1.

Valuing assets at the amount of cash or equivalents paid or the fair value of the consideration
given to acquire them at the time of acquisition most closely describes which measurement of
financial statement elements?

A. Current cost.

B. Historical cost.

C. Realizable value.

D. Value in Use.

E. Present Value.

2. Which of the following will cause a company to show a higher amount of amortization of
tangible assets in the first year after acquisition?

A. A higher residual value.

B. A lower amortization rate.

C. A shorter useful life.

D. A lower carrying amount.

E. A higher impairment loss.

3. BAURU, S.A., a Brazilian corporation, has recently purchased and installed a new machine
for its manufacturing plant. The company incurred the following costs:

Purchase price $10,500

Freight and insurance $1,000

Installation $600

Professional fees $150

Maintenance staff training costs $500

The total cost of the machine to be shown on BAURU’s balance sheet is closest to:

A. $12,750.
B. $12,100.
C. $11,500.
D. $12,600.
 E. $12,250.

4. After reading the financial statements and footnotes of a company that follows IFRS, an
analyst identified the following intangible assets:

 product patent expiring in 40 years;

 copyright with no expiration date; and
 goodwill acquired 2 years ago in a business combination.

Which of these assets is an intangible asset with a finite useful life?

Product Patent Copyright Goodwill

A. Yes Yes No

B. Yes No No

C. No Yes Yes

D. Yes No Yes

E. Yes Yes Yes

5. A financial analyst at BETTO S.A. is analyzing the result of the sale of a vehicle for 85,000
Argentine pesos (ARP) on 31 December 2009. The analyst compiles the following information
about the vehicle:

Acquisition cost of the vehicle ARP 100,000

Acquisition date 1 January 2007

Estimated residual value at acquisition date ARP 10,000

Expected useful life 9 years

 Depreciation method Straight-line

The result of the sale of the vehicle is most likely:

A. a loss of ARP 15,000.

B. a gain of ARP 15,000.
C. a gain of ARP 18,333.
D. a loss of ARP 18,333.
E. a gain of ARP 10,000.

6. A business which comprises a single cash-generating unit has the following assets:

$m
Property 20
Plant and equipment 10
Patent 5
Goodwill 2
Net current assets 3
40
Following an impairment review it is estimated that the value of the patent is $3 million and the
recoverable amount of the business is $30 million.
At what approximate amount should the property be measured following the impairment review?

A. $4 million.
B. $2 million.
C. $18 million.
D. $16 million.
E. $10 million.

7. Diabelli Inc. is a manufacturing company that is operating at normal capacity levels. Which of
the following inventory costs is most likely to be recognized as an expense on Diabelli's financial
statements when the inventory is sold?

A. Selling cost.

B. Allocation of fixed production overhead.

C. Administrative overhead.

D. Research costs.

E. Storage costs.

8. Cinnamon Corp. started business in 2007 and uses the weighted average cost method. During
2007, it purchased 45,000 units of inventory at €10 each and sold 40,000 units for €20 each. In
2008, it purchased another 50,000 units at €11 each and sold 45,000 units for €22 each. Its 2008
cost of sales (€ thousands) was closest to:

A. €491.
B. €495.
C. €485.
D. €545.
E. €505.

9. Which of the following is the criterion for treatment of an investment as an associate?

A. Ownership of a majority of the equity shares.

B. Ability to exercise control.

C. Existence of significant influence.

D. Exposure to variable returns from involvement with the investee.

E. None.

10. On 1 June 2001 Premier Co acquired 80% of the equity share capital of Sandford Co. At the
date of acquisition the fair values of Sandford Co's net assets were equal to their carrying
amounts with the exception of its property. This had a fair value of $2 million BELOW its
carrying amount. The property had a remaining useful life of eight years.
What effect will any adjustment required in respect of the property have on group retained
earnings at 30 September 2001?

A. Increase $40,000.
B. Increase $20,000.
C. Decrease $20,000.
D. Increase $60,000.
E. Decrease $60,000.