International Accounting
An entity must adjust its financial statements for an event that occurs after the end of the reporting period if a. The event occurs before the financial statements have been approved for issuance and it provides evidence of conditions that existed at the end of the reporting period. b. The event occurs before the financial statements have been issued and if changes the value of an assets that existed at the end of the reporting period. c. The event occurs before the financial statements have been audited and it changes the value of a liability that existed at the end of the reporting period. d. The event occurs within 15 days of the end of the reporting period and it changes the level of ownership in another entity from a non-controlling to a controlling interest.
a.
Sandoval company operates in a country in which distributed profits are taxed at 25% and undistributed profits are taxed at 30%. In Year 1, Sandoval generated pre-tax profit of $100,000 and paid $20,000 in dividends from its Year 1 earnings. In Year 2, sandoval generated pre-tax profit of $120,000, and paid dividends of $40,000 from its year 1 earnings. What amounts should Sandoval recognize as current tax expense in Years 1 and 2 respectively? a. 29,000 and 34,000 b. 30,000 and 34,000 c. 25,000 and 30,000 d. 30,000 and 36,000
a.
When an entity chooses the revaluation model as its accounting policy for measuring property, plant, and equipment, which of the following statements is correct? a. When an asset is revalued, the entire class of property, plant, and equipment to which that asset belongs must be revalued. b. When an asset is revalued, individual assets within a class of property, plant, and equipment to which that asset belongs may be selectively revalued. c. Revaluations of property, plant, and equipment must be made at least every three years. d. Increases in an asset's carrying value as a result of the first revaluation must be recognized.
a.
A company incurred the following costs related to the porduction of inventory in the current year: Cost of Materials .................... $100,000 Cost of Direct Labor................ $60,000 Allocation of Var OH cost....... $30,000 Allocation of fixed OH............. $25,000 Storage Costs............................ $2000 Selling Costs.............................. $8,000 The Cost of materials included abnormal waste of $10,000. What is the cost of inventory in the current year? a. $190,000 b. $205,000 c. $215,000 d. $217,000
b.
An entity can justify a change in accounting policy if a. The change will result in a reliable and more relevant presentation of the financial statements b. The entity encounters new transactions that are substantively different from existing or previous transactions c. The entity previously accounted for similar, though immaterial, transactions under an unacceptable accounting method d. An alternate accounting policy gives rise to a material change in current year net income
b.
In selecting an accounting policy for a transaction, which of the following is the first level within the hierarchy of guidance that should be considered? a. The most recent pronouncements of other standard-setting bodies to the extent they do not conflict with IFRS or the IASB Fromework. b. An IASB standard or interpretation that specifically relates to the transaction c. The definitions, recognition criteria, and measurement concepts in the IASB framwork d. An IASB standard or interpretation that deals with similar and related issues
b.
On December 31, Year 1, Airways Corp. issued $1 million in bonds at 5% annual interest, due December 31, Year 6 at a discount of $100,000. Airways incurred band fees of $100,000, legal fees of $50,000, and salaries of $25,000 for its employees in conjunction with issuing the bonds. What is the original carrying amount for these bonds? a. 730,000 b. 750,000 c. 900,000 d. 1,000,000
b.
Past service cost related to nonvested employees should be recognized as expense a. In the period the cost is incurred b. Over the nonvested employees' remaining vesting period c. Over the nonvested employee's estimated remaining working life d. Over the nonvested employee's estimated life expectancy
b.
Under IFRS, an entity that acquires an intangible asset may use the revaluation model for subsequent measurement only if a. The useful life of the intangible asset can be reliably determined b. An active market exists for the intangible asset c. The cost of the intangible asset can be measured reliably d. The intangible asset has a finite life
b.
Which of the following is not a criterion that must be met before an entity recognizes a provision related to a restructuring program? a. The entity has a detailed formal plan for the restructuring. b. The entity has begun implementation of the restructuring c. The restructuring plan indicates that the restructuring will be carried out to a reasonable period of time d. The cost of the restructuring is reasonably estimable.
b.
A company determined the following values for its inventory as of the end of its fiscal year; Historical Cost.......................................$50,000 Current Replacement Costs.................$35,000 Net Realizable Value.............................$45,000 Net Realizable Value Less PM..............$40,000 Fair Value................................................$48,000 What amount should the company report for inventory on its balance sheet? a. 35,000 b. 40,000 c. 45,000 d. 48,000
c.
Costs incurred to accomplish a less than substantial debt modification, such as an interest rate adjustment, are treated in which of the following ways? a. Expensed immediately b. Increased the carrying amount of the debt that has been modified c. Decreased the carrying amount of the debt that has been modified c. Decrease the gain on the debt modification
c.
Manometer company sells accounts receivable of $10,000 to Eck Bank for $9,000 in cash. The sale does not qualify for derecognition of a financial asse. As a result, manometer's balance sheet will be different in which of the following ways? a. 1,000 more in assets than under derecognition b. 9,000 more in assets than under derecognition c. 9,000 more in liabilities than under derecognition d. 10,000 less in equity than under derecognition
c.
Melbourne Inc. became involved in a tax dispute with the national tax authority. Melbourne's legal counsel indicates that there is a 70% likelihood that the company will lose this dispute and estimates that the amount the company will have to pay is between $500,000 and $700,000, what amounts recognized as a provision related to this tax dispute? a. $0 b $500,000 c. $600,000 d. $700,000
c.
When stock options are granted to employees, what is the basis for determining the amount of compensation cost that will be recognized as expense? a. The fir value of the service provided by the employees receiving the options at the grant date b. The fair value of the stock options at the exercise date c. The fair value of the stock options at the grant date d. There is no recognition of expense related to stock options
c.
Which of the following best describes the accounting for goodwill subsequent of initial recognition? a. Goodwill is amortized over its expected useful life, not to exceed 20 years. b. Goodwill is tested for impairment whenever impairment indicators are present c. Goodwill is tested for impairment on an annual basis d. Goodwill is revalued using revaluation model
c.
An asset is considered to be impaired when its carrying amount is greater than its a. Net selling price b. Value in use c. Undiscounted future cash flows d. Recoverable amount
d.
On January 1, year 1, an entity acquires a new machine with an estimated useful life of 20 years for $100,000. The machine has an electrical motor that must be replaced every five years at an estimated cost of $20,000. Continued operation of the machine requires an inspection every four years after purchase; the inspection cost in $10,000. The company uses the straight-line method of depreciation. What is the depreciation expense year 1? a. $5,000 b. $5,500 c. $8,000 d. $10,000
d.
Sinto Bem Company issues a two-year note paying 5% interest on Jan 1, Year 1. The note sells for it's par value of $1,000,000, and the company incurs issuance costs of $22,000. Which of the following amounts best approximates the amount of interest expense Sinto Bem will recognize in Year 1 related to the note? a. 48,900 b. 50,000 c. 58,680 d. 60,670
d.
Which of the following is a criterion that must be met in order for an item to be recognized as an intangible asset? a. The items fair value can be measured reliably b. The item is part of the entity's activities aimed at gaining new scientific or technical knowledge c. The item is expected to be used in the production of supply of goods or services d. The item is identifiable and lacks physical substance
d.
Which of the following is not a criterion that must be met to recognize revenue from the sale of goods? a. The amount of revenue can be measured reliably b. the significant risks and rewards of ownership of the goods have been transferred to the buyer. c. The cost incurred or to be incurred with respect to the sale of the goods can be measured reliably. d. It is certain that the economic benefits associated with the sale will flow to the seller.
d.