MCQ Review 5

Question 1

Tell me the calculation of a gain or loss from bonds extingishment

Answer 1

1. The excess of the net carrying amount of the bonds over the re-acquisition price is a gain from extinguishment.
2. When bond face amount is $600,000, and unamotized balance is $65,000, then the carrying amount is $665,000
3. Bonds reacquired at 102, therefore $612,000- this is re-acquisition cost.
4. Gain is calculated : Bonds carrying amount ($665,000)- Bonds called ($612,000)= $53,000

Question 2

Depreciable base

Answer 2

1. The depreciable base equals historical cost minus salvage value
2. The historical cost is the price at which the new owners bought the equipment

Question 3

Where do you recognize revaluation surplus under IFRS?

Answer 3

in OCI

revaluation reduction is recognized in P&L

Question 4

Under IFRS, When the company is allowed the derecognition of a financial asset?

Answer 4

A financial asset is derecognized if the rights to its cash flows have expired

Question 5

How is reclassified long-lived asset measured? (classified held for sale to classified held and use)

Answer 5

A reclassified long-lived asset is measured individually at the lower of

1. carrying amount before the asset was classified as held for sale minus any depreciation (amortization) that would have been recognized if it had always been classified as held and used OR,
2. FV at the date of the decision not to sell

Question 6

In computing diluted earnings per share (DEPS), the equivalent number of shares of convertible preferred stock is added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is preferred as to dividends, which amount should be added as an adjustment to the numerator (earnings available to common shareholders)?

Answer 6

• Annual preferred dividend
• The tax rate is not a consideration. The preferred dividend is paid with after-tax dollars; preferred dividends are not tax deductible

Question 7

How is cash surrender value of officer’s life insurance calculated?

Answer 7

cash surrender value is the loan value or surrender value of a whole-life insurance policy. It is equal to the difference the premiums paid and the life insurance expense recognized.

Question 8

Fundamental Qualitative Characteristics?

Answer 8

• Relevance : To be relevant, financial information must have predictive value and/or confirming value, and must be material
• Faithful : Faithful representation requires completeness, neutrality, and freedom from error

Question 9

Enhancing Qualitative Characteristics?

Answer 9

Comparability, Verifiability, Timeliness, Understandability

Question 10

The Weighted average for the year inventory cost flow method is applicable to what method?

Answer 10

• The weighted-average method determines an average cost only once (at the end of the period) and is therefore applicable only to a periodic system
• In contrast, the moving-average method requires determination of a new weighted-average cost after each purchase and thus applies only to a perpetual system.