Question 1

Borrowing cost are,

Accepted Answer

Borrowing costs are defined as interest and other costs that an entity incurs in connection with the borrowing of funds. This includes interest expenses on bank loans, overdrafts, and other financial charges related to borrowings.

Question 2

Borrowing cost do not include,

Accepted Answer

Borrowing costs typically include interest and other costs incurred in connection with the borrowing of funds. Dividends declared to equity shareholders are not considered borrowing costs as they are distributions of profit to owners, not costs of borrowing.

Question 3

Total borrowings used for construction of an office building are Rs.30, 00000. Entity issued 8% debentures worth 10,00000 for this purpose and balance amount was utilized from its common pool including 10% bank loan of Rs.1000000 and 9.5% bank loan of Rs.1000000. What is the amount of borrowing cost to be capitalized?

Accepted Answer

The borrowing cost to be capitalized is calculated based on the weighted average interest rate of the borrowings. The debentures have an interest cost of Rs. 80,000 (8% of Rs. 10,00,000), the 10% bank loan has an interest cost of Rs. 1,00,000 (10% of Rs. 10,00,000), and the 9.5% bank loan has an interest cost of Rs. 95,000 (9.5% of Rs. 10,00,000). The total interest cost is Rs. 2,75,000.

Question 4

An entity shall cease capitalizing borrowing cost when

Accepted Answer

According to IAS 23 Borrowing Costs, an entity should cease capitalizing borrowing costs when the asset is substantially ready for its intended use or sale.

Question 5

Capitalization of borrowing cost should not cease when

Accepted Answer

Capitalization of borrowing costs should not cease when there is a delay that is inherent in the asset acquisition process, as this is considered a normal part of the process of preparing an asset for its intended use or sale.

Question 6

Carrying amount of an asset as on 1st April 2015 is Rs. 1500000 and depreciation for the year 2015 - 2016 is 15000. Fair value of the asset less cost of disposal as on 31 March 2016 is Rs. 120000. Which of the following is the carrying amount at 1st April 2106?

Accepted Answer

The carrying amount at 1st April 2016 is the lower of the carrying amount after depreciation (Rs. 1485000) and the fair value less cost of disposal (Rs. 120000). Hence, it is Rs. 120000.

Question 7

Ind AS 2 deals with…

Accepted Answer

Ind AS 2 specifically deals with the accounting treatment for inventories. It sets out the valuation methods and the cost formulas that should be used to account for inventories.

Question 8

An item of property , plant and equipment that qualifies for recognition as an asset shall be measured at

Accepted Answer

According to the International Accounting Standard (IAS) 16, an item of property, plant, and equipment that qualifies for recognition as an asset should initially be measured at its cost. This includes the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Question 9

Inventory allocated to the construction of fixed asset should be……

Accepted Answer

Inventory allocated to the construction of a fixed asset should be capitalized, meaning it is recorded as part of the cost of the fixed asset rather than being expensed in the period it was incurred.

Question 10

Ind AS 38 deals with…….

Accepted Answer

Ind AS 38 deals with the accounting for intangible assets, including their recognition, measurement, and amortization.

Question 11

…………. are the amount of income tax payable in future period for taxable temporary differences.

Accepted Answer

Deferred tax liability represents the amount of income tax payable in future periods as a result of taxable temporary differences. These differences arise when the tax base of an asset or liability differs from its carrying amount in the financial statements.

Question 12

……………….is the price at which goods or services would be sold separately to a customer

Accepted Answer

The stand-alone price is the price at which goods or services would be sold separately to a customer, reflecting the price if the goods or services were sold individually rather than as part of a bundle or contract.

Question 13

……………..are employee benefits that are payable after the completion of employment

Accepted Answer

Post employee benefits are benefits that are payable after the completion of employment, such as pensions and other retirement benefits.

Question 14

As per IFRS15, an agreement between two or more parties that creates enforceable right and obligation is called….

Accepted Answer

Under IFRS 15, an agreement between two or more parties that creates enforceable rights and obligations is referred to as a "Contract."

Question 15

Which of the following is not an exception for application of IFRS 15

Accepted Answer

IFRS 15 does not apply to lease contracts, insurance contracts, and non-monetary exchanges, making all the options listed exceptions.

Question 16

A……………………..is the liability of uncertain timing and uncertain amount.

Accepted Answer

A provision is recognized for a liability of uncertain timing or amount. It represents a company's estimate of financial responsibilities that are likely to be incurred, but where the exact timing and amount cannot be determined with certainty at the reporting date.

Question 17

Operating lease is

Accepted Answer

An operating lease is typically a short-term lease agreement where the lessee uses an asset for a period shorter than its useful life, without ownership transfer.

Question 18

Finance leases are accounted for in a similar manner to:

Accepted Answer

Finance leases are accounted for similarly to credit transactions because they involve borrowing to finance the purchase of an asset, with the lease payments effectively treated as repayments of principal and interest on this financing.

Question 19

Which of the following securities do not influence diluted EPS?

Accepted Answer

Ordinary preference shares do not influence diluted EPS because they are not convertible into common stock and do not dilute the earnings per share for existing shareholders. Diluted EPS is concerned with the potential decrease in earnings per share that could occur from the conversion of convertible securities or the exercise of options, which is not applicable to ordinary preference shares.

Question 20

Which of the following is not an example of a potential ordinary share?

Accepted Answer

Standard preference shares are not considered potential ordinary shares because they do not have the option to be converted into ordinary shares. Convertible preference shares, stock warrants, and convertible debt all have the potential to be converted into ordinary shares, making them examples of potential ordinary shares.

Quiz 3: Accounting Standards and Principles: Borrowing Costs, Asset Measurement, Employee Benefits, and More