PROBLEMS Problem 5-1 Multiple choice (ACP) 1. The elements directly related to the measurement of financial position are a. Asset, liability and equity b. Asset’ and liability c. Income and expense a. Asset, liability, equity, income and expense The elements of financial position describe amounts of resources and claims against resources pp During a period of time At a moment in time During a period of time and at-a moment in time Neither during a period of time nor at a moment in time peop The elements directly related to the measurement of financial performance are e a. Income and expense b. Asset, liability and equity c. Asset and liability d. Income, expense and equity 4. It is a present economic resource controlled by the entity as a result of past events. a. Asset b. Liability c. Equity d. Income 5. It is a present obligation of the entity to transfer an economic resource as a result of past events, a. Asset b. Liability c. Equity d. Expense 1086. It is the residual interest in the assets of the entity after deducting all of the liabilities. Income Equity Retained earnings . All of the choices match the definition BOOP a It is an increase in asset or a decrease in liability that results in increase in equity other than contribution from. equity\ holders. a. Asset b. Liability c. Income d. Expenses 8. It is a decrease in asset or an increase in liability that results in decrease in equity other than distribution to equity holders. a. Asset b. Liability c. Income d. Expense 9. This arises in the course of ordinary regular activities of the entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent. Income Revenue Profit Gain Beep 10, Which statement in relation to income is true? a. Income encompasses both revenue and gain. b. Revenue encompasses both income and gain. c, Gain encompasses both income and revenue. d. Income encompasses revenue only. 109Problem 5-2 Multiple choice (Conceptual Framework) 1 po 2 Which is not within the new definition of an asset? a. An asset is a present economic resource. b. The economic resource is a right that has potential to produce economic benefit. c, The economic resourve is controlled by the entity as a result of past event. a. Future economic benefit is expected to flow to the entity. Which of the following criteria need not be satisfied for a liability to exist? a. The entity has an obligation. b. The obligation is to transfer an economic resource. c. The obligation is a present obligation that exists as a result of a past event. d. The settlement is expected to result in an outflow of economic benefit. ..A present obligation exists as result of past event if . The entity has already obtained economic benefit. . The entity must transfer an economic resource. . The entity has not yet obtained economic benefit but must transfer an economic resource. d. The entity -has already obtained economic benefit and must transfer economic resource. erp 4. Rights that have the potential to produce economic benefits and correspond to an obligation of another entity include all, except a. Right to receive cash b. Right to receive goods c. Right to exchange economic resources with another entity on favorable terms d. Right over property, plant and equipment ;. An economic resource could produce economic benefit if an entity is entitled to all, except a. To receive contractual cash flows b. To exchange economic resources with another entity on unfavorable terms i To receive cash Fi selling the economic resource |. To extinguish a liability by transferring an economic resource ae 1106. It is the present ability to direct the use of an economic resource and obtain the benefit that may flow from it. a. Control b. Legal right c. Obligation d. Ownership 7. It is a duty or responsibility that an entity has no practical ability to avoid. . Right . Obligation Equity d. Expense esp 8. Obligations to transfer an economic resource include all, except a. Obligation to pay cash b. Obligation, to deliver goods c. Obligation to provide services d. Obligation to transfer an economic resource even if a specified future event does not occur 9. Which statement is not true about income and expense? a. Income is increase in asset or decrease in liability that results in increase in equity other than contribution from equity holders. b. Expense is decrease in asset or increase in liability that results in decrease in equity other than distribution to equity holders. c. Income and expenses are the elements that relate to financial position, d. Income encompasses revenue and gain, 10, This new term refers to the statement of profit or loss and a statement presenting other comprehensive income. . Income statement . Statement of comprehensive income Statement of financial performance . Statement of financial position erp 111Problem 5-3 Multiple choice (AICPA Adapted) 1, Revenue may result from a. A decrease in an asset from primary operations. b. An increase in an asset from incidental transactions, c. An increase in a liability from incidental transactions, d. A decrease in a liability from primary operations. 2. What is the primary distinction between revenue and gain? a. The materiality of the amount b. The likelihood that the transaction will recur c. The nature of the activity that gives rise to the transaction ‘ d. The method of disclosing-the transaction 3. The term income a. Includes revaluation of land. b. Includes adjustment of prior period error. c. Includes gain resulting from the sale of an asset in an arm’s length transaction. d. Is the same as retained earnings. 4, A decrease in an asset arising from peripheral or incidental transaction is, called . Capital expenditure Cost Loss .. Expense peop 5. An outflow of asset based on an activity that represents the major operations is called a, Loss b. Liability c, Expense d, Equity 112