Review Question: IAS 1 and IAS 2

It is not enough to just read and gather information, you should also test yourself and measure how much you've learned. Anyways, here are some of the simple review questions based on IAS 1 Presentation of FS and IAS 2 Inventories. This are just a few questions based on those accounting standards.

1. Which of the following is NOT an attribute of relevance?

a. Predictive value
b. Feedback value
c. Timeliness
d. Neutrality

2. Whenever there is a conflict between the economic substance of a certain transaction and its legal form, what shall prevail is the economic substance. What concept is this?

a. Form over substance
b. Substance over form
c. Faithful presentation
d. Completeness

3. Inventories are accounted for by applying the lower of cost or net realizable value. This is in accordance of what concept?

a. Materiality
b. Conservatism
c. Consistency
d. Comparability

4. Objectivity is assumed to be achieved when an accounting transaction

a. Is recorded in a fixed amount of pesos
b. Involves the payment or receipt of cash
c. Involves an arm's length transaction between two independent parties
d. Allocates revenue or expenses in a rational and systematic manner

5.Which of the following is most likely to prepare the most accurate financial forecast for a corporate entity based on empirical evidence?

a. Investors using statistical models to generate forecasts
b. corporate management
c. Financial analysts
d. Independent certified public accountants

6. The cost of inventories includes purchase price and all other costs that are incurred in bringing the inventories to their present location and condition are capitalized as cost of inventories and these include

a. cost of designing products for specific customers
b. abnormal amount of wasted material, labor and production cost
c. selling cost
d. storage cost not necessary in the production process before a further production stage

7.What is Net realizable value?

a. Estimated selling price
b. current replacement cost
c. Estimated selling price less estimated cost to complete
d. Estimated selling price less estimated cost to complete and estimated cost to sell.

8.Inventories of a service provider may simply be described as

a. work in progress
b. unbilled services
c. billed services
d. services inventory

9. Which of the following would not be reported as inventory?

a. Land acquired for resale by a real estate firm
b. Shares and bonds held for resale by a brokerage firm
c. Partially completed goods held by a manufacturing company
d. Machinery acquired by a manufacturing company for the use in the production process

10.Theoretically, cash discounts permitted on purchased raw materials should be

a. Added to other income, whether taken or not
b. Added to other income, only if taken
c. Deducted from inventory, whether taken or not
d. Deducted from inventory, only if taken


Answers:

1. d
2. b
3. b
4. c- An arms's length transaction is a transaction between two independent parties and therefore objective
5. b
6. a
7. d
8. a
9. d
10.c

SOURCE: (Source: Theory of Accounts by Conrado Valix, AICPA Adapted)

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