1. Redeemable preference shares should

A. excluded from the statement of financial position B. included as liability C. included as a contra item in shareholders' equity D. included in ordinary shares

2. The declaration and issuance of share dividend *

A. increases retained earnings and total equity B. may increase or decrease share premium but does not change total equity C. decreases retained earnings but does not change total equity D. increases ordinary shares outstanding and total equity

3. Share capital is said to be "watered" when *

A. it is sold at a price in excess of carrying amount B. it is issued for assets other than cash C. liabilities are overstated D. assets are overstated

4. Which is not a legal restriction related to profit distribution? *

A. The amount distributed must be in compliance with the laws governing corporations B. Profit distribution must be formally approved by board of directors C. Dividends must be in full agreement with the capital contracts as to preferences D. The amount distributed can never exceed the net income reported for the year

5. When an entity issues both consolidated and separate financial statements, the EPS information is required *

A. in neither set of financial statements B. only for consolidated financial statement C. only for separate financial statement D. for both sets of financial statements

6. Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? *

authorized shares issued shares unissued shares treasury shares

7. An entity shall measure a noncurrent asset classified as held for distribution to owners at *

A. lower of carrying amount and fair value less cost to distribute B. higher of carrying amount and fair value less cost to distribute C. fair value less cost to distribute D. carrying amount

8. When ordinary shares are issued in payment of services, the least appropriate basis for recording the transaction is the *

A. all of the given choices are appropriate basis B. fair value of the shares issued C. par value of the shares issued D. fair value of the services received

9. Which statement best describes a possible result of treasury share transaction? *

A. may decrease but not increase net income B. may decrease but not increase retained earnings C. may increase net income if the cost method is used D. may increase but not decrease retained earnings

10. For share appreciation rights, the measurement date for computing compensation is the *

A. date the rights mature B. date of exercise or settlement C. date the share reaches a predetermined amount D. date of grant

11. The liquidation basis of accounting is used when the liquidation is *

probable forthcoming imminent remoted

12. In the computation of weighted average shares outstanding, when a share dividend or share split occurs, the additional shares are *

A. considered outstanding at the beginning of the year B. weighted by the number of months outstanding C. weighted by the number of days outstanding D. considered outstanding at the beginning of the earliest year reported

13. Accrual accounting adheres to which principle of accounting? *

A. matching principle and historical cost principle B. historical cost principle C. neither matching principle and historical cost principle D. matching principle

14. If the beginning inventory in the current year is overstated, and that is the only error in the current year, the net income for the current year would be *

A. understated and assets correctly stated B. overstated and assets overstated C. understated and assets overstated D. understated and assets understated

15. Options and warrants are dilutive if *

A. The option price is lower than the average market price B. The option price is equal to the average market price C. The option shares represent fifty percent of the ordinary shares are actually outstanding D. The option price is higher than the average market price

16. Under the cash basis accounting, revenue is recorded *

when earned and realizable when realized when earned and realized when earned

17. Failure to record accrued salaries at the end of reporting period results in *

understated net income overstated retained earnings overstated assets overstated liabilities

18. Earnings per share should always be shown separately for *

A. income from continuing operations B. discontinued operations C. net income D. all of the given choices require separate EPS presentation

19. During a period of inflation in which a liability account balance remains constant, which of the following occurs? *

A. A purchasing power gain if the item is a monetary liability B. A purchasing power loss if the item is a monetary liability C. A purchasing power loss if the item is a nonmonetary liability D. A purchasing power gain if the item is a nonmonetary liability

20. Failure to record the expired amount of prepaid rent expense would not *

understate expense understate liabilities overstate assets overstate owners' equity

21. Which of the following is not classified as an accounting change? *

A. all of the given choices are classified as an accounting change B. error in the financial statements C. change in accounting policy D. change in accounting estimate

22. Which is the proper time period to record the effect of change in accounting estimate? *

current period current period and retrospectively retrospectively current period and prospectively

23. The presentation of notes to financial statements in a systematic manner *

depends on industry is mandatory is mandatory, as far as practicable is voluntary

24. A non current asset or disposal group shall be classified as held for sale when *

A. the sale is highly probable and the asset is available for immediate sale in the present condition B. the sale is highly probable C. the asset is available for immediate sale in the present condition D. the sale is probable and the asset is available for sale in the present condition

25. Unrelated parties include all of the following, except *

A. customers B. two entities simple because they have a common director C. spouse of managing director D. providers of finance or banks

26. In current cost financial statements *

A. general price level gains or losses are recognized on net monetary items B. all items in the statement of financial position are different from historical cost C. amounts are always stated in common purchasing power unit of measurement D. holding gains and losses are recognized

27. The disclosure of accounting polices is important to financial statement readers in determining *

A. whether accounting policies are consistently applied from year to year B. net income for the year C. the value of obsolete items included in ending inventory D. whether working capital position is adequate for future operations

28. Interim financial reports shall be published *

A. once a year at any time in that year B. on a quarterly basis C. within a month of the half year end D. whenever the entity wishes

29. Which information is not specifically a required disclosure in relation to financial statements? *

A. whether the financial statements cover the individual entity or group of entities B. level of rounding used in presenting financial statements C. name of the reporting entity or other means of identification D. name of major shareholders of the entity

30. Payments to acquire debt instruments of other entities are cash outflow for *

A. lending activities B. investing activities C. financing activities D. operating activities