MULTIPLE CHOICE THEORY

1. When a note payable is issued for property, goods, or services, the present value of the note is
measured by

a. The fair value of the property, goods, or services.

b. The fair value of the note.

c. Using an imputed interest rate to discount all future payments on the note.

d. Any of these.

2. When a note payable is exchanged for property, goods, or services, the stated interest rate is
presumed to be fair unless

a. No interest rate is stated.

b. The stated interest rate is unreasonable.

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c. The stated face amount of the note is materially different from the current cash sales price for similar

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items or from current fair

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value of the note.

d. Any of these. rs e
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3. Which of the following is not a relevant consideration when evaluating whether to derecognize a
financial liability?
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a. Whether the obligation has been discharged.

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b. Whether the obligation has been canceled.

c. Whether the obligation has expired.

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d. Whether substantially all the risks and rewards of the obligation have been transferred.
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4. A debtor and creditor might renegotiate the terms of a financial liability with the result that the
debtor extinguishes the liability fully or partially by issuing equity instruments to the creditor. This
transaction is sometimes referred to as
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a. Troubled debt restructuring

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b. Shared-based payment

c. Debt for equity swap

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d. Swaptions

5. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments does not apply to transactions in
situations where

a. The creditor is also a direct or indirect shareholder and is acting in its capacity as a direct or indirect
existing shareholder.

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 b. The creditor and the entity are controlled by the same party or parties before and after the
transaction and the substance of the transaction includes an equity distribution by, or contribution to,
the entity.

c. Extinguishing the financial liability by issuing equity shares is in accordance with the original terms of
the financial liability.

d. All of the above.

6. Which statement is incorrect regarding IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments?

a. The issue of an entity’s equity instruments to a creditor to extinguish all or part of a financial liability is
consideration paid in accordance with PFRS 9.

b. When equity instruments issued to a creditor to extinguish all or part of a financial liability are
recognized initially, an entity shall measure them at the fair value of the equity instruments issued,

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unless that fair value cannot be reliably measured.

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c. Even if the fair value of the equity instruments issued can be reliably measured, the equity

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instruments shall be measured to reflect the fair value of the financial liability extinguished.

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d. If only part of the financial liability is extinguished, the entity shall assess whether some of the
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consideration paid relates to a modification of the terms of the liability that remains outstanding.
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7. The difference between the carrying amount of the financial liability extinguished, and the
consideration paid, shall be recognized in
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a. Profit or loss
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b. Other comprehensive income

c. Equity

d. Either a or b
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8. An entity shall disclose a gain or loss recognized in debt for equity swaps as a separate line item in

a. Profit or loss
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b. The notes to financial statements.

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c. Other comprehensive income

d. Either a or b

9. In a debt extinguishment in which the debt is settled by a transfer of assets with a fair value less
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than the carrying amount of the debt, the debtor would recognize

a. No gain or loss on the settlement.

b. A gain on the settlement.

c. A loss on the settlement.

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 d. None of these.

10. In a debt settlement in which the debt is continued with modified terms, a gain should be
recognized at the date of settlement whenever the

a. Carrying amount of the debt is less than the total future cash flows.

b. Carrying amount of the debt is greater than the present value of the future cash flows.

c. Present value of the debt is less than the present value of the future cash flows.

d. Present value of the debt is greater than the present value of the future cash flows.

11. An extinguishment of bonds payable, which were originally issued at a premium, is made by
purchase of the bonds between interest dates. At the time of reacquisition

a. Any costs of issuing the bonds must be amortized up to the purchase date.

b. The premium must be amortized up to the purchase date.

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c. Interest must be accrued from the last interest date to the purchase date

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d. .All of these.

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