CPA Financial Reporting (FR) Free Practice Test
Question 1
Plateau Co has the following construction contract in progress: $m Total contract price750 Costs incurred to date225 Estimated costs to completion340 Progress payments invoiced and received290
Calculate the amounts to berecognizedfor the contract in the statement of profit or loss and statement of financial position using the proportion of costs incurred method.
Statement of profit or lossStatement of financial position
Calculate the amounts to berecognizedfor the contract in the statement of profit or loss and statement of financial position using the proportion of costs incurred method.
Statement of profit or lossStatement of financial position
Correct Answer: D
Question 2
Veronica plc prepares its financial statements to 31 December. During 2012 Veronica plc made sales of $850,000 and incurred costs of $610,500. At the beginning of 2012 customers owed
$125,500 and at the end of the year they owed $135,400. At the beginning of 2012 Veronica plc owed $45,500 to its suppliers and employees and at the end of the year it owed $35,700.
During 2012 Veronica plc received interest of $14,500 and paid interest of $500.
In accordance with IAS 7 Statement of Cash Flows, what was Veronica plc's net cash from operating activities under the direct method for the year ended 31 December 2012?
$125,500 and at the end of the year they owed $135,400. At the beginning of 2012 Veronica plc owed $45,500 to its suppliers and employees and at the end of the year it owed $35,700.
During 2012 Veronica plc received interest of $14,500 and paid interest of $500.
In accordance with IAS 7 Statement of Cash Flows, what was Veronica plc's net cash from operating activities under the direct method for the year ended 31 December 2012?
Correct Answer: A
Question 3
Kia Co produces cellular phone and first-in first-out (FIFO) method valuation is used for its inventories. At the start of January it had 500 units in inventory. These had cost $30 each. During January, the following transactions took place:
ReceiptsIssues
DateUnitsCost per unitDateUnits
5230$327640
15380$3417450
What is the value of Kia Co's inventory at the end of January?
ReceiptsIssues
DateUnitsCost per unitDateUnits
5230$327640
15380$3417450
What is the value of Kia Co's inventory at the end of January?
Correct Answer: C
Question 4
Rochester pIc has entered into a fixed price contract for the provision of services to Adele Ltd. The contract commenced in September 2012 and will be completed in 2013.
The contract price is $2 million and costs are recoverable as incurred. At 31 December 2012, Rochester plc's year ends, costs of $500,000 have been incurred.
The contract has been assessed as 30% complete; however, costs to complete cannot be estimated reliably.
In accordance with IAS 18 Revenue, how much revenue should be included in Rochester plc's statement of comprehensive income for the year ended 31 December 2012 in respect of this contract?
The contract price is $2 million and costs are recoverable as incurred. At 31 December 2012, Rochester plc's year ends, costs of $500,000 have been incurred.
The contract has been assessed as 30% complete; however, costs to complete cannot be estimated reliably.
In accordance with IAS 18 Revenue, how much revenue should be included in Rochester plc's statement of comprehensive income for the year ended 31 December 2012 in respect of this contract?
Correct Answer: A
Question 5
Sin plc is considering purchasing Lam Ltd, a subsidiary company of Jim Co. The result of such decision from the directors of Sin plc was because Lam Ltd produces a technically advanced computer microchip but unfortunately neither Lam Ltd nor Jim Co was successful. However, the director of marketing, Mr. Schulze Kidder, presented some factual areas in the board meeting and requested for further investigation before any final decisions are made. The areas are:
(i)The terms of trading between the entities to assess how much of the subsidiary's trade is recurring and whether it is on fair market terms.
(ii)The existence of debt between the parties.
(iii)The level of dividends payable as the subsidiary may have paid large dividends to the parent which may not be sustainable post sale.
Which of the above area(s) is / are not relevant when considering purchase of a subsidiary company like Lam Ltd?
(i)The terms of trading between the entities to assess how much of the subsidiary's trade is recurring and whether it is on fair market terms.
(ii)The existence of debt between the parties.
(iii)The level of dividends payable as the subsidiary may have paid large dividends to the parent which may not be sustainable post sale.
Which of the above area(s) is / are not relevant when considering purchase of a subsidiary company like Lam Ltd?
Correct Answer: B
Question 6
IAS 34 Interim Financial Report contains either a complete set of financial statements or a set of condensed financial statements for an interim period.
The treatment for non-mandatory intangible assets and depreciation during interim period should therefore be:
(i)Non-mandatory intangible assets: Costs of an intangible asset should be deferred and treated as an expense in the interim statement.
(ii)Depreciation: Depreciation should be charged on all non-current assets.
State whether the above treatments are either correct or incorrect.
The treatment for non-mandatory intangible assets and depreciation during interim period should therefore be:
(i)Non-mandatory intangible assets: Costs of an intangible asset should be deferred and treated as an expense in the interim statement.
(ii)Depreciation: Depreciation should be charged on all non-current assets.
State whether the above treatments are either correct or incorrect.
Correct Answer: D
Question 7
Julie plc has one associated company, Andrew Ltd, in which Julie plc holds 40% of the issued 100,000 $1 ordinary shares. The financial controller of Julie plc is unsure how the following transactions should be reflected in the consolidated statement of cash flows and has asked you to confirm the overall impact.
(1)
In the previous accounting period, Julie plc had made a cash advance of $100,000 to Andrew Ltd. During the current accounting period, Andrew Ltd repaid $30,000 of this cash advance.
(2)
During the current accounting period, Andrew Ltd sold an item of property, plant and machinery at its carrying amount for $20,000 cash.
(3)
During the current accounting period, Andrew Ltd paid a dividend of 20c per share.
In accordance with IAS 7 Statement of Cash Flows, what is the impact of the above cash transactions on Julie plc's consolidated statement of cash flows for the current accounting period?
(1)
In the previous accounting period, Julie plc had made a cash advance of $100,000 to Andrew Ltd. During the current accounting period, Andrew Ltd repaid $30,000 of this cash advance.
(2)
During the current accounting period, Andrew Ltd sold an item of property, plant and machinery at its carrying amount for $20,000 cash.
(3)
During the current accounting period, Andrew Ltd paid a dividend of 20c per share.
In accordance with IAS 7 Statement of Cash Flows, what is the impact of the above cash transactions on Julie plc's consolidated statement of cash flows for the current accounting period?
Correct Answer: B
Question 8
IAS 17 Leasesstandardizesthe accounting treatment and disclosure of assets held under lease. IAS 17 Leases requires a lessee tocapitalizea finance lease at the amount of the
Correct Answer: A