F7 02

Which of the following shall a lessee recognise at the commencement date?

• • A right-of use asset

• • A lease liability

• • Deferred income

• • A and B

Which one of the following is not required to be disclosed in a lessee's financial statements in relation to its leases, to comply with the requirements of IFRS 16 Leases?

• • Interest expense on lease liabilities

• • A reconciliation between the total of future minimum lease payments and their present value

• • Total cash outflow for leases

• • Income from sub-leasing right of use assets

Inventory items should be valued at the lower of cost and net realisable value.

• True

• False

If the closing inventory is understated, then the current year's profit will be understated and next year's profit will be overstated.

• True

• False

A company sells goods with a warranty for the cost of repairs required in the first 2 months after purchase. Past experience suggests: 88% of the goods sold will have no defects, 7% will have minor defects, 5% will have major defects. If minor defects were detected in all products sold, the cost of repairs will be £24,000; if major defects were detected in all products sold, the cost would be £200,000. What amount of provision should be made?

• • 11,000

• 11,680

• • 12,000

• • 12,680

How should prompt payment discount be dealt with when valuing inventories at the lower of cost and net realisable value (NRV), according to IAS2 Inventories ?

• • Added to cost

• • Ignored

• • Deducted in arriving at NRV

• • Deducted from cost

How should sales staff commission be dealt with when valuing inventories at the lower of cost and net realisable value (NRV), according to IAS2 Inventories ?

• • Added to cost

• Ignored

• • Deducted in arriving at NRV

• • Deducted from cost

How should trade discounts be dealt with when valuing inventories at the lower of cost and net realisable value (NRV) according to IAS2 Inventories ?

• • Added to cost

• Ignored

• • Deducted in arriving at NRV

• • Deducted from cost

Which of the following is added to the cost of inventories?

• • Storage costs of part-finished goods

• • Trade discounts

• • Refundable purchase taxes

• • Administrative cost

Under IAS 16, using the cost model, the asset in accounted for at Which of the following may be included in the cost of finished goods of a manufacturing company?

• • Production labour wages

• • Storage expenses for finished goods

• • Depreciation of delivery vehicles

• • Carriage outwards