Mid-SessionPracticeQuestions

Mid-SessionPracticeQuestions - ACCT5942 Session22011...

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1 ACCT5942 Session 2 ­ 2011 Mid ­ Session Practice Questions – Part A Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Bill Ltd will have to pay for long service leave (LSL) for its employees when they become entitled to it in 5 years’ time. The estimate of this future payment is a: a. provision to be recognised when they become entitled to the LSL (when there is a legal obligation to pay the LSL) b. a contingent liability to be recognised this year c. a contingent liability to be recognised when they become entitled to the LSL d. provision to be recognised this year ____ 2. An item classified contingent asset can only be reclassified and recognised as an asset when the benefits from that asset are: a. reasonably certain b. virtually certain c. probable d. beyond reasonable doubt This information is for question 3 below. It is possible to measure assets in several ways: the possible ways include: I cost – an input or entry measure II replacement cost – an input or entry measure for a equivalent asset in new condition (an input or entry measure) III value in use (present value of future cash flows) IV current cost – the cost of replacing the production capacity that an asset had when new (an input or entry measure) V fair value less cost to sell VI fair value used under revaluation model ____ 3. Under AASB 136 the following measures are used to estimate recoverable amount: a. the total of III and V b. the greater of III and V c. III d. V ____ 4. When the revaluation model is adopted, the carrying amount at reporting date is measured by: a. VI in all cases b. VI, except when VI is less than IV, in which case IV is used c. IV in all cases d. VI, except when the both III and V are less than VI, when the greater of III and V is used
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2 ____ 5. In measuring recoverable amount under AASB 136, the future net cash flows from an asset are: a. required to be added for 10 years from the reporting date b. required to be discounted using the firm’s weighted average cost of capital c. required to be discounted using the time value of money, represented by current risk-free rate of interest d. not required to be discounted ____ 6. Beaver Ltd has an item of plant which had a cost of $2 000 000; on 30 June 20X7 its accumulated depreciation was $1 100 000 and its recoverable amount was $1 000 000. What is the carrying amount of this asset at 30 June 20X7? a. $1 100 000 b. $1 000 000 c. $900 000 d. $2 000 000 Otter Ltd has an item of plant with a cost of $4 200 000, and at 30 June 20X4 the accumulated depreciation was $600 000 and its estimated residual amount $200 000; its accumulated impairment was $150 000 at the beginning of the reporting period. ____ 7.
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Mid-SessionPracticeQuestions - ACCT5942 Session22011...

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