Question 1

AASB 101's definition of current assets and further discussion at paragraph 59 will:

Accepted Answer

A)  simplify the recognition of current assets. 
B)  require greater professional judgment in order to determine an entity's normal operating cycle. 
C)  improve analysts' decisions, as ratios that use current assets will use the same information. 
D)  have implications for assessing the liquidity of entities as current assets will now include fewer items. 
A)  simplify the recognition of current assets. 
B)  require greater professional judgment in order to determine an entity's normal operating cycle. 
C)  improve analysts' decisions, as ratios that use current assets will use the same information. 
D)  have implications for assessing the liquidity of entities as current assets will now include fewer items.

Question 2

Calling Card Co Ltd has acquired a printing press from Metal Manufacturers Ltd.The deal required Calling Card Co Ltd to exchange the following assets for the printing press 
$\begin{array}{|l|l|}
\hline
\text { Shares in Calling Card Co Ltd } & \begin{array}{l}
50000 \text { shares with a market value of } \
\$ 1.10 \text { each }
\end{array} \
\hline \text { Vehicle } & \begin{array}{l}
\text { Cost } \$ 20000 \text {, accumulated } \
\text { depreciation } \$ 8000 ; \text { fair value } \$ 15000
\end{array} \
\hline \text { Cash } & \$ 5,000\
\hline
\end{array}$
The cost to install the press was $1000 (not yet paid).What is the entry to record the purchase of the printing press?

Accepted Answer

A) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Printing press } & 75000 & \
\hline \mathrm { Dr } & \text { Accumulated depreciation } & 8000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 55000 \
\hline \mathrm { Cr } & \text { Vehicle } & & 20000 \
\hline \mathrm { Cr } & \text { Gain on disposal of vehicle } & & 3000 \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | r | l | r | r | } 
\hline \mathrm { Dr } & \text { Printing press } & 76000 & \
\hline \mathrm { Dr } & \text { Loss on disposal of vehicle } & 5000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 55000 \
\hline \mathrm { Cr } & \text { Vehicle } & & 20000 \
\hline \mathrm { Cr } & \text { Installation cost payable } & & 1000 \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Printing press } & 76000 & \
\hline \mathrm { Dr } & \text { Accumulated depreciation } & 8000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 55000 \
\hline \mathrm { Cr } & \text { Vehicle } & & 20000 \
\hline \mathrm { Cr } & \text { Gain on disposal of vehicle } & & 3000 \
\hline \mathrm { Cr } & \text { Installation cost payable } & & 1000 \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | r | l | r | r | } 
\hline \mathrm { Dr } & \text { Printing press } & 73000 & \
\hline \mathrm { Dr } & \text { Accumulated depreciation } & 8000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 55000 \
\hline \mathrm { Cr } & \text { Vehicle } & & 20000 \
\hline \mathrm { Cr } & \text { Installation cost accrued } & & 1000 \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Printing press } & 75000 & \
\hline \mathrm { Dr } & \text { Accumulated depreciation } & 8000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 55000 \
\hline \mathrm { Cr } & \text { Vehicle } & & 20000 \
\hline \mathrm { Cr } & \text { Gain on disposal of vehicle } & & 3000 \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | r | l | r | r | } 
\hline \mathrm { Dr } & \text { Printing press } & 76000 & \
\hline \mathrm { Dr } & \text { Loss on disposal of vehicle } & 5000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 55000 \
\hline \mathrm { Cr } & \text { Vehicle } & & 20000 \
\hline \mathrm { Cr } & \text { Installation cost payable } & & 1000 \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Printing press } & 76000 & \
\hline \mathrm { Dr } & \text { Accumulated depreciation } & 8000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 55000 \
\hline \mathrm { Cr } & \text { Vehicle } & & 20000 \
\hline \mathrm { Cr } & \text { Gain on disposal of vehicle } & & 3000 \
\hline \mathrm { Cr } & \text { Installation cost payable } & & 1000 \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | r | l | r | r | } 
\hline \mathrm { Dr } & \text { Printing press } & 73000 & \
\hline \mathrm { Dr } & \text { Accumulated depreciation } & 8000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 55000 \
\hline \mathrm { Cr } & \text { Vehicle } & & 20000 \
\hline \mathrm { Cr } & \text { Installation cost accrued } & & 1000 \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline
\end{array}$$

Question 3

AASB 101 requires,as a minimum,certain line items to be included on the face of the statement of financial position .Additional line items may be disclosed based on an assessment of:

Accepted Answer

A)  the nature and liquidity of assets. 
B)  the functions of the assets within the entity. 
C)  the amounts, nature and timing of liabilities. 
D)  all of the given answers. 
A)  the nature and liquidity of assets. 
B)  the functions of the assets within the entity. 
C)  the amounts, nature and timing of liabilities. 
D)  all of the given answers.

Question 4

Discuss the approaches recommended by AASB 101 to present assets in the statement of financial position.

Accepted Answer

AASB 101, the Australian Accounting Stan

Question 5

The AASB Framework allows use of a different measurement basis for similar assets as long as this is disclosed in the summary of accounting policies adopted in the notes to the accounts.

Accepted Answer

A) True 
 B)False

Question 6

Recoverable amount of an asset is defined in AASB 136 as the higher of its fair value less costs to sell and its value in use.In the case where an asset's carrying amount is less than its recoverable amount,which action is consistent with AASB 136?

Accepted Answer

A)  recognise difference as increase is asset revaluation reserve 
B)  recognise difference as impairment loss 
C)  recognise difference as gain from reinstatement of asset 
D)  leave asset at its carrying amount 
A)  recognise difference as increase is asset revaluation reserve 
B)  recognise difference as impairment loss 
C)  recognise difference as gain from reinstatement of asset 
D)  leave asset at its carrying amount

Question 7

Advertising expenditures are typically expensed as incurred because the future economic benefits are uncertain to occur.

Accepted Answer

A) True 
 B)False

Question 8

According to AASB 136,a non-current asset should be:

Accepted Answer

A)  revalued downwards where the net amount that is expected to be recovered through the cash inflows and outflows from its continued use and subsequent disposal exceeds its cost. 
B)  written down to its replacement cost when the recoverable amount is greater than its value in use. 
C)  written down to its recoverable amount when its carrying amount is greater than its recoverable amount. 
D)  revalued upwards where its value in use is greater than its net realisable value. 
A)  revalued downwards where the net amount that is expected to be recovered through the cash inflows and outflows from its continued use and subsequent disposal exceeds its cost. 
B)  written down to its replacement cost when the recoverable amount is greater than its value in use. 
C)  written down to its recoverable amount when its carrying amount is greater than its recoverable amount. 
D)  revalued upwards where its value in use is greater than its net realisable value.

Question 9

Certain classes of property,plant and equipment,for example,aircraft,might comprise a number of individual component parts.How does AASB 116 paragraph 43 require these components to be accounted for?

Accepted Answer

A)  The components can be measured as one asset. 
B)  There is a prescribed unit of measurement for recognition that must be followed. 
C)  Only one depreciation rate can be used for the asset. 
D)  Each component with a significant cost must be depreciated separately. 
A)  The components can be measured as one asset. 
B)  There is a prescribed unit of measurement for recognition that must be followed. 
C)  Only one depreciation rate can be used for the asset. 
D)  Each component with a significant cost must be depreciated separately.

Question 10

The sum of the total assets of an entity will typically reflect their cost under current generally accepted accounting practices.

Accepted Answer

A) True 
 B)False

Question 11

The classification of assets into current or non-current in the statement of financial position will provide useful information on the short-term solvency of the entity:

Accepted Answer

A)  when the entity supplies goods or services within a clearly identifiable normal operating cycle. 
B)  when the operating cycle of the entity is greater than 12 months. 
C)  when the operating cycle of the entity is less than 12 months. 
D)  when the entity is a financial institution. 
A)  when the entity supplies goods or services within a clearly identifiable normal operating cycle. 
B)  when the operating cycle of the entity is greater than 12 months. 
C)  when the operating cycle of the entity is less than 12 months. 
D)  when the entity is a financial institution.

Question 12

The opportunistic view under PAT predicts managers to prefer capitalisation over expensing.Discuss.

Accepted Answer

The opportunistic view under PAT (Positi

Question 13

Which of the following items are required to calculate 'value in use' of an asset?

Accepted Answer

A)  exit and entry prices 
B)  purchase price and cost of disposal 
C)  estimated net future cash flows and appropriate discount rate 
D)  estimated net future cash flows 
A)  exit and entry prices 
B)  purchase price and cost of disposal 
C)  estimated net future cash flows and appropriate discount rate 
D)  estimated net future cash flows

Question 14

If an impairment loss recognised in prior periods for a revalued asset no longer exists,AASB 136 Impairment of Assets requires a reporting entity to:

Accepted Answer

A)  reverse the impairment loss to increase the asset to its recoverable amount. 
B)  reverse the impairment loss in profit and loss, only if the asset adopts the revaluation model. 
C)  treat this as a prior period adjustment and recognise the reversal as a gain. 
D)  ignore this information as previously written off assets are precluded from being reinstated. 
A)  reverse the impairment loss to increase the asset to its recoverable amount. 
B)  reverse the impairment loss in profit and loss, only if the asset adopts the revaluation model. 
C)  treat this as a prior period adjustment and recognise the reversal as a gain. 
D)  ignore this information as previously written off assets are precluded from being reinstated.

Question 15

Using the cost model outlined in AASB 116 to measure property,plant and equipment at acquisition,which of the following costs would not be included?

Accepted Answer

A)  directly attributable costs 
B)  initial estimates of dismantling and removal costs 
C)  12-month servicing plan 
D)  purchase price 
A)  directly attributable costs 
B)  initial estimates of dismantling and removal costs 
C)  12-month servicing plan 
D)  purchase price

Question 16

Golden Co Ltd has donated a vehicle to Bushman Enterprises as a result of publicity about the plight of Bushman Enterprises after bushfires destroyed most of its fleet of vehicles.The vehicle had cost Golden Co $25 000 and has accumulated depreciation of $10 000.Its market value is $20 000.How should the asset transfer be recorded in both companies' books?

Accepted Answer

A) 
$\begin{array}{l}
\text { Golden Co Ltd }\
\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Donation expense } & 15000 & \
\hline \mathrm{Dr} & \text { Accumulated depreciation } & 10000 & \
\hline \mathrm{Cr} & \text { Vehicle } & & 25000 \
\hline & & & \
\hline
\end{array}
\end{array}$
$\begin{array}{l}
\text { Bushman Enterprises }\
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Vehicle } & 20000 & \
\hline \mathrm{Cr} & \text { Donation revenue } & & 20000 \
\hline
\end{array}
\end{array}$ 
B) 
$\text { Golden Co Ltd } \
\begin{array}{|r|l|r|r|}
\hline \mathrm{Dr} & \text { Donation expense } & 20000 & \
\hline \mathrm{Dr} & \text { Accumulated depreciation } & 10000 & \
\hline \mathrm{Cr} & \text { Gain on disposal of vehicle } & & 5000 \
\hline \mathrm{Cr} & \text { Vehicle } & & 25000 \
\hline & & & \
\hline
\end{array}$
$\text { Bushman Enterprises }\
\begin{array}{l}
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Vehicle } & 20000 & \
\hline \mathrm{Cr} & \text { Donation revenue } & & 20000 \
\hline
\end{array}
\end{array}$ 
C) 
${\text { Golden Co Ltd }} \\
\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Goodwill } & 20000 & \
\hline \mathrm{Dr} & \text { Accumulated depreciation } & 10000 & \
\hline \mathrm{Cr} & \text { Gain on disposal of vehicle } & & 5000 \
\hline \mathrm{Cr} & \text { Vehicle } & & 25000 \
\hline & & & \
\hline
\end{array}$
$\begin{array}{l}
\text { Bushman Enterprises }\
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Vehicle } & 20000 & \
\hline \mathrm{Cr} & \text { Equity } & & 20000 \
\hline
\end{array}
\end{array}$ 
D) 
$\begin{array}{l}
\text { Golden Co Ltd }\
\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Goodwill } & 15000 & \
\hline \mathrm{Dr} & \text { Accumulated depreciation } & 10000 & \
\hline \mathrm{Cr} & \text { Vehicle } & & 25000 \
\hline & & & \
\hline
\end{array}
\end{array}$
$\begin{array}{l}
\text { Bushman Enterprises }\
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Vehicle } & 15000 & \
\hline \mathrm{Cr} & \text { Donation revenue } & & 15000 \
\hline
\end{array}
\end{array}$ 
A) 
$\begin{array}{l}
\text { Golden Co Ltd }\
\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Donation expense } & 15000 & \
\hline \mathrm{Dr} & \text { Accumulated depreciation } & 10000 & \
\hline \mathrm{Cr} & \text { Vehicle } & & 25000 \
\hline & & & \
\hline
\end{array}
\end{array}$
$\begin{array}{l}
\text { Bushman Enterprises }\
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Vehicle } & 20000 & \
\hline \mathrm{Cr} & \text { Donation revenue } & & 20000 \
\hline
\end{array}
\end{array}$ 
B) 
$\text { Golden Co Ltd } \
\begin{array}{|r|l|r|r|}
\hline \mathrm{Dr} & \text { Donation expense } & 20000 & \
\hline \mathrm{Dr} & \text { Accumulated depreciation } & 10000 & \
\hline \mathrm{Cr} & \text { Gain on disposal of vehicle } & & 5000 \
\hline \mathrm{Cr} & \text { Vehicle } & & 25000 \
\hline & & & \
\hline
\end{array}$
$\text { Bushman Enterprises }\
\begin{array}{l}
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Vehicle } & 20000 & \
\hline \mathrm{Cr} & \text { Donation revenue } & & 20000 \
\hline
\end{array}
\end{array}$ 
C) 
${\text { Golden Co Ltd }} \\
\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Goodwill } & 20000 & \
\hline \mathrm{Dr} & \text { Accumulated depreciation } & 10000 & \
\hline \mathrm{Cr} & \text { Gain on disposal of vehicle } & & 5000 \
\hline \mathrm{Cr} & \text { Vehicle } & & 25000 \
\hline & & & \
\hline
\end{array}$
$\begin{array}{l}
\text { Bushman Enterprises }\
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Vehicle } & 20000 & \
\hline \mathrm{Cr} & \text { Equity } & & 20000 \
\hline
\end{array}
\end{array}$ 
D) 
$\begin{array}{l}
\text { Golden Co Ltd }\
\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Goodwill } & 15000 & \
\hline \mathrm{Dr} & \text { Accumulated depreciation } & 10000 & \
\hline \mathrm{Cr} & \text { Vehicle } & & 25000 \
\hline & & & \
\hline
\end{array}
\end{array}$
$\begin{array}{l}
\text { Bushman Enterprises }\
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Vehicle } & 15000 & \
\hline \mathrm{Cr} & \text { Donation revenue } & & 15000 \
\hline
\end{array}
\end{array}$

Question 17

The accountant in preparation for the financial statement for the year 2013 realised an error in the determination of recoverable amounts in last year's financial statements.This error had it been detected in 2012 would have required the recognition of impairment losses amounting to $500 000.To comply with AASB 108 Accounting Policies,Changes in Accounting Estimates and Errors,the accountant should:

Accepted Answer

A)  make a prospective change to the 2013 figures, on the basis that he has made an error in 2012. 
B)  make a prospective change to the 2013 figures, on the basis that he is making a change to an estimate in 2012. 
C)  make a retrospective change to the 2013 figures, on the basis that that this is a change in accounting estimates. 
D)  make a retrospective change to the 2013 figures, on the basis that he has made an error in 2012. 
A)  make a prospective change to the 2013 figures, on the basis that he has made an error in 2012. 
B)  make a prospective change to the 2013 figures, on the basis that he is making a change to an estimate in 2012. 
C)  make a retrospective change to the 2013 figures, on the basis that that this is a change in accounting estimates. 
D)  make a retrospective change to the 2013 figures, on the basis that he has made an error in 2012.

Exam 4: An Overview of Accounting for Assets

AASB 101's definition of current assets and further discussion at paragraph 59 will:

AASB 101 requires,as a minimum,certain line items to be included on the face of the statement of financial position .Additional line items may be disclosed based on an assessment of:

Discuss the approaches recommended by AASB 101 to present assets in the statement of financial position.

The AASB Framework allows use of a different measurement basis for similar assets as long as this is disclosed in the summary of accounting policies adopted in the notes to the accounts.

Recoverable amount of an asset is defined in AASB 136 as the higher of its fair value less costs to sell and its value in use.In the case where an asset's carrying amount is less than its recoverable amount,which action is consistent with AASB 136?

Advertising expenditures are typically expensed as incurred because the future economic benefits are uncertain to occur.

According to AASB 136,a non-current asset should be:

Certain classes of property,plant and equipment,for example,aircraft,might comprise a number of individual component parts.How does AASB 116 paragraph 43 require these components to be accounted for?

The sum of the total assets of an entity will typically reflect their cost under current generally accepted accounting practices.

The classification of assets into current or non-current in the statement of financial position will provide useful information on the short-term solvency of the entity:

The opportunistic view under PAT predicts managers to prefer capitalisation over expensing.Discuss.

Which of the following items are required to calculate 'value in use' of an asset?

If an impairment loss recognised in prior periods for a revalued asset no longer exists,AASB 136 Impairment of Assets requires a reporting entity to:

Using the cost model outlined in AASB 116 to measure property,plant and equipment at acquisition,which of the following costs would not be included?

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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