According to the bonus plan hypothesis of Positive Accounting Theory, within the available set of accounting policies, management will tend to choose: (1) Accounting methods that increase current period reported income (where the bonus plan is based on reported profit). (2) Asset increasing accounting policies (where there is a positive link between asset values and the bonus plan). (3) Accounting methods that decrease current period reported income (where the bonus plan is based on reported profit). Which of the above statements is/are correct? According to the bonus plan hypothesis of Positive Accounting Theory, within the available set of accounting policies, management will tend to choose: (1) Accounting methods that increase current period reported income (where the bonus plan is based on reported profit). (2) Asset increasing accounting policies (where there is a positive link between asset values and the bonus plan). (3) Accounting methods that decrease current period reported income (where the bonus plan is based on reported profit). Which of the above statements is/are correct? Statements (1) and (2) Statement (1) only Statement (2) only Statement (3) only

According to the bonus plan hypothesis: According to the bonus plan hypothesis: Managers of firms with bonus plans are more likely to use accounting methods that increase current period’s reported income. None of the given options is correct Managers of firms with bonus plans are more likely to use accounting methods that reduce current period’s reported income. Managers of firms with bonus plans are more likely to use accounting methods which would help in the fair reporting of the current period’s reported income.

If a firm has a profit-related bonus scheme and the expected profit performance is just below the target profit which would trigger the bonus plan, which of the following accounting choices is most likely to be made by managers who behave as Positive Accounting Theory predicts? If a firm has a profit-related bonus scheme and the expected profit performance is just below the target profit which would trigger the bonus plan, which of the following accounting choices is most likely to be made by managers who behave as Positive Accounting Theory predicts? Expense interest rather than capitalise interest. Postpone sales revenue to a future period. Bring forward discretionary expenses to the current period. Capitalise interest rather than expense interest.

Which of the following statements is true about Bonus shares?(1.0 Marks)They Are Issued At A Discounted PriceAExisting Shareholders Pay For ThemBThey Are Issued To New InvestorsCThey Are Issued Out Of Free Reserves And Surplus

11. Many commentators believe that the trend of earnings per share (EPS) is a more reliable indicator of underlying performance than the trend of the net profit for the year. Which of the following statements supports this view? A Net profit can be manipulated by the choice of accounting policies but EPS cannot be manipulated in this way. B EPS takes into account the additional resources made available to earn profit when new shares are issued for cash, whereas net profit does not. C The disclosure of a diluted EPS figure is a forecast of the trend of profit for future periods. D The comparative EPS is restated where a change in accounting policy affects the previous year’s profits. 12. Which TWO of the following statements about IAS 20 Accounting for Government Grants and Disclosure of Government Assistance are true? A A government grant related to the purchase of an asset must be deducted from the carrying amount of the asset in the statement of financial position. B A government grant related to the purchase of an asset should be recognised in profit or loss over the life of the asset. C Free marketing advice provided by a government department is excluded from the definition of government grants. D Any required repayment of a government grant received in an earlier reporting period is treated as prior period adjustment

A firm’s debt contract contains a covenant placing a maximum value on balance sheet gearing and the firm’s gearing is approaching the maximum. Which of the following accounting choices is most likely to be made by managers as Positive Accounting Theory predicts: A) To expense interest rather than capitalise interest B) To renegotiate tax payments C) To postpone sales revenue to a future period D) To take advantage of an off-balance sheet finance scheme to reduce long- term borrowings