Chapter 03 - Multiple choice quiz

According to the AASB Framework, assets are:

A.	future obligations;

B.	benefits to be controlled by the entity as a result of future transactions;

C.	future benefits controlled by the entity as the result of past events;

D.	items that depend upon the occurrence of another event before they result in a future benefit.

Under the AASB Framework liabilities are defined as:

A.	future economic benefits under the control of the entity;

B.	future sacrifices of economic benefits that are contingent upon the occurrence of an unusual event;

C.	future sacrifices of profits payable to owners in the form of dividends;

D.	future sacrifices of economic benefits that an entity is presently obliged to make as a result of past events.

A listed company has issued 30 000 shares for $1 each. The shares are currently trading on the Australian Securities Exchange for $3 each. Details from the company's financial statements reveal: Total assets $100 000; Total liabilities $60 000; Retained earnings $5 000. The amount of recorded equity of this company is:

$90 000;

$30 000;

$35 000;

$40 000.

Income arises because of changes in:

equity;

B.	assets and liabilities;

expenses;

D.	contingent items.

As well as expenses that arise in the ordinary activities of a business the following item is recognised as an expense of a company:

losses;

B.	dividends;

C.	redemption of shares by a company;

D.	transfers out of retained earnings.

An item may only be recognised for financial statement preparation purposes if it is both 'probable' that it will occur, and:

A.	reasonably relevant;

B.	easily understandable;

C.	reliably measurable;

D.	readily comparable.

In the case of long-term construction contracts revenue is recognised in accordance with AASB111 Construction Contracts on the basis of the:

A.	effective interest method;

B.	discounted cash flows method;

C.	receipt of cash flows;

D.	percentage of completion method.

If a final dividend must be approved by a meeting of shareholders the dividend revenue can be recognised:

A.	when the cash is received by the share owner;

B.	if the shareholder's approve the payment of the dividend;

C.	when the dividend is declared;

D.	at the end of the financial year

Interest expenses incurred in relation to a qualifying asset are to be treated as follows:

A.	capitalised as part of the cost of the asset;

B.	written off directly into retained earnings account;

C.	recognised in profit or loss of the period in which they arise;

D.	added to the asset 'goodwill'.

10.

Interest revenue must be recognised according to the following measurement basis:

cash;

B.	percentage of completion;

accrual;

D.	effective interest method.

11.

If the recoverable amount of an asset is less than the carrying value of the asset, the asset is:

enhanced;

B.	depreciated;

impaired;

D.	discounted.

12.

The 'value in use' of an asset is determined as the:

A.	initial historic cost of the asset;

B.	recoverable amount of the asset;

C.	depreciated original cost of the asset;

D.	discounted present value of the future cash flows expected from the asset.

13.

Contingent liabilities are presented in the:

A.	statement of financial position;

B.	statement of comprehensive income;

C.	notes to the financial statements;

D.	statement of changes in equity.

14.

In relation to the measurement of an asset, the amount of consideration given to acquire the asset is known as its:

A.	historical cost;

B.	current cost;

C.	realisable value;

D.	present value.

15.

An appropriate accounting entry to record the declaration of a bonus dividend out of the Asset revaluation reserve account is:

A.	DR Bonus dividend CR Asset revaluation reserve;

B.	DR Asset revaluation reserve CR Cash;

C.	DR Asset revaluation reserve CR Share capital;

D.	DR Cash CR Share capital.

16.

Which of the following would be recognised in a Statement of Comprehensive Income? :

A.	both income and expenses;

B.	both income and a liabilities;

C.	either an asset or a liability;

D.	both a liability and a contribution.

17.

The item 'Dividend Declared' would appear in which of a company's financial statements?

A.	Statement of Financial Position

B.	Statement of Cash Flows

C.	Statement of Comprehensive Income

D.	Statement of Changes in Equity.

18.

The item 'dividend payable' would appear in which of a company's financial statements?

A.	Statement of Cash Flows;

B.	Statement of Comprehensive Income

C.	Statement of Financial Position

D.	Statement of Changes in Equity.

19.

Reserves that are not required by an accounting standard, but instead are established by management requirements represent:

A.	cash set aside for some future contingency;

B.	book entries usually involving a transfer of retained profits;

C.	non-current obligations to pay dividends in the future to owners;

D.	profits that cannot be paid out to owners as dividends in the future.

20.

Reporting entities must prepare and present a set of general purpose financial statements. These include:

I	a statement of financial position
II	a trial balance
III	a statement of comprehensive income
IV	a statement of changes in equity
V	a statement of cash flows

A.	I, II, III and IV only;

B.	I, III and V only;

C.	I, III, IV and V only.

D.	II, IV and V only.

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