FA-FFA Module-2

1. In preparing the accounts of Oscar Ltd (Oscar) for the financial year ended 30 June 20X7, the following items were considered. In accordance with IAS 1 Presentation of Financial Statements, IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and IAS 10 Events after the Reporting Period, which of the following items would be included in the determination of profit after income tax?
Select which three options are correct.

2. In accordance with IAS 1 Presentation of Financial Statements, which one of the following statements is correct?

3. In accordance with IAS 1 Presentation of Financial Statements, which one of the following items must be separately presented in the statement of financial position?

4. Which of the following is not a component of a complete set of financial statements?

5. The IASB requires all entities which comply with IFRS to produce interim financial statements. True or False?

6. An entity which complies with IFRS may depart from the requirements of an international standard:

7. Items of financial information are material if:

8. The information which must be provided so as to properly identify each component of a set of financial statements does not include:

9. Which of the following would generally not be classified as a current asset?

10. Standard IAS1 does not prescribe a format for each of the primary financial statements. True or False?

11. The main financial performance statement is:

12. The main purpose of the statement of changes in equity is:

13. The notes to the financial statements should provide information:

14. Certain items of income and expense must be excluded when calculating an entity’s profit or loss. True or False?

15. An entity must present an analysis of expenses by function (e.g. cost of sales, distribution costs and administrative expenses). True or False?

16. Sandal Ltd (Sandal) prepares consolidated financial statements. During the financial year ended 30 June 20X4, Sandal disposed of an investment in a foreign operation. Up to the date of disposal, Sandal had to translate the financial statement of the foreign operation from another currency for inclusion in its consolidated financial statements. During prior reporting periods,

$14 000 of exchange difference gains net of tax (pre-tax exchange difference gains $20 000) had been recognised in other comprehensive income in the consolidated financial statements of Sandal. During the 20X4 reporting period, a $3500 exchange difference gain net of tax (pre-tax exchange difference gain $5000) up to the date of disposal of the foreign operation had been recognised in other comprehensive income.
In accordance with IAS 1 Presentation of Financial Statements, which one of the following statements is correct in relation to the treatment of the disposal of the foreign operation in the consolidated statement of profit or loss and other comprehensive income of Sandal for the year ended 30 June 20X4?

17. In accordance with IAS 1 Presentation of Financial Statements, which one of the following items does not have to be separately presented in the statement of profit or loss and other comprehensive income?

18. Salter Ltd has completed its 20X5 financial statements which reveal, in part, the following information.

• Profit for the year—$110 000
• Total comprehensive income—$130 000
• Other comprehensive income relates to the revaluation of land and buildings to fair value
• Dividends paid—$35 000
• Opening equity balances—share capital $300 000, retained earnings $220 000, asset revaluation surplus $60 000
• No more share capital was issued during the reporting period
In accordance with IAS 1 Presentation of Financial Statements, which one of the following items would correctly be included in the statement of changes in equity for the year ended 30 June 20X5?

19. In accordance with the requirements of IAS 1 Presentation of Financial Statements, which one of the following statements is correct?

21. In accordance with IAS 1 Presentation of Financial Statements, which one of the following statements in relation to the statement of profit or loss and other comprehensive income is correct?

23. Jon & Margaret Ltd. had the following financial data for the year ended 31 March 2006:

Cash and cash equivalents at 1 April 2005 € 94m
CAPEX €150m
Dividends declared € 2.4m
Net profit € 34m
Share issue € 66m
Increase in trade receivables € 24m
Depreciation/amortization € 7m
Proceeds from disposal of PPE € 12m
Gain on disposal of PPE € 1m
Based on the above, what is the balance of Cash and cash equivalents at 31 March 2006?

24. The following information is taken from the financial statements of Trevelyan & Co. A cash flow statement is being prepared in accordance with IAS 7 – ‘Cash Flow Statement’.
Non-current assets € 1,000,000
Proceeds from sales of non-current assets € 58,000
Acquisition of non-current assets € 260,000
Depreciation charge for the year € 22,000
The net amount to be included under Cash flows from investing activities in respect of transactions in non-current assets should be a cash outflow of:

25. The Magnolia & Co. determines cash flow from operating activities using the indirect method. You are given the following information:

EBT for the year ended 31.12.2005 € 31,000
Depreciation charge for 2005 € 4,200
Inventories at 1.1.05 € 13,400
Inventories at 31.12.05 € 16,400
Trade and other receivables at 1.1.05 € 10,000
Trade and other receivables at 31.12.05 € 8,600
Trade and other payables at 1.1.05 € 9,800
Trade and other payables at 31.12.05 € 11,400
Net cash flow from operating activities is:

26. Irene & Co. had sales of € 15,000 during 2004, 80% of them on credit and 20% for cash. During the year, trade and other receivables increased from € 1,200 to € 1,600, an increase of € 400. What amount of cash was received from customers during 2004?

27. Cost of sales for Irene & Co. during 2004 was € 10,000. Opening inventory was € 2,000 and closing inventory was € 2,800. Opening trade and other payables were € 480 and closing trade and other payables were € 900. What amount of cash was paid to suppliers?

28. Irene & Co.’s income statement for 2004 shows wages of € 5,000. Its cash flow statement reported cash paid to employees of € 4,200. The opening balance of accrued wages was € 360. What was the closing balance for accrued wages?

29. Gains and losses on disposal of long-lived assets are classified as:

30. Which two of the following transactions would appear in a cash flow statement according to IAS 7 – ‘Cash Flow Statement’?

(A) conversion of bonds into shares
(B) interest owed
(C) interest received
(D) proceeds of issue of bonds

31. Which two of the following can be classified as ‘Cash and cash equivalents’ according to IAS 7 – ‘Cash Flow Statement’?
(A) a bank overdraft
(B) equity investments
(C) loan notes held due for repayment in 90 days
(D) redeemable preference shares due in 180 days

32. Read the following statements regarding the impact of a lease on the cash flow statement:
(A) total cash flow impact for the life of the lease is the same under both methods
(B) The interest portion of the payment under a finance lease will affect operating activities, whereas the principal reduction portion of the finance lease payment will affect financing activities
(C) Over time, a cash payment under the finance lease method will cause operating cash flow to decline, whereas financing cash flows will tend to increase
(D)Cash payments made under an operating lease will affect operating activities only

All of the above are true statements except for:

33. A cash flow statement provides information that enables users to evaluate the changes in:

34. The acquisition, and disposal, of long-term assets are:

35. Activities that result in changes in the size (and composition) of the equity capital, and borrowings are:

36. For an investment to qualify as a cash equivalent, it must be:

37. The maximum maturity of a cash equivalent is:

39. The carrying amount of property, plant and equipment was $410 million at 31 March 2011 and $ 680 million at 31 March 2012. During the year, property with a carrying amount of $ 210 million was revalued to $290 million. The depreciation charge for the year was $115 million. There were no disposals. What amount will appear on the statement of cash flows for the year ended 31 March 2012 in respect of purchases of property, plant and equipment?

40. The statement of financial position of Pinto at 31 March 2017 showed property, plant and equipment with a carrying amount of $1,860,000. At 31 March 2018 it had increased to $2,880,000. During the year to 31 March 2018 plant with a carrying amount of $240,000 was sold at a loss of $90,000, depreciation of $280,000 was charged and $100,000 was added to the revaluation surplus in respect of property, plant and equipment. What amount should appear under ‘investing activities’ in the statement of cash flows of Pinto for the year ended 31 March 2018 as cash paid to acquire property, plant and equipment?

42. Daily sales and purchases, employee costs and general overheads comprise:

43. Top Trades Co has been trading for a number of years and is currently going through a period of expansion. An extract from the statement of cash flows for the year ended 31 December 20X7 for Top Trades Co is presented as follows:

Net cash from operating activities 995
Net cash used in investing activities (540)
Net cash used in financing activities (200)
Net increase in cash and cash equivalents 255
Cash and cash equivalents at the beginning of the period 200
Cash and cash equivalents at the end of the period 455

Which of the following statements is correct according to the extract of Top Trades Co’s statement of cash flows?

44. A cash flow statement:

45. Operating management in an enterprise is largely concerned with:

46. Which two of the following are not operating activities?

47. The direct method:

48. The use of estimates always undermines the reliability of financial statements. True or False?

49. Prior period errors could be caused by:

50. A material prior period error should be corrected:

51. An entity’s financial statements provide comparative figures for the previous five accounting periods. If the entity accounts for an item retrospectively, then:

52. Which of the following is a change of accounting policy?

53. When preparing its financial statements for 2016, a company discovers an error in the 2015 financial statements. The 2015 revenue figure should have been £102m but was erroneously reported as £100m. This difference is regarded as material. The comparative figure for revenue shown in the 2016 financial statements should be:

54. The following is an extract from the 20X6 annual report of Status Ltd (Status).

Statement of accounting policies Basis of accounting

The financial statements are drawn up on a historical cost basis  and, except where stated, do not take into account changing money values and/or current valuations of non-current assets.

Changes in accounting policies

During the 20X6 financial year, Status voluntarily changed its policy on accounting for inventory. This did not materially affect the 20X6 financial statements, but will have a material impact on the financial statements in subsequent reporting periods.

In addition to the above accounting policy  details, what must  the accountant  for Status  include as disclosures? Select which two options are correct.

55. In preparing the 20X4 financial statements of Medal Ltd (Medal), there was a voluntary change of accounting policy in relation to inventories. The accountant for Medal noted  that this  change would not require any adjustment in the financial report for the reporting period ending on 30 June 20X4. However, the accountant considered that the change in accounting policy would have a material effect on the subsequent reporting period.

In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, which one of the following actions  should  be  taken  when  preparing  the  financial  report  for the year ended 30 June 20X4?

56. In preparing the accounts of Oscar Ltd (Oscar)  for the  financial  year ended  30  June  20X7, the following items were In accordance with IAS 1 Presentation of Financial Statements, IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and IAS 10 Events after the Reporting Period, which of the following items would be included in the determination of profit after income tax?

Select which three options are correct.

57. Change in accounting policy does not include:

58. Prior-period errors, including fraud, should be corrected:

59. Specific principles bases conventions rules and practices applied in presenting financial statements. This defines:

60. Adjustment of the carrying amount of an asset or a liability or the consumption of an asset. This defines:

61. Changes in accounting policies:

62. If it is impractical to make a retrospective application to a period:

63. The term “accounting policies” refers to:

64. If an accounting standard applies specifically to a certain item, an entity’s accounting policy in relation to that item must normally be determined by applying the relevant standard. True or False?

65. An entity may change one of its accounting policies:

66. A change in accounting policy which does not result from the initial application of an international standard must normally be accounted for:

67. For all changes in accounting policy, the entity concerned must disclose:

68. A change in an accounting estimate should be accounted for: