Question 1

Which of the following items is classified as a financial asset?

Accepted Answer

A)  promissory notes 
B)  accounts receivable 
C)  inventory 
D)  forward exchange contracts 
A)  promissory notes 
B)  accounts receivable 
C)  inventory 
D)  forward exchange contracts

Question 2

Examples of financial liabilities include:

Accepted Answer

A)  bank overdraft 
B)  unsecured convertible notes 
C)  debentures issued 
D)  all of these are examples of financial liabilities. 
A)  bank overdraft 
B)  unsecured convertible notes 
C)  debentures issued 
D)  all of these are examples of financial liabilities.

Question 3

Derecognition of a financial liability occurs when:

Accepted Answer

A)  the contractual obligation has been settled due to the transfer of a cash consideration. 
B)  there is an extension to the terms of the contractual obligation. 
C)  the contractual rights to cash flows has expired. 
D)  the entity obtains control of the financial instrument. 
A)  the contractual obligation has been settled due to the transfer of a cash consideration. 
B)  there is an extension to the terms of the contractual obligation. 
C)  the contractual rights to cash flows has expired. 
D)  the entity obtains control of the financial instrument.

Question 4

When an entity has a legally enforceable right to set off the recognised amounts of a financial asset and financial liability and it intends to settle on a net basis, it:

Accepted Answer

A)  can write off both the asset and the liability. 
B)  is not entitled to offset the asset and liability. 
C)  may offset the financial asset and liability. 
D)  need not present the asset, the liability or the net amount in its financial statements. 
A)  can write off both the asset and the liability. 
B)  is not entitled to offset the asset and liability. 
C)  may offset the financial asset and liability. 
D)  need not present the asset, the liability or the net amount in its financial statements.

Question 5

Which of the following are regarded as financial instruments?
I. Deposits held by a financial institution.
II. Ordinary shares.
III. Raw materials inventories.
IV. Property, plant and equipment.
V. Accounts receivable and accounts payable.

Accepted Answer

A)  I, II, IV and V only. 
B)  II, III and IV only. 
C)  I, II and V only. 
D)  I, IV and V only. 
A)  I, II, IV and V only. 
B)  II, III and IV only. 
C)  I, II and V only. 
D)  I, IV and V only.

Question 6

Company A has convertible notes on issue. These notes are convertible to ordinary shares of the Company after 3 years. The distributions made to the note holders by Company A are classified by Company A as follows:

Accepted Answer

A)  interest expense. 
B)  dividends distributed. 
C)  indeterminable based on the information provided. 
D)  a portion representing interest expense and a portion representing dividends distributed. 
A)  interest expense. 
B)  dividends distributed. 
C)  indeterminable based on the information provided. 
D)  a portion representing interest expense and a portion representing dividends distributed.

Question 7

The disclosure requirements for financial assets that have been reclassified at amortised cost include: $$\begin{array} { | l | c | c | c | c | } 
\hline & \mathrm { I } & \mathrm { II } & \mathrm { III } & \mathrm { IV } \
\hline \text { The interest incorne or experise recopraised } & \text { No } & \text { No } & \text { Yes } & \text { Yes } \
\hline \begin{array} { l } 
\text { The effective interest rate or the reclassification } \
\text { date }
\end{array} & \text { No } & \text { Yes } & \text { Yes } & \text { No } \
\hline \begin{array} { l } 
\text { The fair value of the firarncial assets at the end of } \
\text { the reportirip period after reclassification }
\end{array} & \text { No } & \text { Yes } & \text { Yes } & \text { Yes } \
\hline \begin{array} { l } 
\text { The fair value gair or loss that would have beent } \
\text { recogrised in the firmaricial year if ro } \
\text { reclassification had occured. }
\end{array} & \text { Yes } & \text { No } & \text { Yes } & \text { No } \
\hline
\end{array}$$

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
A)  I. 
B)  II. 
C)  III. 
D)  IV.

Question 8

Dickson Corporation Limited buys an option that entitles it to purchase 4000 shares in Moody Limited at $8 per share at any time in the next 6 months. The derivative financial instrument in this transaction is the:

Accepted Answer

A)  option priced at $8. 
B)  shares in Moody Limited. 
C)  shares in Dickson Corporation Limited. 
D)  price of the shares in Moody Limited after 6 months have elapsed. 
A)  option priced at $8. 
B)  shares in Moody Limited. 
C)  shares in Dickson Corporation Limited. 
D)  price of the shares in Moody Limited after 6 months have elapsed.

Question 9

An example of the derecognition of a financial asset is:

Accepted Answer

A)  the entity no longer has control of the asset. 
B)  the expiration of the contractual rights to cash flows. 
C)  the asset no longer qualifies for recognition in the statement of financial position. 
D)  All of the above. 
A)  the entity no longer has control of the asset. 
B)  the expiration of the contractual rights to cash flows. 
C)  the asset no longer qualifies for recognition in the statement of financial position. 
D)  All of the above.

Question 10

A contract with a residual interest in the assets of an entity after deducting all of its liabilities is referred to as a (an):

Accepted Answer

A)  equity instrument. 
B)  derivative instrument. 
C)  primary instrument. 
D)  secondary instrument. 
A)  equity instrument. 
B)  derivative instrument. 
C)  primary instrument. 
D)  secondary instrument.

Question 11

Which of the following statements relating to financial instruments is not correct?

Accepted Answer

A)  They may relate to singular instruments or a combination of instruments. 
B)  A convertible note with the conversion option to issue shares is a financial liability. 
C)  Primary instruments include receivables and payables. 
D)  Derivative instruments include forward exchange contracts. 
A)  They may relate to singular instruments or a combination of instruments. 
B)  A convertible note with the conversion option to issue shares is a financial liability. 
C)  Primary instruments include receivables and payables. 
D)  Derivative instruments include forward exchange contracts.

Question 12

Company A and Company B regularly trade between each other. They have agreed to offset their accounts receivable and accounts payable and settle them on a net basis. At 30 June Company A has accounts receivable of $40 000 owing from Company B but also has accounts payable of $10 000 owing to Company B. Which of the following statements is correct?

Accepted Answer

A)  The net payable from Company A is $30 000. 
B)  The net receivable from Company B is $40 000. 
C)  Company A offsets the account payable of $10 000 against the account receivable and presents the net amount of $30 000 in their financial statements as accounts receivable. 
D)  Company B offsets the account payable of $10 000 against the account receivable and presents the net amount of $30 000 in their financial statements as accounts receivable. 
A)  The net payable from Company A is $30 000. 
B)  The net receivable from Company B is $40 000. 
C)  Company A offsets the account payable of $10 000 against the account receivable and presents the net amount of $30 000 in their financial statements as accounts receivable. 
D)  Company B offsets the account payable of $10 000 against the account receivable and presents the net amount of $30 000 in their financial statements as accounts receivable.

Exam 11: Financial Instruments

Which of the following items is classified as a financial asset?

Examples of financial liabilities include:

Derecognition of a financial liability occurs when:

When an entity has a legally enforceable right to set off the recognised amounts of a financial asset and financial liability and it intends to settle on a net basis, it:

Which of the following are regarded as financial instruments? I. Deposits held by a financial institution. II. Ordinary shares. III. Raw materials inventories. IV. Property, plant and equipment. V. Accounts receivable and accounts payable.

Company A has convertible notes on issue. These notes are convertible to ordinary shares of the Company after 3 years. The distributions made to the note holders by Company A are classified by Company A as follows:

Dickson Corporation Limited buys an option that entitles it to purchase 4000 shares in Moody Limited at $8 per share at any time in the next 6 months. The derivative financial instrument in this transaction is the:

An example of the derecognition of a financial asset is:

A contract with a residual interest in the assets of an entity after deducting all of its liabilities is referred to as a (an):

Which of the following statements relating to financial instruments is not correct?

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Inventories

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Income Taxes

Share Capital and Reserves

Share Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Recording

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

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