An entity is required to measure a provision at the best estimate of the amount required to settle the obligation at the reporting date.Which one of the following estimates will give a best estimate when a provision involves a large population of items?
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1 .IAS 16 “Property, Plant and Equipment” defines a number of terms with the meaning specified. For example, “the amount at which an asset is recognised after deducting any accumulated depreciation ...”.Which term does this define?
A Carrying amount B Depreciable amount C Recoverable amount D Residual value
2 .On 1 January 2015 Amco acquired a building for USD1,000,000. At 31 December 2015 management made the following assessments about the building as at that date:its useful life is 40 years from the date of acquisition;its residual value is expected to be USD200,000;its fair value is USD1,300,000. What is the carrying amount of the building at 31 December 2015 under the cost model?
A USD1,000,000 B USD980,000 C USD975,000 D USD780,000
3 .On 1 January 2015 Amco acquired a building for USD1,000,000. At 31 December 2015 management made the following assessments about the building as at that date:its useful life is 40 years from the date of acquisition;its residual value is expected to be USD200,000;its fair value is USD1,300,000. What is the carrying amount of the building at 31 December 2015 and the depreciation charge for the year to 31 December under the revaluation model?
A Carrying amount: USD1,300,000 Depreciation charge USDNil B Carrying amount: USD1,300,000 Depreciation charge USD20,000 C Carrying amount: USD1,272,500 Depreciation charge USD27,500 D Carrying amount: USD1,267,500 Depreciation charge USD32,500
4 .A company has incurred the following costs in operating a pilot plant for the manufacture of a new product:(1) amortisation of a licence granted to manufacture the product(2) expenditure on material consumed in the operation of the plant(3) costs incurred in training staff to operate equipment in the plant;(4) depreciation of equipment in the pilot plant.Which of these examples are development activities?
A 1, 2 and 3 only B 1, 2 and 4 only C 1, 3 and 4 only D 2, 3 and 4 only
5 .Agar commenced a research and development project in 2012. USD20,000 was expensed in 2012 and a further USD30,000 in 2013. In December 2014 the project was completed after incurring further expenditure of USD40,000. The intangible asset created is a formula for a medical cure which was patented on 31 December 2014 for 10 years at an additional cost of USD10,000. Management is of the opinion that the useful life of the formula is five years and that the patent could be sold now for an amount in excess of USD100,000.What is the maximum amount at which the intangible asset can be carried in Agar’s statement of financial position for the year ended 31 December 2015?
A USD40,000 B USD45,000 C USD80,000 D USD100,000
7 .Inspire is the defendant in a patent infringement lawsuit. Inspire’s lawyers believe the there is a 30% chance that the court will dismiss the case and Inspire will not have to make any payout.However, if the court rules in favour of the claimant, they believe that there is a 20% chance that Inspire will be required to pay damages of USD200,000 (the amount sought by the claimant) and an 80% chance that damages will be USD100,000 (the amount that was recently awarded by the same judge in a similar case). The court is expected to rule sometime in 2016 and there is no indication that the claimant will settle out of court.What is the best estimate of the provision for the lawsuit that should be recognised in Inspire’s statement of financial position at 31 December 2015 in accordance with IAS 37?
A USDNil B USD100,000 C USD120,000 D USD200,000
8 .At 31 December 2015 Oberon is pursuing a claim against an insurance company through legal processes. The court is expected to rule later in 2016. At the reporting date Oberon’s legal advisers believe there is a 70% chance that Oberon will win the case. Furthermore, they believe that there is a 20% chance that Oberon will be awarded USD200,000 (the amount it is seeking) and an 80% chance of an award of USD100,000 (the amount that was recently awarded by the same judge in a similar case).How should this event be treated in Oberon’s financial statements for the year ended 31 December 2015?
A As an asset measured at USD200,000 B As an asset measured at USD100,000 C As a contingent asset D It should not be included in the financial statements
9 .Which of the following material events occurring after the end of the reporting period are adjusting events?(1) Sales of inventory for less than cost(2) Payment received from a customer whose debt had been written off(3) Sale of a subsidiary company(4) A flood in the warehouse destroying inventory
A 1 and 2 B 2 and 3 C 3 and 4 D 1 and 4
10 .On 15 March 2016 Fumi authorised for issue its financial statements for the year ended 31 December 2015. On 10 March 2016 the entity’s factory and several items of equipment were damaged in an earthquake. The damage is estimated to cost USD700,000 of which USD450,000 is expected to be covered under insurance policies.How should this material event have been included in Fumi’s financial statements for the year ended 31 December 2015?
A As a provision of USD700,000 B As a provision of USD250,000 C As a contingent liability of USD700,000 and a contingent asset of USD250,000 D As a note disclosure of the event
