Financial Accounting
Final Exam
Course Introduction
Financial Accounting introduces students to the principles, techniques, and concepts underlying the preparation and interpretation of financial statements. The course covers the accounting cycle, including journal entries, ledgers, trial balances, and the creation of balance sheets, income statements, and cash flow statements in accordance with generally accepted accounting principles (GAAP). Students will learn how financial information is used by stakeholders such as investors, creditors, and managers to make informed business decisions. Topics also include the measurement and reporting of assets, liabilities, equity, revenues, and expenses, as well as an overview of ethical issues in accounting and the impact of regulatory environments.
Recommended Textbook
Australian Financial Accounting 7th Edition by Craig Deegan
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Chapter 1: An Overview of the Australian External Reporting Environment
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Q1) A recent noteworthy development in relation to Australian Stock Exchange (ASX)-required disclosures is the establishment of the ASX Corporate Governance Council,and the issue of Principles of Good Corporate Governance and Best Practice Recommendations.In relation to these principles:
A) All companies governed by the Corporations Act 2001 must abide by these principles and recommendations.
B) The Australian Accounting Standards Board (AASB) has incorporated the principles and recommendations into the Accounting Framework.
C) All ASX-listed companies are compelled by law to comply in entirety with these principles and recommendations.
D) All ASX-listed companies must follow these principles and recommendations, and where they have not, they must identify the fact that they have not and give reasons for not following them.
Answer: D
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Chapter 2: The Conceptual Framework of Accounting and Its Relevance to Financial Reporting
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Q1) Which of the following is/are characteristics of 'comparability'?
A) Users must be able to compare the financial reports of an entity with the financial reports of a shareholder.
B) Users must be able to compare the current financial reports with prior period financial reports of an entity.
C) Users must be able to compare the financial reports of an entity with the financial reports of another entity.
D) Users must be able to compare the current financial reports with prior period financial reports of an entity and users must be able to compare the financial reports of an entity with the financial reports of another entity.
Answer: D
Q2) Identify which qualitative characteristic of financial reports is best described in each item below:
A) relevance, comparability, timeliness
B) faithful representation, consistency, understandability
C) faithful representation, comparability, timeliness
D) relevance, understandability, comparability
Answer: C
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Chapter 3: Theories of Accounting
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Q1) Creative accounting violates IFRS standards and generally accepted accounting principles.
A)True
B)False
Answer: False
Q2) The efficiency perspective in PAT research considers:
A) the cost of risk capital ex ante-before the provision of additional accounting information to reduce risk through monitoring.
B) what mechanisms are put in place 'up-front' with the objective of minimising future agency costs
C) the interaction of many investors in the market for corporate shares to generate efficient prices.
D) the lowest cost method of establishing which accounting methods are best for particular enterprises.
Answer: B
Q3) Fair value accounting is an example of positive accounting theory.
A)True
B)False
Answer: False
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Page 5
Chapter 4: An Overview of Accounting for Assets
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Q1) Which of the following items are required to calculate 'value in use' of an asset?
A) exit and entry prices
B) purchase price and cost of disposal
C) estimated net future cash flows and appropriate discount rate
D) estimated net future cash flows
Q2) Which of the following measurement bases are acceptable for property,plant and equipment?
A) historical cost
B) revaluation model
C) fair value model
D) historical cost and revaluation model
Q3) Recoverable amount of an asset is defined in AASB 136 as the higher of its fair value less costs to sell and its value in use.In the case where an asset's carrying amount is less than its recoverable amount,which action is consistent with AASB 136?
A) recognise difference as increase is asset revaluation reserve
B) recognise difference as impairment loss
C) recognise difference as gain from reinstatement of asset
D) leave asset at its carrying amount
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Chapter 5: Depreciation of Property, plant and Equipment
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Q1) Tantrax Ltd has just purchased a piece of equipment for $45 000.It is expected to operate at its normal output level for 20 years,but the product it is used to manufacture is expected to be marketable only for the next 13 years.The expected salvage values are $5000 after 20 years and $8000 after 13 years.The equipment is expected to generate output consistently over its life.What depreciation should be charged in each of the first three years of the equipment's life?
A) Year 1: $2846.15, Year 2: $2846.15, Year 3: $2846.15
B) Year 1: $5285.71, Year 2: $4879.12, Year 3: $4472.53
C) Year 1: $3461.54, Year 2: $3461.54, Year 3: $3461.54
D) Year 1: $1850, Year 2: $1850, Year 3: $1850
Q2) The expenditure to modify an asset so that its service potential is improved should be expensed.
A)True
B)False
Q3) The depreciation rate and useful lives of assets should not be revised during the depreciable life of the asset.
A)True
B)False
Q4) Discuss how the useful life of a depreciable asset is determined.
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Chapter 6: Revaluations and Impairment Testing of
Non-Current Assets
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Q1) Purple Co Ltd purchased an item of land 3 years ago at a cost of $700 000.Two years ago the recoverable value of the land was considered to be $550 000.In the current period the land is revalued and the fair value is now $750 000.What is the treatment of the change in value in each of the periods?
A) Two years ago: a loss of $150 000 is recognised. The current period: a gain of $150 000 and an increase in the asset revaluation reserve of $50 000 is recognised.
B) Two years ago: $150 000 is debited to the asset revaluation reserve. The current period: $200 000 is credited to the asset revaluation reserve.
C) Two years ago: $150 000 is expensed in the period. The current period: $200 000 is transferred to the asset revaluation reserve.
D) Two years ago: $150 000 is written off to the asset revaluation reserve. The current period: $200 000 revenue is recognised.
Q2) What is the rationale for revaluing the entire class of assets when an item of property,plant and equipment is revalued?
Q3) Differentiate depreciation expense from impairment loss.
Q4) Discuss the process for the reversal of revaluation decrements and increments.
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Page 8
Chapter 7: Inventory
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Q1) The periodic inventory system operates by:
A) keeping track of inventory as it comes into the organisation and as it leaves.
B) counting inventory at regular intervals to establish how much of each item is on hand.
C) assuming that the inventory that came in first is the first to be sold.
D) tracking the cost of specific items of inventory to the products sold by grouping items according to cost drivers.
Q2) AASB 102 requires that the specific identification method of assigning cost to items of inventory be applied:
A) wherever possible in order to achieve the most accurate cost figure.
B) to items of inventory that are ordinarily interchangeable or identical and have significant individual dollar value.
C) wherever items are separately identifiable and of significant individual dollar value.
D) to items of inventory that are not ordinarily interchangeable or are produced and segregated for specific projects.
Q3) Discuss when a standard cost may be used to arrive at the cost of inventory.
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Chapter 8: Accounting for Intangibles
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Q1) Discuss the benefits of subjecting goodwill to impairment testing as opposed to amortisation.In your answer,consider the relevance and faithfully represented qualitative characteristics of financial information.
Q2) Continuously Contemporary Accounting (CoCoA)emphasises an entity's ability to adapt.Therefore goodwill is considered an important asset in this model.
A)True
B)False
Q3) During 2001 the Financial Accounting Standards Board in the United States indicated they would look to change a requirement for the treatment of goodwill.That change is:
A) to remove the requirement to amortise goodwill and replace it with a requirement to write down goodwill to reflect any impairment in value.
B) to allow the recognition of internally generated goodwill.
C) to extend the period over which goodwill may be amortised.
D) to allow the inverted sum-of-digits method of amortisation.
Q4) Where a revaluation occurs,it is to be to the fair value of the asset.
A)True
B)False
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Chapter 9: Accounting for Heritage Assets and Biological Assets
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Q1) Biological assets are defined in AASB 141 as a 'living animal or plant'.
A)True
B)False
Q2) AASB 141 states that where no active market exists fair value may be determined by:
A) the most recent market transaction price, irrespective of any changes to economic conditions.
B) market prices for similar assets without adjustments to reflect differences.
C) sector benchmarks expressed in relevant units for that type of asset.
D) using net present values calculated at the current-market determined post-tax rate.
Q3) AASB 101 requires heritage assets to be disclosed separately on the statement of financial position.
A)True
B)False
Q4) Biological assets have a natural capacity to grow and/or procreate that directly affects the value of the asset.
A)True
B)False
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Chapter 10: An Overview of Accounting for Liabilities
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Q1) The market will only pay a premium for debentures if the par value of those debentures is lower than the market interest rate.
A)True
B)False
Q2) Tissues and Co has elected to issue preference shares to the value of $220 000.Prior to the share issue the company has assets of $780 000,liabilities of $370 000 and equity recorded at $410 000.The terms of the share issue state that these shares are non-redeemable but a guaranteed cumulative dividend of 8% of share value is payable.Calculate the debt-to-asset ratio immediately before and after the share issue.
A) before-47.4%; after - 47.4%
B) before-47.4%; after - 37%
C) before-52.6%; after - 63%
D) before-47.4%; after - 59%
Q3) A discount on debentures issued arises when the market required rate of return is less than the coupon rate.
A)True
B)False
Q4) Discuss the criteria required to classify a liability as current.
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Page 12
Chapter 11: Accounting for Leases
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Q1) Under AASB 117,operating leases require the following disclosures by lessees:
A) the total of future minimum sublease payments expected to be received under non-cancellable subleases at the statement of financial position date.
B) a general description of the lessee's significant leasing arrangements.
C) No disclosures are required as operating leases are expensed each year.
D) the total of future minimum sublease payments expected to be received under non-cancellable subleases at the statement of financial position date and a general description of the lessee's significant leasing arrangements.
Q2) Describe 'lease incentives' and discuss the suggested approach to 'lease incentives' in Interpretation 115.
Q3) Under a lease agreement,the lessee may have control of an asset even if the lessee does not have legal ownership.According to the AASB Framework this is not a sufficient basis for recording an asset.
A)True
B)False
Q4) Explain what is meant by a 'direct finance' lease,and how such leases should be accounted under AASB 117.
Q5) Explain the benefits of a sale and leaseback transaction.
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Chapter 12: Accounting for Employee Benefits
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Q1) An asset may arise where a defined benefit plan has been overfunded or in certain cases where actuarial gains are recognised.An entity recognises an asset in such cases because:
A) the entity controls a resource, which is the ability to use the surplus to generate future benefits
B) that control is a result of past events (contributions paid by the entity and service rendered by the employee);
C) future economic benefits are available to the entity in the form of a reduction in future contributions or a cash refund, either directly to the entity or indirectly to another plan in deficit.
D) All of the given answers.
Q2) Performance bonuses:
A) are capitalised as part of the cost of an asset 'bonus payments'.
B) form part of salaries and wages and are treated in the same manner.
C) are charged directly against 'opening retained earnings'.
D) form part of the leave entitlements of employees.
Q3) Discuss the assumptions that must be made to determine the long-service leave liability at the end of the reporting period.
Q4) Discuss the implications of corporate collapses upon accrued employee benefits.
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Chapter 13: Share Capital and Reserves
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Q1) Which of the following statements correctly describes this journal entry: \[\begin{array} { | c | l | c | r | }
\hline \mathrm { Dr } & \text { Cash at bank } & 30000000 & \\
\hline \mathrm { Cr } & \text { Share capital } & & 30000000 \\
\hline & & & \\
\hline \mathrm { Dr } & \text { Share options (1 } 000000 \text { options) } & 3500000 & \\
\hline \mathrm { Cr } & \text { Share capital } & & 3500000 \\ \hline \end{array}\]
A) The issue of options, costing $3.50 each.
B) The issue of options, costing $30 each.
C) The exercise of options, with a current market value per share of $3.50.
D) The exercise of options, initially costing $3 500 000 to issue and with an exercise price for each option of $30.
Q2) Explain how an entity could handle excess monies in a share issue that is oversubscribed.
Q3) Preference shares may be classified as a liability,an equity item,or have features of both.Explain with examples,how to determine such a classification.
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Page 15
Chapter 14: Accounting for Financial Instruments
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Q1) An equity instrument of another entity is classified as a 'financial instrument'.
A)True
B)False
Q2) Under the requirements of the AASB Framework how would convertible notes be classified in the statement of financial position?
A) They have the essential characteristics of debt and, using the principle of prudence, would be classified as a liability.
B) They would be classified in a separate category between liabilities and equity.
C) They would be classified as either liabilities or equity at any balance date based on the probability at that time that the notes would, or would not, be converted.
D) They have the essential characteristics of shares and, using the principle of substance over form, they would be classified as equity.
Q3) Explain the reason for the rise in the development and use of financial instruments in recent years.Describe some of the key accounting issues regulators have had to face in light of this increased use and development.
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16
Chapter 15: Revenue Recognition Issues
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Q1) Bellarine Ltd is publisher of Mode magazine and its customers usually sign a three-year subscription with an advance payment of $500.Mode magazine has 12 issues in a year.What is the appropriate accounting treatment for this sale on the date of signing that is in accordance with IASB (2011)Revenue?
A) Recognise revenue in full as this is an immaterial amount.
B) Recognise the sale as a provision.
C) Recognise the sale as unearned revenue.
D) Disclose the sale in the notes as a contingent item.
Q2) Biological assets are:
A) recognised as income when sold.
B) to be valued at market value, with any increase being capitalised and amortised over the period until the asset is sold.
C) to be valued at market value, with any increase being treated as income.
D) to be valued at fair value, with any increase being treated as income.
Q3) What are the three conditions that must be met in order for revenue to be recognised when the sale of a product gives the buyer the right to return the product?
Q4) Discuss the different conditions detailed in IASB (2011)that must be satisfied before the percentage-of-completion method can be used.
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Page 17
Chapter 16: The Statement of Comprehensive Income and Statement of Changes in Equity
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Q1) If the exercise (strike)price of a call option is greater than the current share price,the option is said to be 'in-the-money'.
A)True
B)False
Q2) If it is found that an error had been made in a prior period:
A) The error should be rectified by including the item of income or expense in the period in which the error was discovered.
B) AASB 101 does not cover this concept and so no entry is required.
C) AASB 108 requires that errors are corrected via an adjustment to opening balance of retained earnings.
D) Material errors discovered in the current reporting period must be included in that period's statement of comprehensive income, while non-material errors may be corrected with an adjustment to opening retained earnings.
Q3) The choice between reporting expenses by nature or by function is extremely important,as different net profit figures are derived depending upon the choice made.
A)True
B)False
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Page 18
Chapter 17: Accounting for Share-Based Payments
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Q1) When a good or service is acquired in a share-based payment transaction and it does qualify as an asset,the transaction must be expensed.
A)True
B)False
Q2) AASB 2 requires some share-based payments to be recognised in an entity's financial statements.
A)True
B)False
Q3) On 1 July 2012 Chester Ltd granted an executive director a choice between receiving a cash payment equivalent to 5000 shares or receiving 6000 shares.The grant is conditional upon the director being under the employ of the entity for 3 years.What is the accounting treatment for this share-based payment arrangement that is consistent with AASB 2?
A) similar treatment with cash-settled transactions
B) similar treatment with equity-settled transactions
C) similar to a compound financial instrument
D) recognise salaries benefit expense at vesting date
Q4) Discuss the hierarchy to follow in determining which fair values to use in a share-based payment transaction that is consistent with AASB 2.
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Chapter 18: Accounting for Income Taxes
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Q1) Some items are treated as a deduction for tax purposes when they are paid but are recognised as expenses when they are accrued for accounting purposes.Which of the following items are of that type?
A) long-service leave
B) goodwill amortisation
C) depreciation
D) entertainment
Q2) Tissues Ltd has a depreciable asset that is estimated for accounting purposes to have a useful life of 8 years.For taxation purposes the useful life is 5 years.The asset was purchased at the beginning of year 1,there is no residual value,and the straight-line method of depreciation is used for both tax and accounting purposes.The tax rate is 30% and the cost of the asset is $100 000.What is the amount of the deferred tax liability account generated by this asset at the end of years 1,2 and 3?
A) End of year 1 $0; year 2 $2250; year 3: $4500
B) End of year 1 $7500; year 2 $15,000; year 3: $22 500
C) End of year 1 $6750; year 2 $4500; year 3: $2250
D) End of year 1 $2250; year 2 $4500; year 3: $6750
Q3) How do deferred tax assets and deferred tax liabilities arise?
How do you calculate their balances at a point in time?
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Page 20
Chapter 19: The Statement of Cash Flows
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Q1) Explain how the form and content of the statement of cash flow could change as a result of a joint project by the IASB and the US Financial Accounting Standards Board (FASB)investigating the presentation of financial statements.
Q2) AASB 107 defines cash equivalents to include:
A) highly liquid investments with short periods to maturity that are readily convertible to cash on hand at the investor's option and are subject to an insignificant risk of changes in value.
B) term borrowing.
C) working capital items such as prepayments and accruals.
D) highly liquid investments with short periods to maturity that are readily convertible to cash on hand at the investor's option and are subject to an insignificant risk of changes in value and term borrowing.
Q3) When creating a statement of cash flows certain items must be disclosed separately because of their significance,including:
A) discounts received from suppliers.
B) interest, both received and paid.
C) discounts received from suppliers, and interest both received and paid.
D) interest and tax payments.
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21
Chapter 20: Accounting for the Extractive Industries
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Q1) How are the proceeds of the sale of product from the pre-production stage to be treated under AASB 6?
A) Material revenues earned from the sale of product at the pre-production stage should be transferred to a reserve and recognised when the production revenues come on line. Immaterial revenues from sales at the pre-production stage are to be netted against costs incurred in the period for the area of interest.
B) Revenue earned from pre-production sales is to be treated as a reserve and recognised once production revenues come on stream so that the accumulated costs for an area can be amortised against the total revenues earned from the area.
C) Immaterial proceeds should be offset against the relevant pre-production costs, while material proceeds should be treated as production revenue and the costs of producing the product sold deducted from the revenue as cost of sales.
D) Any revenue earned at any stage of production should be recognised as revenue in the period earned. When the revenue is earned at the pre-production stage and costs are being capitalised, those costs may continue to be capitalised until revenues from production are generated. The accumulated costs are then to be amortised against the post-production revenues.
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22
Chapter 21: Accounting for General Insurance Contracts
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Q1) Which of the following is within the scope of AASB 1023 General Insurance Contracts?
A) fixed fee service contracts
B) life insurance contracts
C) weather derivatives
D) product warranties
Q2) In undertaking a liquidity adequacy test,if the present value of future claims exceeds the unearned premium liability:
A) The difference must be recorded as an asset under AASB 1023.
B) A further liability should be recorded to 'make up' the deficiency.
C) An expense should be recorded by initially writing down any related intangible assets.
D) A further liability should be recorded to 'make up' the deficiency and an expense should be recorded by initially writing down any related intangible assets and related deferred acquisition costs.
Q3) How is outstanding claims liability measured as prescribed in AASB 1023 General Insurance Contracts?
Q4) Explain the accounting treatment for revenues associated with unclosed business.How are they measured?
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Chapter 22: Accounting for Superannuation Plans
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Q1) Discuss the options available for defined benefit superannuation plans.
Q2) It is common for superannuation plans to recognise depreciation expense for its non-current assets.
A)True
B)False
Q3) AAS 25 requires the disclosure of at least a summary of the most recent actuarial report for defined contribution plans.
A)True
B)False
Q4) The disclosure requirements for a defined contribution plan include:
A) a statement of cash flows and an operating statement.
B) a statement of net assets.
C) a statement of changes in net assets.
D) a statement of cash flows and an operating statement and a statement of net assets.
Q5) AAS 25 permits use of cost or revalued basis in measuring assets of a defined contribution plan and a defined benefit plan.
A)True
B)False
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Chapter 23: Events Occurring After the End of the Reporting Period
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Q1) In the case of a non-adjusting event,AASB 110 requires it to be:
A) reflected in the financial information in the statements if it is material and relates to an item that would normally be reflected in the financial statements.
B) disclosed by way of note if it is material.
C) disclosed as a contingent liability, if an unfavourable material event.
D) reflected in the financial statements, if an unfavourable material event; disclosed by way of note, if a favourable event.
Q2) Requirements regarding events after the reporting date are contained in AASB 110 and The Corporations Law.
A)True
B)False
Q3) Discuss the two types of events after the reporting period.
Q4) Inventory reported at lower of cost or realisable amount that is found to be unsaleable after the reporting date should be treated as a non-adjusting event. A)True B)False
Q5) What is a 'non-adjusting event' in accordance with AASB 110? Provide examples.
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Chapter 24: Segment Reporting
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Q1) What is the rationale for including a final threshold test where entities are required to include in their reportable segment at least 75 per cent of the entity's total external revenues?
What action must an entity take if this threshold is not achieved?
Q2) For a segment to be reportable,AASB 8 requires that majority of revenues be earned from external parties and the segment satisfies one of the three quantitative thresholds.
A)True
B)False
Q3) Information about operating segments that do not meet any of the quantitative thresholds:
A) should be ignored.
B) shall be combined and disclosed in an 'all other segments' category.
C) should be combined with other segments that exhibit similar economic characteristics.
D) All of the given answers are correct.
Q4) Explain the reconciliation information AASB 8 requires for segment reporting.
Q5) Discuss the entity-wide disclosures in AASB 8 that need to been made about major customers.
Q6) Discuss the reasons for the release of IFRS 8.
Page 26
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Chapter 25: Related Party Disclosures
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Q1) Which of the following disclosures on key management personnel is/are required in AASB 124 for disclosing entities?
A) name of the person
B) position held
C) qualification(s) of the person
D) name of the person and position held
Q2) Some business leaders argue that related-party transactions have benefits for the reporting entity.The benefits are said to include:
A) lower legal costs associated with contracts.
B) increased profits for the related entity.
C) reduced competition among suppliers.
D) better, more reliable service and better prices.
Q3) Directors' income is defined in AASB 124 as including only:
A) the regularly paid salary of the directors.
B) the regularly paid salary, any bonuses paid and retirement benefits.
C) bonuses, commissions or salaries, retirement benefits and any brokerage or commission made on the subscription or agreement to subscribe to equity instruments in the entity or any of its related parties.
D) none of the given answers.
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Chapter 26: Earnings Per Share
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Q1) Gimlet Ltd has earnings after tax of $930 000 for the year ended 30 June 2015.At the beginning of the period Gimlet had 250 000 fully paid-up ordinary shares on issue.On 30 December 2014 the company made a one-for-six bonus issue.The last sale price of the shares immediately prior to the bonus issue was $1.35 each.What are the earnings per share taking into account the bonus issue?
A) $3.72
B) $4.13
C) $4.34
D) $3.19
Q2) According to AASB 133 the two factors that must be considered when calculating the earnings per share include how earning are defined and:
A) how preference dividends have affected the profit.
B) how the market capitalises the value of each share.
C) how the number of shares are determined.
D) how the shares were issued.
Q3) Describe how the calculation of a basic EPS will be affected by a bonus issue that is in accordance with AASB 133 Earnings per Share.
Q4) Describe the AASB 133 EPS disclosure requirements.
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Chapter 27: Accounting for Group Structures
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Q1) One important aim of releasing AAS 24 in 1991 and amendments made to The Corporations Law in the same year was to:
A) require parent entities to consolidate companies that they controlled into one set of financial statements for the first time.
B) change the treatment of non-controlling interests to be reflected in the accounts as a liability.
C) prevent companies from keeping debt off the statement of financial position consolidated statement of financial position by interposing partnerships or trusts in the group structure.
D) require the consolidation of the cash-flow statement as well as the statement of financial position and statement of comprehensive income.
Q2) On consolidation,the investment in subsidiary,shown in the investor's books,shall be eliminated in full against which of the following?
A) assets and liabilities of the subsidiary
B) post-acquisition shareholders' funds of the subsidiary
C) share capital of the subsidiary acquired by the parent only
D) none of the given answers
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Chapter 28: Further Consolidation Issues I: Accounting for Intragroup Transactions
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Q1) Companies A,B and C are all part of the one economic entity,but are all separate legal entities required to prepare their own financial statements.Company A sold Company B's inventory that cost $56 000 for $78 000.At the end of the same period Company B has three-quarters of that inventory still on hand and the rest has been sold to an entity outside the economic group.At what amount should the inventory remaining in Company B be recorded in Company B's own financial statements?
A) $42 000
B) $58 500
C) $56 000
D) $14 625
Q2) Lilo Ltd sells inventory items to its subsidiary Stitch Ltd.If during the financial year 2013,the unrealised profits in ending inventory in Stitch Ltd exceeds that of its unrealised profits in beginning inventory,which of the following statements is correct with respect to Lilo Ltd's consolidated financial statements after considering these transactions only?
A) Consolidated profit will decrease.
B) Consolidated deferred tax liability will increase.
C) Consolidated ending inventory will decrease.
D) Consolidated sales will be unaffected.
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Chapter 29: Further Consolidation Issues II: Accounting for
Non-Controlling Interests
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Q1) Differentiate 'full goodwill method' from the 'partial goodwill method' in the presence of non-controlling interests in a subsidiary.Discuss the implications of permitting the use of either method in business combinations.
Q2) Acquirer Limited purchased 75 per cent of Subby Limited for $45 000.The fair value of identifiable assets was $95 000,and the fair value of liabilities and contingent liabilities amounted to $47 000.According to AASB 10,what would be the amount of 'goodwill allocated to non-controlling interests of Subby Limited'?
A) $3000
B) $9000
C) $12 000
D) ($3000)
Q3) In calculating the proportion of a subsidiary's profit that is attributable to owners who are not part of the group,all adjustments to the group's profit should be treated as affecting the calculation for the outside owners.
A)True
B)False
Q4) Describe the two options in measuring the non-controlling interest.
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Chapter 30: Further Consolidation Issues IV: Accounting for
Changes in the Degree of Ownership of a Subsidiary
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Q1) Explain how the gain or loss is calculated for: (a)the parent's investment; (b)the economic entity; when the parent sells some of its shares in a subsidiary.
Q2) The consolidated statement of financial position at year end,in a period when the parent sold its interests in a subsidiary:
A) includes the assets and liabilities of the former subsidiary, to ensure that the opening balances reconcile.
B) does not include the assets and liabilities of the former subsidiary, if the subsidiary is no longer controlled by the parent.
C) reports the investment account at cost less proceeds of the sale.
D) includes the assets and liabilities of the former subsidiary, proportionately adjusted for the proceeds of sale.
Q3) Under the single-date method,the aggregate costs of the investments would be eliminated against the parent's share of capital and reserves at the date control of the subsidiary has been ultimately established and only one amount of goodwill (or bargain gain on purchase)is calculated.
A)True
B)False
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Chapter 31: Accounting for Equity Investments,including
Investments in Associates and Joint Arrangements
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Q1) Where an entity holds a controlling equity interest in another entity it may choose to account for that interest using the equity method of accounting.
A)True
B)False
Q2) Where a joint venturer prepares consolidated financial statements then the equity method will be used in the consolidated financial statements.
A)True
B)False
Q3) Discuss why management is motivated to make both short-term and long-term equity investments?
Q4) An associate is an investee over which the investor has control. A)True
B)False
Q5) Discuss the accounting treatment for a joint venture as prescribed in AASB 128 Investments in Associates and Joint Ventures.
Q6) Outline the arguments for and against the use of equity accounting,relative to cost method,when accounting for an investment.
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Chapter 32: Accounting for Foreign Currency Transactions
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Q1) Monetary items are units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.
A)True
B)False
Q2) What is a qualifying asset,and what are the accounting implications in respect to accounting for foreign exchange differences when acquiring such an asset?
Q3) To classify an arrangement as a hedge,and therefore to apply 'hedge accounting',AASB 132 requires a set of strict conditions be met.
A)True
B)False
Q4) Describe,with examples,the two tests of hedge effectiveness.
Q5) Discuss the situations in which the discontinuation of fair-value hedge accounting is to be done as provided for in AASB 139.
Q6) How does the accounting treatment for qualifying monetary items differ from other foreign currency monetary items as prescribed under AASB 121 The Effects of Changes in Foreign Exchange Rates?
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Chapter 33: Translating the Financial Statements of Foreign Operations
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Q1) The amount of a foreign operation's post-acquisition retained earnings as translated into Australian dollars will depend on the amount translated from the statement of comprehensive income.
A)True
B)False
Q2) Explain how non-controlling interests are determined following the translation of the financial statements.
Q3) Under the translation method required by AASB 121,the approach to translating a foreign operation's accounts includes:
A) translating monetary items at the closing rate of exchange .
B) translating non-monetary assets at the average exchange rate since the date of purchase of the asset.
C) translating transfers of post-acquisition equity items within the equity category at the rate of exchange current at the date the original equity item was first included in equity.
D) translating revenues and expenses at the average rate of exchange applied to equity items.
Q4) Distinguish monetary items from non-monetary items.Provide two examples of each.
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Chapter 34: Accounting for Corporate Social Responsibility
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Q1) Social-responsibility reporting may be defined as:
A) the reporting of information relevant to key stakeholders identified by the entity as requiring non-performance information.
B) the provision of information about the performance of an organisation in relation to its interaction with its physical and social environment.
C) the reporting of events and impacts on the financial and economic wellbeing of the organisation that stakeholders will find useful for decision making.
D) the provision of financial information about the impacts of the entity on the environment and communities.
Q2) It is common for 'clean-up' costs to be excluded from traditional financial reports of mining firms because this undertaking is purely voluntary.
A)True
B)False
Q3) A sustainability report is an example of a stand-alone social report.
A)True
B)False
Q4) Discuss the concept of the 'community licence to operate'.
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