AE 111 Prelim Summative results in increase in Inflation adjusted cost

Assessment 3 equity other than

Total points136/150
Assessment Proper
136 of 150 points
Derecognition normally
occurs when *
An item no longer meets
the definition of an asset
or a liability
The entity loses control of
the asset
The entity no longer has a
present obligation for the
liability
All the other choices are
correct
contribution from equity
It is the present ability to
holders
direct the use of an
economic resource and
Expense is decrease in obtain the benefit that may
asset or increase in flow from it. *
liability that results in
decrease in equity other
than distribution to equity Control
holders
Legal right
Income and expenses are
the elements that relate to Obligation
financial position
Ownership
Income encompasses
revenue and gain
The matching principle is
best demonstrated by *
The elements of financial
position describe amounts of
resources and claims against Not recognizing any
resources * expense unless some
revenue is realized

Rights that have the During a period of time

Associating effort with
potential to produce
accomplishment
economic benefits and At a moment in time
correspond to an obligation
of another entity include all, Recognizing prepaid rent
except * During a period of time received as revenue
and at a moment in time

Right to receive cash Establishing an

Neither during a period of appropriation for
time nor at a moment in contingency
Right to receive goods time

It is a decrease in asset or an
Right to exchange Which measurement increase in liability that
economic resources with attribute is not currently results in decrease in equity
another entity on used in practice? * other than distribution to
favorable terms equity holders *
Present value
Right over property, plant
Asset
and equipment
Fair value
Liability
Which statement is not true
about income and Current cost
expense? * Income
Inflation adjusted cost
Income is increase in asset Expense
or decrease in liability that Correct answer
The presentation and Which concept is applied to Expensed in the period
disclosure requirement net income and other incurred
achieves all of the comprehensive income? *
following, except *
Allocated to the specific
Financial capital product based on the best
An effective estimate of the product
communication tool processing time
Physical capital

More relevant and Expensed in the period in

Legal capital which the related revenue
faithfully represented
financial information is recognized
Borrowed capital
Understandability and Capitalized and then
comparability of It is a present economic amortized over a
information resource controlled by the reasonable period
entity as a result of past
events * An example of direct
Financial position,
financial performance, matching of an expense with
and cash flows revenue would be *
Asset

The term recognized is Liability Depreciation expense

synonymous with the term *

Equity Office salaries expense

Recorded
Income Direct labor costs incurred
Realized to produce inventory sold
during a period
Which of the following
Matched criterial need not be
satisfied for a liability to Advertising expense
exist? *
Allocated
The measurement bases
include *
Revenue may result from * The entity has an
obligation
Historical cost
A decrease in an asset
The obligation is to
from primary operations
transfer an economic Current value
resource.
An increase in an asset
from incidental Assessed value
The obligation is a present
transactions
obligation that exists as a
result of a past event. Historical cost and current
An increase in a liability value
from incidental
The settlement is expected
transactions Which principle best
to result in an outflow of
economic benefit describes the rationale for
A decrease in a liability matching distribution costs
from primary operations and administrative expenses
Costs that can be reasonably with revenue of the current
associated with specific period? *
revenue but not with
specific product should be *
 Direct matching Statement of financial An item is recognized in the
performance financial statements if *
Systematic and rational
allocation Statement of financial It is probable that
position economic benefits will
Immediate recognition flow to or from the entity.
The elements directly
related to the measurement It meets the definition of
Partial recognition
of financial position are * an asset, liability, equity,
income and expense
A cause and effect
relationship is implicit in Asset, liability and equity
the * The entity has ownership
of such item
Asset and liability
Realization principle
It is probable that
Income and expense
economic benefits will
Historical cost principle flow to or from the entity
Asset, liability, equity, and that the cost can be
income and expense measured reliably
Matching principle

What is the primary The writeoffs of a worthless

Going concern assumption
distinction between revenue patent is an example of
and gain? * which of the following
Correct answer principles? *
Matching principle The materiality of the
amount Associating cause and
It is a duty or responsibility effect
that an entity has no The likelihood that the
practical ability to avoid * transaction will recur Immediate recognition

Right The nature of the activity Systematic and rational

that gives rise to the allocation
transaction
Obligation
Objectivity
The method of disclosing
Equity
the transaction
Which is not within the new
definition of an asset? *
Expense
Which of the following is
not an acceptable basis for
This new term refers to the the recognition of An asset is a present
statement of profit or loss expense? * economic resource
and a statement presenting
other comprehensive The economic resource is
income * Systematic and rational
a right that has potential
allocation
to produce economic
benefit
Income statement
Direct matching
The economic resource is
Statement of
Immediate recognition controlled by the entity as
comprehensive income
a result of past event.
Cash disbursement
 
Future economic benefit is
expected to flow to the
entity
Correct answer
Future economic benefit is
expected to flow to the
entity
Income and expenses are
Current value includes *
classified as *
Fair value and present
value
Fair value and current cost
Current cost and present
value
Fair value, present value,
and current cost
Which of the following in
the most precise sense
means the process of
Which of the following is
converting noncash
not a theoretical basis for
resources and rights into
the allocation of expense? *
cash or claims to cash? *
Allocation
Collection
Recognition
Realization
Which category of expense
is subject to immediate
Revenue
recognition in the income
conventionally refers to *
statement? *
Utilities expense for the
production line of a
manufacturer
Repairs and maintenance The process of measuring
expense incurred on and relating revenue and
production equipment of a expenses during a period
manufacturer
The earning process
The salary of the which gives rise to
production foreman revenue realization
The salary of the entity The process of identifying
president those transactions that
result in an inflow of
assets to the entity
Correct answer
The process of identifying
Profit or loss and other
transactions to be
comprehensive income
recorded as revenue in an
accounting period
Profit, loss and retained
earnings
What is an example of cost
that cannot be directly
Retained earnings and related to particular revenue
other comprehensive but incurred to obtain
income benefits that are exhausted
in the period when the cost
Ordinary and is incurred? *
extraordinary
Sales commissions
Sales salaries
Freight in
Immediate recognition
Prepaid insurance
Systematic and rational
allocation
Correct answer
Sales salaries
Cause and effect
association
Which of the following
Profit maximization practices may not be an
acceptable deviation from
recognizing revenue at the
recognition point of sale? *
Upon receipt of cash
The process of identifying
transactions to be
During production
recorded as revenue in an
accounting period
Upon receipt of order
 End of production
When should an expenditure
be recorded as an asset
rather than an expense? *
Never
Always
If the amount is material
When there is a right that
has the potential to
produce economic benefit
The elements directly
related to the measurement
of financial performance
are *
Income and expense
Asset, liability and equity
Asset and liability
Income, expense and
equity
It is the amount of cash or
cash equivalent that would
have to be paid if the same
or an equivalent asset was
acquired currently. *
Historical cost
Current cost
Realizable value
Present value
Financial capital is defined
as *
Net assets in monetary Allocation of insurance
terms cost
Net assets in terms of Depreciation of property,
physical productive plant and equipment
capacity
Officers’ salaries
Legal capital
Which statement regarding
Share capital issued and the term profit is true? *
outstanding
Profit is any amount over
The term income * and above that required to
maintain the capital at the
beginning of the period.
Includes revaluation of
land
Profit is equal to income
minus expenses
Includes adjustment of
prior period error
Profit is the equivalent of
net income under PFRS
Includes gain resulting
from the sale of an asset
in an arm’s length All of the statements are
transaction true about the term profit
Is the same as retained Bad debt expense is
earnings recognized according to
which expense recognition
principle? *
Which accounting principle
is being observed when an
accountant charges to Direct matching
expense a cost that
contributed to revenue
during a period? * Immediate recognition
Systematic and rational
Revenue realization
allocation
Matching
Critical event recognition
Monetary unity
Obligations to transfer an
economic resource include
Conservatism all, except *
Which of the following is an Obligation to pay cash
example of the cause and
effect association
principle? * Obligation to deliver
goods
Sales commission
 Obligations to provide
services
Obligation to transfer an
economic resource even if
a specified future event
does not occur
Generally, revenue is
recognized *
At the point of sale
When cause and effect are
associated
At the point of cash
collection
At appropriate points
throughout the operating
cycle
Which statement conforms
to the realization concept? *
Depreciation was assigned
to product unit cost
Equipment was sold in
exchange for a note
receivable
Cash was collected on
accounts receivable
Product unit costs were
assigned to cost of goods
sold
Correct answer
Equipment was sold in
exchange for a note
receivable
Which statement is true
about current value? *
Fair value of an asset is The nominal amount of
the price that would be net assets at year-end
received to sell an asset in increased after excluding
an orderly transaction distributions to and
between market contributions from owners
participants at the
measurement date
The physical productive
capital at year-end
Value in use is the present increased
value of the cash flows
expected to be derived
It is the process of capturing
from the use and ultimate
for inclusion in the financial
disposal of an asset
statements an item that
meets the definition of the
Fulfillment value is the elements of financial
present value of the cash statements. *
expected to be transferred
for the payment of
liability Recognition
All of the choices are Measurement
correct
Classifying
A decrease in an asset
arising from peripheral or Derecognition
incidental transaction is
called *
It is an increase in asset or a
decrease in liability that
Capital expenditure results in increase in equity
other than contribution from
equity holders *
Cost
Loss Asset
Expense Liability
Under the financial capital Income
concept, net income occurs
when * Expense
The nominal amount of Which statement in relation
net assets at year-end to income is true? *
increased
Income encompasses both
The physical productive revenue and gain
capital at year-end
increased after excluding
Revenue encompasses
any distributions to and
both income and gain
contributions from owners
 Gain encompasses both All of the choices match depreciated or amortized
income and revenue the definition over subsequent accounting
periods? *
Income encompasses An outflow of asset based
revenue only on an activity that represents To reduce the income tax
the major operations is liability
called *
This arises in the course of
ordinary regular activities of To aid management in the
the entity and is referred to Loss decision-making process
by a variety of different
names including sales, fees,
interest, dividends, royalties Liability To match the cost of
and rent. * production with revenue
Expense
To adhere tot the
Income
accounting concept of
Equity
conservatism
Revenue
It is the sorting of assets,
What is the new term to
liabilities, equity, income
Profit describe the statement of
and expenses with similar
profit or loss together with
characteristics. *
the statement showing other
Gain
comprehensive income? *
Classification
Normally, revenue is
recognized * Income statement
Summarization
Statement of profit or loss
When the customer order
Interpretation
is received
Statement of other
Recognition comprehensive income
When the customer order
is accompanied by a check
Which of the following Statement of financial
principles best describes the performance
Only if the transaction
conceptual rationale for the
will create an accounts
method of matching
receivable All of the following can be
depreciation with
considered appropriate
revenue? *
classification, except *
When the title to the
goods changes
Associating cause and
Current and noncurrent
effect
It is the residual interest in assets
the assets of the entity after
deducting all of the Systematic and rational
Current and noncurrent
liabilities * allocation
liabilities

Immediate recognition
Income Ordinary share capital and
preference share capital
Partial recognition
Equity
Offsetting asset and
Why are certain costs of liability
Retained Earnings
doing business capitalized
when incurred and then
Correct answer
Offsetting asset and
liability
An economic resource could
produce economic benefit if
an entity is entitled to all,
except *
To received contractual
cash flows
To exchange economic
resources with another
entity on unfavorable
terms
To receive cash by selling
the economic resource
To extinguish a liability
by transferring an
economic resource
A present obligation exists
as a result of a past event
if *
The entity has already
obtained economic benefit
The entity must transfer
an economic resource
The entity has not yet
obtained economic benefit
but must transfer an
economic resource
The entity has already
obtained economic benefit
and must transfer
economic resource
What is the general
approach as to when product
costs are recognized as
expenses? *
In the period when the Derecognition
expenses are paid
Extinguishment
In the period when the
expenses are incurred
Retirement
In the period when the
The physical capital
vendor invoice is received
maintenance concept
requires the adoption of
In the period when the which measurement basis? *
related revenue is
recognized
Historical cost
Which of the following
should be expensed under Current cost
the principle of systematic
and rational allocation? * Fair value
Salesmen’s monthly Present value
salaries
Which of the following is
Insurance premiums not an accepted basis for
recognition of revenue? *
Transportation to
customers Passage of time
Electricity to light office Performance of service
building
Completion of percentage
It is a present obligation of of a project
the entity to transfer an
economic resource as a
result of past events * Upon signing of contract
Which of the following
Asset
would be matched with
current revenue on a basis
Liability other than association of
cause and effect? *
Equity
Goodwill
Expense
Cost of goods sold
It is the removal of all or
part of recognized asset or Sales commission
liability from the statement
of financial position *
Warranty cost
Writeoff
Which of the following
represents the least desirable
choice for the recognition of Research and
revenue? * development cost

Recognition of revenue Warranty cost

during production
Amortization of intangible
Recognition of revenue asset
when as sale occurs

Recognition of revenue
when cash is collected

Recognition of revenue
when production is
completed

Gains on assets unsold are

identified, in a particular
sense, by the term *

Unrecorded

Unrealized

Unrecognized

Unallocated

Recognition of an element is
appropriate when
information results in *

Relevance

Faithful representation

Both relevance and

faithful representation

Neither relevance nor

faithful representation

Which of the following is an

application of the systematic
and rational allocation
principle? *

Doubtful accounts