IA

An investor shall discontinue the use of the equity method when a. The investor ceases to have significant influence over the associate. b. The associate operates under severe long-term restrictions. c. The investor ceases to have control over the associate. d. The business activities of the investor and associate are dissimilar.

A

The irrevocable election to present changes in fair value in other comprehensive income is applicable only to a. Investment in equity instrument not held for trading b. Investment in equity instrument held for trading. c. Financial asset measured at amortized cost. d. Financial asset measured at fair value.

A

When an investment property under construction is completed and to be carried at fair value, the difference between the carrying amount and fair value shall be a. included in profit or loss b. included in retained earnings c. included in retained earnings d. accounted for as revaluation surplus

A

Which is the proper way to report contingent asset, receipt of which is virtually certain? a. As an asset b. An unearned revenue c. As a disclosure only d. No disclosure and no accrual

A

Which of the following is incorrect? a. Bonds payable should be reported at noncurrent at face amount less any amortized discount or plus any amortized premium. b. To evaluate, the risk and quality of an individual bond issue, investors rely heavily on bonds ratings provided by investment houses. c. Zero-coupon bonds do not result in zero interest expense for the issuer; they offer a return in the form of a deep discount off the face amount. d. The bond method used to pay interest depends on whether the bonds are registered or coupon. e. Most corporate bonds are debenture bonds.

A

Which of the following is incorrect? a. The par value of an ordinary share represents the amount received by the corporation when the share is originally issued. b. Shares that have a fixed per-share amount printed on the share certificate are called par value shares. c. The term residual owner means that ordinary shareholders bear the ultimate risks and uncertainties and receive the benefits of ownership. d. In accounting for shareholders' equity, the accountant is primarily concerned with recording the source of each of the various elements of shareholders' equity. e. Total shareholders' equity represents a claim against the total assets of an entity.

A

Which of the following is incorrect? a. Treasury shares may be recognized as financial asset. b. "Loss" from sale of treasury shares shall be charged to share premium from treasury shares and then retained earnings. c. If treasury shares are reissued for noncash consideration, the proceeds shall be measured by fair value of the noncash consideration received. d. The total cost of treasury shares shall be reported as deduction from shareholders' equity. e. The cost of treasury shared acquired for noncash consideration is usually measured by carrying amount of the noncash asset surrendered.

A

Which of the following is incorrect? a. When a bond matures on a single date and the effective interest method of amortizing bond discount is used, interest expense remains constant every interest period. b. If bonds are issued at a premium, this indicates that the nominal rate exceeds the yield rate. c. The market rate of interest for a bond issue which sells for more than face value is less than rate stated on the bond. d. For a bond issue which sells for less than face value, the market rate of interest is higher than rate stated on the bond. e. The effective interest rate of a bond measured at amortized cost is the interest rate that exactly discounts estimated future cash payments through the expected life of the bond or when appropriate, a shorter period to the net carrying amount of the bond.

A

Which of the following is incorrect? a. When a financial asset is reclassified from FVPL to amortized cost, the difference between the new carrying amount of the financial asset at amortized cost and the face amount of the financial asset shall be amortized through profit or loss over the original life of the financial asset using the effective interest method. b. Any gain or loss on reclassification of financial asset is recognized only in a reclassification of financial asset from amortized cost to FVPL. c. All equity investments cannot be reclassified. d. Debt investment measured at FVPL by irrevocable election cannot be reclassified. e. The reclassification date is the first day of the reporting period following the change in business model that results in an entity reclassifying financial asset.

A

Which of the following is incorrect? a. When bonds are issued with share warrants, the equity component is equal to the market value of the share warrants. b. When the cash proceeds from bonds issued with share warrants exceed the fair value of the bonds without the warrants, the excess should be credited to Share premium - share warrants. c. The bonds are assigned an amount equal to the market value of the bonds ex-warrants, regardless of the market value of the warrants. d. If the market value of the bonds ex-warrants is not known, the amount allocated to the bonds is equal to the present value of the principal bond liability plus present value of the future interest payments using the effective or market interest rate for similar bonds without the warrants e. In the absence of market value of the bonds without conversion privilege, the amount allocated to the bonds is equal to the present value of the principal bond liability plus present value of the future interest payments using the effective or market interest rate for similar bonds without conversion privilege.

A

Which of the following statements is correct? a. When cash is received in lieu of share dividends, the share dividends are assumed to be received and subsequently sold at the cash received; thus, a gain or loss may be recognized. b. Split down is the reverse of the split up whereby the outstanding shares are called in and replaced by a smaller number, accompanied by a decrease in the par or stated value. c. Bonus issues are additional contribution of the shareholders and are recorded as additional cost of the investment. d. The purpose of the share right is to give the shareholders the chance to preserve their equity interest in the corporation; the ownership of share rights is evidenced by instruments or certificates called right issue.

A

Which of the following statements is incorrect? a. Between the date of record and the date of payment, the shares are selling ex dividend which means that the share can be sold, and the original shareholder will no longer have the right to receive the dividends on payment date. b. When share dividends are declared and issued, the assets of the entity are the same before and after the issuance of the share dividends. c. When share dividends are different from those held, the original cost of the investment is apportioned between the original shares and the share dividends on. the basis of market value of each at the date of receipt. d. When shares are received in lieu of cash dividends, the dividends are considered income at fair value of the shares received because such shares are in effect property dividends.

A

If an entity owns and manages a hotel, services provided to guests are a significant component of the arrangement as a whole. In such a case, the hotel is classified as a. Investment property b. Owner-occupied property c. Partly investment property and partly owner-occupied property d. Property held for long-term capital appreciation

B

When an entity holds between 20% and 50% of the voting power if an investee a. The investor must use the equity method. b. The investor should use the equity method unless circumstances indicate that it is unable to exercise significant influence over the investee. c. The investor must use the cost method. d. The investor must use the fair value method.

B

When an investment ceases to be an associate, the fair value of the investment at the date when it ceases to be an associate a. Is regarded as its cost on initial recognition as a financial asset. b. Is regarded as its fair value on initial recognition as a financial asset. c. Is regarded as its fair value on initial recognition as a financial liability. d. Is regarded as its amortized cost on initial recognition as an investment.

B

Which of the following is a characteristic of a current liability but not of a noncurrent liability? a. The obligating event has already occurred. b. Settlement is expected within the normal operating cycle or within 12 months, whichever is longer. c. Present obligation to transfer an economic resource d. Settlement is expected within the normal operating cycle or within 12 months, whichever is shorter.

B

Which of the following is incorrect? a. Dividend paid on redeemable preference share shall be accounted for as interest expense as component of finance cost. b. Convertible preference shares are compound financial instrument. c. When preference shares are called in by the issuing entity for less than original issue price, proper accounting for the redemption increases the contributed capital of the ordinary shareholders. d. When an entity calls in all of the preference shares for more than the original price, the excess over the original issue price should be charged against retained earnings. e. The issuance of preference shares increases preference shares outstanding.

B

Which of the following is incorrect? a. Share split is issued primarily to induce a decline in market value per share. b. Share warrants outstanding account shall be reported as reduction of share premium c. An entity issued rights to the existing shareholders to purchase unissued ordinary shares at more than par value. Share premium would be recorded when the rights are exercised. d. Share warrant is issued to shareholders of a corporation to acquire unissued shares within a specified time at a specified price. e. An entity makes only a memorandum entry when it issues rights to existing shareholders.

B

Which of the following is incorrect? a. The amortization of discount on bonds payable increases the carrying amount and decreases the net income, respectively. b. The amortization of premium on bonds payable decreases the carrying amount and decreases the net income, respectively. c. Debentures are unsecured bonds. d. Bonds issued with scheduled maturities at various dates are called serial bonds, while bonds that mature on a single date are called term bonds.

B

Which of the following is incorrect? a. The par value of shares issued is normally recorded in Share capital account. b. The Share capital account is measured as the number of shares outstanding multiplied by the par value. c. Authorized share capital refers to the total number of shares that can be issued. d. Issued shares refer to the number of outstanding shares plus treasury shares. e. Outstanding ordinary shares are shares in the hands of the shareholders.

B

Which of the following is correct? a. Debt investments held for collection of contractual cash flows and for sale of the financial asset are measured at FVOCI by irrevocable election or fair value option. b. Equity investments held for trading are measured at FVOCI by irrevocable election. c. Debt investments held for collection of contractual cash flows are measured at FVPL by irrevocable designation of fair value option. d. All other investments in quoted equity instruments are measured using the equity method of accounting.

C

Which of the following is incorrect? a. An entity issued a bond with a stated rate of interest that is less than the effective interest rate. The bond was issued on one of the interest payment dates. The entity should report on the first interest payment date an interest expense that is greater than the cash payment made to the bondholders. b. An entity should calculate the net proceeds to be received from bond issuance by discounting the bonds at the market rate of interest and deducting the bond issuance cost. c. Under international accounting standard, the valuation method used for bond payable is discounted cash flow valuation at current yield rate. d. The market price of a bond issued at a discount is the present value of the principal amount at the market rate of interest plus the present value of all future interest payments at the market rate of interest. e. In theory, the proceeds from the sale of a bond will be equal to the present value of the principal due at the end of the life of the bond plus the present value of the interest payments made during the life of the bond.

C

Which of the following is incorrect? a. Bonds usually sell at a premium when stated rate is greater than market rate. b. Bonds usually sell at a discount when investors are willing to invest in bonds at an effective rate higher than the stated interest rate. c. To compute the price to pay for a bond, the present value of 1 of the principal, and the future value of the future interest payments are used. d. The interest rate written on the face of the bond is known as stated rate, coupon rate or nominal rate. e. The actual interest earned by the bondholder is market rate, yield rate or effective rate.

C

Which of the following is incorrect? a. When an investment property under construction is completed and to be carried at fair value, the difference between fair value and carrying amount shall be included in profit or loss. b. If an inventory is transferred to investment property that is to be carried at fair value, the remeasurement to fair value shall be included in profit or loss. c. If owner-occupied property is transferred to investment property that is to be carried at fair value, the difference between the fair value and the carrying amount of the property shall be included in profit or loss. d. A transfer from investment property carried at fair value to owner-occupied property or inventory shall be accounted for at fair value which becomes the deemed cost for subsequent accounting.

C

Which of the following is incorrect? a. When shares are issued for services received, the least appropriate measure is equal to par value of the shares issued. b. If the shares are issued to extinguish a financial liability, the initial measurement of the shares issued is the fair value of the shares issued. c. If shares are issued for noncash consideration, the proceeds shall be measured by the fair value of the shares ilsued. d. When shares without par value are sold, the proceeds shall be credited to share capital to the extent of the stated value and any excess is credited to share premium. e. When shares with par value are sold, the excess of the proceeds over the par value is credited to share premium.

C

Which of the following is incorrect? a. When shares are issued in exchange for property, the best evidence of fair value might be any of the following: fair value of the property received, selling price of the shares in recent transaction, price of the share quoted on the stock exchange. b. When shares traded on an active exchange are issued for an asset, an asset is recorded at the fair value of the shares. c. When more than one security is sold for a single price and the total selling price is not equal to the sum of the market prices, the cash received is allocated between the securities based on relative book value. d. Share issue costs are not recorded separately. e. Share premium is reported as an increase in shareholders' equity.

C

Which of the following statements is incorrect? a. When convertible bond is not converted but paid at maturity, the carrying amount of the bond equal to face amount is derecognized. b. Issued convertible bonds are separated into debt and equity components with the liability component recorded at fair value and the residual assigned to the equity component. c. In accounting for issued convertible bond, the instrument should be presented either as bond or equity but not both. d. The major difference between convertible bonds and bonds issued with warrants is that upon exercise of the warrants, the holder has to pay a certain amount to obtain shares. e. The main reason for issuing convertible bond is that entities can obtain financing at lower rate.

C

Which statement best describes significant influence? a. The holding of a significant proportion of the share capital in another entity. b. The contractually agreed sharing of control over an economic entity. c. The power to participate in the financial and operating policy decisions of an entity. d. The mutual sharing in the risks and benefits of a combined entity

C

A debt investment is measured at amortized cost a. By irrevocable election b. When the debt investment is managed and evaluated on a document risk 0 management strategy. c. When the debt investment is held for trading d. When the business model is to collect contractual cash flows that are solely payments of principal and interest.

D

A debt investment shall be measured at fair value through other comprehensive income. a. When the debt investment is held for trading b. When the debt investment is not held for trading c. By irrevocable designation d. When the business model is to collect contractual cash flows and to sell the financial asset

D

A provision shall be recognized for a. Future operating losses b. Obligations under insurance contracts c. Reductions in fair value of financial instruments d. Obligations for plant decommissioning costs e. All of the above

D

Investment property includes all of the following except a. Land held for long-term capital appreciation b. Land held for currently undetermined use c. Building owned by an owner or held by the lessee under a finance lease to earn rentals or capital appreciation or both d. Property held for sale in the ordinary course of business or in the process of construction for such sale.

D

On the loss of significant influence, the investor shall recognize in profit or loss any difference between a. The initial carrying amount of any retained investment, any proceeds from sale of the part interest and the carrying amount of the investment at the date when significant influence is lost. b. The fair value of any retained investment and the carrying amount of the investment at the date significant influence is lost. c. Any proceeds from sale of the part interest and the carrying amount of the investment at the date significant influence is lost. d. Any proceeds from sale of the part interest and the carrying amount of the investment sold, and the difference between the fair value and carrying amount of the retained investment.

D

The cost of customer premium offer should be charged to expense a. When the premium is claimed b. Over the life cycle of the product to which the premium relates c. When the premium offer expires d. When the related product is sold

D

When the interest payment dates of a bond are May 1 and November 1, and a bond is purchased on June 1, the cash paid by the investor would be a. Decreased by accrued interest from June 1 to November 1. b. Decreased by accrued interest from May 1 to June 1. c. Increased by accrued interest from June 1 to November 1. d. Increased by accrued interest from May 1 to June 1.

D

Which does not meet the definition of a liability? a. An obligation that is estimated in amount b. A note payable with no specified maturity date c. An obligation to provide goods or services in the future d. The signing of an employment contract at fixed monthly salary

D

Which of the following is a characteristic of the accrual of warranty but not the sale of warranty? a. Warranty revenue b. Unearned warranty revenue c. Warranty expense d. Warranty liability

D

Which of the following is correct? a. The life insurance expense account is credited for the expired premium at the time of death. b. A cash surrender value legally commences to accrue anytime during the third year as long as premiums for three full years must have been paid. c. A loan value, which is the amount which the insured can borrow from insurance firm with cash surrender value as collateral security, is classified as noncurrent investment. d. Dividends received on the life policy are not income but a reduction of life insurance expense. e. That portion of the cash surrender value applicable to the prior years is credited to retained earnings and that portion applicable to the current year is debited to life insurance expense.

D

Which of the following is correct? a. When share rights are exercised, the cost of the new investment includes the subscription price and the cost of all the share rights received, whether exercised or not. b. If share rights are not accounted for separately, and the share rights are not exercised but expired, a loss on share rights is debited. c. On the date of record, the warrants evidencing the share rights are issued to the shareholders. On or after this date, the shares are said to be selling right-on. d. The theoretical or parity value of one right is always higher if the market value of the share is ex-right than if the market of the share is right-on.

D

Which of the following is incorrect? a. A bond was issued at a discount with a call provision. When the bond issued exercised the call provision on an interest date, the amount of bond liability derecognized should have equaled the face amount less unamortized discount. b. A bond issued on June 1 has interest payment dates of April 1 and October 1. Bond interest expense for the current year ended December 31 is for a period of seven months. c. The issuer of a bonds sold at face amount with interest payable February 1 and August 1 should report liability for accrued interest. d. When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be decreased by accrued interest from May 1 to June 1. e. Unamortized bond discount should be reported as direct deduction from the face amount of the bond.

D

Which of the following is incorrect? a. In terms of business volume, the dominant form of business organization is corporation. b. Ordinary shareholders have the right to share in net income, to share in the assets upon liquidation, to elect board of director, but not to participate in the day-to-day operations. c. When preference shares are retired by the issuer at a price below the original issue price, the transaction increases contributed capital of ordinary shareholders. d. When preference shares carry a redemption privilege, the shareholders may purchase treasury shares ahead of ordinary ahead of ordinary shareholders. e. An entity that issued shares of Class B should report share capital as equity unless the shares are mandatorily redeemable.

D

Which of the following is incorrect? a. In the amortization schedule for discount on bonds payable, the total effective interest over the term to maturity is equal to the amount of the discount plus the total cash interest paid. b. An amortization schedule for bonds issued at a premium is a schedule that reflects the changes in the bonds payable over the term to maturity. c. When bonds are retired prior to maturity date, the issuer probably will report an ordinary gain or loss. d. When an entity has bonds outstanding during a year in which the market rate of interest has risen and elected the fair value option, it will report interest expense and a loss for the year.

D

Which of the following is incorrect? a. The effective interest rate on bond is lower than the stated rate when bond sells above face amount. b. The effective interest rate on bond is higher than the stated rate when bond sells below face amount. c. The interest method of amortizing discount provides for increasing amortization and increasing interest income. d. The interest method of amortizing premium provides for increasing amortization and increasing interest income.

D

Which of the following is incorrect? a. The preemptive right of an ordinary shareholder is the right to share proportionately in any new issue of shares of the same class. b. An ordinary shareholder does not possess the right to direct ownership of the corporate assets. c. The right to inspect the accounting records of the corporation is not one of the basic shareholders' rights. d. Discount on share capital may be offset against share premium on the same class of share capital. e. Contributed capital does not include capital accumulated by retention of earnings.

D

Which statement is incorrect concerning the equity method? a. The investment is initially recorded at cost. b. The investment in associate is increased or decreased by the investor's share of the profit or loss of the investee after the date of acquisition. c. The investor's share of the profit or loss of the investee is recognized in the investor's profit or loss. d. Dividends received form the investee are accounted for as dividend income.

D

The discount on bonds payable is reported as a. A prepaid expense b. An expense account c. A current liability d. A noncurrent liability e. A contra liability

E

Which of the following is incorrect? a. Characteristics of the corporate form that have led to the growth of this form of business ownership include ease of raising capital, limited liability and ease of ownership transfer but exclude low government regulation. b. The corporate charter is known as Articles of Incorporation. c. Details of each class of share capital should be reported on the face of the statement of financial position or in disclosure notes. d. The two primary account classifications within shareholders' equity hare contributed capital and retained earnings. e. Net assets of a corporation refer to the legal capital.

E

Which of the following is incorrect? a. The granting of award credits is effectively accounted for as a future delivery of goods or service. b. The fair value of the consideration received with respect to initial sale shall be allocated between the award credits and the sale based on relative stand-alone selling price. c. The consideration allocated to the award credits is initially recognized as deferred revenue and subsequently recognized as revenue when the award credits are redeemed. d. The amount of revenue recognized shall be based on the number of credits that have been redeemed relative to the total number expected to be redeemed. e. The estimated redemption rate is assessed each period; changes in the total number expected to be redeemed affect the total consideration for the award credits.

E

Which of the following is incorrect? a. Trading bond investments are reported at fair value. b. Trading bond investments are held with the intention of selling them in a short period of time. c. Accrued interest on bonds that are purchased between interest dates increases the amount a buyer must pay. d. For bonds measured at amortized cost, the interest income for the year would be higher if the bond was purchased at a discount, and lower if purchased at a premium. e. None of the above. f. statements a to d are all incorrect.

E

Which of the following is incorrect? a. Treasury shares shall be recorded at cost irrespective of whether acquired below or above par value; its cost shall be deducted from shareholders' equity; gain or loss on its sale shall not be credited or charged to income. b. When treasury shares are sold at a price above cost, contributed capital is increased. c. Shares issued would exceed shares outstanding as a result of purchase of treasury shares. d. Gain on retirement of treasury shares shall be credited to share premium. e. Loss on retirement of treasury shares is debited to retained earnings.

E

Which of the following is incorrect? a. When a financial asset is reclassified from amortized cost to FVOCI, or from FVOCI to amortized cost, the original effective rate is not adjusted. b. When a financial asset is reclassified from FVPL to FVOCI, or from FVPL to amortized cost, a new effective interest rate must be determined based on the new carrying amount or fair value at reclassification date. c. When a financial asset is reclassified from FVOCI to amortized cost, the cumulative UG-OCI or UL-OCI is eliminated and adjusted against the fair value at reclassification date, resulting the investment being reverted back to amortized cost measurement. d. When a financial asset is reclassified from FVOCI to FVPL, the cumulative UG-OCI or UL-OCI is reclassified to UG-FVPL or UL-FVPL at reclassification date. e. When a financial asset is reclassified from amortized cost to FVOCI, the difference between the amortized cost carrying amount and the fair value at reclassification date is recognized in profit or loss.

E

Which of the following statements is incorrect? a. When an entity issues a note payable with no stated interest rate in exchange for a depreciable asset and the fair value is unavailable, the note payable should be recorded at present value discounted at the market rate of interest. b. The discount resulting from the determination of the present value of a note payable should be reported as direct deduction from the face amount of the note. c. When a note payable is exchanged for property, the stated interest rate is presumed to be fair when the stated interest rate is equal to the market rate. d. A note payable with no ready market is exchanged for property whose fair value is currently indeterminable. When such a transaction takes place, the present value of the note payable must be approximated using an imputed interest rate. e. Amortizing the discount on note payable gradually decreases the carrying amount of the liability over the life of the note

E