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MCQ QUESTIONS 1. IAS 21 also includes some other terms and definitions: The term foreign operation...

MCQ QUESTIONS

1. IAS 21 also includes some other terms and definitions:

The term foreign operation definition is:

  1. This is subsidiary, associate, joint venture or branch whose activities are conducted in a country or currency different from the functional currency of the reporting entity
  2. This is subsidiary, associate and or branch whose activities are conducted in a country or currency different from the functional currency of the reporting entity
  3. This is a associate, joint venture or branch whose activities are conducted in a country or currency different from the functional currency of the reporting entity

  1. The Net investment in a foreign operation definition is:
  1. The amount of the reporting entity’s interest in the net assets of a foreign operation
  2. The amount of the reporting entity’s interest in the net liabilities of a foreign operation
  3. The amount of the non-reporting entity’s interest in the net assets of a foreign operation

  1. Exchange difference definition is:
  1. A difference resulting from translating the same assets, liabilities, income or expenses from one currency into another currency at different exchange rates.
  2. A difference resulting from translating the same liabilities, income or expenses from one currency into another currency at different exchange rates.
  3. A difference resulting from translating the group’s assets, liabilities, income or expenses from one currency into another currency at different exchange rates.

  1. Monetary item definition is:
  1. Units of currency held, or assets and liabilities to be received or paid (in cash), in a fixed number of currency units
  2. Units of inventory held, or assets and liabilities to be received or paid (in cash), in a fixed number of currency units
  3. Units of payable held, or assets and liabilities to be received or paid (in cash), in a fixed number of currency units
  1. A UK company (with sterling as its functional currency) has a financial year ending on 31 December.

It buys goods from a supplier in France (with euros as its functional currency) on 17 November 20X6 invoiced in euros $140,000. The French supplier is eventually paid in March 20X7. Exchange rates over the period were as follows:

17 November 20X6 $1=$0.70
31 December 20X6 $1=$0.75
Average for November $1=$0.72

A) The purchase/inventory and the trade payable should be recorded initially by translating the transaction at the spot rate of $1=$0.70. This gives a translated value of $98,000 for recording in the ledger accounts ($140,000 X0.70)

B) The purchase/inventory and the trade payable should be recorded initially by translating the transaction at the spot rate of $1=$0.75. This gives a translated value of $105,000 for recording in the ledger accounts ($140,000 X0.75)

C) The purchase/inventory and the trade payable should be recorded initially by translating the transaction at the spot rate of $1=$0.72. This gives a translated value of $100,000 for recording in the ledger accounts ($140,000 X0.72)

  1. This rules in IAS21 for reporting assets and liabilities at the end of a subsequent reporting period make a distinction between:

A) Monetary items, such as trade payables and trade receivables, and non-monetary items, such as non current assets and inventory

B) Tangible items, such as trade payables and trade receivables, and non-monetary items, such as non current assets and inventory

C) Intangible items, such as trade payables and trade receivables, and non-monetary items, such as non current assets and inventory

  1. Accounting treatment for the statement of financial position:
  1. Monetary items Re-translate at the closing rate
  2. Monetary items Re-translate at the opening rate
  3. Monetary items Re-translate at the spot rate
  1. Accounting treatment for the statement of financial position:
  1. Non monetary items carried at cost- No re-translation. The transaction is left at original spot rate
  2. Non monetary items carried at cost- Yes re-translation. The transaction is left at original spot rate
  3. None of the above two
  1. A gain or loss arising on the re-translating of a monetary item should be:
  1. Recognised in profit or loss in the period that it arises
  2. Not necessary to recognized
  3. Recognised in profit and loss in the next year
  1. In addition to the financial statements, the annual report and accounts published by companies include other information that may be of relevance to users. This information may include:
    A. an operating and financial review, or a business review

B. a chairman’s statement a directors’ report

C. a corporate social responsibility report

A) All of the above
B) None of the above
C) Only A and B

11. It is difficult to assess a company’s financial performance by analyzing the financial results for one year?
A) Better information is obtained by making comparisons with financial performance in the previous year, or perhaps over several periods (trend analysis)

B) Better information is obtained by making comparisons with financial performance in the previous year, or perhaps over several periods (regression analysis)

C) Better information is obtained by making comparisons with financial performance in the previous year, or perhaps over several periods (cost analysis)

12. For an entity that has a seasonal business, with some months of high purchases and some months of low purchases:

  1. It may be appropriate to calculate the average payable payment ratios at different times of the year (for each season)
  2. It may be appropriate to calculate the average receivables ratios at different times of the year (for each season)
  3. It may be appropriate to calculate the average payable payment ratios at different times of month (for each season)

13. A highly geared company may find it more difficult to raise additional debt capital:

A) Because lenders will demand either security for their loans/bonds or will demand a much higher yield/ interest rate

B) Because lenders will demand neither security for their loans/bonds or will demand a much higher yield/ interest rate

C) None of the above

14. This ratio measure the share price as a multiple of EPS. Investors use the P/E ratio to make comparisons of share prices between companies and to assess whether a company’s shares seems under-priced or over-priced relatives to share prices of other companies

A) Price earnings ratio (P/E)

B) Earnings per share (EPS)

C) None of the above

15. In most countries, companies are allowed to decide for themselves what their financial year-end date should be

A) The choice of dates can affect the financial ratios

B) The choice of dates can affect the solvency ratios

C) The choices of dates can affect the insolvency ratios

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