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1. Inventory should be stated atCorrectIncorrect
2. Which of the following cost models is not permitted under IAS 2?CorrectIncorrect
3. Inventories are assetsCorrectIncorrect
4. Which of the following items are excluded from the scope of IAS 2 – Inventories?CorrectIncorrect
5. Which of the following is allowed as a cost of inventory?CorrectIncorrect
6. Inventories are stated at:CorrectIncorrect
7. Inventory excludes…CorrectIncorrect
8. When actual production output is abnormally high, the fixed overheads allocated should be reduced.CorrectIncorrect
9. The cost of inventory should not includeCorrectIncorrect
10. Which of the following costs must be expensed under IAS 2?CorrectIncorrect
11. Which of the following is not permitted as a cost of inventory?CorrectIncorrect
12. Inventory should be stated atCorrectIncorrect
13. Which of the following costs of conversion cannot be included in cost of inventory?CorrectIncorrect
14. Inventories are assetsCorrectIncorrect
15. The cost of inventory should not includeCorrectIncorrect
16. Inventories, are defined as:CorrectIncorrect
17. Net realisable value is defined as:CorrectIncorrect
18. The difference between Net Realisable Value and Fair Value is that:CorrectIncorrect
19. The cost of inventories:CorrectIncorrect
20. The purchase price, transport and handling costs. Taxes and import duties are all examples of:CorrectIncorrect
21. Variable Production overheads are:CorrectIncorrect
22. How would unallocated overheads be recognised?CorrectIncorrect
23. As opposed to fixed production overheads, variable production overheads are:CorrectIncorrect
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?CorrectIncorrect
25. Which of the following items cannot be included in the cost of inventories?CorrectIncorrect
26. Which of the following items should be included in the cost of inventories?CorrectIncorrect
27. The cost formulas permitted by IAS2 are:CorrectIncorrect
28. The FIFO cost formula assumes that:CorrectIncorrect
29. The net realisable value of inventories is defined by IAS2 as:CorrectIncorrect
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:CorrectIncorrect
31. IAS2 states that inventories should be measured at:CorrectIncorrect
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.CorrectIncorrect
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:CorrectIncorrect
34. A company’s inventories should be measured at the lower of total cost and total net realisable value. True or False?CorrectIncorrect
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:CorrectIncorrect
38. In relation to accounting for income taxes, which one of the following statements is correct?CorrectIncorrect
39. To calculate the tax base of a liability for employee benefits, which one of the following formulas would be used?CorrectIncorrect
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?CorrectIncorrect
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?CorrectIncorrect
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?CorrectIncorrect
44. The following information is available for Alpha Ltd (Alpha).
- The taxable profit for the year ended 30 June 20X8 was $100 000.
- Deductible temporary differences were:
Accounts receivable 10 000 15 000
Provision for employee benefits 65 000 80 000
- Taxable temporary differences were:
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?CorrectIncorrect
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 opportunitiesCorrectIncorrect
48. If liquidation of carrying amounts will make future tax payments larger or smaller, IAS 12 generally requires an undertaking to record a:CorrectIncorrect
49. Permanent differences require:CorrectIncorrect
50. Permanent differences require adjustments in the:CorrectIncorrect
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 differencesCorrectIncorrect
52. Deferred tax relates to: 1. Deductible temporary differences 2. Unused tax losses 3. Unused tax credits 4. Taxable temporary differences 5. Permanent differencesCorrectIncorrect
53. If revenue is taxed in the period received, the tax base:CorrectIncorrect
54. Research and development costs may be expensed in the current period, but deductible for tax purposes over subsequent periods. The tax base:CorrectIncorrect
55. Temporary differences arise:CorrectIncorrect
56. A taxable temporary difference gives rise to:CorrectIncorrect
57. Taxable temporary differences occur when tax is charged in a period:CorrectIncorrect
58. Deductible temporary differences occur when tax is charged in a period:CorrectIncorrect
59. Differences arising from fair value adjustments are treated:CorrectIncorrect
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 revaluationsCorrectIncorrect
61. The realisation of deferred tax assets depends on:CorrectIncorrect
62. When different rates of tax apply to different types and amounts of taxable income:CorrectIncorrect
63. An undertaking should review unrecorded deferred tax assets to determine whether new conditions will permit the recovery of the asset:CorrectIncorrect
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 profitsCorrectIncorrect
65. The difference between the carrying amount of a revalued asset and its tax base is a:CorrectIncorrect
66. In relation to provisions, for a present obligation to exist, which one of the following factors must be present?CorrectIncorrect
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?CorrectIncorrect
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.CorrectIncorrect
69. Which of the following does define the term “provision”?CorrectIncorrect
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.CorrectIncorrect
71. Which of the following statements does more likely define the term “restructuring”?CorrectIncorrect
72. An entity shall not recognise a contingent liability __________.CorrectIncorrect
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?CorrectIncorrect
74. Which one of the following is included in the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets?CorrectIncorrect
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?CorrectIncorrect
76. Which of the following circumstances would result in a disclosure of a contingent liability? Select which two options are correct.CorrectIncorrect
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?CorrectIncorrect
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?CorrectIncorrect
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?CorrectIncorrect
81. International standard IAS37 defines a provision as:CorrectIncorrect
82. In general, contract costs incurred in relation to a contract with a customer must be:CorrectIncorrect
82. In order that a provision should be recognised in an entity’s financial statements, it is necessary that:CorrectIncorrect
83. A past event is an obligating event only if it gives rise to a legally enforceable obligation. True or False?CorrectIncorrect
84. The amount of a provision should be the “best estimate” of the expenditure required to settle the obligation concerned. This estimate:CorrectIncorrect
85. If a provision relates to a large population of items, the amount of the provision should be calculated as:CorrectIncorrect
86. Should a provision be recognised in relation to:
(a) future operating losses?
(b) onerous contracts?CorrectIncorrect
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?CorrectIncorrect
88. Contingent liabilities are:CorrectIncorrect
89. Contingent assets are:CorrectIncorrect
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?CorrectIncorrect
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?CorrectIncorrect
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?CorrectIncorrect
93. The following two issues relate to Spiko Co’s mining activities:
- Issue 1: Spiko Co began operating a new mine in January 20X3 under a five-year government licence which required Spiko Co to landscape the area after mining ceased at an estimated cost of $100,000.
- Issue 2: During 20X4, Spiko Co’s mining activities caused environmental pollution on an adjoining piece of government land. There is no legislation which requires Spiko Co to rectify this damage, however, Spiko Co does have a published environmental policy which includes assurances that it will do so. The estimated cost of the rectification is $1,000,000.
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?CorrectIncorrect
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?CorrectIncorrect
95. When to accrue a provision for Restructuring by closure or re-organization:CorrectIncorrect
96. Which one of the following is a correct statement in relation to IFRS 15 Revenue from Contracts with Customers?CorrectIncorrect
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?CorrectIncorrect
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.CorrectIncorrect
99. Which of the following is an exception for application of IFRS 15?CorrectIncorrect
100. A contract does not exist if …CorrectIncorrect
101. A contract is wholly unperformed if …CorrectIncorrect
102. With regard to the definition of revenue given by IFRS15, which of the following statements is true?CorrectIncorrect
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?CorrectIncorrect
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?CorrectIncorrect
105. A contract modification is always treated as a separate contract for the purposes of IFRS15. True or False?CorrectIncorrect
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?CorrectIncorrect
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?CorrectIncorrect
108. The accounting principle applied by IFRS15 when determining whether or not revenue should be recognised in respect of a repurchase agreement is:CorrectIncorrect
109. A performance obligation is satisfied over time if:CorrectIncorrect
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?CorrectIncorrect
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?CorrectIncorrect
112. In general, contract costs incurred in relation to a contract with a customer must be:CorrectIncorrect
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 expenseCorrectIncorrect
114. The incremental costs of obtaining a contract must be recognised as an asset if the entity expects to recover those costs.CorrectIncorrect
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.CorrectIncorrect
116. In case of option to purchase warranty separately (extended), warranty is distinct and should be recognized as:CorrectIncorrect
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.CorrectIncorrect
118. The standard introduces a ______ step model for the recognition of revenueCorrectIncorrect
119. In case of forward and call option, the customer:CorrectIncorrect
120. The reason for the bill-and-hold arrangement must be:CorrectIncorrect
121. Indicators that an arrangement is a consignment arrangement include, but are not limited to, the following:
- The product is controlled by the entity until a specified event occurs, such as the sale of the product to a customer of the dealer or until a specified period expires;
- The entity is able to require the return of the product or transfer the product to a third party (such as another dealer); and
- The dealer does not have an unconditional obligation to pay for the product (although it might be required to pay a deposit).
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:CorrectIncorrect
123. Step one in the five-step model requires the ——————CorrectIncorrect
124. When a contract contains more than one distinct performance obligation, an entity:CorrectIncorrect
125. A good or service is distinct if the following criteria are met:
- The customer can benefit from the good or services on its own or in conjunction with other readily available resources; and
- The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises/elements in the contract