THEORY OF ACCOUNTS TOA1M-1407 NON-FINANCIAL ASSETS PAS 41 AGRICULTURE
1. A bearer biological asset A. Livestock for meat production B. Trees grown for lumber C. Livestock held for sale D. Fruit trees. 2. Biological assets are measured at A. FV less cost to sell B. Historical cost of the harvest C. Historical cost less accumulated impairment losses D. Market value 3. Not presented as a biological asset A. Grapevines B. Plantation forest C. Carcass D. Sheep 4. Not an agricultural produce A. Bushes B. Logs C. Carcass D. Picked fruits 5. Measured at fair value less cost to sell at the point of harvest A. Leaves C. Lumber B. Bushes D. Wine 6. Measured at the lower of cost and net realizable value A. Sugar B. Wool C. Fruit trees
D. Dairy cattle 7. When agricultural produce is harvested, .the harvest shall be accounted for by using PAS 2, Inventories, or another applicable PFRS. For the purpose of that standard, cost at the date of harvest is deemed to be A. Historical cost of the harvest B. Historical cost less accumulated impairment losses C. Market value D. FV less cost to sell at the point of harvest 8. Subsequent to point of harvest, an agricultural produce is measured a A. Historical cost of the harvest B. Historical cost less accumulated impairment losses C. Lower of cost and net realizable value D. FV less cost to sell 9. Not costs to sell biological assets A. Commissions to brokers and dealers B. Levies by regulatory agencies C. Transfer taxes and duties. D. Transport and other costs necessary to get the assets to a market 10. Where there is a production cycle of more than one year for a biological asset, PAS 41 encourages separate disclosure of A. Physical change only C. Total change in value B. Price change only D. Physical change and price change 11. Choose the incorrect statement. A. For a biological asset, there is a presumption that a fair value can be measured reliably B. The fair value assumption on biological assets can be rebutted only on initial recognition C. For an agricultural produce, it is assumed that its fair value less costs to sell on initial recognition (point of harvest) can always be measured reliably D. Quantified description of each group of biological assets is required b y PAS 41. 12. Regarding the choice of measurement basis used for measuring biological assets, PAS 41 A. Sets out several ways of measuring fair value B. Recommends the use of historical cost C. Recommends the use of current cost D. Recommends the use of present value.
13. A required disclosure for biological assets. I.
Aggregate gain or loss arising during the current p eriod on initial recognition of biological assets and agricultural produce and from the change in fair value less costs to sell of biological assets. II. Description of each group of biological assets A. I only C. Both land Il B. Il only D. Neither I nor Il 14. Not a common feature of agricultural activity, per PAS 41 A. Capability to change C. Measurement of change B. Management of change D. Control of change 15. Inventories are measured at A. Higher of cost and net realizable value B. Fair value less costs to sell C. Lower of cost and net realizable value D. Net realizable value 16. Measurement of inventories at the lower of cost and net realizable value is done A. On an item by item basis B. On an aggregate basis C. On a first-in, first-out basis D. On an arbitrary basis 17. Net realizable value is A. Estimated selling price less estimated costs to complete less estimated costs to sell B. Replacement cost less estimated costs to complete less estimated costs to sell C. Estimated selling price less estimated costs to complete less estimated costs to sell less normal profit margin D. Replacement cost less estimated costs to complete less estimated costs to sell less normal profit margin 18 Commodities of broker traders are normally measured at A. Higher of cost and net realizable value C. Lower of cost and net realizable value B. Fair value less costs to sell D. Net realizable value 19. Harvested agricultural crops or extracted mineral ores assured to be sold under a forward contract or government guarantee are measured at A. Higher of cost and net realizable value C. Lower of cost and net realizable value
B. Fair value less costs to sell
D. Net realizable value
20. The original cost of an inventory item is below both replacement cost and net realizable value. The net realizable value less normal profit margin is below the original cost. Per PAS 2, the inventory item should be valued at A. Replacement cost C. Net realizable value less normal profit margin B. Net realizable value D. Original cost 21. Which of the following is not dealt with by PAS 41? A. The accounting for biological assets B. The initial measurement of agricultural produce harvested from the entity’s biological assets C. The processing of agricultural produce after harvesting D. The accounting treatment of government grants received in respect of biological assets 22. Where there is a long aging or maturation process after harvest, the accounting for such products should be dealt with by A. PAS 41 C. PAS 16 B. PAS2 D. PAS 40 I 3 23. Entity A had a plantation forest that is likely to be harvested and sold in 30 years. The income should be accounted for in the following way: A. No income should be reported until first harvest and sale in 30 years. B. Income should be measured annually and reported using a fair value approach that recognizes and measures biological growth. C. The eventual sale proceeds should be estimated and matched to the profit and loss account over the 30-year period. D. The plantation forest should be valued every 5 years and the increase in value should be shown in the statement of recognized gains and losses. 24. Where the fair value of the biological asset cannot be determined reliably, the biological asset should be measured at A. Cost B. Cost less accumulated depreciation C. Cost less accumulated depreciation and accumulated impairment losses D. Net realizable value 25. Under PFRS, which of the following inventory items are not valued at the lower of cost or net realizable value?
A. Manufactured inventory items B. Retail inventory items
C. Biological inventory items D. Industrial inventory items
26. Which of the following attributes would not be used to measure inventory? A. Historical cost B. Replacement cost
C. Net realizable value D. Present value of future cash flows
PAS 36 IMPAIRMENT OF ASSETS
1. Assets intended to be held and used for productive purposes may suffer from impairment in each of the following circumstances except A. A change in the way the assets are used or physical change in the assets B. Asset costs incurred exceed the original amounts planned C. Discounted expected future cash flows and interest charges are less than the carrying amount of the asset D. A significant adverse change in legal factors that might affect the assets’ fair value 2. Under the reporting requirements for impaired assets, impairment losses for assets to be held and used shall be reported A. As an extraordinary item B. As a component of discontinued operations C. As a component of income from continuing operations D. As a change in accounting estimate 3. Sloan Corporation is performing its annual test of the impairment of goodwill for its Financing reporting unit. It has determined that the fair value of the unit exceeds it carrying value. Which of the following is correct concerning this test of impairment? A. Impairment is not indicated and no additional an alysis is necessary. B. Goodwill should be written down as impaired. C. The assets and liabilities should be valued to determine if there has been an impairment of goodwill. D. Goodwill should be retested at the entity level. 4. For companies that prepare financial statements in accordance with PAS 16, property, plant and equipment should be valued using which models? A. The cost model or the revaluation model B. The cost model or the fair value model C. The cost or the fair value through profit or loss model
D. The revaluation model or the fair value model 5. For companies that are SMEs, property, plant and equipment., should be valued using which models? “ A. The cost model or the revaluation model B. he cost model or the fair value model C. The cost model only D. The revaluation model r the fair value model 6. When the revaluation model is used for reporting plant, property, and equipment, the gain or loss should be included in A. Income for the period B. Gain from revaluation on, the income statement C. A revaluation surplus account is other comprehensive income D. An extraordinary gain or loss on, the income statement 7. Under PAS 38, what valuation methods are used for intangible assets? A. The cost model or the revaluation model B. The cost model or the fair value model C. The cost or the fair value through profit or loss model D. The revaluation model or the fair value model 8. Under PAS 16, when accounting for plant, property, and equipment, a company A. Must use the cost model for presenting the assets B. May elect to use the cost model or the revaluation model on any individual asset C. May elect to use the cost model or the revaluation model on any asset class D. Must use the cost model for land 9. Under PAS 38, an- entity that acquires an intangible asset ma y use the revaluation model for subsequent measurement only if A. The useful life of the intangible asset can b e reliably determined. B. An active market exists forth intangible asset. C. The cost of the intangible asset can be measured reliably. D. The intangible asset is a monetary asset. 10. Under the PAS 16, revaluation model for accounting for plant, property, and equipment A. Assets must be revaluated quarterly B. Assets must be revaluated annually C. Assets must be revaluated biannually
D. There are no rules regarding the frequency of revaluation. 11. Under PAS 36, intangible assets with indefinite lives are tested for impairment A. Quarterly at the quarterly reporting date B. Annually at the annual reporting date C. Biannually at the reporting date. D. There are no guidelines defining when intangible assets are tested for impairment. 12. Under PAS 36, an intangible asset is considered to be impaired if its carrying value is greater than its recoverable amount. The recoverable amount is A. Its historical cost B. Its net selling price C. The greater of its net selling price or its value in use D. Its replacement cost 13. Fair value less cost to sell is also A. Historical cost B. Depreciated replacement cost C. Net selling price D. Current cost PAS 20 GOVERNMENT GRANTS
1. It is an action by government designed to provide an economic benefit specific to an entity or range of entities qualifying under certain criteria. A. Government assistance C. Government subvention B. Government grant D. Government premium 2. These are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. A. Government assistance. C. Government subvention B. Government grants D. Government premium 3. These are government grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. A. Government assistance C. Grants related to income B. Government grants D. Grants related to assets 4. These are government grants other than those related to assets.
A. Government assistance B. Government grants
C. Grants related to income D. Grants related to assets
5, These are loans which the lender undertakes to waive repayment of under certain prescribed conditions. A. Grants related to income C. Forgivable loans B. Grants related to assets D. Simple loans 6. Government grants, including non-monetary grants at fair value, shall not be recognized until there is reasonable assurance that: I. The entity will comply with the conditions a ttaching to them. Il. The grants will be received. A. I only B. II only
C. Both I and Il D. Neither I nor Il
7 Which of the following statement is incorrect? A. A government grant is not recognized until there is reasonable assurance that the entity will comply with the conditions attaching to it and that the grant will be received B. The manner in which a grant is received does not affect the accounting method to be adopted in regard to the grant. C. A forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of t he loan. D. The benefit of a government loan at a below-market rate of interest is not to be treated as government grant. 8. Which of the following accounting for government grants is incorrect? A. Government grants shall be recognized in profit or loss on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. B. Grants related to depreciable assets are usually recognized in profit or loss over the periods and in the proportions in which depreciation expense on those assets is recognized. C. Grants related to non-depreciable assets may also require the fulfillment of certain obligations and would be recognized in profit or loss over the periods that bear the cost of meeting the obligations. D. A government grant that becomes receivable as co mpensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity
with no future related costs shall be recognized in profit or loss after meeting certain conditions. 9. In the case of a nonmonetary grant, which of the following accounting treatments is prescribed by PAS 20? A. Record the asset at replacement cost and the grant at a nominal value. B. Record the grant at a value estimated by management. C. Record both the grant and the asset at fair value of the nonmonetary asset. D. Record only the asset at fair value; do not recognize the fair value of the grant 10. In the case of grants related to an asset, which of these a ccounting treatments (statement of financial position presentation) is prescribed by PAS 20? A. Record the grant at a nominal value in the first year and write it off in th e subsequent year. B. Either set up the grant as deferred income or deduct it in arriving at the carrying amount of the asset. C. Record the grant at fair value in the first year and take it to income in the subsequent year. D. Take it to the income statement and disclose it as an extraordinary gain. 11. In the case of grants related to income, which of these accounting treatments is prescribed by PAS 20? A. Credit the grant to “general reserve” under shareholders’ equity. B. Present the grant in the income statement as “other income” or as a separate line item, or deduct it from the related expense. C. Credit the grant to “retained earnings” on the statement of financial position. D. Credit the grant to sales or other revenue from op erations in the income statement. 12. Which of these disclosures is not required b y PAS 20? A. The accounting policy adopted for government grants, including methods of presentation adopted in the financial statements B. Unfulfilled conditions and other contingencies attaching to government a ssistance C. The names of the government agencies that gave the grants along with the dates of sanction of the grants by these government agencies and the dates when cash was received in case of monetary grants D. The nature and extent of government grants recognized in the financial statements and an indication of other forms of government assistance from which the entity ha s directly benefited 13. Which of the following is not specifically excluded from the purview of PAS 20?
A. B. C. D.
Government participation in ownership of the entity Government grant covered by PAS 41 Government assistance provided in the form of tax benefits Forgivable loan from the government
14. When government grants related to income become repayable due to nonfulfillment of a condition attaching to it, the repayment: (choose the incorrect statement) A. Should be treated as a change in accounting estimate B. Should be accounted for prospectively C. Should be first applied against any unamortized deferred income D. Should be recognized as a debit to retained earnings to the extent that the repayment exceeds any such deferred income 15. Grants related to depreciable assets are usually recognized as income A. Immediately B. Over the useful life of the asset using straight line method C. Over the useful life of the asset using the sum of the years’ digits method D. Over the useful life of the asset and in proportion to the depreciation of the asset 16. Grants in recognition of specific costs are recognized as income A. Over the same period as the relevant expense on a systematic and rational basis B. Immediately C. Over 5 years using straight line method D. Over 5 years using SYD method 17. Which disclosure is not required by Section 24, PFRS for SMEs on Government Grants? A. The accounting policy adopted for government grant including the methods of presentation adopted in the financial statements B. Unfulfilled conditions and other contingencies attaching to government a ssistance C. Other form of government assistance from which the entity has directl y benefited. D. The nature of government grant recognized in the financial statements PAS 40 INVESTMENT PROPERTY
1. Which of the following noncurrent assets ma y not be classified as Investment property? A. Land C. Machinery B. B. Building D. All of them may qualify 2. Which of the following is not an investment property?
A. B. C. D.
Land held for long-term capital appreciation Land held for currently undetermined use Land held as a future plant site Land developed for use as investment property
3. If the entity has not determined that it will use the land either as owner-occupied of for short term sale, the land is classified as A. Owner-occupied property C. Noncurrent asset held for sale B. Investment property D. Other noncurrent asset 4. Which of the following building shall be classified as investment property? A. Building owned and leased out to others under finance leases B. Building leased under finance lease and used for administrative purposes C. Building that is vacant and held to be sold in the near future D. Building constructed for future use as investment property 5. A property interest that is held by a lessee under an operating lease may be classified and accounted for as an investment property provided the following criteria are met: (choose the exception) A. The property meets the definition of investment property B. The operating lease is accounted for as if it were a finance lease C. The lessee uses the FV model in measuring the property interest D. The lessee uses either the cost or FV model in measuring the property interest 6. An entity shall choose which model as its accounting policy for its investment property? A. Fair value model C. Revaluation model B. Cost model D. Either a or b 7. Which of the following is considered in determining fair valuation of an item of investment property? I. Transaction costs on disposal Il. Accrued operating income A. I only B. Il only
C. Both I and Il D. Neither I nor Il
8. Linden Corporation has investment property that is held to earn rental income. Linden prepares for its financial statements in accordance with PFRS. Linden uses the fair value mode for reporting the investment property. Which of the following is true?
A. B. C. D.
Changes in fair value are reported as profit or loss in the current period. Changes in fair value are reported as other comprehensive income for the period. Changes in fair value are reported as an extraordinary gain on the income statement. Changes in fair value are reported as deferred revenue for the period.
9. An investment property should be measured initially at A. Cost B. Cost less accumulated impairment losses C. Depreciable cost less accumulated impairment losses D. Fair value less accumulated impairment losses 10. The applicable PFRS/PAS for a property being constructed or developed for future use as investment property is A. PAS 2 C. PAS 11 B. PAS4O D. PAS 16 11. In case of property held under an operating lease and classified as investment property A. The entity has to account for the investment property under the cost model only. B. The entity has to use the fair value model only. C. The entity has the choice between the cost model and the fair value model. D. The entity needs only to disclose the fair value and can use the cost model under PAS 38. 12. Transfers from investment property to property, plant, and equipment are appropriate A. When there is change of use B. Based on the entity’s discretion. C. Only when the entity adopts the fair value model under PAS 38 D. The entity can never transfer property into another classification on the statement of financial position once it is classified as investment property. 13. Investment property includes all of the following, ex cept r: A. Land held for long-term capital appreciation B. Land held for currently undetermined use C. Building owned by the reporting enterprise or held by a finance lessee leased out under one or more operating lease D. Property in the process of construction for sale in the ordinary course of business 14. Which of the following is not an investment property? A. Land which the entity has not determined whether it is to be used as owner-occupied property or to be held for sale B. Property that is being constructed and developed as investment property
C. Building that is vacant but is held to be leased out to operating lessee D. Property being constructed or developed on behalf of third parties 15. An entity owns machinery that it leases out to lessees under an operating lease. The machinery should be presented on the entity’s books as A. Investment property c. Property and equipment B. Inventory D. Non-current asset held for sale 16. Which statement in incorrect if the property is partly investment property and partly owneroccupied? A. If the investment and owner-occupied portions could be sold or leased out separately, the portions should be accounted for as investment property and owner-occupied property. B. B. If the investment and owner-occupied portions could not be sold or leased out separately, the property is investment property if only an insignificant po rtion is held for manufacturing or administrative purposes. . C. When ancillary services are provided by the enterprise to the occupants of the property and these services are relatively insignificant component of the arrangement, the property is investment property. D. A hotel is normally an investment property because services provided to the guests are an insignificant component of the arrangement. PFRS 5 ASSETS HELD FOR SALE
1. How should the income from discontinued operations be presented in the income statement? A. The entity should disclose a single amount on the face of the income statement with analysis in the notes or a section of the income statement separate from continuing operations B. The amounts from discontinued operations should be broken down over each category of revenue and expense C. Discontinued operations should be shown as a movement on retained earnings D. Discontinued operations should be shown as a lin e item after gross profit with the taxation being shown as part of income tax expense . 2. How should the assets and liabilities of a disposal group classified as held for sale be sho wn in the balance sheet? A. The assets and liabilities should be offset and presented as a single amount B. The assets of the disposal group should be sho wn separately from other assets in the balance sheet, and the liabilities of the disposal group should be shown separately from other liabilities in the balance sheet
C. The assets and liabilities should be presented as a single amount and as a deduction from equity D. There should be no separate disclosure of assets and liabilities that form part of a disposal group 3. In order for a noncurrent asset to be classified as held for sale, the sale must be highly probable. “Highly probable” means that A. The future sale is likely to occur B. The future sale is more likely than not to occur C. The sale is certain D. The probability is higher than more likely than not 4. An entity acquires a subsidiary exclusively with a view to selling it. The subsidiary meets the criteria to be classified as held for sale. At the b alance sheet date, the subsidiary has not yet been sold, and six months have passed since its acquisition. How will the subsidiary be valued in the balance sheet at the date of the first financial statements after acquisition? A. At fair value B. At the lower of its cost and fair value less cost to sell C. At carrying value D. In accordance with applicable PFRS 5. Any gain on a subsequent increase in the fair value less cost to sell of a noncurrent asset classified as held for sale should be treated as follows: . A. The gain should be recognized in full B. The gain should not be recognized C. The gain should be recognized but not in excess of the cumulative impairment loss D. The gain should be recognized but only in retained earnings 6. An entity has an asset that was classified as held for sale. However, the criteria for it to remain as held for sale no longer apply. The entity should therefore. A. Leave the noncurrent asset in the financial statements at its current carrying value B. Remeasure the noncurrent asset at fair value C. Measure the noncurrent asset at the lower of its ca rrying amount before the asset was classified as held for sale (as adjusted for subsequent depreciation, amortization, or revaluations) and its recoverable amount at the date of the decision not to sell D. Recognize the noncurrent asset at its carrying amount prior to its classification as held for sale as adjusted for subsequent depreciation, amortization, o r revaluations 7. Which of the following criteria do not have to be met in order for an operation to be classified as discontinued?
A. The operation should represent a separate line of business or geographical area B. The operation is part of a single plan to dispose of a separate major line of business or geographical area C. The operation is a subsidiary acquired exclusively with a view to resale D. The operation must be sold within three months of the year-end 8. PFRS S states that a noncurrent asset that is to be abandoned should not be classified as held for sale. The reason for this is because A. Its carrying amount will be recovered principally through c ontinuing us B. . It is difficult to value C. . It is unlikely that the noncurrent asset will be sold within 12 months D. It is unlikely that there will be an active market for the noncurrent asset
