Question 1

Which of the following best describes the role played by the 'income approach' in determining an asset's fair value

Accepted Answer

A) it is the method required by AASB 116 to estimate fair value in the absence of an active, liquid market 
B) it refers to the process of comparing an asset's fair value to the period profit or loss (sometimes called income or net income) 
C) it is another term for net present value, and in some circumstances NPV is the best estimator of fair value 
D) it has no formal role in the current AASB 116, although it was mentioned in the subsequently withdrawn Australian implementation guidance 
A) it is the method required by AASB 116 to estimate fair value in the absence of an active, liquid market 
B) it refers to the process of comparing an asset's fair value to the period profit or loss (sometimes called income or net income) 
C) it is another term for net present value, and in some circumstances NPV is the best estimator of fair value 
D) it has no formal role in the current AASB 116, although it was mentioned in the subsequently withdrawn Australian implementation guidance

Question 2

Otter Ltd has an item of plant with a cost of $4,200,000, and at 30 June 20X4 the accumulated depreciation was $600,000 and its estimated residual amount $200,000; its accumulated impairment was $150,000 at the beginning of the reporting period.
-Otter Ltd has adopted the cost model for the class of assets.At reporting date, the directors determined that the asset's value in use was $3 200,000, its fair value was $3,300,000 and the estimated costs to sell it $150,000.At what amount will it be reported in the balance sheet?

Accepted Answer

A) $3,350,000 
B) $3,150,000 
C) $3,500,000 
D) $3,200,000 
A) $3,350,000 
B) $3,150,000 
C) $3,500,000 
D) $3,200,000

Question 3

Beaver Ltd has an item of plant which had a cost of $2 000 000; on 30 June 20X7 its accumulated depreciation was $1,100,000 and its recoverable amount was $1,000,000.What is the carrying amount of this asset at 30 June 20X7?

Accepted Answer

A) $1,100,000 
B) $1,000,000 
C) $900,000 
D) $2 000 000 
A) $1,100,000 
B) $1,000,000 
C) $900,000 
D) $2 000 000

Question 4

Impairment requirements of AASB 136 apply to non-current assets recognised using the revaluation model under AASB 116.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following does not result in the recognition of a provision in the balance sheet?

Accepted Answer

A) the expected future warranty claims in respect of goods sold during the reporting period 
B) a final dividend declared by directors after the reporting date 
C) the amount of employee annual leave accrued but not taken at reporting date 
D) the company has been held liable for damages for breach of copyright but the court is yet to determine the amount of damages payable to the copyright owner. 
A) the expected future warranty claims in respect of goods sold during the reporting period 
B) a final dividend declared by directors after the reporting date 
C) the amount of employee annual leave accrued but not taken at reporting date 
D) the company has been held liable for damages for breach of copyright but the court is yet to determine the amount of damages payable to the copyright owner.

Question 6

Bill Ltd will have to pay for long service leave (LSL) for its employees when they become entitled to it in 5 years' time.The estimate of this future payment is a:

Accepted Answer

A) provision to be recognised when they become entitled to the LSL (when there is a legal obligation to pay the LSL) 
B) a contingent liability to be recognised this year 
C) a contingent liability to be recognised when they become entitled to the LSL 
D) provision to be recognised this year 
A) provision to be recognised when they become entitled to the LSL (when there is a legal obligation to pay the LSL) 
B) a contingent liability to be recognised this year 
C) a contingent liability to be recognised when they become entitled to the LSL 
D) provision to be recognised this year

Question 7

Restating of assets to their fair value can only be done using the revaluation model under AASB 116.

Accepted Answer

A) True 
 B)False

Question 8

A contingent liability is never recognised in the financial statements.

Accepted Answer

A) True 
 B)False

Question 9

Under AASB 116, the minimum factors that must be considered when deciding if an asset's recoverable amount must be reassessed are not the same for both impairment and reversal of a previously recognised impairment.

Accepted Answer

A) True 
 B)False

Question 10

Edwards Ltd has two pieces of equipment in its balance sheet as follows:
$\begin{array} { l c c c c c } 
\begin{array} { l } 
\text { Item } \
\text { no. }
\end{array} & \begin{array} { c } 
\text { Cost or } \
\text { revalued } \
\text { amount }
\end{array} & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Value in Use } & \text { Fair value } & \begin{array} { c } 
\text { Estimated } \
\text { cost to sell }
\end{array} \
1 & \$ 600000 & \$ 100000 & \$ 600000 & \$ 450000 & \$ 20000 \
2 & \$ 800000 & \$ 400000 & \$ 450000 & \$ 500000 & \$ 25000 \
\text { Total } & \$ \mathbf { 4 0 0 0 0 0 } & \$ \mathbf { 5 0 0 0 0 0 } & & &
\end{array}$
-If Edwards Ltd applies the cost model to the assets, at what amount will asset 1 be reported in the balance sheet?

Accepted Answer

A) $450,000 
B) $500,000 
C) $600,000 
D) Nil 
A) $450,000 
B) $500,000 
C) $600,000 
D) Nil

Question 11

The definition of contingent assets is narrower than the definition of contingent liabilities.

Accepted Answer

A) True 
 B)False

Which of the following best describes the role played by the 'income approach' in determining an asset's fair value

Beaver Ltd has an item of plant which had a cost of $2 000 000; on 30 June 20X7 its accumulated depreciation was $1,100,000 and its recoverable amount was $1,000,000.What is the carrying amount of this asset at 30 June 20X7?

Impairment requirements of AASB 136 apply to non-current assets recognised using the revaluation model under AASB 116.

Which of the following does not result in the recognition of a provision in the balance sheet?

Bill Ltd will have to pay for long service leave (LSL) for its employees when they become entitled to it in 5 years' time.The estimate of this future payment is a:

Restating of assets to their fair value can only be done using the revaluation model under AASB 116.

A contingent liability is never recognised in the financial statements.

Under AASB 116, the minimum factors that must be considered when deciding if an asset's recoverable amount must be reassessed are not the same for both impairment and reversal of a previously recognised impairment.

The definition of contingent assets is narrower than the definition of contingent liabilities.

Companies and Corporate Regulation

Objectives of Company Reporting, Conceptual Elements and Terminology

Forming a Company and Issuing Shares

Profits, Reserve and Distributions to Owners

Reorganisation of Share Capital

Debt Securities

Foreign Currency Transactions and an Introduction to Hedging

Income Tax

Reports and Disclosures I: Overview

Reports and Disclosures Ii: the Financial Statements

Receivership and Voluntary Administration

Liquidations

External Administration Reports and Accounts

Investments in New Assets; Introduction to Business Combinations and Associates

The Corporate Group

Acquisition Method Introduction and Substitution

Acquisition Method Application After Control Date

Intra-Group Transactions

Direct Non-Controlling Interest

Changes to Parent Investment in Subsidiaries

Indirect Interest

Translation of Foreign Currency Statements

Consolidated Cash Flow Statements

Equity Accounting Expanded and Joint Ventures

Segment Reporting

Filters

Exam 8: Advanced Asset and Liability Issues

Which of the following best describes the role played by the 'income approach' in determining an asset's fair value

Beaver Ltd has an item of plant which had a cost of $2 000 000; on 30 June 20X7 its accumulated depreciation was $1,100,000 and its recoverable amount was $1,000,000.What is the carrying amount of this asset at 30 June 20X7?

Impairment requirements of AASB 136 apply to non-current assets recognised using the revaluation model under AASB 116.

Which of the following does not result in the recognition of a provision in the balance sheet?

Bill Ltd will have to pay for long service leave (LSL) for its employees when they become entitled to it in 5 years' time.The estimate of this future payment is a:

Restating of assets to their fair value can only be done using the revaluation model under AASB 116.

A contingent liability is never recognised in the financial statements.

Under AASB 116, the minimum factors that must be considered when deciding if an asset's recoverable amount must be reassessed are not the same for both impairment and reversal of a previously recognised impairment.

The definition of contingent assets is narrower than the definition of contingent liabilities.

Companies and Corporate Regulation

Objectives of Company Reporting, Conceptual Elements and Terminology

Forming a Company and Issuing Shares

Profits, Reserve and Distributions to Owners

Reorganisation of Share Capital

Debt Securities

Foreign Currency Transactions and an Introduction to Hedging

Income Tax

Reports and Disclosures I: Overview

Reports and Disclosures Ii: the Financial Statements

Receivership and Voluntary Administration

Liquidations

External Administration Reports and Accounts

Investments in New Assets; Introduction to Business Combinations and Associates

The Corporate Group

Acquisition Method Introduction and Substitution

Acquisition Method Application After Control Date

Intra-Group Transactions

Direct Non-Controlling Interest

Changes to Parent Investment in Subsidiaries

Indirect Interest

Translation of Foreign Currency Statements

Consolidated Cash Flow Statements

Equity Accounting Expanded and Joint Ventures

Segment Reporting

Filters