F1 Exam Dumps - Financial Reporting

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Question # 9

The International Accounting Standards Board's "The Conceptual Framework for Financial Reporting" identifies fundamental and enhancing qualitative characteristics of financial statements.

Which of the following is included within the fundamental characteristics?

Comparability

Verifiability

Understandability

Materiality

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Question # 10

Which of the following are techniques that can be used by a company to ensure they receive timely payment of receivables? Select ALL that apply:

Offering cash or early payment discount

Charging interest on late payments

Assessing credit risk of customers before they are given credit

Offering extended credit to return customers

Offering free items

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Question # 11

On 31 March 20X1 OP decided to sell a property. On that date this property was correctly classified as held for sale in accordance with IFRS 5 Non-Current Assets Held For Sale And Discontinued Operations.

In the draft financial statements of OP for the year ended 31 October 20X1 this property has been included at its fair value, which was $520,000 lower than its carrying value. This has resulted in a charge to profit or loss, the result of which is that the draft financial statements show a loss of $450,000 for the year to 31 October 20X1. When the management board of OP reviewed the draft financial statements it was unhappy about the loss and decided that the property should be reclassified as a non-current asset and reinstated to its original value, despite the fact that its plans for the property had not changed.

In accordance with the ethical principle of professional competence and due care, which THREE of the following statements explain how this property should be accounted for in the financial statements of OP for the year ended 31 October 20X1?

The property should be treated as a non-current asset held for sale from 31 March 20X1.

The property should be treated as a non-current asset held for sale from 1 November 20X1.

The property should not be depreciated after 31 March 20X1.

The impairment of $520,000 should be shown as an expense in the statement of profit or loss.

The property should be depreciated until 31 October 20X1.

The property impairment should not be recorded until the sale has completed.

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Question # 12

Which of the following would NOT be classified as part of non-current assets in a statement of financial position?

The interest paid on a loan raised to fund the construction of a factory, where that factory is still not ready for its intended use.

A property held as an investment which is let to tenants.

The goodwill arising on the acquisition of a subsidiary.

Assets held for sale, classified in accordance with IFRS 5 Non-current Assets Held for Sales and Discontinued Operations.

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Question # 13

Which of the following is the main purpose of corporate governance regulation?

To ensure that shareholder wealth is maximized.

To protect the interests of shareholders in a quoted entity.

To guarantee that corporate scandals do not happen in the future.

To ensure that financial reports are produced on a regular basis and in line with relevant regulations.

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Question # 14

In accordance with IAS 16 Property, Plant and Equipment, in which of the following situations would subsequent expenditure on a non-current asset be capitalised?

An entity purchased an aircraft five years ago, when its engines were separately identified in the accounting records. The engines now need to be replaced at a cost of $2 million each. When the engines are replaced the aircraft is expected to be airworthy for a further 5 years.

An entity's head office building suffered a major fire, the upper floors and roof were completely destroyed. The entity proposes to restore the building at a cost of $1 million and move back in to the building to use it as a head office again.

An entity's delivery vehicle was in a car park when the car park was flooded. The engine and interior of the vehicle needed extensive repair and renovation costing $25,000.

A manufacturing entity closes its factory for two weeks each summer for routine maintenance and repairs. The current year's cost of maintenance and repairs was $62,000.

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Question # 15

A specialized product was commissioned by a customer and the agreed price was $38,000. The product was completed at a cost of $34,000.

It was then discovered that new regulations meant that the specialized product now failed health and safety requirements. The specialized product had to be modified to meet the new regulations at a cost of $9,000. The customer agreed to pay an extra $3,000 towards the modifications.

At 31 December 20X5 the specialized product was still in inventory and had not been modified.

Calculate the value of the specialized product that should be included in inventory as at 31 December 20X5.

Give your answer to the nearest whole $000.

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Question # 16

KL has just completed their inventory count and has ascertained that the cost value of the inventory is $460,000; this was made up of 10,000 units of component part FF.

A week before the year end the FF components were moved to a temporary warehouse.

Two weeks later they were inspected and found to have been damaged by the damp conditions in the temporary warehouse.

Of the 10,000 units 2,500 of them were damaged. After remedial work of $5.00 per unit KL anticipates they will be able to sell the damaged parts for $32.00 per unit.

What is the value for closing inventory to be included in the financial statements of KL?

Give your answer to the nearest $.

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