Question 1

Accounting standards in the USA are issued by:

Accepted Answer

A) Congress. 
B) the Financial Accounting Standards Board. 
C) the Securities and Exchange Commission. 
D) the Accounting Principles Board.

Question 2

Table 17-1
 In 2016, a developer sells land for $ \$ 800,000 $. The cost of the land was $ \$ 500,000 $. He receives a $ \$ 200000 $ down payment plus three instalments of $ \$ 300,000 $, $ \$ 200000 $ and $ \$ 100,000 $ which will be paid in 2017, 2018 and 2019 . He uses the instalment method to record revenue. It is decided that $ 10 \% $ is the appropriate rate of interest.
-Refer to Table 17-1.What amount of profit will be recorded when the 2019 payment is received?

Accepted Answer

A) $0 
B) $26 091 
C) $100 000 
D) $9 091

Question 3

All of the following accounting practices are examples of conservatism,except:

Accepted Answer

A) completed contract method. 
B) lower-of-cost-and-net-realisable-value inventory method. 
C) accelerated depreciation. 
D) FIFO method when prices are increasing.

Question 4

AASB 101 requires that accounting policy changes be disclosed in a note to the financial statements.A business bought new equipment and thought it would have a six-year useful life.After two years,the business decided that the equipment would be useful for only three more years.This would be considered a:

Accepted Answer

A) change in accounting estimate. 
B) change in accounting policy. 
C) recording error. 
D) contingency.

Question 5

The body that is responsible for the issue of accounting standards in Australia is:

Accepted Answer

A) The Australian Securities and Investments Commission. 
B) The Australian Accounting Standards Board. 
C) The Institute of Chartered Accountants in Australia. 
D) CPA Australia.

Question 6

The interest in the assets of an entity that remains after subtracting its liabilities is referred to as:

Accepted Answer

A) a gain. 
B) equity. 
C) a debt. 
D) income.

Question 7

The Financial Reporting Council (FRC)was established by the federal government to oversee the Australian standard-setting process.

Accepted Answer

A) True 
 B)False

Question 8

Alpha Hardware sells on the instalment plan.Sales-related figures for Alpha hardware for 2017 were as follows: sales,$700 000;down payments on the sales,$70 000;collections on instalments $300 000;beginning inventory,$50 000;ending inventory,$40 000;and purchases,$410 000.What is Alpha Hardware's gross profit for 2017 using the instalment method?

Accepted Answer

A) $370 000 
B) $280 000 
C) ($50 000) 
D) $148 000

Question 9

All entities using the same terms to describe the elements of financial statements is an example of the:

Accepted Answer

A) timeliness principle. 
B) comparability principle. 
C) materiality principle. 
D) reliability principle.

Question 10

Which of the following statements is incorrect? Timeliness in reporting:

Accepted Answer

A) improves usefulness. 
B) often requires a trade-off with relevance. 
C) means reporting without undue delay. 
D) often requires a trade-off with reliability.

Question 11

The basic accounting concepts and principles:

Accepted Answer

A) explain the difference between managerial and financial accounting. 
B) provide financial information about the reporting entity that is useful to existing and potential investors,lenders and other creditors in making decisions about providing resources to the entity. 
C) are an important way in which management discharges its accountability to investors and other outside users. 
D) provide a structure for helping us to judge whether specific rules and methods for calculating and reporting accounting information are consistent with each other.

Question 12

Table 17-1
 In 2016, a developer sells land for $ \$ 800,000 $. The cost of the land was $ \$ 500,000 $. He receives a $ \$ 200000 $ down payment plus three instalments of $ \$ 300,000 $, $ \$ 200000 $ and $ \$ 100,000 $ which will be paid in 2017, 2018 and 2019 . He uses the instalment method to record revenue. It is decided that $ 10 \% $ is the appropriate rate of interest.
-Refer to Table 17-1.What is the developer's gross profit?

Accepted Answer

A) $500 000 
B) $300 000 
C) $200 000 
D) $800 000

Question 13

SAC 2 is titled:

Accepted Answer

A) Objective of General Purpose Financial Reporting. 
B) Qualitative Characteristics of Financial Information. 
C) Definition and Recognition of the Elements of Financial Statements. 
D) Definition of the Reporting Entity.

Question 14

The term 'revenue recognition' means the recording of revenue in the accounting records and its reporting in the income statement.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following parties is NOT a frequent contributor in the consultation phase of the standard setting process?

Accepted Answer

A) The professional accounting bodies,CPAA and ICAA 
B) Academics 
C) ASIC 
D) Industry groups

Question 16

In most businesses,profit is recognised at the point of sale.

Accepted Answer

A) True 
 B)False

Question 17

Accounting principles:

Accepted Answer

A) should be accepted by people and organisations who need financial information to make decisions. 
B) explain financial phenomena. 
C) are similar to natural laws,like the law of gravity. 
D) apply only to large business organisations.

Question 18

Which of the following is not a type of 'value'?

Accepted Answer

A) Current cost 
B) Historical cost 
C) Selling price 
D) None of the above,i.e.all are types of 'value'

Question 19

According to the IASB and adopted by the AASB,the primary objective of financial reporting is to provide information:

Accepted Answer

A) about the profitability of the business. 
B) that is useful for decision making,particularly for investors and lenders. 
C) to the federal government. 
D) regarding the cash flows of the business.

Question 20

Inventory has a cost of $475 000 and a current selling price of $435 000.What amount should be reported on the financial statements and what concept or principle applies?

Accepted Answer

A) $435 000,conservatism 
B) $435 000,going concern 
C) $475 000,going concern 
D) $475 000,cost

Exam 17: The Framework of Accounting

Accounting standards in the USA are issued by:

All of the following accounting practices are examples of conservatism,except:

The body that is responsible for the issue of accounting standards in Australia is:

The interest in the assets of an entity that remains after subtracting its liabilities is referred to as:

The Financial Reporting Council (FRC)was established by the federal government to oversee the Australian standard-setting process.

All entities using the same terms to describe the elements of financial statements is an example of the:

Which of the following statements is incorrect? Timeliness in reporting:

The basic accounting concepts and principles:

SAC 2 is titled:

The term 'revenue recognition' means the recording of revenue in the accounting records and its reporting in the income statement.

Which of the following parties is NOT a frequent contributor in the consultation phase of the standard setting process?

In most businesses,profit is recognised at the point of sale.

Accounting principles:

Which of the following is not a type of 'value'?

According to the IASB and adopted by the AASB,the primary objective of financial reporting is to provide information:

Inventory has a cost of $475 000 and a current selling price of $435 000.What amount should be reported on the financial statements and what concept or principle applies?