FR Financial Statements Quiz

Welcome to your FR Financial Statements Quiz




PQ has ceased operations overseas in the current accounting period. This resulted in the closure of a number of small retail outlets.

Which one of the following costs would be excluded from the loss on discontinued operations?


HB sold goods to S2, its 100% owned subsidiary, on 1 November 2010. The goods were sold to S2 for $33,000. HB made a profit of 25% on the original cost of the goods.
At the year end, 31 March 2011, 50% of the goods had been sold by S2. The remaining goods were included in inventory.

Calculate the amount of the adjustment required to inventory in the consolidated statement of financial position at 31 March 2011.


OC signed a contract to provide office cleaning services for an entity for a period of one year from 1 October 2009 for a fee of $500 per month.
The contract required the entity to make one payment to OC covering all twelve months’ service in advance. The contract cost to OC was estimated at $300 per month for wages, materials and administration costs.
OC received $6,000 on 1 October 2009.

How much profit/loss should OC recognise in its statement of comprehensive income for the year ended 31 March 2010?


Which one of the following could be classified as deferred development expenditure in M’s statement of financial position as at 31 March 2010 according to IAS 38 Intangible assets?


Explain the criteria to be met in order to classify a non current asset as "held for sale" in accordance with IFRS 5 Non current assets held for sale and discontinued operations".


IAS 10 Events after the reporting period distinguishes between adjusting and non-adjusting events.

Which ONE of the following is an adjusting event in XS’s financial statements?


Using the requirements set out in IAS 10 Events after the Reporting Period, which of the following would be classified as an adjusting event after the reporting period in financial statements ended 31 March 20X4 that were approved by the directors on 31 August 20X4?


On 1 January 20X5 Ness revalued its head office to $21m, creating a revaluation surplus of $7m. At this date, the head office had a 35‐year remaining life.
On 1 January 20X9 property prices crashed and the head office was revalued to $11m.
Ness makes an annual reserves transfer for excess depreciation.

What loss on revaluation will be taken to the statement of profit or loss at the date of the revaluation on 1 January 20X9?


Toad plc enters into a 5 year lease agreement to lease a motor vehicle on 1 July 20X2. The present value of the total lease payments is $166,800. The motor vehicle has a useful life of 6 years. The lease payments are $40,000 per annum to be made in advance. The interest rate implicit in the lease is 10%.

What will be the expense in the statement of profit or loss in respect of the lease for the year ended 31 December 20X2?


Malik Co has an item in inventory which cost $15,000.
The usual selling price of this item is $20,500. However, this item has been found to be damaged, and needs to be repaired at a price of $3,750.

At what value should the item of inventory be shown in Malik’s financial statements?


The carrying amount of Roger’s property, plant and equipment at 31 December 20X5 was $2,890,000. At 31 December 20X6, this had risen to $3,070,000.
During the year ended 31 December 20X6, Roger revalued one property upwards by $500,000, and sold another property for $948,000, recognising a profit on disposal of $200,000. Depreciation charged during the year amounted to $380,000.

What amount did Roger spend on the purchase of property, plant and equipment in the year ended 31 December 20X6?


Happy Co have decided to sell their head office, which meets the held‐for‐sale criteria per IFRS 5 Non‐current Assets Held for Sale and Discontinued Operations.
The head office was purchased 15 years ago, at a cost of $400,000 and was estimated to have a useful life of 25 years.
Happy Co believe that they can sell their head office for $300,000, but costs to sell will total $80,000.

At what value should the asset be valued when classified as held for sale?


Events after the reporting date (IAS 10):   A fire broke out at a company's Westown factory on 4 April 20X3. This has destroyed the factory's administration block.  Many of the costs incurred as a result of this fire are uninsured.
A major customer went into liquidation on 27 April 20X3. The customer's balance at  31 March 20X3 remains unpaid. The receiver has intimated that unsecured payables will receive very little compensation, if any.

Explain how each of these matters should be dealt with in the published accounts for the year ended 31 March 20X3 in the light of the accounting standards referred to above.


You are the management accountant of Informed, a private company. one of your directors has recently attended a seminar which discussed the drawbacks in an environment of rising prices of financial statements prepared under the historical cost convention. Your company normally depreciates its plant and machinery on a straight-line basis over a period of eight years, with no expectation of significant residual value. Your director is considering recommending to the board that the company adopts a policy of revaluing non-current assets every five years. 
Assume that today's date is 1 May 20X8 and that the company prepares financial statements to 30 April each year. 

(a)       Write a report to your director which summarises the arguments for and against a policy of carrying non-current assets at revalued amounts. Your director has a solid general knowledge of business but she is not a qualified accountant, so any technical terms you use in the report will need to be clearly explained. 
(b)       In respect of an item of plant purchased for $40,000 on 1 May 20X8 and under the new accounting policy revalued to $18,000 on 30 April 20Y3:
(i)        set out the charges in the statement of profit or loss for each of the years ending 30 April 20X9 to 30 April 20Y5.
(ii)       explain how the revaluation will be treated in the financial statements for the year ending 30 April 20Y3.    
(iii)     calculate the gain or loss on sale that will be taken to the statement of profit or loss for the year ending 30 April 20Y6 assuming the plant is sold for $7,500 on 1 May 20Y5. 


Needs of users of accounts:
Several different categories of users are traditionally considered as having an interest in the financial statements of a company. The importance of the financial statements to each category will vary with the nature and size of the company and with the type of use made of the company's accounts by that category.

Describe the ways in which the needs of users of the financial statements vary with the size of the company, for each of the following categories of user:
(a)       Investors and their advisers
(b)       Loan creditors
(c)       Employees
(d)       Customers, suppliers and other business contacts
(e)       The Government
(f)        The public.


Which of the following is NOT an adjusting event per IAS 10 Events after the Reporting Period in the financial statements for the year ended 31 March 20X7 which were approved on 11 June 20X7?


Complete the sentence:
An asset is impaired if its carrying amount is greater than its _________________.


Which of the following is not a criterion for classification of an asset as held for sale under IFRS 5 Assets Held for Sale and Discontinued Operations?


Frog Co purchased an asset on 1 January 20X7 at a cost of $90,000. Frog received a grant in relation to the cost of this asset of $15,000. It has decided to write off the grant income against the cost of the non‐current asset. The asset has a useful economic life of nine years.
What is the carrying amount of the asset as at 31 December 20X7?


The plant and machinery of Crawley Co was shown at a carrying amount of $425,000 at 31 March 20X5. The comparative figure at 31 March 20X4 was $350,000.
During the year to 31 March 20X5, the depreciation charge for plant and machinery was $52,000, and machinery with a carrying amount of $45,000 was sold at a profit of $4,000.
At 31 March 20X5 a $20,000 payable existed in relation to the purchase of plant and machinery during the year.

What figure should be shown for the purchase of plant and machinery in Crawley Co’s statement of cash flows for the year ended 31 March 20X5?