You are on page 1of 16

Chapter 13

1. Which of the following commitments would NOT require disclosure in the financial statement notes? Student Response 1. Large purchases of materials in the normal course of business. 2. Commitments involving significant risk. 3. Payments under non-cancellable operating leases. 4. Major property, plant and equipment expenditures 2. Under current IFRS requirements, a contingent liability is recognized if Student Response 1. the amount of the loss can be reliably estimated and it is probable that an asset has been impaired or a liability incurred as of the financial statement date. 2. the amount of the loss cannot be measured reliably but it is probable that an asset has been impaired or a liability incurred as of the financial statement date. 3. it relates to a lawsuit commenced after the balance sheet date, the outcome of which can be reliably measured. 4. it relates to an asset recognized as impaired after the balance sheet date. 3. A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should Student Response 1. not be accrued unless a written contractual obligation exists. 2. be accrued during the period following vesting. 3. be accrued during the period when the compensated time is expected to be used by employees. 4. be accrued during the period when earned. 100% Value Correct Answer Value 100% Correct Answer Value 100% Correct Answer

4. What are the current International Financial Reporting Standards regarding customer loyalty programs (such as frequent flyer points)? Student Response 1. The current proceeds are to be split between the original transaction and the award credits (as unearned revenue). 2. They are recognized only when customers redeem their points. 3. They are not explicitly addressed. 4. They are recognized only in the financial statement notes. 5. Which of the following statements is FALSE? Student Response 1. Under the cash basis method, warranty costs are charged to expense as they are paid. 2. A company may exclude a short-term obligation from current liabilities if, at balance sheet date, the entity expects to refinance under an existing agreement for at least a year, and the decision is solely at its discretion. 3. Cash dividends should be recorded as a liability when they are declared by the board of directors. 4. Federal income taxes withheld from employees' payroll cheques should never be recorded as a liability 100% Value Correct Answer Value 100% Correct Answer

Chapter 14
1. Moss Corp issued ten year bonds with a maturity value of $400,000. If the bonds were issued at a premium, this indicates that Student Response 1. the market and stated rates were the same. 2. the market rate was higher than the stated rate 3. the stated rate was higher than the market rate. 4. no relationship exists between the two rates. 100% Value Correct Answer

2. An early extinguishment of bonds payable, which were originally issued at a premium, is made by purchasing the bonds between interest dates. At the time of reacquisition Student Response 1. any deferred bond issue costs must be amortized up to the purchase date. 2. the premium must be amortized up to the purchase date. 3. interest must be accrued from the last interest date to the purchase date. 4. all of these statements are correct 3. Which of the following arrangements may represent a possible example of off-balancesheet financing? Student Response 1. Non-consolidated subsidiaries 2. Variable interest entities 3. Operating leases. 4. All of the above 4. When a note payable is issued for property, goods, or services, the present value of the note is measured by Student Response 1. the present value of the property, goods or services. 2. the fair value of the property, goods, or services. 3. the fair value of the debt instrument. 4. any of the above. 5. A contract representing the covenants and other terms of the agreement between the issuer of bonds and the lender is known as a Student Response Value Correct Answer 100% Value Correct Answer 100% Value Correct Answer 100% Value Correct Answer

1. bond indenture. 2. long term note payable. 3. registered bond. 4. bond debenture.

100%

Chapter 15
1. Shareholders' equity is generally classified into two major categories: Student Response 1. Contributed capital and donated capital. 2. Contributed surplus and retained earnings. 3. Retained earnings and Accumulated Other Comprehensive Income. 4. Earned capital and contributed capital 2. The pre-emptive right enables a shareholder to Student Response 1. share proportionately in any new issues of shares in the same class. 2. sell shares back to the corporation at the option of the shareholder. 3. receive cash dividends before other classes of shares without the pre-emptive right. 4. receive the same amount of dividends on a percentage basis as the preferred shareholders. 3. Preferred shares are often issued instead of debt Student Response 1. to avoid paying dividends to the common shareholders. 2. because a corporations debt-to-equity ratio has become 100% Value Correct Answer Value 100% Correct Answer 100% Value Correct Answer

too high. 3. to increase the market value of the shares. 4. none of the above are correct reasons. 4. Under IFRS, the Statement of Changes in Shareholders Equity must include Student Response 1. retained earnings, share capital, and accumulated other comprehensive income 2. share capital and contributed surplus only. 3. share capital, accumulated other comprehensive income, contributed surplus, and retained earnings. 4. share capital and retained earnings only. 5. Noncumulative preferred dividends in arrears Student Response 1. are not paid or disclosed. 2. are paid to preferred shareholders if sufficient funds remain after payment of the current preferred dividend. 3. must be paid before any other cash dividends can be distributed. 4. are disclosed as a liability until paid. Value 100% Correct Answer 100% Value Correct Answer

Chapter 16
1. The three types of market risk are Student Response 1. interest rate, other price, and credit risks 2. currency, interest rate, and liquidity risks. 3. currency, interest rate, and other price risks 4. liquidity, currency, and other price risks. 100% Value Correct Answer

2. Convertible bonds Student Response 1. are usually secured by a first or second mortgage 2. may usually be exchanged for common shares. 3. have priority over all other types of bonds 4. pay interest only in the event earnings are sufficient to cover the interest 3. A forward contract Student Response Value Correct Answer 100% Value Correct Answer

1. commits the contracting parties upfront to do something in 100% the future. 2. has no locked in time period 3. creates a right but not an obligation 4. is generally exchange traded, therefore has a ready market value. 4. A call option is a right to Student Response 1. force another party to buy the underlying security 2. repurchase a previously sold underlying security. 3. sell the underlying security. 4. buy the underlying security. 5. Gains on derivatives should Student Response 1. be booked through net income 2. be recorded as deferred revenue Value 100% Correct Answer 100% Value Correct Answer

3. be booked through other comprehensive income 4. not be recorded

Chapter 17
1. Under IFRS, common shares are also called Student Response 1. ordinary shares 2. non-dilutive shares 3. potential shares 4. treasury shares. 2. When calculating diluted earnings per share, convertible bonds are Student Response 1. assumed converted only if they are antidilutive. 2. ignored 3. assumed converted whether they are dilutive or antidilutive 4. assumed converted only if they are dilutive 3. Assume a corporation has two potentially dilutive convertible securities outstanding. The one that should be used first to calculate diluted earnings per share is the security with the Student Response 1. greater earnings per share adjustment 2. smaller earnings per share adjustment 3. smaller earnings adjustment 4. greater earnings adjustment 4. In calculating basic earnings per share, if the preferred shares are cumulative, the amount that should be deducted as an adjustment to the numerator is the 100% Value Correct Answer 100% Value Correct Answer Value 100% Correct Answer

Student Response 1. preferred dividends in arrears 2. annual preferred dividend times (one minus the income tax rate) 3. annual preferred dividend 4. preferred dividends in arrears times (one minus the income tax rate) 5. Antidilutive securities Student Response 1. include call options and warrants whose exercise price is less than the average market price of common shares. 2. should be ignored in all earnings per share calculations 3. should be included in the calculation of diluted earnings per share but not basic earnings per share 4. are those whose inclusion in earnings per share calculations would cause basic earnings per share to exceed diluted earnings per share.

Value

Correct Answer

100%

Value

Correct Answer

100%

Chapter 18
1. For calculating income tax expense, International Financial Reporting Standards (IFRS) requires the use of Student Response 1. either the taxes payable method or the balance sheet liability method 2. the taxes payable method only 3. the balance sheet liability method only 4. any method as long as the CRA approves it. 2. Basani Corp's taxable income differed from its accounting income for 2012. An item that would create a permanent difference in accounting and taxable incomes for Basani would be 100% Value Correct Answer

Student Response 1. making instalment sales during the year 2. using CCA for tax purposes and straight-line depreciation for book purposes 3. a balance in the Unearned Rent account at year end. 4. a payment of the golf club dues for the presidents membership 3. The effective tax rate for a period is calculated by dividing Student Response 1. total income tax expense by the pre-tax income on the income statement 2. taxable income by total income tax expense 3. total income tax expense by taxable income 4. taxable income by the pre-tax income on the income statement 4.

Value

Correct Answer

100%

Value 100%

Correct Answer

Under IFRS, how are future or deferred tax asset and liability accounts presented on the balance sheet? Student Response 1. They must be segregated into current and noncurrent items 2. They must be shown as noncurrent assets or liabilities 3. They must be reported as a reduction of the related asset or liability accounts 4. They must be shown as current assets or liabilities 5. Allocating income tax expense or benefit for the period (both current and future income taxes) to the income and other statements to reflect transactions that attract income tax is known as Student Response 1. Current tax allocation Value Correct Answer 100% Value Correct Answer

2. Intraperiod tax allocation 3. Reconcilation approach 4. Interperiod tax allocation

100%

Chapter 19
1. In pension accounting, the actuarys main purpose is to Student Response 1. make predictions about mortality rates and employee turnover 2. ensure the employer has established an appropriate funding pattern to meet its pension obligations 3. calculate the current pension cost 4. calculate the interest cost of the pension plan 2. The relationship between the amount funded and the amount reported for pension expense is that: Student Response 1. pension expense must always equal the amount funded 2. pension expense may be greater than, equal to, or less than the amount funded. 3. pension expense will be more than the amount funded 4. pension expense will be less than the amount funded 3. A liability experience gain or loss is an unexpected gain or loss that changes Student Response 1. the amount of benefits paid to retirees 2. the value of the pension plan assets 3. the interest rate to be used for the pension obligation 4. the amount of the accrued benefit obligation 100% Value Correct Answer 100% Value Correct Answer 100% Value Correct Answer

4. Which of the following statements is correct? Student Response 1. There is a general ledger account called Pension Fund Assets 2. There is a general ledger account called Accrued Benefit Obligation 3. Accrued Pension Asset/Liability and Accrued Benefit Obligation should both be reported on the balance sheet 4. There is a general ledger account called Accrued Pension Asset/Liability 5. Corridor amortization for net actuarial gains and losses Student Response 1. can be used for either the immediate recognition approach or the deferral and amortization approach 2. is only used by the actuary 3. only applies when the immediate recognition approach is used 4. amortizes the net accumulated gain or loss when its balance is considered too large 100% Value Correct Answer 100% Value Correct Answer

Chapter 20
1. For a lessee, the minimum lease payments may include Student Response 1. the minimum rental payments and a guaranteed residual value only 2. a bargain purchase option and a guaranteed residual value 3. the minimum rental payments and a bargain purchase option only 4. the minimum rental payments, a bargain purchase option, and a guaranteed or unguaranteed residual value. 100% Value Correct Answer

2. In calculating depreciation of a leased asset, the lessee should subtract a(n) Student Response 1. unguaranteed residual value and depreciate over the economic life of the asset 2. guaranteed residual value and depreciate over the term of the lease. 3. unguaranteed residual value and depreciate over the term of the lease 4. guaranteed residual value and depreciate over the economic life of the asset 3. The obligations under capital leases should be disclosed as Student Response 1. all current liabilities 2. all noncurrent liabilities 3. deferred credits 4. the current portion in current liabilities and the remainder in noncurrent liabilities 4. An essential element in a lease agreement is that the Student Response 1. lease must contain a bargain purchase option 2. lessor transfers less than the total interest in the property 3. rental (lease) payments must be the same for the duration of the lease 4. lessee transfers less than the total interest in the property. 5. Which of the following is a correct statement regarding one of the ASPE capitalization criteria? Student Response Value Correct Answer 100% Value Correct Answer 100% Value Correct Answer 100% Value Correct Answer

1. The lease term is 75% or more of the leased propertys estimated economic life 2. The lease must contain a bargain purchase option 3. The lease transfers ownership of the property to the lessor. 4. The fair value of the minimum lease payments is equal to 90% or more of the present value of the leased asset.

100%

Chapter 21
1. One condition required by IFRS is that a voluntary change in accounting policy must result in information that is Student Response 1. more reliable than before 2. both more reliable and more relevant 3. more reliable, but equally as relevant as before 4. more relevant, but equally as reliable as before 2. Under IFRS, which of the following disclosures is not required for the correction of an accounting error? Student Response 1. The nature of the error 2. The effect of the correction on both basic and diluted earnings per share for each prior period presented 3. The amount of the correction made to each affected financial statement item for each prior period presented 4. Who was responsible for the error 3. An example of a correction of an error in previously issued financial statements is a change Student Response 1. in the service life of plant assets, based on changes in the economic environment Value Correct Answer 100% Value Correct Answer 100% Value Correct Answer

2. from the cash basis of accounting to the accrual basis of accounting 3. in the tax assessment related to a prior period 4. from the FIFO method of inventory valuation to the average cost method 4. Which of the following is not considered to be an accounting error? Student Response 1. Changing depreciation methods from declining-balance to straight line 2. Failing to accrue wages payable at year end. 3. Changing from the cash basis to the accrual basis 4. Expensing the cost of a new machine. 5.

100%

Value 100%

Correct Answer

Which of the following is not considered a change in accounting policy? Student Response 1. Initial adoption of a new accounting standard 2. Change in depreciation method 3. Change from FIFO to weighted average cost 4. Change in accounting for a defined benefit pension plan from deferral and amortization to immediate recognition. 100% Value Correct Answer

Chapter 22
1. The statement of cash flows is required to be included Student Response 1. only for financial statements prepared under IFRS 2. only for financial statements prepared under ASPE (PE GAAP). 3. for financial statements prepared under IFRS, but is Value Correct Answer

optional under ASPE (PE GAAP). 4. for both financial statements prepared under IFRS and under ASPE (PE GAAP). 2. In a statement of cash flows, which of the following would be reported in the cash flows from investing activities section? Student Response 1. Issuance of common shares in exchange for a factory building 2. Stock dividends received 3. Development costs incurred (intangible asset). 4. Declaration of cash dividends 3. When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to cash flows from operating activities? Student Response 1. Depreciation expense 2. A decrease in income taxes payable 3. An increase in bonds payable 4. An increase in prepaid expenses 4. Oyster Corp reports its income from investments by the equity method and recognized income of $25,000 from its investment in Pearl Ltd during the current year, even though no dividends were declared or paid by Pearl during the year. On Oyster's statement of cash flows (indirect method), the $25,000 should Student Response Value Correct Answer 100% Value Correct Answer 100% Value Correct Answer 100%

1. be shown as a deduction from net income in the cash flows 100% from operating activities section. 2. be shown as cash inflow from investing activities 3. be shown as cash outflow from financing activities 4. not be shown 5.

When preparing a statement of cash flows using the direct method, a net loss reported on the income statement will Student Response 1. be disclosed as a note to the statement of cash flows 2. automatically result in a cash outflow from operating activities 3. not be included on the statement at all 4. be included in financing activities 100% Value Correct Answer

You might also like