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WorksheetsTNM 1-100
Total questions: 100
Worksheet time: 51mins
1. Repairs and maintenance costs are normally:
Recorded as deferred expenses
Expensed in the profit or loss as incurred
Capitalised
Happy Plcvacated an office building and let it out to a third party on 30 June20X8.The
building had an original cost of $800,000on 1 January 20X0andwas beingdepreciated
over 50 years. It wasjudgedto have a fair value on 30 June20X8of $800,000.At the year
end date of 31December 20X8the fair value of the building was estimated at $1.1
million. Happy Plc usesthe fair valuemodel for investment property. What amount will
be shown in revaluation surplus at 31December 20X8in respect of this building?
0
136,000
144,000
444,000
3. Under IAS 36, reversal ofimpairment loss is allowed if
Therecoverable amount ofthe asset
becomes higher than its carrying
amountbecauseofthe 'unwinding' of
the discount.
The loss is related to acquired
goodwill
Either A or B
Neither A or B
4. TheHuang Company has a non-current asset which had a carrying amount in the
financial statements of $18,000 at 31 December 20X9. Its tax written down value (the tax
base) at that date was $9,000. Thetax rate is 30%. In accordance with IAS12 Income
taxes, what is the deferred tax balance in respect of this asset at 31 December 20X9?
2,700 asset
2,700 liability
900 asset
9,000 liability
5. According to IAS36, an asset is impaired if:
Its carrying amount equals the amount to
be recovered through use (or sale)of the B
asset
If it has been damaged
Its carrying amount exceeds the amount
to be recovered through use (or sale) of D
the asset
Theamount to be recovered through use
(or sale) of the asset exceeds its carrying
amount
6. Again or loss arising from a change in the fair value of an investmentproperty should be recognised in the revaluation surplus
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7. If a company builds an office building for its own use, it may account for the building at historical cost less accumulated depreciation and impairment losses, with depreciation and impairment losses recognised in profit or loss.
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8. Thepersonal 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
Accounting period
Accrual basis
9. Shouldthe fees paid to accountants to effectthe combination be included in the consideration transferred in a business combination, according to IFRS 3Business combinations?
Yes
No
10. Select the correct statement with regards to intragroup balances and transactions during consolidation:
Intragroup balances and transactions
must be eliminated
Intragroup balances and transactions
must be eliminatedto the extent of
non-controlling interest
Intragroup balances and transactions
must be eliminatedin proportion to
the percentage of effective ownership
Intragroup balances and transactions
donot have to be eliminated
11. According to IAS38 Intangible assets, intangible assets with a finite useful life should be measured at cost and tested annually for impairment.
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12. DoogiePlc’s draft net profit for the year ended 31 December 20X4 was £67,890 before recording the depreciation charge on a new machine. DoogiePlc acquired this machine on 1 October 20X4 for £50,000. DoogiePlc planned to depreciated this new machine monthly on the straight-line basis over four years to its residual value of £2,000. What is DoogiePlc’s net profit for the year ended 31 December 20X4 after charging depreciation on the machine?
70,890
64,890
64,765
13. According to IAS36, goodwill should be tested for impairment
Only if there is an indication of impairment
Every five years
Annually
On the acquisition of a subsidiary
14. At the commencement date, a lessee shall measure the lease liability at the future value of the lease payments that are paid at that date.
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15. Oysle Ltd is preparing its trial balance for the year ended 30September 20X8. Total purchases in the period were £490,850. Opening inventories were valued at £29,980 and closing inventories were valued at £28,730. Which amount should appear as the cost of sales in the trial balance?
491,200
492,200
491,100
492,100
16. An entity shall account for each business combination by applying the equity method.
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17. An entity shall apply IFRS16 to all leases, except leases of right-of-use assets in a sublease.
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18. On 1 April 20X1, Cakeplc acquired a property for £500,000. This property is depreciated
on the straight-line basis over 25 years to its residual value of £50,000. On 31 March 20X6,
Cakeplc performed an impairment review and determined that the property had a fair
value less disposal costs of £380,000 and a value in use of £370,000. What is the
impairment loss in respect of the property asat 31 March 20X6?
£20,000
£30,000
£40,000
£12,000
19. According to IAS38 Intangible assets, intangible assets cannot be treated as having an indefinite useful life.
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20. According to IAS36, costs of disposal are:
Incremental costs, directly attributable to
the disposal of an asset(or cash-
generating unit), plus finance costs and
income tax expense
Incremental costs, directly
attributable to the disposal of an
asset, excluding finance costs and
income tax expense
Incremental costs, directly attributable to
the disposal of an asset(or cash-
generating unit), plus finance costs, but
excluding income tax expense
Incremental costs, directly attributable to
the disposal of an asset(or cash-
generating unit), plus tax expense, but
excluding finance costs
21. Thecost of goods manufactured by an entity cannot include overhead costs.
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22. In a period of rising prices, applying the FIFOmethod in measuring cost of inventories
would result in a lower gross profit figure than the AVCOmethod.
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23. Under IFRS16 Leases, which two of the following dates are used to identify the inception
of alease?
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
24. Under IAS 36Impairment of assets are the following statements relating to an
active markettrue 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
25. Under IAS36 Impairment of assets is the following statement relating to an active market
true or false? “Pricesare available to the public.”
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26. TheMarkab Company has acquired a trademark relating to the introduction of a new
manufacturing process. The costs incurred were as follows:
According to IAS38 Intangible assets, what is the total cost that should be capitalised as
an intangible non-current asset in respect of the new process?
CU3,550,000
CU3,750,000
CU3,500,000
CU3,700,000
27. According to IAS 12Income taxes,“The tax base for a machine for tax purposes is
greater than the carrying amountin the financial statements up to the end ofthe
reporting period.This will give rise to a deferred tax asset.”
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28. Whichof the following shall a lessee recognise in profit or loss after the commencement
date?
A.Interest on the lease liability
B.Variable lease payments not included
in the measurement of the lease liability
in the period in which the event or
condition that triggers those payments
occurs
C.Net investment in the lease
A and B
B and C
29. Theinformation 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
30. TheGrandCompany placed an order with The Little Company for new specialist
machinery. Theorder was non-cancellable once signed and Grand agreedto pay for
the machinery at the time the order was signed on1February 20X9.Little held the
machinery to Grand's order from 1June 20X9,the date onwhich it was completed.
Grand commencedusingthe machinery on1August20X9when Little completed
the installation process. Little had staff on standby to deal with any operating
problems until the warranty period ended on1November 20X9.Under IFRS 15
Revenue from contracts with customers, Little should recognise the revenue from
the sale ofthis specialist machinery on:
1Nov X9
1Aug X9
1 Jun X9
1 Feb X9
31. According to IAS12 Income taxes, where accumulated depreciation on an asset is greater
than accumulated tax depreciation, the amount should be classified under deductible
temporary differences.
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32. Thefinancial statements of the Farren Company for the year ended 31 December 20X8
included a provision for restructuring of £7 million and an environmental provision of £3
million. At 31 December 20X9, the environmental provision was no longer required and
£2 million of the restructuring provision was no longer required. Under IAS37, the
environmental provision is to be written back to profit or loss.
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33. 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?
Development of the product is not yet
complete.
No patent has yet been registered in
respect of the product.
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.
34. Which one of the following would be recognised as an investment property under IAS40
in the consolidated financial statements of Buildco?
A property intended for sale in the
ordinary course of business
A property being constructed for a
customer
A property held by Buildco as a right-of-
use asset and leased out under a six-
month lease
A property held by Buildco as a right-of-
use asset and leased out under a six-
month lease
35. Thefinancial statements of the Farren Company for the year ended 31 December 20X8
included a provision for restructuring of £7 million. At 31 December 20X9, £2 million of
the restructuring provision was no longer required. An additional provision of £2 million
was needed for legal claims against the company. Under IAS37, £2 million of the
restructuring provision no longer required is to be re-allocated to cover the legal claims.
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36. Which TWOofthe following are listed in the IASB Framework as enhancing
qualitative characteristics' regarding financial statements?
The financial statements are reliable
Any changesof accountingpolicy are
neutral
The financial statements are prepared
in a timely manner
The financial statements are verifiable
37. Spring Cospent $25,000 on a patent for the new technique on 30 March 20X7. The
company capitalized it as an intangible asset in the financial statements.
Spring Coexpected to use the patent for 5 years.
According to IAS38, which one of the following journal entry is correct to record the
amount of the patent amortized for the year ended 30 March 20X7?
Dr. Expenses: $25,000 Cr.Accumulated
amortization: $25,000
Dr. Expenses: $5,000 Cr.Accumulated
amortization: $5,000
Dr. Intangible assets: $5,000 Cr.
Accumulated amortization: $5,000
Dr. Accumulated amortization: $5,000 Cr.
Intangible assets: $5,000
38. The Chadwick Company sells electrical goods covered by a one-year warranty for any
defects.
Of sales of CU70million for the year, the company estimates that 3%will have major
defects, 5%will have minor defects and 92%will have no defects.
Thecost of repairs would be CU5million if all the products sold had major defects and
CU3million if all had minor defects.
What amount should Chadwick recognise as a warranty provision?
CU5,600,000
CU8,000,000
CU300,000
CU190,000
39. According to IFRS15, Revenue from contracts with customers, an entity should disclose
which TWO of the following?
Advances received in cash, analysed
according to each material contract
Total amount of contract revenue
recognised in the period
For each material contract, the aggregate
costs incurred
Impairment losses on receivables or
other assets from contracts with
customers
40. According to IAS2 Inventories, maintenance expenses for an item of equipment used in
the manufacturing process should be included in the cost of inventories.
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41. Are the following statements true or false, according to IAS38 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
42. Are the following statements true or false, according to IAS2 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
43. According to IAS38 Intangible assets, expenditure during the development phase of a
project may sometimes be capitalised as an intangible asset.
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44. Under IAS 16,usingthe cost model,the assetin accountedfor at:
Costless accumulated depreciation
Cost
Costless accumulateddepreciation
and any impairment losses
Costless accumulatedimpairment
losses
45. Which ONE of the following terms best describes the amount of cash or cash
equivalents that could currently be obtained by selling an asset in an orderly
disposal?
Fair value
Realisable value
Residual value
Value in use
46. When allocating an impairment loss, such a loss should reduce the carrying amount of
which asset first?
Goodwill
Property, plant and equipment
Intangible assets
Leases
47. Which of the following does not define an “asset”?
A resource that is controlled by an entity
asa result of past events
A resource which value in use exceeds its
historical cost
A resource from which future economic
benefits are expected to flow to the
entity
None of the above
48. M Cosets up his demolition business from scratch on 1 January20X0.Which items should
be represented as capital expenditure?
Rents office premises
Buys three wrecking machines
Repairs the warehouse roof
Writes off a damaged machine.
49. UggyCoentered into a 4-year lease agreement on 1 January20X5. The agreement meets
the definition of a lease in accordance with IFRS16.An initial payment of $150,000 was
made on 1 January20X5 followed by three annual payments on 1 Januaryof $110,000
each. Therate implicit in the lease is 10%. UggyCoincurred initial direct costs of $20,000
to set up the lease.What is the carrying amount of the lease liability at 31 December
20X6?
230,000
300,909
210,000
110,000
According to IAS 37Provisions, contingent liabilities and contingent assets, a
present obligation that arises from past events but cannotbe reliably measured is
a contingentliability.”
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51. 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 D
to be sold
In a period of rising purchase costs, FIFO
usually gives a lower taxable income than
AVCOand therefore
52. Whichof the following is not included as part of the definition of control under IFRS10
Consolidated Financial Statements?
Exposure, or rights, to variable returns
from its investment
Theability 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
53. According to IAS02 - 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
54. Are the following statements in relation to a contingent liability true or false, according to
IAS37 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. Apresent 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
1.True 2. True
55. According to IAS2 Inventories, which TWOof the following should be accounted for in the
cost of an inventory item?
Trade discounts received on purchase of Storage costs of finished goods
inventories
Storage costs of finished goods
Import duties on shipping of inventories
inwards
Material wasted due to a machine
breakdown
56. According to IAS37 Provisions, contingent liabilities and contingent assets, an obligation
as a result of the entity creating a valid expectation that it will discharge its
responsibilities is a contingent liability.
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57. Which ofthe following shall be accounted in accordance with IAS 38
Motionpicture films
Patents and copyrights
Manuscripts
All ofthe above
58. On 1 April 20X0Slow and Steady Coheld non-current assets that cost $312,000 and had
accumulated depreciation of $66,000 at this date. During the year ended 31 March 20X1,
Slow and Steady Codisposed of non-current assets which had originally cost $28,000 and
had a carrying amount of $11,200. Slow and Steady Co'spolicy is to charge depreciation
of 40%on the reducing balance basis, with no depreciation charged in the year of
disposal. What is the depreciation charge to the statement of profit or loss for the year
ended 31 March 20X1?
$93,920
$98,400
$124,800
$120,320
59. Muse plc begins trading on 1 January20X8 and has zero inventories at that date. During
20X8 it makes purchases of £45,500, incurs carriage inwards of £2,400, and carriage
outwards of £2,900. Closing inventories at 31 December 20X8 are valued at £5,200.
In the statement of profit or loss for the year ended 31 December 20X8 the cost of sales
figure is:
£45,600
£43,200
£53,100
£42,700
60. TheHook Company entered into two new lease arrangements on 1 January20X9:
1. Alease 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. Alease of a colour printer for the ChiefExecutive's office.
Which of the leases would qualify for a recognition exemption under IFRS16 Leases?
The plant lease only
The printer lease only
Both of the leases
Neither of the leases
61. Which one ofthe following is not required to be disclosed in a lessee's financial
statements in relation to its leases,to comply with the requirements ofIFRS 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
62. Anentity should treat any difference between the measurement of an IAS 16
property and the measurement of an IAS 40Investment Property at the date of
transfer as an expense to the profit or loss
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63. According to IFRS16 Leases, any initial direct costs incurred by a lessee are added to the
amount of the assetrecognised in the statement of financial position.
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64. Whether the following statement is TRUE or FALSE in accordance with IAS40 Investment
Property? An investment property is initially measured at cost, including transaction costs
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65. Under IFRS15 Revenue from contracts with customers, which of the following is not given
asa 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
66. Under IAS 36Impairment of assets, which one ofthe following statements best
describes 'value in use'?
Theamountof cash or cash
equivalents that could currently be
obtained by selling an assetin an
orderly disposal
Thepresent value of estimated future
cash flows expected to arise from the
continuinguse of an asset and from
its ultimate disposal
The net amountwhich an entity
expects to obtain for an asset at the
endofits useful life
Theamount at which an asset could
be exchanged between
knowledgeable,willing parties in an
arm's length transaction
67. IAS 36 applies to which ofthe following assets
Property, plant, and equipment and
intangible assets
Inventories
Assetsheld for sale
Financial assets and property plant
and equipment and intangible assets
68. According to IAS38 Intangible assets, expenditure during the research phase of a project
may sometimes be capitalised as an intangible asset.
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69. Thelease payments shall be discounted using __________,if that rate can be readily
determined.
The lessee’s incremental borrowing rate
Benchmark interest rate
Interest rate implicit in the lease
Weighted average cost of capital rate
Internal rate of return
70. According to IAS36, value-in-use is
The amount at which an assetis
recognized in the statement of
financial position
The discounted present value of
future cashflows arisingfromuseof
the asset andfromits disposal.
The higher of an asset’s fair value less
costto sell and its market value.
The market value.
71. According to IAS 36,if the fair value less costs to sell cannotbe determined
The carrying value ofthe asset
remains the same
Theassetis not impaired
Thenet realizable value is used
Therecoverable amountis the value-
in-use
72. According to IAS 2Inventories, cost offactory management should be included in
the costofinventories.
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73. Acompany sells goods with a warranty for the cost of repairs required in the first 2
months after purchase. Past experience suggests: 88%of the goods sold will have no
defects, 7%will have minor defects, 5%will have major defects. If minor defects were
detected in all products sold, the cost of repairs will be £24,000; if major defects were
detected in all products sold, the cost would be £200,000. What amount of provision
should be made?
11,000
11,680
12,000
12,680
74. Once recognized, intangible assets can be carried at
Revalued amount less accumulated
impairment.
Cost less accumulated impairment and
less accumulated amortization.
Cost less accumulated impairment.
Cost plus a notional increase in fair value
since the intangible asset is acquired.
75. Are the following statements true or false, according to IAS 38Intangible 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
76. According to IAS40, transfer to or from investment property should only be made when
there is a change in their use
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77. An investmentproperty shall be measured initially at its __________.
Cost
Fair value
Deemed cost
Value in use
78. Custom duties are included in the cost of inventories.
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79. Under IFRS 3,the acquirer’s application ofthe recognition principle and conditions
may resultin recognising some assets and liabilities that the acquiree had not
previously recognised as assets and liabilities in its financial statements.
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80. In cases of conflict,the requirements ofthe Frameworkprevail over those ofthe
relevant IFRS.
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81. The Conceptual Framework normally prevails over International Financial Reporting
Standards where there is a conflict between the two. Is this statement true or false?
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Which of the following statements about IAS2 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 net realisable value of
inventories, settlement discounts must
be deducted from the expected selling
price
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
83. According to IAS 2Inventories, which one ofthe following lists consistsonly of
items which may be includedin the cost ofinventories?
Supervisor's wages, carriage inwards,
carriage outwards, raw materials
Raw materials, carriage inwards, costs
of storage offinished goods,plant
depreciation
Plant depreciation, carriage inwards,
raw materials, Supervisor's wages
Carriage outwards, raw materials,
Supervisor's wages, plant depreciation
84. According to IFRS 15,which one ofthe following criteria must be satisfied before
revenue from the sale of goodsshould be recognised in profit or loss?
The customer has norights to return
Theoutcomeofthe transaction is
certain
Aperformance obligation has been
met
The transaction price has been settled
in full by the customer
85. TheHogbean 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 IFRS15 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
86. Which of the following disclosures is not required by IAS 38?
Fair value of similar intangible assets
usedby its competitors.
Reconciliation of carrying amount at
the beginningand the year-end.
Contractual commitments for the
acquisition of intangible assets.
Useful lives ofthe intangible assets.
87. If an investmentproperty is held at fair value,this must be applied to all of the
entity's investment properties
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88. According to IFRS 15Revenue from contracts with customers, which of the
following factors is nottaken into account when establishing the transaction price
of a contract?
Financing components
Variable consideration in contract
price
Non-cash consideration
Customer credit quality
89. Inventory should be valued at the lowest of cost, net realisable value and
replacement cost.
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90. IAS 16applies to bearer plants butit does not apply to the produce onbearer
plants.
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91. IFRS15 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.
Revenueto date divided by total contract
revenue
Advances received to date as a
percentage of the total amount
receivable
Surveys of work performed
Machine hours worked to date
92. According to IAS12 Income taxes, deferred tax liabilities are the amounts of income taxes
payable in future periods in respect of taxable temporary differences.
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93. According to IAS12 Income taxes, interest expense accrued but included in taxable profit
on a cash basis should be classified under deductible temporary differences.
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94. In a period of rising prices, applying the FIFO method in determining cost of inventories
would result in a lower cost of sales and higher closing inventory than the AVCOmethod.
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95. Are the following statements regarding the classification of items under IAS12 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. Whereaccumulated 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.True2. False
1.True 2. True
96. 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
97. Which ONE ofthe following terms best describes information in financial
statements that is neutral?
Understandable
Reliable
Relevant
Unbiased
98. A truck held for resale should be considered asa non-current asset in the statement of
financial position
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99. An entity shall not recognise a contingent liability __________.
Unless an entity has a present liability
as a result of a past event
Unless it is probable that an outflow
of resources embodying economic
benefits will be required to settle this
liability
Unless a reliable estimate can be
made ofthe amount of this liability
None of the above
100. No disclosure of a contingent liability is required if the possibility of a transfer of
economic benefits arising is remote.
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