a finite useful life should commence when
it is first recognised as an asset
it is probable that it will generate future economic benefits
it is available for use
the costs can be identified with reasonable certainty
According to IAS 02 Inventories, what does inventory cost include?
Purchase costs and conversion costs
Purchase costs, net of trade volume rebates, conversion costs, other costs to bring inventory to its present condition and location and selling costs
Purchase costs, net of trade volume rebates, conversion costs and other costs to bring inventory to its present condition and location
Purchase costs, conversion costs, other costs to bring inventory to its present condition and location and storage costs
An associate is an entity in which an investor has significant influence over the investee.
Which TWO of the following indicate the presence of significant influence?
The investor owns 330,000 of the 1,500,000 equity voting shares of the investee
The investor has representation on the board of directors of the investee
The investor is able to insist that all of the sales of the investee are made to a subsidiary of the investor.
The investor controls the votes of a majority of the board members
Whether the following statement is TRUE or FALSE in accordance with IAS 40 Investment Property?
If an investment property is held at fair value, this must be applied to all of the entity's investment properties
True
False
In which of the following situations is the net realisable value of an item of inventory likely to be lower than its cost?
The production cost of the item has been falling
The selling price of the item has been rising
The item is becoming obsolete
Demand for the item is increasing
Because of the loss arising from operating the shops, the accountant is considering whether Lisbon is a going concern. If it was decided that Lisbon was no longer a going concern at 31 March 20X6, which of the following is correct in accordance with the Conceptual Framework?
Financial statements do not need to be prepared
All the assets should be liquidated
The financial statements should be prepared as normal and the going concern status disclosed in the notes
The financial statements should be prepared on a different basis
Which TWO of the following facts would indicate that a contract's transaction price had a financing component that would need to be accounted for separately under IFRS 15 Revenue from contracts with customers?
The customer paid in advance and the timing of delivery is at the customer's discretion
The credit terms are significantly longer than are normally offered to customers for the same goods
The consideration, or an element of it, is variable because it is a sales-based royalty
The customer has the option to delay payment by a year and the price if they choose this option is noticeably different from the price for immediate cash payment
Transfer from investment property to an IAS 16, property must be made at either FV or Cost of the investment property at the date of the transfer
True
False
IAS 36 Impairment of Assets contains a number of examples of internal and external events which may indicate the impairment of an asset. In accordance with IAS 36, which of the following would definitely NOT be an indicator of the potential impairment of an asset (or group of assets)?
An unexpected fall in the market value of one or more assets
Adverse changes in the economic performance of one or more assets
A significant change in the technological environment in which an asset is employed making its software effectively obsolete
The carrying amount of an entity's net assets being below the entity's market capitalisation
According to IAS 23 – Borrowing Costs, investment income generated from loans taken in order to finance a qualifying asset should be:
Capitalized to cost of property, plant and equipment
Deducted from borrowing costs
Added to borrowing costs
Shown as Investment Income in the Income Statement
According to current guidance within IAS 23 Borrowing costs, which of the following treatments are required for borrowing costs incurred that are directly attributable to the construction of a qualifying asset?
Recognise as an expense in the period incurred.
Capitalise as part of the cost of the asset.
None of the above
IFRS 15 allows the recognition of revenue through the duration of a contract for services if it has been demonstrated that the performance obligation is met over time.
Which two of the following methods for determining the stage of completion of a contract involving the rendering of services are specifically referred to in IFRS 15 Revenue from contracts with customers, as being acceptable?
Revenue to date divided by total contract revenue
Advances received to date as a percentage of the total amount receivable
Machine hours worked to date
Surveys of work performed
A gain or loss arising from a change in the fair value of an investment property should be recognised in the revaluation surplus
True
False
Following initial recognition, investment property can be held at either cost or fair value.
True
False
How does the Conceptual Framework define an asset?
A. A present economic resource, which is a right that has the potential to economic benefits, owned by an entity as a result of past events produce
A present economic resource over which an entity has legal rights. An economic resource is a right that has the potential to produce economic benefits
A present economic resource controlled by an entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits
A present economic resource to which an entity has a future commitment as a result of past events. An economic resource is a right that has the potential to produce economic benefits
Which of the following would meet the definition of a liability?
Dexter's businessmanufactures a product under licence. In 12 months' time the licence expires and Dexter will have to pay $50,000 for it to be renewed
Reckless purchased an investment 9 months ago for $120,000. The market for these investments has now fallen and Reckless's investment is valued at $90,000
Carter has estimated the tax charge on its profits for the year just ended as $165,000
Expansion is planning to invest in new machinery and has been quoted a price of $570,000
Which of the following would correctly describe the net realisable value of a two year old asset?
The original cost of the asset less two years' depreciation
The amount that could be obtained from selling the asset, less any costs of disposal
The cost of an equivalent new asset less two years' depreciation
The present value of the future cash flows obtainable from continuing to use the asset
The Conceptual Framework identifies which of the following as an underlying assumption in preparing financial statements.
Going concern
Materiality
Substance over form
Accruals
The Conceptual Framework identifies four enhancing qualitative characteristics of financial Information. Which ONE of the following is NOT an enhancing qualitative characteristic?
Verifiability
Timeliness
Consistency
Understandability
In accordance with the Conceptual Framework which of the following is/are true in relation to the enhancing characteristic of comparability?
(1) Permitting alternative accounting treatments for the same economic phenomenon enhances comparability
(2) Comparability requires uniformity
Both 1 and 2
Neither 1 nor 2
1 only
2 only
Tynan's year end is 30 September 20X4 and the following potential liabilities have been identified.
Which TWO of the above should Tynan recognise as liabilities as at 30 September 20X4?
The signing of a non-cancellable contract in September 20X4 to supply goods in the following year on which, due to a pricing error, a loss will be made
The cost of a reorganisation which was approved by the board in August 20X4 but has not yet been implemented, communicated to interested parties or announced publicly
An amount of deferred tax relating to the gain on the revaluation of a property during the current year. Tynan has no intention of selling the property in the foreseeable future.
The balance on the warranty provision which related to products for which there are no outstanding claims and whose warranties had expired by 30 September 20X4
The Grand Company placed an order with The Little Company for new specialist machinery. The order was non-cancellable once signed and Grand agreed to pay for the machinery at the time the order was signed on 1 February 20X9. Little held the machinery to Grand's order from 1 June 20X9, the date on which it was completed. Grand commenced using the machinery on 1 August 20x9 when Little completed the installation process. Little had staff on standby to deal with any operating problems until the warranty period ended on 1 November 20X9. Under IFRS 15 Revenue from contracts with customers, Little should recognise the revenue from the sale of this specialist machinery on:
1 November 20X9
1 August 20X9
1 June 20X9
1 February 20X9
The Kuma Company is being sued for damages. When preparing its 20X5 financial statements the directors took the view that the likelihood of any payments having to be made to the claimant was remote. In preparing the 20X6 financial statements their view was that it was possible that such payments would have to be made and in preparing the 20X7 statements their view was that such payments were probable. For the 20X8 statements there was virtual certainty that the payments would have to be made. The payments were made in the 20X8 accounting period. Under IAS 37 Provisions, contingent liabilities and contingent assets, in which set of financial statements should a contingent liability first be disclosed?
20X8
20X7
20X6
20X5
According to IAS23 Borrowing costs, which TWO of the following assets could be treated as qualifying assets for the purpose of capitalising interest costs?
Investment property
Investments in financial instruments
Inventory of finished goods produced over a short period of time
Power generation facilities
According to IAS38 Intangible assets, which TWO of the following criteria are relevant in determining the useful life of an intangible asset?
Obsolescence
The amortisation period
The expected usage of the asset
The residual value of the asset
According to IAS38 Intangible assets, the recognition criteria for an intangible asset include which TWO of the following conditions?
It must be measured at cost
Its cost can be measured reliably
It is probable that future economic benefits will arise from its use
It is an integral part of the business
According to IAS1 Presentation of financial statements, which TWO of the following must be included in an entity's statement of financial position?
Investment property
Number of shares authorised
Provisions
Shares in an entity owned by that entity
Wetherby purchased a machine on 1 July 20X7 for $500,000. It is being depreciated on a straight-line basis over its expected life of ten years. Residual value is estimated at $20,000. On 1 January 20X8, following a change in legislation, Wetherby fitted a safety guard to the machine. The safety guard cost $25,000 and has a useful life of five years with no residual value.
What amount will be charged to profit or loss for the year ended 31 March 20X8 in respect of depreciation on this machine?
(a)
Auckland purchased a machine for $60,000 on 1 January 20X7 and assigned it a useful life of 15 years. On 31 March 20X9 it was revalued to $64,000 with no change in useful life.
What will be depreciation charge in relation to this machine in the financial statements of Auckland for the year ending 31 December 20X9?
(a)
A company had $20 million of capitalised development expenditure at cost brought forward at 1 October 20X7 in respect of products currently in production and a new project began on the same date. The research stage of the new project lasted until 31 December 20X7 and incurred $1.4 million of costs. From that date the project incurred development costs of $800,000 per month. On 1 April 20X8 the directors became confident that the project would be successful and yield a profit well in excess of costs. The project was still in development at 30 September 20X8. Capitalised development expenditure is amortised at 20% per annum using the straight line method.
What amount will be charged to profit or loss for the year ended 30 September 20X8 in respect of research and development costs?
(a)
At 30 September 20X9 Sandown's trial balance showed a brand at cost of $30 million, less accumulated amortisation brought forward at 1 October 20X8 of $9 million. Amortisation is based on a ten-year useful life.
An impairment review on 1 April 20X9 concluded that the brand had a value in use of $12 million and a remaining useful life of three years. However, on the same date Sandown received an offer to purchase the brand for $15 million.
What should be the carrying amount of the brand in the statement of financial position of Sandown as at 30 September 20X9?
(a)
Dempsey's year end is 30 September 20X4. Dempsey commenced the development stage of a project to produce a new pharmaceutical drug on 1 January 20X4. Expenditure of $40,000 per month was incurred until the project was completed on 30 June 20X4 when the drug went into immediate production. The directors became confident of the project's success on 1 March 20X4. The drug has an estimated life span of five years; time apportionment is used by Dempsey where applicable.
What amount will Dempsey charge to profit or loss for development costs, including any amortisation, for the year ended 30 September 20X4?
(a)
Carter vacated an office building and let it out to a third party on 30 June 20X8. The building had an original cost of $900,000 on 1 January 20X0 and was being depreciated over 50 years. It was judged to have a fair value on 30 June 20X8 of $950,000. At the year end date of 31 December 20X8 the fair value of the building was estimated at $1.2 million. Carter uses the fair value model for investment property.
What amount will be shown in revaluation surplus (P/L?) at 31 December 20X8 in respect of this building?
(a)
Leclerc has borrowed $2.4 million to finance the building of a factory. Construction is expected to take two years. The loan was drawn down and incurred on 1 January 20X9 and work began on 1 March 20X9. $1 million of the loan was not utilised until 1 July 20X9 so Leclerc was able to invest it until needed. Leclerc is paying 8% on the loan and can invest surplus funds at 6%.
Calculate the borrowing costs to be capitalised for the year ended 31 December 20X9 in respect of this project.
(a)
A cash-generating unit comprises the following assets:
Building: 700
Plant and equipment: 200
Goodwill: 90
Current assets: 20
One of the machines, carried at $40,000, is damaged and will have to be scrapped. The recoverable amount of the cash generating unit is estimated at $750,000.
What will be the carrying amount of the building when the impairment loss has been recognised? (to the nearest $'000)
(a)
A machine has a carrying amount of $85,000 at the year end of 31 March 20X9. Its market value is $78,000 and costs of disposal are estimated at $2,500. A new machine would cost $150,000. The company which owns the machine expects it to produce net cash flows of $30,000 per annum for the next three years. The company has a cost of capital of 8%.
What is the impairment loss on the machine to be recognised in the financial statements at 31 March 20X9?
(a)
Candel is being sued by a customer for $2 million for breach of contract over a cancelled order. Candel has obtained legal opinion that there is a 20% chance that Candel will lose the case. Accordingly Candel 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 Candel in accordance with IAS 37 Provisions, contingent liabilities and contingent assets?
(a)
A company's trial balance shows a debit balance of $2.1 million brought forward on current tax and a credit balance of $5.4 million on deferred tax. The tax charge for the current year is estimated at $16.2 million and the carrying amounts of net assets are $13 million in excess of their tax base.
The income tax rate is 30%
What amount will be shown as income tax in the statement of profit or loss for the year?
(a)
A company's trial balance at 31 December 20X9 shows a debit balance of $700,000 on current tax and a credit balance of $8,400,000 on deferred tax. The directors have estimated the provision for income tax for the year at $4.5 million and the required deferred tax provision is $5.6 million, $1.2 million of which relates to a property revaluation.
What is the profit or loss income tax liability for the year ended 31 December 20X9?
(a)
At 1 January 20X8 the carrying amount of non-current assets exceeded their tax written down value (tax base) by $850,000.
For the year to 31 December 20X8 the entity claimed depreciation for tax purposes of $500,000 and charged depreciation of $450,000 in the financial statements.
During the year ended 31 December 20X8 the entity revalued a property. The revaluation surplus was $250,000. There are no current plans to sell the property.
The tax rate was 30% throughout the year.
What is the provision for deferred tax required by IAS 12 Income Taxes at 31 December 20X8?
(a)
Cloud obtained a 60% holding in the 100,000 $1 shares of Mist on 1 January 20X8, when the retained earnings of Mist were $850,000. Consideration comprised $250,000 cash, $400,000 payable on 1 January 20X9 and one share in Cloud for each two shares acquired. Cloud has a cost of capital of 8% and the market value of its shares on 1 January 20X8 was $2.30.
Cloud measures non-controlling interest at fair value. The fair value of the non-controlling interest at 1 January 20X8 was estimated to be $400,000.
What was the total consideration paid for Cloud Co's share of Mist Co?
(a)
On 1 August 20X7 Patronic purchased 18 million of the 24 million $1 equity shares of Sardonic. The acquisition was through a share exchange of two shares in Patronic for every three shares in Sardonic. The market price of a share in Patronic at 1 August 20X7 was $5.75. Patronic will also pay in cash on 31 July 20X9 (two years after acquisition) $2.42 per acquired share of Sardonic. Patronic's cost of capital is 10% per annum.
What is the amount of the consideration attributable to Patronic for the acquisition of Sardonic?
(a)
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?
(a)
Crash acquired 70% of Bang's 100,000 $1 ordinary shares for $800,000 when the retained earnings of Bang were $570,000 and the balance in its revaluation surplus was $150,000. Bang also has an internally-developed customer list which has been independently valued at $90,000. The non-controlling interest in Bang was judged to have a fair value of $220,000 at the date of acquisition.
What was the goodwill arising on acquisition?
(a)
On 1 October 20X8 Pacemaker acquired 30 million of Vardine's 100 million shares in exchange for 75 million of its own shares. The stock market value of Pacemaker's shares at the date of this share exchange was $1.60 each.
Vardine's profit is subject to seasonal variation. Its profit for the year ended 31 March 20X9 was $100 million.
$20 million of this profit was made from 1 April 20X8 to 30 September 20X8. Pacemaker has one subsidiary and no other investments apart from Vardine.
What amount will be shown as 'investment in associate' in the consolidated statement of financial position of Pacemaker as at 31 March 20X9?
(a)
Ulysses owns 25% of Grant, which it purchased on 1 May 20X8 for $5 million. At that date Grant had retained earnings of $7.4 million. At the year end date of 31 October 20X8 Grant had retained earnings of
$8.5 million after paying out a dividend of $1 million. On 30 September 20X8 Ulysses sold $600,000 of goods to Grant, on which it made 30% profit. Grant had resold none of these goods by 31 October.
At what amount will Ulysses record its investment in Grant in its consolidated statement of financial position at 31 October 20X8?
(a)
Ruby owns 30% of Emerald and exercises significant influence over it. Emerald sold goods to Ruby for $160,000. Emerald applies a one third mark up on cost. Ruby still had 25% of these goods in inventory at the year end.
What amount should be deducted from consolidated retained earnings in respect of this transaction?
(a)
Which one of the following would not NECESSARILY lead to a liability being classified as a current liability?
The liability is expected to be settled in the course of the entity's normal operating cycle.
The liability has arisen during the current accounting period
The liability is held primarily for the purpose of trading
The liability is due to be settled within 12 months after the end of the reporting period.
The Plaice Company acquired a new filing machine, the list price of which was CU 90,000. The supplier allowed a trade discount of CU 1,700 off the list price. On delivery, the cost of installing the machine in its desired location was CU 500. According to IAS 16 Property, plant and equipment, at what cost should the filing machine be measured in the financial statements of Plaice?
(a)
On 1 January 20X9 The Hamerkop Company borrowed CU6 million at an annual interest rate of 10% to finance the costs of building an electricity generating plant. Construction commenced on 1 January 20X9 and cost CU6 million. Not all the cash borrowed was used immediately, so interest income of CU80,000 was generated by temporarily investing some of the borrowed funds prior to use. The project was completed on 30 November 20X9. What is the carrying amount of the plant at 30 November 20X9?
(a)
On 1 January 20X9 The Cygan Company took out a loan of CU26 million in order to finance the renovation of a building. The renovation work started on the same date. The loan carried interest at 10%. Work on the building was substantially complete on 31 October 20X9. The loan was repaid on 31 December 20X9 and CU180,000 investment income was earned in the period to 31 October on those parts of the loan not yet used for the renovation.
According to IAS23 Borrowing costs, what is the total amount of borrowing costs to be included in the cost of the building?
(a)
The Waloneke Company has a policy of using non-current assets until they can no longer be operated and are worthless. On 1 January 20X9 it acquired an item of plant and machinery for CU100,000. It is being depreciated over 10 years on a straight-line basis.
For tax purposes there is an allowance of 20% per annum on a reducing balance basis. There are two rates of tax: 15% on trading profits and 25% on gains on disposals. What deferred tax balance should Waloneke recognise at 31 December 20X9, according to
IAS12 Income taxes ?
Deferred tax asset of CU2,500
Deferred tax liability of CU2,500
Deferred tax asset of CU1,500
Deferred tax liability of CU1,500
In arriving at its profit before tax for the year ended 31 December 20X9 The Ryan
Company has accrued royalties receivable of CU200,000 and interest payable of CU250,000.
Both royalties and interest are dealt with on a cash basis in tax computations.
What are Ryan's net temporary differences at 31 December 20X9, according to IAS12
Income taxes?
Taxable temporary differences of CU50,000
Deductible temporary differences of CU450,000
Deductible temporary differences of CU50,000
Taxable temporary differences of CU450,000
A company's financial statements must NOT disclose the accounting policies used in measuring inventories.
True
False
How should prompt payment discount be dealt with when valuing inventories at the lower of cost and net realisable value (NRV), according to IAS2Inventories?
Ignored
Added to cost
Deducted in arriving at NRV
Deducted from cost