These are ACCA F7 (FR) Financial Reporting MCQs for Part-B of the Syllabus “Accounting for transactions in financial statements”.

These multiple-choice questions (MCQs) are designed to help ACCA F7 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

Please note:

Students should not attempt these MCQs until they have finished the entire chapter.
All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F7 (FR) exam.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course:	ACCA – Association of Chartered Certified Accountants
Fundamental Level:	Applied Skills
Subject:	Financial Reporting
Paper:	F7 – FR
Chapter and Topic	05 – Impairment of assets
Syllabus Area:	B – “Accounting for transactions in financial statements”
Questions Type:	CBE MCQs
Exam Section:	Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part-B of the Syllabus; “Accounting for transactions in financial statements” of ACCA F7 (FR) Financial Reporting Module.

Time

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F7 (FR) - Chapter 05 - Part B - MCQs - Impairment of assets

Course: ACCA - Association of Chartered Certified Accountants
Subject: F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Chapter: 05 - Impairment of assets
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

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1 / 9

A cash-generating unit comprises the following assets:

	$'000
Building	700
Plant and equipment	200
Goodwill	90
Current assets	20
	1,010

One of the machines, carried at $40,000, is damaged and will have to be scrapped. The recoverable amount of the cash-generating unit is estimated at $750,000.

What will be the carrying amount of the building after the impairment loss has been recognised? (to the nearest $'000)

$594,000

$577,000

$597,000

$548,000

2 / 9

Lichen Ltd owns a machine that has a carrying amount of $85,000 at the year end of 31 March 20X9. Its market value is $78,000 and costs of disposal are estimated at $2,500. A new machine would cost $150,000. Lichen Ltd expects it to produce net cash flows of $30,000 per annum for the next three years.
The cost of capital of Lichen Ltd is 8%.

What is the impairment loss on the machine to be recognised in the financial statements at 31 March 20X9? $________

Note. You are not required to put $ sign nor any coma. (e.g. 1000)

3 / 9

Which of the following statements are indicators of impairment of impairment under IAS 36 Impairment of Assets?

Advances in the technological environment in which an asset is employed has an adverse impact on its future use
An increase in interest rates which increases the discount rate an entity uses
The carrying amount of an entity's net assets is lower than the entity's number of shares in issue multiplied by its share price
The estimated net realisable value of inventory has been reduced due to fire damage although this value is greater than its carrying amount

Statement 4 only

Statement 1 and 2 only

All four Statements

Statement 1, 2, and 3 only

4 / 9

The RECOVERABLE AMOUNT of an asset is the higher of ______________ and ______________ under IAS 36.

Value in use and Market value

Fair value less costs of disposal and Value in use

Fair value and Fair value less costs of disposal

Fair value and Market value

5 / 9

The net assets of Fyngle Co, a cash-generating unit (CGU), are:

	$
Property, plant and equipment	200,000
Allocated goodwill	50,000
Product patent	20,000
Net current assets (at net realisable value)	30,000
	300,000

As a result of adverse publicity, Fyngle Co has a recoverable amount of only $200,000.

What would be the value of Fyngle Co's property, plant and equipment after the allocation of the impairment loss?

$133,333

$154,545

$160,000

$170,000

6 / 9

The following information relates to an item of plant owned by Bazaar Co:

Its carrying amount in the statement of the financial position is $3 million.
Bazaar Co has received an offer of $2.7 million from a company in Japan interested in buying the plant.
The present value of the estimated cash flows from continued use of the plant is $2.6 million.
The estimated cost of shipping the plant to Japan is $50,000.

What is the amount of the impairment loss that should be recognised on the plant? $_______

Note. You are not required to put $ sign nor any coma. (e.g. 1000)

7 / 9

Riley Co acquired a non-current asset on 1 October 20W9 (ten years before 20X9) at a cost of $100,000 which had a useful life of ten years and a nil residual value. The asset had been correctly depreciated up to 30 September 20X4. At that date the asset was damaged and an impairment review was performed. On 30 September 20X4, the fair value of the asset less costs of disposal was $30,000 and the expected future cash flows were $8,500 per annum for the next five years. The current cost of capital is 10% and a five-year annuity of $1 per annum at 10% would have a present value of $3.79.

What amount would be charged to profit or loss for the impairment of this asset for the year ended 30 September 20X4?

$20,000

$32,215

$17,785

$30,000

8 / 9

IAS 36 Impairment of Assets suggests how indications of impairment might be recognised.

Which TWO of the following would be EXTERNAL INDICATORS that one or more of an entity's assets may be impaired?

A decline in the economic performance of one or more assets

An unusually significant fall in the market value of one or more assets

Evidence of obsolescence of one or more assets

An increase in market interest rates used to calculate value in use of the assets

9 / 9

A business which comprises a single cash-generating unit has the following assets:

	$m
Goodwill	3
Patent	5
Property	10
Plant and equipment	15
Net current assets	2
	35

Following an impairment review it is estimated that the value of the patent is $2 million and the recoverable amount of the business is $24 million.

At what amount should the property be measured following the impairment review?

$7 million

$8 million

$10 million

$5 million

Your score is

	$'000
Total impairment (1,010 – 750)	260
Goodwill	(90)
Damaged plant	(40)
Balance to allocate	‎ 130

Fair value less costs of disposal	(78,000 – 2,500)		$75,500
Value in use:	30,000 × 1 / 1.08	27,778
	30,000 × 1 / 1.08²	25,720
	30,000 × 1 / 1.08³	23,815	$77,313

	$
Fair value less costs of disposal (2.7m – 50,000)	2,650,000
Value in use	2,600,000

Recoverable amount is therefore:	2,650,000
Impairment loss (β)	350,000
Carrying amount	3,000,000

		$‎ ‎ ‎ ‎
Carrying amount	(100,000 × 5/10)	50,000
Fair value less costs to sell		30,000
Value in use	(8,500 × 3.79)	32,215

F7 (FR) – Chapter 5 – PART B – CBE MCQs – ACCA