Ch 3

67. The ability to bring together for the purpose of noting points of likeness and difference.
a. Consistency
b. Free from error
c. Prudence
d. Materiality
A- because free from error were omissions in the description of the phenomenon. Prudence, the
exercise of care and caution when dealing with uncertainties. Materiality, sub quality of
relevance based on the nature or magnitude or both of the items.

68. All the meaning of Neutrality except:

a. The financial information should not favor one party to the detriment of another party.
b. Supported by the exercise of prudence.
c. The capacity of the information to influence a decision.
d. The information is directed to the common needs of many users and not to the
particular needs of specific users.
C - The capacity of the information to influence a decision is Relevance.

69. To be a perfectly faithful representation according to the Conceptual Framework, a depiction

of financial information would have the three characteristics of:

a. Completeness, neutrality, and freedom from error.

b. Predictive value, confirmatory value, and materiality.
c. Comparability, consistency, and materiality.
d. Predictive value, consistency and reliability.

A- Completeness, neutrality, and freedom from error.

B was Qualitative Characteristics,
C about Financial Statement
D about Predictive value & Specificity
4. Measuring financial assets and financial liabilities at authorized cost is the application of
which of the following measurement basis?

a. Historical Cost
b. Fair Value
c. Value in use
d. Current Cost

B- Fair Value
A. Measure Value
C. the price for bearing the uncertainty inherent in the asset
D. the cost that would be required to replace an asset in the current period.

70. These is the qualities or attributes that make financial accounting information useful to the
users.

a. Fundamental Qualitative Characteristics

b. Application of Qualitative Characteristics
c. The objective of Financial Reporting
d. Qualitative Characteristics

D - Qualitative Characteristics
A. Relate to the content or substance of financial information.
B. Most efficient and effective process
 C. ascertaining and cross verifying the usage of resources, business performance, cash flow as well as to
assess the financial health of the business.

71. The Most efficient and effective process of applying the fundamental qualitative
characteristics are:

a. First, most relevant and can be faithfully represented.

Second, Information is available
Third, the potential to be useful

b. First, the potential to be useful.

Second, most relevant and can be faithfully represented.
Third, Information is available

c. Third, the potential to be useful

First, most relevant and can be faithfully represented.
Second, Information is available

d. First, Information is available.

Second, the potential to be useful.
Third, most relevant and can be faithfully represented.

B - First, the potential to be useful.

Second, most relevant and can be faithfully represented.
Third, Information is available.
- Because is the most accurate and right answer.
72. Cost of self-constructed property, plant, and equipment includes the following except:
a. Direct cost of materials
b. The direct cost of labor
c. Indirect cost and increment overhead are specifically identifiable or traceable to the
construction.
d. Purchase price, including import duties and non-refundable purchase taxes, after deducting
discounts and rebates.

D- because it is an element of cost.

73. It is the price that would be received to sell an asset in an orderly transaction between market
participants at the measurement date.
a. Fair value
b. Fair value of an asset
c. Fair value liability
d. Value

B- Fair value of an asset

A.road measure of an asset's intrinsic worthwhile market value
C. observable market prices of similar transactions
D. monetary worth of an asset, business entity, goods sold, services rendered, or liability or
obligation acquired
73. It is the price that would be paid to transfer a liability in an orderly transaction between
market participants at the measurement date.

a. Fair value of liability

b. Fair value
c. Value
d. Fair value of asset
A- Fair value of liability
B- road measure of an asset's intrinsic worthwhile market value
C- monetary worth of an asset, business entity, goods sold, services rendered, or liability or
obligation acquired
D- the price that would be received to sell an asset in an orderly transaction between market
participants at the measurement date.

74. It is the present value cash that an entity expects to transfer in paying or settling a liability.

a. Fulfillment value
b. Fair value
c. Current cost
d. Value

A- Fulfillment value
B- road measure of an asset's intrinsic worthwhile market value
C- the cost that would be required to replace an asset in the current period.
D- monetary worth of an asset, business entity, goods sold, services rendered, or liability or
obligation acquired.
75. Choose the correct historical cost of an asset update.
A. Payment made or satisfying an obligation to deliver goods
B. Increase in value of the obligation to transfer economic resources such that 5he liability becomes
onerous.
C. Accrual of interest to reflect any financing component of the liability
D. Accrual of interest to reflect any financing component of the asset.

D- because others are historical cost of a liability update.

76. Choose the right historical cost of a liability update.

A. Impairment
B. Amortized cost measurement of financial asset
C. Amortized cost measurement of financial liability
D. Depreciation and amortization

C- because others are examples of the historical cost of an asset.

77. The historical cost or ________ _________ cost of an asset is the cost incurred in acquiring or
creating the asset comprising the consideration paid plus transaction cost.

A. Original Acquisition
B. Amortized cost
C. Entry value
D. Transaction cost

A- Original Acquisition

78. It is defined as quantifying in monetary terms the elements in the financial statements.

A. Current value
B. Historical cost
C. Measurement
D. Conceptual framework

C- Measurement

79. Under this principle, the cost incurred is expensed outright because of uncertainty of future
economic benefits.

A. Immediate recognition
B. Derecognition
C. Expense recognition
D. Recognition

A- Immediate recognition

80. The ________ ________principle means that Expenses are recognized when incurred.

A. Immediate recognition
B. Derecognition
C. Expense recognition
D. Recognition

C- Expense recognition

81. What does the Revised Conceptual Framework introduce?

A. Immediate recognition
B. Derecognition
C. Expense recognition
D. Recognition

B- Derecognition

82. It is recognized at the carrying amount if the exchange transactions lack commercial substance.
A. Asset
B. Cash
C. Liability
D. Exchange

D- Exchange

83. ___________amount of an asset shall be allocated on a systematic basis over the useful life

A. Depreciable
B. Depreciation
C. Derecognition
D. Depreciation period

A- Depreciable

84. It is defined as the systematic allocation of the depreciable amount of an asset over a useful life.
A. Depreciable
B. Depreciation
C. Derecognition
D. Depreciation period

B- Depreciation

85.These are the factors in determining useful life, exempt for one

A. Expected usage of the asset

B. Expected output wear and tear
C. Technical or commercial obsolescence
D. Legal limit for the use of the asset, such as the expiry date of the related lease

B- It should be "physical" not "output".

86. __________ a method shall reflect the pattern in which the future economic benefits from the asset
are expected to be consumed by the entity

A. Depreciable
B. Depreciation
C. Derecognition
D. Depreciation period

B- Depreciation

87. The _________ or the output method assumes that depreciation is more a function of use rather
than the passage of time

A. Depreciable
B. Production
C. Derecognition
D. Depreciation period

B- Production

88. Which of the following items are required to be disclosed in a limited liability company’s
financial statements according to IAS 1 Presentation of Financial Statements?
1. Authorised share capital
2. Finance costs
3. Depreciation and amortization
4. Issued share capital

a. 3 and 4 only
b. 1, 2 and 3 only
c. All four item.
d. 2 only

C- All of these item is disclosed, either in financial statement or in the notes.

89. Which of the following could appear as separate items in the statement of changes in equity required
by IAS I Presentation of Financial Statements as part of a company’s financial statements?

1. Gain on revaluation of land.

2. Loss on sale of investments.
3. Prior year adjustments.
4. Proceeds of an issue of ordinary shares.
5. Dividends proposed after the year end.

a. 1, 3 and 4 only
b. 1, 2 and 4 only
c. 1 and 3 only
d. All five items

A- The loss on sale of investment will be recognized in the statement of comprehensive income.

90. Which of these statements about limited liability companies is/are correct?

1. A company might make a bonus (capitalization) issue to raise funds for expansion.
2. The profit or loss on the disposal of part of a company’s operations must be disclosed in the statement
of comprehensive income as an extraordinary item if material.
3. Both Realized and unrealized gains and losses may be included in the statement of changes in equity
required by IAS 1 Presentation of Financial Statements.

a. 1 and 3
b. 2 and 3
c. 1 and 2
d. 3 only

D- A bonus issue does not raise any fund ( no cash involved ) and item are no longer classified as
extraordinary.
91. According to the illustrative financial structure in IAS 1 (revised) Presentation of financial statements,
dividends paid during the year should be disclosed in:
a. Statement of Comprehensive income(statement of profit or loss)
b. Statement of changes in equity
c. Statement of Financial position
d. None of these

B- Dividends are not an expense. Dividends decalred but still due at year end go into SFP and SOCIE

93. Which of the following statements is incorrect?

1. All non-current assets must be depreciated.

2. If property is revalued, the revaluation surplus appears in the statement of comprehensive income.
3. If a tangible non-current asset is revalued, all tangible assets of the same class should be revalued.
4. In a company’s published statement of financial position, tangible assets and intangible assets must be
shown separately.

a. 1
b. 2
c. 3
d.4

C- Land is usually not depreciated; gain on revaluation in also included in the statement of changes in
equity.

94. Which of the following events occurring after the reporting period are classified as adjusting, if
material?
1. The sale of inventories valued at cost at the end of the reporting period for a figure in excess of cost.
2. A valuation of land and buildings providing evidence of an impairment in value at the year end.
3. The issue of shares and loan notes.
The insolvency of a customer with a balance outstanding at the year end

a. 1 and 3
b. 2 and 4
c. 2 and 3
d. 1 and 4

B- Inventories should always be valued at lower of cost and NRV

95. When does an event after the reporting period require changes in the financial statements?

a. Never
b. If it provides further evidence of conditions existing at the end of the reporting period
c. Never again
d. Always

B- If it provides further evidence of conditions existing at the end of the reporting period

96. Which of the following events between the end of the reporting period and the date the financial
statements are authorised for issue must be adjusted in the financial statements?

1. Declaration of equity dividends.

2. Decline in market value of investments.
3. The announcement of changes in tax rates.
4. The announcement of a major restructuring.
 a. 1 only
b. 2 and 4
c. 3 only
d. None of them

D- None of them

96. A receivable has been written off as irrecoverable. However, the customer suddenly pays the written
off amount after the end of the reporting period. Is this event

a. Adjusting
b. Non-adjusting
c. Pre – Adjusting
d. Unadjusted

A- Adjusting

97. Which of the following would be a non-adjusting event after the reporting period when preparing
financial statements at 30 September 20X0 according to IAS 10, Events after the reporting period?

a. An insurance claim in agreed on 10 October 20X0 for compensation for a fire in September
which destroyed part of the warehouse inventory
b. A decision is made on 9 October 20X0 to sell the group's major trading activities in Eastern
Europe
c. Inventory valued at $30,000 is judged no longer saleable
d. Notification received on 11 October 20X0 that a customer owing $50,000 as at 30 September
20X0 has gone into liquidation

B- A, C and D are adjusting events. B is a post year end decision not clarifying the position at the
reporting period and is therefore non-adjusting

98. Which of the following statements are correct, according to IAS 10 Events after the reporting
period?

1. Details of all adjusting events must be disclosed by note to the financial statements.
2. A material loss arising from the sale, after the reporting period, of inventory valued at cost in
the statement of financial position must be reflected in the financial statements.
3. If the market value of investments falls materially after the end of the reporting period, the
details must be disclosed by note.
4. Events after the reporting period are those that occur between the end of the reporting period
and the date when the financial statements are authorised for issue.

a. 2 and 3 only
b. 1,3 and 4
c. 1 and 2 only
d. 2,3 and 4

D- 2,3 and 4

99. Clogs Co has proposed dividends of $10,000 after the end of the reporting period. What is
the correct treatment according to IAS 10?

a. Do nothing
b. Adjust for the dividends
c. Disclose in a note to the financial statements
d. Stare at it
 C- Disclose in a note to the financial statements

100. Which of the following events after the statement of financial position date would normally
qualify as adjusting events according to IAS 10 Events after the reporting period?

1. The bankruptcy of a credit customer with a balance outstanding at the end of the reporting
period.
2. A decline in the market value of investments.
3. The declaration of an ordinary dividend.
4. The determination of the cost of assets purchased before the end of the reporting period.

a. 2 and 3 only
b. 1,3 and 4
c. 1 and 4 only
d. 2,3 and 4

C- 1 and 4 only