Question

Question 1 If dividends are declared after the reporting period but before the financial statements are...

Question 1

  1. If dividends are declared after the reporting period but before the financial statements are authorised for issue, the dividends are __________as a liability at the end of the reporting period because no obligation exists at that time. Such dividends are disclosed in the notes in accordance with AASB 101 Presentation of Financial Statements (AASB 110).

not recognised

recognised

authorised

not authorised

2 points

Question 2

  1. A share option will give the holder the right to acquire shares at a particular price in the ___________.

present

future

past

None of the given answers are correct.

2 points

Question 3

  1. Which of the following transactions is usually not considered a 'related party' in AASB 124?

A leasing arrangement with a local government

The sale of inventory to a subsidiary

The write-off of an immaterial loan to a director

The sale of non-current assets to an associate

2 points

Question 4

  1. In relation to expectations about the useful life (and the residual value) of a non-current asset, paragraph 51 of AASB 116 requires that: ‘The __________and the useful life of an asset shall be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) shall be accounted for as a change in an accounting estimate in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors’ (AASB 116).

depreciable asset

residual value

depreciable base

cost apportionment

2 points

Question 5

  1. Accounting standard AASB 1053 Application of Tiers of Australian Accounting Standards defines a__________ as ‘an entity in respect of which it is reasonable to expect the existence of users who rely on the entity’s general purpose financial statements for information that will be useful to them for making and evaluating decisions about the allocation of resources. It can be a single entity or a group comprising a parent and all of its subsidiaries’.

non reporting entity

reasonable entity

reporting entity

resource entity

2 points

Question 6

  1. The AASB has followed ____________________.

the International Financial Reporting Standard

the International Auditing Standards

no standards

US accounting standards

2 points

Question 7

  1. In what situation does an excess on acquisition arise and how does AASB 3 require it to be treated?

An excess arises when the fair value of the purchase consideration is greater than the nominal value of the assets purchased. AASB 3 requires an excess to be eliminated by recognising it as a gain in the period in which the entity was purchased.

An excess arises when the fair value of the purchase consideration is greater than the nominal value of the assets purchased. AASB 3 requires the fair values of the monetary assets acquired to be proportionately decreased until the excess is eliminated. If an excess balance remains, it must be recognised as an expense in the statement of comprehensive income.

An excess arises when the cost of acquisition exceeds the fair value of the identifiable net assets purchased. AASB 3 requires the equity of the purchased entity to be proportionately decreased until the excess is eliminated.

An excess arises when the fair value of the identifiable net assets acquired by the entity exceeds the fair value of the consideration paid. AASB 3 requires a reassessment of the identification and measurement of the identifiable net assets, and a reassessment of the measurement of the fair value of the consideration paid. If an excess remains after the reassessment it must be recognised as income in profit or loss.

2 points

Question 8

  1. Some items are typically not allowable tax deductions but are recognised as an expense for accounting purposes. Which of the following items are of that type?

Prepaid insurance

Government grants

Long-service leave

Entertainment expenses

2 points

Question 9

  1. Depending upon the background to the change, changes in accounting policy are to be made:

retrospectively

prospectively

retrospectively or prospectively

None of the given answers are correct.

2 points

Question 10

  1. According to AASB 121, at the end of the reporting period, all monetary items must be translated using the reporting date ______ .

exchange rates

borrowing rates

spot rates

futures price

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