Question 1

Which of the following is an efficiency ratio?

Accepted Answer

A)  Current ratio 
B)  Rate of return on total assets 
C)  Debt-to-equity ratio 
D)  Times interest earned 
A)  Current ratio 
B)  Rate of return on total assets 
C)  Debt-to-equity ratio 
D)  Times interest earned B

Question 2

A business reports the following in its financial statements:
$$\begin{array} { l l } 
\text { Net profit before tax } & \$ 150 \
\text { Interest expense } & 20 \
\text { Income tax expense } & 30 \
\text { Total assets at the beginning of the year } & 700 \
\text { Total assets at the end of the year } & 850
\end{array}$$
Its rate of return on total assets is:

Accepted Answer

A)  19.4% 
B)  21.9% 
C)  16.8% 
D)  4.83% 
A)  19.4% 
B)  21.9% 
C)  16.8% 
D)  4.83% B

Question 3

A company reports the following in relation to its latest financial year:
$$\begin{array} { l l } 
\text { Cument assets } & \$ 175 \
\text { Non-current assets } & \mathbf { 3 0 0 } \
\text { Current liabilities } & 50 \
\text { Non-current liabilities } & 250
\end{array}$$
Writing a cheque for $25 to pay off some long-term debentures payable means that the current ratio will be:

Accepted Answer

A)  7.0 times 
B)  3.0 times 
C)  unchanged 
D)  5.5 times 
A)  7.0 times 
B)  3.0 times 
C)  unchanged 
D)  5.5 times B

Question 4

Discuss the benefits of the 'management approach' adopted by AASB 8.

Accepted Answer

The International Accounting Standards B

Question 5

When evaluating whether to calculate diluted earnings per share (EPS),a company issuing convertible notes should consider:

Accepted Answer

A)  the time weighting factor 
B)  if the notes potentially convert to ordinary shares 
C)  if conversion of the notes is likely to increase earnings, or decrease losses, per share 
D)  both B and C must be considered 
A)  the time weighting factor 
B)  if the notes potentially convert to ordinary shares 
C)  if conversion of the notes is likely to increase earnings, or decrease losses, per share 
D)  both B and C must be considered

Question 6

A business reports the following in its financial statements:
$$\begin{array} { l } 
\text { Profit before tax and interest } &\$100\
\text { Interest expense }&\quad\quad\quad\quad20\
\text { Income tax expense }&\quad\quad\quad\quad\quad\quad\quad\quad30
\end{array}$$
Its 'times interest earned' ratio is:

Accepted Answer

A)  5.0 times 
B)  6.5 times 
C)  3.5 times 
D)  4.0 times 
A)  5.0 times 
B)  6.5 times 
C)  3.5 times 
D)  4.0 times

Question 7

Under the provisions of Australian Accounting Standard AASB 133,a basic earnings per share is calculated as:

Accepted Answer

A)  profit or loss including extraordinary items and after income tax expense ÷ weighted average number of ordinary shares outstanding during the reporting period 
B)  profit or loss excluding extraordinary items and before income tax expense ÷ weighted average number of ordinary shares outstanding during the reporting period 
C)  profit or loss including extraordinary items but before income tax expense ÷ weighted average number of ordinary shares outstanding during the reporting period 
D)  profit or loss before income tax expense ÷ weighted average number of ordinary shares outstanding during the reporting period 
A)  profit or loss including extraordinary items and after income tax expense ÷ weighted average number of ordinary shares outstanding during the reporting period 
B)  profit or loss excluding extraordinary items and before income tax expense ÷ weighted average number of ordinary shares outstanding during the reporting period 
C)  profit or loss including extraordinary items but before income tax expense ÷ weighted average number of ordinary shares outstanding during the reporting period 
D)  profit or loss before income tax expense ÷ weighted average number of ordinary shares outstanding during the reporting period

Question 8

Which of the following is an argument against the publication of a highlights statement?

Accepted Answer

A)  Simplifies presentation of data 
B)  Additional audit work 
C)  A risk of unconscious bias exists 
D)  Includes too many financial ratios 
A)  Simplifies presentation of data 
B)  Additional audit work 
C)  A risk of unconscious bias exists 
D)  Includes too many financial ratios

Question 9

Which of the following is not a likely benefit of including a highlights statement in the annual report of a business?

Accepted Answer

A)  It provides unskilled readers of the report with a simple summary of key financial indicators 
B)  The statement is regarded by many readers as being highly informative 
C)  Performance indicators can be calculated and then clearly set out in the highlights statement 
D)  Management can select what items are to be included in the report 
A)  It provides unskilled readers of the report with a simple summary of key financial indicators 
B)  The statement is regarded by many readers as being highly informative 
C)  Performance indicators can be calculated and then clearly set out in the highlights statement 
D)  Management can select what items are to be included in the report

Question 10

What benefits is an investor likely to gain if a business presents financial information for its various separate major organisational divisions and/or geographical areas of operations? Are there any likely costs (direct or indirect)to the investor from the presentation of this information?

Accepted Answer

The data provided by segment reporting w

Question 11

Which of the following items need not be shown when reporting primary segment information for a business?

Accepted Answer

A)  Segment results 
B)  Segment revenues 
C)  Segment receivables 
D)  Segment liabilities 
A)  Segment results 
B)  Segment revenues 
C)  Segment receivables 
D)  Segment liabilities

Question 12

Reporting by segments of a business is believed to have a number of disadvantages.Which of the following is not likely to be such a disadvantage?

Accepted Answer

A)  Segment information may not be sufficiently reliable 
B)  The costs to a business of providing segment information may exceed the benefits to investors 
C)  Providing segment information may assist a business's competitors 
D)  Investors invest in a whole company and not in its individual segments 
A)  Segment information may not be sufficiently reliable 
B)  The costs to a business of providing segment information may exceed the benefits to investors 
C)  Providing segment information may assist a business's competitors 
D)  Investors invest in a whole company and not in its individual segments

Question 13

Reporting by segments of a business is believed to have a number of advantages.Which of the following is not likely to be such an advantage?

Accepted Answer

A)  Allowing better assessment of expected returns from and risks of investing 
B)  Preventing management from hiding failures in decision making 
C)  Increasing the net profit of a business 
D)  Improving investors' decision making 
A)  Allowing better assessment of expected returns from and risks of investing 
B)  Preventing management from hiding failures in decision making 
C)  Increasing the net profit of a business 
D)  Improving investors' decision making

Question 14

A company reports the following information on its year-end financial statements:
$$\begin{array} { l l } 
\text { Cument assets } & \$ 300 \
\text { Non-current assets } & 700 \
\text { Current liabilities } & 150 \
\text { Non-current liabilities } & 250
\end{array}$$
Shareholders' equity 600
What is the debt-to-equity ratio?

Accepted Answer

A)  50.0% 
B)  66.7% 
C)  40.0% 
D)  33.3% 
A)  50.0% 
B)  66.7% 
C)  40.0% 
D)  33.3%

Question 15

According to paragraph 19 of AASB 8,after which number of reportable segments should an entity consider whether a practical limit has been reached?

Accepted Answer

A)  10 
B)  15 
C)  8 
D)  None of the above 
A)  10 
B)  15 
C)  8 
D)  None of the above

Question 16

A business reports the following in its financial statements:
$$\begin{array} { l l } 
\text { Net profit before tax } & \$ 100 \
\text { Interest expense } & 20 \
\text { Income tax expense } & 30 \
\text { Preference dividends paid } & 10 \
\text { Ordinary dividends paid } & 15 \
\text { Total assets at the beginning of the year } & 750 \
\text { Total assets at the end of the year } & 850 \
\text { Total liabilities at the beginning of the year } &  3 7 5  \
\text { Total liabilities at the end of the year } & 4 2 5 
\end{array}$$
Its rate of return on shareholders' equity is:

Accepted Answer

A)  11.25% 
B)  15.0% 
C)  7.5% 
D)  22.5% 
A)  11.25% 
B)  15.0% 
C)  7.5% 
D)  22.5%

Question 17

Which of the following statements relating to AASB 8 is not true?

Accepted Answer

A)  It adopts a management approach 
B)  It applies to all for profit entities 
C)  Reconciliations are required for revenues, profit and loss and other material items 
D)  None; all of the statements are true 
A)  It adopts a management approach 
B)  It applies to all for profit entities 
C)  Reconciliations are required for revenues, profit and loss and other material items 
D)  None; all of the statements are true

Question 18

The 'current ratio' is usually calculated as:

Accepted Answer

A)  current assets minus goodwill ÷ current liabilities 
B)  current assets ÷ current liabilities 
C)  current assets excluding inventory ÷ current liabilities 
D)  current liabilities ÷ current assets 
A)  current assets minus goodwill ÷ current liabilities 
B)  current assets ÷ current liabilities 
C)  current assets excluding inventory ÷ current liabilities 
D)  current liabilities ÷ current assets

Question 19

A company reports the following in relation to its latest financial year:
$$\begin{array} { l l } 
\text { Net profit } & \$ 12000 \
\text { Number of ordinary shares issued } & 5000
\end{array}$$
Number of preference shares issued
$$\text { \{paying an annual dividend of } 50 \text { cents per share\} }$$
The company's basic earnings per share figure is:

Accepted Answer

A)  $2.00 
B)  $2.20 
C)  $2.10 
D)  $2.35 
A)  $2.00 
B)  $2.20 
C)  $2.10 
D)  $2.35

Question 20

Many companies,especially larger companies,now include a highlights statement in their annual reports.What are the main items likely to be included in such a statement? What are the perceived benefits of giving this information? Also explain any possible disadvantages of publishing a highlights statement.

Accepted Answer

Answer:First,there are data extracted fr

Exam 17: Financial Reporting: Segment Reporting and Highlights Statements

Which of the following is an efficiency ratio?

A business reports the following in its financial statements: Net profit before tax \ 150 Interest expense 20 Income tax expense 30 Total assets at the beginning of the year 700 Total assets at the end of the year 850 Its rate of return on total assets is:

A company reports the following in relation to its latest financial year: Cument assets \ 175 Non-current assets Current liabilities 50 Non-current liabilities 250 Writing a cheque for $25 to pay off some long-term debentures payable means that the current ratio will be:

Discuss the benefits of the 'management approach' adopted by AASB 8.

When evaluating whether to calculate diluted earnings per share (EPS),a company issuing convertible notes should consider:

A business reports the following in its financial statements: Profit before tax and interest \1 00 Interest expense 20 Income tax expense 30 Its 'times interest earned' ratio is:

Under the provisions of Australian Accounting Standard AASB 133,a basic earnings per share is calculated as:

Which of the following is an argument against the publication of a highlights statement?

Which of the following is not a likely benefit of including a highlights statement in the annual report of a business?

What benefits is an investor likely to gain if a business presents financial information for its various separate major organisational divisions and/or geographical areas of operations? Are there any likely costs (direct or indirect)to the investor from the presentation of this information?

Which of the following items need not be shown when reporting primary segment information for a business?

Reporting by segments of a business is believed to have a number of disadvantages.Which of the following is not likely to be such a disadvantage?

Reporting by segments of a business is believed to have a number of advantages.Which of the following is not likely to be such an advantage?

A company reports the following information on its year-end financial statements: Cument assets \ 300 Non-current assets 700 Current liabilities 150 Non-current liabilities 250 Shareholders' equity 600 What is the debt-to-equity ratio?

According to paragraph 19 of AASB 8,after which number of reportable segments should an entity consider whether a practical limit has been reached?

Which of the following statements relating to AASB 8 is not true?

The 'current ratio' is usually calculated as:

Institutional Arrangements for Setting Accounting Standards in Australia

The Conceptual Framework: Purpose, reporting Entity, the Objective of Financial Reporting, and Qualitative Characteristics

The Conceptual Framework: Definition, recognition and Measurement of the Elements in General Purpose Financial Statements

Fair Value Measurement

The Choice of Accounting Methods

The Statement of Financial Position

Accounting for Current Assets

Accounting for Property, plant and Equipment

Accounting for Company Income Tax

Accounting for Intangible Assets

Accounting for Leases

Accounting for Employee Benefits

Accounting for Financial Instruments

The Statement of Comprehensive Income

Revenue

The Statement of Cash Flows

Further Financial Reporting Issues

Accounting for Extractive Industry

Accounting for Agricultural Activity

Accounting for Superannuation Entities

Accounting for Insurance

International Accounting Standards, harmonisation and Convergence

Foreign Currency Translation

Accounting for Corporate

Ethics in Accounting

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