Question

ACC206: Financial Reporting MCQ

Please help, urgent!! no need for explanations

1. An exclusive 15-year right to manufacture a product or use a process is a:

a. patent

b. copyright

c. franchise

d. trademark

2. At the end of its fiscal year, an adverse economic condition caused AA Ltd to perform an impairment test for one of its patents, for which it originally paid $66 million for. At the end of the fiscal year, it had accumulated amortisation of $16 million on the patent. The estimated undiscounted future cash flows was $45 million, the estimated discounted future cash flows was $43 million, and the fair value less costs of disposal is $35 million. Under FRS 36 Impairment of Assets, AA Ltd

a. would record no impairment loss on the equipment.

b. would debit impairment loss of $7 million and credit accumulated impairment loss of $7 million.

c. would debit impairment loss of $5 million and credit accumulated impairment loss of $5 million.

d. would debit impairment loss of $15 million and credit accumulated impairment loss of $15 million.

3. At the end of its fiscal year, an adverse economic condition caused AA Ltd to perform an impairment test for one of its patents, for which it originally paid $60 million for. At the end of the fiscal year, it had accumulated amortisation of $16 million on the patent. The estimated undiscounted future cash flows was $45 million, the estimated discounted future cash flows was $43 million, and the fair value less costs of disposal is $35 million. Under FRS 36 Impairment of Assets, what is the recoverable amount of the patent?

a. $44 million

b. $43 million

c. $60 million

d. $35 million

4. At the end of its fiscal year, an adverse economic condition caused AA Ltd to perform an impairment test for one of its equipment, for which it originally paid $90 million for. At the end of the fiscal year, it had accumulated depreciation of $27 million on the equipment. The estimated undiscounted future cash flows was $62 million, the estimated discounted future cash flows was $60 million, and the fair value less costs of disposal is $40 million. Under FRS 36 Impairment of Assets, AA Ltd

a. would record no impairment loss on the equipment.

b. would debit impairment loss of $3 million and credit accumulated impairment loss of $3 million.

c. would debit accumulated impairment loss of $3 million and credit impairment loss of $3 million.

d. would debit impairment loss of $23 million and credit accumulated impairment loss of $23 million.

5. Surgical Medical Supplies Ltd (“Surgical”) has the following information for its surgical equipment inventory. The selling price of the inventory is $240. The cost of the inventory is $190. The estimated costs to sell the inventory is $10. Under FRS 2 Inventories, how should Surgical report this inventory item on its balance sheet?

a. $190

b. $180

c. $230

d. $200

6. According to FRS 16 Property, Plant and Equipment, the revaluation of equipment when fair value exceeds book value usually results in:

a. A decrease in net income.

b. None of the listed options

c. An increase in other comprehensive income.

d. A decrease in other comprehensive income.

7. Surgical Medical Supplies Ltd (“Surgical”) has the following information for its surgical equipment inventory. The selling price of the inventory is $230. The cost of the inventory is $220. The estimated costs to sell the inventory is $20. Under FRS 2 Inventories, how should Surgical report this inventory item on its balance sheet?

a. $230

b. $220

c. $200

d. $210

8. Which of the following statements relating to FRS 16 Property, Plant and Equipment is FALSE?

a. When an item of property, plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount. At the date of the revaluation, the gross carrying amount may be restated proportionately to the change in the carrying amount.

b. None of the listed options

c. When an item of property, plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount. At the date of the revaluation, the gross carrying amount may be restated by reference to observable market data.

d. When an item of property, plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount. At the date of the revaluation, the accumulated depreciation is eliminated against the gross carrying amount of the asset.

Answer 1

Answer 1) Patent
(Only Patent and trademark are exclusive rights out of all and only patent could be extended for more than 10 years, so patent is right answer)

2) b. would debit impairment loss of $7 million and credit accumulated impairment loss of $7 million.
(According to FRS 36 Impairment of Assets , The impairment loss is carrying value minus recoverable amount )
Where carrying value = 66-16 = 50
and recoverable amount = higher of present value of cashflows and fair value of assets = 43 million
SO Impairment loss = $7 Million

3. b) $43 million
( The same Concept is Used, Recoverable amount = higher of present value of cashflows and fair value of assets = $43 million )
4. b) would debit impairment loss of $3 million and credit accumulated impairment loss of $3 million.

(Again Same Concept is Used
Where carrying value = 90-27 = 63
and recoverable amount = higher of present value of cashflows and fair value of assets = 60 million
SO Impairment loss = $3 Million

(P.S. - Only 4 Ques are Required to be answered according to HOMEWORKLIB RULES , but I have answered all , Please rate the answer , I have not provided Explanations of the below answers but they are correct . )

5. a) 190$

6. c). An increase in other comprehensive income.

7. d.) $210

8. b.) None of the listed options