1.

An entity purchases a building and the seller accepts payment partly in equity shares
and partly in debentures of the entity. This transaction should be treated in the cash flow
statement as follows:
a. The purchase of the building should be investing cash outflow and the issuance of
shares and the debentures financing cash outflows.
b. The purchase of the building should be investing cash outflow and the issuance of
debentures financing cash outflows while the issuance of shares investing cash
outflow.
c. This does not belong in a cash flow statement and should be disclosed only in the
notes to the financial statements.
d. Ignore the transaction totally since it is a non-cash transaction. No mention is
required in either the cash flow statement or anywhere else in the financial
statements
2. What is the measurement basis of an
asset that is acquired in non-monetary
exchange
With commercial substance
With no commercial substance
a. Fair value of asset given up
Carrying amount of asset given up
b. Carrying amount of asset given up
Carrying amount of asset received
c. Carrying amount of asset received
Fair value of asset received
d. Fair value of asset given up
Fair value of asset given up
3. Which of the following statements concerning borrowing costs is false?
a. Borrowing costs generally include interest costs, bank overdrafts, amortization of
discounts or premiums related to borrowings, finance charges with respect to
finance leases.
b. Borrowing costs are interest and other costs incurred by an enterprise in relation to
borrowed funds.
c. Per PAS 23, the benchmark treatment for borrowing costs is to capitalize it as part
of the cost of the asset to which it relates.
d. Borrowing costs include amortization of ancillary costs incurred in connection with the
arrangement of borrowings, as well as exchange differences arising from foreign
currency borrowings to the extent that they are regarded as an adjustment to interest
cost.
4. Under IAS 20, which of the following is permitted in recognizing an intangible asset
acquired free of charge, or for nominal consideration, by way of a government grant?
I. Recognize both the intangible asset and the grant initially at fair value.
II.
Recognize the asset initially at a nominal amount plus any expenditure that
is directly attribute to preparing the asset for its intended use.
a. I only
b. Either I or II, at the option of the acquiring enterprise
c. II only
d. Neither I nor II
5. PAS 20, Government Grants provide two approaches to accounting for government
grants :
(1) capitalization approach and (2) income approach. Arguments in support of the
income
approach include the following except:
a. Government grants are considered earned through compliance with the condition
and
meeting envisaged obligations
b. Government grants are receipts from a source other than shareholders or capital
providers

c. Government grants represent an incentive provided by the government without

related costs.
d. Government grants are considered as extension of fiscal policies similar to income
and other taxes