TOA - Liabilities
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Problem 1-1 Multiple Choice (PFRS 9)
1. An entity shall measure initially a financial liability not designated at fair value through profit or loss at
a. Fair value b. Fair value plus direct attributable transaction costs c. Fair value minus direct attributable transaction costs d. Face amount
2. Transaction costs direct attributable to the issue of a financial liability include all of the following, except
a. Fees and commissions paid to agents b. Levies by regulatory agencies c.Transfer taxes and duties d. Financing costs
3. The fair value of a liability is defined as
a. The appraised value of the liability b. The price that would be received to assume the liability in an orderly transaction between market participants c.The amount that would be paid when transferring a liability in an orderly transaction between market participants d. The carrying amount of the liability on the date of transaction
4. After initial recognition, an entity shall measure a financial liability at
I. Amortized cost using the effective interest method. II. Fair value through profit or loss
a. I only b. II only c. Either I or II d. Neither I or II
5. Which of the following statements is true in relation to the fair value option of measuring a financial liability?
I. At initial recognition, an entity may irrevocably designate a financial liability at fair value through profit or loss.
II. The financial liability is measured at every year-end and any changes in fair value are recognized in profit or loss.
III.The interest expense on the financial liability is recognized using nominal interest rate.
a.I and II only b.I and III only c.II and III only d.I, II and III
Problem 1-2 Multiple Choice (PAS 1)
1. Some liabilities, such as trade payables, accruals for employee and other operating costs, are expected to be settled in more than twelve months after the reporting period. How will an entity classify these items in the statements of financial positions?
a. Current b. Noncurrent c. First classify as noncurrent since the term is more than twelve months, then classify to current if the term is less than twelve months. d. It will depend on the entitys policy
2. Which of the following liabilities that are not part of the normal operating cycle of an entity should be classified as noncurrent?
a. Financial liabilities classified as held for trading b. Bank overdrafts c. Current portion of noncurrent financial liabilities d. Financial liabilities that provide financing but are not due for settlement within twelve months after the reporting period
3. With respect to loans classified as current liabilities, all of the following events that occur between the end of the reporting period and the date the financial statements are authorized for issue are disclosed as nonadjusting events, except
a. Refinancing on a long term basis b. The entity has the discretion to refinance an obligation for a shorter period c. Rectification of a breach of a long-term loan arrangement d. The granting by the lender of a period to rectify breach of a long-term loan arrangement ending at least twelve months after the reporting period.
4. Which of the following should be classified as noncurrent liability?
a. Long-term loan arrangement wherein an entity breaches a provision such that the loan becomes payable on demand. After the reporting period and before authorization of the financial statements for issue, the lender has agreed not to demand payment. b. Bond payable issued with the intention to repurchase in the near term c. Dividend payable due in two years after the reporting period d. Trade note payable
5. Which of the following should be classified as noncurrent liability?
a. Trade and other payable b. Provision c. Financial liability held for trading d. Deferred tax liability
Problem 1-3 Multiple choice (PAS 1)
1. The principal classifications of liabilities are
a. Current liabilities and noncurrent liabilities b. Current liabilities, noncurrent liabilities and deferred revenue c. Current liabilities and deferred revenue d. Noncurrent liabilities and deferred revenue
2. All of the following condition would require the classification of a liability as current, except
a. The entity expects to settle the liability within the entitys operating cycle b. The entity holds the liability for the purpose of trading c. The liability is due to be settled within twelve months after the reporting period d. The entity has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
3. A long-term debt which is due to be settled within twelve months after the reporting period is classified as noncurrent when
I. An agreement to refinance or to reschedule payments on a long-term basis is completed on or before the end of the reporting period and before the financial statements are authorized for issue
II. The entity has the discretion to refinance or roll over the obligation for at least twelve months after the reporting period under an existing loan facility.
a. I only b. II only c. Both I and II d. Neither I nor II
4. Which obligations are classified as current even if they are expected to be settled after more than twelve months from the end of reporting period?
a. Trade payables and accruals for employee and other operating costs b. Bank overdrafts c. Dividends payable d. Income taxes payable
5. Some borrowing agreements incorporate covenants which have the effect that the liability becomes payable on demand if certain conditions related to the covenants are breached. In such a case, the liability is classified as
I. Current even if the lender has agreed, after the reporting period and before the statements are authorized for issue, not to demand payment as a consequence of the breach.
II. Noncurrent when the lender has agreed on or before the end of the reporting period to provide a period of grace ending at least twelve months after that date.
a. I only b. II only c. Either I or II d. Neither I nor II
Problem 1-4 Multiple choice (IAA)
1. For a liability to exist
a. A past transaction or event must have occurred b. The exact amount must be known c. The identity of the party owed must be known d. An obligation to pay cash in the future must exists
2. The conceptually appropriate method of measuring a liability is
a. Discount the amount of expected cash outflows that are necessary to liquidate the liability using the market rate of interest at the date the liability was initially incurred. b. Discount the amount of expected cash outflows that are necessary to liquidate the liability using the market rate of interest at the date financial statements are prepared. c. Record as a liability the amount of cash that the entity would be required to pay to eliminate the liability in the ordinary course of business on the date of the financial statements. d. Record as a liability the amount of cash actually received when a liability was incurred.
3. Which of the following represents a liability?
a. The obligation to pay for goods that an entity expects to order from suppliers next year. b. The obligation to provide goods that customers have ordered and paid for during the current year. c. The obligation to pay interest on a five-year note payable that was issued the last day of the current year. d. The obligation to distribute an entity's own shares next year as a result of a stock dividend declared near the end of the current year.
4. Which of the following does not meet the definition of a liability?
a. The signing of a three-year employment contract at a fixed annual salary. b. An obligation to provide goods or services in the future. c. A note payable with no specified maturity date. d. An obligation that is estimated in amount.
5. Note disclosure for long-term debt generally include all of the following, except
a. Asset pledged as security b. Call provision c. Restriction imposed by creditor d. Name of Creditor
Problem 1-5 Multiple choice (IAA)
1. Among the short-term obligations as of the year-end are notes payable with a certain bank. These are 90-day notes, renewable for another 90-day period. These notes should be classified
a. Current liabilities b. Deferred credits c. Noncurrent liabilities d. Intermediate debt
2. At year-end, an entity has 120-day note payable outstanding. The entity has followed the policy of replacing the note rather than repaying it over the last three years. The entity's treasurer says that this policy is expected to continue indefinitely, and the arrangement is acceptable to the bank to which the note was issued. What is the proper classification of the note in the year-end statement of financial position?
a. Dependent on the intention of management b. Dependent on the actual ability to refinance c. Current liability, unless specific refinancing criteria are met d. Noncurrent liability
3. An entity had a note payable due next year. After the end of reporting period and before the issuance of the current year financial statements, the entity issued long-term bonds payable. Proceeds from the bonds were used to repay the note when due. How should the entity classify the note payable at current year-end?
a. Current liability with separate discl