Financial Accounting
Test Questions
Course Introduction
Financial Accounting introduces the fundamental principles and practices involved in the preparation, interpretation, and analysis of financial statements for business entities. The course covers key concepts such as the accounting cycle, double-entry bookkeeping, accrual accounting, and the recognition and measurement of assets, liabilities, equity, revenues, and expenses. Students learn to apply generally accepted accounting principles (GAAP) and understand how financial information is used by stakeholders including investors, creditors, and management for decision-making and performance evaluation. Through theoretical and practical exercises, this course prepares students to critically assess financial reports and understand the ethical and regulatory environment of accounting.
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) Which of the following statement(s)is/are true with respect to the differences between IFRS and US generally accepted accounting standards?
A) There are no differences between IFRS and US generally accepted accounting standards.
B) There are only slight differences between IFRS and US generally accepted accounting standards.
C) There was a decision made by both the IASB and the US Financial Accounting Standards Board (FASB) to pursue a high Difficulty of convergence program designed to bring a number of short-term fixes between the two sets of accounting standards.
D) There are only slight differences between IFRS and US generally accepted accounting standards; and there was a decision made by both the IASB and the US Financial Accounting Standards Board (FASB) to pursue a high Difficulty of convergence program designed to bring a number of short-term fixes between the two sets of accounting standards.
E) None of the given answers.
Answer: C
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Chapter 2: The Conceptual Framework of Accounting and Its Relevance to Financ
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Q1) Which of the following statement(s)is/are true with respect to materiality?
A)It refers to the notion that an item need not be recognised in the financial reports.
B)It is a primary qualitative characteristic.
C)It relates to financial information where its omission or misstatement could influence the economic decisions of users.
D)All of the given answers.
E)Equipment under lease where the risks and rewards flows into the entity and it relates to financial information where its omission or misstatement could influence the economic decisions of users.
Answer: C
Q2) The AASB Framework serves as a guide to the Australian Accounting Standards Board (AASB)in developing accounting standards:
A)True
B)False Answer: True
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Page 4
Chapter 3: Theories of Financial Accounting
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Q1) To comply with AASB 101,in which section of the financial report should a summary of accounting policies adopted by reporting entities be positioned?
A) Anywhere in the notes to the accounts as long as this is disclosed.
B) Anywhere in the financial report.
C) Initial section of the notes to the accounts.
D) Middle section of the notes to the accounts.
E) End section of the notes to the accounts.
Answer: C
Q2) AASB 101 requires the summary of accounting policies adopted by reporting entities to be presented in any section of the notes to the financial report.
A)True
B)False
Answer: False
Q3) The Conceptual Framework can be described as a positive theory of accounting: A)True
B)False
Answer: False
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Chapter 4: An Overview of Accounting for Assets
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Q1) Heritage assets have characteristics that create doubt about whether or not they satisfy the definition of an asset.These characteristics include.
A) They are not expected to generate net economic benefits.
B) They never generate cash inflows.
C) They are unlikely ever to be sold.
D) They are not expected to generate net economic benefits and they are unlikely ever to be sold.
E) None of the given answers.
Q2) When an asset's recoverable amount is less than the asset's cost,the asset's cost must be written down to recognise an impairment loss:
A)True
B)False
Q3) Previously written-off assets are allowed to be reinstated under AASB 136 "Impairment of Assets".
A)True B)False
Q4) Future economic benefits can only be derived from the sale of an asset:
A)True B)False
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Chapter 5: Depreciation of Property, plant and Equipment
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Q1) Amortisation has the same meaning as depreciation,but conventionally is used in relation to intangible assets:
A)True
B)False
Q2) In accordance with AASB 116,under the cost model,the carrying amount of property,and equipment should be greater than:
A) Historical cost.
B) Recoverable amount
C) Revalued amount.
D) Depreciable amount.
E) None of the given answers.
Q3) Under the declining balance method of depreciation,the depreciable amount of an asset is determined by deducting residual value from cost or revalued amount.
A)True
B)False
Q4) Land that has a definite useful life should be depreciated.
A)True
B)False
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Chapter 6: Revaluation 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.
E) None of the given answers.
Q2) Australia is the only country that allows upward revaluations of non-current assets: A)True B)False
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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.
E) None of the given answers.
Q2) In addition to the cost-flow assumption,the system used to record movements in inventory also affects the determination of the cost of inventory.What are the systems commonly in use for recording the movement of inventory?
A) Continuous and cyclic.
B) ABC costing and overhead allocation.
C) Positive and periodic.
D) Periodic and perpetual.
E) None of the given answers.
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9
Chapter 8: Accounting for Intangibles
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Q1) AASB 138 states that intangible assets:
A) May not be revalued and must be amortised over their useful lives.
B) Are only able to be revalued if they have been internally generated and there is an active market for them.
C) May only be revalued to their fair value as assessed by a licensed valuer.
D) may be measured by using either the cost model or the revaluation model.
E) None of the given answers.
Q2) Development costs are less likely to meet the test for deferral than research costs: A)True
B)False
Q3) According to AASB 138 on intangible assets,if an entity buys another entity separate values can be assigned to purchased goodwill and to a brand name: A)True B)False
Q4) Internally generated brands,mastheads,publishing titles and customer lists are permitted to be recognised as intangible assets. A)True
B)False
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Page 10
Chapter 9: Accounting for Heritage Assets and Biological Assets
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Q1) Which of the following statements is a valid argument for not recognising heritage assets in the statement of financial position?
A) Heritage assets provide economic benefits.
B) The identity of the party that ultimately controls the heritage asset is not clear.
C) The benefits derived from use of heritage assets are measured reliably.
D) Demand for financial information on heritage assets has been clearly established.
E) None of the given answers.
Q2) Research has indicated that in general large arts institutions in the English-speaking world value their collections as assets and report them in their financial statements:
A)True
B)False
Q3) AASB 141 covers agricultural activities such as deep sea fishing.
A)True
B)False
Q4) Biological assets are defined in AASB 141 as 'living animal or plant':
A)True
B)False
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Chapter 10: An Overview of Accounting for Liabilities
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Q1) Pearl Ltd issues $8 million in 5-year debentures that pay interest every 6 months at a coupon rate of 12 per cent per annum.The required market rate of return is 16 per cent per annum.What is the issue price of the debentures (rounded to the nearest dollar)?
A) $6,926,387
B) $8,000,000
C) $9,177,614
D) $8,673,978
E) None of the given answers.
Q2) A debenture will be issued at par value:
A) Because that is the offer price. If the rate offered is too low the offer will be under-subscribed, so those who take it up will receive more interest.
B) On most occasions, because management is careful to issue the debentures at an amount close to the market rate.
C) On those rare occasions when the coupon rate is the same as the market rate.
D) On those occasions when the offer rate is equal to the coupon rate.
E) None of the given answers.
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Chapter 11: Accounting for Lease
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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 balance sheet 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 balance sheet date and a general description of the lessee's significant leasing arrangements.
E) The net carrying amount at balance sheet date for each class of asset.
Q2) AASB 117 defines the benefits of ownership to include.
A) Those obtainable from the insurance claims associated with it.
B) Those obtainable from gains in the realisable value of the asset.
C) Those obtainable from the profitable use of the asset.
D) Those obtainable from gains in the realisable value of the asset and those obtainable from the profitable use of the asset.
E) All of the given answers.
Q3) Explain what is meant by a 'direct finance' lease,and how such leases should be accounted under AASB 117.
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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) The "Offsetting" in AASB 132 "Financial Instruments: Presentation" is similar to "derecognition" in AASB 139.
A)True
B)False
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Page 14
Chapter 13: Accounting for Employee Benefits
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Q1) A defined contribution superannuation plan is one in which:
A) The contributions to the plan only are paid out to members on retirement.
B) The benefits paid out by the plan are based on the average salary of an employee over a period of years as a reflection of the employee's contribution to the employer.
C) The contributions are defined by the amount needed to pay out benefits to the members at a specified level on retirement.
D) The benefits paid out by the plan depend on the contributions made to the plan and the earnings of that plan.
E) None 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.
E) Are not covered by AASB 119.
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Chapter 14: Share Capital and Reserves
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Q1) Share capital:
A) Relates to one class of shares, with the remaining equity recorded as reserves or retained profits.
B) Represents the amount shareholders are guaranteed to receive if the company is wound up.
C) May relate to one or several classes of shares.
D) May be calculated by subtracting liabilities from assets.
E) None of the given answers.
Q2) Retained earnings can be used (reduced)for the purpose of a bonus issue of shares:
A)True
B)False
Q3) What is the effect of a stock split on earnings per share and the number of shares outstanding,respectively?
A) Increase; Decrease
B) Decrease; Increase
C) Increase; Increase
D) No effect; Increase
E) Decrease; No effect
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16
Chapter 15: Accounting for Financial Instruments
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Q1) Financial instruments have recently been developed and used for what purposes?
A. Increasing the volatility of primary financial instruments.
B. Making speculative gains.
C. Reducing risks.
D. Making speculative gains and reducing risks.
E. None of the given answers.
A)True
B)False
Q2) Prepayments are:
A. Not financial instruments because they typically provide a right to future goods or services.
B. Financial instruments because they typically provide a right to future goods or services.
C. Not financial instruments because they typically provide a right to cash or another financial instrument.
D. Financial instruments because they typically provide a right to future goods or services
E. Financial instruments as they are monetary assets.
A)True
B)False
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Page 17
Chapter 16: Revenue Recognition Issues
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Q1) Lonsdale Ltd sells mobile phones and provides a one-year warranty.Lonsdale is able to recognise revenue at point-of-sale in accordance with AASB 118 because:
A) this is industry practice;
B) repairs are unlikely within a year of sale;
C) cost of repairs can be estimated based on experience and this is recognised as warranty expense in the year of sale;
D) cost of repairs can be estimated based on experience and this is recognised as sales returns;
E) E: None of the given answers.
Q2) Transactions that result in an inflow of economic benefits such as the purchase of assets can be classified as a gain:
A)True
B)False
Q3) If a company sells its product but gives the buyer the right to return the product,AASB 118 requires revenue from the sales transaction to be recognised at the time of sale.
A)True
B)False
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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) An income statement that includes the following items: Revenue
Other Income
Employee Benefits and Costs
Motor Vehicle Expenses
Would have been prepared using the:
A) Nature of expense method.
B) Narrative method.
C) Revenues and gains approach.
D) The function of expense approach.
E) None of the given answers.
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Chapter 18: Accounting for Share-Based Payments
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Q1) Which of the following share-based payment transactions are considered cash-settled transactions within the scope of AASB 2?
A) Company A grants 5,000 options each to its directors in return for services to be received over two years.
B) Company B purchases machinery in exchange for shares.
C) Company C incurs a liability based on the price of the entity's share options to pay for the services of its sales executives.
D) All of the given answers.
E) Company A grants 5 000 options each to its directors in return for services to be received over two years; Company B purchases machinery in exchange for shares.
Q2) What is the Employee benefits expense of Liverpool Ltd related to this share option for the year ended 30 June 2012?
A) $19,500
B) $22,750
C) $26,500
D) $70,200
E) None of the given answers
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Chapter 19: Accounting for Income Taxes
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Q1) Raging Dragons Ltd has a depreciable asset that is estimated for accounting purposes to have a useful life of 15 years.For taxation purposes the useful life is 10 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 per cent and the cost of the asset is $150,000.What adjustment will be required to the deferred tax liability account in years 10 and 11?
A) End of year 10: $1,500; Year 11: $1,500
B) End of year 10: $5,000; Year 11: $(10,000)
C) End of year 10: $1,500; Year 11: $(3,000)
D) End of year 10: $15,000; Year 11: $(3,000)
E) None of the given answers.
Q2) The balance sheet approach adopted in AASB 112:
A) Will continue to be used as the alternatives are too simplistic.
B) Will only be understood by the very sophisticated financial readers.
C) Uses existing balance sheet data thus reducing record keeping costs.
D) Will only be understood by the very sophisticated financial readers and uses existing balance sheet data thus reducing record keeping costs.
E) None of the given answers.
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Page 21
Chapter 20: Cash-Flow Statements
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Q1) AASB 107 requires disclosure of information about transactions and events that do not result in cash flows during the financial year,including:
A) A commitment under an operating lease.
B) The use of forward exchange contracts to hedge purchases.
C) Acquisition of assets by entering into finance leases.
D) Liquidation of investments.
E) None of the given answers.
Q2) Cash-flow statements should be subdivided into selling,financing and investing categories:
A)True
B)False
Q3) Sharma (1996)argues that cash flows from operating activities divided by current debt should replace the current ratio as a measure of liquidity: A)True
B)False
Q4) AASB 107 requires disclosures about non-cash financing and investing activities: A)True B)False
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Chapter 21: Accounting for the Extractive Industries
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Q1) An area of interest is defined in AASB 6 as:
A) A specific type of exploration activity as defined by either the production process, type of mineral or gas extracted, or expected future pattern of cash inflows.
B) A cost centre as defined for the purposes of tracking expenses and revenues and which is also used as a basis for completing taxation returns.
C) A specific geological area as defined by the initial geological surveys or as grouped according to the nature of the natural substance to be extracted.
D) An individual geological area which is considered to constitute a favourable environment where there may be a mineral deposit or natural gas field, or which has been proved to contain such a deposit or field.
E) None of the given answers.
Q2) AASB 6 deals with the financial recording and performance of an entity and must be applied by all companies:
A)True
B)False
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Chapter 22: Accounting for General Insurance Contracts
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Q1) A general insurer that also conducts other business may be required to apply different valuation methods even within 1 class of assets.For example,land and buildings may be valued in one of a number of ways,including:
A) At cost or fair value where they do not back general insurance business liabilities but only at fair value under AASB 1023.
B) At lower of cost and net realisable value where they are an integral part of the insurance business and net present value where they are not an integral part of the insurance business.
C) At management's discretion, at either net market value or depreciated (in the case of buildings) cost.
D) Depending upon the whether the land and buildings are an investment for the purposes of generating revenue or used as an operating asset to provide office space for the insurance business, at net market value or fair value respectively.
E) None of the given answers.
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Chapter 23: Accounting for Superannuation Plans
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Q1) Use of professional judgement to establish the net market values of assets is not permitted on which of the following matters?
A) Market price of unquoted securities;
B) Discount factor to use for long-term monetary assets;
C) Market price of quoted securities;
D) Costs of expected disposal;
E) None of the given answers.
Q2) Superannuation funds are monitored and regulated by the Australian Vigilance Regulation Authority and the Australian Securities and Investments Commission:
A)True
B)False
Q3) In the case of a defined benefit plan,the statements the trustees must provide if a detailed actuarial review has not been conducted at balance date include:
A) An operating statement and a balance sheet.
B) A statement of net assets and an operating statement.
C) A statement of changes in net assets and a statement of net assets.
D) A statement of changes in net assets and a balance sheet.
E) None of the given answers.
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25
Chapter 24: Events Occurring After Balance Sheet Date
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Q1) If an event or transaction that occurs after reporting date does not relate to conditions that existed at reporting date then:
A) No action should be taken to report the event or transaction in the financial reports.
B) The balance sheet should not be adjusted but effects on the income statement should be reflected in that statement.
C) The event or transaction should be disclosed in the notes to the accounts as a post-reporting date event and the financial statements adjusted appropriately.
D) The event or transaction should be disclosed in the notes to the accounts if it is material.
E) None of the given answers.
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 Directors' Declaration must be signed before the reporting date: A)True B)False
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26
Chapter 25: Segment Reporting
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Q1) AASB 8 specifies that a geographical segment cannot include more than two countries:
A)True
B)False
Q2) Research has shown that companies only provide segment information when it is required by accounting regulation:
A)True
B)False
Q3) Situations in which aggregated data may be sufficient to evaluate the performance of an entity include:
A) Where the entity has not existed for a long period of time.
B) Where the segments of the entity have highly correlated profit prospects.
C) Where the entity has a large consolidated asset base.
D) Where the entity operates in different geographic areas with different risks.
E) None of the given answers.
Q4) 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
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Chapter 26: Related-Party Disclosures
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Q1) The disclosure requirements of AASB 124 include:
A) Disclosure of the fair value of a transaction with a related party.
B) Restatement of the transaction to its fair value in the accounts of the entity.
C) Comparative transactions with non-related parties to form a basis for a fair value assessment by users of the accounts.
D) Disclosure of the fair value of a transaction with a related party and comparative transactions with non-related parties to form a basis for a fair value assessment by users of the accounts.
E) None of the given answers.
Q2) The disclosures that AASB 124 requires for other related parties are:
A) Limited to the aggregate amount, nature and type of transaction.
B) Largely the same as the disclosure requirements for directors of the entity.
C) Fairly consistent with the requirements for the wholly owned group.
D) Limited to the nature and terms and conditions of each different type of transaction.
E) None of the given answers.
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28
Chapter 28: Accounting for Group Structures
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Q1) It is possible for one entity to control another entity under the AASB 3 definition without the controlling entity having any equity-ownership interest in the other entity:
A)True
B)False
Q2) The partition effect in relation to a group of companies arose when:
A) It was not permitted under corporations law to consolidate an entity that was not a company. This resulted not only in the non-company entity not being consolidated, but also all the entities (company or otherwise) that it controlled not being consolidated.
B) The minority shareholders in a number of companies controlled by a parent entity organised themselves to block the transfer of funds within a group.
C) Companies in a group co-ordinated to transfer assets in such a way as to protect part of the group from being taxed, thus reducing the total tax owing for the group as a whole.
D) Dividends were declared and paid in such a way as to manage cash reserves within a group.
E) None of the given answers.
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Chapter 29: Further Consolidation Issues I: Accounting for
Intragroup Transact
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Q1) Examples of intragroup transactions include:
A) Dividends payable to group members.
B) The payment of taxation.
C) The recognition of minority interests.
D) The sale of inventories to external parties.
E) None of the given answers.
Q2) The fact that consolidation worksheets start "afresh" each year means that the tax entry for eliminating unrealised profit in opening inventory requires a "Dr" to Deferred Tax Assets,rather than Income Tax Expense:
A)True
B)False
Q3) Intragroup transactions that are to be eliminated in the consolidated accounts include:
A) Inter-entity loans.
B) Inter-entity sales of non-current assets.
C) The payment of management fees to a member of the group.
D) The transfer of tax losses between entities in the group without consideration being paid.
E) All of the given answers.
Page 31
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Chapter 30: Further Consolidation Issues II: Accounting for Minority Interests
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Q1) 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 ED 139,what would be the amount of 'goodwill allocated to non-controlling interests of Subby Limited'?
A) $3,000.
B) $9,000.
C) $12,000.
D) ($3,000).
E) Cannot determine from the information given.
Q2) Minority interests are 'identified' and eliminated as part of the consolidation process: A)True B)False
Q3) One of the steps in preparing consolidated financial statements is working out the amounts to be attributed to non-controlling interests to determine the amount to be eliminated in the consolidation process.
A)True
B)False
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Chapter 31: Further Consolidation Issues III: Accounting for
Indirect Ownershi
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Q1) Non-controlling indirect interests are entitled to receive dividends in a subsidiary.
A)True
B)False
Q2) The following diagram represents the ownership of issued share capital of the companies in a group.What is the total outside equity interest in D Ltd?
A) 20 per cent
B) 33.6 per cent
C) 60 per cent
D) 24.8 per cent
E) None of the given answers.
Q3) The elimination of the parent entity's investment in a subsidiary will be done by eliminating the investment against the parent entity's direct and indirect ownership interest in pre-acquisition share capital and reserves.
A)True
B)False
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Chapter 32: Further Consolidation Issues Iv: Accounting for
Changes in the Deg
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Q1) AASB 3 specifies that where a parent entity purchases additional shares in a subsidiary over time:
A) No further goodwill on purchase may be recognised. Any excess payment over the fair value of the additional net assets purchased is to be written off in the period of the purchase.
B) Each purchase of shares is to be treated as part of a single, combined purchase so that the amount of goodwill reported in the consolidated financial statements cannot be increased at the discretion of the controlling entity.
C) Goodwill would be recognised by a single consolidation journal entry at that point in time when the parent entity ultimately gains control of the subsidiary.
D) The parent entity may choose between treating the purchases separately or combining them into a single transaction.
E) None of the given answers.
Q2) Additional purchases of shares in a subsidiary should be accounted for by the combined tranche method,according to AASB 3:
A)True
B)False
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Chapter 33: Accounting for Equity Investments
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Q1) An equity investment that is expected to be held for longer than six (6)months after reporting date is considered a non-current asset:
A)True
B)False
Q2) An equity instrument is defined as:
A) An agreement to exchange rights in an entity at an agreed price by a willing buyer and a willing seller in an arm's length transaction.
B) An arrangement in writing to transfer the risks and rights of ownership to the holder of the script in exchange for consideration in the form of payment in cash or kind.
C) Any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
D) An arrangement to ultimately settle in cash or by transferring a right to another financial asset to the holder within a specified time and at a specified value.
E) None of the given answers.
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Chapter 33: Accounting for Equity Investments
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Q1) AASB 131 disclosure requirements for jointly controlled operations include:
A) The name and principal activities of each jointly controlled operation.
B) For each category of liabilities, the amount of obligation arising out of jointly controlled operations.
C) For each category of assets, the aggregate amount employed in jointly controlled operations.
D) The name and principal activities of each jointly controlled operation and for each category of assets, the aggregate amount employed in jointly controlled operations.
E) All of the given answers.
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) AASB 131,'Interests in joint ventures' specifies how the venturers should account for their interest in a joint venture and how the joint venture's accounts should be prepared.
A)True
B)False
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Chapter 35: Accounting for Foreign Currency Transactions
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Q1) Apart from some limited exceptions,AASB 121 requires that exchange differences on monetary items shall be:
A) Deferred and recognised when the associated asset or liability is realised or settled.
B) Treated as a reserve or provision against the associated monetary item.
C) Not recognised in the accounts until the monetary asset is received or monetary liability settled.
D) Recognised as income or an expense in the reporting period in which the exchange rates change.
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.
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Chapter 36: Translation of the Accounts of Foreign Operations
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Q1) Distributions from retained profits are translated at A) The 'spot rate'.
B) The rates current at the reporting date.
C) The rates current at the dates when the retained profits were created.
D) The rates current at the dates when the distributions were first proposed.
E) The rates current at the dates when the distributions were made.
Q2) AASB 121 specifies that post-acquisition movements in equity other than retained profits or accumulated losses are translated at A) The 'spot rate'.
B) The 'forward rate'.
C) The 'market rate'.
D) The 'closing rate'.
E) None of the given answers
Q3) The amount of a foreign operation's post-acquisition retained earnings as translated into Australian dollars will depend on the amount translated from the income statement:
A)True
B)False
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Chapter 37: Accounting for Corporate Social Responsibility
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Q1) An externality can be defined as:
A) An impact of an external group or entity on the reporting organisation.
B) Impacts that a reporting organisation has on parties that have a direct financial relationship with the organisation.
C) Impacts that a reporting organisation has on parties that are external to the organisation; parties that typically have no direct relationship with the organisation.
D) Impacts on the organisation that are not of an economic nature and which are caused by environmental protection regulations.
E) None of the given answers.
Q2) One way in which traditional financial accounting has been able to deal in an environmentally friendly way with the measurement of effects on the environment is through the recognition of pollution permits and emission rights as assets:
A)True
B)False
Q3) A Sustainability Report is an example of a stand-alone social report.
A)True
B)False
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