Question 1

If an item meets the definition of an expense,to be reported in the income statement it must also meet the recognition criteria of being probable that the decrease in economic benefits has arisen and that the amount is able to be reliably _______________.

Accepted Answer

The answer of If an item meets the definition of...

Question 2

Which of the following is not disclosed in the statement of comprehensive income?

Accepted Answer

A)  Transactions with owners as owners. 
B)  Income and expenses recognised in the statement of profit or loss. 
C)  Income and expenses recognised directly in equity. 
D)  All of the above options are disclosed in the statement of comprehensive income.

Question 3

An owner contributes $50 000 to expand the business.This transaction would:

Accepted Answer

A)  increase income. 
B)  increase expenses. 
C)  increase capital. 
D)  decrease income.

Question 4

Which of the following statements concerning a company's income tax expense is correct?

Accepted Answer

A)  Income tax expense is calculated as pre-tax accounting profit multiplied by the company tax rate. 
B)  Income tax expense often differs from the amount of tax paid to the ATO (Australian Taxation Office). 
C)  Income tax expense will only rarely differ from the amount of tax paid to the ATO. 
D)  Income tax expense will be the same as the amount of tax paid to the ATO.

Question 5

Managers’ use of accounting discretion allowable under accounting policy choices and estimates to portray a desired level of profit in a particular reporting period is referred to as ___________________ management.

Accepted Answer

The answer of Managers’ use of accounting discretion allowable under...

Question 6

Which of the following are included in a statement of changes in equity?

Accepted Answer

A)  All changes in equity arising from equity contributions and dividends paid. 
B)  All changes in equity arising from shares purchased. 
C)  All changes in equity arising separately from non-owner changes in equity (e.g. profit). 
D)  All options are included in a statement of changes in equity.

Question 7

An entity pays wages on a fortnightly basis and the next payroll date is 8 September.If wages expense is not accrued at 31 August the effect on the financial statements for August will be:

Accepted Answer

A)  an overstatement of assets and profit. 
B)  an understatement of assets and profit. 
C)  an understatement of liabilities and an overstatement of profit. 
D)  an overstatement of liabilities and an understatement of profit.

Question 8

A transaction recording accrued income will:

Accepted Answer

A)  have no effect on total assets. 
B)  increase cash and decrease sales income. 
C)  increase accounts receivable and sales income. 
D)  increase accounts receivable and accounts payable.

Question 9

Accrued income is recognised _________ the cash has been received.

Accepted Answer

The answer of Accrued income is recognised _________ the cash...

Question 10

An entity's profit or loss is measured over a _________ period of time.

Accepted Answer

The answer of An entity's profit or loss is measured...

Question 11

Gains from the disposal of non-current assets are recognised as ____________ income.

Accepted Answer

The answer of Gains from the disposal of non-current assets...

Question 12

An expense is considered to be __________________ if its non-disclosure could affect decisions made by the users of the statement of profit or loss.

Accepted Answer

The answer of An expense is considered to be __________________...

Question 13

The relevant profit measure that isolates the returns associated with investment decisions is ______________ ______________ ______________ and ______________.

Accepted Answer

The answer of The relevant profit measure that isolates the...

Question 14

Equipment is purchased for $50 000.It is to be depreciated on a diminishing balance basis using a rate of 10%.How much will be charged for depreciation expense for year 3 of the machine's life?

Accepted Answer

A)  $4 050 
B)  $5 000 
C)  $4 500 
D)  $15 000

Question 15

Which of the following statements relating to the presentation of the statement of profit or loss by non-reporting entities is not true?

Accepted Answer

A)  There is no prescribed format. 
B)  The statement of profit or loss must be prepared in accordance with the AASB accounting standards. 
C)  The purpose of the statement of profit or loss is to report the profit or loss for the entity for the reporting period. 
D)  Income is usually more detailed and less aggregated than that prepared for a reporting entity.

Question 16

Which of the following is an example of other comprehensive income?

Accepted Answer

A)  Dividends received. 
B)  Sales income. 
C)  Royalties. 
D)  Revaluations of assets recorded directly in the revaluation surplus account.

Question 17

Which of the following transactions will be recorded as income?

Accepted Answer

A)  Borrow $50 000 from the bank. 
B)  A. J. Smith pays $2 500 for goods sold to him on credit last month. 
C)  Sold inventory on credit for $5 000. 
D)  Owner contributes $8 000 of personal funds to the business.

Question 18

Which of the following statements is correct for an entity that has discontinued part of its operations during the financial year?

Accepted Answer

A)  The entity must show the profit or loss from the discontinued operation separately to the profit or loss from continued operations. 
B)  The entity must include the profit or loss from the discontinued operation as part of continued operations. 
C)  The entity must not show the profit or loss from the discontinued operation on the financial statements for the year. 
D)  The entity must show only the profit or loss from the discontinued operation on the financial statements for the year.

Question 19

Other ______________ income represents all changes in equity other than profit or loss,and transactions associated with owners such as dividends and capital contributions.

Accepted Answer

The answer of Other ______________ income represents all changes in...

Question 20

The ______________ of _____________ depreciation method measures depreciation based on an asset's activity or output relative to the total activity or output expected.

Accepted Answer

The answer of The ______________ of _____________ depreciation method measures...

Exam 6: Statement of Profit or Loss and Statement of Changes in Equity