At the end of the fiscal year, the usual adjustment for depreciation on equipment was omitted. Which of the following statements is true?
Total assets will be understated at the end of the current year
The statement of financial position and the income statement will be misstated but the statement of equity will be correct for the current year
Net income will be overstated for the current year
Total liabilities and total assets will be understated
The balance in the rent expense account before adjustment at the end of the year is €20,000. This represents five months’ rent paid on November 1. The adjusting entry required on December 31 is
Decrease rent expense €8,000 and increase deferred expenses €8,000
Decrease rent expense €12,000 and increase deferred expenses €12,000
Increase rent expense €8,000 and decrease deferred expenses €8,000
Increase rent expense €12,000 and decrease deferred expenses €12,000
The inventory account before adjustment at the end of the year amounts to €13,500. The value of the closing inventory at the end of the year is €14,000. This means that the adjusting entry required on December 31 should be
Increase inventory of goods €14,000 and increase cost of goods sold €14,000
Increase inventory of goods €500 and decrease cost of goods sold €500
Increase inventory of goods €14,000 and decrease cost of goods sold €14,000
Increase inventory of goods €500 and decrease impairment losses €500
Which of the following is not a typical year-end adjustment?
Accrual for tax on profit
Recording the depreciation cost
Recording bank statements
Adjusting the inventory account
Net income available to shareholders is the
Profit before interest and tax
Profit after interest and before tax
Profit after interest and after tax, but before any year-end adjustments
Profit after interest and after tax
One of Alfa Company’s major customers has failed to pay the amounts awed to Alfa. Alfa Company wishes to recognise an allowance for doubtful debts. Which of the following is true in this case?
There is a contingent liability
There is a contingent asset
There is a need to recognise a provision
There is an impairment of assets
There is a need to recognise additional depreciation
IAS 37 requires that in order to recognise a provision, an outflow of resources embodying economic benefits must be probable. What does “probable” mean in this context?
The outflow of economic resources is more likely than not to occur
The outflow of economic resources is quite likely to occur
The outflow of economic resources will possibly occur
The outflow of economic resources is virtually certain to occur
The outflow of economic resources might occur
Which of the following statements applies to a contingent liability?
It is a probable obligation arising from past events, confirmed by the occurrence of future events wholly within the control of the company
It is a possible obligation arising from past events, confirmed by the occurrence of future events wholly within the control of the company
It is a possible obligation arising from past events, confirmed by the occurrence of future events not wholly within the control of the company
It is a present obligation arising from past events, confirmed by the occurrence of future events not wholly within the control of the company
Which of the following conditions is not part of the IAS 37 recognition criteria of a provision?
A present obligation of the company
An obligation arising from past events
An obligation the settlement of which is expected to lead to an outflow of economic benefits
An obligation to be confirmed by future events
Company Omega has a present obligation that can be reliably measured, but the outflow of economic benefits is only possible and will be confirmed by the occurrence of a future event. In this case Company Omega will:
Do nothing
Disclose a contingent liability
Recognise a liability in the statement of financial position
Recognise a contingent liability in the statement of financial position
Disclose a contingent asset
Company Beta has a present obligation that can be reliably measured, but the possibility of an outflow of economic benefits to settle the obligation is only remote. In this case Company Beta will:
Do nothing
Disclose a contingent liability
Recognise a liability in the statement of financial position
Recognise a contingent liability in the statement of financial position
Disclose a contingent asset
Company Delta expects that one of its major operating segments will incur significant losses in the next accounting period. A net outflow of economic resources is probable and can be reliably estimated. In this case Company Delta will
Do nothing
Recognise a provision for the estimated loss
Recognise a contingent liability for the estimated loss