QB Questions

Question 1

If there is an opening credit balance on tax payable, is this indicative of an over provision or under provision from prior year?

Answer 1

Over provision

Question 2

True or false:

A discontinued operation must have been disposed of by the end of the reporting period

Answer 2

False

Question 3

True or false:

A discontinued operation must be a separate major line of business or geographical area of operation

Answer 3

True

Question 4

True or false:

A discontinued operation must be clearly distinguished operationally and for financial reporting purposes

Answer 4

True

Question 5

Does the following classify as a discontinued operation?:

A UK division whose operations are being terminated and transferred to another UK division producing the same product

Answer 5

Could be a discontinued operation as a geographical area of operations is being sold

Question 6

Does the following classify as a discontinued operation?:

A division which is the sole operator in South America has its business being sold externally to the group

Answer 6

Not a discontinued operation as a a separate line of business is not being terminated- production is shifting from one division to another

Question 7

Does the following classify as a discontinued operation?:

Activity W (part of division Z) has its operations closed down. W’s results have not been reported separately

Answer 7

Not discontinued as it cannot be separately distinguished for financial reporting purposes

Question 8

If there is additional depreciation arising from a revaluation, is this added or deducted to retained earnings?

Answer 8

Added

Question 9

Does the following classify as a related party relationship?

Albert plc and James plc each have a board containing five directors, four of whom are common. There are no common shareholdings

Answer 9

Yes; together, there is a clear majority of the board, and they can control both of them

Question 10

Does the following classify as a related party relationship?

James plc has two associated companies, Hector Ltd and Frances Ltd

Answer 10

James plc had significant influence but not control. Hector ltd and Frances ltd would not normally be regarded as related parties of each other

Question 11

Does the following classify as a related party relationship?

Giprock ltd controls Jasper plc. Giprock ltd also exerts influence over Kendal plc

Answer 11

Kendal plc is an associate of Giprock ltd and Jasper plc is a member of the Giprock Group, so Kendal plc and Jasper plc are related parties per IAS 24.9

Question 12

Should stamp duty be capitalised as part of the cost of a PPE asset, per IAS 16?

Answer 12

Yes

Question 13

If given two loans of different rates and asked to calculate capitalised borrowing costs, how should the loans be treated?

Answer 13

Use a weighted average

Question 14

True or false

Each significant part of an item of PPE must be depreciated separately

Answer 14

True

Question 15

Information is a _______ ______ of the performance and position of the entity if it sis complete, neutral and free from error

Answer 15

Faithful representation

Question 16

In accordance with IAS38, how should the following type of expenditure be treated in the financial statements:

Tangible assets acquired in order to provide additional secure facilities for research and development activities

Answer 16

Capitalised under IAS16

Question 17

In accordance with IAS38, how should the following type of expenditure be treated in the financial statements:

Legal costs in connection with the registration of a patent

Answer 17

Capitalise as part of the cost of an internally generated intangible

Question 18

In accordance with IAS38, how should the following type of expenditure be treated in the financial statements:

Salaries of personnel solely engaged in finalising a new product

Answer 18

Capitalised as part of the cost of an internally generated intangible

Question 19

In accordance with IAS38, how should the following type of expenditure be treated in the financial statements:

Costs of searching for possible alternative products

Answer 19

Written off to PL as research expenditure

Question 20

Would the following be included in the cost of finished goods inventories?

Expenses paid to the firm’s lorry-drivers for transporting parts from the distribution centres to customers

Answer 20

No

Question 21

Depreciation is charged based on the shorter of lease term and ______ life

Answer 21

Useful

Question 22

Right-of-use asset relating to rights retained equation: the initial measurement of a right-of-use asset in respect of a sale and leaseback transaction is as follows:

Right-of-use asset = carrying amount * PVFLP / ____

Answer 22

FV

Question 23

Information is _______ if it can influence the economic decisions of users. This is achieved if the information has a confirmatory or _____ value (or both).

Answer 23

Relevant, predictive

Question 24

How does IFRS 16 requiring a separate disclosure for right-of-use assets aid understandability of financial statements?

Answer 24

Because it clearly distinguishes them from owned assets

Question 25

For a contract to constitute a lease, the contract must cover a defined period of ______, or be based upon the production of the asset, such as the number of units produced

Answer 25

Time

Question 26

Where are equity dividends recognised?

Answer 26

In the statement of changes in equity

Question 27

True or false

Equity dividends declared after the year-end are a liability at the end of the reporting year so are recognised

Answer 27

False

Question 28

True or false

Dividends on redeemable preference shares are classed as a liability and are recognised in the profit and loss as a finance cost

Answer 28

True

Question 29

Show the journal entry for the following:

100,000 of equity shares are reacquainted at a price of £2.15 per share

Answer 29

DR Treasury shares: 215,000

CR cash: 215,000

Question 30

A customer in a foreign country is experiencing cash flow problems. Their currency has weakened against yours.

For the loans you have given them, what two primary risks are there?

Answer 30

1. Credit risk (the risk that the entities whom it has advanced a loan will be unable to repay the money)
2. Market risk (the risk of an exchange loss on the transaction, for here)