ACCT3563 - Practice Exam
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ACCT3563 - Practice Exam
1 A company has a debt contract in place which limits the amount it can borrow to 60% of total tangible assets. As balance day approaches, the company estimates that its ratio of total liabilities to total tangible assets will be 65% unless remedial action is taken, based on total tangible assets of $2,000,000 and total liabilities of $1,300,000.
According to Positive Accounting Theory, in order to reduce the ratio of total liabilities to total tangible assets to 60% the company could:
Refuse to conduct impairment tests on purchased goodwill even though there is evidence of impairment.
Switch from cost model to revaluation model for a trademark owned by the company and revalue the trademark upwards by $100,000 to its fair value.
Delay to next year recognition of revenue of $100,000 on a bundled package of two performance obligations, one of which has been performed in the current year and the other in the next year.
Classify a forward contract liability for $100,000 as a non-current liability rather than as a current liability. The forward contract is to purchase foreign currency in six months’ time
Reduce Provision for Sick Leave by $100,000 at balance date.
2 Which of the following statements about ethical systems you have learnt in this Course are correct?
I. In Aristotelian ethics, intellectual virtues help a person attain the moral virtues and vice versa
II. In utilitarian ethics, in making a decision you weigh up how many in a group of people are better off by the decision and how many are worse off. If those better off exceed those worse off, the decision is ethical
III. In Aristotelian ethics, prudence is a moral virtue because it involves control of the emotions.
IV. In Aristotelian ethics, an injustice occurs only if someone gets less than their rightful due
V. In self-interest maximization, a person acts to further their own welfare even if that means a majority of other people are worse off as a result
All statements are correct
I, II and V are correct
I and II are correct
I, III and IV are correct
III, IV and V are correct
3 King Lessee Ltd leases an item of equipment on 1 July 20X1 on the following terms:
Term of lease (years) |
8 |
Interest rate implicit in lease |
10% |
Initial lease payment up front on 1 July 20X1 |
$4,500 |
Initial direct costs paid by King Lessee |
zero |
Subsequent lease payments, in arrears, each 30 June |
$12,000 |
Useful life of equipment (years) |
10 |
Assume straight line depreciation method is used for the lease asset and residual value is zero at the end of the lease term. |
At the end of the lease term, King Lessee is going to return the equipment to the lessor. |
What is the amount of the current lease liability and non-current lease liability at 30 June 20X2, each rounded to nearest hundred dollars?
Current liability |
Non-current liability |
$5600 |
$58,000 |
Current liability |
Non-current liability |
$6,200 |
$52,300 |
Current liability |
Non-current liability |
$5,800 |
$58,400 |
Current liability |
Non-current liability |
$6,200 |
$58,400 |
Current liability |
Non-current liability |
$5,600 |
$52,300 |
4 Jack Lessee Ltd leases an item of equipment on 1 July 20X1 on the following terms:
Term of lease (years) |
8 |
Interest rate implicit in lease |
10% |
Initial lease payment up front on 1 July 20X1 |
$4,500 |
Initial direct costs by Jack Lessee |
zero |
Subsequent lease payments, in arrears, each 30 June, each including $1,500 for costs of maintenance of the equipment |
$11,500 |
Useful life of equipment (years) |
10 |
Jack guarantees a residual value at the end of lease of |
$5,000 |
Unguaranteed residual value at end of lease |
$3,000 |
Assume straight line depreciation method is used for the lease asset. |
At the end of the lease term, Jack Lessee will return the equipment to the lessor |
What annual depreciation expense (to nearest hundred dollars) will Jack Lessee record for this leased equipment?
$6,900
$7,200
$5,500
$6,700
$7,900
5 Allied Lessor leases equipment to XYZ Lessee on 1 July 20X1 on the following terms
Term of lease (years) |
5 |
Interest rate implicit in lease |
10% |
Initial lease payment up front on 1 July 20X1 by XYZ to Allied |
$4,500 |
Subsequent lease payments, in arrears, each 30 June |
$10,000 |
Useful life of equipment (years) |
6 |
XYZ guarantees a residual value at the end of lease of |
$5,000 |
Unguaranteed residual value at end of lease |
$3,000 |
At the end of the lease term, XYZ Lessee will return the equipment to Allied Lessor |
Allied Lessor purchased the asset on 1 July 20X1 for $40,000 and then immediately leased it to XYZ Lessee |
There are no initial direct costs incurred by Allied Lessor on 1 July 20X1 |
For Allied Lessor, what is the interest revenue for the year ended 30 June 20X2 and the book value of the lease receivable at 30 June 20X2 (both rounded to nearest hundred dollars)
Interest revenue |
Lease receivable |
$4,300 |
$37,000 |
Interest revenue |
Lease |
2022-11-15