10. Kingsford Ltd operates in an emerging marketwith a fast-growing economy where prices increasefrequently.Which of the following statements are false whenusing historical cost accounting compared tocurrent value accounting in this type of market?(i) Capital employed which is calculated usinghistorical costs is understated compared to currentvalue capital employed(ii) Historical cost profits are overstated incomparison to current value profits(iii) Capital employed which is calculated usinghistorical costs is overstated compared to currentvalue capital employed(iv) Historical cost profits are understated incomparison to current value profitsA. (i) and (ii)B. (i) and (iv)C. (ii) and (iii)D. (iii) and (iv)11. How often should goodwill acquired in abusiness combination be tested forimpairment?A. Every yearB. Whenever there are external indications ofimpairmentc. Whenever there are internal indications ofimpairmentD. Never13. Which of the following would not be includedin the cost of an item of property, plant andequipment under IAS 16?A. Delivery and installation chargesB. Testing costsc. Refundable value added taxD.Site preparation costs16. An impairment loss is:A. The amount by which the recoverable amountof an asset exceeds its carrying amountB. The amount by which the recoverable amountof an asset exceeds its written down valuec. The amount by which the carrying amount of anasset exceeds its recoverable amountD. The amount by which the carrying amount of anasset exceeds its market value17. Which of the following is the main purpose of thestatement of changes in equity?A. To show an entity's income, expenses and profitfor an accounting periodB. To show how each component of an entity'sequity has altered during an accounting periodc. To show an entity's total equity at the end of anaccounting periodD. To show an entity's assets, liabilities and equity atthe end of an accounting period.18. Which of the following is true about the notesto the financial statements?The notes to the financial statements should provideinformation:As required by international standards, if notpresented elsewhere in the financial statementsi. Which is relevant to an understanding of thefinancial statementsAbout the entity's accounting policiesA. (i) and (ii) onlyB. (i) and (iii) onlyC. All of the aboveD. None of the above

Historical cost refers to the concept of noting the value of an fixed asset in the accounting books…

frequently. Which of the following stateme using historical cost account current value accounting in this (i) Capital employed which is historical costs is understated co value capital employed (ii) Historical cost profits an comparison to current value profits (iii) Capital employed which is historical costs is overstated co value capital employed (iv) Historical cost profits an comparison to current value profits A. (i) and (ii) B. (i) and (iv) C. (ii) and (iii)

frequently. Which of the following stateme using historical cost account current value accounting in this (i) Capital employed which is historical costs is understated co value capital employed (ii) Historical cost profits an comparison to current value profits (iii) Capital employed which is historical costs is overstated co value capital employed (iv) Historical cost profits an comparison to current value profits A. (i) and (ii) B. (i) and (iv) C. (ii) and (iii)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

10. Kingsford Ltd operates in an emerging market
with a fast-growing economy where prices increase
frequently.
Which of the following statements are false when
using historical cost accounting compared to
current value accounting in this type of market?
(i) Capital employed which is calculated using
historical costs is understated compared to current
value capital employed
(ii) Historical cost profits are overstated in
comparison to current value profits
(iii) Capital employed which is calculated using
historical costs is overstated compared to current
value capital employed
(iv) Historical cost profits are understated in
comparison to current value profits
A. (i) and (ii)
B. (i) and (iv)
C. (ii) and (iii)
D. (iii) and (iv)
11. How often should goodwill acquired in a
business combination be tested for
impairment?
A. Every year
B. Whenever there are external indications of
impairment
c. Whenever there are internal indications of
impairment
D. Never
13. Which of the following would not be included
in the cost of an item of property, plant and
equipment under IAS 16?
A. Delivery and installation charges
B. Testing costs
c. Refundable value added tax
D.
Site preparation costs
16. An impairment loss is:
A. The amount by which the recoverable amount
of an asset exceeds its carrying amount
B. The amount by which the recoverable amount
of an asset exceeds its written down value
c. The amount by which the carrying amount of an
asset exceeds its recoverable amount
D. The amount by which the carrying amount of an
asset exceeds its market value
17. Which of the following is the main purpose of the
statement of changes in equity?
A. To show an entity's income, expenses and profit
for an accounting period
B. To show how each component of an entity's
equity has altered during an accounting period
c. To show an entity's total equity at the end of an
accounting period
D. To show an entity's assets, liabilities and equity at
the end of an accounting period.
18. Which of the following is true about the notes
to the financial statements?
The notes to the financial statements should provide
information:
As required by international standards, if not
presented elsewhere in the financial statements
i. Which is relevant to an understanding of the
financial statements
About the entity's accounting policies
A. (i) and (ii) only
B. (i) and (iii) only
C. All of the above
D. None of the above

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