QUESTION: 25

PQ entered into a $300,000 contract on 1 January 20X9 to provide computer hardware to WX with support services for the 3 years from the date of installation.
The contract is made up as follows:

The hardware was delivered to WX on 1 January 20X9 and installed immediately. WX paid the full value of the contract on 30 June 20X9.
What journal entry records PQ's revenue from this contract for the year ended 31 December 20X9?

Option A
Option B
Option C
Option D

Answer(s): C

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QUESTION: 26

PQ and WX are similar sized entities and operate in the same industry within Country X . Both operate from a single warehouse and have similar levels of non current asset resources. The following ratios have been calculated at 31 October 20X8:

If considered individually, which of the following would limit the usefulness of these ratios in assessing the comparative financial performances of PQ and WX?

Depreciation of warehouses being charged to cost of sales by PQ and distribution costs by WX.
Operating lease rentals for plant and equipment being charged to administration expenses by PQ and distribution costs by WX.
Year end review of equipment resulting in WX charging an impairment loss while PQ's equipment is not impaired.
Increased prices for raw materials, which was passed on to customers by both entities.

Answer(s): A

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QUESTION: 27

RS is a listed entity that has no subsidiaries although its Finance Director is also a director of TU, an unconnected entity.
It is preparing its financial statements to 30 September 20X6.
Which of the following substantial transactions must be disclosed in these financial statements in accordance with IAS 24 Related Party Disclosures?

Pension payments made on behalf of the Managing Director of RS.
Purchase of production materials from TU at a discounted price to the current market value.
Sale of finished goods to TU at normal selling price.
Performance related bonus payments made to the office staff for the year.

Answer(s): A

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QUESTION: 28

AB and FG incorporated on 1 January 20X1 in the same country and had similar investment in net assets. Both entities are financed entirely by equity. In the year to 31 December 20X1 both entities generated the same volume of sales.
Which of the following, taken individually, would explain why AB's return on capital employed ratio was lower than that of FG?

AB revalued its non current assets upwards on 31 December 20X1; FG's non current assets were stated at historic cost.
FG issued bonds on 31 December 20X1; AB remains ungeared.
AB paid a lower dividend to its shareholders than FG in the year.
AB's deferred tax provision at the year end is higher than that of FG.

Answer(s): A

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QUESTION: 25

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QUESTION: 28

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