Business Accounting
Final Test Solutions
Course Introduction
Business Accounting provides an essential introduction to the principles and practices of accounting within a business context. The course covers core topics such as the preparation and interpretation of financial statements, the accounting cycle, and the use of accounting information in decision-making. Students will learn how to analyze transactions, manage budgets, and understand the regulatory environment affecting financial reporting. Emphasis is placed on developing practical skills in bookkeeping, understanding the ethical considerations in accounting, and applying accounting concepts to real-world business scenarios. This foundation equips students with the knowledge necessary to contribute to effective financial management and planning in any organizational setting.
Recommended Textbook
Australian Financial Accounting 6e by Craig Deegan
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Page 2
Chapter 1: An Overview of the Australian External Reporting Environment
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Sample Questions
Q1) The Corporations Act is very specific about what must,and must not,be included in the Directors' Report attached to a company's financial statements:
A)True
B)False
Answer: False
Q2) Section 296 of The Corporations Act requires (all or in part):
A) The AASB to follow the broad strategic direction determined by the FRC.
B) The directors to make a declaration stating whether, in their opinion, the financial statements comply with accounting standards.
C) The AASB to develop a conceptual framework, not having the force of an accounting standard, for the purpose of evaluating accounting standards and international standards.
D) A company's directors to ensure that the company's financial statements for a financial year comply with accounting standards.
E) None of the given answers.
Answer: D
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Chapter 2: The Conceptual Framework of Accounting and Its Relevance
to Financ
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Sample Questions
Q1) SAC 2 (Objectives of General Purpose Financial Reporting)requires that general-purpose financial reports disclose information that is:
A)Relevant to the assessment of profit,funding and investing,and compliance.
B)Relevant to the assessment of financial and social performance,financial position and funding and investing and includes information about compliance.
C)Relevant to the assessment of performance,financial position and funding and investing,including information about compliance.
D)Relevant to the assessment of performance,financial position and cash flows.
E)None of the given answers.
Answer: C
Q2) The IASB and US FASB are jointly developing a common conceptual framework because this is necessary for the Convergence Project which aims to converge two sets of accounting standards.
A)True
B)False
Answer: True
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4
Chapter 3: Theories of Financial Accounting
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Sample Questions
Q1) Under the efficiency perspective of PAT,where regulation bans an accounting method being used by a particular organisation:
A) This will lead to lower monitoring costs because management does not have as wide a range of methods to choose from.
B) This will lead to more useful reporting of performance because principals will be able to compare reports between different organisations.
C) This will lead to inefficiencies, as the financial statements will no longer provide the best reflection of the performance of the organisation.
D) This decreases the chance that agents will undertake opportunistic behaviour to provide principals with creative accounts.
E) None of the given Answers.
Answer: C
Q2) Fair value accounting is an example of positive accounting theory.
A)True
B)False
Answer: False
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Chapter 4: An Overview of Accounting for Assets
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Sample Questions
Q1) The AASB Framework allows use of different measurement basis for similar assets as long as this is disclosed in the summary of accounting policies adopted in the notes to the accounts.
A)True
B)False
Q2) Which of the following are considered to be an asset:
A) Deposit on a futures contract
B) Asset under finance lease
C) Deferred acquisition costs
D) All of the given answers.
E) Deposit on a futures contract and asset under finance lease.
Q3) Under AASB 101 the classification of assets into current and non-current will depend on the entity's:
A) average operating cycle.
B) current accounting period.
C) ordinary course of business
D) normal operating cycle.
E) 12 month cycle.
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6
Chapter 5: Depreciation of Property, plant and Equipment
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Q1) Depreciation represents a decline in the market value of an asset over its life:
A)True
B)False
Q2) AASB 116 requires disclosure of a reconciliation of the carrying amount at the beginning and end of the period for depreciable assets.This reconciliation includes:
A) Additions and Disposals.
B) Impairment gains recognised in the balance sheet.
C) Depreciation.
D) Additions and Disposals and Depreciation.
E) All of the given answers.
Q3) Depreciation functions as an allocation process of cash outflows where economic benefits are expected to arise over several accounting periods and the association with income can only be broadly or indirectly determined.
A)True
B)False
Q4) Assets must be depreciated from the time they are acquired
A)True
B)False
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7
Chapter 6: Revaluation and Impairment Testing of
Non-Current Assets
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Q1) Positive accounting theory suggests that the revalution model is income increasing because the credit is asset revaluation reserve:
A)True B)False
Q2) The revaluation model is a tool used by managers to reduce political costs. A)True B)False
Q3) By permitting some classes of assets to be valued at cost and others at fair value the AASB has:
A) Removed any confusion regarding the total balance of non-current assets.
B) Forced entities to accurately reflect their true financial position at any point in time.
C) Created a situation where the total asset figure may be a combination of cost and fair value assessments, reducing its meaningfulness.
D) Removed the opportunity for managers to act in their own self-interest as suggested by Positive Accounting Theory.
E) None of the given answers.
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8
Chapter 7: Inventory
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Q1) Consistent with positive accounting theory,an entity close to breaching their debt covenant will:
A) prefer LIFO method over FIFO method.
B) prefer FIFO method over LIFO method.
C) prefer weighted average method over FIFO method.
D) prefer moving average method over FIFO method.
E) None of the given answers.
Q2) The cost-flow assumption selected for inventory costing purposes should always reflect the physical flow of goods out of inventory:
A)True
B)False
Q3) FIFO method is an income decreasing inventory cost flow method in periods of rising prices.
A)True
B)False
Q4) The only difference between the old AASB 1019 and the new AASB 102 is that the 'international' standards allow inventory to be valued using LIFO:
A)True
B)False
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Chapter 8: Accounting for Intangibles
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Sample Questions
Q1) The approach to accounting for intangibles raises some issues because:
A) Assets are now subject to impairment testing, which will remove the professional judgement required for amortisation.
B) Consistency has now been achieved regarding research and development meaning entities cannot claim to have expended resources on potential benefits while other entities could not.
C) Many intangible assets will not be recognised under this approach, particularly in regard to internally generated assets.
D) Intangible assets are more likely to be recorded at fair values because of the active market criteria, which may overstate asset values.
E) None of the given answers.
Q2) In accordance with AASB 136 "Impairment of Assets" what should be the carrying amount of equipment as at 30 June 2012?
A) $0
B) $100,000
C) $150,000
D) $190,000
E) None of the given answers.
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10
Chapter 9: Accounting for Heritage Assets and Biological Assets
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Q1) What is the accounting treatment for a non-living product of a biological asset in accordance with AASB 141 "Agriculture"?
A) They are to be treated the same as all other biological assets and are to be valued accordingly.
B) They shall be measured at fair value less point-of-sale costs at the point of harvest and thereafter be covered by AASB 102 "Inventory".
C) They become a special category of biological assets that should be valued at the lower of cost or market value until sold.
D) They are no longer biological assets but are to be treated as current or non-current assets as appropriate, based on management's intention for the product.
E) None of the given answers.
Q2) Research has indicated that in general large arts institutions in the English-speaking world value their collections as assets and report them in their financial statements: A)True B)False
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11
Chapter 10: An Overview of Accounting for Liabilities
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Q1) If the entity is offering a higher interest rate on debentures than the market believes is appropriate,the market will:
A) Be prepared to pay more than the par value of the debentures, offering a discount.
B) Be prepared to pay less than the par value of the debentures, offering a discount.
C) Be prepared to pay more than the par value of the debentures, offering a premium.
D) Be prepared to pay less than the par value of the debentures, offering a premium.
E) None of the given answers.
Q2) Some researchers have found that firms can benefit from being in financial distress: A)True B)False
Q3) A discount on debentures issued arises when the market required rate of return is less than the coupon rate:
A)True B)False
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12
Chapter 11: Accounting for Lease
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Sample Questions
Q1) The rental payments made during the term of a finance lease.
A) Are reductions of the lease liability that should be debited to the liability account.
B) Are an expense that should be recognised in the annual income statements.
C) Need to be divided into an interest component and an expense component. The expense effectively shows the amortisation of the lease asset.
D) Should be considered as a payment of principal (reduction in the lease liability) and interest (an annual expense).
E) None of the given answers.
Q2) In a lease arrangement that is classified by the lessee as an operating the lease payment should be:
A) allocated between depreciation expense and interest expense.
B) allocated between the reduction of liability for leased assets and interest expense
C) recognised as rental expense.
D) recognised as interest expense.
E) recognised as depreciation expense.
Q3) Describe 'lease incentives' and how they should be accounting according to AASB 117.
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13
Chapter 12: Set-Off and Extinguishment of Debt
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Sample Questions
Q1) A financial asset is:
A) Cash.
B) A contractual right to exchange financial assets and financial liabilities with another entity under conditions that are potentially favourable to the entity.
C) A contractual right to exchange financial assets and financial liabilities with another entity under conditions that are potentially unfavourable to the entity.
D) Cash and a contractual right to exchange financial assets and financial liabilities with another entity under conditions that are potentially favourable to the entity.
E) Cash and a contractual right to exchange financial assets and financial liabilities with another entity under conditions that are potentially unfavourable to the entity.
Q2) AASB 132 "Financial Instruments: Presentation" supports a substance over from approach in the accounting treatment for Insubstance Debt Defeasance (ISDD).
A)True
B)False
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14
Chapter 13: Accounting for Employee Benefits
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Sample Questions
Q1) The amount represented as a current liability,'Provision for Long-Service Leave' generally represents:
A) The amount to be expensed as long-service leave expense in the next 12 months.
B) The amount of long-service that has been provided for, for all employees of the entity.
C) The amount of long-service leave remaining to be taken by staff.
D) The amount of long-service leave that is expected to be taken in the 12 months following balance date.
E) None of the given answers.
Q2) Employees generally receive superannuation entitlements as part of their employment agreements.Thus usually involves the employer transferring funds to an independent superannuation fund that is administered by an independent trustee:
A)True
B)False
Q3) Non-vesting sick leave that has accumulated will be paid to employees when their employment ceases:
A)True
B)False
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15
Chapter 14: Share Capital and Reserves
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Q1) The Corporations Act 2001 requires that where a company redeems preference shares it must do so out of profits that would otherwise be available for dividends or out of the proceeds of a fresh issue of shares made for the purpose of the redemption:
A)True
B)False
Q2) In recognising accounting errors that were made in prior periods:
A) Any information presented about prior periods, for a period of ten years, is restated.
B) Any information presented about prior periods, including any historical summaries of financial data, is restated as directed by the auditors examining the financial statements.
C) Any information presented about prior periods, including any historical summaries of financial data, is restated as far back as practicable.
D) No information presented about prior periods needs to be restated.
E) Adjustments are made to the current period's income statement.
Q3) A share split is usually funded through retained earnings.
A)True B)False
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Chapter 15: Accounting for Financial Instruments
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Sample Questions
Q1) Derivatives are sometimes called "secondary" financial instruments:
A)True
B)False
Q2) In a convertible note,the embedded option to convert the liability into the equity of the issuer has a fair value of zero on initial recognition when the option is out of the money.
A)True
B)False
Q3) A change in classification of a financial instrument may occur as a result of "revised probabilities" of,for example,conversion:
A)True
B)False
Q4) Which of the following are examples of derivative financial instruments?
A. Deferred tax and future income tax benefits.
B. Mortgage loans.
C. Participating, redeemable preference shares.
D. Share options.
E. None of the given answers.
A)True
B)False
Page 17
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Chapter 16: Revenue Recognition Issues
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Sample Questions
Q1) Transactions such as the purchase of assets or the issuance of debt are not considered income because:
A) they involve external parties.
B) they necessarily involve cash.
C) they do not result in an increase in equity.
D) they both result in an increase of the asset or liability concerned.
E) they both result in a reduction of leverage.
Q2) When it is probable that total contract costs will exceed total contract revenue,the expected loss should not be recognised as an expense until the future economic sacrifice eventuates.
A)True
B)False
Q3) If the borrower prepays interest,the inflow of future economic benefits represented by the prepayment would not constitute an item of revenue to the lender because the lender has a present obligation to the borrower to provide finance for the period to which the prepayment relates.
A)True
B)False
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18
Chapter 17: The Statement of Comprehensive Income and
Statement of Changes in E
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Sample Questions
Q1) AASB 118 'Revenue' requires a number of disclosures,including information about:
A) Rents, interest, royalties and dividends.
B) Accounting policies adopted for the recognition of revenues.
C) Methods adopted to determine the stage of completion of contracts involving the rendering of services.
D) All of the given answers.
E) None of the given answers.
Q2) Total comprehensive income for the year is profit for the year plus comprehensive income.
A)True
B)False
Q3) By focusing only on the income statement,we do not obtain a full picture of all the gains and losses that may have occurred for an entity during the perioD.
A)True
B)False
Q4) All disclosure requirements that relate to an entity's profit or loss are included in AASB 101:
A)True
B)False
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Chapter 18: Accounting for Share-Based Payments
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Q1) In a cash-settled share-based payment transaction,the entity shall remeasure the fair value of the liability at each reporting date and at the date of settlement,with any changes in fair value recognised in profit or loss for the period.
A)True
B)False
Q2) What is the Employee benefits expense of Liverpool Ltd related to this share option for the year ended 30 June 2012?
A) $19,500
B) $22,750
C) $26,500
D) $70,200
E) None of the given answers
Q3) Where equity instruments are issued with a vesting period,the transactions must be recognised over the vesting period.
A)True
B)False
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Chapter 19: Accounting for Income Taxes
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Q1) A company has received $40,000 for subscription revenue in advance and recorded a liability account 'revenue received in advance'.Revenue is taxed when it is received.The tax rate is 30 per cent.What is the tax base for this item?
A) $0
B) $40,000
C) $12,000
D) $36,000
E) None of the given answers.
Q2) The amount of tax assessed by the Tax Office based on the entity's operations for the period will be reflected in which account?
A) Income tax expense.
B) Deferred income tax.
C) Deferred tax liability.
D) Income tax payable.
E) None of the given answers.
Q3) Profit for taxation purposes is determined in accordance with Australian Accounting Standards,AASB 112:
A)True
B)False
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Page 21
Chapter 20: Cash-Flow Statements
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Sample Questions
Q1) In accordance with AASB 107 "Cash Flow Statements",dividends paid may be classified as an investing or a financing cash flow.
A)True
B)False
Q2) Sharma (1996)suggests that a cash-flow based measure of retained cash flows from operations (RCFFO)may be an important indicator of financial flexibility.How is RCFFO measured?
A) The level of cash retained, calculated by deducting net cash flows from investing from the net cash flows from operations.
B) The level of cash retained after meeting all operating costs and priority payments such as interest costs and dividends.
C) The level of cash retained after meeting all operating costs and deducting or adding as appropriate the cash flows from financing and investing activities.
D) The level of cash retained, calculated by deducting net cash flows from financing from the net cash flows from operations.
E) None of the given answers.
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Chapter 21: Accounting for the Extractive Industries
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Q1) AASB 1022,a predecessor to AASB 6,divides extractive industry operations into five phases.These are:
A) Exploitation, feasibility, establishment, commissioning and manufacturing.
B) Identification, valuation, development, construction and production.
C) Exploration, assessment, research, development and production.
D) Exploration, evaluation, development, construction and production.
E) None of the given answers.
Q2) Where an area of interest contracts in size and subsequently becomes two distinct operations:
A) All costs to date must be apportioned equally between the two new operations.
B) All future costs must be accounted for separately.
C) Only the costs up to and including production should be apportioned between the two sites.
D) Pre-production cost should be accumulated and then apportioned between the two operations based on the size of the new areas of interest.
E) None of the given answers.
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Chapter 22: Accounting for General Insurance Contracts
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Q1) Where an insurer reinsures some or its entire insurance portfolio,AASB 1023 requires that,with respect to the revenue received relating to the reinsured policies and the premiums ceded to the reinsurer:
A) The revenue and premiums be set-off so that the net revenue only is recorded as this reflects the risk borne by the direct insurer.
B) The gross revenue be reflected in the accounts but a provision for reinsurance premiums be created and set-off against the policy revenue.
C) The net amount of premium (gross premium revenue less amounts transferred to the reinsurer) be recognised but a note disclosing both the gross amount of revenue and the premiums transferred to the reinsurer be provided.
D) The full amount of revenue received by the direct insurer be recognised and the portion of the premiums ceded to the reinsurer treated as an expense.
E) None of the given answers.
Q2) Under AASB 1023 general insurers would not record a gain or loss on the disposal of investments:
A)True
B)False
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Page 24
Chapter 23: Accounting for Superannuation Plans
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Q1) For a defined contribution plan and a defined benefit plan,the changes in net market values of the plan's financial liabilities since the beginning of the reporting period shall be included in the profit or loss for the reporting period.
A)True
B)False
Q2) A defined benefit plan is one in which:
A) The contributions by employees are defined in advance and the employers agree to increase their contribution to the fund to compensate for changes in the consumer price index.
B) The benefits to be paid to members on retirement are determined by the performance of the fund over the period of employee membership. This ensures that the member enjoys the benefits of the investments made by the plan.
C) The amounts to be paid to members at normal retirement age are specified or determined, at least in part, by reference to members' years of membership and/or salary levels.
D) The amounts to be contributed by employees are determined by the plan trustees based on members' years of membership and/or salary levels.
E) None of the given answers.
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25
Chapter 24: Events Occurring After Balance Sheet Date
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Q1) Which of the following statements is incorrect with respect to AASB 110 "Events after the reporting date"?
A) An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting date.
B) If an entity declares dividends to holders of equity instruments after the reporting date, the entity shall not recognise those dividends as a liability at the reporting date.
C) An entity may prepare its financial statements on a going concern basis if management determines after the reporting date that it intends to go on voluntary liquidation.
D) An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting date.
E) An entity should disclose by way of a note to the financial statements adjusting events that cannot be quantified.
Q2) Events after reporting date should not be disclosed because the balance sheet is 'as at' a particular date:
A)True B)False
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Chapter 25: Segment Reporting
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Q1) The guidelines to determine that a segment is reportable in accordance with AASB 8 "Operating Segments" includes:
A) The segment's assets are equal to or greater than 10 per cent of the entity's total assets.
B) The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses.
C) The segment's assets are 10 per cent or more of the combined assets of all operating segments.
D) The expenses of the segment that relate to external and internal sales are equal to or greater than 10 per cent of total segment expenses.
E) None of the given answers.
Q2) IAS 8 was issued as part of the ongoing process to converge IAS standards with US Accounting Standards: A)True B)False
Q3) AASB 8 bans the disclosure of segments that do not pass the "10 per cent test". A)True B)False
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Chapter 26: Related-Party Disclosures
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Q1) In order for control to exist as the basis for a related-party disclosure the capacity to control must have been demonstrated as having been exercised in the past:
A)True
B)False
Q2) Which of the following is a not related party within the provisions of AASB 124 "Related Party Disclosures"?
A) Associates
B) Non-executive directors
C) Executive personnel
D) Bankers
E) Subsidiaries
Q3) In order for two parties to be related they must be under the common control or influence of a third party:
A)True
B)False
Q4) An alternate director who is not acting in that capacity is considered a related party in AASB 124.
A)True
B)False
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Chapter 27: Earnings Per Share
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Q1) Awake Ltd has a net income after tax of $5,620,000 for the year ended 30 June 2006.At the beginning of the period Awake Ltd has 1,000,000 fully paid-up ordinary shares on issue.On 1 February 2006 Awake Ltd makes a rights issue of 1 fully paid share for every 4 shares held.The required payment for the rights issue shares was $3.00.The last cum rights price was $3.80.Awake Ltd also has 2,000,000,$1.00,cumulative,7 per cent preference shares on issue for the whole period.The dividends on the preference shares are not treated as expenses in the income statement. What are the basic earnings per share for the period ended 30 June 2005 in accordance with AASB 133?
A) $4.39
B) $4.61
C) $4.97
D) $5.22
E) None of the given answers.
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Chapter 28: Accounting for Group Structures
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Q1) In the consolidated financial statements of the parent entity and its controlled entities only transactions with assets and liabilities relating to parties external to the economic entity will be reflected.
A)True
B)False
Q2) AASB 127 notes that in preparing consolidated financial statements,an entity combines the financial statements of the parent and the subsidiaries line by line by adding together,in proportion to the degree of ownership,like items of assets,liabilities,income and expenses; but not equity balances:
A)True
B)False
Q3) Sullivan (1985)argued that the preparation of group accounts can proceed to the fulfilment of the true and fair notion only when partitioning is fully enforced. A)True
B)False
Q4) A subsidiary is an entity that is controlled by a parent entity:
A)True
B)False
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Chapter 29: Further Consolidation Issues I: Accounting for
Intragroup Transact
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Q1) The level of equity ownership is not a factor in deciding what proportion of a transaction between entities in a group should be eliminated.
A)True
B)False
Q2) Intragroup sales of non-current assets results in the need to eliminate the effect of any profit or loss on sale in the period of the sale and,in the rest of the periods of the asset's life,any tax effects of the profit or loss,the depreciation and accumulated depreciation will have to be adjusted for the life of the asset,along with the tax effects of the adjustment to depreciation:
A)True
B)False
Q3) Intragroup profits are eliminated in consolidation to reduce consolidated profits. A)True
B)False
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Chapter 30: Further Consolidation Issues II: Accounting for Minority Interests
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Q1) Minority interests are allocated on a 'line-by-line' basis throughout the income statement:
A)True
B)False
Q2) Buster Ltd owns 85 per cent of the issued capital of Rhymes Ltd.During the period ended 30 June 2006 the operating profit of Rhymes Ltd was $680,000.Buster Ltd bought goods for $540,000 from Rhymes.The goods cost Rhymes $400,000 and at the end of the period none of this inventory was still on hand.Rhymes paid Buster a management fee of $100,000 during the period.Goodwill on consolidation was impaired by $30,000.Rhymes paid a dividend of $40,000 at the end of the period. What is the minority interest in the operating profit of Rhymes Ltd?
A) $87,000
B) $112,500
C) $102,000
D) $101 969
E) None of the given answers.
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Chapter 31: Further Consolidation Issues III: Accounting for
Indirect Ownershi
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Q1) The order of acquisition of subsidiaries (i.e.,sequential or non-sequential)is of no consequence when it comes to calculating minority interests; they are calculated the same way regardless of the order:
A)True
B)False
Q2) A Ltd owns 85 per cent of the issued capital of B Ltd and B Ltd owns 90 per cent of the issued capital of C Ltd.What is the total outside equity interest in C Ltd?
A) 23.5 per cent
B) 10 per cent
C) 13.5 per cent
D) 15 per cent
E) None of the given answers.
Q3) Non-controlling indirect interests are entitled to receive dividends in a subsidiary. A)True B)False
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Page 33
Chapter 32: Further Consolidation Issues Iv: Accounting for
Changes in the Deg
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Q1) Which of the following is not a reason for a parent to lose control of a subsidiary?
A) Where the subsidiary issues additional shares to parties other than the parent
B) Where the subsidiary issues bonus shares on a pro-rata basis.
C) When the parent makes a decision to sell its controlling interest in the subsidiary to another party.
D) Where the subsidiary issues additional shares to parties other than the parent.
E) The subsidiary becoming subject to the control of a government regulator.
Q2) When additional shares in a subsidiary are acquired,AASB 3 requires each acquisition to be accounted for separately: A)True
B)False
Q3) In calculating the profit or loss on the sale of shares in a controlled entity that is to be included in the group accounts,consideration should be given to the share of post-acquisition profits and movements in reserves that have been recognised. A)True B)False
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Chapter 33: Accounting for Equity Investments
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Q1) AASB 128 notes that in the absence of evidence to the contrary,significant influence would normally exist where an investor holds:
A) directly 20 per cent or more of the shares of another entity.
B) directly 20 per cent or less of the voting power of another entity.
C) directly 20 per cent or more of the total equity and debt on issue of another entity.
D) directly, or indirectly, 20 per cent or more of the shares of another entity.
E) None of the given answers.
Q2) Key difference(s)between the cost method and the equity method of accounting for investments include that under the equity methoD.
A) The investment is not initially recorded at cost in the investor's accounts.
B) Dividends from pre-acquisition profits are treated as revenue in the investor's accounts.
C) The investment is retained at cost in the consolidated accounts.
D) Changes in the fair value of the investment are recognised and deferred to an asset revaluation reserve.
E) None of the given answers.
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35
Chapter 33: Accounting for Equity Investments
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Q1) AASB 131 provides guidelines on accounting for an interest in a partnership that has been established either as a joint venture or as a business activity with a view to a profit by the partners:
A)True
B)False
Q2) A partnership can never be a jointly controlled entity: A)True B)False
Q3) The accounting treatment for jointly controlled assets is very similar to that for jointly controlled entities:
A)True
B)False
Q4) AASB 131 "Interests in Joint Ventures" prescribes disclosure by venturers of each category of asset and liability contributed to the jointly controlled operations. A)True B)False
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Page 36
Chapter 35: Accounting for Foreign Currency Transactions
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Q1) Common examples of qualifying assets are assets that result from development and construction activities in:
A) Agriculture; power generation facilities; investment property.
B) Extractive industries; general insurance; investment property.
C) Agriculture; general insurance; investment property.
D) Extractive industries; power generation facilities; investment property.
E) Extractive industries; power generation facilities; agriculture.
Q2) AASB 121 requires foreign currency transactions to be recorded,on initial recognition in the presentation currency,by applying to the foreign currency amount the spot exchange rate between the presentation currency and the foreign currency at the date of the transaction.
A)True
B)False
Q3) AASB 123 Borrowing Costs defines a qualifying asset as an asset that:
A) takes a period of greater than twelve months to get ready for its intended use or sale.
B) takes a substantial period of time to get ready for its intended use or sale.
C) takes a period of greater than twelve months to complete.
D) takes a substantial period of time to complete.
E) is specified as "qualifying" under the Corporations Act.
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Page 37
Chapter 36: Translation of the Accounts of Foreign Operations
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Q1) 'Exchange rate' is:
A) Not defined in AASB 121.
B) Only defined in AASB 139.
C) Defined as 'the ratio of exchange for two currencies' in AASB 121.
D) All of the given answers.
E) None of the given answers.
Q2) The translation approach required by AASB 121 in translating to presentation currency is similar to the "current rate" method required under the former AASB 1012:
A)True
B)False
Q3) As prescribed in AASB 121,when re-measuring financial statements of foreign operations to functional currency,which of the following identifies all items to be re-measured at historic rates?
A) Cash, inventory and accounts receivable;
B) Payables, long-term loan and unearned revenue;
C) Inventory, goodwill, property plant and equipment;
D) Accounts receivable, accounts payable and accrued expenses;
E) None of the given answers
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Chapter 37: Accounting for Corporate Social Responsibility
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Q1) The Minerals Council of Australia has created a Code for Environmental Management that addresses the environmental performance and public accountability of signatories.Reasons suggested for the Council's proactive approach to developing the Code include:
A) It was a means for the Council to enhance its position within the industry and potentially raise the fees it charges to members.
B) It was a means of preventing or delaying the imposition of mandatory requirements by governmental bodies.
C) It was a means of maintaining the perceived legitimacy of the industry in the face of public concerns over its environmental performance.
D) It was a means of preventing or delaying the imposition of mandatory requirements by governmental bodies and it was a means of maintaining the perceived legitimacy of the industry in the face of public concerns over its environmental performance.
E) All of the given answers.
Q2) A Sustainability Report is an example of a stand-alone social report.
A)True
B)False
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