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1. Inventory should be stated at
2. Which of the following cost models is not permitted under IAS 2?
3. Inventories are assets
4. Which of the following items are excluded from the scope of IAS 2 – Inventories?
5. Which of the following is allowed as a cost of inventory?
6. Inventories are stated at:
7. Inventory excludes…
8. When actual production output is abnormally high, the fixed overheads allocated should be reduced.
9. The cost of inventory should not include
10. Which of the following costs must be expensed under IAS 2?
11. Which of the following is not permitted as a cost of inventory?
12. Inventory should be stated at
13. Which of the following costs of conversion cannot be included in cost of inventory?
14. Inventories are assets
15. The cost of inventory should not include
16. Inventories, are defined as:
17. Net realisable value is defined as:
18. The difference between Net Realisable Value and Fair Value is that:
19. The cost of inventories:
20. The purchase price, transport and handling costs. Taxes and import duties are all examples of:
21. Variable Production overheads are:
22. How would unallocated overheads be recognised?
23. As opposed to fixed production overheads, variable production overheads are:
24. The definition of “inventories” given by international standard IAS2 states that items qualify as inventories only if they are assets held for sale in the ordinary course of business or assets in the process of production for such sale. True or False?
25. Which of the following items cannot be included in the cost of inventories?
26. Which of the following items should be included in the cost of inventories?
27. The cost formulas permitted by IAS2 are:
28. The FIFO cost formula assumes that:
29. The net realisable value of inventories is defined by IAS2 as:
30. On 31 December 2015, a company has partly-completed inventory with a cost to date of £26,300. It is expected that further costs of £8,900 will be incurred in order to complete the inventory. It will then be sold for £47,500. Selling costs will be £2,000.
The cost and the net realisable value of this inventory at 31 December 2015 are:
31. IAS2 states that inventories should be measured at:
32. If production is abnormally low, the amount of fixed overheads allocated to each unit of production should be calculated by dividing total fixed overheads by the number of units produced.
33. At the end of an accounting period, the cost of a company’s inventory is £450,000. This includes damaged items with a cost of £25,000 which are expected to be sold for only £10,000 (less selling expenses of 5%). All other items of inventory have a net realisable value which exceeds cost.
The amount at which the company’s inventory should be recognised at the end of the period is:
34. A company’s inventories should be measured at the lower of total cost and total net realisable value. True or False?
35. A company which makes only one type of product incurs fixed production overheads of £180,000 for an accounting year. Actual production during the year was 30,000 units. Normal production is 24,000 units per annum.
The amount of fixed production overheads that should be allocated to each unit of production is:
38. In relation to accounting for income taxes, which one of the following statements is correct?
39. To calculate the tax base of a liability for employee benefits, which one of the following formulas would be used?
41. For the year ended 30 June 20X7, Pringle Ltd (Pringle) had an accounting profit of $200 000 and a taxable profit of $170 000. The tax expense of Pringle for the year ended 30 June 20X7 was $60 000. At 30 June 20X7 it was determined that the company had a deferred tax liability of $27 Assume that there was no deferred tax asset at the beginning or end of the period. The tax rate is 30 per cent.
Which one of the following statements is correct?
42. At 30 June 20X3, the gross amount of the accounts receivable of Atom Ltd (Atom) was $10 000. At the same date, there was a related allowance for doubtful debts of $500. Revenue from sales is included in the statement of profit or loss and other comprehensive income in the same period as it is included in taxable profit. The tax rate is 30 per cent.
At 30 June 20X3, Atom would recognise which one of the following items in its statement of financial position?
43. At 31 December 20X6, the statement of financial position of Multi Manufacturing Ltd (MM) contained a liability for employee benefits of $1 200 000. For tax purposes, a deduction for employee benefits is allowed in the reporting period in which they are In addition, during the year ended 31 December 20X6, MM obtained a foreign currency loan of FC100 000 repayable in three years. During the year ended 31 December 20X6, the AUD equivalent of the foreign currency loan decreased from $200 000 on initial recognition to $180 000. Gains or losses on foreign currency loans are included in the determination of taxable profit in the period when the loan is settled. The tax rate is 30 per cent. Assume that for the purposes of statement of financial position presentation, deferred tax assets and deferred tax liabilities are netted off against each other.
At 31 December 20X6, in relation to the above liabilities, MM would recognize which one of the following items in its statement of financial position?
44. The following information is available for Alpha Ltd (Alpha).
Accounts receivable 10 000 15 000
Provision for employee benefits 65 000 80 000
Prepaid insurance 20 000 30 000
Assume that the tax rate is 30 per cent. What was the amount of the tax expense of Alpha for the year ended 30 June 20X8?
47. IAS 12 prescribes the accounting treatment for income taxes, and the tax consequences of: 1. Transactions of the current period that are recorded in an undertaking’s financial statements 2. The future liquidation of the of assets and liabilities that are recorded in an undertaking’s statement of financial position 3. Tax planning opportunities
48. If liquidation of carrying amounts will make future tax payments larger or smaller, IAS 12 generally requires an undertaking to record a:
49. Permanent differences require:
50. Permanent differences require adjustments in the:
51. Deferred tax assets are the taxes recoverable, in future periods, in respect of: 1. Deductible temporary differences 2. Unused tax losses 3. Unused tax credits 4. Taxable temporary differences
52. Deferred tax relates to: 1. Deductible temporary differences 2. Unused tax losses 3. Unused tax credits 4. Taxable temporary differences 5. Permanent differences
53. If revenue is taxed in the period received, the tax base:
54. Research and development costs may be expensed in the current period, but deductible for tax purposes over subsequent periods. The tax base:
55. Temporary differences arise:
56. A taxable temporary difference gives rise to:
57. Taxable temporary differences occur when tax is charged in a period:
58. Deductible temporary differences occur when tax is charged in a period:
59. Differences arising from fair value adjustments are treated:
60. Not all temporary differences are recognised as deferred tax balances. The exceptions are: 1. Goodwill 2. Initial recognition of certain assets and liabilities 3. Certain investments 4. Property revaluations
61. The realisation of deferred tax assets depends on:
62. When different rates of tax apply to different types and amounts of taxable income:
63. An undertaking should review unrecorded deferred tax assets to determine whether new conditions will permit the recovery of the asset:
64. The carrying amount of a deferred tax asset should be reviewed for: 1. Changes in tax rates 2. Changes in the expected manner of recovery of an asset 3. Changes in future profits
65. The difference between the carrying amount of a revalued asset and its tax base is a:
66. In relation to provisions, for a present obligation to exist, which one of the following factors must be present?
67. In accordance with the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, where measurement uncertainty exists, which one of the following methods is not an appropriate valuation for a provision based on accounting standards?
68. A manufacturer provides warranties at the time of sale to purchasers of its product lines.
Under the terms of the warranty, the manufacturer undertakes to repair or replace items that fail to perform satisfactorily within a period of two years from the date of sale. When should the manufacturer recognise the provision? Select which one of the following is correct.
69. Which of the following does define the term “provision”?
70. An onerous contract is a contract in which __________ of meeting the obligations under the contract __________ the economic benefits expected to be received under it.
71. Which of the following statements does more likely define the term “restructuring”?
72. An entity shall not recognise a contingent liability __________.
73. Zulu Ltd (Zulu) enters into a contract with a customer to deliver a phone package to the customer in return for an upfront payment of $1000. Under the terms of the contract the customer will receive a ‘free’ phone upon signing the contract, and phone service for two years. Zulu also sells phones and phone services separately.
Which one of the following statements is correct?
74. Which one of the following is included in the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets?
75. The Acme Building Company Ltd is aware of draft legislation that, when enacted, will require the company to refund certain amounts previously charged to its customers. The company intends to lobby against the legislation. At the reporting date, the planned legislative changes have been approved and are now effective.
Which one of the following treatments would be required at the reporting date?
76. Which of the following circumstances would result in a disclosure of a contingent liability? Select which two options are correct.
77. Which one of the following is a correct statement in relation to provisions and contingencies?
78. Which one of the following represents an appropriate discount rate for measuring a provision based on IAS 37 Provisions, Contingent Liabilities and Contingent Assets?
79. Beta Ltd (Beta) enters into a contract with a customer to provide 100 widgets at a price of $50 per widget. Under the contract terms, unused widgets may be returned within 30 days of sale for a full refund. Based on past experience, Beta attaches the following probabilities to the estimated number of widgets the customer will return:
Probability of outcome
Which two of the following statements are correct?
80. As at 30 June 20X8 (reporting date), STU Ltd (STU) is involved in a legal dispute with a supplier in relation to the early termination of the exclusive licence agreement between the two entities.
The supplier is seeking damages of $40 million. The directors of STU believe they will be successful in defending the claim. STU’s lawyers have advised that it is 90 per cent probable the entity would not be found liable.
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, which one of the following is the most appropriate option for STU when preparing its financial report for 30 June 20X8?
81. International standard IAS37 defines a provision as:
82. In general, contract costs incurred in relation to a contract with a customer must be:
82. In order that a provision should be recognised in an entity’s financial statements, it is necessary that:
83. A past event is an obligating event only if it gives rise to a legally enforceable obligation. True or False?
84. The amount of a provision should be the “best estimate” of the expenditure required to settle the obligation concerned. This estimate:
85. If a provision relates to a large population of items, the amount of the provision should be calculated as:
86. Should a provision be recognised in relation to:
(a) future operating losses?
(b) onerous contracts?
87. In general terms, a contingent liability is a possible obligation that depends upon the outcome of a future event that is within the control of the entity. True or False?
88. Contingent liabilities are:
89. Contingent assets are:
90. International standard IAS10 requires that financial statements should be adjusted to take account of any events occurring between the end of the reporting period and the date when the financial statements are authorised for issue. True or False?
91. A company is preparing its financial statements for the year to 31 March 2016. Assuming that each of the following events occurs after 31 March 2016 but before the financial statements are authorised for issue, which one of them should be classified as a NON-ADJUSTING event?
92. Although the accounting treatment of inventories is prescribed by IAS2 Inventories, a company may also need to apply IAS10 Events After the Reporting Period when determining the inventories figure which should be shown in its financial statements. True or False?
93. The following two issues relate to Spiko Co’s mining activities:
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, which of the following statements is correct in respect of Spiko Co’s financial statements for the year ended 31 December 20X4?
94. On 1 October 20X4, Kalatra Co commenced drilling for oil from an undersea oilfield. Kalatra Co is required to dismantle the drilling equipment at the end of its five-year licence. This has an estimated cost of $30m on 30 September 20X9. Kalatra Co’s cost of capital is 8% per annum and $1 in five years’ time has a present value of 68 cents.
What is the provision which Kalatra Co would report in its statement of financial position as at 30 September 20X5 in respect of its oil operations?
95. When to accrue a provision for Restructuring by closure or re-organization:
96. Which one of the following is a correct statement in relation to IFRS 15 Revenue from Contracts with Customers?
97. Zulu Ltd (Zulu) enters into a contract with a customer to deliver a phone package to the customer in return for an upfront payment of $1000. Under the terms of the contract the customer will receive a ‘free’ phone upon signing the contract, and phone service for two years. Zulu also sells phones and phone services separately.
Which one of the following statements is correct?
98. Entity shall recognise revenue to depict the transfer of promised goods or services to customers in the _________ amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
99. Which of the following is an exception for application of IFRS 15?
100. A contract does not exist if …
101. A contract is wholly unperformed if …
102. With regard to the definition of revenue given by IFRS15, which of the following statements is true?
103. If the agreed date of payment by a customer is later than the date on which goods or services are transferred to that customer, part of the consideration should always be treated as finance income (not revenue). True or False?
104. Step 1 of the “five-step model” states that certain conditions must be satisfied before an entity can account for a contract with a customer. Which of the following is not one of these conditions?
105. A contract modification is always treated as a separate contract for the purposes of IFRS15. True or False?
106. A single contract with a customer could include more than one performance obligation and it is necessary to identify each performance obligation in the contract. True or False?
107. A company enters into a contract to build a factory for a customer. The agreed price is £2m and the specified completion date is 31 October 2016. However, the contract provides that the company should receive an incentive payment of a further £250,000 if the factory is completed by 30 September 2016. Similarly, the price will be reduced by £250,000 if the factory is not completed until after 30 November 2016.
The company estimates that there is a 15% probability that the factory will be completed by 30 September 2016, an 80% probability that it will be completed in October 2016 or November 2016 and a 5% probability that it will not be completed until after 30 November 2016.
What is the expected value of the transaction price for this contract?
108. The accounting principle applied by IFRS15 when determining whether or not revenue should be recognised in respect of a repurchase agreement is:
109. A performance obligation is satisfied over time if:
110. A company enters into a contract to supply three distinct products to a customer. The promise to supply each of these products is regarded as a separate performance obligation. The stand-alone prices of the three products (if sold singly) are:
Product X £12,500
Product Y £24,000
Product Z £27,500
The agreed contract price is £57,600. How should this price be allocated to performance obligations?
111. If a contract with a customer provides a warranty, then the warranty always represents a separate performance obligation and part of the transaction price must be allocated to it. True or False?
112. In general, contract costs incurred in relation to a contract with a customer must be:
113. The carrying amount of contract costs relating to a performance obligation and recognised as an asset is £120,000. Further costs required in order to satisfy the obligation are estimated to be £30,000. The consideration receivable by the company when the obligation is satisfied is £132,000.
Calculate the amount of the impairment loss (if any) which should be deducted from the contract asset and recognised as an expense
114. The incremental costs of obtaining a contract must be recognised as an asset if the entity expects to recover those costs.
115. The asset recognised in respect of the costs to obtain or fulfill a contract is not amortised on a systematic basis that is consistent with the pattern of transfer of the goods or services to which the asset relates.
116. In case of option to purchase warranty separately (extended), warranty is distinct and should be recognized as:
117. A repurchase agreement is a contract in which an entity sells an asset and also promises or has the option (either in the same contract or in another contract) to repurchase the asset.
118. The standard introduces a ______ step model for the recognition of revenue
119. In case of forward and call option, the customer:
120. The reason for the bill-and-hold arrangement must be:
121. Indicators that an arrangement is a consignment arrangement include, but are not limited to, the following:
122. Where a contract has multiple performance obligations, an entity will allocate the transaction price to the performance obligations in the contract by reference to the relative standalone selling prices of the goods or services promised. This allocation is made at:
123. Step one in the five-step model requires the ——————
124. When a contract contains more than one distinct performance obligation, an entity:
125. A good or service is distinct if the following criteria are met: