Liabilities - TOA

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

. 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 mar!et participants c. The amount that would be paid when transferring a liability in an orderly transaction between mar!et participants d. The carrying amount of the liability on the date of transaction

". After initial recognition, an entity shall measure a financial liability at #. Amorti$ed cost using the effective interest method. ##. Fair value through profit or loss a. # only b. ## only c. %ither # or ## d. &either # or ##

'. (hich of the following statements is true in relation to the fair value option of measuring a financial liability) #. At initial recognition, an entity may irrevocably designate a financial liability at fair value through profit or loss. ##. The financial liability is measured at every year*end and any changes in fair value are recogni$ed in profit or loss. ###.The interest expense on the financial liability is recogni$ed using nominal interest rate. a. # and ## only b. # and ### only c. ## and ### only d. #, ## and ###

Problem 1-2 Multiple Choice (PAS 1)

1. +ome 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. ow will an entity classify these items in the statements of financial positions) a. -urrent b. &oncurrent 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. #t will depend on the entitys policy

2. (hich 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. /an! overdrafts c. -urrent portion of noncurrent financial liabilities d. Financial liabilities that provide financing but are not due for settlement within twelve months after the reporting period

. (ith 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 authori$ed for issue are disclosed as nonad0usting events, except a. efinancing on a long term basis b. The entity has the discretion to refinance an obligation for a shorter period c. ectification 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.

". (hich 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 authori$ation of the financial statements for issue, the lender has agreed not to demand payment. b. /ond payable issued with the intention to repurchase in the near term c. ividend payable due in two years after the reporting period d. Trade note payable

'. (hich of the following should be classified as noncurrent liability) a. Trade and other payable b. 3rovision c. Financial liability held for trading d. eferred tax liability

Problem 1-3 Multiple choice (PAS 1)

1. The principal classifications of liabilities are a. -urrent liabilities and noncurrent liabilities b. -urrent liabilities, noncurrent liabilities and deferred revenue c. -urrent liabilities and deferred revenue d. &oncurrent liabilities and deferred revenue

2. All of the following condition would re4uire the classification of a liability as current, except a. The entity expects to settle the liability within the entitys 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.

. A long*term debt which is due to be settled within twelve months after the reporting period is classified as noncurrent when #. 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 authori$ed for issue

##. 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. # only b. ## only c. /oth # and ## d. &either # nor ##

". (hich 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. /an! overdrafts c. ividends payable d. #ncome taxes payable

'. +ome borrowing agreements incorporate covenants which have the effect that the liability becomes payable on demand if certain conditions related to the covenants are breached. #n such a case, the liability is classified as #. Current even if the lender has agreed, after the reporting period and before the statements are authori$ed for issue, not to demand payment as a conse4uence of the breach. ##. 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. # only b. ## only c. %ither # or ## d. &either # nor ##

Problem 1-4 Multiple choice (AA)

1. For a liability to exist a. A past transaction or event must have occurred b. The exact amount must be !nown c. The identity of the party owed must be !nown d. An obligation to pay cash in the future must exists

2. The conceptually appropriate method of measuring a liability is a. iscount the amount of expected cash outflows that are necessary to li4uidate the liability using the mar!et rate of interest at the date the liability was initially incurred. b. iscount the amount of expected cash outflows that are necessary to li4uidate the liability using the mar!et rate of interest at the date financial statements are prepared. c. ecord as a liability the amount of cash that the entity would be re4uired to pay to eliminate the liability in the ordinary course of business on the date of the financial statements. d. ecord as a liability the amount of cash actually received when a liability was incurred.

. (hich 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 entity5s own shares next year as a result of a stoc! dividend declared near the end of the current year.

". (hich 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.

'. &ote disclosure for long*term debt generally include all of the following, except a. Asset pledged as security b. -all provision c. estriction imposed by creditor d. &ame of -reditor

Problem 1-! Multiple choice (AA)

1. Among the short*term obligations as of the year*end are notes payable with a certain ban!. These are 67*day notes, renewable for another 67*day period. These notes should be classified a. -urrent liabilities b. eferred credits c. &oncurrent liabilities d. #ntermediate debt

2. At year*end, an entity has 127*day note payable outstanding. The entity has followed the policy of replacing the note rather than repaying it over the last three years. The entity5s treasurer says that this policy is expected to continue indefinitely, and the arrangement is acceptable to the ban! to which the note was issued. (hat is the proper classification of the note in the year*end statement of financial position) a. ependent on the intention of management b. ependent on the actual ability to refinance c. -urrent liability, unless specific refinancing criteria are met d. &oncurrent liability

. 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. 3roceeds from the bonds were used to repay the note when due. ow should the entity classify the note payable at current year*end)

a. -urrent liability with separate disclosure at the note refinancing. b. -urrent liability with no disclosure re4uired. c. &oncurrent liability with separate disclosure of the note refinancing d. &oncurrent liability with no separate disclosure re4uired

". An entity has a loan due for repayment in six months5 time, but the entity has the option to refinance for repayment two years later. The entity plans to refinance this loan. #n which section of the statement of financial position should this loan be presented) a. -urrent liabilities b. -urrent assets c. &oncurrent liabilities d. &oncurrent assets

'. (hich of the following circumstances may result in the classification of a liability as current) a. +hort*term obligations refinanced with long*term debt at the end of reporting period b. ebts to be li4uidated from funds that have been accumulated and are reported as noncurrent assets c. 8iolation of provisions of a debt agreement d. 9bligations for advance collections that involve long term deferment of the delivery of goods or services

Problem 1-" Multiple choice (AA)

1. (hich of the following is a characteristics of a current liability but not a current liability ) a. :navoidable obligation b. 3resent obligation re4uires settlement by probable future transfer or use of cash, goods or services. c. +ettlement is expected wothin the normal operating cycle or within 12 months, whichever is longer. d. The obligating event creating the liability has already occurred.

2. (hich of the following is not considered a characteristics of liability ) a. 3resent obligation b. Arises from past event c. esults in an outflow of resources d. Li4uidation is reasonably expected to re4uire use of current assets

. (hat is the relationship between the current liabilities and an operating cycle) a. Li4uidation of current liabilities is reasonably expected within the operating cycle or one year, whichever is higher. b. -urrent liabilities aren the result of operating transactions. c. -urrent liabilities cannot exceed the amount incurred in one operating cycle. d. There is no relationship between the two.

". (hat is the relationship between present value and the concept of liability) a. 3resent value is used to measure certain liabilities. b. 3resent value is not used to measure liabilities. c. 3resent value is used to measure all liabilities. d. 3resent value is only used to measure noncurrent liabilities.

'. (hich of the following is &9T an acceptable presentation of current liabilities) a. Listing current liabilities in the order of maturity. b. Listing current liabilities according to amount. c. 9ffsetting current liabilities against assets that are to be applied to their li4uidation. d. +howing current liabilities in the order of li4uidation preference.

Problem 1-# Multiple choice (FRS)

1. (hich of the following statements best describes the term ;liability; ) a. An excess of e4uity over current assets b. esources to meet financial commitments as they fall due c. The residual interest in the assets of the entity after deducting all of the liabilities d. A present obligation of the entity arising from past events

2. -onceptually, a short*term note payable with no stated rate of interest should be

a. ecorded at maturity value. b. ecorded at the face amount. c. iscounted to its present value. d. eported separately from other short*term notes payable.

. #n which section of the statement of financial position should employment taxes that are due for settlement in 1' months5 ime be presented) a. -urrent liabilities b. -urrent assets c. &oncurrent liabilities d. &oncurrent assets

". (hich of the following should be classified as noncurrent liability) a. :nearned revenue b.