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Free F2 Exam Braindumps
Advanced Financial Reporting Questions 61–65 (page: 14)

Updated On: 10-Feb-2026
Page 14 of 55
PDF with 268 Questions

HJ is currently in dispute with an employee, who is claiming $400,000 in a legal case against them. HJ's legal advisors have stated that it is probable that they will lose the case and will have to pay the amount claimed.

Also, HJ are claiming $250,000 from a supplier of defective goods and the legal advisors have stated that it is probable that HJ will be successful in this claim.
What is the correct accounting treatment for these two items in HJ's financial statements?

  1. Provide for the $400,000 potential outflow and disclose the $250,000 potential inflow.
  2. Provide for the $400,000 potential outflow and recognise the $250,000 potential inflow.
  3. Disclose the $400,000 potential outflow and disclose the $250,000 potential inflow.
  4. Disclose the $400,000 potential outflow and recognise the $250,000 potential inflow.

Answer(s): A



RST sells computer equipment and prepares its financial statements to 31 December. On 30 September 20X5 RST sold computer software along with a two year maintenance package to a customer. The customer is given the right to return the goods within six months and claim a full refund if they are not satisfied with the computer software. The risk of return is considered to be insignificant for RST.
How should the revenue from this transaction and the right of return be recognised in the financial statements for the year ended 31 December 20X5?

  1. Recognise 100% of the revenue from both the sale of goods and the maintenance contract and create a provision for the anticipated level of returns.
  2. Do not recognise any revenue from the sale of goods or the maintenance contract and do not create a provision for the anticipated level of returns.
  3. Recognise 12.5% of the revenue from both the sale of goods and the maintenance contract and do not create a provision for the anticipated level of returns.
  4. Recognise 100% of the revenue from the sale of goods,12.5% of the revenue from the maintenance contract and create a provision for the anticipated level of returns.

Answer(s): D



Which THREE of the following statements are true in relation to financial assets designated as fair value through profit or loss under IAS 39 Financial Instruments: Recognition and Measurement?

  1. Shares in another entity held for short term trading purposes fall within this category.
  2. Transaction costs in relation to these assets are expensed to profit or loss on acquisition.
  3. Transaction costs in relation to these assets are added to the initial cost of the asset on acquisition.
  4. The gain or loss on the subsequent measurement of these assets is recorded within other comprehensive income.
  5. The gain or loss on the subsequent measurement of these assets is recorded within profit for the year.
  6. Once the asset has been subsequently measured to fair value an impairment review is undertaken.

Answer(s): A,B,E



AB acquired a financial investment on 1 January 20X9, incurring $5,000 related agency fees. AB initially classified the investment as held for trading, in accordance with IAS 32 Financial Instruments:
Presentation.
Which of the following statements reflects the accounting treatment that AB adopted in respect of this investment when it prepared its financial statements to 31 December 20X9?

  1. Agency fees were recorded as an expense and the gain/loss on the remeasurement of the investment at the year end was recorded in profit or loss for the year.
  2. Agency fees were recorded as an expense and the gain/loss on the remeasurement of the investment at the year end was recorded in other comprehensive income.
  3. Agency fees were added to the cost of the investment and the gain/loss on the remeasurement of the investment at the year end was recorded in profit or loss for the year.
  4. Agency fees were added to the cost of the investment and the gain/loss on the remeasurement of the investment at the year end was recorded in other comprehensive income.

Answer(s): A



ST has sold its main office property, which had a carrying value of $360,000, to AB, a property management entity.
The property was sold for $400,000 which is equal to its fair value and was immediately leased back under an operating lease agreement.
Which of the following journals will record this transaction?

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): A



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