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Multiple Choice Questions 1.Themarketvalueofacompanyoften: a.Exceedsitsbookvaluebecausecertainassetsarenotrecognisedunderaccountingrules b.Appearstoberandomdistributedwithregardstobookvalue c.Islessthanitsbookvaluebecausecertainassetsarenotrecognisedunderaccountingrules d.Noneoftheabove 2.Historicallyinternallygeneratedintangibleassetshavenotbeenrecognisedinthefinancialstatementsforwhatreason? a.Thedifficultyinmeasuringtheassociatedcosts b.Failuretomeettheoldassetdefinition c.Theperceivedlackofusefulnessinassessingfutureearningscapacity. d.Theydidnotexistasaconceptuntilrecently 3.WhichofthefollowingisNOTpartoftheConceptualFrameworkdefinitionofanasset? a.Control b.Seperability c.Futureeconomicbenefit d.Noneoftheabove,i.e.theyareallpartofthedefinition 4.Whichofthefollowingattributesareimportantindeterminingwhetheranassetexists? a.Tangibility b.Ownership c.Existenceofamarketfortheasset d.Noneoftheabove 5.WhichofthefollowingisNOTacriticismthathasbeenlevelledatthecurrentdefinitionofanassetundertheConceptualFramework? a.Itistoocomplextooperationalise b.Itistoovaguetobeusedtosolveproblems c.Itexcludestoomanypotentialassets d.Noneoftheabove,i.e.theyhaveallbeenidentifiedasproblems 6.WhichofthefollowingisNOTafeatureofintangiblesthatdifferentiatesthemfromotherassets? a.Theyarelargelyknowledgebasedassets b.Manyarenotseparableitems c.Theyoftendonothavewell-definedpropertyrights d.Noneoftheabove,i.e.theyareallfeaturesofintangibleassets 7.WhichofthefollowinginNOTpartoftheAASB138definitionofanintangibleasset? a.Non-monetary b.Unidentifiable c.Controlled d.Noneoftheabove,i.e.theyareallpartofthedefinition 8.WhichofthefollowinginternallygeneratedintangibleassetscanberecognisedinaccordancewithAASB138? a.Mastheads b.Customerlists c.Registeredbrandnames d.Noneoftheabove 9.Differentialtreatmentofpurchasedversusinternallygeneratedintangibleassetsissaidtonotmakeeconomicsensebecause: a.Itviolatestheefficientmarkethypothesis b.Itisn’teconomicallyrational c.Itcreatesinformationasymmetry d.Alloftheabove 10.Internallygeneratedgoodwillisnotaccountedforbecauseitisdifficultto: a.Identify b.Measure c.Isolate d.Alloftheabove .

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4.Xavier Plata operates a small manufacturing business, trading under the name of Plata Products. The following list of financial data relates to the business as at 30 June. Cash Receivables Inventories Prepaid insurance Intangibles $131 950 70 300 13 026 1500 8750Plant & equipment (net) Accounts payable Salaries payable Interest-bearing, long-term Borrowings Contributed capital Retained profits$183 000 8500 1450 155 000 198 626 44 950 Additional information •Receivables will be collected within.

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21.Arguments in favour of triple bottom line reporting include: A.enhanced all-round company credibility from greater transparency. B.that it facilitates the implementation of an environmental strategy. C.enhanced communication with stakeholders. D.all of the above. 22.The Global Reporting Initiative: A.refers to an institution based in Sweden. B.is the most widely cited benchmark for the determination of the content of.

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MULTIPLE CHOICE 1.Which of the following is not true of sole traders? A.They are one-owner businesses. B.They are not normally reporting entities. C.They are separate legal entities. D.They usually have limited funds at their disposal. 2.Which of the following is not true for a partnership? A.Suppliers can supply goods on credit to a partnership. B.Customers can purchase goods.

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SHORT ANSWER 1.What is a conceptual framework from the perspective of financial reporting? 2.Describe four objectives of a conceptual framework. 3.Outline the nature and purpose of general-purpose financial reports (GPFR). 4.Under what circumstances does an entity represent a ‘reporting entity’ for the purposes of the Australian conceptual framework? 5.Describe the purpose of the external auditor.

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31.Which one of the following groups is not generally regarded as an external user of the accounting information of an enterprise? A.Employees B.Customers C.Management D.Lenders 32.FeelGood Limited has been set up specifically for the building of an inner-city women’s refuge. When the building has been erected and becomes operational (estimated time four months), the company.

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21.The Davis Company purchases a new delivery truck by making a 10% cash down payment and signing a note payable for the balance. How will assets, liabilities and owners’ equity be affected by this transaction? Assets              Liabilities             Owners’ Equity A.decrease            increase                no change B.increase            increase                no change C.increase            decrease                increase D.no change          increase                decrease 22.On 31.

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SHORT ANSWER 1.What is the role of accounting information in business? 2.Distinguish managerial accounting from financial accounting. Your answer should include a brief discussion of differences in the types of information provided to users as well as differences in the identity of users of financial and managerial accounting information. .

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CASE 1.In June 2002 WorldCom, a US telecommunications firm, announced that it had misreported financial information in previous accounting periods – to the sum of USD $3.9 billion – by recording routine operating expenses as capital expenditure. Discuss (a)The impact of the treatment on the financial statements. (b)The possible reasons for management’s accounting policy.

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TRUE/FALSE 1.An objective of accounting is to provide information to predict and evaluate the going concern of an entity. 2.Accounting information is always quantitative and objective. 3.Stewardship is the term used to refer to management’s role in protecting an entity’s economic resources from theft, fraud and wastage. 4.Management is an external user of accounting.

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11.For which of the following accounts would the use of historical cost normally be a greater limitation than for the other three? A.Cash B.Accounts Receivable C.Plant and Machinery D.Prepaid Rent 12.For which of the following accounts would the limitation ‘use of estimates and allocations’ not be a concern? A.Inventory B.Cash C.Equipment D.Accounts Receivable 13.Which of the following statements about the.

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11.Political costs create incentives for managers to select accounting policies that increase reported profits. 12.Triple bottom line reporting confirms the maximisation of profit as the major objective of listed companies. 13.A triple bottom line report refers to the publication of economic, environmental and corporate governance information in an integrated report. 14.Because triple bottom.

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31.On a balance sheet, assets are usually classified as: A.Current Assets, Fixed Assets, Plant and Equipment, and Intangible Assets. B.Current Assets, Long Term Assets, Plant and Equipment, and Intangible Assets. C.Current Assets, Fixed Assets and Long-term Investments. D.Current Assets and Non-current Assets. 32.What is the value of total assets if current assets equal $2200, current.

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TRUE/FALSE 1.Deontologists judge the moral correctness of actions by only looking at the consequences of such actions. 2.For accountants to use judgement in providing advice would be unethical. 3.It is ethical for an accountant to minimise the amount of tax his client is required to pay. 4.Effective corporate governance may reduce agency costs. 5.Corporate governance.

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41.Which of the following accounts is a liability? A.Interest Expense B.Interest Payable C.Interest Revenue D.Interest Receivable 42.Liabilities are: A.resources under an organisation’s legal control. B.obligations owed by an organisation to its suppliers of goods and services on credit creditors. C.the amount of investment made by owners in a business. D.the profits earned by a corporation. 43.Which of the following accounts.

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PROBLEM 1.The accountant for Tiny Tots has compiled the following information about the company and its accounts: Cash $1500Prepaid Rent$1000 Revenues 4000Expenses2000 Accounts Payable4500Equipment10 000 Wages Payable2500Notes Payable 1000 (a)What is the total amount of assets belonging to Tiny Tots? (b)What is the total amount that Tiny Tots owes for liabilities? (c)Using the accounting equation, what is the.

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MULTIPLE CHOICE 1.Accounting information: A.is helpful for financing decisions but not for marketing decisions. B.is useful for profit-making entities but is not needed for not-for-profit entities. C.must follow accounting principles provided by management. D.is useful for all economic organisations. 2.The primary purpose of accounting is to: A.help people make decisions about economic activities. B.provide information that management can.

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31.The fundamental element equity does not require recognition criteria, because it represents the residual interest in assets, after deducting liabilities. 32.In accordance with the IASB Conceptual Framework, income includes both revenue and gains. 33.The external auditor is responsible for preparing the general-purpose financial reports of a company. 34.The responsibilities of the Australian Financial.

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21.General-purpose financial reports provide the information that is required for both internal and external user group needs. 22.Accrual accounting refers to the method of measuring profit on the basis of cash flow, rather than when revenues and expenses occur. 23.The going concern assumption assumes that an entity will continue to operate successfully.

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11.Match the type of accounting information to the term that best describes it. Information prepared for                     Information prepared for external decision makers                      internal decision makers A.Financial accounting                             Financial accounting B.Financial accounting                             Managerial accounting C.Managerial accounting                           Financial accounting D.Managerial accounting                           Managerial accounting 12.Information contained in external financial reports can be useful to a firm’s: Suppliers              Employees A.No                      No B.No                      Yes C.Yes                     No D.Yes                    .

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11.WhichofthefollowinghasASICidentifiedasapracticethatindicatesriskofcorporateinsolvency? a.Disorganisedinternalaccountingprocedures b.Judgementdebts c.Lossofkeymanagementpersonnel d.Alloftheabove 12.WhichofthefollowinghasASICNOTidentifiedasapracticethatindicatesriskofcorporateinsolvency? a.Absenceofcorporateplans b.Enteringintoinstalmentarrangementstopaydebts c.Decreasedmonitoringbyfinancier d.Noneoftheabove,i.e.theyhaveallbeenidentifiedbyASIC 13.Corporategovernancehasbeensuggestedtobeattheheartofcorporatefailure.Ithasbeensuggestedthatcompaniesarelesslikelytogetinfinancialtroubleiftheirboards: a.Letmanagementrunthecompanywithminimaloversight b.Areactiveintheirroles c.Alsomanagethecompany d.Havegoodpoliticalconnections 14.BusinessWeekconsiderswhichofthefollowingtobegoodgovernancewhenratingboards? a.Directorsshoulddobusinesswiththecompany b.Directorsshouldownsharesinthecompany c.Directorsshouldalwaysmeetwithmanagementpresent d.Noneoftheabove 15.ThecorporatecollapseinAustraliathathappenedinthe1980’swerethoughttobearesultof: a.Poorcorporategovernance b.Inadequateaccountingdisclosures c.Economicdownturn d.Auditfailures 16.Followinganumberofcorporatefailuresin2001legislativechangesinAustralia: a.Prohibitedauditfirmsfromprovidingotherservicestoclients b.Requiredtherotationofauditfirmsevery5years c.Requireddisclosureofthenatureandvalueofnon-auditservicesprovidedbyauditorstobedisclosed d.ForcedtheAustraliangovernmenttoenacttheSarbanes-OxleyAct 17.AcommonfactoridentifiedasanissueinboththeHIHandEnroncollapseswas: a.Deficienciesintheauditprocess b.Overrelianceoncomplexfinancialinstruments c.Lackofboardindependence d.Noneoftheabove 18.IthasbeennotedthatremunerationpackagesforCEOsinfailedcompanies: a.Tendtoincludemoreoptions b.Haveasubstantiallylowerproportionof‘atrisk’components c.Aregenerallymuchhigher d.Aregenerallymuchlower 19.Abubbleinwhichclassofassetshasgenerallybeenclaimedasthetriggerfortheglobalfinancialcrisis? a.Shares b.Preciousmetals c.Consumables d.Housing 20.WhichofthefollowingmechanismstransferredthefinancialcrisisfromtheUStotherestoftheworld? a.Exposureoftheworld’sfinancialsystemtosub-primedebt b.DeclineinUSdemandforimports c.Contagionofconcernsaboutthehousingmarketinothercountries d.Alloftheabove .

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11.Howispurchasedgoodwillvalued? a.Atfairvalue b.Asthebalancingitembetweenthefairvalueofassetsandtheircarryingamount c.Asthebalancingitembetweenpurchaseconsiderationandthefairvalueofidentifiablenetassetsacquired d.Athistoriccost 12.Ithasbeenarguedthatwhenitcomestointangibleassetscapitalmarketswouldbebetterservedby: a.Requiringallintangibles,internallygeneratedorpurchased,tobeexpensed b.Onlyallowingpurchasedintangiblestobecapitalised c.Givingdiscretiontomanagementonwhentocapitaliseintangibleassets d.Requiringallintangibles,internallygeneratedorpurchased,tobecapitalised 13.Levhassuggestedthatbynotincludinginternallygeneratedintangibleassetscompanies’bookvaluesmaybeunderstatedbyasmuchas: a.100% b.75% c.50% d.25% 14.WhichofthefollowingisNOTpartofthedefinitionofaheritageasset? a.Intangible b.Ofhistoric,artistic,scientificetc.value c.Heldandmaintainedforitscontributiontoknowledgeandculture d.Noneoftheabove,i.e.theyareallpartofthedefinition 15.WhichofthefollowingisNOTanexampleofaheritageasset? a.Stonehenge b.Aboriginaloralhistory c.TheGreatBarrierReef d.Noneoftheabove,i.e.theyareallheritageassets 16.WhichpartoftheConceptualFrameworkdefinitionofanassetmakesrecognitionofHeritageAssetsdifficult? a.Futureeconomicbenefit b.Control c.Pasttransactionorevent d.Bothfutureeconomicbenefitandcontrol 17.WhichpartoftheConceptualFrameworkdefinitionofaliabilitymakesitunlikelythatHeritageAssetsshouldberecognisedasliabilities? a.Futureeconomicsacrifice b.Presentobligation c.Pasttransactionorevent d.Measurability 18.WhichoffollowingmethodshaveNOTbeenproposedtomeasurethevalueofHeritageAssets? a.Valuationatnominalamounts b.Travelcostmethod c.Contingentvaluation d.Noneoftheabove,i.e.theyareallproposedmeasurementapproaches 19.OneimportantquestionregardingtherecognitionofHeritageAssetsiswhethertheyfallwithinSAC2.Whichofthefollowingquestionswouldaddressthisconcern? a.Aretheentitiesholdingtheassetsreportingentities? b.Dotheassetsmeettheformaldefinitionofanasset? c.Arethereidentifiableuserswhorequirefinancialinformationabouttheassets? d.Canthevalueoftheassetsbeaccuratelymeasured? 20.WhichobjectiveoffinancialaccountingmostcloselyalignswiththeconceptofHeritageAssets? a.Stewardship b.Corporategovernance c.Decisionusefulness d.Financialvaluation .

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21.The separation of ownership and control is normally a characteristic of: A.companies. B.partnerships. C.sole traders. D.partnerships and companies. 22.The factors that should be considered before forming the partnership and company forms of entity would include: A.income taxation implications. B.the liability of the equity participants for the debts of the business. C.the scale/magnitude of the operations involved and the.

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11.Which of the following is classified as a liability? A.Wages expense B.Accounts payable C.Owners’ drawings D.Retained profits 12.Amounts owed by a business enterprise to external parties are described as: A.assets. B.liabilities. C.equities. D.revenue. 13.Owners’ equity is: A.the owners’ interest in the total assets of the firm. B.only profits retained in the business. C.the contributions by the proprietor plus all profits retained by the.

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MULTIPLE CHOICE 1.According to Josephson (1992), characteristics of an ethical person include: A.honesty, caring and listening to clients’ orders. B.promise-keeping, not listening to client’s orders and respectfulness. C.loyalty, fairness and caring. D.honesty, coolness and being smart. 2.According to Josephson (1992), people do not behave in an ethical manner because of: A.faulty reasoning and loyalty. B.self-righteousness and greed. C.self-deception and.

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11.Accounting Standards set by the Australian Accounting Standards Board (AASB) apply to both the private and public sectors in Australia. 12.Due process is primarily concerned with producing Accounting Standards that meet managers’ objectives. 13.The Corporations Act 2001 requires that financial statements include a directors’ report, a directors’ statement and an auditor’s report. 14.The.

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