Financial Accounting

Group 2
 Chapter 1. : Introduction to Financial Accounting. ( 5 questions)
MAIN CONTENTS
Chapter 2: Cash and Receivables. ( 10 questions)

Chapter 3: Inventories. ( 10 questions)

Chapter 4: Property, Plant, and Equipment. ( 10 questions).

Chapter 5: Intangible Assets. ( 3 questions)

Chapter 6: Accounting for leases. ( 3 questions).

CHAPTER 1: Introduction to Financial Accounting
QUESTION 1:
Which of the following statements represents
information at a specific point in time?
A. The balance sheet.
B. The income statement and the balance sheet.
C. The income statement.
ANSWER: A
EXPLAIN: The balance sheet reflects the
financial position of the company at a specific
point in time. The income statement reflects the
financial performance of a company over a
period of time.
QUESTION 2:

Declaration and payment of a dividend during the most recent accounting period would be shown on a company's

statements of:

A. Cash flows and changes in equity.

B. Cash flows and comprehensive income.

C. Changes in equity and comprehensive income.

ANSWER: A
Cash flows and changesin equity.

When a business declares a payment of a dividend, because the dividend paid is deducted from
equity, reducing equity, the payment will be recorded on the statement of changes in capital changes
in equity.
When a business pays dividends, due to cash outflows, the payment will be recorded in the cash flow
statement.
The declaration or payment of dividends does not directly affect the results of operations or other
comprehensive income, and is therefore not recognized in the statement of comprehensive income.
Question 3: Which of the following statements concerning the
notes to the audited financial statements of a company is least
accurate? Financial statement notes:

A. Include management's assessment of the company's operating

performance and financial results.
B. Contain information about contingent losses that may occur.
C. Are audited.
 ANSWER: A
Include management's assessment of the company's operating
performance and financial results

EXPLAIN:
Management's assessment of the company's operating and financial position is often presented in
the management discussion and analysis, which is an informative supplement but is presented
here. separate from the financial statements, not included in the notes to the financial statements.
Therefore, choose answer A.
The notes to the financial statements supplement the financial statements with information such
as the company's accounting assumptions and methods, contingent liabilities/losses, the
acquisition and disposal of fixed assets, etc. ... Notes to the audited financial statements.
QUESTION 4:
Which groups of people are most likely to be interested in the financial statements of
a sole trader?
1.Shareholders of the company.
2.The business’s bank manager.
3.The tax authorities.
4.Financial analysts.

A. 1 and 2 only.
B. 2 and 3 only.
C. 2, 3 and 4 only.
D. 2 and 4 only.
ANSWER: B
This question requires us to identify the target groups that are interested in “financial statements of a sole trader” – the
financial statements of a private enterprise.
1: “Shareholders of the company” However, a sole proprietorship has only one owner and no shareholders
---> Incorrect.
2: “The business’s bank manager” The bank account manager's task is to assess the business's level of activity and ability to
repay the bank's debt in order to consider the business for continued borrowing. Therefore, they will be very interested in
financial statements
---> Correct
3: “The tax authories” The role of the tax authority is to investigate whether businesses, including private companies, are
paying taxes correctly and sufficiently to the state budget. This job requires them to scrutinize financial statements.
---> Correct
4: “Financial analysts”. Typically, financial analysts will be more interested in the financial statements of a joint stock company
than that of a sole proprietorship.
---> Incorrect
QUESTION 5:
Which TWO of the following are purposes of the IASB's Conceptual Framework?
A. To assist preparers to develop consistent accounting policies when no Standard applies to a particular event.
B. To issue rules regarding the accounting treatment of elements in the financial statements.
C. To assist in determining the treatment of items not covered by an existing IFRS.
D. To be authoritative where a specific IFRS conflicts with the Conceptual Framework.
ANSWER: A&C

EXPLAIN:
• Conceptual framework was developed to assist preparers, auditors and users of financial
statements with a common framework for understanding and applying the standards, and
to understand the nature and functions of financial statements. relevant financial
information; help reduce subjective, individual decisions and create unity.
---> A is correct
• In cases not specified in the individual standards, the conceptual framework is applied for
accounting.
---> C is correct
• Conceptual framework giving principles, not providing detailed rules.
--->B is incorrect
• Conceptual framework shall not take precedence over individual IFRS standards when there
is a conflict between the two standards.
---> D is inccorrect
CHAPTER 2: Cash and Receivables. ( 10 questions).
QUESTION 1: ANSWER: C

Postdated cheques are considered as…. EXPLAIN:

A. Cash. Postdated cheques are considered as Accounts receivable. If
the postdated check was received as payment on accounts
B. Bank balance.
receivable, the accounts receivable balance is not reduced
C. Account receivable.
until the date of the check.
D. Cash reserve.
 ANSWER: C
QUESTION 2: EXPLAIN:

Bank Reconciliation statement is the comparision

Bank Reconciliation statement is the comparision of
a bank statement (sent by bank) with the… of a bank statement (sent by bank) with the Cash
A. Cash receipt journal. book. In other words, the balance shown in the
B. Cash payment journal. Pass Book given by the bank should tally with the
C. Cash book.
balance of Bank Account Kept in his ledger or
D. Financial statements.
Cash Book (Bank Column).
QUESTION 3:
Answer: D

The $3,400 would be increased by

If a business commenced the day with
$3,400 in hand, receives and pays out $42,800 and reduced by the payment
$42,800 and $44,200 respectively of $44,200 = $2,000.
during the day, the cash in hand at the
end of the day would be:

A. $46,200

B. $1,400

C. $4,800

D. $2,000
QUESTION 4:
Answer: B
A business account is only for transactions. Which of the
following is not a transaction?
A. £600 was paid for advertising. EXPLAIN:
B. The business enquires about buying some land.
In accounting a transaction has to be able to
C. The owner introduces £100,000 as capital.
D. £75,000 was paid to buy land and buildings. be expressed in money terms. A business

enquiry is not a transaction in that it is not

measurable in money terms.

QUESTION 5: ANSWER: A
If a business commenced the day with If $14,200 is part of the payment of the $58,900 then
$14,200, paid out $58,900 during the day and a further $44,700 would be needed from receipts.
has $22,900 by the end of the day, it should [58,900 – 14,200 = 44,700]
have received ______ during the day. If in addition there is a balance of $22,900 then total
A. $67,600 receipts would be $67,600.
B. $21,800 [44,700 + 22,900 = 67,600]
C. $1,400
D. $50,200
QUESTION 7: ANSWER: A

What is a balance sheet? Balance Sheet is the financial statement of a

A. A statement of all assets and liabilities on a certain
date.
B. A statement of all the balances in the ledger accounts
on a certain date.
C. A statement showing all the receipts and payments for
a financial year.
D. A statement showing the income and expenditure for
a financial year.
company which includes assets, liabilities,
equity capital, total debt, etc. at a point in
time. Balance sheet includes assets on one
side, and liabilities on the other. For the
balance sheet to reflect the true picture, both
heads (liabilities & assets) should tally (Assets
= Liabilities + Equity).
QUESTION 6:
In which book of prime entry will a
business record debit notes in respect of
goods which have been sent back to
suppliers?
A. The sales returns day book.
B. The cash book.
C. The purchase returns day
D. The purchase day book.
ANSWER: C
“The purchase returns day book”
means the book of goods returned to
the supplier. This type of book is used
to record the value of the items that
the business returns to the distributor.
Therefore, it is used to record the
goods value of increased invoices.
QUESTION 8: ANSWER: B

Which are assets of a business? A business asset is an item of value owned

1. creditors
by a company. Business assets span many
2. loan from bank
categories. They can be physical, tangible
3 motor vehicle
4. telephone bill prepaid goods, such as vehicles, real estate,
computers, office furniture, and other
A. 1, 2 and 3 fixtures, or intangible items, such as
B. 1 and 3 only intellectual property.
C. 2, 3 and 4
D. 3 and 4 only
QUESTION 9: ANSWER: C
Company ABC had $ 800,000 in accounts
Write - off Bad Debt $ 21,000
receivable at year end . The Allowance for Allowance for Uncollectables 21,000
Uncollectable account had a beginning $ 42,000 Accounts receivable 21,000
credit balance . During the year they wrote off $ Estimate of Bad Debt Expense ( 1 % x 6,000,000 )
21,000 in bad debt . They had credit sales of $ Bad Debt Expense 60,000
6,000,000 with bad debt estimated at 1 % . What Allowance for Uncollectables 60,000
was the Accounts Receivable at the year end? Bad Debt Expense = Estimated Bad debt Expense =
60,000
A. $794,000
Ending Balance
B. $700,000
Beginning Balance 42,000
C. $719,000
Less Write off -21,000
D. $747,000
Estimate based on sales 60,000
_____________________________________
Ending Balance 81,000
Accounts Receivables = 800,000 – 81,000 = 719,000.
QUESTION 10:
At 1 April 20X9, the payables ledger control account showed a balance of $142,320.
At the end of April the following totals are extracted from the subsidiary books for April:
Purchases day book: $183, 800
Return outwards day book: $ 27,490
Return inwards day book: $ 13,420
Payments to payables, after deducting $1,430 cash discount $ 196,360

It is also discovered that:

(a) The purchase day book figure is net of sales tax at 17.5%; the other figures all include sales tax.
(b) A customer's balance of $2,420 has been offset against his balance of $3,650 in the payables ledger.
(c) A supplier's account in the payables ledger, with a debit balance of $800, has been included on the list of payables
as a credit balance.
What is the corrected balance on the payables ledger control account?
A. $130,585
B. $144,835
C. $98,429
D. $128,985
ANSWER: A
NHÓM 2

CHAPTER 2:
Cash and
Receivables
Financial Accounting
Question 1: Answer: C
Postdated cheques are considered as…. Postdated cheques are considered as Accounts
receivable. If the postdated check was received
A. Cash. as payment on accounts receivable, the accounts
receivable balance is not reduced until the date
B. Bank balance.
of the check.
C. Account receivable.
D. Cash reserve.
Question 2:
Bank Reconciliation statement is the
comparision of a bank statement (sent by
bank) with the…
A. Cash receipt journal.
B. Cash payment journal.
C. Cash book.
D. Financial statements.
ANSWER: C
Bank Reconciliation statement is the comparision
of a bank statement (sent by bank) with the
Cash book. In other words, the balance shown in
the Pass Book given by the bank should tally
with the balance of Bank Account Kept in his
ledger or Cash Book (Bank Column).
Question 3:
If a business commenced the day with $3,400 in hand, receives and
pays out $42,800 and $44,200 respectively during the day, the cash
in hand at the end of the day would be:

A. $46,200
B. $1,400
C. $4,800
D. $2,000

ANSWER: D
The $3,400 would be increased by $42,800 and reduced by the payment of $44,200 = $2,000.
Question 4: ANSWER: B
A business account is only for transactions. In accounting a transaction has to be able to
Which of the following is not a transaction? be expressed in money terms. A business
enquiry is not a transaction in that it is not
A. £600 was paid for advertising. measurable in money terms.
B. The business enquires about buying
some land.
C. The owner introduces £100,000 as
capital.
D. £75,000 was paid to buy land and
buildings.
Question 5:
If a business commenced the day with $14,200, paid out
$58,900 during the day and has $22,900 by the end of the
day, it should have received ______ during the day.
A. $67,600
B. $21,800
C. $1,400
D. $50,200

Answer: A

If $14,200 is part of the payment of the $58,900 then a

further $44,700 would be needed from receipts.
[58,900 – 14,200 = 44,700]
If in addition there is a balance of $22,900 then total
receipts would be $67,600.
[44,700 + 22,900 = 67,600]
 Question 6:
At 30 November 20X9 Jane had a bank loan of
$9,500 and a balance of $578 in hand in her bank
account. How should these amounts be recorded on
Jane’s opening trial balance on 1 December 20X9?
A. Debit $ 8,922.
B. Credit $8,922.
C. Credit $9,500 and Debit $578.
D. Debit $9,500 and Credit $578.
ANSWER: C
The $9,500 loan from the bank belongs to
liabilities. The entry procedure for this item
is:
 Recording: Credit Bank Loan $9,500.
Conversely, the balance of $578 in Jane's
bank account is an asset class. For asset:
 Recording: Debit Cash at bank $578.
Question 7:
What is a statement of financial position ?
A. a statement of all assets and liabilities on
a certain date
B. a statement of all the balances in the
ledger accounts on a certain date
C. a statement showing all the receipts and
payments for a financial year
D. a statement showing the income and
expenditure for a financial year

Answer: A
The statement of financial position is the financial statement of a company which includes assets,
liabilities, equity capital, total debt, etc. at a point in time. Balance sheet includes assets on one side,
and liabilities on the other. For the balance sheet to reflect the true picture, both heads (liabilities &
assets) should tally (Assets = Liabilities + Equity).
Question 8:
Which of the following transactions would cause
a change in owners' equity?
A. Repayment of the principal on a bank loan.
B. Purchase of a delivery truck on credit.
C. Sale of land on credit for a price above cost.
D. Borrowing money from a bank.

Answer: C
Owner’s equity is essentially the owner’s rights to the
assets of the business. It’s what’s left over for the owner
after you’ve subtracted all the liabilities from the assets.
The owner's equity speaks to the owner's venture within
the business short of the owner's draws or withdrawals
from the trade and the net salary (or short the net
misfortune) since commerce started. Owner's equity is seen
as a leftover claim on the business assets because
liabilities have the following declaration.
 Question 9: ANSWER: C
Company ABC had $ 800,000 in accounts Write - off Bad Debt $ 21,000
receivable at year end . The Allowance for Allowance for Uncollectables 21,000
Uncollectable account had a beginning $ 42,000 Accounts receivable 21,000
credit balance . During the year they wrote off $ Estimate of Bad Debt Expense ( 1 % x 6,000,000 )
21,000 in bad debt . They had credit sales of $ Bad Debt Expense 60,000
6,000,000 with bad debt estimated at 1 % . What Allowance for Uncollectables 60,000
Bad Debt Expense = Estimated Bad debt Expense = 60,000
was the Accounts Receivable at the year end?
Ending Balance
A. $794,000 Beginning Balance 42,000
B. $700,000 Less Write off -21,000
C. $719,000 Estimate based on sales 60,000
D. $747,000 _____________________________________
Ending Balance 81,000
Accounts Receivables = 800,000 – 81,000 = 719,000.
 Question 10:
At 1 April 20X9, the payables ledger control account showed a balance of $142,320.
At the end of April the following totals are extracted from the subsidiary books for April:
Purchases day book: $183, 800
Return outwards day book: $ 27,490
Return inwards day book: $ 13,420
Payments to payables, after deducting $1,430 cash discount $ 196,360

It is also discovered that:

(a) The purchase day book figure is net of sales tax at 17.5%; the other figures all include sales tax.
(b) A customer's balance of $2,420 has been offset against his balance of $3,650 in the payables ledger.
(c) A supplier's account in the payables ledger, with a debit balance of $800, has been included on the list of
payables as a credit balance.
What is the corrected balance on the payables ledger control account?
A. $130,585
B. $144,835
C. $98,429
D. $128,985
ANSWER: A
Chapter 3: Inventories.
QUESTION 1: ANSWER: C
Inventory cost does not include any of the following: Shipping costs incurred from transporting goods to
A. Production-related storage costs consumers are included in selling costs and are not
B. Costs incurred as a result of normal waste of included in the price of inventory. Meanwhile,
material transportation costs to bring inventory to the point
C. The cost of transporting the goods to the of sale are included in the price of the inventory.
consumer Storage costs and costs arising from the loss of raw
D. All the answers above materials are included in the cost of the inventory.
Question 2: ANSWER: A
$
Company X has $4000 of inventory on hand at
the beginning of the month. During the month, Beginning inventory: 4000
the company buys $41.000 of merchandise Purchases: + 41.000
and sells merchandise that had cost $30.000. Cost of Goods sold: - 30.000
At the end of the month, $13.000 of the
Ending balance: 15.000
inventory is on hand. How much shrinkage
occurred during the month? Inventory count: - 13.000
A. $2,000 Shrinkage: 2.000
B. $6,000
C. $500
D. $3,000
 Question 3:
A company uses the LIFO inventory method as follows:

2018 2017
Cost of good sold $50,800 $48,500

Ending inventory $10,550 $10,000

LIFO reserve $4,320 $2,600

What is the cost of goods sold (COGS) for 2018 calculated by the FIFO formula?
A. $48,530
B. $49,080
C. $52,520
D. $50,100

Answer: B
Cost of goods sold (COGS) under the FIFO method is adjusted by subtracting the increase in LIFO reserve
from the LIFO reserve.
COGS (FIFO) = $50,800 – ($4,320 - $2,600)
COGS (FIFO) = $49,080
QUESTION 4:
On 14th April 2001, H’s company bought the inventory. The following costs were incurred:
Purchase price: $10,000
Import tax: $500
Sale tax: $1,000
Installation cost: $2,000
What is the value of company H's inventory?
A. $12,000
B. $12,500
C. $13,000
D. $13,500

The value of company H's inventory = $10,000 + $500 + $2,000 = 12,500

QUESTION 5:
H's company took some goods costing $2,010 from inventory for producing. The normal selling price of the goods is $4,700.
Which of the following journal entries would correctly record this?
A. Dr Inventory Account $4,700
Cr Cash $4,700
B. Dr Direct raw material expense $2,010
Cr Inventory Account $2,010
C. Dr Cash $4,700
Cr Inventory Account $4,700
D. Dr Direct raw material expense $2,010
Cr Cash $2,010
QUESTION 6:
An inventory record card shows the following details: ANSWER: C
February ∗$ ∗$ . ∗$
Cost per unit: = $60,9
1 800 units stock at a cost $60 per unit
4 500 units purchased at a cost $62.2 per unit
7 1000 units used for producing => Closing inventory: $60,9 * 400 = $24,360
14 700 units bought at a cost $61 per unit
21 600 units sold
What is the value of inventory at 28 February using the Periodic
AVCO method?
A.$24,400
B.$24,372
C.$24,360
D.$24,000
 QUESTION 7:
An inventory record card shows the following details. What is the value of inventory at 28
February using the FIFO method?
February
1 1000 units stock at a cost $5,485 per unit
4 230 units sold
7 150 units purchased at a cost $5,500 per unit
14 100 units purchased at a cost $5,406.25
21 300 units sold

A. $3,943,575 B. $5,589,075 C. $5,205,125 D. $7,026,425

ANSWER: A
Opening inventory: 1000 * 5,485 = 5,485,000
230 units sold: 230*5,485=1,261,550
150 units purchased: 150 * $5,500 = $825,000
100 units purchased: 100 * $5,406.25 = $540,625
300 units sold: 300 * $5485 = $1,645,500
--- >Closing inventory:
$5,485,000-$1,261,550+$825,000+$540,625-$1645500= $3,943,575
 The inventory value for the financial statements of Global Inc for the year ended 31 December 20X3 was
based on a inventory count on 7 January 20X4, which gave a total inventory value of $47000.
Between 31 December 20X3 and 7 January 20X4, the following transactions took place:
Purchased goods $1,400
Sale of goods (markup on cost at 20%) $600
QUESTION 8: Finished machining materials $400
What figure should be included in the financial statements for inventories at 31 December 20X3?
A. $45,700
B.$45,680
C.$48,300
D.$48,320

Markup on cost at 20% → Sale of goods: $600 / 120% = $500

ANSWER: A
---> Inventory value in 31 December 20X3: $47,000 - $1,400 + $500 - $400 =
$45,700
 QUESTION 9:
A company has decided to switch from using the FIFO method of inventory valuation to using the average cost method (AVCO).
In the first accounting period where the change is made, opening inventory valued by the FIFO method was $55,000. Closing
inventory valued by the AVCO method was $40,000
Total purchases and during the period were $144,000. Using the continous AVCO method, opening inventory would have been
valued at $53,000.
What is the cost of materials that should be included in the statement of profit or loss for the period?
A.$199,000
B.$197,000
C.$159,000
D.$157,000

ANSWER: D
Dr Inventory Account Cr
Opening balance $53,000
Purchases $144,000 Closing balance $40,000
$197,000 $197,000

=> Cost of materials: $53,000 + $144,000 - $40,000 = $157,000

 ANSWER: A
QUESTION 10:
You are preparing the final accounts for a business. The
cost of the items in closing inventory is $20,100. This
includes some items which cost $2,018 and which were
damaged in transit. You have estimated that it will cost Inventory value:
$530 to repair the items, and they can then be sold for $20,100 - ($2,018 + $530 - $1,000) = $18,552
$1,000.
What is the correct inventory valuation for inclusion in the
final accounts?
A.$18,552
B.$19,082
C.$19,612
D.$20,588
Chapter 4: Property, Plant, and Equipment
 Question 1:
On 15 May 20X6 Bean acquired a machine under the following
terms:
$
Cost 2,500,000
Trade discount (applying to cost only) 5%
Sale tax 250,000
Freight charges 30,000
Electrical installation cost 28,000
Staff training in use of machine 40,000
Pre-production testing 22,000
Purchase of a three-year maintenance contract 60,000

What amount should be recognised under non-current assets as the cost of the machine?

A. 2,705,000 C. 2,427,000

B. 2,455,000 D. 2,433,000
2
Answer: B
Cost of PPE include:
+ freight charges: 30,000
+ electrical installation cost: 28,000
+ pre-production testing: 22,000
The trade discount also needs to be deducted from cost:
(2,500,000 x 5%) = (125,000)

Cost 2,500,000

Trade discount (2,500,000 x 5%) (125,000)

Freight charges 30,000

Electrical installation cost 28,000

Pre-production testing 22,000

2,455,000
3
Question 2:
Which of the following statements are correct?
1. IAS 16 Property, plant and equipment requires entities to disclose the
purchase date of each asset.
2. The carrying amount of a non-current asset is the cost or valuation of that
asset less accumulated depreciation.
3. IAS 16 Property, plant and equipment permits entities to make a transfer
from the revaluation surplus to retained earnings for excess
depreciation on revaluation assets.
4. Once decided, the useful life of a non-current asset should not be
changed.

A. 1, 2 and 3 C. 2 and 4 only

B. 2 and 3 only D. 1,2 and 4 only

Question 3:
Alex bought a lorry for $300,000 on 1 June 20X3 which had an estimated useful life
of 9 years. Depreciation is calculated on the reducing balance method at a rate of
10%. On 1 June 20X6 it was decided to change the method straight line.
What was the carrying amount of the asset at 1 June 20X7?

A. 202,500

B. 243,000

C. 205,200

D. 200,000

Answer: A
On 1 June 20X6 :
Carrying amount = 300,000 * ( 1 - 10% ) 2 = 243,000
Depreciation = 243,000 : 6 = 40,500
Carrying amount of the asset at 1 June 20X7 = 243,000 - 40,500 = 202,500.
5
 Question 4:
What is the purpose of charging depreciation in financial statements?

A. To allocate the cost of a non-current asset over the accounting periods

expected to benefits from its use.

B. To ensure that funds are available for the eventual replacement of the
asset.

C. To reduce the cost of the asset in the statement of financial position to

its estimated market value.

D. To account for the ‘wearing-out’ of the asset over its life.

6
 Question 5:
Linda has extracted from the summarised trial balance of Kandy as at 30 April 20X2:

Land ($20 million) and buildings – at cost: $75 million

Accumulated depreciation of buildings at 1 May 20X1: $10 million

The price of property has increased significantly in recent years and on 1 May 20X1, the directors decided to revalue the land and
buildings. The directors accepted the report of an independent surveyor who valued the land at $22 million and the buildings at $49
million on that date. The remaining life of the buildings at 1 May 20X1 was 15 years. Kandy does not make an annual transfer to
retained profits to reflect the realisation of the revaluation gain.
What amount of the gain on revaluation and carrying amount of the land and buildings at 30 April 20X2?

Revaluation surplus($) Carrying amount($)

A 3,500,000 65,000,000
B 6,000,000 66,000,000
C 6,000,000 67,500,000
D 3,500,000 68,500,000 7
 Answer: B
At 1/10/20X3:
Carrying amount of land and buildings
= $75,000,000 – $10,000,000 = $65,000,000
Fair value of land and buildings
= $22,000,000 + $49,000,000 = $71,000,000
Revaluation surplus
= $71,000,000 - $65,000,000 = $6,000,000
At 30/9/20X4:
Depreciation of the buildings = $49,000,000/14 years = $3,500,000
( note : Land is not depreciated )
Carrying amount = $71,000,000 – $3,500,000 = $67,500,000.

8
Question 6:
Which of the following costs would be classified as capital expenditure for a
restaurant business?

A. A replacement for a broken window.

B. Repainting the restaurant.

C. An illuminated sign advertising the business name.

D. Cleaning of the kitchen floors.

9
Question 7:
John acquired a mixing machine on 1 July 20X4 for $ 64,000. The payment for it was
correctly entered in the bank statement but was entered on the debit side of the
mixing machine repairs account. He charged depreciation on the straight line method
, the useful life was 4 years, with pro rata in year of purchase and disposal, and
residual value at the end of asset life was $ 30,000.
How will John's profit for the end of the year 31 December 20X4 be affected by the
error ?

A. Understated 57,000 C. Overstated 57,000

B. Understated 59,750 D. Overstated 59,750

10
Explain:
Correct:
Dr Machine : $ 64,000
Cr Cash : $ 64,000
Dr Depreciation expense : (64,000 - 30,000) : 4 * 6/12 = 4250
Cr Accumulate depreciation : 4250
=> Profit decrease : $4250
But now wrong:
Dr Machine repairs : $ 64,000
Cr Cash : $ 64,000
=> Profit decrease : $64,000
=> Understated : $64,000 - $4250 = $59,750.

11
 Question 8:
Which of the following best explains what is meant by 'capital
expenditure'?
A. Expenditure relating to the acquisition or improvement of non-
current assets.
B. Expenditure on expensive assets.
C. Expenditure relating to the issue of share capital.
D. Expenditure on non-current assets, including repairs and
maintenance.

12
Question 9:
A non-current asset (cost $50,000, depreciation $35,000) is given in part exchange for a
new asset costing $60,500. The agreed trade-in value was $25,500.
Which of the following will be included in the statement of profit or loss?

A. A profit on disposal $25,500

B. A loss on disposal $25,500

C. A profit on disposal $10,000

D. A loss on disposal $$10,000

Answer:C
Carrying amount at disposal = $50,000 - $35,000 = $15,000
Trade-in allowance was $25,500
=> Profit on disposal = $25,500 - $15,000 = $10,000.

13
 Question 10:
Which of the following should be disclosed for tangible non-current assets according to IAS 16 Property, plant and
equipment?
1. Depreciation methods used and the total depreciation allocated for the period.
2. A reconciliation of the carrying amount of non-current assets at the beginning and end of the period.
3. For revalued assets, whether an independent valuer was involved in the valuation.
4. For revalued assets, the effective date of the revaluation.

A. 1,2,4 only B. 1 and 2 only

C . 1, 2, 3 and 4 D. 1, 3 and 4 only

14
15
 Nhóm 2

CHAPTER 5:
INTANGIBLE
ASSETS
Financial Accounting
 Question 1:
Question 1.
Which of the following is NOT an example of intangible assets?

A. Franchise rights.
B. Goodwill.
C. Patents.
D. Land

Answer: C
Land is NOT an example of intangible assets. An intangible asset
is an asset that is not physical in nature.
Question 2:
At 30 September 20X2, Sandown's trial balance showed a brand
at cost of $300,000, less accumulated amortisation brought
forward at 1 October 20X1 of $90,000. Amortisation is based on
a 10-years useful life. An impairment review on 1 April 20X2,
concluded that the brand had a value in use of $120,000 and a
remaining useful life of 3 years. However, on the same date
Sandown received an offer to purchase the brand for $150, 000.
What should be the carrying amount of the brand in the
statement of financial position of Sandown as at 30 September
20X9?
A. $125,000
B. $145,000
C. $150,000
D. $100,000
 Answer: A
Depreciation in each year = 300,000 /10 = 30,000
1 April 20X2 the asset will be depreciation for 3 years and 6 months
 30,000 * 3,5 = 105,000
Carrying amount at 1April 20X2 = 300,000 – 105,000 = 195,000
On 30 September 20X2, depreciation will be: 150,000 –( 150,000 / 3 * 6/12) = 125,000
 Question 3:
Bee carries out research and development. In the year ended 30 June 20X3, Bee incurred costs in
relation to project X of $750,000. These ws incurred at the same amount each month from 1 July
20X2 to 30 April 20X3, when the project was completed. The project produced by the project went
on sale from 31 May 20X3.
The project had been confirmed as feasible on 1 Jan 20X3, and the project produced by the project
was expected to have a useful life of 5 years.
What is the carrying amount of the development expenditure asset as at 30 June 20X3?

A. $ 150,000
B. $ 295,000
C. $ 250,000
D. $300,000
 Answer: B

The capital cost of the asset = (750,000 /10) * 4 = 300,000

Amortization of 30 June 20X3 = (300,000 /5) * 1/ 12 = 5,000
CA of assets of 30 June 20X3 = 300,000 -5,000 = 295,000
 Chapter 6:
Accounting for lease
Group 2
 Question 1:
IFRS 16 Leases permits certain assets to be exempt from the recognition treatment for
right‐of‐use assets. Which of the following assets leased to an entity would be
permitted to be exempt?
A. A used motor vehicle with an original cost of $15,000 and a current fair value of
$700, leased for 24 months
B. A new motor vehicle with a cost of $15,000, leased for 24 months
C. A new motor vehicle with a cost of $15,000, leased for 24 months, to be rented to
customers on a daily rental basis
D. A new motor vehicle with a cost of $15,000, leased for 12 months
 Explain:
According to IFRS 16 – Leases, assets permitted to be exempted from
recognition are:
Low‐value assets when new
Assets with a lease term of 12 months or less

Option Description Low value when new 12 months or less

 Original cost: $15,000

 Current fair value: $700 (considered

A No No
lo → easy to be mistaken)

 Lease term: 24 months

B  Original cost: $15,000 No No

C  Lease term: 24 months No No

 Original cost: $15,000

D No Yes
 Lease term: 12 months
 Question 2:
During the year ended 30 September 20X4 Dookki entered into two lease transactions:
On 1 October 20X3, Dookki made a payment of $72,000 being the first of five equal annual
payments under a lease for an item of plant. The lease has an implicit interest rate of 8%
and the present value of the total lease payments on 1 October 20X3 was $450,000.
On 1 January 20X4, Dookki made a payment of $24,000 for a one‐year lease of an item of
equipment.
What amount in total would be charged to Dookki’s statement of profit or loss for the year
ended 30 September 20X4 in respect of the above transactions?

A. $137,000
B. $140,300
C. $138, 240
D. $125,750
 Explain
Depreciation of leased plant = $450,000/5 years= $90,000
Finance cost= (($450,000-$72,000)x8%= $30,240
Rental of equipment= ($24,000/12)x 9= $18,000
Total $138,240.
 Question 3: Explain
ABC purchased a quota for carbon dioxide emissions for
$55,000 on 31 December 20X1 and capitalised it as an The amortisation charge is $55,000/5 years = $11,000 per annum.
intangible asset in its statement of financial position. ABC The double entry to record the amortisation is:
estimates that the quota will have a useful life of 5 years. Dr. Expenses.
What is the journal entry required to record the Cr. Accumulated amortisation.
amortisation of the quota in the accounts for the year
ended 31 December 20X6?

$ $
A. . Dr Expenses 11,000
Cr. Accumulated amortisation 11,000
B. Dr Accumulated amortisation 55,000
Cr. Intangible assets 55,000
C. Dr. Expenses 55,000
Cr Accumulated amortisation 55,000
D. Dr. Intangible assets 11,000
Cr Accumulated amortisation 11,000
Thanks
For
Pay attention !