Question 1

If the expected value in use of an asset is more than its market value,then it is expected that the entity will retain the asset:

Accepted Answer

A) True 
 B)False  True

Question 2

If it is not probable that expenditure will generate future benefits,the accounting treatment should bE.

Accepted Answer

A)  To treat it as a deferred asset. 
B)  To amortise it over a period of no more than two operating cycles. 
C)  To expense it. 
D)  To treat it as an unearned revenue. 
E)  None of the given answers. 
A)  To treat it as a deferred asset. 
B)  To amortise it over a period of no more than two operating cycles. 
C)  To expense it. 
D)  To treat it as an unearned revenue. 
E)  None of the given answers. C

Question 3

O'Briens Construction Ltd exchanged equipment that had a book value of $40 000 for a truck that had a book value (in the other entity's books)of $38 000.The fair value of the equipment is $45 000 and the fair value of the truck is $48 000.Further cost incurred to prepare the truck for use by O'Briens was $700 for signage.What is the acquisition cost of the truck?

Accepted Answer

A)  $48 700 
B)  $40 000 
C)  $48 000 
D)  $45 700 
E)  None of the given answers. 
A)  $48 700 
B)  $40 000 
C)  $48 000 
D)  $45 700 
E)  None of the given answers. D

Question 4

Land and buildings may be valued at:

Accepted Answer

A)  Recoverable amount. 
B)  Opportunity cost. 
C)  Fair value. 
D)  All of the given answers. 
E)  Recoverable amount or fair value. 
A)  Recoverable amount. 
B)  Opportunity cost. 
C)  Fair value. 
D)  All of the given answers. 
E)  Recoverable amount or fair value.

Question 5

The accountant in preparation for the financial statement for the year 2007 realised an error in the determination of recoverable amounts in last year's financial statements.This error had it been detected in 2006 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 2007 figures, on the basis that he has made an error in 2006. 
B)  Make a prospective change to the 2007 figures, on the basis that he is making a change to an estimate in 2006. 
C)  Make a retrospective change to the 2007 figures, on the basis that that this is a change in accounting estimates. 
D)  Make a retrospective change to the 2007 figures, on the basis that he is changing the accounting policy in 2006. 
E)  Make a retrospective change to the 2007 figures, on the basis that he has made an error in 2006. 
A)  Make a prospective change to the 2007 figures, on the basis that he has made an error in 2006. 
B)  Make a prospective change to the 2007 figures, on the basis that he is making a change to an estimate in 2006. 
C)  Make a retrospective change to the 2007 figures, on the basis that that this is a change in accounting estimates. 
D)  Make a retrospective change to the 2007 figures, on the basis that he is changing the accounting policy in 2006. 
E)  Make a retrospective change to the 2007 figures, on the basis that he has made an error in 2006.

Question 6

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)    
B)    
C)    
D)    
E)  None of the given answers. 
A)    
B)    
C)    
D)    
E)  None of the given answers.

Question 7

AASB 101 indicates that when presenting a balance sheet an entity shoulD.

Accepted Answer

A)  Present all assets and liabilities as two groups and disclose their specific classifications in notes as per paragraphs 57-67. 
B)  Only present items on the basis of liquidity if that information is reliable and more relevant. If this is the case, assets should be discretely grouped into current and non-current classifications. 
C)  Present items broadly in order of liquidity if that information is reliable and more relevant than following paragraphs 57-67. 
D)  Always classify items as current and non-current. 
E)  None of the given answers. 
A)  Present all assets and liabilities as two groups and disclose their specific classifications in notes as per paragraphs 57-67. 
B)  Only present items on the basis of liquidity if that information is reliable and more relevant. If this is the case, assets should be discretely grouped into current and non-current classifications. 
C)  Present items broadly in order of liquidity if that information is reliable and more relevant than following paragraphs 57-67. 
D)  Always classify items as current and non-current. 
E)  None of the given answers.

Question 8

In the case of classifying a liability as current or non-current,what approach does AASB 101 require if there is no clearly identifiable operating cycle?

Accepted Answer

A)  The most common length of operating cycle for other entities in a comparable industry must be used. 
B)  The operating cycle of the event that gave rise to the creation of the liability must be used as the basis for determining the liability's operating cycle. 
C)  The 12 month period from the reporting date must be used. 
D)  The average operating cycle length over all operations of the entity must be used. 
E)  None of the given answers. 
A)  The most common length of operating cycle for other entities in a comparable industry must be used. 
B)  The operating cycle of the event that gave rise to the creation of the liability must be used as the basis for determining the liability's operating cycle. 
C)  The 12 month period from the reporting date must be used. 
D)  The average operating cycle length over all operations of the entity must be used. 
E)  None of the given answers.

Question 9

A material prior period error in year ending 2009 was subsequently discovered in 2010.To comply with AASB 108 "Accounting policies,changes in accounting estimates and errors" an entity should.

Accepted Answer

A)  re-issue the 2009 financial statements with the error corrected. 
B)  make a retrospective adjustment in 2009. 
C)  make a retrospective adjustment in 2010. 
D)  make a prospective adjustment in 2009. 
E)  make a prospective adjustment in 2010. 
A)  re-issue the 2009 financial statements with the error corrected. 
B)  make a retrospective adjustment in 2009. 
C)  make a retrospective adjustment in 2010. 
D)  make a prospective adjustment in 2009. 
E)  make a prospective adjustment in 2010.

Question 10

The preserved body of famous Australian racehorse Phar Lap is an example of a heritage asset:

Accepted Answer

A) True 
 B)False

Question 11

If an assets 'value in use' exceeds its market value then:

Accepted Answer

A)  An entity should adjust the current carrying amount of the asset to book value. 
B)  It would be expected that the entity would dispose of the asset immediately. 
C)  An impairment loss will need to be recorded. 
D)  It would be expected that the entity would retain the asset. 
E)  No entry is required as cost is the only way to reliably value an asset. 
A)  An entity should adjust the current carrying amount of the asset to book value. 
B)  It would be expected that the entity would dispose of the asset immediately. 
C)  An impairment loss will need to be recorded. 
D)  It would be expected that the entity would retain the asset. 
E)  No entry is required as cost is the only way to reliably value an asset.

Question 12

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 in asset revaluation reserve. 
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. 
E)  None of the given answers 
A)  reverse the impairment loss in asset revaluation reserve. 
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. 
E)  None of the given answers

Question 13

AASB 101 "Presentation of Financial Statements" requires all current and non-current assets to be presented in the balance sheet in the order of maturity.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

According to the AASB Framework an asset should have a number of characteristics,including:

Accepted Answer

A)  It must be owned by the entity. 
B)  It must be expected to provide future economic benefits to the entity. 
C)  The transaction giving rise to the ownership must have already occurred. 
D)  The future economic benefits must be very likely to eventuate. 
E)  All of the given answers. 
A)  It must be owned by the entity. 
B)  It must be expected to provide future economic benefits to the entity. 
C)  The transaction giving rise to the ownership must have already occurred. 
D)  The future economic benefits must be very likely to eventuate. 
E)  All of the given answers.

Question 16

Applying the asset recognition criteria,which of the following accounting treatments are incorrect?

Accepted Answer

A)  Transfer duties were included in the cost of acquisition of the photocopier. 
B)  Monthly servicing of the photocopier was capitalised. 
C)  Monthly servicing of the photocopier was expensed. 
D)  Replacement of a minor component part of the photocopier was expensed. 
E)  None of the given answers. 
A)  Transfer duties were included in the cost of acquisition of the photocopier. 
B)  Monthly servicing of the photocopier was capitalised. 
C)  Monthly servicing of the photocopier was expensed. 
D)  Replacement of a minor component part of the photocopier was expensed. 
E)  None of the given answers.

Question 17

It is expected that the service potential of a non-current asset will decline over time.The appropriate accounting treatment is to:

Accepted Answer

A)  Amortise the asset over its useful life. 
B)  Disclose the effect in the notes to the balance sheet if it is material in nature. 
C)  Write-off the asset. 
D)  Accrue the difference as a payable in adjusting entries at the end of the period. 
E)  None of the given answers. 
A)  Amortise the asset over its useful life. 
B)  Disclose the effect in the notes to the balance sheet if it is material in nature. 
C)  Write-off the asset. 
D)  Accrue the difference as a payable in adjusting entries at the end of the period. 
E)  None of the given answers.

Question 18

Previously written-off assets are allowed to be reinstated under AASB 136 "Impairment of Assets".

Accepted Answer

A) True 
 B)False

Question 19

How should borrowing costs relating to an asset being constructed over a substantial period of time be treated in the accounts?

Accepted Answer

A)  Expensed as incurred. 
B)  Capitalised and amortised over the period of the construction of the asset. 
C)  Accrued and amortised over the period of the loan. 
D)  Capitalised as part of the cost of the asset. 
E)  None of the given answers. 
A)  Expensed as incurred. 
B)  Capitalised and amortised over the period of the construction of the asset. 
C)  Accrued and amortised over the period of the loan. 
D)  Capitalised as part of the cost of the asset. 
E)  None of the given answers.

Question 20

If the entity received a donated asset the entity must:

Accepted Answer

A)  recognise an asset. 
B)  recognise a liability. 
C)  recognise an income. 
D)  recognise expense. 
E)  recognises an asset and an income. 
A)  recognise an asset. 
B)  recognise a liability. 
C)  recognise an income. 
D)  recognise expense. 
E)  recognises an asset and an income.

Exam 4: An Overview of Accounting for Assets

If the expected value in use of an asset is more than its market value,then it is expected that the entity will retain the asset:

If it is not probable that expenditure will generate future benefits,the accounting treatment should bE.

Land and buildings may be valued at:

AASB 101 indicates that when presenting a balance sheet an entity shoulD.

In the case of classifying a liability as current or non-current,what approach does AASB 101 require if there is no clearly identifiable operating cycle?

A material prior period error in year ending 2009 was subsequently discovered in 2010.To comply with AASB 108 "Accounting policies,changes in accounting estimates and errors" an entity should.

The preserved body of famous Australian racehorse Phar Lap is an example of a heritage asset:

If an assets 'value in use' exceeds its market value then:

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:

AASB 101 "Presentation of Financial Statements" requires all current and non-current assets to be presented in the balance sheet in the order of maturity.

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

According to the AASB Framework an asset should have a number of characteristics,including:

Applying the asset recognition criteria,which of the following accounting treatments are incorrect?

It is expected that the service potential of a non-current asset will decline over time.The appropriate accounting treatment is to:

Previously written-off assets are allowed to be reinstated under AASB 136 "Impairment of Assets".

How should borrowing costs relating to an asset being constructed over a substantial period of time be treated in the accounts?

If the entity received a donated asset the entity must:

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financ

Theories of Financial Accounting

Depreciation of Property, plant and Equipment

Revaluation 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 Lease

Set-Off and Extinguishment of Debt

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 E

Accounting for Share-Based Payments

Accounting for Income Taxes

Cash-Flow Statements

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After Balance Sheet Date

Segment Reporting

Related-Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transact

Further Consolidation Issues II: Accounting for Minority Interests

Further Consolidation Issues III: Accounting for Indirect Ownershi

Further Consolidation Issues Iv: Accounting for Changes in the Deg

Accounting for Equity Investments

Accounting for Equity Investments

Accounting for Foreign Currency Transactions

Translation of the Accounts of Foreign Operations

Accounting for Corporate Social Responsibility

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