This objective test question contains a question type which will only appear in a computer-based exam, but this question provides valuable practice for all students whichever version of the exam they are taking. Shuffles is attempting to decide which size of fork-lift truck to buy to use in its warehouses. There are three grades of truck, the A series, B series and the C series. The uncertainty faced is the expected growth in the on-line market it serves, which could grow at 15%, 30% or even 40% in the next period. Shuffles has correctly produced the following decision table and has calculated the average daily contribution gained from each combination of truck and growth assumption.
Based upon the scenario information, if the probabilities of the given growth rates are 15%: 0.4, 30%: 0.25 and 40%: 0.35, which truck would the risk-neutral buyer purchase?
IAS 10 Events after the reporting period regulates the extent to which events after the reporting period should be reflected in
financial statements.
Which one of the following lists of such events consists only of items that, according to IAS 10, should normally be classified
as non-adjusting?
A manager has to choose between mutually exclusive options C and D and the probable outcomes of each option are as follows.
Both options will produce an income of $30,000. Which should be chosen, on the basis of the expected value decision rule?
Which of the following events occurring after the reporting period are classified as adjusting, if material?
1 The sale of inventories valued at cost at the end of the reporting period for a figure in excess of cost
2 A valuation of land and buildings providing evidence of an impairment in value at the year end
3 The issue of shares and loan notes
4 The insolvency of a customer with a balance outstanding at the year end
Fill in the blanks.
(a) Maximin decision rule: choosing the alternative that …………….….... the ……...….……………..
(b) Minimax decision rule: choosing the alternative that ……………….… the …….….……………....
(c) Maximax decision rule: choosing the alternative that …….…………… the………...……………...
(d) Minimin decision rule: choosing the alternative that ……….………….. the…......…………………
The financial statements of Overexposure Co for the year ended 31 December 20X1 are to be approved
on 31 March 20X2. Before they are approved, the following events take place.
1 On 14 February 20X2 the directors took the strategic decision to sell their investment in Quebec Co despite the fact that this investment generated material revenues.
2 On 15 March 20X2, a fire occurred in the eastern branch factory which destroyed a material amount of inventory. It is
estimated that it will cost $505,000 to repair the significant damage done to the factory.
3 On 17 March 20X2, a customer of Overexposure Co went into liquidation. Overexposure has been advised that it is unlikely
to receive payment for any of the outstanding balances owed by the customer at the year end.
How should these events reflected in the financial statements at 31 December 20X1?
Adjust Disclose Do nothing
Which of the following events between the reporting date and the date the financial statements are authorised for issue must
be adjusted in the financial statements?
1 Declaration of equity dividends
2 Decline in market value of investments
3 The announcement of changes in tax rates
4 The announcement of a major restructuring
Which of the following is the correct definition of an adjusting event after the reporting period?
Which TWO of the following are circumstances where an employee will NOT be entitled to claim a redundancy payment?
(1) They could have been dismissed for misconduct before the redundancy notice
(2) Their claim is not made within three months of the redundancy notice
(3) They are involved in strike action after the redundancy notice is served
(4) They unreasonably refuse a renewal to their contract
In the context of employment law, which of the following is an AUTOMATICALLY fair ground for dismissing an employee?