Pre-fi exam

Question 1

When an investor uses the cost method to account for investment in ordinary shares, how should cash dividends received by the investor from the investee be recorded?

A. An addition to the investor’s share of the investee’s profit
B. A deduction from the investor’s share of the investee’s profit
C. Dividend income
D. A deduction from the investment account

Answer 1

Dividend income

Question 2

What does the effective interest method of amortizing discount provide?

A. Increasing amortization and increasing interest income
B. Increasing amortization and decreasing interest income
C. Decreasing amortization and increasing interest income
D. Decreasing amortization and decreasing interest income

Answer 2

A. Increasing amortization and increasing interest income

Question 3

These are dividends generally recognized as receivable or as income when received

A. Cash dividends
B. Share dividends
C. Property dividends
D. Scrip dividends

Answer 3

A. Cash dividends

Question 4

What is the initial measurement of an intangible asset acquired by way of a government grant?

A. Fair value
B. Nominal amount or zero plus any directly attributable expenditure
C. Either fair value or nominal amount or zero plus directly attributable expenditure
D. Neither fair value nor nominal account

Answer 4

C. Either fair value or nominal amount or zero plus directly attributable expenditure

Question 5

What is the measurement of an intangible asset after initial recognition?

A. Cost model
B. Revaluation model
C. Cost model or revaluation model
D. Cost model or fair value model

Answer 5

C. Cost model or revaluation model

Question 6

Which of the following cases represents bonds sold at a premium?

A. When market rate is greater than stated rate
B. When stated rate is greater than market rate
C. When the price of the bonds is greater than maturity amount
D. None of these

Answer 6

B. When stated rate is greater than market rate

Question 7

These represent ownership interest, such as ordinary and preference shares

A. Equity securities
B. Debt securities
C. Accounts payable
D. Accounts receivable

Answer 7

A. Equity securities

Question 8

These are the issuance of shares in the same class held by the shareholders

A. Share dividends
B. Property dividends
C. Scrip dividends
D. Cash dividends

Answer 8

A. Share dividends

Question 9

These are revenues or reduction in future cost that can be obtained in using the asset

A. Measurable
B. Identifiability
C. Future economic benefit
D. Control

Answer 9

C. Future economic benefit

Question 10

Which intangible asset should be reported as a separate line item in the statement of financial position?

A. Goodwill
B. Franchise
C. Patent
D. Trademark

Answer 10

A. Goodwill

Question 11

These are corporate distribution to shareholders proportionate to the number of shares held by the latter

A. Dividends
B. Preference share
C. Treasury share
D. Share split

Answer 11

A. Dividends

Question 12

When an investor purchased a bond between interest dates at a premium, which of the following corresponds to cash paid to the seller?

A. More than the face amount of the bond
B. Less than the face amount of the bond
C. Same as the face amount of the bond
D. Same as the face amount of the bond plus accrued interest

Answer 12

A. More than the face amount of the bond

Question 13

What is the treatment for the difference between the previous carrying amount and fair value at the reclassification date when a debt investment at amortized cost is reclassified to FVPL?

A. Not recognized
B. Recognized in other comprehensive income
C. Included in the retained earnings
D. Recognized in profit or loss

Answer 13

D. Recognized in profit or loss

Question 14

Under what condition can an entity classify financial asset that meets the amortized cost criteria at FVPL?

A. When the instrument is held to maturity
B. When the business model approach is adopted
C. When the financial asset passes the contractual cash flow characteristics test
D. If doing so eliminates or reduces an accounting mismatch

Answer 14

D. If doing so eliminates or reduces an accounting mismatch

Question 15

Which disclosure is NOT required with respect to intangible assets?

A. Fair value of similar intangible asset used by the competitor
B. Useful life of the intangible asset
C. Reconciliation of the carrying amount at the beginning and the end of the year
D. The line item of the statement of comprehensive income in which any amortization of intangible assets is included

Answer 15

A. Fair value of similar intangible asset used by the competitor

Question 16

When interest payment dates of a bond are May 1 and November 1, and a bond is purchased on June 1, what would happen to the amount of cash to be paid by the investor?

A. Decreased by accrued interest from June 1 to November 1
B. Decreased by accrued interest from May 1 to June 1
C. Increase by accrued interest from June 1 to November 1
D. Increased by accrued interest from May 1 to June 1

Answer 16

D. Increased by accrued interest from May 1 to June 1

Question 17

Which or the following is NOT a characteristic of a financial asset held for trading?

A. It is acquired principally for selling or repurchansing it in the near term
B. On initial recognition, it is part of a portfolio of financial assets that are managed together and for which there is evidence of a recent actual pattern of short term profit taking
C. it is a derivative that is not designated as an effective hedging instrument
D. It is a derivative that is designated as an effective hedging instrument

Answer 17

D. It is a derivative that is designated as an effective hedging instrument

Question 18

Within what time period is the equity method NOT required when the associate has been acquired and held with a view of disposal?

A. 6 months from the end of the reporting period
B. 12 months from the end of the reporting period
C. 12 months from the date of classification
D. 6 months from the date of the reporting period

Answer 18

C. 12 months from the date of classification