UP Cfas Reviewer (Theories)

Which one of the following represents a close family relationship that may qualify
as a related party relationship?

A husband and wife both work for the same manufacturer in non-management or
directorship positions.
A founder of an entity, who is on the board of directors, is also the father to the
president of the same company.
A husband and wife, employed by two different subsidiaries, work for the same parent
company in non-management roles.
A company executive hires his financially independent niece as a temporary employee
for the summer to work in a non-management role.
Which of the following statements (see image below) about PAS 20 Accounting
for Government Grants and Disclosure of Government Assistance are true?
I&
I & II
II & III
II & IV
III & IV
Which of the following is not specifically excluded from the purview of PAS 20?
Government participation in ownership of the entity.
Government grant covered by PAS 41.
Government assistance provided in the form of tax benefits.
Forgivable loan from the government.
Statement 1: The cost of property less expected residual value, if any, is called
the depreciable amount.; Statement 2: The salvage value of an asset is defined as
the estimated amount that can be realized upon retirement of the asset.
Only statement 1 is correct.
Only statement 2 is correct
Both statements are correct
Neither of the statement is correct.
PAS 20 permits the reporting of government grant either on the deferral method
or on the offset method. As accountant of a limited company which of the
following reasons (see image below) will prompt you to opt for the deferral
method rather than the offset method?
I & III
III & IV
II, III & IV
I, II, III & IV
Statement 1: Land held for future use or speculation should be reported in the
property, plant and equipment.; Statement 2: When property is acquired by
issuing securities, the transaction is always recorded at fair value of the
securities issued.

Which of the following is not a major characteristic of a plant asset?
Possesses a physical substance
acquired for resale
acquired for use
yields services over a number of years
Which of the following does not constitute a related party to an entity under PAS
24?
A party who has, through intermediaries, joint control of the entity
A party that’s a post-employment benefit plan for the benefit of employees of an entity
that is a related party of the entity
A party who is a member of the key management personnel of a subsidiary of the entity
A party that has an interest in the entity that gives it significant influence over the entity
The cost of option on properties not acquired is

expensed immediately
capitalized
amortized
ignored
The acquisition cost of items of property, plant and equipment purchased on a

lump-sum price is allocated to the individual assets based on their
relative fair values
relative book values
need not to be allocated
relative useful lives
According to PAS 16, subsequent to initial recognition, an entity shall measure an
item of property, plant and equipment using
Cost Model
Revaluation Model
Fair Value Model
Either Cost Model or Revaluation Model
Statement 1: An item of property, plant and equipment that qualifies for

recognition as an economic resource of the entity shall be measured at cost.;
Statement 2: Cost of an item of property, plant and equipment excludes import
duties and nonrefundable purchase taxes.
Which one of the following characteristics is not required for an asset to be

properly described as property, plant and equipment?
Held for use and not for investment
Newly purchased
Expected life of more than 1 year
Tangible
Which one of the following situations represents a related party relationship

requiring disclosure in the financial statements?
A parts supplier and trucking company are joint venturers of a distribution company.
An investor maintains a four percent ownership interest in a guided tour company and
has no decision-making capabilities.
A manufacturer frequently uses the same supplier because of the quality and
uniqueness of its products.
A parent entity owns 100 percent of one subsidiary and 65 percent of another
subsidiary.
Government assistance includes

Imposing import tariffs
Direct action to provide economic benefits to qualifying firms
Indirect help, such as improving local infrastructure
All of other options
Which one of the following statements represents a situation where disclosure of

the controlling party’s name under PAS 24 is necessary?
A manufacturer owns five percent of a parts supplier that issues its own public financial
statements.
A parent entity is the controlling shareholder of a hat distributor which issues
consolidated financial statements to the public.
An investor owns ten percent of a guided tour company but has no ability to influence
financial decisions.
An international entity invests in a toy testing company, which is individually owned and
operated, obtaining a one percent interest, and no majority ownership.
Which of the following terms are defined by this statement: “Action by

government designed to provide an economic benefit specific to an entity or
range of entities qualifying under certain criteria”?
Government grant
Grants related to assets
Government assistance
Forgivable loans
Which one of the following represents a main component in identifying a related
party relationship?
An entity’s management must have significant experience in the parent’s or subsidiary’s
industry.
A parent entity must have a minimum of 20 percent ownership interest in the equity of
the entity.
An entity maintains control, joint control, or significant influence over the other entity
either directly or indirectly.
A major customer of the entity.
Under this model, an item of property, plant and equipment is measured at fair
value at the date of the revaluation less any subsequent accumulated
depreciation and subsequent accumulated impairment losses.
Cost Model
Revaluation Model
Fair Value Model
Which of the following is not an appropriate basis for measuring the cost of
property, plant and equipment?
The purchase price, freight cost and installation costs of a productive asset should be
included in asset's cost.
Proceeds obtained in the process of readying land for its intended purpose, such as
from the sale of cleared timber, should be recognized immediately as income.
The costs of improvements to equipment incurred after its acquisition should be added
to the asset's cost if they increase future service potential.
All costs incurred in the construction of a plant building, from excavation to completion,
should be considered as part of the asset's cost.
Statement 1: The acquisition cost of property includes only the original purchase
price or equivalent value.; Statement 2: Trade-ins are accounted for similarly to
exchanges with commercial substance.
Under this model, an item of property, plant and equipment is measured at its
cost less any accumulated depreciation and any accumulated impairment losses.
Cost Model
Revaluation Model
Fair Value Model
Which of the following statements is the assumption on which straight-line

depreciation is based?
The operating efficiency of the asset decreases in later years.
Service value declines as a function of time rather than use.
Service value declines as a function of obsolescence rather than time
Physical wear and tear are more important than economics obsolescence
The sale of a depreciable asset resulting in a loss indicates that the proceeds
from the sale were
less than current market value
greater than cost
greater than carrying amount
less than carrying amount
Which one of the following is a situation where a related party relationship may
exist due to control, joint control, or significant influence?
An investor maintains a one percent ownership interest in an international furniture
manufacturer; the remaining 99 percent is held by several other investors.
A parts subsidiary sells its product to a local assembly manufacturer; both parties report
to a common parent.
A manufacturer of roofing tiles purchases a significant amount of materials from a
specific independent vendor.
A parent entity decides to purchase impaired equipment, at a deep discount, from a joint
venture partner.
On notification that a firm will receive a grant:
An account receivable will be set up, but the grant will be recorded on an accrual basis
An account receivable will be set up, but the grant will be recorded on a cash basis
Do nothing until the cash arrives
Any of the accounting treatment in the other options is acceptable
Which of the following categories should not be disclosed separately under PAS
24?
The parent, subsidiaries and associates
Key management personnel of the entity or its parent
Entities with joint control of, or significant influence over, the entity
Joint ventures in which the entity is a joint venturer
The other joint venturer of the entity's joint venture
GG Co. has successfully applied for and received a grant from the government
but is unsure how to account for the grant. Which of the following options would
be acceptable?
debit the amount of the grant to the statement of profit or loss and credit the wages
account
credit the amount of the grant to the wages expense account to which it relates
debit the amount of the grant to the related tangible non-current asset
capitalize the amount of the grant to the Development Expenditure account and
amortize it over period that the employees are expected to remain in GG Co.’s employ
Statement 1: The property, plant and equipment are tangible assets which means
it has always a commercial substance.; Statement 2: The property, plant and
equipment are expected to be used for not less than a year.
Which one or more of the following would be the justification for accounting for
government grants on “income approach” rather than “capital approach”?
I,
II & IV
I, III & IV
II, III & IV
I, II, III & IV

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Which one of the following represents a close family relationship that may qualify

as a related party relationship?

Only statement 1 is correct.

The cost of option on properties not acquired is

The acquisition cost of items of property, plant and equipment purchased on a

Statement 1: An item of property, plant and equipment that qualifies for

Which one of the following characteristics is not required for an asset to be

Which one of the following situations represents a related party relationship

Government assistance includes

Which one of the following statements represents a situation where disclosure of

Which of the following terms are defined by this statement: “Action by

Which of the following statements is the assumption on which straight-line

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