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Financial Reporting Questions and Answers

Question 1

Measurement of the elements of financial position is the process of determining the monetary amounts at which the elements of the financial statements are to berecognizedand carried in the statement of financial position and statement of comprehensive income. There are number of basis of measurement that companies use in preparing financial statements.

Which of the following best explains the ‘current cost accounting’?

Options:

A.

Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition.

B.

The amount of cash or cash equivalents that would have to be paid if an equivalent asset was acquired currently.

C.

The amount of cash or cash equivalents that was paid if an equivalent asset was acquired currently.

D.

The amount of cash or cash equivalents that could currently be obtained by selling an asset in an orderly disposal.

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Question 2

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?

Options:

A.

Nil

B.

$500,000

C.

$600,000

D.

$2 million

Question 3

Debra Ltd. has the following loan finance in place during the year ended 31 December 2012:

$2 million of 6% loan finance

$4 million of 8% loan finance

It constructed a new factory which cost $900,000 and this was funded out of the existing loan finance.

The factory took eight months to complete.

What borrowing costs should be capitalised in the year ended 31 December 2012?

Options:

A.

$65,970

B.

$43,980

C.

$36,000

D.

$30,000