ACCA P2 mcq3

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ACCA P2 mcq3

  1. 1. F7 (INT) Competency AssessmentPurpose Candidates are able to assess as to whether he/she has the required competency of Paper F7 (International). Note: The role of Paper F7 is to form a solid footing going forward to study for Paper P2 (International). When studying Paper P2, Paper F7 syllabus will be assumed knowledge.Who should attempt? Candidates awarded an exemption of Paper F7 Candidates successfully completed Paper 2.5 (old syllabus)What is the Competency Assessment about? Consist of 20 multiple choice questions (MCQ) MCQs are designed to test the candidates’ knowledge of the breadth of syllabus of Paper F7 (International)Instruction for candidates Time allowed: 45 minutes All 20 questions are compulsory and MUST be attempted This question paper MUST be returned at the end of assessment Do not open this paper until instructed by the supervisor 1
  2. 2. ALL 20 questions are compulsory and MUST be attempted.Question 1Which of the following are underlying assumptions of financial statements? A. Relevance and reliability. B. Financial capital maintenance and physical capital maintenance. C. Accrual basis and going concern. D. Prudence and conservatism.Question 2Which of the following reports is not a component of the financial statements according to IAS1? A. Statement of financial position. B. Statement of changes in equity. C. Director’s report. D. Notes to the financial statements.Question 3Inventory should be stated at A. Lower of cost and fair value. B. Lower of cost and net realisable value. C. Lower of cost and nominal value. D. Lower of cost and net selling price. 2
  3. 3. Question 4How should gain on sale of an office building owned by the entity be presented in a cash flowstatement? A. As an inflow in the investing activities section of the cash flow because it pertains to a long-term asset. B. As an inflow in the “financing activities” section of the cash flow statement because the building was constructed with a long-term loan from a bank that needs to be repaid from the sale proceeds. C. As an adjustment to the net income in the “operating activities” section of the cash flow statement prepared under the indirect method. D. Added to the sale proceeds and presented in the “investing activities” section of the cash flow statement.Question 5When an independent valuation expert advises an entity that the salvage value of its plant andmachinery had drastically changed and thus the change is material, the entity should A. Retrospectively change the depreciation charge based on the revised salvage value. B. Change the depreciation charge and treat it as a correction of an error. C. Change the annual depreciation for the current year and future years. D. Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expected to be recovered in future.Question 6Which of the following event is an adjusting event? A. Declaration of an equity dividend after the reporting date. B. Determination of a bonus payment after the reporting date when an entity has a constructive obligation at the reporting date. C. Commencing a lawsuit relating to events that occurred after the reporting date. D. Decline in the market value of an investment after the reporting date. 3
  4. 4. Question 7Lazy Builders, a public limited company, has incurred the following contract costs in the firstyear on a two year fixed price contract for $4.0 million to construct a bridge: Material cost $2 million Other contract costs (including the labour costs) $1 million Cost to complete $2 millionHow much profit or loss should Lazy Builders recognise in the first year of the two yearconstruction contract? A. Loss of $0.5 million prorated over two years. B. Loss of $1 million expensed immediately. C. No profit or loss in the first year and deferring it to second year. D. Since 60 % is the percentage of completion, recognise 60 % of loss (i.e. $0.6 million).Question 8Which of the following statement is not correct regarding deferred tax? A. Reason for providing deferred tax is that IFRS recognition criteria are different from those that are normally set out in tax law. B. IAS 12 uses a liability method and adopts an income statement approach. C. Tax base is the value that IAS 12 assumes that each asset and liability has for tax purposes. D. Temporary differences are differences between the carrying amount of an asset and liability and its tax base. 4
  5. 5. Question 9XYZ, a public limited company, owns a fleet of over 100 cars and 20 ships. It operates in acapital-intensive industry and thus has significant other property, plant and equipment that itcarries in its books. It decided to revalue its property, plant and equipment. The company’saccountant has suggested the following alternatives.Which one of the options should XYZ select in order to be in line with the provisions of IAS 16? A. Revalue only one-half of each class of property, plant and equipment, as that method is less cumbersome and easy compared to revaluing all assets together. B. Revalue an entire class of property, plant and equipment. C. Revalue one ship at a time, as it is easier than revaluing all ships together. D. Since assets are being revalued regularly, there is no need to depreciate.Question 10The accounting concept that is principally used to classify leases into operating and finance is A. Substance over form. B. Prudence. C. Neutrality. D. Completeness.Question 11Revenue from an artistic performance is recognised once A. The audience register for the event online. B. The tickets for the concert are sold. C. Cash has been received from the ticket sales. D. The event takes place. -5-
  6. 6. Question 12In the case of a non-monetary grant, which of the following accounting treatments is prescribedby IAS 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 non-monetary asset. D. Record only the asset at fair value; do not recognise the fair value of the grant.Question 13Which of the following may not be considered a “qualifying asset” under IAS 23? A. A power generation plant that normally takes two years to construct. B. An expensive private jet that can be purchased from a local vendor. C. A toll bridge that usually takes more than a year to build. D. A ship that normally takes one to two years to complete.Question 14In calculating whether potential ordinary shares are dilutive, the profit figure used is A. Profit before tax (including discontinued operations). B. Profit after tax (including discontinued operations). C. Profit from continuing operation. D. Retained profit for the year after dividends.Question 15When allocating an impairment loss, such a loss should reduce the carrying amount of whichasset first? A. Property, plant and equipment. B. Intangible assets. C. Goodwill. D. Current assets. 6
  7. 7. Question 16Amazon, a public limited company, has been served a legal notice on December 15, 2011, by thelocal environmental protection agency (EPA) to fit smoke detectors in its factory on or beforeJune 30, 2012 (the following year). The cost of fitting smoke detectors in its factory is estimatedat $250,000.How should Amazon treat this in its financial statements for the year ended December 31, 2011? A. Recognise a provision for $250,000 in the financial statements for the year ended December 31, 2011. B. Recognise a provision for $125,000 in the financial statements for the year ended December 31, 2011, because the other 50 % of the estimated amount will be recognised next year in the financial statement for the year ended December 31, 2012. C. Because Amazon can avoid the future expenditure by changing the method of operations and thus there is no present obligation for the future expenditure, no provision is required at December 31, 2011, but as there is a possible obligation, this warrants disclosure in notes to the financial statements for the year ended December 31, 2011. D. Ignore this for the purposes of the financial statements for the year ended December 31, 2011, and neither todisclose nor provide the estimated amount of $250,000.Question 17Which of the following intangible assets not covered by IAS 38? A. Goodwill. B. Patent. C. Copyright. D. Computer software.Question 18An investment property cannot be derecognised (eliminated from statement of financial position)when A. It is held for undetermined future use. B. It is permanently withdrawn from use. C. It is disposed to a third party. D. No future economic benefits are expected from its disposal -7-
  8. 8. Question 19An acquirer should at the acquisition date recognise goodwill acquired in a business combinationas an asset. Goodwill should be accounted for as follows: A. Recognise as an intangible asset and amortise over its useful life. B. Write off against retained earnings. C. Recognise as an intangible asset and impairment test when a trigger event occurs. D. Recognise as an intangible asset and annually impairment test.Question 20Which of the following criteria do not have to be met in order for an operation to be classified asdiscontinued? 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

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