Ch2 The Statement Of Financial Position Test Bank Answers - Question Bank | Intro to Accounting 2e P. Scott by Peter Scott. DOCX document preview.
Chapter 2: The Statement of Financial Position
Test Bank
Type: multiple choice question
Title: Chapter 02 Question 01
1) Which one of the following statements is the IASB’s definition of an asset?
a. A right that has the potential to produce economic benefits.
Heading reference: Assets
b. A present obligation of the entity to transfer an economic resource as a result of past events.
Heading reference: Assets, Liabilities
c. A present economic resource controlled by the entity as a result of past events.
Heading reference: Assets
d. A present economic resource that has the potential to produce economic benefits.
Heading reference: Assets
Type: multiple choice question
Title: Chapter 02 Question 02
2) The International Accounting Standards Board’s Conceptual Framework for Financial Reporting defines an asset as:
a. A resource not purchased for resale in the normal course of business, held for long-term use in the business to produce goods or services.
Heading reference: Assets, Non-current assets
b. A present obligation of the entity to transfer an economic resource as a result of past events.
Heading reference: Assets, Liabilities
c. A short term resource that is constantly changing.
Heading reference: Assets, Current assets
d. A present economic resource controlled by the entity as a result of past events.
Heading reference: Assets
Type: multiple choice question
Title: Chapter 02 Question 03
3) Which one of the following statements most accurately describes an asset?
a. Something an entity owes, the value of which can be faithfully represented.
Heading reference: Assets, Liabilities
b. Something an entity owes which will result in the transfer of cash.
Heading reference: Assets, Liabilities
c. Something an entity controls which it uses to generate cash.
Heading reference: Assets
d. Something an entity owns for long term use within its business.
Heading reference: Assets, Liabilities
Type: multiple response question
Title: Chapter 02 Question 04
4) An asset can be recognized in an entity’s statement of financial position when: Please select all that apply.
Heading reference: Assets, Liabilities
a. A past event gives rise to an economic resource controlled by the entity.
b. The monetary value of the economic resource can be measured in such a way that a faithful representation is achieved.
c. The resource will give rise to a transfer of economic resources.
d. Profit will be generated by the resource.
Type: multiple choice question
Title: Chapter 02 Question 05
5) The International Accounting Standards Board’s Conceptual Framework for Financial Reporting defines an asset as “a present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits.” In addition, the IASB Conceptual Framework only allows entities to recognize assets when their monetary value can be measured in such a way that a faithful representation can be achieved. In which one of the following situations would a manufacturing company not recognize an asset on its statement of financial position?
a. A new piece of plant and equipment is purchased for use in the production process.
Heading reference: Assets
b. Raw materials for use in production are bought by the company.
Heading reference: Assets
c. A trade receivable that owes money to the company goes into liquidation with no likelihood that it will be able to pay what is owed.
Heading reference: Assets
d. Cash that is not required to finance day to day trading operations is invested in a bank account paying a fixed rate of interest for a fixed term of three years.
Heading reference: Assets
Type: true-false
Title: Chapter 02 Question 06
6) The International Accounting Standards Board’s Conceptual Framework for Financial Reporting defines an asset as “a present obligation of the entity to transfer an economic resource as a result of past events.”
a. True
Heading reference: Assets, Liabilities
b. False
Heading reference: Assets, Liabilities
Type: multiple choice question
Title: Chapter 02 Question 07
7) PhonesForUs has a stock of old smart phones bought three years ago from a supplier. The phones have been counted up, and it has been found that there are 100 of them. These phones originally cost £50 each three years ago. However, no one has bought one of these phones in the past 18 months as much newer models with much greater levels of features and connectivity have rendered these phones out of date. The accountant has decided that the phones can no longer be recognized as an asset in the statement of financial position of PhonesForUs. What is the reason for the accountant’s decision?
a. The monetary value of the phones cannot be measured in such a way that a faithful representation is achieved..
Heading reference: Assets
b. The phones have no potential to produce economic benefits for the entity.
Heading reference: Assets
c. There is no past event giving rise to the asset.
Heading reference: Assets
d. The smart phones are not controlled by PhonesForUs
Heading reference: Assets
Type: multiple choice question
Title: Chapter 02 Question 08
8) Which one of the following is the definition of a liability according to the IASB’s Conceptual Framework for Financial Reporting?
a. A present economic resource controlled by the entity as a result of past events..
Heading reference: Assets, Liabilities
b. A right that has the potential to produce economic benefits.
Heading reference: Assets, Liabilities
c. A present obligation of the entity as a result of past events.
Heading reference: Assets, Liabilities
d. A present obligation of the entity to transfer an economic resource as a result of past events.
Heading reference: Assets
Type: true-false
Title: Chapter 02 Question 09
9) Liabilities can only be recognized in the statement of financial position if their monetary value can be measured in such a way that a faithful representation is achieved.
a. True
Heading reference: Assets, Liabilities
b. False
Heading reference: Assets, Liabilities
Type: multiple choice question
Title: Chapter 02 Question 10
10) A liability can be described as:
a. Something an entity owes, the monetary value of which just needs to be estimated.
b. Something an entity owes which will result in the payment of cash by the entity.
Heading reference: Liabilities
c. Something an entity controls which it uses to generate cash.
Heading reference: Assets, Liabilities
d. Something an entity owns or leases for long term use within its business.
Heading reference: Assets, Liabilities
Type: multiple response question
Title: Chapter 02 Question 11
11) A liability can be recognized in an entity’s statement of financial position when: Please select all that apply.
Heading reference: Liabilities
a. There is a present obligation as a result of past events.
b. There is an expectation that the obligation can be avoided.
c. There is a contractual or legal claim against the entity.
d. There is expected to be a transfer of an economic resource.
Type: multiple choice question
Title: Chapter 02 Question 12
12) In which one of the following circumstances would an organization not recognize a liability on its statement of financial position?
a. When the monetary value of the obligation cannot be measured in such a way that a faithful representation is achieved.
Heading reference: Liabilities
b. When the obligation cannot be avoided.
Heading reference: Liabilities
c. When the entity has an obligation at the statement of financial position date.
Heading reference: Liabilities
d. When a transfer of an economic resources will take place.
Heading reference: Liabilities
Type: multiple choice question
Title: Chapter 02 Question 13
13) Which one of the following would be recognized as a non-current asset in the statement of financial position of a mining company?
a. A licence to mine land for minerals.
Heading reference: Assets in the statement of financial position
b. A pile of ore ready for shipment.
Heading reference: Assets in the statement of financial position
c. A loan to the mining company which is due for repayment in 10 years’ time.
Heading reference: Assets in the statement of financial position
d. Money owed by the mining company’s customers.
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 14
14) Which one of the following would not be recognized as a non-current asset in the statement of financial position of a professional football club?
a. The contracts of players purchased from other football clubs.
Heading reference: Assets in the statement of financial position
b. Grass cutting machinery purchased during the year.
Heading reference: Assets in the statement of financial position
c. The stadium owned by the football club.
Heading reference: Assets in the statement of financial position
d. The contracts of players who joined the club after successfully completing their apprenticeship with the club.
Heading reference: Assets in the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 15
15) Which one of the following would not be recognized as inventory on the statement of financial position of a house building company?
a. Roof tiles on a building site.
Heading reference: Assets in the statement of financial position
b. Timber beams for roofing.
Heading reference: Assets in the statement of financial position
c. Equipment hire paid in advance.
Heading reference: Assets in the statement of financial position
d. A finished house sold subject to contract.
Heading reference: Assets in the statement of financial position
Type: multiple response question
Title: Chapter 02 Question 16
16) Which of the following would be classified as intangible non-current assets in the statement of financial position of a publisher? Please select all that apply.
Heading reference: Non-current assets
a. Publishing rights.
b. A shareholding in another company.
c. Trademarks.
d. Licences.
Type: multiple response question
Title: Chapter 02 Question 17
17) Why can an entity not recognize its workforce as a current or non-current asset on its statement of financial position? Please select all that apply.
Heading reference: Assets
a. The entity does not control its workforce.
b. There is no past event giving rise to an asset.
c. There is no potential to produce economic benefits from the workforce.
d. The monetary value of the workforce cannot be measured in such a way that a faithful representation is achieved..
Type: multiple choice question
Title: Chapter 02 Question 18
18) Which one of the following would be classified as a current liability in a building company with a financial year end date of 30 September 2021?
a. A loan used to acquire the building firm’s head office. This loan is repayable in full on 30 June 2028.
Heading reference: Liabilities
b. A trade receivable from a customer for work completed during the year.
Heading reference: Liabilities
c. An amount owed to a brick manufacturer for bricks supplied during September 2021.
Heading reference: Assets in the statement of financial position, Liabilities
d. The share capital of the company.
Heading reference: Liabilities, The components of equity
Type: multiple response question
Title: Chapter 02 Question 19
19) On 30 September 2021, the last day of the company’s financial year, Billdit Limited orders 500 timber roof beams from its supplier at a cost of £50 per beam, the timber roof beams to be delivered on 7 October 2021. Why can Billdit Limited not recognize a trade payable liability for these timber beams on its statement of financial position at 30 September 2021? Please select all that apply.
Heading reference: Liabilities
a. The monetary value of the liability is not measureable in such a way that a faithful representation is achieved..
b. There is no past event giving rise to an obligation.
c. The obligation is avoidable.
d. There is no present obligation at the statement of financial position date.
Type: multiple response question
Title: Chapter 02 Question 20
20) Which of the following would be recognized as trade and other payables in the statement of financial position of a book publishing company? Please select all that apply.
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
a. Amounts due to a paper supplier.
b. Amounts due from a bookseller.
c. Amounts due to authors for royalties on books sold.
d. Amounts due to HM Revenue and Customs for taxes due on profits.
Type: multiple choice question
Title: Chapter 02 Question 21
21) Farook Limited has current assets of £68,420, current liabilities of £50,328, non-current liabilities of £102,000 and equity of £202,359. Using the accounting equation, calculate the figure for non-current assets.
a. £18,389
Heading reference: The accounting equation
b. £118,451
Heading reference: The accounting equation
c. £286,267
Heading reference: The accounting equation
d. £423,107
Heading reference: The accounting equation
Type: multiple choice question
Title: Chapter 02 Question 22
22) Gurbinder Limited has non-current assets of £250,000, current assets of £142,000, current liabilities of £125,000 and equity of £150,000. Using the accounting equation, calculate the figure for non-current liabilities.
a. £667,000
Heading reference: The accounting equation
b. £383,000
Heading reference: The accounting equation
c. £367,000
Heading reference: The accounting equation
d. £117,000
Heading reference: The accounting equation
Type: multiple choice question
Title: Chapter 02 Question 23
23) Harriet Limited has non-current assets of £425,000, current liabilities of £142,000 and equity of £391,000. Harriet Limited has no non-current liabilities. Using the accounting equation, calculate the figure for current assets.
a. £108,000
Heading reference: The accounting equation
b. £176,000
Heading reference: The accounting equation
c. £674,000
Heading reference: The accounting equation
d. £958,000
Heading reference: The accounting equation
Type: multiple choice question
Title: Chapter 02 Question 24
24) Nishi Limited has non-current assets of £622,481, non-current liabilities of £235,148, current assets of £359,727 and equity of £327,138. Using the accounting equation, calculate the figure for current liabilities.
a. £170,764
Heading reference: The accounting equation
b. £419,922
Heading reference: The accounting equation
c. £890,218
Heading reference: The accounting equation
d. £1,074,198
Heading reference: The accounting equation
Type: multiple choice question
Title: Chapter 02 Question 25
25) Roisin runs a small retail business from a shop in the town centre. At the end of her financial year, she has the following assets and liabilities: taxation repayable: £890, inventory: £25,450, cash in the cash register: £1,750, bank balance (overdrawn): £10,250. What is the total of Roisin’s current assets?
a. £27,200
Heading reference:
Current assets
Liabilities in the statement of financial position
Drawing up the statement of financial position
b. £28,090
Heading reference:
Current assets
Liabilities in the statement of financial position
Drawing up the statement of financial position
c. £37,450
Heading reference:
Current assets
Liabilities in the statement of financial position
Drawing up the statement of financial position
d. £38,340
Heading reference:
Current assets
Liabilities in the statement of financial position
Drawing up the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 26
26) Patrick runs an engineering business. At the financial year end he has the following account balances: prepayments: £7,500, trade payables: £52,600, inventory: £74,100, long term loan: £250,000, property, plant and equipment: £325,400, trade receivables: £46,300, bank balance (asset): £22,000, taxation payable: £10,700. Patrick’s total assets are:
a. £149,900
Heading reference:
Current assets
Liabilities in the statement of financial position
Drawing up the statement of financial position
b. £162,000
Heading reference:
Current assets
Liabilities in the statement of financial position
Drawing up the statement of financial position
c. £467,800
Heading reference:
Current assets
Liabilities in the statement of financial position
Drawing up the statement of financial position
d. £475,300
Heading reference:
Assets in the statement of financial position
Liabilities in the statement of financial position
Drawing up the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 27
27) Gina has the following assets at her financial year end: cash at the bank: £15,000, trademarks: £25,000, trade receivables: £52,000, patents: £10,000, inventory: £35,000, property, plant and equipment: £225,000, a long-term shareholding in Tina plc: £48,000. Gina’s total non-current assets are:
a. £260,000
Heading reference: Assets in the statement of financial position, Drawing up the statement of financial position
b. £273,000
Heading reference: Assets in the statement of financial position, Drawing up the statement of financial position
c. £308,000
Heading reference: Assets in the statement of financial position, Drawing up the statement of financial position
d. £410,000
Heading reference: Assets in the statement of financial position, Drawing up the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 28
28) At her financial year end of 31 December 2021, Haylie has trade and other receivables of £78,400, current taxation payable of £22,350 and trade and other payables of £56,250. Haylie also has bank borrowings totalling £500,000. These bank borrowings are repayable by equal annual instalments over the next five years starting with the first repayment of £100,000 on 30 December 2022. What figure will Haylie record in her statement of financial position at 31 December 2021 for current liabilities?
a. £157,000
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
b. £178,600
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
c. £257,000
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
d. £578,600
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 29
29) At 31 October 2021, her statement of financial position date, Suad has trade and other payables of £18,475, taxation recoverable of £1,250, cash in hand of £745 and a bank overdraft of £12,225. What are Suad’s current liabilities at 31 October 2021?
a. £30,700
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
b. £31,205
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
c. £31,950
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
d. £32,695
Heading reference: Assets in the statement of financial position, Liabilities in the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 30
30) Shamsa Limited has the following balances at 30 June 2021, the company’s year-end:
Trade and other payables: £47,450
Taxation payable: £17,275
Bank loan: £360,000
The bank loan is repayable over 5 years by equal monthly instalments. The first loan repayment is due on 28 August 2021 and each subsequent repayment will be on the 28th of each month until the loan is repaid. What figures will Shamsa Limited show for current and non-current liabilities at 30 June 2021?
a. Current liabilities: £64,725, non-current liabilities: £360,000
Heading reference: Liabilities in the statement of financial position, Drawing up the statement of financial position
b. Current liabilities: £113,450, non-current liabilities: £294,000
Heading reference: Liabilities in the statement of financial position, Drawing up the statement of financial position
c. Current liabilities: £130,725, non-current liabilities: £294,000
Heading reference: Liabilities in the statement of financial position, Drawing up the statement of financial position
d. Current liabilities: £136,725, non-current liabilities: £288,000
Heading reference: Liabilities in the statement of financial position, Drawing up the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 31
31) The International Accounting Standards Board’s Conceptual Framework for Financial Reporting defines equity as:
a. The residual interest in the assets of the entity after adding all its liabilities.
Heading reference: Equity
b. The residual interest in the liabilities of the entity after adding all its assets.
Heading reference: Equity
c. The residual interest in the assets of the entity.
Heading reference: Equity
d. The residual interest in the assets of the entity after deducting all its liabilities.
Heading reference: Equity
Type: multiple choice question
Title: Chapter 02 Question 32
32) The equity of an unincorporated business that makes a profit in the financial year is calculated as:
a. Capital at the start of the year + capital introduced + profit for the year + drawings.
Heading reference: The components of equity
b. Capital at the start of the year + capital introduced + profit for the year – drawings.
Heading reference: The components of equity
c. Capital at the start of the year + capital introduced – profit for the year – drawings.
Heading reference: The components of equity
d. Capital at the start of the year + capital introduced – profit for the year + drawings.
Heading reference: The components of equity
Type: multiple choice question
Title: Chapter 02 Question 33
33) Alpaca Limited has the following balances at 31 December 2021: share capital of £25,000, share premium of £50,000, retained earnings at 1 January 2021 of £225,000 and a retained loss for the year to 31 December 2021 of £70,000. What is the total equity of Alpaca Limited at 31 December 2021?
a. £180,000
Heading reference: The components of equity, Drawing up the statement of financial position
b. £230,000
Heading reference: The components of equity, Drawing up the statement of financial position
c. £300,000
Heading reference: The components of equity, Drawing up the statement of financial position
d. £370,000
Heading reference: The components of equity, Drawing up the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 34
34) Parminder, a sole trader, makes a profit of £25,600 in the year ended 30 June 2021. Her capital account balance at 1 July 2020 was £76,750 and she withdrew £55,200 from the business during the year for her own expenses. What is the balance on Parminder’s capital account at 30 June 2021?
a. £47,150
Heading reference: The components of equity
b. £76,750
Heading reference: The components of equity
c. £102,350
Heading reference: The components of equity
d. £157,550
Heading reference: The components of equity
Type: multiple choice question
Title: Chapter 02 Question 35
35) Foromin Limited has share capital of £20,000, share premium of £50,000 and retained earnings at the start of the financial year (1 July 2020) of £150,000. During the year ended 30 June 2021, Foromin Limited makes a profit of £60,000 from which a dividend of £40,000 is paid to shareholders. What is the total equity of Foromin Limited at 30 June 2021?
a. £220,000
Heading reference: The components of equity, Drawing up the statement of financial position
b. £240,000
Heading reference: The components of equity, Drawing up the statement of financial position
c. £280,000
Heading reference: The components of equity, Drawing up the statement of financial position
d. £320,000
Heading reference: The components of equity, Drawing up the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 36
36) Bubbles Limited has share capital of £16,000, share premium of £25,000 and retained earnings at 1 May 2020 of £75,000. During the financial year ended 30 April 2021, Bubbles Limited made a loss of £22,000 and paid a dividend of £9,000 to the shareholders. What is the total equity of Bubbles Limited at 30 April 2021?
a. £85,000
Heading reference: The components of equity, Drawing up the statement of financial position
b. £94,000
Heading reference: The components of equity, Drawing up the statement of financial position
c. £103,000
Heading reference: The components of equity, Drawing up the statement of financial position
d. £129,000
Heading reference: The components of equity, Drawing up the statement of financial position
Type: multiple choice question
Title: Chapter 02 Question 37
37) Which one of the following does the statement of financial position show?
a. All the assets and liabilities of an organization.
Heading reference: What does the statement of financial position show?, What the statement of financial position does not show
b. All the financially measurable resources and obligations of an organization.
Heading reference: What does the statement of financial position show?, What the statement of financial position does not show
c. The market value of an organization.
Heading reference: What does the statement of financial position show?, What the statement of financial position does not show
d. All the assets and liabilities of an organization at their current market values.
Heading reference: What does the statement of financial position show?, What the statement of financial position does not show
Type: multiple choice question
Title: Chapter 02 Question 38
38) Which one of the following statements is not correct?
a. The statement of financial position does not show all the assets and all the liabilities of an organization.
Heading reference: What does the statement of financial position show?, What the statement of financial position does not show
b. The statement of financial position shows the market value of an organization
Heading reference: What does the statement of financial position show?, What the statement of financial position does not show
c. The statement of financial position shows the resources and commitments of an organization in money terms at the end of each accounting period.
Heading reference: What does the statement of financial position show?, What the statement of financial position does not show
d. The statement of financial position shows the financial situation of an organization at the end of each accounting period.
Heading reference: What does the statement of financial position show?, What the statement of financial position does not show
Type: multiple choice question
Title: Chapter 02 Question 39
39) A business buys a new computer system for £20,000 and agrees to pay the £20,000 to the supplier of the system in 30 days’ time. What is the double entry in the statement of financial position to reflect this transaction?
a. Increase current assets by £20,000, increase current liabilities by £20,000.
Heading reference: The dual aspect concept
b. Increase current assets by £20,000, increase non-current liabilities by £20,000.
Heading reference: The dual aspect concept
c. Increase non-current assets by £20,000, increase non-current liabilities by £20,000.
Heading reference: The dual aspect concept
d. Increase non-current assets by £20,000, increase current liabilities by £20,000.
Heading reference: The dual aspect concept
Type: multiple choice question
Title: Chapter 02 Question 40
40) Beta Limited buys £30,000 of inventory on credit terms. What is the correct double entry to reflect this transaction?
a. Increase inventory £30,000, decrease trade payables £30,000
Heading reference: The dual aspect concept
b. Increase inventory £30,000, increase trade payables £30,000
Heading reference: The dual aspect concept
c. Decrease inventory £30,000, decrease trade payables £30,000
Heading reference: The dual aspect concept
d. Decrease inventory £30,000, increase trade payables £30,000
Heading reference: The dual aspect concept
Type: multiple choice question
Title: Chapter 02 Question 41
41) Jaswant Limited receives a payment of £15,000 from a trade receivable for goods supplied a month ago. The company’s accountant pays this £15,000 into the company’s bank account. Jaswant Limited currently has an overdraft at the bank of £50,000 before this receipt of £15,000 is paid in. What is the correct double entry to reflect this transaction?
a. Increase trade receivables £15,000, increase bank overdraft £15,000.
Heading reference: The dual aspect concept
b. Increase trade receivables £15,000, decrease bank overdraft £15,000.
Heading reference: The dual aspect concept
c. Decrease trade receivables £15,000, decrease bank overdraft £15,000.
Heading reference: The dual aspect concept
d. Decrease trade receivables £15,000, increase bank overdraft £15,000.
Heading reference: The dual aspect concept
Type: multiple choice question
Title: Chapter 02 Question 42
42) Maria makes a payment of £25,000 to a trade payable from her bank account. Prior to this payment, Maria’s bank account showed an asset of £45,000. Which one of the following options represents the correct entries to reflect this payment?
a. Increase trade payables £25,000, decrease bank account £25,000.
Heading reference: The dual aspect concept
b. Decrease trade payables £25,000, increase bank account £25,000.
Heading reference: The dual aspect concept
c. Increase trade payables £25,000, increase bank account £25,000.
Heading reference: The dual aspect concept
d. Decrease trade payables £25,000, decrease bank account £25,000.
Heading reference: The dual aspect concept
Type: multiple choice question
Title: Chapter 02 Question 43
43) Josh’s trade receivables stand at £322,000 and he has a bank overdraft of £17,000 (a liability). A trade receivable pays the £22,000 owed and Josh pays this £22,000 into his bank account. What are the balances on trade receivables and the bank account after this receipt of cash?
a. Trade payables £300,000, Bank account £5,000 asset.
Heading reference: The dual aspect concept
b. Trade payables £344,000, Bank account £5,000 asset.
Heading reference: The dual aspect concept
c. Trade payables £300,000, Bank account £39,000 overdraft.
Heading reference: The dual aspect concept
d. Trade payables £344,000, Bank account £39,000 overdraft.
Heading reference: The dual aspect concept
Type: multiple choice question
Title: Chapter 02 Question 44
44) Which one of the following statements is not true?
a. Intangible assets have no material substance.
Heading reference: Assets in the statement of financial position
b. Current assets are short term assets which are constantly changing in a constantly repeating trading cycle.
Heading reference: Assets in the statement of financial position
c. Control over economic resources is gained solely through ownership of those economic resources.
Heading reference: Assets
d. Liabilities are contractual or legal claims against an entity.
Heading reference: Liabilities
Type: multiple choice question
Title: Chapter 02 Question 45
45) Which one of the following statements is not true?
a. If an entity can avoid transferring cash or other economic resources then there is no obligation and no liability exists.
Heading reference: Liabilities
b. Total assets = equity – total liabilities.
Heading reference: The accounting equation
c. Borrowings can appear as both a current and a non-current liability in an entity’s statement of financial position.
Heading reference: Liabilities in the statement of financial position
d. The International Accounting Standards Board Conceptual Framework for Financial Reporting defines equity as “the residual interest in the assets of the entity after deducting all its liabilities”.
Heading reference: Equity
Type: multiple choice question
Title: Chapter 02 Question 46
46) Which one of the following statements is not true?
a. The statement of financial position shows the financial situation of an entity on the last day of its accounting year.
Heading reference: What does the statement of financial position show?
b. Current liabilities + non-current liabilities = total liabilities.
Heading reference: Liabilities in the statement of financial position
c. The statement of financial position does not show all the assets of the organization.
Heading reference: What the statement of financial position does not show
d. The International Accounting Standards Board defines equity as “the residual interest in the assets of the entity after adding all its liabilities.”
Heading reference: Equity
Type: multiple choice question
Title: Chapter 02 Question 47
47) Which one of the following statements is true?
a. A resource is controlled by an entity when anyone can use that resource.
Heading reference: Assets
b. Valuing assets and liabilities in the statement of financial position at their original cost is referred to as the historic cost convention.
Heading reference: How are assets and liabilities valued?, Historic cost v. fair value
c. The event giving rise to an obligation does not need to have taken place by the statement of financial position date for an entity to recognize a liability.
Heading reference: Liabilities
d. The statement of financial position shows the market value of an entity.
Heading reference: What the statement of financial position does not show
Type: multiple response question
Title: Chapter 02 Question 48
48) Which of the following statements are true? Please select all that apply.
Heading reference:
What does the statement of financial position show?
The components of equity
Liabilities
The distinction between non-current and current assets
a. The statement of financial position shows the financially measurable resources (assets) and financially measurable obligations (liabilities) of a business in money terms.
b. Called up share capital is the number of shares issued multiplied by the par value of each share.
c. The IASB defines a liability as “a present obligation of the entity to receive an economic resource as a result of past events.”
d. The distinction between non-current and current assets comes down to one of time.
Type: multiple choice question
Title: Chapter 02 Question 49
49) Which one of the following statements about assets is not true?
a. Non-current assets are those assets that are purchased for resale in the normal course of business and are acquired with the intention of reselling them immediately or in the near future.
Heading reference: Non-current assets
b. Non-current assets are made up of intangible assets, property, plant and equipment and investments.
Heading reference: Non-current assets
c. Entities are now allowed to value different classes of assets either at cost or at fair value.
Heading reference: What does the statement of financial position show?, What the statement of financial position does not show
d. The IASB has laid down the rule that an asset can only be recognized in the statement of financial position when the monetary value of that asset can be measured in such a way that a faithful representation is achieved..
Heading reference: Assets
Type: multiple response question
Title: Chapter 02 Question 50
50) Which of the following statements are true? Please select all that apply.
Heading reference:
Assets
Assets in the statement of financial position
The accounting equation
a. An asset represents a store of future economic benefits, the ability to use the asset to generate cash and profit for a business.
b. Non-current assets are held for short-term use within a business to produce goods or services.
c. The IASB defines an asset as “a present economic resource controlled by the entity as a result of past events”
d. Total assets = total liabilities + equity.