Professional Accounting Practice
Exam Questions
Course Introduction
Professional Accounting Practice provides students with an in-depth understanding of the practical and ethical aspects of the accounting profession. The course emphasizes real-world applications of accounting principles, including the preparation and analysis of financial statements, client communication, regulatory compliance, and contemporary issues facing practitioners. Through case studies, simulations, and collaborative projects, students gain practical skills in audit procedures, taxation, financial reporting, business advisory, and the use of accounting information systems. The course also explores professional standards, codes of ethics, and the legal responsibilities of accountants, preparing students to navigate the challenges of a dynamic professional environment.
Recommended Textbook
Accounting for Corporate Combinations and Associations 7th Australian Edition by Neal Arthur
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11 Chapters
368 Verified Questions
368 Flashcards
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Page 2
Chapter 1: Text Objectives and Introduction to Consolidation
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) What is the application of the reporting entity concept to consolidation accounting?
Answer: Reporting entity concept:
- Definition: entity where there are users reliant on general purpose financial statements (GPFS)
- SAC 1 provides factors to be considered in determining existence of a reporting entity - A group that is a reporting entity must prepare consolidated financial statements
- Some group structures may contain more than one reporting entity
Q2) A Ltd controls B Ltd who in turn controls C Ltd.B Ltd and the B Ltd group are not reporting entities.A Ltd is a reporting entity.Consolidated financial statements will be required to be prepared for:
A) The A group
B) The B group
C) Both the A Group and the B Group
D) Not required
Answer: A
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Page 3
Chapter 2: Principles of Consolidation
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42 Verified Questions
42 Flashcards
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Sample Questions
Q1) In August 20X6,Caesar Ltd acquired the issued ordinary shares of Alesia Ltd in a one-for-one share exchange.Immediately prior to the acquisition,the shares of Caesar Ltd and Alesia Ltd were being traded on the ASX for $12 and $10 per share respectively.Immediately following the offer to purchase the shares,the shares in Alesia Ltd were being traded at $13 per share.From this information,the cost of acquisition would be recorded at:
A) $12 per share since this the market assessment of the fair value of the shares issued by Caesar Ltd.
B) $10 per share since this is the fair value of the shares of Alesia Ltd and thus a reliable measure of the fair value of the shares issued by Caesar Ltd.
C) $13 per share since the shareholders of Alesia Ltd have a choice between accepting the offer of Caesar Ltd or selling their shares in the market, so that $13 per share is the most objective measure of the fair value of the shares in Caesar Ltd.
D) None of the above.
Answer: A
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Page 4
Chapter 3: Fair Value Adjustments and Tax Effects
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34 Verified Questions
34 Flashcards
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Sample Questions
Q1) Where the value of an investment in a subsidiary increases,a deferred tax liability is generally not required to be recognised when:
A) it is unlikely that profits of the subsidiary will be distributed as dividends
B) it is unlikely that the subsidiary investment will be sold
C) both A and B
D) none of the above
Answer: C
Q2) A contingent liability recognised in a business combination will be recorded:
A) in the subsidiary's accounts
B) in the group accounts
C) either A or B
D) none of the above
Answer: B
Q3) All assets acquired in a business combination must be recognised at fair value
A)True
B)False
Answer: False
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Page 5
Chapter 4: Intra-Group Transactions
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36 Verified Questions
36 Flashcards
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Sample Questions
Q1) Unrealised profits on the intra-group sale of inventory will only be eliminated on consolidation in the year in which they arise
A)True
B)False
Q2) Discuss the basis of recognition of tax effects relating to accrued revenue and expenses for such intra-group items as management fees and interest
Q3) P Ltd acquired inventories for $150,000 which were sold to its subsidiary S Ltd for $120,000 (assume a tax rate of 30%)On consolidation a deferred tax liability would be recorded for:
A) $45,000
B) $36,000
C) $9,000
D) Not recorded
Q4) Dividends paid by the parent company and all subsidiaries will be eliminated as consolidation adjustments
A)True
B)False
Q5) Explain why cash will never be adjusted in consolidation journal entries
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Chapter 5: Non-Controlling Interest
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37 Verified Questions
37 Flashcards
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Sample Questions
Q1) Under the entity concept of consolidation the NCI is recognised as a liability.
A)True
B)False
Q2) The non controlling interest share of a subsidiary's retained earnings will be calculated as a percentage of:
A) opening balance of retained earnings
B) profit for the period
C) dividend and other appropriations
D) the sum of all the above
Q3) In preparing a consolidated financial report,the parent entity consolidates:
A) The financial statements of all entities over which it has the power to exercise control.
B) The financial statements of only those entities over which it has the power to control and in which it holds more than 50% of the voting shares.
C) The financial statements of only those entities in which it holds more than 50% of the ordinary share capital; as a result of which it necessarily has the power to exercise control.
D) None of the above.
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Chapter 6: Partly-Owned Subsidiaries: Indirect
Non-Controlling Interest
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Sample Questions
Q1) When a parent does not have an ownership interest in a subsidiary the NCI is 100%
A)True
B)False
Q2) The sequential consolidation method uses a 'top down' approach
A)True
B)False
Q3) The calculation of notional profits of entities with cross holdings is required to:
A) determine the parent ownership interest in the subsidiaries
B) determine the NCI ownership interest in the subsidiaries
C) determine both the parent and NCI ownership interests in the subsidiaries
D) none of the above
Q4) Using the data from Question 4 but assuming that Parent Ltd controls S2 Ltd without holding any shares in S2 Ltd.The Parent Ltd indirect interest in S1 Ltd is:
A) 100%
B) 70%
C) nil
D) none of the above
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Chapter 7: Consolidated Cash Flow Statements
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25 Flashcards
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Sample Questions
Q1) The time to maturity is relevant in the classification of cash equivalents
A)True
B)False
Q2) Discuss the basis of classifying cash flows arising from interest paid.
Q3) AASB 107 requires the use of the direct method of calculating cash flows from operating activities.
A)True
B)False
Q4) The purpose of holding a cash equivalent is irrelevant for the classification in the statement of cash flows
A)True
B)False
Q5) A company holds $100,000 in a term deposit account as an interest-generating investment.For purposes of the statement of cash flows the term deposit will be classified as:
A) cash equivalent
B) investment
C) either cash equivalent or investment
D) none of the above
Q6) Why is cash flow from operating activities seen as a performance measure?
Page 9
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Chapter 8: Accounting for Joint Arrangements
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Sample Questions
Q1) On January 1 20X7,a parent entity Emborough Ltd acquired 20% of the share capital of Bernborough Ltd and the power to significantly influence the operating and financial policies of that company for $4,500,000 cash.In the period from the date of acquisition to June 30 20X7,Bernborough Ltd earned a profit for the period of $400,000 (after tax of $200,000),recognised a post-acquisition asset revaluation increment of $500,000 (deferred tax liability $100,000)and declared a dividend of $200,000.At June 30 20X7,Emborough Ltd recognised its equity in the dividend. In the consolidated balance sheet as at June 30 20X7 of the group controlled by Emborough Ltd,the investment in the associate would be reported at an amount of:
A) $4,620,000
B) $4,500,000
C) $4,680,000
D) None of the above.
Q2) Unrealised profits on both upstream and downstream transactions between an investor and an associate are to be eliminated under accounting standard AASB128 Investments in Associates.
A)True
B)False
Q3) Discuss the basis of the equity carrying amount of the investment
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Page 10
Chapter 9: Accounting for Associates and Joint Ventures: the Equity Method
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37 Flashcards
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Sample Questions
Q1) A venture must recognise its interest in a jointly controlled entity using:
A) proportionate consolidation
B) equity method
C) either proportionate consolidation or equity method
D) one line method
Q2) Alternative reporting formats are allowed under AASB131 for jointly controlled entities
A)True
B)False
Q3) Discuss the issue of entitlement of venturers to share in profits of a jointly controlled entity.
Q4) A 50% joint venturer acquires a further 10% interest in a jointly controlled operation,paying $2,000,000 to the jointly controlled operation whose assets including cash $1,000,000 have a fair value of $4,000,000.The acquisition will have the following effect on the venturer's cash position:
A) reduced by $2,000,000
B) reduced by $700,000
C) reduced by $1,000,000
D) none of the above
Page 11
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Chapter 10: Translation and Consolidation of Foreign Currency Financial Statements
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) In the consolidated balance sheet at June 30 20X7 of the group controlled by Johnson Ltd,the foreign currency translation reserve attributable to the members the parent entity would be (rounded to the nearest thousand dollars):
A) $311,111
B) $839,300
C) $108,538
D) None of the above.
Q2) In the separate income statement of Johnson Ltd for the year ended June 30 20X7,the translation gain or loss arising on the loan from the Bank Negara was (rounded to the nearest thousand dollars):
A) A translation gain of $311,111
B) A translation loss of $444,000
C) A translation loss of $600,000
D) Nil, since any loss is initially recognised in equity.
Q3) Discuss the treatment of differences in accounting standards when consolidating foreign operations.
Q4) Discuss whether the use of the current rate method provides adequate disclosure of the exposure of a foreign operation to exchange rate movements.
Page 12
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Chapter 11: Segment Reporting by Diversified Entities
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27 Flashcards
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Sample Questions
Q1) The definition of operating segments requires recognition of components of the entity that:
A) are cost centres
B) are production units
C) have similar gross margins
D) none of the above
Q2) On the basis of revenue,asset and results,the reportable business segments are:
A) Piebalds, Pintos and Crillos.
B) Piebalds, Skewbalds, Pintos and Crillos.
C) Piebalds, Skwsbalds, Pintos, Crillos and Others.
D) None of the above.
Q3) A segment which does not meet any of the materiality thresholds in the current period can never be disclosed as a reportable segment.
A)True
B)False
Q4) How might management be able to conceal segment information under the 'management approach' to identifying reportable segments?
Q5) Outline the requirements to report information on geographical segments under current accounting standards
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