21 which of the following is generally not used as a basis for calculating bonuses o 4314673

21.Which of the following is generally NOT used as a basis for calculating bonuses or profit-sharing amounts?

a) a percentage of the employees’ regular pay rates

b) the company’s pre-tax income

c) productivity increases

d) gross sales

22.Under IFRS, a provision is

a) a special fund set aside to pay long-term debt.

b) unearned revenue.

c) a liability of uncertain timing or amount.

d) an allowance for future dividends to be paid.

23.At the time of recognition of an asset retirement obligation, the present value should be

a) recorded as a separate long-term asset and as an asset retirement obligation.

b) expensed and recorded as an asset retirement obligation.

c) expensed to “Asset Retirement Expense” in the period actually paid.

d) added to the related asset cost and recorded as an asset retirement obligation.

24.Under ASPE, an asset retirement obligation should be recognized when

a) an asset is impaired and is available for sale.

b) operation of an asset has resulted in an additional obligation such as the cost of cleaning up an oil spill.

c) there is a legal obligation to restore the site of the asset at the end of its useful life.

d) the company has an obligation to purchase a long-lived asset.

25.Which of the following statements is INCORRECT regarding the recording of the related increase or accretion in the carrying amount of an asset retirement obligation (ARO)?

a) Under ASPE, it is recognized as interest expense.

b) Under ASPE, it is recognized as an operating expense (but not as interest expense).

c) Under IFRS, it is recognized as a borrowing cost.

d) The amount should be calculated using the same discount (interest rate) as was used to calculate the initial present value of the ARO.

26.Using the revenue approach of accounting for product guarantees and warranty obligations

a) the liability is measured at the estimated cost of meeting the obligation.

b) there is no effect on future income.

c) the liability is measured at the value of the services to be provided.

d) the liability is measured at the value of the services to be provided, but there is no effect on future income.

27.Which of the following statements is INCORRECT concerning warranties?

a) Using the expense approach, the warranty is provided with the product or service with no additional fee.

b) Where warranty costs are immaterial or when the warranty period is quite short, the warranty costs may be accounted for using the cash basis.

c) Using the revenue approach, the warranty is a separate deliverable from the related product or service.

d) The revenue approach must be used for income tax purposes.

28.The current (commonly used) accounting treatment for premiums and coupons requires that the costs should

a) be recorded at the maximum possible redemption cost in the year of the related sales.

b) be recorded at the total estimated redemption cost in the year of the related sales.

c) be recorded in the year(s) that the redemption is expected to occur.

d) not be recorded at all.

29. What are the current International Financial Reporting Standards regarding customer loyalty programs (such as frequent flyer points)?

a) They are recognized only in the financial statement notes.

b) They are recognized only when customers redeem their points.

c) They are not explicitly addressed.

d) The current proceeds are to be split between the original transaction and the award credits (as unearned revenue).

30.Under ASPE, a contingent liability is recognized if

a) it is certain that funds are available to settle the contingency.

b) an asset may have been impaired.

c) the amount of the loss can be reasonably estimated and it is likely that an asset has been impaired or a liability incurred as of the financial statement date.

d) it is likely that an asset has been impaired or a liability incurred even though the amount of the loss cannot be reasonably estimated.