Question Details

Which of the following non-monetary exchange transactions has commercial substance 



1.	When an asset acquired through government grants is recorded using the capital approach,
a.	assets and equity increase by the fair value of the asset.
b.	assets and liabilities increase by the fair value of the asset.
c.	assets and equity increase by the cost of the asset.
d.	assets and liabilities increase by the cost of the asset.

	2.	Which of the following is required by IFRS?
a.	Resources acquired through government grants must be recorded at cost.
b.	Resources acquired through government grants must be recorded at fair value.
c.	Resources acquired through government grants must be accounted for using the capital approach.
d.	Resources acquired through government grants must be accounted for using the income approach.

	3.	If the cost of the asset is recorded net of the government grant,
a.	equity will likely be overstated.
b.	liabilities will likely be overstated.
c.	assets will likely be understated.
d.	revenues will likely be understated.

4.	Which of the following is true regarding the alternative ways to apply the income approach to accounting of resources acquired through government grants?
a.	expenses will be higher and net income lower if the grant is recorded as deferred revenue.
b.	expenses will be higher and net income lower if the grant is accounted for as an adjustment to the asset.
c.	depreciation expense will be higher if the grant is recorded as deferred revenue, but net income will be the same under the two alternatives.
d.	depreciation expense will be higher if the grant is recorded as an adjustment to the asset, but net income will be the same under the two alternatives.

	5.	Which of the following non-monetary exchange transactions has commercial substance ?
a.	Exchange of assets with no difference in future cash flows.
b.	Exchange of products by companies in the same line of business with no difference in future cash flows.
c.	Exchange of assets with a difference in future cash flows.
d.	Exchange of an equivalent interest in similar productive assets that causes the companies involved to remain in essentially the same economic position.




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