HomeChapter 11: Practice Questions

Chapter 11: Practice Questions

Chapter 11: Practice Questions

The following 20 questions are designed to reinforce your mastery of the IFRS topics covered in this book. Answers are provided in the Appendix.

  1. Acquisition & Goodwill: Entity P acquires 80% of Entity S for \$5,000,000. S’s identifiable net assets at fair value are \$4,500,000. Calculate goodwill and draft the consolidation entry.
  2. Bargain Purchase: Entity X acquires Entity Y for \$3,000,000. Y’s net assets at fair value are \$3,500,000. Record the acquisition journal and recognize any gain.
  3. Fair‑Value Uplift & DTL: On acquisition, machinery is uplifted by \$300,000 with 15 years remaining life. Tax rate = 20%. Calculate extra depreciation and deferred tax liability, and prepare year‑end journals.
  4. PPE Depreciation: Entity A has opening PPE cost \$2,000,000 with remaining life 10 years and adds \$500,000 during the year. Compute depreciation expense.
  5. Inventory FIFO COGS: Opening inventory 200 units @ \$10; purchases 300 units @ \$12; sales 350 units. Calculate COGS and ending inventory using FIFO.
  6. Weighted Average & NRV: Opening 150 units @ \$8, purchase 150 units @ \$11; sales 180 units; year‑end NRV \$9. Compute weighted average cost, COGS, ending inventory, and write‑down.
  7. IFRS 9 ECL (12‑month): Trade receivables total \$1,200,000. Based on forward‑looking data, 12‑month ECL = 2.5%. Record the provision journal.
  8. IFRS 9 Lifetime ECL: Receivables \$800,000. Significant increase in credit risk → lifetime ECL rate 5%. Calculate and journalize.
  9. Intercompany Sales Elimination: Parent sells goods to subsidiary for \$400,000 at 20% markup; 30% remains in ending inventory. Compute elimination entries.
  10. Dividend Elimination: Subsidiary declares dividends of \$250,000 to the parent. Prepare the consolidation elimination entry.
  11. Standalone Statements: Given trial‑balance data for two entities, prepare standalone Income Statements and Balance Sheets.
  12. Consolidated Statements: Using data from Q1 and Q9, prepare consolidated Income Statement and Statement of Financial Position.
  13. Current & Quick Ratios: From consolidated BS, current assets \$6,800,000 (inventory \$2,100,000) and current liabilities \$3,000,000. Calculate ratios.
  14. Gross Margin & ROA: Consolidated gross profit \$6,000,000 on revenue \$15,000,000; profit \$2,700,000; average assets \$18,000,000. Compute ratios.
  15. ROE & Debt‑Equity: Net profit \$2,700,000; average equity \$13,000,000; total liabilities \$4,000,000. Calculate ratios.
  16. Equity Method: Investor acquires 50% of JV for \$600,000. JV reports profit \$120,000 and pays dividends \$30,000. Record investor’s entries.
  17. Sale & Leaseback: Entity sells equipment (carrying amount \$450,000) for \$550,000 and leases back over 5 years. Record sale, ROU asset, and lease liability.
  18. Lease Classification: Lease term 4 years on asset life 10 years; lease payments cover 80% of asset fair value. Classify and journalize initial recognition under IFRS 16.
  19. IAS 36 Impairment: Asset carrying amount \$800,000; recoverable amount \$650,000. Recognize impairment loss and subsequent reversal of \$50,000.
  20. IFRS 5 Held for Sale: Non-current asset cost \$1,000,000; fair value less costs to sell \$900,000; classify and present on BS at measurement date.