which statements is incorrect regarding for value measurements? a. fair value is normally the amount that an entity would receive or pay in a forced transaction, involuntary liquidation, or distress sale. b. underlying the concept of fair value measurements is a presumption that the entity is a going concern. c. the measurement of fair value may be relatively sample for assets that are bought and sold in active and open markets. d. the estimation of fair value may be achieved through the use of valuation model or through the assistance of an expert, such as an independent appraiser.

which statements is incorrect regarding for value measurements? a. fair value is normally the amount that an entity would receive or pay in a forced transaction, involuntary liquidation, or distress sale. b. underlying the concept of fair value measurements is a presumption that the entity is a going concern. c. the measurement of fair value may be relatively sample for assets that are bought and sold in active and open markets. d. the estimation of fair value may be achieved through the use of valuation model or through the assistance of an expert, such as an independent appraiser.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 23MCQ

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7. Which of the following indicators of impairment is considered an internal source of information? a. Significant decline in market value than what is expected as a result of passage of time of normal use. b. Significant changes in technological, market, economic or legal environment in which the entity operates or in the market to which an asset is dedicated. c. Carrying amount of the net assets is more than its market capitalization. d. Significant change with adverse effect to the entity has taken place or will take place, which will affect expected use of asset, e.g., discontinuance, disposal, restructuring plans.
Which among the sentences below is incorrect?A. An entity shall measure a current asset or disposal group classified as held for sale at the lower of carrying amount or fair value less cost of disposal.B. One of the conditions that exists if the sale is highly probable is that there is an active program to locate a buyer and complete the plan must have been initiated.C. Impairment loss is the writedown to fair value less cost of disposal.D. An entity can recognize a gain if there is a subsequent increase in fair value less cost of disposal but only up to the impairment loss previously recognized.
Which of the following is correct about subsequent measurement of financial asset at fair value? a. the financial asset shall be measured at fair value if the business model is not to collect contractual cash flows on specified dates and the contractual cash flow ae not solely payment of principal and interest. b. An entity may designate a finacncial asset as measured at fair value through profit or loss even if the financial asset satisfies the amortized cost measurement. c. both are correct d. both are incorrect
11. The valuation of assets in the balance sheet is based primarily upon: What it would cost to replace the assets. Cost, because cost is usually factual and verifiable. Current fair market value as established by independent appraisers. Cost, because in the event of liquidation, the assets would be sold at an amount equal to their original cost. 12. Which one of the following equations correctly expresses the relationship between assets (A), liabilities (L), revenues (R), expenses (E) and capital (C)? (a) A = L + R + E + C (b) A = C + L + (R-E) (c) A = C - (R - E) + L (d) A = (L - C) + (R - E) 13. Which of the following would be added to net income using the indirect method? An increase in accounts receivable An increase in prepaid expenses Depreciation expense A decrease in accounts payable 14. Unpaid expenses may be included as an expense on the income statement. True False…
Q11 Which of the following options is INCORRECT regarding financial assets and the subsequent measurement model(s)? Select one: a. Financial Asset: Equity instrument Management Intention: Realise fair value changes Measurement Model: Fair value, adjustments in OCI _ b. Financial Asset: Debt instrument Management Intention: Earning contractual cash flows Measurement Model: Amortised cost _ c. Financial Asset: Equity instrument Management Intention: Realise fair value changes Measurement Model: Fair value, adjustments in SPL _ d. Financial Asset: Debt instrument Management Intention: Earning contractual cash flows Measurement Model: Fair value, adjustments in OCI _
Q21 Which of the following is NOT a step in impairment testing? Select one: a. Sell the asset after if the fair value is greater than the recoverable amount b. Calculate the asset’s carrying amount in the books of the entity c. Calculate the recoverable amount of the asset d. Assess whether there are circumstances that may indicate that the asset should be impaired.
4. Statement 1: In the sale of a financial asset measured at fair value through OCI, the difference between the selling price and the carrying amount is recorded as a gain or loss on sale of investment. Statement 2: When the fair value of a financial asset measured at fair value through OCI is higher than its carrying amount, an unrealized loss-OCI is debited. a. Only statement 1 is true b. Only statement 2 is true c. Both statements are true d. Both statements are false
18. An SME measures biological assets at fair value less costs to sell only when fair value is readily determinable without undue cost or effort. True or False
Statement 1: It is not always necessary to identify both fair value less cost to sell and value in use. Only when fair value less cost to sell is not greater than the carrying amount, then value in use calculation is required. Statement 2: IAS 36 is not applicable to financial assets, particularly those that are classified as investments in subsidiaries, joint ventures and associates. Only Statement 1 is correct. Only Statement 2 is correct. Both statements are correct. Both statements are incorrect.
4. Which of the following is not a component of other comprehensive income?a. Unrealized gain on equity investment measured at fair value through other comprehensive incomeb. Revaluation lossc. Unrealized gain from derivative contracts designated as cash flow hedged. Loss from translation of the financial statements of a domestic operation 5. Which of the following is a component of other comprehensive income?a. Unrealized loss from derivative contracts designated as fair value hedge.b. Unrealized loss on debt investment measured at fair value through other comprehensive incomec. Gain from translation of the financial statement of a domestic operation.d. Remeasurements of defined obligation plan, including accrual gain 6. Statement of comprehensive income can be presented asa. Two statements or single statement of comprehensive incomeb. Single statement of comprehensive income onlyc. Two statement of income statement or statement of comprehensive income onlyd. Statement of…
q13 According to IFRS, which accounting policy may an entity apply to measure investment property in periods subsequent to initial recognition? Select one: a. Fair value model or revaluation model. b. Cost model or fair value model c. Fair value model only. d. Cost model or revaluation model.
Which of the following statements is false? a. The monetary unit assumption is used under IFRS. b. Under IFRS, companies may use fair value for property, plant, and equipment. c. The FASB and IASB are no longer working on a joint conceptual framework project. d. Under IFRS, the concept of prudence is not considered.