ACC206: Financial Reporting MCQ

1. ABC Ltd owns an asset that can be traded in four different locations, Markets 1 to 4. The number of trades in markets 1 to 4 are 38 trades, 33 trades, 40 trades and 30 trades respectively. The price of the asset in each of the markets is $32, $28, $25 and $31 respectively. The transaction cost in each of the markets is similar at $3. The transport cost is in each of the markets is $4, $4, $2 and $2 respectively. Under FRS 113 Fair Value Measurement, what is the fair value of this asset?

a. $20

b. $22

c. $25

d. $23

2. CC Computer Ltd (CCC) sells supercomputers with an unconditional right to return the supercomputer if the customer is not satisfied. CCC has a long history selling these supercomputers under this returns policy and can provide precise estimates of the amount of returns associated with each sale. Due to the massive size of the supercomputer, CCC delivers these supercomputers to their customers. Under FRS 115 Revenue from Contracts with Customers, CCC most likely should recognise revenue:

a. When a customer returns the supercomputer to CCC.

b. When CCC receives cash payment from the customer.

c. Never at all, because the right of return is unconditional.

d. None of the listed options.

3. The Accounting Standards Councils (ASC) Conceptual Framework for Financial Reporting is the ASCs conceptual framework. This Framework does not cover:

a. The elements of financial statements

b. Concepts of capital maintenance

c. The format of financial statements

d. The objective of financial statements

4. ABC Ltd owns an asset that can be traded in four different locations, Markets 1 to 4. The number of trades in markets 1 to 4 are 40 trades, 38 trades, 33 trades and 30 trades respectively. The price of the asset in each of the markets is $32, $28, $25 and $31 respectively. The transaction cost in each of the markets is similar at $3. The transport cost is in each of the markets is $4, $4, $2 and $2 respectively. Under FRS 113 Fair Value Measurement, what is the fair value of this asset?

a. $29

b. $32

c. $28

d. $25

5. A software company, SS Software Ltd (SSS) packaged a software programme and one-year technical support together for $500. SSS can also sell the two items separately, i.e. the software programme for $450 and the one-year technical support for $100. When should SSS recognise revenue for the $500 package under FRS 115 Revenue from Contracts with Customers?

a. None of the listed options.

b. Defer the entire $500 and recognise the amount evenly over the period of the technical support.

c. Defer the entire $500 and recognise the amount only after the one-year technical support has completed.

d. Recognise the entire $500 when the customer pays cash to buy the package.

6. Assume that the stage of completion can be estimated reliably. Under FRS 115 Revenue from Contracts with Customers, when estimating the stage of completion of accounting for long-term service contracts, the stage of completion at the end of the first year is usually determined by measuring:

a. None of the listed options.

b. Costs incurred in the first year, divided by the total expected revenue for the long-term service contract.

c. Costs incurred in the first year, divided by estimated remaining costs to complete the project.

d. Costs incurred in the first year, divided by estimated total costs of the project.

7. A software company, SS Software Ltd (SSS) packaged a software programme and one-year technical support together for $500. SSS can also sell the two items separately, i.e. the software programme for $450 and the one-year technical support for $100. When should SSS recognise revenue for the $500 package under FRS 115 Revenue from Contracts with Customers?

a. Defer the entire $500 and recognise the amount evenly over the period of the technical support.

b. Recognise the entire $500 when the customer pays cash to buy the package.

c. None of the listed options.

d. Recognise the portion of the $500 attributable to the software programme when the customer pays cash to buy the package, and defer the portion attributable to technical support and recognise this portion evenly over the period of the technical support.

8. Under FRS 113 Fair Value Measurement, which of the following is NOT a factor in determining highest and best use?

a. Legally permissible.

b. Physically possible.

c. All the listed factors are factors.

d. Financially feasible.

9. Which of the following bodies is the official standard setting body of Singapore? Accounting Standards Council (ASC)

a. The charging of depreciation expense over the life of an asset rather than the immediate full expensing of its cost is an example of

b. matching.

c. reliability.

d. consistency.

10. Which of the following statements best describes the aim of Singapore Financial Reporting Standards (FRS) Framework:

I. defines the objective of financial statements

II. identifies the qualitative characteristics that make information in financial statement useful

III. defines the basic elements in financial statements and the concepts for recognising and measuring them in financial statements.

*can choose more than 1

a. Both I and II

b. I only

c. I, II and III

d. II only

11. Valuing assets at their liquidation values rather than their cost is inconsistent with the

a. matching principle.

b. materiality concept

c. time-period assumption.

d. historical cost principle.

12. The Singapore Financial Reporting Standards (FRS) Conceptual Framework for Financial Reporting specifies the basic accounting bases and/or assumptions as:

a. accrual and prudence.

b. accrual and going concern.

c. going concern and consistency.

d. prudence and consistency.

13. Which of the following statements relating to the International Accounting Standards Board (IASB)/International Financial Reporting Standards (IFRSs) is true?

a. IASB prescribes that, where IFRSs are the required accounting standards, or an entity chooses to comply with IFRSs, the requirements of all IFRSs should be regarded as mandatory.

b. IASB prescribes that an entity can choose to comply with selective IFRSs

c. IASB has the authority to require compliance with its accounting standards.

d. IASB does not prescribe accounting standards.

14. Which ONE of the following is stated as an underlying basis or assumption according to the Singapore Financial Reporting Standards (FRS) Framework for Financial Reporting?

a. Prudence

b. Accrual

c. Relevance

d. Neutrality

15. Which of the following bodies is the official standard setting body of Singapore?

a. Accounting and Corporate Regulatory Authority (ACRA)

b. Monetary Authority of Singapore (MAS)

c. Accounting Standards Council (ASC)

d. Inland Revenue Authority of Singapore (IRAS)

16. An art gallery is in the business of selling paintings of various artists. Mr Teddy Smith is one of the artists who sells his work under consignment at the art gallery. He displays his pieces at the art gallery and the customers buy his work there. Under FRS 115 Revenue from Contracts with Customers, he will most likely recognise revenue when:

a. When he transfers the painting to the art gallery.

b. None of the listed options.

c. When the gallery sells the painting.

d. He paints the painting.

17. ABC Ltd owns an asset that can be traded in four different locations, Markets 1 to 4. The price of the asset in each of the markets is $32, $28, $25 and $31 respectively. The transaction cost in each of the markets is similar at $3. The transport cost is in each of the markets is $4, $4, $2 and $1 respectively. Under FRS 113 Fair Value Measurement, what is the fair value of this asset?

a. $29

b. $28

c. $30

d. $24

18. ABC Ltd owns an asset that can be traded in four different locations, Markets 1 to 4. The number of trades in markets 1 to 4 are 38 trades, 40 trades, 33 trades and 30 trades respectively. The price of the asset in each of the markets is $32, $28, $25 and $31 respectively. The transaction cost in each of the markets is similar at $3. The transport cost is in each of the markets is $4, $4, $2 and $2 respectively. Under FRS 113 Fair Value Measurement, what is the fair value of this asset?

a. $28

b. $21

c. $25

d. $24

19. A software company, SS Software Ltd (SSS) packaged a software programme and one-year technical support together for $500. SSS can also sell the two items separately, i.e. the software programme for $450 and the one-year technical support for $100. How much revenue should SSS attribute to the software portion under FRS 115 Revenue from Contracts with Customers?

a. $90.91.

b. $100.

c. $450.

d. $409.09.

20. Assume a payment is made 25 months prior to the delivery of a product. The seller is likely to do which of the following with respect to the time value of money over the life of the contract?

a. Ignore the time value of money.

b. Recognise the interest expense.

c. Recognise the interest revenue.

d. None of the listed answers.

21. FRS 113 Fair Value Measurement seeks to mitigate the problems associated with measurement under level 3 of the hierarchy by means of;

a. reference to averages.

b. estimation.

c. reference to indices.

d. Disclosures.