Corporate Accounting
Exam Answer Key
Course Introduction
Corporate Accounting is a specialized area of accounting that focuses on the financial activities, reporting, and regulatory requirements of corporations. This course covers essential topics such as the preparation and analysis of financial statements, accounting for share capital and debentures, corporate restructuring, mergers and acquisitions, profit distribution, and compliance with legal and regulatory frameworks. Students will develop a thorough understanding of accounting practices specific to corporations, including the application of accounting standards, interpretation of financial reports, and the management of corporate finances to ensure transparency, accuracy, and informed decision-making in a corporate environment.
Recommended Textbook
Understanding Australian Accounting Standards 1st Edition by Janice Loftus
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Chapter 1: Accounting Regulation and the Conceptual Framework
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Q1) Which of the following statements about the Conceptual Framework's definition of income is correct?
A) Income is always in the form of enhancements of assets.
B) Income results in decreases in equity.
C) Income includes contributions from owners.
D) Income includes gains from non-ordinary business activities.
Answer: D
Q2) The Financial Reporting Council (FRC) has the power to do the following, except:
A) directing the AASB to develop a particular accounting standard.
B) appointing the members of the AASB.
C) determining broad strategic direction for the AASB.
D) monitoring the development of international accounting standards.
Answer: A
Q3) The definition of income encompasses the following criteria, except:
A) increases in economic benefits.
B) control of increases in economic benefits by the entity.
C) including capital contributions from owners.
D) results in increases in equity.
Answer: C
Page 3
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Chapter 2: Application of Accounting Theory
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Sample Questions
Q1) In which of the following contexts would accountants be required to exercise professional judgement?
A) Determining depreciation method used for non-current assets.
B) Estimating net realisable value of inventories.
C) Deciding which model to use to measure value of property, plant and equipment after initial recognition.
D) All of the options are correct.
Answer: D
Q2) A market is efficient if:
A) investors are able to earn profits by trading on information.
B) it takes time for market to adjust to new information.
C) share prices fully reflect available information about the shares.
D) available information can be used to earn returns beyond those that compensate for the risk involved.
Answer: C
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4
Chapter 3: Shareholders Equity: Share Capital and Reserves
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Q1) Dividends declared after the balance date but before the financial statements are authorised for issue:
A) meet the criteria for recognition as a liability
B) satisfy the criteria for recognition as an expense
C) are recognised in the Statement of Financial Position as they meet the definition of equity
D) do not meet the AASB 137 criteria of a present obligation.
Answer: D
Q2) The appropriate account to record any excess proceeds received and retained (not refunded) by a company from an oversubscription to a share offer application, is the:
A) Share issue costs account;
B) Forfeited Shares account;
C) Share capital account;
D) Calls in advance account.
Answer: D
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Chapter 4: Fair Value Measurement
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Q1) Which of the following disclosures are not required under AASB 13?
A) the valuation techniques used to measure fair value
B) the inputs used to measure fair value
C) the level of the fair value hierarchy within which the fair value measurements are categorised
D) quantitative information about all unobservable inputs used in the fair value measurement
Q2) Unobservable inputs for the asset or liability are an example of:
A) a Level 1 input
B) a Level 2 input
C) a Level 3 input
D) a Level 4 input
Q3) Which of the following is an indication of an active market?
A) there are few recent transactions
B) price quotations vary substantially over time
C) price quotations vary substantially among market-makers
D) price quotations are based on current market information.
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6
Chapter 5: Revenue
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Sample Questions
Q1) Big Bank Limited provides Good Sport Pty Ltd with a five-year loan to finance the construction of a new sporting stadium. Good Sport had the choice of paying a market rate of interest (7.5% at the inception of the loan) or paying interest at a rate of 1.5% below the market rate, and paying in addition a fixed 'arrangement fee' of $200 000 to compensate Big Bank for charging an interest rate below the fair market value. Good Sport chose the second option.
Big Bank should recognise revenue from the arrangement fee as:
A) fee revenue as services are provided by Big Bank
B) fee revenue on the completion of the significant act of drawing down the loan
C) interest revenue on the completion of the significant act of drawing down the loan
D) interest revenue over the life of the loan in accordance with the effective interest method.
Q2) Which of the following items are defined in AASB 118?
A) Income
B) Revenue
C) Gains
D) All of the above
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Page 7
Chapter 6: Provisions, Contingent Liabilities and Contingent Assets
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Q1) An example of where an entity has a present obligation is:
A) a public announcement made by an entity's management to undertake restructuring.
B) a recommendation from the HR manager to the Board as to the level of bonuses to be paid at year end.
C) a historical pattern of performing a major overhaul of machinery every two years.
D) the declaration of a dividend by directors which is required to be ratified at a meeting of shareholders
Q2) Provisions shall be recognised when:
I an entity has a present obligation
II it is possible that an outflow of resources will be required to settle the obligation
III the amount of the obligation can be reliably estimated
IV there has been a past event
A) I, II and III
B) II, III and IV
C) I, III and IV
D) I, II and IV
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8
Chapter 7: Income Taxes
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Q1) D'Silva Limited has a product warranty liability amounting to $10 000. The product warranty costs are not tax deductible until paid out to customers. The company tax rate is 30%. The company has:
A) a deductible temporary difference of $10 000
B) an taxable temporary difference of $10 000
C) a tax base of $10 000
D) a future deductible amount of $0.
Q2) ABC Limited has an asset with a carrying value of $50 000. The tax base of this asset is $40 000. The tax rate is 30%. As a result, which of the following deferred tax items does Roland Limited have?
A) A deferred tax asset of $10 000.
B) A deferred tax liability of $3000.
C) A deferred tax liability of $10 000;
D) A deferred tax asset of $3000;
Q3) The deferred tax liability is:
A) $1500
B) $4500
C) $15 000
D) $34 500.
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Page 9
Chapter 8: Financial Instruments
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Q1) A financial asset classified as fair value through profit and loss (FVTPL) must be:
I\(\quad\) a derivative that is a financial guarantee contract or a hedging instrument II \(\quad\)acquired princip ally for the purpose of selling it in the near term III\(\quad\) part of a portfolio of identified instrument that are managed together and for \(\quad\)\(\quad\)which there is evidence of a recent actual pattern of short-term profit-taking
IV \(\quad\)designated as such upon initial recognition
A) I, II and III
B) I, III and IV
C) I, II and IV
D) II, III and IV
Q2) Which of the following is NOT an example of a derivative financial instrument?
A) A forward exchange contract
B) A commercial bill contract
C) A futures contract
D) An option contract
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10
Chapter 9: Share-Based Payments
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Q1) A share -based payment transaction in which the entity acquires goods or services by incurring liabilities to the supplier for amounts that are based on the value of the entity's shares or other equity instruments of the entity is classified in AASB 2
Share-based Payment as
A) an equity-settled share-based payment transaction
B) a cash-settled share-based payment transaction
C) a liability-settled share-based payment transaction
D) an "other" share-based payment transaction
Q2) The amount recognised as an expense for the year ended 30 June 2016 is:
A) $5987
B) $22 500
C) $28 487
D) $47 320
Q3) The liability recorded at 30 June 2015 is:
A) $19 680
B) $21 653
C) $41 333
D) $47 320
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Chapter 10: Translation of the Financial Statements of Foreign Entities
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Q1) If the local currency of Sing Sing is Singapore dollars and the functional currency is Australian dollars the total assets of S$900,000 would translate into Australian dollars as:
A) $703 125
B) $709 688
C) $1 141 500
D) $1 152 000
Q2) When translating into the functional currency foreign currency denominated non-monetary items measured using historical cost must be translated using the:
A) rate current at end of reporting period;
B) average rate for the reporting period;
C) exchange rate at the date of the transaction;
D) rate prevailing at the end of the last financial year.
Q3) When translating into the functional currency monetary liabilities are translated using the:
A) exchange rate current at the date the item was first recorded;
B) exchange rate prevailing at the end of the last reporting period;
C) closing exchange rate;
D) exchange rate current at end of reporting period.
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Chapter 11: Employee Benefits
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Sample Questions
Q1) Actuarial gains or losses can arise from:
I \(\quad\)employee service provided in the current period
II \(\quad\)the unwinding of the discount applied to the obligation
III \(\quad\)changes to actuarial assumptions
IV \(\quad\)experience adjustments
A) I and II
B) II and III
C) III and IV
D) I and IV
Q2) Employee benefits can arise from which of the following?
I workplace agreements between an entity and its employees
II enterprise bargaining agreements between an entity and the relevant employee union
III government legislation
IV specific industry arrangements
A) I and II only
B) II, III and IV only
C) I, II and III only
D) I, II, III and IV
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Chapter 12: Inventories
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Q1) AASB 102 requires separate disclosure of:
A) where there has been abnormal wastage which has been expensed
B) details of inventory pledged as security for loans
C) interest costs which have been capitalised into the cost of inventory
D) details of key terms of purchase
Q2) Duo Ltd uses a periodic inventory system and rounds the average unit cost to the nearest dollar. The following data relates to Duo Ltd for the year ended 30 June 2013:
Opening inventory 15 units @ average cost of $25 each
January purchases 10 units @ $24 each
July purchases 25 units @ $26 each
October purchases 20 units @ $24 each
Ending inventory 20 units
The cost of ending inventory using the weighted average cost method (rounded to the nearest dollar) is:
A) $459
B) $465
C) $499
D) $483
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Page 14
Chapter 13: Property, Plant and Equipment
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Q1) Which of the following statements is NOT correct in relation to disclosure of property, plant & equipment balances?
A) Paragraph 79 of IAS 16 contains disclosure that are encouraged, but not required in relation to property, plant & equipment.
B) An entity must disclose the useful life estimates for each class of assets.
C) A summary of movements in the revaluation surplus is required to be disclosed.
D) Information on assets carried at revalued amounts must be disclosed on an individual asset basis.
Q2) An entity acquired an item of Plant in exchange for an item of Equipment. The Equipment has a carrying value of $5000 and a fair value of $6000. The journal entry to record the acquisition of the Plant will show:
A) a loss on acquisition of $1000;
B) proceeds on sale of Equipment of $1000;
C) a gain on sale of $1000;
D) proceeds on sale of Plant of $1000.
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Chapter 14: Leases
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Q1) Which of the following is an appropriate journal entry for the initial recognition by a lessor of a finance lease arrangement?
A) DR Lease receivable: CR Asset
B) DR Lease receivable: CR Lease liability
C) DR Leased asset: CR Cash/Accounts payable
D) DR Leased asset: CR Cash
Q2) The minimum lease payment is defined as including all of the following components except:
A) bargain purchase option
B) contingent rentals
C) a guaranteed residual value
D) the lease payments occurring over the lease term
Q3) On inception date, the present value of the minimum lease payments is:
A) $60 359
B) $64 170
C) $64 584
D) $69 000
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Chapter 15: Understanding Australian Accounting Standards
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Q1) Under AASB 138 Intangibles, goodwill may only be recognised as an asset if it:
A) arises as a result of creating new assets within the normal business operations
B) does not exceed its internally recorded cost
C) is internally generated
D) is acquired as part of a business combination.
Q2) The recognition criteria that an asset must meet before it may be recognised and presented in the financial statements include:
A) that the recognition of the asset is relevant to user decision making;
B) probability that future economic benefits will flow to the entity;
C) that the information about the asset is neutral;
D) a likelihood that the cost of the asset is verifiable.
Q3) The cost of an intangible asset is comprised of the fair value of the consideration:
A) less legal costs incurred in the purchase
B) plus directly attributable costs
C) plus indirect costs
D) less directly attributable costs
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Chapter 16: Impairment of Assets
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Q1) Value in use is:
A) amount obtainable from disposal of an asset excluding any selling costs
B) initial cost of an asset less any expected disposal costs
C) incremental costs directly attributable to disposal of an asset
D) the present value of future cash flows expected to be derived from an asset
Q2) When assessing the recoverable of assets that have previously been subject to an impairment loss, which of the following indicators assist in providing external evidence that an impairment loss has reversed:
A) the asset's market value has decreased significantly during the period
B) significant changes with an adverse effect on the entity have taken place
C) market interest rates have decreased during the period
D) internal reporting sources indicate that the economic performance of the asset will not be as good as expected.
Q3) An impairment loss occurs when:
A) the recoverable amount of an asset exceeds the carrying amount
B) the carrying amount of an asset exceeds the recoverable amount
C) the asset has a zero residual value
D) the recoverable amount of an asset exceeds its initial cost.
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18
Chapter 17: Accounting for Mineral Resources
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Q1) The obligation to record a provision for removal and restoration costs arising from mining exploration and evaluation arises through the application of:
A) AASB 6
B) AASB 137
C) The Framework
D) IFRIC 1
Q2) Which of the following methods best reflects the traditional concept of an asset?
A) the area of interest method
B) the successful efforts method
C) the appropriation method
D) the full cost method
Q3) Which of the following methods tends to be restricted to small mining companies in South Africa?
A) the area of interest method
B) the successful efforts method
C) the appropriation method
D) the full cost method
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Chapter 18: Agriculture
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Q1) Which of the following require disclosures to be made under AASB 117 and AASB 141?
A) operating and financing leases by lessors and lessees
B) finance leases by lessors and lessees only
C) operating and finance leases by lessees only
D) operating and finance leases by lessors only
Q2) Agricultural produce is defined in AASB 141 as:
A) a living animal or plant
B) a living product capable of biological transformation
C) the harvested product of the entity's biological assets
D) the detachment of produce from a biological asset or cessation of a biological asset's life processes
Q3) According to AASB 13 Fair Value Measurement, the market used to determine fair value should be:
A) the principal market, or, in the absence of a principal market, the relevant market
B) the most advantageous market
C) the relevant market
D) either the principal market, or, in the absence of a principal market, the most advantageous market
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Page 20
Chapter 19: Financial Statement Presentation
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Q1) According to AASB 101, a required format for the presentation of the statement of profit or loss and other comprehensive income is:
A) prescribed by the standard
B) not prescribed and no guidance is provided in the standard for a suitable format
C) not prescribed but guidance is provided in the standard for a suitable format
D) prescribed by the standard and further details are found in the Corporations Act.
Q2) Where an accounting estimate has been revised materially the item is:
A) to be accounted for retrospectively;
B) not required to be recognised in the current period;
C) to be accounted prospectively;
D) to be adjusted in the comparative numbers of previous periods.
Q3) Which of the following note disclosures are NOT required by AASB 101?
A) Sources of estimation uncertainty in relation to impairment of assets
B) Dividends declared after end of reporting period but before the financial statements are authorised for issue
C) the country of incorporation of the entity
D) the names and qualifications of all directors of the entity
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21
Chapter 20: Statement of Cash Flows
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Q1) According to AASB 107 Statement of Cash Flows, which of the following items does NOT fall within the definition of cash?
A) Bank notes and coins
B) Non-bank bills that are readily convertible to cash
C) Deposits on the short-term money market with a term of less than 3 months
D) Accounts receivable
Q2) For cash flow reporting purposes, operating activities include:
A) buying and selling of non-current assets
B) incurring and extinguishing equity and debt
C) acquisition and disposal of investments
D) activities not otherwise classified as financing and investing.
Q3) Which of the following descriptions best describes cash flows from investing activities? Those activities that relate to:
A) changing the size or financial structure of an entity
B) altering the composition of the debt of an organisation
C) the acquisition or disposal of non-current assets
D) restructuring the working capital components of a business.
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Chapter 21: Earnings Per Share
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Q1) Under paragraph 4, if an entity presents both consolidated and separate financial statements, the AASB 133 disclosures need only be determined on the basis of:
A) parent entity only
B) subsidiary entities only
C) consolidated information
D) the entity has choice of either parent entity or consolidation
Q2) ABC Ltd has 21 000 ordinary shares on issue at 1 January 2015 which is the beginning of its reporting period. On 30 June 2015, it issued a further 2000 ordinary shares for cash. On 1 November 2015, ABC Ltd repurchased 600 shares at fair value in a market transaction.
The weighted average number of shares for use in the earnings per share calculation is:
A) 21 000 shares
B) 21 700 shares
C) 21 900 shares
D) 22 400 shares
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Chapter 22: Operating Segments
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Q1) Which of the following statements is incorrect?
AASB 8 requires external revenue by product to be disclosed on an entity wide basis by all entities to which AASB 8 applies:
A) unless the information has already been provided as part of the reportable segment information;
B) unless the information is not available and the cost to develop it would be excessive; C) and must be calculated based on the financial information used to produce the entity's financial statements;
D) unless providing such information would be considered to damage the entity's competitive advantage.
Q2) A key objective of providing financial reporting information by segment is:
A) to allow detailed analysis to be undertaken by users such as segment profit margin analysis;
B) to allow the user to better understand the entity's future performance; C) to highlight poorly performing areas of an entity's business to users;
D) to allow users to better assess the entity's risks and returns.
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Chapter 23: Operating Segments
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Q1) The latest version of AASB 124 is applicable for annual reporting periods commencing on or after:
A) 1<sup>st</sup> January 2009;
B) 1<sup>st</sup> January 2010;
C) 1<sup>st</sup> January 2011; D) 1<sup>st</sup> January 2012.
Q2) The contractually agreed sharing of control over an economic entity is known as:
A) significant influence;
B) significant control;
C) joint control;
D) joint venture.
Q3) The scope of AASB 124 states that AASB 124 shall be applied in identifying the followings, except for:
A) outstanding balances, including commitments, between an entity and its related parties;
B) insider trading with related parties;
C) circumstances in which disclosures of transactions with related parties are required; D) related party relationships and transactions.
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Chapter 24: Business Combinations
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Q1) In a business combination, the acquirer is the party that:
A) obtains control of the other entities
B) concedes control over the acquired entities
C) sells the acquired entity
D) receives the acquisition consideration.
Q2) In order for a tangible asset to be recognised by an acquirer under a business combination it must be probable that future economic benefits will flow to the acquirer and:
A) its fair value can be measured reliably
B) it must be a non-current item
C) it must be measured using the present value method
D)it may not be a non-monetary asset.
Q3) Under AASB 3 the method of accounting for a business combination is the:
A) joint venture method
B) purchase method
C) market value method
D) acquisition method
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26
Chapter 25: Consolidation: Principles and Accounting Requirements
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Q1) If the cost of a business combination is greater than the acquired interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree:
A) a business combination gain on bargain purchase arises
B) goodwill has been purchased and must be recognised
C) the difference is treated as a special equity reserve in the acquirer's accounting records
D) the difference is treated as a loss and immediately charged to profit or loss of the period in which the business combination occurred.
Q2) Which of the following events can cause a change in the pre-acquisition elimination entry
Subsequent to acquisition date?
A) Transfers from post-acquisition retained earnings
B) Dividends paid from pre-acquisition reserves
C) Transfers from pre-acquisition retained earnings
D) Impairment of goodwill
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Chapter 26: Consolidation: Intragroup Transactions
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Q1) A parent entity group sold a depreciable non-current asset to a subsidiary entity for $2800. The asset originally cost $3000 and at the date of sale accumulated depreciation was $500. The amount of the unrealised gain on sale to be eliminated is:
A) $2800
B) $500
C) $300
D) $200
Q2) AASB 10 Consolidated Financial Statements, requires that intragroup transactions be:
A) eliminated on consolidation to the extent of the parent's interest in the subsidiary.
B) adjusted for in the books of the parent and subsidiary to the extent of the parent's interest in the subsidiary.
C) adjusted for in full in the books of the parent and subsidiary.
D) eliminated in full on consolidation.
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Chapter 27: Consolidation: Non Controlling Interest
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Q1) A non-controlling interest is a contributor of:
A) equity to a consolidated group;
B) debt to a consolidated group;
C) assets to a consolidated group;
D) profit to a consolidated group.
Q2) Which of the following statements is correct?
I made a change to the original question, as the original question is very similar to Q22.
A) The NCI is not entitled to share the group's profit.
B) Transactions that do not affect profit will not give rise to an adjustment to the NCI.
C) All intragroup transactions have an impact on the NCI share of equity.
D) When parent entity sells inventory to its subsidiary, a consolidation adjustment needs to be recorded to reduce the NCI.
Q3) When presenting a consolidated statement of financial position the non-controlling interest is:
A) presented separately within the non-current liability section;
B) presented as a separate component of total assets and total liabilities;
C) presented separately within the equity section;
D) shown as a separate portion of net assets.
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Chapter 29: Joint Arrangements
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Q1) Company A Limited and Company B Limited formed a joint operation and share in the output of the joint operation 60:40. The joint operation paid a management fee of $20 000 to Company A Limited during the current period. The cost to Company A Limited of supplying the management service was $14 000. The amount of profit that Company A Limited will recognise in relation to the provision of the management fee to the joint operation is:
A) NIL
B) $2 400
C) $3 600
D) $6 000
Q2) When eliminating any unrealised profit arising when a joint operator provides services to a joint operation the profit is eliminated against:
A) the investment in the joint operation;
B) retained earnings;
C) work in progress, finished goods and other inventory related accounts;
D) cost of goods sold.
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Chapter 30: Associates and Joint Ventures
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Source URL: https://quizplus.com/quiz/70198
Sample Questions
Q1) Adjustments made for the purpose of calculating the incremental adjustment to the share of profit of an associate are:
A) recognised in the books of the investor;
B) recognised in the books of the investee;
C) notional adjustments and not included in the books of the investee;
D) relate to realised transactions and so are recognised directly by the investee.
Q2) Where there are transactions between the investor and associate that result in an unrealised profit, the investor's share of the associate's profit is:
A) not affected at all regardless of whether the transaction is an upstream or downstream one;
B) affected only if the transaction is an upstream one;
C) affected only if the transaction is a downstream one;
D) affected regardless of whether the transaction is an upstream or downstream one.
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