Question

1. Under IFRS, a discontinued operation must be a: Select one: a. Product line. b. Cash Generating Unit (CGU) c. Product line or Geographic segment. d. Geographic segment.

2.

A company is preparing its bank reconciliation for December 31, 2004 (end of the reporting period). The following verified data are available:

Based on the above data only, the amount for the December 2004 bank reconciliation Deposits in Transit is:

Select one:

a. Insufficient Information Provided

b. 17810

c. 3070

d. 1560

e. 3770

3.

Ambo Inc. earned $200,000 for the current year. This means:

Select one:

a. Ambo's retained earnings must be $200,000 more at December 31 than it was at January 1

b. Ambo's cash increased $200,000 during the year.

c. Ambo's earnings increased Ambo's net assets $200,000 during the year.

d. Ambo's total assets increased $200,000 during the year.

Answer 1

1) Option C

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As per IFRS

Discontinued operations are separate product line of business or geographical area of operations that are components of the entity which are classified or held for sale.

Incorrect

Cash generating units are the group of assets that re capable of producing cash flows that are independent of any other group of assets

2) For the given information,the question can't be answered.

If this is all the available information the answer is option a) Insufficient information provided.

3)

Option C is correct to the extent

Earnings may result in increase of assets or decrease of liabilities.

This effect is calculated in Net assets i.e assets-liabilities.

Earnings may result in increase of net assets if all the other sources which affect the net assets like contribution from owners are not changed during the year.

Option a) is incorrect because retained earnings increase only when no dividend is declared .

Retained earnings

Opening balance. Xxxxxx

(+) Earnings for the year. xxxx

(-) Dividend for the year xxxxxx

(-) if any bonus issue from retained earnings xxxxx

Closing balance. = xxxxxx

From this we can see retained earnings are increased by earnings if no dividends are declared.

Option b) is incorrect because not all the earnings are represented by increase of cash because these may be represented by increase of accounts receivable or decrease of liabilities or increase of stock etc..

Option D) is incorrect because as explained above all earnings may not result in increase of assets. They may be represented by decrease of liabilities.