1.chapter 1 Current Liabilities Problem 1

CHAPTER 1 PROBLEM 1.
TRUE OR FALSE
1. A liability exists only if the party to whom the obligation is owed is specifically identified.
2. Legal obligation arise only from law.
3. A long-term debt that is within 12 months from the end of the reporting period is a current liability.
4. Financial liabilities other than FVPL liabilities are initially measured at fair value plus transactions costs.
5. Amortized cost financial liabilities are subsequently measured at the present value of the cashflows from the
instrument.
6. Financial liabilities maybe subsequently reclassified between the amortized cost and fair value measurement
categories.
7. Trade payables and other liabilities that are part of an entity’s working capital maybe presented as a current-
liabilities even if they are expected to be settled beyond one year.
8. According to PAS 1, a currently maturing debt that the entity’s management intends to refinance is presented as
noncurrent.
9. According to PFRS 15, if an entity expects that a portion of gift certificates sold will not be redeemed, the entity
recognizes the expected breakage amount as revenue in proportion to the pattern of rights exercised by
customers.
10. Unearned revenue is revenue that is earned but not yet collected.
ANSWER
1. True 6. False
2. False 7. True
3. True 8. False
4. False 9. True
5. True 10. False
PROBLEM 2. MULTIPLE CHOICE – THEORY
1. Which of the following is not one of the aspects of the definition of a liability under the conceptual framework?
A. Obligation
B. Transfer of an economic resource
C. Present obligation as a result of past events
D. Probable outflow of economic benefits.
2. Which of the following would most likely not give rise to a liability?
A. An irrevocable purchase commitment becomes burdensome.
B. Earning of taxable income.
C. Signing an employment contract.
D. Sale of good product with implied warranty.
3. Entity A enters into an executory contract. Entity appropriately did not recognize any asset or liability from the
contract. Which of the following statement is correct?
A. If entity A performs its obligation first, Entity A shall recognize an asset.
B. If entity A performs its obligation first, Entity A shall recognize a liability.
C. If the counterparty performs its obligation first, Entity A shall recognize an asset.
D. Entity A should recognize a combined assets and liability upon signing the contract.
4. According to PFRS 9, when should an entity recognized a financial liability.
A. When the instrument imposes probable outflows of economic benefits that can be measured reliably.
B. When the entity becomes a party to the contractual provisions of the instrument.
C. Upon entering into the contract even if the contract is still executory.
D. Any of these as a matter of an accounting policy choice.
5. Which o0f the following liabilities is a financial liability?
A. Advances from customers
B. A constructive obligation
C. Callable preference shares issued
D. An obligation to deliver a variable number of own shares worth a fixed amount of cash.
6. According to PFRS 9, financial liabilities are classified as
A. FVPL or amortized cost
B. FVPL, FVOCI or amortized cost
C. FVPL or FVOCI
D. None of these
7. Financial liabilities that are classified as amortized cost are subsequently measured at
A. Fair value with changes in fair value recognized in profit or loss.
B. Fair value with changes in fair value recognized in other comprehensive income.
C. Partly (a) and partly (b) depending on the change in the instrument credit risk.
D. The present value of the remaining cash flows of the instrument, discounted at the original effective
interest rate.
8. According to PAS 1, which of the following statement is correct regarding the refinancing of long-term
obligations?
A. A currently maturing obligation is classified as current even if a refinancing agreement to reschedule
payments on a long-term basis is completed after the reporting period and before the financial statements
are authorized for issue.
B. A currently maturing obligation is classified as a current if a refinancing agreement to reschedule payments
on a long-term basis is completed after the reporting period and before the financial statements are
authorized for issue.
C. A currently maturing obligation is always classified as a current liability, without exception.
D. A currently maturing obligation is classified as noncurrent if the entity expects to refinance it on a long-
term basis.
9. Which of the following is a trade payable?
A. Income tax payable
B. Note payable issued in exchange for inventories
C. Dividend payable
D. Short-term bank loan
10. Which of the following is incorrect regarding the accounting for gift certificates under PFRS 15?
A. The entity recognizes a contract liability when it sells gift certificates.
B. The entity derecognizes the contract liability and recognizes revenue when customers use gift certificates.
C. The entity recognizes revenue for the full amount of expected breakage.
D. If the entity expects that a portion of the gift certificates expected breakage amount as revenue in
proportion to the pattern of rights exercised by the customer.
ANSWER
1. D 5. D 9. B
2. C 6. A 10. A
3. A 7. D
4. C 8. A

1.chapter 1 Current Liabilities Problem 1

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CHAPTER 1 PROBLEM 1.

PROBLEM 2. MULTIPLE CHOICE – THEORY

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