T.Y B.COM
SEMESTER - 6
FINANCIAL REPORTING
(FR)
MCQS - UNIT III
CHAPTER -1 = EARNINGS PER SHARE
(AS-20)
MCQS
1) _________ is a financial instrument or other contract that entitles, or may entitle its holder
to equity share.
(A) Potential Equity Share (B) Preference shares
(C) Equity shares (D) Debentures
Ans: A
2) In case of preference shares, the amount of preference dividend already declared or provide
will be deducted.
(A) Non-cumulative (B) Convertible
(C) Cumulative (D) Redeemable
Ans:A
3) S. Ltd., had 1800 Equity Shares outstanding as on 01.01.2011. On 31st May, 2011, it Issued
600 Equity Shares for cash. On 01.11.2011, It bought back 300 Equity Shares. The weighted,
number of shares as on 31st December, 2011 are:
(a) 2100 (b) 1800
(c) 1500 (d) 2700
Ans:A
4) Earning per share gives the information regarding savings available to each
(a) Preference Share (b) Equity Share
(c) Debenture (d) Both (a) and (b)
Ans:B
5) In case of preference shares, the preference dividend Payable, whether provided of be
deducted
(A) Non cumulative (B) Convertible
(C) Cumulative (D) Redeemable
Ans:C
6) Arrears of preference dividend are deducted in EPS calculation.
(A) Should not (B) Must
(C) Should (D) None
Ans:A
7) As per AS 20 it is Mandatory to disclose Earnings per share.
(A) Positive (B) Both
(C) Negative (D) None
Ans:a
8) Calculate from the following information basic earnings per share for the year ended 31st
March, 2013: Net Profit Rs. 50 lakhs ,Number of equity shares in the beginning of the year 10 lakhs Equity shares issued on 1st Jan., 2013 of Rs. 10,
paid-up value Rs.5 .
(a) 3.85 (b) 3.07
(c) 5.00 (d) 2.5
Ans:D
9) The objective of AS is to bring about consistency in computation of EPS:
(a) 29 (b) 22
(c) 14 (d) 20
Ans:D
10) It is necessary to assign "weighting" because shares get through fresh issue and conversion
or get. due to buyback during the period.
(A) Added deleted (B) Deleted, Added
(C) Both (D) None
Ans:A
11) The concept of takes into consideration the impact of anticipated changes in the
number of shares on EPS.
(A) Fully diluted earnings per share (B) Basic earring per share
(C) Both (D) None of above
Ans:a
12) The object of computation and disclosure of Diluted Earnings per share is to keep the
shareholders informed of effect that would have on the EPS.
(A) Future increase (B) Present increase
(C) Future dilution (D) Present dilution
Ans:C
13) Diluted earnings per share is calculated when there are in capital structure of the enterprise.
The diluted earnings per share is calculated as follows.
(A) Potential Equity Shares (B) Preference shares
(C) Debentures (D) All of the above
Ans: A
14) When the potential equity shares outstanding since the beginning of the accounting year,
the deemed date of conversion will be
(A) Date of the commencement of the year. (B) Date of issue
(C) Date of conversion (D) All of the above
Ans:a
15) When the potential equity shares are issued during the year, the deemed date of conversion
will be
(A) Date of the commencement of the year. (B) Date of issue
(C) Date of conversion (D) All of the above
Ans:b
16) A potential Equity Shares is dilutive if after giving the effect of their conversion into Equity
Shares the recalculated EPS is the basic earnings per share.
(A) More than (B) Equal to
(C) Less than (D) None of the above
Ans:C
17) A potential Equity Shares is anti-dilutive if after giving the effect of their conversion into
Equity Shares, the recalculated EPS is the basic earning per shares.
(A) More than (B) Equal to
(C) Less than (D) None of the above
Ans:A
18) As per the Accounting Standard-20, which of the following are not potential equity shares?
(a) Redeemable preference shares (b) Convertible preference shares
(c) Employee stock option plans (d) Convertible debt instruments
Ans:A
Example 1: Number of shares outstanding as on 01-01-2010 are 2000. Fresh issue of 600 shares for cash on 31-05-2010. Buy back of 300 shares on 01-11-2010.
Solution: The weighted average outstanding number of shares = (2000 x 12/12) + (600 x 7/12) – (300 x 2/12) = 2300 shares
Example 2: Opening balance of shares as on 01-01-2010 is 2000 shares. On 31-10-2010, issue of 600 shares of Rs. 10 each, Rs. 5 paid up.
Solution: As per AS 20, partly paid up equity shares should be calculated in the ratio of amount paid up to face value (amount paid / face value). The weighted average outstanding number of shares = (2000 x 12/12) + (600 x 5/10 x 2/12) = 2050 shares
Example 3: On 01-01-2010, 2 Lac equity shares of Rs. 10 each fully paid up. On 30-06-2010, fresh issue of 2 lac equity shares of Rs. 5 each fully paid up.
Solution: The weighted average outstanding number of shares = (2,00,000 x 12/12) + (2,00,000 x 5/10 x 6/12) = 2,50,000 shares
Example 4: Net profit for the year 2010 is Rs. 18 lacs. Net profit for the year 2011 is Rs. 60 lacs. Number of equity shares outstanding till 30-09-2010 is 20 lacs. Bonus issue on 01-10-2011 = 2 (new): 1(old). Calculate EPS for the year 2011 and adjusted EPS for the year 2010.
Solution: As per AS 20, when bonus shares are issued during the year, it should be calculated in the weighted average from the beginning of reporting period irrespective of issue date. Therefore, the bonus issue is treated as if it had occurred prior to the beginning of the year 2010, the earliest period reported.
Example 5: Net profit for the year 2010 is Rs. 11,00,000 and for the year 2011 is Rs. 15,00,000. Number of shares outstanding prior to right are 5,00,000 shares. Right issue of one new share for each five outstanding at right issue price of Rs. 15. Last date to exercise rights is 01-03-2011. Fair value of one equity share immediately prior to exercise of rights on 01-03-2011 is Rs. 21. Compute basic EPS for the year 2011 and adjusted EPS for the year 2010.
Solution: As per Para 22, Theoretical ex-rights fair value per share = (Fair value of all shares prior to rights + Right issue proceeds) / Number of shares outstanding post right issue = {(Rs. 21 x 5,00,000 shares) + (Rs. 15 x 1,00,000 shares)} / 5,00,000 shares + 1,00,000 shares = Rs. 20 Bonus element = Fair value per share prior to exercise of rights / Theoretical ex-rights value per share = 20 / 21 = 1.05
CHAPTER - 2 = EMPLOYEES BENEFITS
1. Gratuity and Pension are examples of
(A) Short-term employees benefits
(B) Post-employment benefits
(C) Long-term employees benefits
(D) Termination benefits
2. Actuarial gain or loss is the different between
(A) Fair-value of plan assets at the beginning and the end of the year
(B) Expected return on plan assets and actual return on plan assets.
(C) Present value of defined benefit obligation at the beginning and at the end of the year
(D) Current service cost and past service cost.
3. Basic principles for accounting short-employee benefits are that the undiscounted amount of short term employee benefits should be recognized when the employee _______ service.
(A) Resign from the
(B) Dismissed from the
(C) Rendered
(D) Retired from the
4. _______ arises when an enterprise introduces a defined benefit plan or changes in the benefits payable under an existing defined benefit plan.
(A) Interest Cost
(B) Current Service Cost
(C) Past Service Cost
(D) Auctorial Gain and Losses
5. _________ benefits are conditional upon fulfillment of future employment conditions.
(A) None vested
(B) Short term
(C) Vested
(D) Long term
6. _________ this represents paid — leave - of -absence, subject to the proviso that unveiled portion cannot be carried forward.
(A) Accumulating Compensating Absences
(B) Non-accumulating Compensating Absences
(C) Both
(D) None
7. Non-accumulating Compensating Absence is popularly called as
(A) Casual leave
(B) Earned leave
(C) Sick leave
(D) All of the above
8. ________ benefits are employee benefits (other than termination benefits) which are payable after the completion of employment,
(A) Pre — employment
(B) On job
(C) Post employment
(D) None
9. Post employee benefits include termination benefits.
(A) Does
(B) Both
(C) Does not
(D) None
10. Accounting for defined benefit plans is ________ because actuarial assumptions are required to measure the obligation and the expense.
(A) Simple
(B) A verage
(C) Complex
(D) All of the above
11. __________ plan is a plan where employer and employee contribute a fixed sum to the plan and some are invested in separate entity.
(A) Defined benefits
(B) Defined contribution
(C) Employees benefits
(D) All of the above
12. ________ Plans usually includes participation of two or more unrelated employee by creating independent entity.
(A) Multi-employer
(B) Insured benefits
(B) State
(D) All of the above
13. ________ plan are established by legislation to cover all enterprises or all enterprises of a specific industry and are operated by Government.
(A) Multi employer
(B) Insured benefits
(C) State
(D) All of the above
14. Provident Fund administrated by the Govt. of Indiais an example of ________ plan.
(A) Multi employer
(B) Insured benefits
(C) Slate
(D) All of the above
15. ________ is the increase in the present value of the defined benefit obligation resulting from employee service in the current period
(A) Interest cost
(B) Current service cost
(C) Post service cost
(D) All of the above
16. To determine the present value of its defined benefit obligations and the related current service cost and where applicable past service cost and enterprise should use the
(A) Discounted cash flow method
(B) Present value method
(C) Projected Unit Credit Method
(D) Projected cash flow method
17. _______ are enterprises best estimates of the variables that will determine the ultimate cost of providing post employment benefits.
(A) Actuarial assumption
(B) Employer’s. Assumptions
(C) Accountant's assumption
(D) All of the above
18. The discount rate should be determined by reference to market yield at the balance sheet date on
(A) Company's shares
(B) Company's debentures
(C) Government bonds
(D) All of the above
19. Actuarial gains and losses should be recognized in the statement of profit and loss as income or expenses.
(A) Immediately
(B) At the end of the year
(C) After one year
(D) None
20. _________ is measured as the change in the liability resulting from the amendment.
(A) Interest Cost
(B) Current Service Cost
(C) Post service cost
(D) All of the above
21. The difference between the expected return on plan assets and the actual return on plan assets is
(A) An actuarial gain or loss
(B) Gain or loss on plan assets
(C) Both
(D) None
22. As per AS-15, a provident fund which guarantees a specified rate of return is a:
(A) Defined Benefit Plan
(B) Defined Contribution Plan
(C) Insured Benefit Plan
(D) None of a, b and c
23. Which of the following is not a type of Defined Contribution Plans?
(A) Employed plans
(B) Multi-employer plans
(C) State Plans
(D) Insured Benefit
24. To measure obligation-under defined benefit plan, the discount rate should tie determined by reference to:
(A) Market yield on Government bonds at the beginning of the year
(B) Market yield on Government bonds at the balance sheet date
(C) Higher of (a) or (b) above
(D) Lower of (a) or (b) above
25. Arise when an enterprise introduces a defined benefit plan or changes in the benefits payable under an existing defined benefit plan.
(A) Interest cost
(B) Current service cost
(C) Past service cost
(D) Actuarial gains and losses
26. AS-15 applies to accounting of all employee benefits except
(A) Employee Stock Options
(B) Salary and Wages
(C) Gratuity and Pension
(D) Social Security Contribution
27. _________ benefits are recognized as an expense immediately.
(A) Short term benefits
(B) Termination
(C) Both
(D) None
28. Benefits in the form of employee share - based payment like Stock option ______ covered by this standard.
(A) Are
(B) Both
(C) Are not
(D) None
29. _______ Employee benefits are employee benefits that are not conditional on future employment.
(A) Non— vested
(B) Short term
(C) Vested
(D) Long term
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