Week 2 Quiz

  1. Which of the following is not an advantage of having global accounting standards?

(a)Reduce the cost of reporting

(b)Easier to raise international finance

(c)Decreases the firm’s cost of capital

(d)Decreases the firm’s share price

  1. The conceptual framework

(a)Creates accounting standards

(b)Replaces existing standards

(c)Provides a base of principles to assist preparers of accounting reports where no standard exists

(d)Helps standard setters provide more alternatives in existing standards

  1. Which of the following best describes the purpose of the IASB Framework?

(a)Sets out the ethical code that Chartered Accountants must follow

(b)Assists auditors to prepare and conduct an audit of financial statements.

(c)Provides a set of fundamental principles to guide the preparation of financial statements.

(d)Ensures that accountants prepare financial statements that are true and fair.

  1. Which of the following is not a qualitative characteristic of financial information?

(a)Financial information must be understandable to readers who have a reasonable ability to comprehend financial statements.

(b)Financial information must be comparable so readers can assess an entity's performance.

(c)Financial information must be relevant to the needs of readers to assess an entity's ability to survive.

(d)Financial information shall be prepared on an accrual basis and on the assumption the reporting entity is a going concern.

  1. Why do we need the IASB Framework?

(a)To define the meaning of “true and fair”

(b)To ensure financial statements are based on clearly understood and agreed accounting principles.

(c)To ensure 'best practice' is followed by accountants when preparing financial statements.

(d)Because the Chinese government made it part of the law in 2006.

  1. Which of the following is not a reason for issuing shares?

(a)To reduce liquidity

(b)As part of the Chief Executive Officer’s salary

(c)As consideration on an acquisition

(d)As a share dividend to shareholders

  1. Which of the following is part of Owners’ Equity (Shareholders’ Funds)?

(a)Net profit before tax

(b)Retained earnings

(c)Trade creditors (payables)

(d)Sales revenue

  1. Which of the following is not a distributable reserve?

(a)Retained earnings

(b)Realised gains

(c)Revaluation reserve

(d)None of the above

  1. A temporary difference that would result in a deferred tax liability is

(a)Excess of tax depreciation over financial accounting depreciation

(b)Interest on bonds

(c)Accrual of a warranty expense

(d)Subscriptions received in advance

  1. Temporary differences arise when revenues are taxable:

After they are recognisedBefore they are recognised

in financial incomein financial income

(a)YesYes

(b)YesNo

(c)NoNo

(d)No Yes

  1. Which of the following is not a cost of an item of property, plant and equipment?

(a)Purchase price

(b)Repairs and maintenance expenses

(c)Installation expenses

(d)Costs of site preparation

  1. Which of the following is true of depreciation?

(a)Depreciation is the process that establishes the useful life of an asset

(b)Depreciation is the term normally applied to intangible assets such as patents and goodwill

(c)Depreciation is the service potential in an asset that a business can use to make money

(d)Depreciation is regarded as a measure of the cost of economic benefits being used up

  1. Which of the following is not a method of depreciation?

(a)Sum of the units method

(b)Straightline method

(c)First in first out method

(d)Diminishing value method

  1. Which of the following statements is true? Impairment of an asset can occur when the carrying amount is

(a)less than net selling price

(b)greater than value in use

(c)less than recoverable amount

(d)none of the above

  1. Which of the following is not an advantage of a finance lease for the lessee?

(a)Cash flow management

(b)Can be easily cancelled

(c)Flexibility of asset base

(d)Conservation of capital

  1. Which of the following does not apply to a finance lease?

(a)The ownership of the asset is shifted to the lessee by the end of the lease period

(b)The lessee can buy the asset at the end of the lease term for a below-market price

(c)The present value of the minimum lease payments amounts to substantially all of the fair value the asset at the inception of the lease

(d)The period of the lease encompasses not more than 75% of the useful life of the asset (and the lease is noncancellable during that time)

17.A lessee is negotiating a new lease for a large piece of property. Which of the following is most likely to be true?

(a)The lessee will try to structure this contract as an operating lease to take advantage of off-balance sheet financing

(b)The lessee will not care whether the contract is viewed as an operating lease or a capital lease.

(c)The lessee will try to structure this contract as a capital lease to avoid the implications of off-balance sheet financing.

(d)The lessee will structure the contract in whatever way is most convenient for the lessor (the actual owner of the property).

  1. Which of the following is not classified as research?

(a)The design of tools, jigs, moulds and dies involving new technology

(b)Activities aimed at obtaining new knowledge

(c)The search for alternatives to materials, devices, products, process, systems and services

(d)The search for, evaluation and final selection of, applications of research findings or other knowledge

  1. Which of the following intangible assets may not be amortised over its useful life?

(a)Copyright

(b)Patent

(c)Purchased goodwill

(d)Computer software

  1. What must be disclosed in the financial statements for each type of intangible asset?

(a) Whether the useful lives are indefinite or finite and, if finite, the useful lives or the amortisation rates used

(b) The amortisation methods used for intangible assets with finite useful lives

(c) The gross carrying amount and any accumulated amortisation

(aggregated with accumulated impairment losses) at the beginning andend of the period

(d) All of the above

(e)None of the above