7. When the residual value of plant and machinery has drastically changed, the entity should a. Change the annual depreciation for the current year and future years b. Retrospectively change the depreciation charge based on the revised residual value c. Ignore the effect of the change on annual depreciation d. Change the depreciation charge and treat it as a correction of error 8. Which of the following is among those listed under PAS 29 as indicators of hyper-inflation? a. People prefer to keep their wealth in monetary assets b. The cumulative inflation rate over five years exceeds or is100% c. The people prefer to keep their wealth in relatively stable foreign currency d. All of the statements are indicators of hyperinflation 9. An entity uses periodic inventory system and neglected to record a purchase of merchandise on account at year end. This merchandise was omitted from the year end physical count. How would these errors affect the entity's Assets, Liabilities, Shareholders' Equity at year end and Net Income for the year? a. Asset - NO EFFECT, Liabilities - OVERSTATE, Shareholders' Equity - UNDERSTATE, Net Income - UNDERSTATE b. Asset - UNDERSTATE, Liabilities - NO EFFECT, Shareholders' Equity - UNDERSTATE, Net Income - UNDERSTATE c. Asset - UNDERSTATE, Liabilities - UNDERSTATE, Shareholders' Equity - NO EFFECT, Net Income - NO EFFECT d. Asset - NO EFFECT, Liabilities - UNDERSTATE, Shareholders' Equity - OVERSTATE, Net Income - OVERSTATE 10. For purposes of computing the weighted-average number of shares outstanding in BPS computation, a midyear event that must be treated as occurring at the beginning of the year is a. Issuance of shares out of share split b. Issuance of share rights c. Purchase and issuance of treasury shares d. Issuance of shares

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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7. When the residual value of plant and machinery has drastically changed, the entity should

a. Change the annual depreciation for the current year and future years

b. Retrospectively change the depreciation charge based on the revised residual value

c. Ignore the effect of the change on annual depreciation

d. Change the depreciation charge and treat it as a correction of error

8. Which of the following is among those listed under PAS 29 as indicators of hyper-inflation?

a. People prefer to keep their wealth in monetary assets

b. The cumulative inflation rate over five years exceeds or is100%

c. The people prefer to keep their wealth in relatively stable foreign currency

d. All of the statements are indicators of hyperinflation

9. An entity uses periodic inventory system and neglected to record a purchase of merchandise on account at year end. This merchandise was omitted from the year end physical count. How would these errors affect the entity's Assets, Liabilities, Shareholders' Equity at year end and Net Income for the year?

a. Asset - NO EFFECT, Liabilities - OVERSTATE, Shareholders' Equity - UNDERSTATE, Net Income - UNDERSTATE

b. Asset - UNDERSTATE, Liabilities - NO EFFECT, Shareholders' Equity - UNDERSTATE, Net Income - UNDERSTATE

c. Asset - UNDERSTATE, Liabilities - UNDERSTATE, Shareholders' Equity - NO EFFECT, Net Income - NO EFFECT

d. Asset - NO EFFECT, Liabilities - UNDERSTATE, Shareholders' Equity - OVERSTATE, Net Income - OVERSTATE

10. For purposes of computing the weighted-average number of shares outstanding in BPS computation, a midyear event that must be treated as occurring at the beginning of the year is

a. Issuance of shares out of share split

b. Issuance of share rights

c. Purchase and issuance of treasury shares

d. Issuance of shares

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