Question 1

In order to assess the financial performance of a company, the financial statements must

Accepted Answer

A)  be prepared on a monthly basis. 
B)  provide information on management's use of the company's resources. 
C)  be audited annually. 
D)  provide information concerning changes in the company's share price. 
A)  be prepared on a monthly basis. 
B)  provide information on management's use of the company's resources. 
C)  be audited annually. 
D)  provide information concerning changes in the company's share price.

Question 2

Which of the following is not a criterion pertaining to revenue recognition for the sale of goods under the earnings approach?

Accepted Answer

A)  Amount of returns is known with certainty. 
B)  Collection is reasonably assured. 
C)  Amount of the revenue can be reliably measured. 
D)  Significant risks and rewards of ownership have been transferred to the buyer. 
A)  Amount of returns is known with certainty. 
B)  Collection is reasonably assured. 
C)  Amount of the revenue can be reliably measured. 
D)  Significant risks and rewards of ownership have been transferred to the buyer.

Question 3

Spanish Marine Supplies is a marine supplier of tugboat engines. As part of the selling process, the company will install the tugboat engine, conduct sea trials on the engine, provide any servicing required on the engine for the first year of operation, and not require a payment from the client until 60 days after the client's acceptance of the engine. The engine will remain the property of Spanish until the first payment is made, even though the boat is not the property of Spanish. The company's customers frequently ask Spanish to customize the engines to suit their needs. These customization changes can be extensive and may take several months.
Instructions
Comment on when you think Shediac should recognize revenue.

Accepted Answer

Revenue is recognized when all of the fo

Question 4

Revenue recognition criteria state that revenue is recognized at the same time that a decrease in an asset is recognized or an increase in a liability is recognized for profit-generating activities.

Accepted Answer

A) True 
 B)False

Question 5

Target Security Company provides surveillance services to numerous corporate customers. The company has recently signed a new surveillance contract with Martin Manufacturing on January 1 for a period of one month at a cost of $ 500. On January 31, Target completed the contract and invoiced Martin for the full contract price due in 30 days.
Instructions
Complete the following steps to determine if the appropriate criteria have been met for Target to recognize revenue under the contract-based approach to revenue recognition. Be sure to conclude whether Target can recognize the revenue and when it would be appropriate to do so.
1. Is there a contract?
2. What is the performance obligation?
3. What is the transaction price?
4. Is there a need to allocate the selling price?
5. Has the performance obligation been satisfied?

Accepted Answer

1. Yes. Target and Martin signed a contr

Question 6

For each of the independent situations described below, list the assumption, concept, constraint, or recognition criteria that have been violated and describe the appropriate treatment.
1. MacDonald Industrial purchased a piece of land that was listed for $ 150,000. The company worked very hard in negotiations and both parties agreed on a purchase price of $ 139,000. Lawson's accountant has recorded the land on the books at $ 150,000 because she felt this was the most representative fair value at the time of purchase.
2. Chantal's Hair Salon purchases many different hair and cosmetic supplies to be used within the salon and sold to customers. Darlene only has one credit card that she uses to make personal and business purchases. She often gets confused which purchases are for business purposes so she records all credit card transactions through the salon.
3. Buddie's Furniture operates in a small town and often sells on credit without any detailed credit checks. The company sold merchandise to Darcy last year and he failed to pay the amount owing so Buddie wrote off his account. Buddie has recently made another sale to Darcy on credit for $ 12,000 without any security on the transaction. Buddie records all sale transactions once the goods are delivered and title passes.
4. Fancy Diamonds is a Canadian company that reports its financial statements in Canadian dollars. The company often sells its diamonds to customers in the United States and receives U.S. dollars. Fancy records the U.S. dollar amounts within the accounting records without any currency exchange.

Accepted Answer

1. Cost principle - GAAP requires that i

Question 7

A number of unrelated transactions recorded by Farm Company are as follows:   Instructions
For each of the above situations, identify the accounting assumption, concept, constraint, or recognition criteria that have been violated. Prepare the correct journal entry as it should have been made. If no entry should have been made, or if additional financial statement disclosure is required, explain.

Accepted Answer

The answer of A number of unrelated transactions recorded by...

Question 8

Which is not necessary to ensure that faithful representation is achieved?

Accepted Answer

A)  Accounting information is reported on a cash basis. 
B)  Accounting information is free from material error. 
C)  Accounting information is complete. 
D)  Accounting information is neutral. 
A)  Accounting information is reported on a cash basis. 
B)  Accounting information is free from material error. 
C)  Accounting information is complete. 
D)  Accounting information is neutral.

Question 9

Fair value is the amount of cash expected to be collected if the asset is sold.

Accepted Answer

A) True 
 B)False

Question 10

A company can change to a new accounting principle if management can justify that the new principle results in

Accepted Answer

A)  more relevant and faithful representation of the financial presentation in the statements. 
B)  a higher profit. 
C)  a lower profit for tax purposes. 
D)  less likelihood of clerical errors. 
A)  more relevant and faithful representation of the financial presentation in the statements. 
B)  a higher profit. 
C)  a lower profit for tax purposes. 
D)  less likelihood of clerical errors.

Question 11

The summary of significant accounting policies footnoted in the financial statements would not normally discuss

Accepted Answer

A)  depreciation methods. 
B)  board of directors' salaries. 
C)  method of inventory costing. 
D)  revenue recognition policies. 
A)  depreciation methods. 
B)  board of directors' salaries. 
C)  method of inventory costing. 
D)  revenue recognition policies.

Question 12

Retailers who sell a product with a warranty period can recognize revenue when

Accepted Answer

A)  the warranty period has expired. 
B)  at the point of sale if the warranty amount can be estimated. 
C)  when cash is collected. 
D)  when the exact cost of the items sold is known. 
A)  the warranty period has expired. 
B)  at the point of sale if the warranty amount can be estimated. 
C)  when cash is collected. 
D)  when the exact cost of the items sold is known.

Question 13

Timeliness means that accounting information is provided when it is still highly useful for decision-making.

Accepted Answer

A) True 
 B)False

Question 14

The conceptual framework ensures that existing standards and practices are clear and consistent.

Accepted Answer

A) True 
 B)False

Question 15

Match between columns
                        Premises: Information that is helpful in assessing management's performance
Confirmatory value
Timeliness
Comparability-consistency
Information that is useful in making resource allocation decisions
Neutral
Expense
Full disclosure principle
Owners' equity
Faithful representation

Accepted Answer

The Answer of Qualitative Characteristics of Accounting Information and Objective is...

Question 16

Match between columns
                        Premises: Insurance expense is recorded each month, although the insurance policy covers a full year and is paid annually.
A company's accountant notices that the petty cash account was not adjusted prior to preparing the year-end financial statements and the account balance is incorrect by $ 13.52. However, the accountant decides to release the financial statements without making the correction.
The company's sales are made on credit, but to keep accounting costs down, sales are recorded when the customer accounts are paid.
When preparing financial statements, the company's policy is to record all correcting entries, whether the correction is for $ 200,000 or $ 2.
The proprietor's babysitting costs are recorded in the company expense accounts.
After obtaining an independent appraisal that indicated a significant increase in value over original cost, the company restated its land at the higher amount. The company has not adopted the revaluation model for accounting for long-lived assets.
A former employee has sued the company for a large amount, but no mention is made of this case in the financial statements.
One third of the company's sales were made to a related party and this fact is disclosed in the financial statements.
The company has a large number of accounts receivable that individually have small balances. In order to determine the allowance for doubtful accounts, the company uses an estimate based on past experience rather than taking the time to evaluate the collectibility of individual accounts.
A patent with an indefinite life has an original cost of $ 12,500 although the company was recently offered $ 1,000,000 by another company who wants to buy it.
The proprietor of an unincorporated business maintains two bank accounts and two sets of accounting records—one for household expenses, and the other for business purposes.
Interest is payable semi-annually and is recorded only when paid, with no adjustment at year end even though payment dates do not coincide with the year-end date.
All assets are restated at their liquidation values.
The company records revenue when services are provided, not when the customers pay for the service.
The company's inventory's cost is $ 50,000, its retail value is $ 120,000, and if liquidated could be sold at auction for $ 30,000. The inventory is reported at $ 50,000 on the company's balance sheet.
The company accountant recently spent two days calculating the accrued utilities expense on 130 individual apartments for the last few days of the year. In the past, the amounts were estimated.

Accepted Answer

The Answer of Cost concept and Cost constraint and Full is...

Question 17

Using the contract-based approach to revenue recognition, the entity will record revenue at the amount that it expects to receive.

Accepted Answer

A) True 
 B)False

Question 18

Canadian and International standards are based on specific rules for accounting.

Accepted Answer

A) True 
 B)False

Question 19

Under ASPE, the characteristic which ensures, that when preparing financial statements, accountants should choose the accounting treatment or estimate that will be least likely to overstate assets, revenues, and gains and the least likely to understate liabilities, expenses, and losses is

Accepted Answer

A)  conservatism. 
B)  understandability. 
C)  comparability. 
D)  relevance. 
A)  conservatism. 
B)  understandability. 
C)  comparability. 
D)  relevance.

Question 20

Which statement below is not true?

Accepted Answer

A)  The conceptual framework includes specific rules for every situation. 
B)  The conceptual framework ensures the existing standards and practices are clear and consistent. 
C)  The conceptual framework provides guidance in responding to new issues and developing new standards. 
D)  The conceptual framework increases financial statement users' understanding of and confidence in the financial statements. 
A)  The conceptual framework includes specific rules for every situation. 
B)  The conceptual framework ensures the existing standards and practices are clear and consistent. 
C)  The conceptual framework provides guidance in responding to new issues and developing new standards. 
D)  The conceptual framework increases financial statement users' understanding of and confidence in the financial statements.

In order to assess the financial performance of a company, the financial statements must

Which of the following is not a criterion pertaining to revenue recognition for the sale of goods under the earnings approach?

Revenue recognition criteria state that revenue is recognized at the same time that a decrease in an asset is recognized or an increase in a liability is recognized for profit-generating activities.

Which is not necessary to ensure that faithful representation is achieved?

Fair value is the amount of cash expected to be collected if the asset is sold.

A company can change to a new accounting principle if management can justify that the new principle results in

The summary of significant accounting policies footnoted in the financial statements would not normally discuss

Retailers who sell a product with a warranty period can recognize revenue when

Timeliness means that accounting information is provided when it is still highly useful for decision-making.

The conceptual framework ensures that existing standards and practices are clear and consistent.

Using the contract-based approach to revenue recognition, the entity will record revenue at the amount that it expects to receive.

Canadian and International standards are based on specific rules for accounting.

Under ASPE, the characteristic which ensures, that when preparing financial statements, accountants should choose the accounting treatment or estimate that will be least likely to overstate assets, revenues, and gains and the least likely to understate liabilities, expenses, and losses is

Which statement below is not true?

Long-Lived Assets

Current Liabilities and Payroll

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and IFRS

Non-Current Liabilities

Investments

The Cash Flow Statement

Financial Statement Analysis

Understanding Interest, Annuities, and Bond Valuation

Filters

Exam 3: Financial Reporting Concepts

In order to assess the financial performance of a company, the financial statements must

Which of the following is not a criterion pertaining to revenue recognition for the sale of goods under the earnings approach?

Revenue recognition criteria state that revenue is recognized at the same time that a decrease in an asset is recognized or an increase in a liability is recognized for profit-generating activities.

Which is not necessary to ensure that faithful representation is achieved?

Fair value is the amount of cash expected to be collected if the asset is sold.

A company can change to a new accounting principle if management can justify that the new principle results in

The summary of significant accounting policies footnoted in the financial statements would not normally discuss

Retailers who sell a product with a warranty period can recognize revenue when

Timeliness means that accounting information is provided when it is still highly useful for decision-making.

The conceptual framework ensures that existing standards and practices are clear and consistent.

Using the contract-based approach to revenue recognition, the entity will record revenue at the amount that it expects to receive.

Canadian and International standards are based on specific rules for accounting.

Under ASPE, the characteristic which ensures, that when preparing financial statements, accountants should choose the accounting treatment or estimate that will be least likely to overstate assets, revenues, and gains and the least likely to understate liabilities, expenses, and losses is

Which statement below is not true?

Long-Lived Assets

Current Liabilities and Payroll

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and IFRS

Non-Current Liabilities

Investments

The Cash Flow Statement

Financial Statement Analysis

Understanding Interest, Annuities, and Bond Valuation

Filters