Intermediate Accounting 3

Preliminary Examination

Instructions: Answer with your heart and mind together, do not copy from others. You are only cheating
yourself.

1. Related Party includes

A. Providers of Finance
B. Major Customers
C. Trade Unions
D. Key management personnel and close family members of such individuals

2. Which of the following is not a related party as envisaged by PAS 24?

A. Director of the entity
B. The parent company of the entity
C. A shareholder of the entity that holds 1% stake in the entity.
D. The son of the chief executive officer of the entity.

3. According to PAS24 Related Party disclosures, which one of the following is not a related party
of the Parnaby Co.?
A. A shareholder of the Co. owning 30% of the ordinary share capital
B. An entity providing banking facilities to the Co.
C. An associate of the Co.
D. Key management personnel of the Co.

4. Which of the following fall within the definition of an entity’s related party?
A. Another entity in which the entity owns 5% of the voting rights
B. An executive director of the entity
C. The partner of a key manager in a major supplier to the entity
D. A customer with whom an entity transacts a significant volume of business.

5. The Atrato Company carried out the following transactions during the current period.
Which of the four is a related party transaction According to PAS24 Related Party disclosures?
A. Transferred goods from inventory to a shareholder owning 10% of the company’s ordinary
shares.
B. Sold a company car to the wife of the managing director.
C. Sold an asset to the Little Company, a sales agent.
D. Took out a 1 million bank loan.

6. Which statement is correct regarding related party disclosures?

A. Related party relationship are unusual feature of commerce and business.
B. Related parties may enter into transactions that unrelated parties would not.
C. The profit or loss and financial position of an entity may not be affected by a related party
relationship if related party transaction do not occur.
D. In considering each possible related party relationship, attention is directed to the legal form
 of the relationship.

7. The Sulafat Co. has a 70% Subsidiary Harbringer and is a venturer in Thabit, a join venture
company. During the current financial year, Sulafat sold goods to both companies. Consolidated
financial statements are prepared combining the financial statement of Sulafat and Harbringer.

Under PAS24 Related Party disclosures, in the separate financial statements of Sulafat for the
current year, disclosure is required of transactions with

A. Thabit only
B. Harbringer only
C. Both Thabit and Harbringer
D. Neither of the two

8. PAS 24 requires disclosures of compensation of key management personnel. Which of the

following would not be considered “compensation” this purpose?
A. Short-term benefits
B. Share-based payments
C. Termination benefits
D. Reimbursement of out-of-pocket expenses

9. Which of the following is not a required disclosure for related party transcation?
A. The nature of the relationship
B. A description of the transaction
C. The amounts due from or to related parties
D. The impact of the transactions on current year’s income.

10. The revised PAS 10 states that if an entity declares dividends after the reporting period, the
entity __________ those dividends as a liability at the end of the reporting period.
A. shall recognize
B. shall not recognize
C. is encourage to recognize
D. is encourage not to recognize

11. Which of the following is not an objective of IAS 10?

A. To prescribe when an entity should adjust its financial statements for events after the
reporting period
B. To prescribe how an entity should distinguish favorable events from unfavorable
C. To prescribe the disclosures that an entity should give about the date when the financial
 statements were authorised for issue and about events after the reporting period
D.To require an entity should not prepare its financial statement on a going concern basis if
events after the reporting period indicate the going concern assumption is not appropriate

12. Events after the reporting period are __________ events that occur between the end of the
reporting period and the date when the financial statements are authorised for issue.
A. Favorable
B. Unfavorable
C. Either A or B
D. Neither A or B

13. Which of the following information cannot indicate that the asset was impaired at the end of the
reporting period?
A. The bankruptcy of a customer after the reporting period
B. The sale of inventories after the reporting period
C. The destruction of a major production plant by a fire after the reporting period
D. All of the above

14. Which would be treated as a NON-adjusting event under IAS 10 Events After the Reporting Period?

A A public announcement in April 2015 of a formal plan to discontinue an operation which had been approved by
the board in February 2015

B The settlement of an insurance claim for a loss sustained in December 2014

C Evidence that $20,000 of goods which were listed as part of the inventory in the statement of financial position
as at 31 March 2015 had been stolen

D A sale of goods in April 2015 which had been held in inventory at 31 March 2015. The sale was made at a
price below its carrying amount at 31 March 2015

15. Which TWO of the following events which occur after the reporting date of a company but before
the financial statements are authorised for issue are classified as ADJUSTING events in accordance with
IAS 10 Events after the Reporting Period ?

(i) A change in tax rate announced after the reporting date, but affecting the current tax liability

(ii) The discovery of a fraud which had occurred during the year

(iii) The determination of the sale proceeds of an item of plant sold before the year end

(iv) The destruction of a factory by fir

A     (i) and (ii)

B     (i) and (iii)
C     (ii) and (iii)
D     (iii) and (iv)

16. Isaac is a company which buys agricultural produce from wholesale suppliers for retail to the general
public.

It is preparing its financial statements for the year ending 30 September 2014 and is considering its
closing inventory.

In addition to IAS 2 Inventories, which of the following IFRSs may be relevant to determining the figure
to be included in its financial statements for closing inventories?

A     IAS 10 Events After the Reporting Period

B     IAS 11 Construction Contracts
C     IAS 16 Property, Plant and Equipment
D     IAS 41 Agriculture

17. On 29 January 2007, management of an undertaking completes draft financial statements for the
year to 31 December 2006. On 4 February 2007, the board of directors reviews the financial statements
and approves them for issue. On 15 February 2007, the undertaking announces its profit and selected
other financial information. On 18 March 2007, The financial statements are made available to
shareholders, and others. On 25 April 2007, the shareholders approve the financial statements at the
annual meeting. On 29 April 2007, the approved financial statements are then filed with a regulatory
body. Which of the above dates marks the end of the period covered by IAS 10?
A. 29 April
B. 18 March
C. 25 April
D. 04 February

18. On 14 February 2008, the management of an undertaking approves financial statements for issue to
its supervisory board. The supervisory board is made up solely of non-executives, and may include
representatives of employees, and other outside interests. On 21 February 2008, the supervisory board
approves the financial statements. On 10 March 2008, the financial statements are made available to
shareholders, and others. On 17 April 2008, the shareholders approve the financial statements at their
annual meeting. On 25 April 2008, the financial statements are filed with a regulatory body. Which of
the above dates marks the end of the period covered by IAS 10?
A. 17 April
B. 14 February
C. 25 April
D. 21 February

19. The Phoenix Company accounts for non-current assets using the revaluation model. On 30 June 2019
Phoenix classified a non-current asset as held for sale in accordance with PFRS 5. At that date the
property’s carrying amount was 300,000 and the balance on the revaluation reserve was 30,000. Fair
value was estimated at 280,000 and the cost to sell at 20,000. The value in use is not determinable. The
asset is still unsold at Dec. 31, 2019. What amount should be included in entity’s statement of profit or
loss for the year ended Dec. 31, 2019
A. 40,000
B. 20,000
C. 10,000
D. 0

20. On January 1, 2019, CDO corp determined to sell a group of assets within its shoe manufacturing
division, as it believed it was cheaper to buy the parts from China. The assets that it wanted to sell had
the following carrying amounts:
Factory 22,000,000
Accumulated Depreciation (12,000,000)
Raw Materials 3,800,000
Spare Parts 2,200,000

The management of CDO calculated the Fair Value less cost to sell of the disposal group to be
14,000,000. The assets were sold on February 15, 2019 for 15,400,000, with selling costs amounting to
700,000.

Before income taxes, how much should be recognized as gain(loss) on sale of the disposal group?
A. 300,000
B. (600,000)
C. 1,000,000
D. 1,300,000

21. The Angelbert Company accounts for NCA using the Revaluation model. On June 30, 2018 Angelbert
classified a freehold property as held for sale in accordance with PFRS 5. At the date the property’s
carrying amount was 290,000 and the balance on the revaluation reserve was 20,000. At that date its
fair value was estimated at 330,000 and the cost to sell at 20,000. At December 31, 2018 the property’s
fair value was estimated at 325,000 and the costs to sell at 25,000.

If the assets was sold for a net proceeds of 285,000 in 2019, what amount should be included as loss on
disposal in the entity’s statement of comprehensive income for the year ended December 31, 2019?
A. 5,000
B. 15,000
C. 25,000
D. 35,000

22. On April 1, 2019, Brandoni Company has a piece of machinery with a cost of 1,000,000 and
accumulated depreciation of 750,000. On April 1, Brandoni decided to sell the machine within 1year. As
of April 1, 2019, the machine had an estimated selling price of 100,000 and a remaining useful life of 2
years. It is estimated that selling costs associated with the disposal of the machine will be 10,000. On
December 31, 2019, the estimated selling price of the machine had increase to 150,000, with estimated
selling costs increasing to 16,000. The gain on reversal of impairment loss on December 31, 2019 is
A. 160,000
B. 50,000
C. 44,000
D. 0

23. On December 1, 2020, Green company committed to a plan to dispose of a business component’s
assets.
The disposal meets the requirements to be classified as discontinued operation.
On that date, the entity estimated that the loss from the disposition of the assets would be 700,000 and
the components operating loss was 200,000.
What amount of pretax loss should be reported for discontinued operations for 2020?
A. 900,000
B. 200,000
C. 700,000
D. 0

24. Sky Company reported the following data for the current year:
Income from continuing operations 700,000
Net Income 500,000
Selling and Administrative expenses 2,250,000
Income before income tax 1,000,000

What amount should be reported as income or loss from discontinued operations?

A. 700,000 Income
B. 500,000 Income
C. 100,000 Loss
D. 200,000 Loss