Q 50 During 2009, DLF limited sold land for $10 million to Unitech for development.

Unitech paid $3 million and will pay remaining amount in 2010. DLF had purchased the land at $2 million in 2001. Using the cost recovery method, how much profit will DLF report for 2009? A. Zero B. $2 million C. $1 million

Q51. A firm believes that all the accounts receivable will be collected by them and does not reduce the amount which may be uncollectible? What impact this will have on the balance sheet of the company and Income statement of the firm? .............Asset......Net Income A.......Understate......Understate B.......Understate......Overstate C.......Overstate.......Overstate

Q52. A firms begining shareholder equity is $100 mn, net income for the year is $10 mn, cash dividend is $1 mn. No stock was issued or purchased during the year. The ending shareholder equity is $114mn. The amount that is being classified as other comprehensive income is closest to? A. $0 mn B. $5 mn C. $14 mn

Q53. Below are some of the items from a firms financial stmt (figures in mn dollars) Capital Expenditure.. $200 Acquisition cost.. $50 Investment in partnership/ Joint Venture.. $100 Dividends paid.. $30 Dividends received.. $20 Cash flow from Operations.. $250 Change in cash balance.. $500 Two analysts from Indus Investment partners are analyzing the firm and they make the following statements, assume that there are no other transactions apart from these. First Analyst: Cash flow from Financing is $580 million Second Analyst: Cash flow from Investing is - $350 million As per US GAAP A. None of the analysts are correct

B. First analyst is correct where as second analyst is wrong C. Second analyst is correct where as first analyst is wrong

Q60. A firm dealing in IPod has the following data for the purchases and value of its inventory. Cost = 110, Net Realizable Value = $120, replacement cost = $100, profit margin = $15 If the firm is following GAAP, what should be the value of inventory in B/S? A. $105 B. $110 C. $120

Q 62 A firm following IFRS, recognized a writedown in inventory of $20 mn few years back. The inventory is currently reported in the balance sheet as $430 mn and the fair value of the inventory is $470 mn. The firm revalues the inventory, what should be the balance sheet value of the inventory A) $470 mn B) $430 mn C) $450 mn

Q 63 Suppose a firm over a year (the accounting period has the following inventory transactions:Beginning Inventory( Jan 1st) : 100 Units @ 30 per unit Purchases and Sales during the year: Jan 3rd : Purchased 60 units @ $40 per unit Jan 5th : Sold 70 units Jan 10th : Purchased 20 units @ $50 per unit Jan 11th : Sold 90 units Jan 20th : Purchased 50 units @ $60 per unit Jan 21st: Sold 40 units LIFO COGS for the year will be, assuming perpetual method:A. $8500 B. $8200 C. $7600

Q 64 Which of the following is the most likely impact of capitalization as compared to expensing on the financial statement? A. Cash flow from operations is lower B. Results in lower income in the year on which the expense is capitalized C. Variability in the net income is lower

Q 65 A company bought a machine for $10,000, $500 tax was charged, transportation cost was $300, installation cost was $200. Company paid a firm $200 to train its employees. Company had to modify the plant to accommodate the machine which had cost $500. The estimated life of machine is 3 years. How much cost the company will capitalize and how much it will expense? A. $11,000 B. $11,500 C. $11,700

Q 66 Singh Engineering Works buys a lathe machine for $6,000, it has an estimated life of 10 years and residual value of $1,000. The cutting tool need to be replaced every 5 years and it costs $2,000. Part 1: What is the depreciation expense in 1st year if component method is used and if the component method is not used? Options----------Component Method------------Non-Component Method A------------------------------$300-----------------------------------$500 B------------------------------$700-----------------------------------$500 C------------------------------$400-----------------------------------$600

Part 2: What is the depreciation expense in 6th year if component method is used and if the component method is not used? Options----------Component Method------------Non-Component Method A------------------------------$700-----------------------------------$900 B------------------------------$700-----------------------------------$500 C------------------------------$300-----------------------------------$500 Part 3: What is the depreciation expense over the life of the asset if component method is used and if the component method is not used? Options----------Component Method------------Non-Component Method A------------------------------$7000-----------------------------------$7000 B------------------------------$7000-----------------------------------$6000 C------------------------------$8000-----------------------------------$8000

Q 67 A firm purchased an asset for $5,000 having some components made of gold. At the end of the first year assets value was $4,000, but at the end of 2nd year assets fair value was $5,500 because of increase in the price of gold. If the firm is following revaluation model. How much would be the value of the asset in the b/s at the end of 2nd year and also how much profit the firm would recognize in its profit and loss statement? What is the impact on comprehensive income? Options-----Value of Asset-----Profit in P&L statement----Change in Other Comprehensive Income A----------------$5,500----------------------$1,000--------------------------------$500

B----------------$5,000----------------------$0-------------------------------------$1,500 C----------------$5,000----------------------$1,500--------------------------------$0

Q68. A firm purchased an asset for $5,000 having some components made of gold. At the end of the first year assets value was $6,000 because of increase in the price of gold, but at the end of 2nd year assets fair value was $4,500. If the firm is following revaluation model. How much would be the value of the asset in the b/s at the end of 2nd year and also how much profit the firm would recognize in its profit and loss statement? What is the impact on comprehensive income? .........Value of Asset....Profit in P&L statement.....Change in Other Comprehensive Income A....... $4,500............... -$500................................ -$1,000 B....... $4,500............... $0..................................... $1,500 C....... $4,500............... -$1,500.............................. $0

Q 69 An analyst with alpha advisors comment the following:Statement 1: IFRS allows a company to increase or decrease the residual value based on new estimates. Statement 2: Under US GAAP, a firm may revise the residual value downwards but not upwards Please choose the correct option:A. Analyst is correct with respect to Statement 1 but not Statement 2 B. Analyst is correct with respect to Statement 2 but not Statement 1 C. Analyst is correct with respect to both Statement 1 and Statement 2

Q 70 A firm has an asset having following characteristics Carrying amount----------------------------------------$10,000 Undiscounted expected future cash flows------------$11,000 Present value of expected future cash flows---------$9,000 Fair value if sold----------------------------------------$9,500 Selling costs---------------------------------------------$1,000 What would be the carrying value in B/S as per GAAP and IFRS? Options-------------------GAAP-----------------------IFRS A------------------------------$9,000---------------------------$9,000 B------------------------------$10,000--------------------------$9,000 C------------------------------$9,000---------------------------$10,000

Q 71 A firm has deferred tax liability (DTL) of $2 million and deferred tax asset (DTA) of $3 million. An increase in tax rate will result in:A) An increase in both DTL and DTA but decrease in tax expense. B) An increase in both DTL and DTA but increase in tax expense. C) An increase in DTL but decrease in DTA and decrease in tax expense.

Q 72 Greece is in severe crisis and the government is taking strict measure to reduce the fiscal deficit, it has increased the tax rate from 40% to 60%. A firm has the following data for the deferred tax expenses and the earnings, which of the following is most likely to be the income tax expense for this year (2010).

Taxable Income for 2010-----------------------------------------------------$10000 Temporary difference in 2010 which will create deferred tax asset------$2000 Temporary difference in 2010 which will create deferred tax liability----$3000 Deferred tax asset (DTA) for 2009------------------------------------------$2000 Deferred tax liability (DTL) for 2009-----------------------------------------$4000 A. $6800 B. $4400 C. $7600

Q 73 Which of the following with regards to deferred tax is correct? A) All deferred tax assets and liabilities are classified as noncurrent under US GAAP. B) All deferred tax assets and liabilities are classified as noncurrent under IFRS. C) All deferred tax assets and liabilities are classified as current under US GAAP.

Q 74 Bharti Airtel and Idea have raised same amount of funds by issuing debt securities. The difference is that Idea has issued zero coupon bonds where as Bharti has issued coupon paying bonds. An analyst comparing these two telecom firms makes the following statements, assume that both the firms differ only due to the debt issue Statement I) Bharti Airtels cash flow from operations is higher than that of Idea Statement II) Ideas interest expense will increase as time passes Analyst is correct with respect to: A. Neither statement 1 nor statement 2 B. Statement 2 but not statement 1 C. Both Statement 1 and statement 2

Q75. A firm is planning to raise capital by issuing hybrid security (having both debt and equity feature). But the firm has existing debt covenants which restricts a high amount of debt to equity ratio. Which of the following instrument issue is most likely suitable for the firm, assume that the firm is following US GAAP. A. Convertible bond B. Debt with warrant C. Both convertible bond and debt with warrant will have the same impact

Q 76 Company A issues a bond at premium (that is the coupon rate is more than the market interest rate). The coupon rate is 10% per annum and the market interest rate is 9%. The tenure of bond is 5 years and face value is $100,000, the coupon is paid annually. Find the book value of the bond

Options---------At time of issue-------------After One year A--------------------$103,889-------------------------$103,239 B--------------------$104,539-------------------------$94,539 C--------------------$103,889-------------------------$93,899

Q 77. Which of the following bonds have highest cash flow from financing at the time of issuance, assume that the face value is same for all the bonds and they have the same maturity? A) Premium Bond B) Zero Coupon Bond C) Discount Bond

Q 78 Firm X was accounting a lease as operating lease but the lessor has now given the bargain purchase option to X so it will recognize the lease as capital lease. What impact this will have on the operating profit of X? A. Increase B. Decrease C. No Impact

Q 79. A firm is leasing equipment, the lease payments are $20,000 and the lease is for 5 years. The management is contemplating on whether to consider a lease as operating lease or capital lease. The management wants to increase the net profit of the firm for this particular year only, which type of lease would help the management achieve its goal. Assume if the lease is a capital lease then the asset life is 5 years and salvage value is zero, discount rate is 10%. A. Operating Lease

B. Capital or financing lease C. It doesnt matter which lease method is chosen