Introduction to Accounting Solved
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Course Introduction
Introduction to Accounting provides students with a foundational understanding of the principles and practices of accounting. The course covers essential topics such as the accounting cycle, the preparation and interpretation of financial statements, and the role of accounting in business decision-making. Students will learn about basic accounting concepts, generally accepted accounting principles (GAAP), and how to record and summarize financial transactions. By the end of the course, students will be equipped with the fundamental skills necessary to analyze financial information and understand the importance of accounting in organizational contexts.
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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Q1) The Corporations Act requires which of the following to be included in a Directors' Declaration?
A) State whether in their opinion the financial statements comply with accounting standards and the Corporations Act.
B) State whether in their opinion the financial statements give a true and fair view of the financial position and financial performance of the entity.
C) State whether or not in their opinion, when the declaration was made, there were reasonable grounds to believe that the company would be able to pay its debts as they become due.
D) All of the given answers.
E) None of the given answers.
Answer: D
Q2) The Australian Accounting Standards Board (AASB)issues only one set of accounting standards which have general applicability to the private,public and not-for-profit sectors:
A)True
B)False
Answer: True
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Chapter 2: The Conceptual Framework of Accounting and Its Relevance
to Financ
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Q1) The Framework is considered to be an Australian Accounting Standards Board (AASB)standarD.
A)True
B)False
Answer: False
Q2) A separate recognition criteria for equity is not set forth in the Framework because it represents a residual interest in the assets of an entity.
A)True
B)False
Answer: True
Q3) Which of the following items is not considered an asset?
A)Patents.
B)Research expenses of an R&D project.
C)Equipment under lease where the risks and rewards flows into the entity.
D)All of the given answers.
E)Research expenses of an R&D project and equipment under lease where the risks and rewards flows into the entity.
Answer: B
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Chapter 3: Theories of Financial Accounting
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Q1) A company has a debt contract in place which requires the company's working capital (ratio of current asset to current liabilities)must never fall below 2.As balance date approaches,the company estimates that the working capital ratio will be 1.9 and the company may default on its debt contract unless remedial action is taken.Which of the following action(s)will increase the company's working capital at balance day:
A) Revalue plant and equipment by 10%.
B) Increase allowance for doubtful debts by 10%.
C) Increase provision for warranty claims by 10%
D) Accelerate recognition of credit sales by 10%
E) Reduce depreciation of plant and equipment by 10%.
Answer: D
Q2) An example of a theory that adopts a system-based perspective is Legacy Theory: A)True B)False
Answer: False
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Chapter 4: An Overview of Accounting for Assets
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Q1) Where the entity presents current assets separately from non-current assets and current liabilities separately from non-current liabilities,AASB 101 requires items to be disclosed on the face of the balance sheet,including:
A) Total assets.
B) Total liabilities.
C) Total parent entity interest.
D) Total equity.
E) All of the given answers.
Q2) The effect of capitalising expenditures is to:
A) Decrease current period profit, increase current period assets and decrease future period equity.
B) Increase current period profit, increase current period assets and decrease future period profit.
C) Increase current period profit, decrease current period assets and decrease future period liabilities.
D) Increase current period profit, increase current period equity and increase future period profit.
E) None of the given answers.
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6
Chapter 5: Depreciation of Property, plant and Equipment
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Q1) Priceless Products Ltd purchased some display stands for $5,000.They were modified to make them suitable for the premises at a further cost of $1,500.The expected life of the stands is 20 years,but Priceless Products expects to replace them in 5 years' time as the style of product presentation will change in that time.The stands are expected to have a zero salvage value in either case.The benefits from the stands are expected to be derived evenly over their life.Priceless Products reviewed the useful life of the stands as part of the process of assessing the amount to be depreciated in year 4 and decided that they could be used for an additional 2 years.The recoverable amount at that time is close to the net book value of the stands after depreciation is recorded for the 4th year.What is the amount of depreciation charge in years 3 and 5?
A) $1,000; $500
B) $325; $276
C) $1,300; $650
D) $250; $213
E) None of the given answers.
Q2) Assets must be depreciated from the time they are acquired
A)True
B)False
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Chapter 6: Revaluation and Impairment Testing of
Non-Current Assets
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Q1) A class of non-current assets as defined by AASB 116 is a category of non-current assets that:
A) Were all purchased at the same time by the reporting entity.
B) All have a similar nature or function in the operations of the entity.
C) Are disclosed as a single item without supplementary dissection in the financial report.
D) All have a similar nature or function in the operations of the entity, and are disclosed as a single item without supplementary dissection in the financial report.
E) All of the given answers.
Q2) The concept of conservatism requires that if a class of non-current assets is revalued a revaluation decrement should be treated as an expense of the period,whereas a revaluation increment should be treated as an increase in a reserve:
A)True
B)False
Q3) If an asset is subject to depreciation or amortization there is no longer a need to test the asset for impairment.
A)True
B)False
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Chapter 7: Inventory
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Q1) In periods where production costs or purchase prices of inventory items do not change,it does not matter which inventory method is adopted as this would generate the same value for cost of goods sold and ending inventory.
A)True
B)False
Q2) According to AASB 102,one or more of which set of methods should be used to apply the costs of inventories to particular items of inventory?
A) Specific identification, LIFO or FIFO.
B) Absorption costing, weighted average costing or LIFO.
C) FIFO, specific identification or weighted average cost.
D) Weighted average costing, ABC costing or FIFO.
E) None of the given answers.
Q3) According to AASB 102 inventories include assets:
A) Such as service contracts arising under construction contracts.
B) Such as assets held long-term for use in the production process.
C) Such as financial instruments.
D) Held in the process of production, preparation or conversion for sale.
E) None of the given answers.
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9
Chapter 8: Accounting for Intangibles
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Q1) AASB 138 describes the distinction between the treatment of internally generated goodwill and purchased goodwill (as well as other intangibles)as arising because:
A) The two different sources of goodwill result in two different types of asset.
B) Internally generated goodwill is developed in order to be sold, so its value will be recognised at that time.
C) Internally generated goodwill cannot be reliably measured.
D) Recording purchased goodwill could lead to the manipulation of profit and asset amounts.
E) None of the given answers.
Q2) After initial recognition,the acquirer shall recognise goodwill at:
A) Historical cost.
B) Fair value.
C) Cost less accumulated amortisation.
D) Cost less accumulated impairment losses.
E) None of the given answers.
Q3) International convergence has meant that there is no longer one specific standard related to intangibles:
A)True
B)False
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Chapter 9: Accounting for Heritage Assets and Biological Assets
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Q1) Measuring the value of heritage assets to be reported in the balance sheet raises difficulties because:
A) While reliable valuations may be made, the cost of maintaining and improving the value of the assets is so high that the capitalisation of these amounts often distorts the valuations.
B) The cost of heritage assets is the most reliable measure, but because heritage assets may be very old their carrying value will often be zero under the requirements of AAS 29.
C) Obtaining a reliable valuation for heritage assets is problematic because there will generally be no sales or purchases and no valid market comparison to use.
D) The cost of obtaining detailed valuations by experts in the area of the specific type of heritage asset is prohibitive for most government departments.
E) None of the given answers.
Q2) Heritage assets may be defined as intangible assets that a community intends preserving because of cultural,historic or spiritual associations:
A)True
B)False
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Chapter 10: An Overview of Accounting for Liabilities
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Q1) Which of the following statements is ?consistent with the positive accounting theory paradigm?
A) Managers avoid future sacrifice of economic benefits debt covenants when the company is close to violation of debt covenants.
B) Managers avoid constructive obligations in the presence of accounting based debt covenants even though there is no realistic alternative to making future sacrifice of economic benefits.
C) Managers choose accounting methods that will decrease income to reduce the probability of debt covenant violation.
D) Managers avoid income increasing accounting methods to reduce the probability of debt covenant violation.
E) All of the given answers
Q2) A guarantee provided to a financier for a loan taken out by another entity,where default on that loan is uncertain as at the reporting date,is an example of a contingent liability:
A)True
B)False
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Chapter 11: Accounting for Lease
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Q1) Snowy River Ltd is a lessee to two lease arrangements.Lease A is non-cancellable,contains a bargain purchase option and the lease term is equal to 75 per cent of the economic life of the asset.Lease B is non-cancellable,lease term is less than 60% of the economic life of the asset and the minimum lease payment represents 75% of the fair value of the leased asset. How should Snowy River Ltd classify Lease A and Lease B,respectively?
A) Operating lease; Operating lease;
B) Operating lease; Finance lease
C) Finance lease; Finance lease;
D) Finance lease; Operating lease;
E) None of the given answers.
Q2) For a lessee entering into a finance lease,initial direct costs are.
A) Expensed immediately.
B) Expensed at the end of the lease term.
C) Capitalised as part of the lease receivable.
D) Capitalised as part of the cost of the leased asset.
E) None of the given answers.
Q3) Discuss how entities with debt to asset constraints are impacted by the classification of leases as either finance or operating leases.What are the implications for lease accounting?
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Chapter 12: Set-Off and Extinguishment of Debt
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Q1) A debt cannot be considered extinguished,and therefore removed from the balance sheet,unless:
A) It is not likely that the reporting entity will be required to assume the debt-servicing requirements of the loan and it has not otherwise guaranteed the servicing of the debt.
B) The probability that the reporting entity will be required to repay the principal and interest remaining under the conditions of the debt is so low as to be considered virtually impossible.
C) It is highly improbable that the reporting entity will be required to assume again the primary obligation for the debt-servicing requirements or to satisfy any guarantee, indemnity or similar relating to such requirements.
D) The possibility of the reporting entity being required to assume responsibility for the debt is considered remote.
E) None of the given answers.
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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Page 14
Chapter 13: Accounting for Employee Benefits
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Q1) Junior Ltd employs three workers to develop and test games.The employees are currently earning $30,000 each and are expected to cease their employment in 20 years.At the end of their employment each employee is entitled to a lump sum payment equal to 10 per cent of their final salary.Actuarial analysis suggests salaries will increase evenly at a rate of 5 per cent per year over the 20 years.At the end of the 20 years Junior's undiscounted obligation is $477,593.Assuming an interest rate of 8 per cent,calculate the obligation that would be recorded at the end of year 1 (rounded to the nearest dollar):
A) $5,123.
B) $23,898.
C) $21,986.
D) $102,466.
E) None of the given answers.
Q2) Defined benefit plans are fairly simplistic and AASB 119 devotes only a small section to them:
A)True
B)False
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Page 15
Chapter 14: Share Capital and Reserves
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Q1) Prior period errors and changes in accounting policy create gains and losses that are accounted for in the period that the errors are discovered,or the change in policy made:
A)True
B)False
Q2) A residual interest is:
A) A claim to a fixed percentage return on the amount invested.
B) A priority claim over the assets of the entity as the right of an owner.
C) A claim or right to the net assets of the reporting entity.
D) The minimum entitlement of the holder of the interest.
E) None of the given answers.
Q3) As a residual interest,equity ranks after liabilities in terms of a claim against the assets of a reporting entity.
A)True
B)False
Q4) If a company is listed in the Australian Securities Exchange and shareholders fail to pay the amount due on allotment,the shares forfeited must be refunded in full to defaulting investors.
A)True
B)False
Page 16
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Chapter 15: Accounting for Financial Instruments
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Q1) Derivatives are sometimes called "secondary" financial instruments:
A)True
B)False
Q2) Which of the following statements is true?
The initial measurement of financial assets is to be at fair value
The initial measurement of financial liabilities is to be at present value
The initial measurement of financial liabilities is to be at fair value
The subsequent measurement of financial assets and financial liabilities will be at fair value
The subsequent measurement of financial assets and financial liabilities will be dependent upon the category to which the financial instrument belongs
A. I, II and V
B. I, II and IV
C. I, III and IV
D. III and IV
E. I, III and V.
A)True
B)False
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Chapter 16: Revenue Recognition Issues
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Q1) AASB 118 requires revenues to be measured in terms of historical cost to improve reliability:
A)True
B)False
Q2) Accounting standards require that the provision for doubtful debts should be shown as a deduction from the class of assets to which it relates.The net expense in relation to bad and doubtful debts must also be disclosed
A)True
B)False
Q3) Gains never arise from the ordinary activities of an entity:
A)True
B)False
Q4) 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.
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Chapter 17: The Statement of Comprehensive Income and
Statement of Changes in E
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Q1) Which of the following items is not an example of items reportable under other comprehensive income?
A) Changes in revaluation surplus;
B) Actuarial gains and losses on defined contribution plans;
C) Gains and losses arising from translating the financial statements of a foreign operation;
D) The effective portion of gains and losses on hedging instruments in a cash flow hedge;
E) All of the given answers.
Q2) Which of the following is not required to be shown on the face of the income statement?
A) Tax Expense.
B) Revenue.
C) Share of profit or loss of joint ventures using the equity method.
D) Profit or loss attributable to minority interests.
E) Share of profit or loss of joint ventures using the proportional consolidation method.
Q3) Comprehensive income includes dividend payments to shareholders.
A)True
B)False
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Chapter 18: Accounting for Share-Based Payments
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Q1) On 30 June 2012,based on probability estimates how many employees are expected to be employed by Windermere Ltd when the share vests?
A) 78
B) 82
C) 88
D) 90
E) None of the given answers
Q2) Which of the following is an acceptable measure of fair value of the equity instruments granted?
A) Cost of the equity instrument at initial recognition.
B) Estimate using a valuation technique to estimate what the price of the equity instruments would have been on the measurement date in an arm's length transaction between knowledgeable, willing parties.
C) Fair value of a similar equity instrument.
D) Net realisable value of the equity instrument
E) All of the given answers.
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Chapter 19: Accounting for Income Taxes
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Q1) On 1 January 2012,William Bay Ltd purchased a machine for $100,000.The entity adopts a straight-line depreciation method and uses 10% and 15% as depreciation rate and tax rate,respectively.The salvage value is zero and the tax rate is 30%. At 31 December 2012,which of the journal entries is correct with respect to this transaction only that is in accordance with AASB 112 "Income Taxes"?
A) Dr There is a deductible temporary difference of $5,000.
B) There is a deductible temporary difference of $1,500.
C) There is a taxable temporary difference of $5,000.
D) There is a taxable temporary difference of $1,500.
E) The deferred tax liability is $5,000.
Q2) The carrying amount of deferred tax assets and deferred tax liabilities can change:
A) With a change in the amount of the related temporary differences.
B) Even if there is no change in the amount of the related temporary differences.
C) A re-assessment of the recoverability of deferred tax liabilities.
D) With a change in the amount of the related temporary differences and even if there is no change in the amount of the related temporary differences.
E) All of the given answers.
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Chapter 20: Cash-Flow Statements
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Q1) AASB 107 requires ledger accounts to be reconstructed in order to calculate cash flows from operating activities:
A)True
B)False
Q2) In accordance with AASB 107 "Cash Flow Statements",cash payments to suppliers for goods and services are classified as cash flows from operating activities.
A)True
B)False
Q3) To calculate the cash flow from the issue of debentures,the face value of the debentures would have to be adjusted by deducting any premium or adding any discount on issue:
A)True
B)False
Q4) A cash flow statement is a forecast of net cash flows from operating,investing and financing activities.
A)True
B)False
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Chapter 21: Accounting for the Extractive Industries
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Q1) Factors to be considered in reassessing the estimate of recoverable reserves each year include:
A) The past production rate compared to total estimated reserves.
B) The possibility that technological developments or discoveries may make the product obsolete or uneconomical at some future time.
C) Changes in technology, market or economic conditions affecting either sales prices or production costs, with a consequent impact on cut-off grades.
D) The possibility that technological developments or discoveries may make the product obsolete or uneconomical at some future time and changes in technology, market or economic conditions affecting either sales prices or production costs, with a consequent impact on cut-off grades.
E) All of the given answers.
Q2) Firms engaged in the extractive industries are solely engaged in the search for natural substances of commercial value:
A)True
B)False
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Chapter 22: Accounting for General Insurance Contracts
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Q1) Under the revised AASB 1023,acquisition costs with future economic benefits are no longer deferred; instead these costs should be expensed as incurred.
A)True
B)False
Q2) An unearned premium liability is:
A) A premium that has been recognised previously in the income statement but not yet claimed against.
B) To meet costs, including the claims handling costs.
C) Required to be recognised in the balance sheet.
D) To meet costs, including the claims handling costs and required to be recognised in the balance sheet.
E) None of the given answers.
Q3) A reinsurance asset is impaired if,and only if there is objective evidence,as a result of an event that occurred after initial recognition,that the cedant may not receive amounts due to it under the terms of the contract; and that event has a reliably measurable impact on the amounts that the cedant will receive from the reinsurer.
A)True
B)False
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Chapter 23: Accounting for Superannuation Plans
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Q1) Accrued benefits in a defined contribution plan encompass amounts which have been allocated and amounts which have not been allocated to members of the plan.
A)True B)False
Q2) For a defined contribution plan to satisfy the reporting requirements of AAS 25 it must provide:
A) A balance sheet, an operating statement and accompanying notes.
B) A balance sheet, an operating statement and a statement of cash flows.
C) A statement of net assets, a statement of changes in net assets and accompanying notes.
D) A balance sheet, an operating statement and accompanying notes or a statement of net assets, a statement of changes in net assets and accompanying notes.
E) None of the given answers.
Q3) AAS 25 requires all liabilities of a superannuation plan to be discounted to their present value at reporting date:
A)True B)False
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25
Chapter 24: Events Occurring After Balance Sheet Date
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Q1) Requirements regarding after-reporting-date-events are contained in AASB 110 and The Corporations Law:
A)True
B)False
Q2) Dividends declared and proposed after balance sheet date may be recognised as liability and this is consistent with AASB 110:
A)True
B)False
Q3) The requirements of AASB 110 for additional disclosures in the face of going-concern difficulties revealed after balance sheet date have been argued to be so extensive that they add financial pressure to a business already in financial distress: A)True
B)False
Q4) Bonus payments that are part of an existing agreement with employees determined after the reporting date is an example of an adjusting event. A)True B)False
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26
Chapter 25: Segment Reporting
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Q1) AASB 8 "Operating Segments" requires an entity to report a measure of segment liabilities and particular income and expense items,if such measures are regularly provided to the chief operating officer.
A)True
B)False
Q2) The guidelines for determining that a segment is reportable in accordance with AASB 8 includes:
A) The segment's equity is equal to or greater than 10 per cent of the total segment equity.
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 revenues are 10 per cent or more of the total segment revenues.
D) The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses and the segment's revenues are 10 per cent or more of the total segment revenues.
E) None of the given answers.
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Chapter 26: Related-Party Disclosures
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Q1) Close family members of key management personnel include:
A) Domestic partner and children.
B) Children of domestic partner.
C) Dependents of domestic partner.
D) All of the given answers.
E) Domestic partner and children and children of domestic partner.
Q2) The following diagram shows three companies and their associated equity ownership percentages.Which of the companies shown would most likely be considered related entities?
A) F and G, and G and H are related parties.
B) F and G, G and H, and F and H are related parties.
C) Only G and H are related parties.
D) Only F and H are related parties.
E) None of the given answers.
Q3) A potential benefit of requiring extensive related-party disclosures is to increase the confidence of overseas investors in the Australian capital market:
A)True
B)False
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Chapter 27: Earnings Per Share
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Q1) According to AASB 133 the number of shares included in the weighted-average number of shares is determined by:
A) The number of shares that meet the definition of ordinary shares as at the end of the reporting period.
B) The number of shares that are on issue as ordinary shares for part or all of the period.
C) The number of ordinary shares (that meet the definition of ordinary shares) at the beginning of the period plus any ordinary shares issued during the period less any reductions in ordinary shares during the period.
D) The number of ordinary shares (as defined) that are issued or partly paid up at the beginning of the period plus any shares issued during the period whether fully or partly paid up.
E) None of the given answers.
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Chapter 28: Accounting for Group Structures
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Q1) Which of the following statements is not in accordance with AASB 127 "Consolidated and Separate Financial Statements"?
A) A parent need not present consolidated financial statements if the parent is itself a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity.
B) Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity.
C) A parent consolidates subsidiaries that satisfy the criteria to be classified as assets held for sale.
D) Intragroup balances, transactions, income and expenses are eliminated in full for wholly-owned subsidiaries and in proportion to ownership for partially-owned subsidiaries.
E) None of the given answers.
Q2) Goodwill arises at acquisition date when the purchase price exceeds the identifiable assets acquired and the liabilities assumed.
A)True
B)False
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Chapter 29: Further Consolidation Issues I: Accounting for
Intragroup Transact
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Q1) AASB 127 "Consolidated and Separate Financial Statements" prescribes that intragroup balances,transactions,income and expenses be eliminated in full on consolidation.This requirement is consistent with the parent entity concept of consolidation.
A)True
B)False
Q2) What is the amount of unrealised profit that needs to be eliminated at the end of the period,in the following situation,where Morecombe Limited is the parent of Wise Limited? (Ignore the tax effect) Morecombe purchases 500 units of inventory for $20 each.Morecombe sells this entire inventory to Wise at a mark up of 25 per cent.Wise then sells half of the inventory to an external party.Half of the remaining amount (after the external sale)is sold back to Morecombe for $2,500.
A) Cannot determine from the information given.
B) $300.
C) $625.
D) $1 250.
E) $2 500.
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Chapter 30: Further Consolidation Issues II: Accounting for Minority Interests
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Q1) Where the parent entity holds less than 100 per cent interest in a subsidiary,AASB 127 requires the remaining shareholders' interests in what items to be disclosed?
A) The subsidiary's share capital and reserves.
B) The subsidiary's profit or loss.
C) The subsidiary's current and non-current assets.
D) The subsidiary's share capital and reserves and the subsidiary's profit or loss.
E) All of the given answers.
Q2) Which of the following situations,involving eliminations as part of the consolidation process,would not have implications for the calculation of minority interests?
A) The sale of a non-current asset by the subsidiary to the parent.
B) The payment of a management fee by the subsidiary to the parent.
C) The sale of inventory by the parent to the subsidiary.
D) The payment of a management fee by the subsidiary to the parent and the sale of inventory by the parent to the subsidiary.
E) The sale of a non-current asset by the subsidiary to the parent and the sale of inventory by the parent to the subsidiary
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Page 32
Chapter 31: Further Consolidation Issues III: Accounting for
Indirect Ownershi
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Q1) The non-controlling interest in post-acquisition movement in reserves and post-acquisition profits is based on the combined sum of both direct non-controlling interest and indirect non-controlling interest.
A)True
B)False
Q2) Which of the following statements are incorrect?
A) The elimination of the parent's investment in a subsidiary will be done by eliminating the investment against the parent's direct ownership interest.
B) The parent's interest in post-acquisition earnings will be based on the parent's direct and indirect ownership interests.
C) The minority interest in post-acquisition earnings will be based on the direct minority interest.
D) The minority interest in pre-acquisition reserves will be based on the direct minority interest.
E) None of the given answers; they are all correct.
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Chapter 32: Further Consolidation Issues Iv: Accounting for
Changes in the Deg
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Q1) Once control over a subsidiary has been lost,the parent entity must derecognise the individual assets,liabilities and equity including any non-controlling interest relating to that subsidiary.
A)True
B)False
Q2) The profit or loss on the sale of shares in a controlled entity will be the same in the parent entity's legal books as it is in the consolidated accounts:
A)True
B)False
Q3) When additional shares in a subsidiary are acquired,AASB 3 requires each acquisition to be accounted for separately:
A)True
B)False
Q4) Control over a subsidiary may be lost without a change in absolute or relative ownership levels.An example of this is loss of control to a court administrator as a result of bankruptcy.
A)True
B)False
Page 34
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Chapter 33: Accounting for Equity Investments
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Q1) Investments are commonly classified into seven different categories:
A)True B)False
Q2) On acquisition of the investment in associate,any excess of the investor's share of the net fair value of the associate's identifiable assets and liabilities over the cost of the investment is accounted for as.....
A) goodwill relating to an associate and amortised over the period of economic benefits. B) goodwill relating to an associate included in the carrying amount of the investment and amortisation is not permitted.
C) income in the determination of the investor's share of the associate's profit or loss in the period in which the investment is acquired.
D) expense in the determination of the investor's share of the associate's profit or loss in the period in which the investment is acquired.
E) None of the given answers.
Q3) An associate is an investee over which the investor has control:
A)True
B)False
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Chapter 33: Accounting for Equity Investments
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Q1) Interest in jointly controlled entities,using the equity method of accounting,shall be classified as:
A) A current asset.
B) A non-current asset.
C) An expense.
D) A minority interest.
E) A part of share capital.
Q2) When a joint venturer contributes assets to a joint venture the assets must be revalued in the books of the venturer:
A)True
B)False
Q3) A contractual arrangement to establish a joint venture would normally cover matters such as:
A) Dividend distribution arrangements.
B) Authority for the joint venture to raise debt and equity capital.
C) The appointment of a governing body for the joint venture.
D) Dividend distribution arrangements and the appointment of a governing body for the joint venture.
E) None of the given answers.
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Page 36
Chapter 35: Accounting for Foreign Currency Transactions
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Q1) An exception to the requirement that foreign currency monetary items should be re-translated at the reporting date is:
A) When the foreign exchange rate is considered to be undervalued.
B) When the foreign currency exchange rate is fixed for a particular transaction according to a contractual arrangement.
C) When exchange rates are expected to move in the opposite direction shortly after reporting date.
D) When the foreign exchange rate is considered to be overvalued.
E) None of the given answers.
Q2) 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.
Q3) Inventory is an example of a monetary item.
A)True
B)False
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Page 37
Chapter 36: Translation of the Accounts of Foreign Operations
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Q1) The foreign exchange exposure of the parent entity in relation to its foreign operation relates to the net cash flows of the investment in the operation: A)True B)False
Q2) In the process of consolidating the translated financial accounts of a foreign operation,the calculation of minority interests will be affected by the translation process in what way?
A) The minority interests will be allocated a portion of the gain or loss on translation from the income statement.
B) The effect of transactions between the subsidiary and the minority interests will be eliminated after calculating the unrealised foreign exchange gain or loss implicit in the unrealised profit on the inter-company transaction.
C) The minority interests will be allocated a portion of the foreign currency translation reserve.
D) The minority interests calculation is not affected.
E) None of the given answers.
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Chapter 37: Accounting for Corporate Social Responsibility
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Q1) Discounting liabilities using the present value technique is not ecologically sound because:
A) Environmental liabilities are hard to measure.
B) The value of a dollar in the present is greater than the value of a dollar in the future.
C) Discounting has the effect of reducing the apparent size of the cost of future environmental clean-up and so encourages entities to undertake projects that have large negative (distant) future impacts on the environment.
D) It discourages entities from providing sufficient reserves to restore environments after project completion.
E) All of the given answers.
Q2) The stand-alone social responsibility reports voluntarily provided by Australian companies since the late 1990s include(s):
A) Triple-bottom line report.
B) Sustainability report.
C) Social responsibility report.
D) All of the given answers.
E) Sustainability report and social responsibility report.
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