PRE-COMPREHENSIVE EXAMINATION FINANCIAL ACCOUNTING 1 & 2 $¥.2011-2012 “Theories 1pteach 1 ‘The operating cycle ofan entity is that span of time which ‘a. Coincides with an entity's business cycle which runs from one trough ofthe entity's business activity to the next Corresponds with ts natural busines yea which runs fram ane rough ofthe particular Firm’ businoss activity tothe nex. _lssetby the industry's trade association usualy on an average length of time forall entities which are ‘members ofthe association. 4. Runs rom cash disbursement for items of inventory through thei sale to the realization of eash from sale. [At the Boginning ofthe current year, an investor acquired 308 ofthe ocdinary shares of another entity Inthe current year, the investes has net eaings which exceeded dvidends paid. The investor mistakenly recorded these transactions using the cost method instead ofthe equity method of accounting. What effect would this have on investment account, net earnings, and retained earnings, respectively? 2 Overstate, overstate, overstate 'b.Overstato, understate, understate &Understate, overstate, understate 1. Underetate, understate, understate Ian inventory is transferred to investment property that ist be carried at fir, the remeasurement to flr value 3, Included in equity by Inchded in profit or loss © Incuded in retained earings 4. Aecounted fr as revaluation of inventory Which ofthe fallowing best dscrbos residual value? 4. Theestimated net amount currently obtainable If the asst is at the ond of its useful ie The present value of estimated future cash lows expected to arise fom the continuing use ofthe asset and from its timate isposal The amount at which the asset could be exchanged between knowledgeable and wing partios nan arm's length transaction 44. The amount of cash or cash equivalents that could curently obtained by sling the asset in an orderly ‘isposat Which ofthe following statements regarding depreciation struc? 2a. Anassot must be depreciated frm the date ofits purchase the date of sale b, The annual depreciation charge shal be constant over the feof the asset The total costs of an asset must eventually be depreciated 44. the carrying amount of an assets less than the residual value, deprecation I not charged Contingent assets are usualy recognized when a. Realized 1b. Occurrence is reasonably possible and the amount canbe reliably measured ‘&Oceurrence is probable and the amount can be reliably measured 1d, Theamountcan be reliably measured Ifthe sale and leaseback transaction results ina finance lease, any exces of sale procoeds over the carrying amounts 1. Deferred and amortized as income over the lease term 1, Deferred and amortized as income over theif ofthe asset Recognized in the profit or loss immediately 4. Recognized in other comprehensive income10. a 2 13. 14 Uf the present value of 2 note issued In exchange for a property's las than Its face amount, the ifference shall Amortized as interest expense over the life of the note “Amortized as interest expense over the lf of the asset Included in interest expense inthe year of issuance be | Included in the costo the asset b 4 Which ofthe following ienota theoretical basis forthe allocation of expense? 3. Summarization b. Classification Profit maximization immediate recognition \Which ofthe following would be matched with current revenue ona basis other than association of causeand effect? 3. Good! Sales commission Cost of goods sold Purchases on account ‘The installation of accounting procedures forthe accumulation of accounting data is known 3s a. Auditing . Financlal Accounting 6 Gloctronie data processing 1d. Recounting system eis a financing agreement thats usually done ona “without recourse, notification basis. a. Pledge b. Assignment Factoring 6. Discounting Any transtion loss on fist adosting PAS 19 shal be recognized 1. Asexpense immediately Ik As expense over a maximum ofS years a. Lonly b. Monly Either ort irevocably 44. Either or i revocably ‘Any transition gain on fist adopting PAS 19 shal be ‘8. Recognized as income immediately b. Deferred and amorszed over a maximum of § years © Credited to Retained Earrings 4. Credited to Equity Which one ofthe following lt an adjunctaecount that should not be closed a the end of every accounting period? Allowance for doubtful accounts be Fightin ‘&_Dscount on bonds payable 4 ‘Share premium Which ofthe following should be lnluded in plan assets?L Assets held by long-term employee benefit fund N.——Qualiying insurance policy a tonly b.tonly & Bothtandit Nether | nor 117. How should sales staff commission be dealt with when valuing inventors atthe lower of cost and net realizable vue? a. Added tocost bored &Deducted in arriving NRV 4. Deducted fram cost 28, These ae spoof principles, bases, conventions, rules and practices applied inthe preparation and presentation of financial statements. Accounting polices Accounting principles © Accounting standards 4. Accounting concepts 19. The use ofa discount lst account implies that cost ofa purchased inventory item is | Invoice price bist price © Invoice price less the purchase discount taken ‘4, Invoic price less the purchase discount allowable whether or not taken 20. Which ofthe followings not a derivative? Interest ate swap agreement Futures contract © Option Regular way purchase or sale Problems 2pts cach 4 During the curent year, Shawn Company incurred the following costs in connection with the issuance of bonds: Printing and engraving 150,000 Legal fees 800,000 Fees pad to independent accountants {or registration information 100,000 Commission pai to underwriter 1,500,000 ‘what amount should be recorded as bond issue costs to be amortized ver the term ofthe bonds? 1. 2,550,000 ». . 2,400,000 © 1500.00 3. 1,050,000 2. Hana Company had 700,000 ordinary shares authorized and 300,000 shares outstanding at January 12010. The {allowing events occured during 2010 Januaty31 Declared 10% stock dividends June 30 Purchased 100,000 shares August Reissued 50,000 shares November 30 Declared 2-or- stock split