CA Financial Reporting & Analysis 2

Question 1

Under IFRS 16, how should a lessee classify a lease on the balance sheet at commencement date?

Accepted Answer

Recognize a right-of-use asset and a corresponding lease liability

Answer

IFRS 16 requires lessees to recognize a right-of-use asset and a lease liability at commencement, reflecting the present value of future lease payments.

Question 2

A company reports net income of $500,000, depreciation of $80,000, and an increase in accounts receivable of $30,000. What is operating cash flow using the indirect method?

Accepted Answer

$550,000

Answer

Operating cash flow = $500,000 + $80,000 – $30,000 = $550,000 under the indirect method.

Question 3

Which financial ratio best measures a company's ability to meet short-term obligations using only its most liquid assets?

Accepted Answer

Cash ratio

Answer

The cash ratio (cash + cash equivalents ÷ current liabilities) is the most conservative liquidity measure, excluding receivables and inventory.

Question 4

Under IAS 36, when must an entity test goodwill for impairment?

Accepted Answer

Annually, regardless of impairment indicators

Answer

IAS 36 requires goodwill to be tested for impairment annually and whenever there is an indication that it may be impaired.

Question 5

A company uses the percentage-of-completion method for a long-term contract. In Year 1, costs incurred are $200,000 out of estimated total costs of $500,000 on a $750,000 contract. What revenue is recognized in Year 1?

Accepted Answer

$300,000

Answer

Percentage complete = 200,000/500,000 = 40%; Revenue recognized = 40% × $750,000 = $300,000.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA Financial Reporting & Analysis 2