Question 1

The decision to expense or capitalise an item is important because.

Accepted Answer

A)   It may have direct implications for the value of the organisation and wealth of managers.
B)   It may impact on contractual arrangements that are based on accounting numbers related to profits and/or assets.
C)   It may give managers scope to maximise personal wealth, in line with Positive Accounting Theories.
D)   The decision should only be based on providing an unbiased report of the company.
E)   All of the given answers.

Question 2

An asset is classified as current when:

Accepted Answer

A)   it is expected to be realised or intended for sale or consumption in the entity's normal operating cycle.
B)   the item is held form trading.
C)   it is expected to be realised within twelve months after reporting date.
D)   it is cash or cash equivalent.
E)   All of the given answers.

Question 3

Advertising costs are not typically capitalised because.

Accepted Answer

A)   It is not considered probable that the advertising will generate future economic benefits.
B)   The advertising cannot be controlled by the entity.
C)   The future economic benefits cannot generally be measured reliably.
D)   The cost of the advertising is typically greater than the recoverable amount.
E)   None of the given answers.

Question 4

Recoverable amount of an asset is defined in AASB 136 the higher of its fair value less costs to sell and its value in use.In the case where an asset's carrying amount is less than its recoverable amount,which action is consistent with AASB 136?

Accepted Answer

A)   Recognise difference as increase is asset revaluation reserve.
B)   Recognise difference as impairment loss.
C)   Recognise difference as gain from reinstatement of asset.
D)   Leave asset at its carrying amount.
E)   None of the given answers.

Question 5

The cost of an asset will typically include the purchase price and.

Accepted Answer

A)   other expenditures on material and services to generate the asset.
B)   depreciation costs of other assets used to generate the asset.
C)   salaries and wages of the Chief Executive Officer.
D)   All of the given answers.
E)   other expenditures on material and services to generate the asset and depreciation costs of other assets used to generate the asset.

Question 6

AASB 116 "Property,Plant and Equipment" allows both cost and revaluation models to be applied as a measurement basis to one class of property,plant and equipment.

Accepted Answer

A) True 
 B)False

Question 7

AASB 108"Accounting policies,changes in accounting estimates and errors" requires material prior period errors to be corrected retrospectively,in the period when the error was discovered.

Accepted Answer

A) True 
 B)False

Question 8

According to AASB 136 a non-current asset should bE.

Accepted Answer

A)   Revalued downwards where the net amount that is expected to be recovered through the cash inflows and outflows from its continued use and subsequent disposal exceeds its cost.
B)   Written down to its replacement cost when the recoverable amount is greater than its value in use.
C)   Written down to its recoverable amount when its carrying amount is greater than its recoverable amount.
D)   Revalued upwards where its value in use is greater than its net realisable value.
E)   None of the given answers.

Question 9

The effect of capitalising expenditures is to:

Accepted Answer

A)   Decrease current period profit, increase current period assets and decrease future period equity.
B)   Increase current period profit, increase current period assets and decrease future period profit.
C)   Increase current period profit, decrease current period assets and decrease future period liabilities.
D)   Increase current period profit, increase current period equity and increase future period profit.
E)   None of the given answers.

Question 10

Which of the following assets are recognised at fair value?

Accepted Answer

A)   Biological assets.
B)   Revalued property, plant equipment.
C)   Assets under a finance lease.
D)   All of the given answers.
E)   Biological assets and revalued property, plant equipment.

Question 11

The following measurement bases are acceptable for property,plant and equipment:

Accepted Answer

A)   Historical Cost
B)   Revaluation Model
C)   Fair value Model
D)   All of the given answers
E)   Historical Cost and Revaluation Model

Question 12

Future economic benefits can only be derived from the sale of an asset:

Accepted Answer

A) True 
 B)False

Question 13

For an asset to be recognised,it is required to possess a cost or other value that can be measured exactly:

Accepted Answer

A) True 
 B)False

Question 14

The term 'probable' is described in AASB Framework as meaning that the chance of the future economic benefits arising is more likely rather than less likely:

Accepted Answer

A) True 
 B)False

Question 15

AASB 108 (Accounting Policies,Changes in Accounting Estimates and Errors) specifies the accounting treatment for changes in accounting policies,correction of errors and changes in accounting estimates.Which of the following statement(s) in relation to these items is/are true?

Accepted Answer

A)   Prior period errors are to be corrected by restating prior period information.
B)   Voluntary changes in accounting policy is to be accounted for prospectively.
C)   Changes in accounting estimates are to be accounted for retrospectively, unless it is impracticable to do so.
D)   A change in the useful life of an asset is considered a change in accounting policy.
E)   All of the given answers.

Question 16

Which of the following are considered to be an asset:

Accepted Answer

A)   Deposit on a futures contract
B)   Asset under finance lease
C)   Deferred acquisition costs
D)   All of the given answers.
E)   Deposit on a futures contract and asset under finance lease.

Question 17

Heritage assets have characteristics that create doubt about whether or not they satisfy the definition of an asset.These characteristics include.

Accepted Answer

A)   They are not expected to generate net economic benefits.
B)   They never generate cash inflows.
C)   They are unlikely ever to be sold.
D)   They are not expected to generate net economic benefits and they are unlikely ever to be sold.
E)   None of the given answers.

Question 18

If an asset's carrying amount is less than its recoverable amount,the increase in value is recognised as a gain.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following items are required to calculate "value in use" of an asset?

Accepted Answer

A)   Exit and entry prices
B)   Purchase price and cost of disposal
C)   Estimated net future cash flows and appropriate discount rate
D)   Estimated net future cash flows
E)   None of the given answers

Question 20

AASB 101 requires,as a minimum,certain line items to be included on the face of the balance sheet.Additional line items may be disclosed based on an assessment of:

Accepted Answer

A)   The nature and liquidity of assets.
B)   The functions of the assets within the entity.
C)   The amounts, nature and timing of liabilities.
D)   The nature and liquidity of assets and the amounts, nature and timing of liabilities.
E)   All of the given answers.

Exam 4: An Overview of Accounting for Assets

An asset is classified as current when:

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Advertising costs are not typically capitalised because.

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Which of the following items are required to calculate "value in use" of an asset?

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AASB 116 "Property,Plant and Equipment" allows both cost and revaluation models to be applied as a measurement basis to one class of property,plant and equipment.

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Heritage assets have characteristics that create doubt about whether or not they satisfy the definition of an asset.These characteristics include.

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Recoverable amount of an asset is defined in AASB 136 the higher of its fair value less costs to sell and its value in use.In the case where an asset's carrying amount is less than its recoverable amount,which action is consistent with AASB 136?

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The decision to expense or capitalise an item is important because.

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AASB 101 requires,as a minimum,certain line items to be included on the face of the balance sheet.Additional line items may be disclosed based on an assessment of:

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The term 'probable' is described in AASB Framework as meaning that the chance of the future economic benefits arising is more likely rather than less likely:

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The following measurement bases are acceptable for property,plant and equipment:

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For an asset to be recognised,it is required to possess a cost or other value that can be measured exactly:

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The cost of an asset will typically include the purchase price and.

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Which of the following are considered to be an asset:

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AASB 108"Accounting policies,changes in accounting estimates and errors" requires material prior period errors to be corrected retrospectively,in the period when the error was discovered.

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AASB 108 (Accounting Policies,Changes in Accounting Estimates and Errors) specifies the accounting treatment for changes in accounting policies,correction of errors and changes in accounting estimates.Which of the following statement(s) in relation to these items is/are true?

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If an asset's carrying amount is less than its recoverable amount,the increase in value is recognised as a gain.

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Future economic benefits can only be derived from the sale of an asset:

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The effect of capitalising expenditures is to:

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According to AASB 136 a non-current asset should bE.

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Which of the following assets are recognised at fair value?

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