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AM Test > Economics - ACC313 Aug 2013 > Flashcards

Economics - ACC313 Aug 2013 Flashcards

1
Q

The abbreviation “GAAP” stands for:
A Globally accepted accounting practice
B Generally accepted accounting practice
C Globally accepted accounting principles
D Generally accepted accounting principles

A

D Generally accepted accounting principles

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2
Q 
The body to which the International Accounting Standards Board is responsible is:		
A	The IFRS Advisory Council	
B	The IFRS Interpretations Committee	
C	The IFRS Foundation	
D	The Monitoring Board
A

C The IFRS Foundation

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3
Q

The role of the IFRS Advisory Council is to:
A Chair the meetings of the IASB
B Interpret the application of international standards
C Appoint members to the IASB
D Inform the IASB of the Council’s views on standard-setting projects

A

D Inform the IASB of the Council’s views on standard-setting projects

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4
Q 
The word "entity" as used by the IASB refers to:	
A	Profit-oriented organisations only
B	Companies only
C	Not-for-profit organisations only
D	Corporations only
A

A Profit-oriented organisations only

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5
Q

The role of the IFRS Advisory Council is to:
A Chair the meetings of the IASB
B Interpret the application of international standards
C Appoint members to the IASB
D Inform the IASB of the Council’s views on standard-setting projects

A

D Inform the IASB of the Council’s views on standard-setting projects

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6
Q 
The word "entity" as used by the IASB refers to:	
A	Profit-oriented organisations only
B	Companies only
C	Not-for-profit organisations only
D	Corporations only
A

A Profit-oriented organisations only

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7
Q 
Which of the following is not a contributory factor towards faithful representation?	
A	Completeness
B	Freedom from error
C	Neutrality
D	Predictive value
A

D Predictive value

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8
Q

An entity which complies with IFRS may depart from the requirements of an international standard:
A Whenever it wishes to do so
B If compliance would produce misleading information
C If compliance costs would be excessive
D Never

A

C If compliance costs would be excessive

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9
Q

The notes to the financial statements should provide information:
A About the entity’s accounting policies
B As required by international standards, if not presented elsewhere in the financial statements
C Which is relevant to an understanding of the financial statements
D All of the above

A

D All of the above

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10
Q 
Which of the following is not a component of a complete set of financial statements?	
A	A statement of changes in equity
B	A management commentary
C	A set of notes
D	A statement of cash flows
A

B A management commentary

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11
Q

A change in accounting policy which does not result from the initial application of an international standard must normally be accounted for:
A Retrospectively
B Prospectively
C Either retrospectively or prospectively
D Prospectively unless it is impracticable to do so

A

A Retrospectively

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12
Q

An entity which complies with IFRS may depart from the requirements of an international standard:
A Whenever it wishes to do so
B If compliance would produce misleading information
C If compliance costs would be excessive
D Never

A

C If compliance costs would be excessive

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13
Q

Items of financial information are material if:
A They are insignificant
B They could not influence the economic decisions made by the users of financial statements
C They could influence the economic decisions made by the users of financial statements
D They are aggregated with other items

A

C They could influence the economic decisions made by the users of financial statements

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14
Q

Which of the following would generally not be classified as a current asset?
A An asset held for the purpose of being traded
B A cash equivalent
C An asset intended for consumption within the entity’s normal operating cycle
D An asset held for long-term use within the entity

A

D An asset held for long-term use within the entity

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15
Q

The notes to the financial statements should provide information:
A About the entity’s accounting policies
B As required by international standards, if not presented elsewhere in the financial statements
C Which is relevant to an understanding of the financial statements
D All of the above

A

D All of the above

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16
Q

An entity may change one of its accounting policies:
A Whenever it wishes to do so
B If this would result in the provision of reliable and more relevant information
C If this would reduce the cost of preparing the financial statements
D Never

A

B If this would result in the provision of reliable and more relevant information

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17
Q

A change in accounting policy which does not result from the initial application of an international standard must normally be accounted for:
A Retrospectively
B Prospectively
C Either retrospectively or prospectively
D Prospectively unless it is impracticable to do so

A

A Retrospectively

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18
Q

A change in an accounting estimate should be accounted for:
A Retrospectively
B Prospectively
C Either retrospectively or prospectively
D Retrospectively unless it is impracticable to do so

A

B Prospectively

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19
Q 
Prior period errors could be caused by:	
A	Fraud
B	Mistakes in applying accounting policies
C	Mathematical errors
D	Any of the above
A

D Any of the above

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20
Q

Which of the following items qualifies as property, plant and equipment?
A A machine bought for resale to a customer
B A machine bought for use during a single accounting period
C A machine bought for use in more than one accounting period
D Computer software bought for use in more than one accounting period

A

C A machine bought for use in more than one accounting period

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21
Q

If investment property is measured using the fair value model, a gain arising from a change in the fair value of an investment property must be:
A Recognised in the calculation of profit or loss
B Recognised as other comprehensive income
C Credited to a revaluation reserve
D Ignored

A

A Recognised in the calculation of profit or loss

22
Q

Goodwill does not fall within the IAS38 definition of an intangible asset because:
A It is a monetary asset
B It is not separable
C It may not generate future economic benefits
D None of the above

A

B It is not separable

23
Q

Which of the following would not be included in the cost of a separately acquired intangible asset?
A Non-refundable value added tax
B Employee costs incurred in preparing the asset for its intended use
C Costs incurred in using the asset
D Testing costs

A

C Costs incurred in using the asset

24
Q

How should research and development expenditure be dealt with in an entity’s financial statements?
A Research and development expenditure should always be written off as an expense
B Research and development expenditure should always be capitalised as an intangible asset
C Research expenditure should always be written off as an expense but development expenditure should always be capitalised as an intangible asset
D Research expenditure should always be written off as an expense but development expenditure should be capitalised as an intangible asset if it satisfies certain conditions

A

D Research expenditure should always be written off as an expense but development expenditure should be capitalised as an intangible asset if it satisfies certain conditions

25
Q

An impairment loss is:
A The amount by which the recoverable amount of an asset exceeds its carrying amount
B The amount by which the recoverable amount of an asset exceeds its written down value
C The amount by which the carrying amount of an asset exceeds its recoverable amount
D The amount by which the carrying amount of an asset exceeds its market value

A

C The amount by which the carrying amount of an asset exceeds its recoverable amount

26
Q

Which of the following is not an external indication of impairment?
A An unexpected decline in the asset’s market value
B The asset becoming idle
C An adverse technological change
D An adverse change in the market in which the entity operates

A

B The asset becoming idle

27
Q

An asset’s recoverable amount is equal to:
A The lower of the asset’s fair value less costs to sell and its value in use
B The lower of the asset’s value in use and its carrying amount
C The higher of the asset’s value in use and its carrying amount
D The higher of the asset’s fair value less costs to sell and its value in use

A

D The higher of the asset’s fair value less costs to sell and its value in use

28
Q

Which of the following situations would normally lead to a lease being classified as a finance lease?
A The lease does not transfer ownership of the leased asset to the lessee by the end of the lease term
B The lessee has the option to purchase the asset at a price which makes it reasonably certain that this option will be exercised
C The lease term is not for the major part of the asset’s economic life
D At the inception of the lease, the present value of the minimum lease payments does not amount to substantially all of the fair value of the asset

A

B The lessee has the option to purchase the asset at a price which makes it reasonably certain that this option will be exercised

29
Q

In relation to operating leases, which of the following statements is not true?
A The lessee has not taken on the risks and rewards incidental to ownership
B The leased item is not shown as an asset in the lessee’s financial statements
C The lease payments are recognised as an expense in the lessee’s financial statements
D The leased item is not shown as an asset in the lessor’s financial statements

A

D The leased item is not shown as an asset in the lessor’s financial statements

30
Q

At the commencement of a finance lease, IAS17 requires that the lessee should recognise both an asset and a liability to the lessor. These should be measured at:
A The fair value of the leased item
B The present value of the minimum lease payments
C The lower of the fair value of the leased item and the present value of the minimum lease payments
D The higher of the fair value of the leased item and the present value of the minimum lease payments

A

C The lower of the fair value of the leased item and the present value of the minimum lease payments

31
Q

Which of the following items should be included in the cost of inventories?
A Conversion costs
B The cost of abnormal wastage of materials and labour
C Selling costs
D The cost of storing finished goods

A

A Conversion costs

32
Q

Which of the following items cannot be included in the cost of inventories?
A Irrecoverable import duties payable on the acquisition of inventories
B Fixed production overheads
C The cost of abnormal wastage of materials and labour
D Variable production overheads

A

C The cost of abnormal wastage of materials and labour

33
Q

The FIFO cost formula assumes that:
A The inventory items which are sold or consumed are those acquired most recently
B The inventory items which are sold or consumed are those acquired longest ago
C The inventory items which are sold or consumed are a mixture of those acquired in the last 12 months
D Newer inventory items are sold or consumed before older inventory items

A

B The inventory items which are sold or consumed are those acquired longest ago

34
Q

On 31 December 2011, 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 2011 are:		
A	£26,300 and £36,600	
B	£26,300 and £38,600	
C	£35,200 and £45,500	
D	£35,200 and £47,500
A

A £26,300 and £36,600

35
Q

The net realisable value of inventories is defined by IAS2 as:
A Selling price
B Cost price
C Selling price less costs of completion
D Selling price less costs of completion and selling costs

A

D Selling price less costs of completion and selling costs

36
Q

In order that a provision should be recognised in an entity’s financial statements, it is necessary that:
A The entity has a present obligation
B The entity has a legally enforceable obligation
C The entity has a constructive obligation
D It is possible that an outflow of economic benefits will be required

A

A The entity has a present obligation

37
Q

Contingent assets are:
A Always recognised in the statement of financial position
B Always disclosed in the notes to the financial statements
C Disclosed in the notes if an inflow of economic benefits is probable
D Disclosed in the notes unless an inflow of economic benefits is only remotely possible

A

C Disclosed in the notes if an inflow of economic benefits is probable

38
Q

The amount of a provision should be the “best estimate” of the expenditure required to settle the obligation concerned. This estimate:
A Should always be discounted to present value
B Should not be adjusted to reflect future events that may affect the amount of the required expenditure, whether or not those events are likely to occur
C Must always be made on the basis of advice from independent experts
D Should be the amount that would rationally be paid to settle or transfer the obligation

A

D Should be the amount that would rationally be paid to settle or transfer the obligation

39
Q

Contingent liabilities are:
A Always recognised in the statement of financial position
B Always disclosed in the notes to the financial statements
C Recognised in the statement of financial position unless the possibility of an outflow of economic benefits is remote
D Disclosed in the notes unless the possibility of an outflow of economic benefits is remote

A

D Disclosed in the notes unless the possibility of an outflow of economic benefits is remote

40
Q 
The accounting principle applied by standard IAS18 when determining whether or not revenue should be recognised in respect of a sale and repurchase agreement is:	
A	Relevance
B	Verifiability
C	Prudence
D	Substance over form
A

D Substance over form

41
Q

If the selling price of goods includes an amount for after-sales servicing and support, then:
A This amount should be recognised as revenue as soon as the seller has transferred the risks and rewards of ownership of the goods to the buyer
B This amount should be deferred and not recognised as revenue until the servicing and support period has come to an end
C This amount should be deferred and recognised as revenue over the period in which the servicing and support services are provided
D The amount of revenue associated with servicing and support services is equal to the expected costs of providing these services

A

C This amount should be deferred and recognised as revenue over the period in which the servicing and support services are provided

42
Q

Which of the following is a cash inflow or outflow arising from investing activities?
A Cash received from the repayment of loans made to other parties
B Royalties received
C Cash repaid to lenders
D Cash received on the issue of loan stock

A

A Cash received from the repayment of loans made to other parties

43
Q

Which of the following is not a cash inflow or outflow arising from financing activities?
A Cash proceeds of a share issue
B Cash proceeds from issuing debentures
C Cash payments to acquire equity of other entities
D Cash repayments of amounts borrowed

A

C Cash payments to acquire equity of other entities

44
Q

A company uses the indirect method for reporting cash flows from operating activities. During an accounting period, inventories have risen by £5,000, trade receivables have fallen by £4,000 and trade payables have risen by £3,000. When calculating the net cash inflow or outflow from operating activities, the required adjustments are as follows:
A Subtract £5,000, Add £4,000, Subtract £3,000
B Add £5,000, Subtract £4,000, Add £3,000
C Add £5,000, Subtract £4,000, Subtract £3,000
D Subtract £5,000, Add £4,000, Add £3,000

A

D Subtract £5,000, Add £4,000, Add £3,000

45
Q 
A company's figures for an accounting period include sales £25m, cost of sales £15m and equity £5m. The gross profit margin for the period is:	
A	60%
B	50%
C	40%
D	30%
A

C 40%

46
Q 
A company's current assets and current liabilities at the end of an accounting period are £6m and £2.4m respectively. Current assets include inventories of £1.8m. The current ratio and the quick assets ratio at the end of the period are:	
A	2.5 and 0.75
B	2.5 and 1.75
C	1.75 and 2.5
D	2.5 and 0.7
A

B 2.5 and 1.75

47
Q 
A company's profit after tax for an accounting period is £12m. The company's issued share capital consists of 50m ordinary shares of 50p each and 10m preference shares of £1 each. The preference dividend is £1m. Earnings per share for the period are:	
A	22p
B	20p
C	34.3p
D	44p
A

A 22p

48
Q 
A company's average trade receivables and trade payables for an accounting period are £12.5m and £18m respectively. Credit sales and credit purchases for the period are £210m and £78m respectively. The trade receivables collection period and the trade payables collection period are:	
A	59 days and 31 days
B	16.8 days and 4.3 days
C	6.2 days and 11.7 days
D	22 days and 84 days
A

22 days and 84 days

49
Q

Which of the following is a characteristic of an operating segment, as defined by international standard IFRS8?
A It engages in business activities from which it may earn revenues and incur expenses
B Its operating results are regularly reviewed by the chief operating decision maker
C Discrete financial information is available
D All of the above

A

D All of the above

50
Q

A reportable segment is an operating segment which meets any of several 10% thresholds. Which of the following is not one of these thresholds?
A Segment assets are at least 10% of the total assets of all operating segments
B Segment liabilities are at least 10% of the total liabilities of all operating segments
C Segment revenue is at least 10% of the total revenue of all operating segments
D Segment profit or loss is at least 10% of the greater of the total profit of all profitable operating segments and the total loss of all loss-making operating segments

A

B Segment liabilities are at least 10% of the total liabilities of all operating segments

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