Problem 1-2 Multiple Choice (PAS 1)

1. Some liabilities, such as trade payables, accruals for employee and other operating
costs, are expected to be settled in more than twelve months after the reporting
period. How will an entity classify these items in the statements of financial
positions?
a. Current
b. Noncurrent
c. First classify as noncurrent since the term is more than twelve months, then
classify to current if the term is less than twelve months.
d. It will depend on the entitys policy
2. Which of the following liabilities that are not part of the normal operating cycle
of an entity should be classified as noncurrent?
a. Financial liabilities classified as held for trading
b. Bank overdrafts
c. Current portion of noncurrent financial liabilities
d. Financial liabilities that provide financing but are not due for settlement within
twelve months after the reporting period

3. With respect to loans classified as current liabilities, all of the following events that
occur between the end of the reporting period and the date the financial statements
are authorized for issue are disclosed as nonadjusting events, except
a. Refinancing on a long term basis
b. The entity has the discretion to refinance an obligation for a shorter period
c. Rectification of a breach of a long-term loan arrangement
d. The granting by the lender of a period to rectify breach of a long-term loan
arrangement ending at least twelve months after the reporting period.
4. Which of the following should be classified as noncurrent liability?
a. Long-term loan arrangement wherein an entity breaches a provision such that the
loan becomes payable on demand. After the reporting period and before
authorization of the financial statements for issue, the lender has agreed not to
demand payment.
b. Bond payable issued with the intention to repurchase in the near term
c. Dividend payable due in two years after the reporting period

d. Trade note payable

5. Which of the following should be classified as noncurrent liability?
a. Trade and other payable
b. Provision
c. Financial liability held for trading
d. Deferred tax liability