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AM Test > Economics - ACC313 May 2013 > Flashcards

Economics - ACC313 May 2013 Flashcards

1
Q

Standards issued by the International Accounting Standards Board (IASB) are known as:
A Financial Reporting Standards (FRSs)
B International Accounting Standards (IASs)
C International Financial Reporting Standards (IFRSs)
D International Financial Standards (IFSs)

A

C International Financial Reporting Standards (IFRSs)

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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

One of the main advantages of standardisation in financial reporting is:
A Comparability between accounting periods and between entities
B The production of prudent financial statements
C Increased flexibility in financial reporting
D The use of creative accounting practices

A

A Comparability between accounting periods and between entities

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4
Q

A conceptual framework for financial reporting is:
A A set of items which make up an entity’s financial statements
B A set of regulations which govern financial reporting
C A set of principles which underpin financial reporting
D A set of financial reporting standards

A

C A set of principles which underpin financial reporting

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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

The elements of financial statements which relate to financial position are:
A Income and expenses
B Income, expenses and equity
C Assets, liabilities and equity
D Assets, liabilities, income and expenses

A

C Assets, liabilities and equity

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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

If the current cost measurement basis is used, assets are measured at:
A Replacement cost
B The amount paid to acquire them
C The amount which could be obtained by selling them
D Present value

A

A Replacement cost

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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’s financial statements provide comparative figures for the previous five accounting periods. If the entity accounts for an item retrospectively, then:
A Comparative figures for the previous five accounting periods are not restated in any circumstances
B Comparative figures for all of the previous five accounting periods may need to be restated
C Comparative figures are restated for the prior accounting period but never for the four previous accounting periods
D The entity may choose whether or not to restate comparative figures

A

B Comparative figures for all of the previous five accounting periods may need to be restated

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13
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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14
Q

The “carrying amount” of an item of property, plant and equipment generally refers to:
A The cost of the item
B The replacement cost of the item
C The depreciable amount of the item
D The amount at which the item is recognised in the financial statements

A

D The amount at which the item is recognised in the financial statements

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15
Q 
Which of the following would not be included in the cost of an item of property, plant and equipment?		
A	Delivery and installation charges	
B	Testing costs	
C	Refundable value added tax	
D	Site preparation costs
A

C Refundable value added tax

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16
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

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17
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

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18
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

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19
Q

The revaluation model cannot be used for the measurement of an intangible asset unless:
A The asset is revalued every year
B The fair value of the asset is determined by a professional valuer
C There is an active market in that type of asset
D The revaluation model is also used for tangible assets

A

C There is an active market in that type of asset

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20
Q

The amortisation method used in relation to an intangible asset should be chosen so as to:
A Write off the asset as soon as possible
B Reflect the usage pattern of the asset
C Evenly spread the cost of the asset over its useful life
D Maximise the amortisation charge in the early years of the asset’s useful life

A

B Reflect the usage pattern of the asset

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21
Q

International standard IFRS3 states that goodwill acquired in a business combination is:
A An asset which arises from the acquired entity’s good reputation
B An asset which arises from the acquired entity’s strong customer relationships
C An asset which arises from assets acquired in the business combination that are individually identified
D An asset which arises from assets acquired in the business combination that are not individually identified

A

D An asset which arises from assets acquired in the business combination that are not individually identified

22
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

23
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

24
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

25
Q 
An asset's carrying amount is £25,000. Its fair value less costs to sell is £15,000 and its value in use is £19,000. There is an impairment loss of:	
A	£10,000
B	£6,000
C	£4,000
D	£nil
A

B £6,000

26
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

27
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

28
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

29
Q

Assuming that the total finance charge is allocated to accounting periods using the actuarial method, calculate the liability to the lessor at 31 December 2011 and show how this should be split between current and non-current liabilities.
A Total £34,747, Non-current £18,121, Current £16,626
B Total £34,747, Non-current £16,626, Current £18,121
C Total £32,970, Non-current £16,485, Current £16,485
D Total £34,747, Non-current £14,994, Current £19,753

A

A Total £34,747, Non-current £18,121, Current £16,626

30
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

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 
The cost formulas permitted by IAS2 are:	
A	FIFO and LIFO
B	FIFO and AVCO
C	LIFO and AVCO
D	FIFO, LIFO and AVCO
A

B FIFO and AVCO

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

International standard IAS37 defines a provision as:
A A liability which is legally enforceable
B A liability which is not legally enforceable
C A liability of uncertain timing or amount
D A reduction in the carrying amount of an asset

A

C A liability of uncertain timing or amount

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

Which of the following is not a condition which must be satisfied before revenue arising from a sale of goods may be recognised?
A The seller has transferred the significant risks and rewards of ownership to the buyer
B The seller no longer has effective control over the goods concerned
C It is certain that the economic benefits associated with the transaction will flow to the seller
D The costs incurred in respect of the transaction can be measured reliably

A

C It is certain that the economic benefits associated with the transaction will flow to the seller

39
Q

Which of the following is a condition which must be satisfied before revenue arising from the rendering of services may be recognised?
A The amount of revenue can be measured reliably
B It is certain that the economic benefits associated with the transaction will flow to the seller
C The sales transaction is 100% complete at the end of the reporting period
D The costs incurred in respect of the transaction can be measured with certainty

A

A The amount of revenue can be measured reliably

40
Q

Current tax should be measured using tax rates and tax laws that:
A Have been enacted by the end of the reporting period
B Have been enacted by the date that the financial statements are authorised for issue
C Have been enacted or substantively enacted by the end of the reporting period
D Have been enacted or substantively enacted by the date that the financial statements are authorised for issue

A

C Have been enacted or substantively enacted by the end of the reporting period

41
Q

Deferred tax should be accounted for in relation to certain differences between taxable profit and accounting profit. The differences which require an entity to account for deferred tax are:
A Temporary differences
B Permanent differences
C Both temporary differences and permanent differences
D Neither temporary differences nor permanent differences

A

A Temporary differences

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 
If cash flows from operating activities are reported using the direct method, the statement of cash flows does not show:	
A	Cash received from customers
B	Depreciation charges
C	Cash paid to suppliers
D	Cash paid to employees
A

B Depreciation charges

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 has inventory of £7m at the start of an accounting period and £8m at the end of the period. Sales for the period are £60m and the gross profit is £15m. The inventory holding period is:	
A	46 days
B	61 days
C	49 days
D	65 days
A

B 61 days

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

D 22 days and 84 days

49
Q 
A company's profit after tax for the year to 30 June 2012 was £1m. The company's issued share capital at 1 July 2011 consisted of 2,400,000 ordinary shares of 50p each. A further 300,000 shares were issued at full market price on 1 September 2011. Basic EPS for the year is:	
A	75.5p
B	39.2p
C	78.4p
D	37.7p
A

D 37.7p

50
Q

When calculating earnings per share, a bonus issue made during the current accounting period is treated as if it had been made at the beginning of the earliest period for which comparative figures are presented. True or False?
A TRUE
B FALSE

A

A TRUE

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