Question 1

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under AASB 101:

Accepted Answer

A) True 
 B)False

Question 2

Estimations are frequently made in the income statement in relation to items such as bad debts, inventory obsolescence, an asset's useful life, and the expected pattern of consumption of economic benefits of depreciable assets. The effect of these estimations on the income statement is to:

Accepted Answer

A)  Increase the variability of profits. 
B)  Make the statement unreliable. 
C)  Reduce the relevance of the profit figures reported. 
D)  All of the given answers. 
E)  None of the given answers.

Question 3

Profit is not defined in the AASB Framework:

Accepted Answer

A)  Because it is simply the difference between income and expenses, both of which are defined. 
B)  As it is an intangible item and therefore cannot be properly defined. 
C)  Because different measurement methods will give different profits, therefore there cannot be one definition. 
D)  As it is clearly defined under AASB 101. 
E)  None of the given answers.

Question 4

A statement displaying components of profit or loss is referred to in AASB 101 as a(n):

Accepted Answer

A)  Profit and loss statement. 
B)  Statement of income. 
C)  Statement of financial performance. 
D)  Income statement. 
E)  None of the given answers.

Question 5

Discovery of an error from a prior period corrected retrospectively is an example of an item reportable under other comprehensive income.

Accepted Answer

A) True 
 B)False

Question 6

Different measurement models affect the determination of income and expenses. The different measurement models include:

Accepted Answer

A)  Historical cost, market value, present value. 
B)  Historical cost, direct costs, indirect costs. 
C)  Current cost, historical cost, overhead cost. 
D)  Market value, opportunity cost, historical cost. 
E)  None of the given answers.

Question 7

Which of the following is not required to be shown on the face of the income statement?

Accepted Answer

A)  Tax Expense. 
B)  Revenue. 
C)  Share of profit or loss of joint ventures using the equity method. 
D)  Profit or loss attributable to minority interests. 
E)  Share of profit or loss of joint ventures using the proportional consolidation method.

Question 8

If the exercise (strike) price of a call option is greater than the current share price, the option is said to be 'in-the-money':

Accepted Answer

A) True 
 B)False

Question 9

Hicks' notion of income is that:

Accepted Answer

A)  An individual's income is what they consume. 
B)  An individual's income is the minimum value that they can consume during a period and still be as well off at the end as they were in the beginning. 
C)  An individual's income is the difference between their revenues and expenses. 
D)  An individual's income is the maximum value that they can consume during a period and still be as well off at the end as they were in the beginning. 
E)  None of the given answers.

Question 10

Following are the items of income and expense recognised during the period by Murray LtD.

Which of the following combinations identify all items permitted in AASB 101 "Presentation of Financial Statements" to be presented under other comprehensive income?

Accepted Answer

A)  I, II, V and VI; 
B)  II, III, VI and V; 
C)  I, III, and VI; 
D)  II, IV and VI 
E)  III, IV and V;

Question 11

Government departments are now required to report in accordance with AAS 29 'Financial reporting by government departments'. The broad effect of the requirements of this standard is to:

Accepted Answer

A)  Emphasise the reporting of the service role of government departments. 
B)  Emphasise the use of cash accounting by government departments. 
C)  Introduce accrual accounting and an emphasis on profit. 
D)  Introduce value added reporting. 
E)  None of the given answers.

Question 12

When selecting a presentation format management must select the one that is:

Accepted Answer

A)  The most relevant. 
B)  The most reliable. 
C)  The most consistent. 
D)  The most useful to management. 
E)  The most relevant and the most reliable.

Question 13

An implication of the fact that traditional financial accounting is based on a model that emphasises property rights is:

Accepted Answer

A)  fair values become of critical importance. 
B)  that such rights are recognised as intangible assets. 
C)  many social costs are ignored. 
D)  that these financial reports are always prepared on a 'true and fair' basis. 
E)  that auditors have an easier job in verifying financial statements.

Question 14

All adjustments to equity other than those related to transactions with owners in their capacity as owners are disclosed in the Statement of Comprehensive Income (AASB 101):

Accepted Answer

A) True 
 B)False

Question 15

The notes to the accounts that relate to income and expense should include:

Accepted Answer

A)  Only commentary on issues covered by AASB 101. 
B)  A variety of information that incorporates the disclosures required in all standards related to income and expenses. 
C)  Only information that would have resulted in a different profit or loss figure if it had been included on the face of the statement. 
D)  Only items that were deemed non-material when selecting items to place on the face of the accounts. 
E)  None of the given answers.

Question 16

The income statement satisfies the requirements of the Corporations Act 2001 for a 'profit and loss statement':

Accepted Answer

A) True 
 B)False

Question 17

If it is found that an error had been made in a prior period.

Accepted Answer

A)  The error should be rectified by including the item of income or expense in the period in which the error was discovered. 
B)  AASB 101 does not cover this concept and so no entry is required. 
C)  AASB 108 requires that errors are corrected via an adjustment to opening retained earnings. 
D)  Material errors discovered in the current reporting period must be included in that period's income statement, while non-material errors may be corrected with an adjustment to opening retained earnings. 
E)  None of the given answers.

Question 18

When there is a change made to the useful life of an asset:

Accepted Answer

A)  it must be recognised as a change in an accounting estimate and the impact of the reported change must be disclosed in the notes to the accounts. 
B)  it must be recognised as an error and all previous financial statements must be restated. 
C)  it must be recognised as an error and opening retained earnings and opening balances of the asset must be restated. 
D)  it is recognised as a change in an accounting estimate and the opening retained earnings and opening balances of the asset must be restated. 
E)  it is ignored.

Question 19

In establishing the classification of items in the income statement, the size of an item is an appropriate basis for establishing a separate classification (by nature or function) for it:

Accepted Answer

A) True 
 B)False

Question 20

Total recognised income and expense is also defined as:

Accepted Answer

A)  Net profit reported in the income statement. 
B)  Net operating cash flows reported on the cash flow statement. 
C)  Net profit reported on the income statement, plus total of all income and expenses recognised directly in equity. 
D)  Net operating cash flows reported on the cash flow statement, plus total of all income and expenses recognised directly in equity. 
E)  Net operating cash flows reported on the cash flow statement, plus net profit reported in the income statement.

Exam 17: The Statement of Comprehensive Income and Statement of Changes in E

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under AASB 101:

Estimations are frequently made in the income statement in relation to items such as bad debts, inventory obsolescence, an asset's useful life, and the expected pattern of consumption of economic benefits of depreciable assets. The effect of these estimations on the income statement is to:

Profit is not defined in the AASB Framework:

A statement displaying components of profit or loss is referred to in AASB 101 as a(n) :

Discovery of an error from a prior period corrected retrospectively is an example of an item reportable under other comprehensive income.

Different measurement models affect the determination of income and expenses. The different measurement models include:

Which of the following is not required to be shown on the face of the income statement?

If the exercise (strike) price of a call option is greater than the current share price, the option is said to be 'in-the-money':

Hicks' notion of income is that:

Following are the items of income and expense recognised during the period by Murray LtD. Which of the following combinations identify all items permitted in AASB 101 "Presentation of Financial Statements" to be presented under other comprehensive income?

Government departments are now required to report in accordance with AAS 29 'Financial reporting by government departments'. The broad effect of the requirements of this standard is to:

When selecting a presentation format management must select the one that is:

An implication of the fact that traditional financial accounting is based on a model that emphasises property rights is:

All adjustments to equity other than those related to transactions with owners in their capacity as owners are disclosed in the Statement of Comprehensive Income (AASB 101):

The notes to the accounts that relate to income and expense should include:

The income statement satisfies the requirements of the Corporations Act 2001 for a 'profit and loss statement':

If it is found that an error had been made in a prior period.

When there is a change made to the useful life of an asset:

In establishing the classification of items in the income statement, the size of an item is an appropriate basis for establishing a separate classification (by nature or function) for it:

Total recognised income and expense is also defined as: