WEEK 6- FINANCIAL STATEMENT OF A CORPORATE ORGANISATION & LEASE

CIS FINANCIAL ACCOUNTIG 1.1 CONTACT NUMBER 08038400843 CONTACT HOURS TUESDAYS AND FRIDAY 6PM 7PM. QUESTION WEEK 6- FINANCIAL STATEMENT OF A CORPORATE ORGANISATION & LEASE CHAPTER 10 & 13. MULTIPLE CHOICE 1. Which of the following statements regarding a limited liability company s Statement of Comprehensive Income is correct? A. Accounting Standards define the expenses which are reported under Cost of Sales B. Depreciation appears as a separate heading C. Interest payable is deducted from profit after taxation D. Exchange differences arising from translation of foreign operations are accounted for E. Other Comprehensive Income Statement does not report incomes and expenses not recognised in the income statement 2. In which of the following Statement of a bank are Impairment losses on loans and advances accounted for (debited)? A. Statement of Comprehensive Income B. Statement of Changes in Equity C. Statement of Income D. Statement of Financial Position E. Statement of Cash Flows 3. Which of the following is TRUE about limited liability companies? A. When a non-current asset is sold at a profit, it results in revaluation surplus B. Events after the reporting period of a company which are non adjusting in nature are to be disclosed as notes to the financial statements. C. The nominal value of shares of a company is a function of the market price of the share D. The authorised share capital of a company is the total of nominal value of shares and loan stock E. Retained earnings is a form of capital reserve of a company www.starrygoldacademy.com Page 1

4. In accordance with IAS 1 on presentation of financial statements, which of the following items should appear in the Statement of Changes in Equity? i. Amortisation of goodwill ii. Dividend paid iii. Revaluation surplus iv. Taxation v. Issue of share capital A. i, ii and v B. ii, iii and iv C. ii, iii and v D. i, iii and iv E. iii, iv and v 5. Which of the following qualitative characteristics of Financial Statements is NOT an integral part of each other? A. Materiality with Relevance B. Fair value with Reliability C. Prudence with Reliability D. Timeliness with Relevance E. Consistency with Relevance 6. On what basis would the lessee recognise a leased asset in the Statement of Financial Position? A. Right of ownership B. Right to receive rental payment C. Right to use the asset D. Right to defer payments E. On signing a contract agreement 7. Which of the following would be recognised on both the Statement of Changes in Equity and the Statement of Other Comprehensive Income? A. Prior period adjustment B. Premium on issue of shares www.starrygoldacademy.com Page 2

C. Increase in fair value of available for sale financial asset D. Dividend declared E. Provision for company income tax 8. According to IAS 1-Presentation of Financial Statements, where should dividends paid during the year be disclosed? A. Statement of Changes in Equity B. Statement of Comprehensive Income C. Statement of Financial Position D. Statement of Value Added E. Notes to the accounts 9. The financial position of an entity is available from an examination of the Statement of Financial Position and includes the following EXCEPT A. The economic resources controlled by an entity B. The generation and use of cash C. The financial structure D. Liquidity and solvency E. Capacity to adapt to changes 10. Which of the following is NOT part of retained earnings? A. Revenue reserve B. Accumulated profits C. Profits on exceptional activities D. Undistributed profits E. Unappropriated profits 11. Which of these is NOT a characteristic of bonus issue? A. Increasing capital without diluting current shareholdings B. Capitalising reserves, so that they cannot be paid as dividends C. Not raising cash D. Generating new shares www.starrygoldacademy.com Page 3

E. Could jeopardise payment of future dividend if profit declines 12. Which of the following will NOT be a content of the Statement of Financial Position of a company? A. Non-current assets B. Finance charge C. Inventory D. Payables E. Loan notes 13. Which of the following is a liability account in the books of the lessor? A. Short workings account B. Royalty receivable account C. Cash account D. Lessee account E. Statement of Profit or Loss 14. At 1 January 2011, the capital structure of Jumbo Plc was as follows: Issued share capital, 10,000,000 ordinary shares of N1.00 each 10,000,000 Share premium account 500,000 On 1 September 2011, the company made a fresh issue of 500,000 shares at N1.30 each. Which of the following correctly presents the company s share capital and share premium accounts as at 31 December 2011? N Share capital Share premium A. N10,000,000 N650,000 B. N10,500,000 N650,000 C. N10,650,000 N500,000 D. N10,150,000 N1,000,000 E. N10,000,000 N500,000 www.starrygoldacademy.com Page 4

15. In accounting for lease transaction, which type of lease allows the lessor to retain the risks and rewards associated with ownership A. Operating Lease B. Sale and Lease back C. Finance Lease D. Baloon Lease E. Pepper corn rent lease 16. Under IFRS a resource controlled by an organisation as a result of past events and from which future economic benefits can be generated is called A. Economic benefit B. Expandable supplies C. An asset D. Equity Capital E. Goodwill 17. Each of the following is referred to as an element of financial statements under IFRS EXCEPT A. An asset B. A liability C. Income D. Expense E. Revenue reserve 18. Finance lease is a contract between two parties for the purpose of: A. Buying and selling goods B. Credit sales and purchase C. Acquiring an asset D. Cash purchases and sales E. Buying materials for production 19. An exceptional item is www.starrygoldacademy.com Page 5

A. Normal but excessive B. Abnormal, excessive and infrequent C. Normal but infrequent D. Excessive but frequent E. Excessive but not frequent 20. Items of revenue and expenses that were recorded in the current year but would have been recorded in a prior year or years if all of the facts had been known at that time are A. Prior year adjustments B. Ordinary activities C. Exceptional items D. Extraordinary items E. Accrual items 21. Which of the following is included in statement of changes in equity? A. Taxation B. Dividend paid C. Share premium D. Investment E. Non-current Assets 22. Which of the following transactions will feature in ONLY the books of a limited liability company? A. Overdraft B. Trade Receivables C. Bills Payable D. Debenture Stock E. Inventories 23. Which of the following should be reported in the statement of comprehensive income? A. Proposed dividend B. Preference dividend C. Interim dividend paid www.starrygoldacademy.com Page 6

D. Capital reissues E. Revaluation reserves 24. In January 2013, ABC Ltd purchased a new machine for N280,000. Delivery costs of N3,000 were incurred and the cost of insuring the machine for the year to 31 December 2013 was /N3,500. How much of the above expenditure may ABC Ltd capitalise in its Statement of Financial Position?. (a) N280,000 (b) N286,500 (c) N283,000 (d) N283,500 25. According to IAS 17 Leases, which of the following statements is true? (a) A finance lease is a lease that has a minimum period of over five years. (b) A finance lease transfers substantially all the risks and rewards of ownership to the lessee. (c) A finance lease transfers substantially all the risks and rewards of ownership to the lessor. (d) A finance lease is a lease which has the ability to continue for a secondary period at a rent greater than the market rent. www.starrygoldacademy.com Page 7

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