Financial Accounting Test 2

Account Receivable is considered a monetary asset because it represents the amount of money owed to a company by its customers for goods or services provided on credit. It is a claim that the company has on its customers and can be converted into cash relatively quickly. In contrast, assets like patents, land, and inventory are not considered monetary assets as they do not represent a direct claim to cash.

The major research and feasibility study performed in order to assess planned development of intangible asset - software cannot be considered a qualifying asset because it is not a tangible asset. Qualifying assets are assets that are expected to provide economic benefits to the entity for a period of time, such as inventories, software intended for resale, and self-constructed buildings. The major research and feasibility study is a preliminary step in the development of the intangible asset, but it is not the actual asset itself. Therefore, it cannot be considered a qualifying asset.

When ABC Company failed to record the purchase of inventory on account at the end of 2008, it means that they did not include the value of the inventory as an asset on their balance sheet. This leads to an understatement of assets because the inventory should have been included. Additionally, since the purchase was made on account, it means that the company has a liability to pay for the inventory in the future. However, by not recording this liability, the balance sheet also understates liabilities. Therefore, the correct answer is that assets and liabilities are both understated.

The amount will be considered as Cash.

Cash or cash equivalents are highly liquid assets that can be readily converted into cash with minimal risk of value changes. In this question, petty cash and bank account balance are considered as cash because they are readily available for immediate use. Additionally, short-term investments that can be easily converted into cash and have insignificant risk of changes in value are also classified as cash equivalents. The other options include term deposits and debentures, which are not as easily convertible to cash and may have longer maturity periods or higher risks.

Treasury shares are own shares that should be recognized as a deduction in equity. Written warrants are basically equity instruments.

Everything goes to a single number – gain on disposal: sale proceeds of 4,000 less carrying amount of 1,500 less cost of disposal of 200 = 2,300

Period costs are not a necessary part of the manufacturing process, The period costs are usually associated with the selling function of the business or its general administration.

If the asset is carried at revalued amount, then the revaluation surplus will be reduced first and only remaining impairment loss will be recognized in profit or loss.

The unusually revenue is the revenue that return from past period like recover debts.

Due to timing and wrong recording.

For the Current Liabilities, assume in 2009 the AP was 10M and in 2010 become 15M it means: the Co. has 5M extra.

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The correct answer is "Yes, because this situation is not offsetting." This means that the manufacturing company can offset the inventory valuation provision against the inventory balance in the statement of financial position. Offset refers to the practice of combining or netting the values of assets and liabilities. In this case, the offsetting is allowed because it does not involve the netting of assets and liabilities, but rather the recognition of a valuation provision for inventories. This helps in providing a better understanding of the financial statements by the users.