*c. relevant and faithful representation.
d. Probability of occurrence and Control.
General Feedback:
Learning objective 1.9: explain the criteria for recognising and derecognising the elements of financial statements.
19. James Ltd purchased a block of land on 31 March and paid $300 000 cash to the land owner. An independent evaluation reveals that the land is worth $550 000. Using historical cost as a measurement base, how should James Ltd recognise this purchase of land in its financial statements?
a. $300 000 recognised as an asset (land) and $250 000 as a liability.
*b. $300 000 recognised as an asset (land).
c. $550 000 recognised as an asset (land).
d. The land should not be recognised as an asset as it cannot be reliably measured.
General Feedback:
Learning objective 1.10: compare alternative measurement bases for measuring the elements of financial statements.
20. Which of the following statements is incorrect about the physical capital concept?
*a. The general price level accounting system follows the physical capital concept.
b. Capital is seen as the operating capability of the entity's assets.
c. Profit is earned after an entity has set aside enough capital to maintain the operating capability of the entity's assets.
d. Physical capital may be measured under a current value system.
General Feedback:
Learning objective 1.12: outline concepts of capital.