1. For companies with patterns of increasing R&Dexpenditure, the expenses avoided by capitalization in a givenperiod exceed that period's amortization charges. In such cases,what would be the impact of R&D capitalization on the reportedprofits?

a. The reported profits would be inflated relative to afull-expensing system.

b. The reported profits would be deflated relative to afull-expensing system.

c. There would be no impact on the reported profits.

d. The reported profits would be doubled, compared to afull-expensing system.

2. "Costs that are excluded from the costs of inventories areabnormal amounts of ______ materials, labor, or other productioncosts and storage costs that are not related to the productionprocess."

a. wasted

b. direct

c. manufacturing

d. production

3. The removal of an asset or liability from the balance sheetand the accounts refers to ______.

a. derecognition

b. deletion

c. recognition

d. removal

e. None of the choices

4. According to IAS 2, the net realizable value is computed bysubtracting the estimated costs of completion and the estimatedcosts necessary to make the sale from ______.

a. the estimated selling price in the ordinary course ofbusiness

b. the estimated selling price in a booming market condition

c. the historical cost or the original purchase price

d. the estimated selling price in a recession

5. The acquisition costs of property, plant, and equipment donot include:

a. Maintenance costs during the first 30 days of use.

b. Legal fees, delivery charges, installation, and anyapplicable sales tax.

c. The net invoice price.

d. The ordinary and necessary costs to bring the asset to itsdesired condition and location for use.

6. According to International Financial Reporting Standards(IFRS), the revaluation of equipment when fair value exceeds bookvalue, results in

a. An increase in other comprehensive income.

b. A decrease in other comprehensive income.

c. A decrease in net income.

d. An increase in net income.

7. Under U.S. GAAP, research and development costs for projectsother than software development should be:

a. Expensed in the period incurred.

b. Expensed if unsuccessful, capitalized if successful.

c. Deferred pending determination of success.

d. Expensed in the period they are determined to beunsuccessful.

10. IAS 16 covers all of the following aspects of accounting forfixed assets, except ______.

a. recognition of initial costs of merchandise held forresale

b. depreciation

c. recognition of initial costs of property, plant, andequipment

d. measurement at initial recognition

e. All of the choices are covered in IAS 16.