Question 1

Audited financial statements are prepared by

Accepted Answer

A) auditors. 
B) financial analysts. 
C) Canada Revenue Agency. 
D) management. 
A) auditors. 
B) financial analysts. 
C) Canada Revenue Agency. 
D) management. D

Question 2

Which of the following is NOT a method of disclosing additional information in the financial statements?

Accepted Answer

A) supporting schedules 
B) parenthetical explanations 
C) cross reference and contra items 
D) press releases 
A) supporting schedules 
B) parenthetical explanations 
C) cross reference and contra items 
D) press releases B

Question 3

Which of the following is correct regarding vendor rebates?

Accepted Answer

A) Vendor rebates are generally recorded as a reduction from sales. 
B) The rebate is never recognized until it is actually received.
Inventory 8 - 15 
C) If the rebate meets asset recognition criteria, the receivable is allocated to goods sold. 
D) Vendor rebates are generally recorded as a reduction in the purchase cost of inventory. 
A) Vendor rebates are generally recorded as a reduction from sales. 
B) The rebate is never recognized until it is actually received.
Inventory 8 - 15 
C) If the rebate meets asset recognition criteria, the receivable is allocated to goods sold. 
D) Vendor rebates are generally recorded as a reduction in the purchase cost of inventory. D

Question 4

Principles-based GAAP is sometimes criticized for being

Accepted Answer

A) too inflexible. 
B) too flexible. 
C) too inconsistent. 
D) too difficult for the reader to understand. 
A) too inflexible. 
B) too flexible. 
C) too inconsistent. 
D) too difficult for the reader to understand.

Question 5

When deciding whether to recognize a financial statement element (or not), and how to measure it, the accountant should

Accepted Answer

A) always use estimates. 
B) record "hard" numbers and ignore "soft" numbers. 
C) determine an acceptable level of uncertainty. 
D) recognize a financial statement element even if it cannot be measured. 
A) always use estimates. 
B) record "hard" numbers and ignore "soft" numbers. 
C) determine an acceptable level of uncertainty. 
D) recognize a financial statement element even if it cannot be measured.

Question 6

Unusual gains and losses are items on the income statement that

Accepted Answer

A) are typical of everyday activities but do not occur frequently. 
B) are not typical of everyday activities or do not occur frequently. 
C) include writedown of inventories and writeoff of bad debts. 
D) are not usually disclosed separately. 
A) are typical of everyday activities but do not occur frequently. 
B) are not typical of everyday activities or do not occur frequently. 
C) include writedown of inventories and writeoff of bad debts. 
D) are not usually disclosed separately.

Question 7

Which of the following elements of financial statements is NOT a component of comprehensive income?

Accepted Answer

A) Revenues 
B) Distributions to owners 
C) Losses 
D) Expenses 
A) Revenues 
B) Distributions to owners 
C) Losses 
D) Expenses

Question 8

When a realtor sells a house for a client, he/she

Accepted Answer

A) takes temporary title to the property until the client moves in. 
B) has the risks and rewards of ownership until the client moves in. 
C) receives a commission on the sale but does not hold title to the property. 
D) does hold title to the property but has the risks and rewards of ownership until the client
Moves in. 
A) takes temporary title to the property until the client moves in. 
B) has the risks and rewards of ownership until the client moves in. 
C) receives a commission on the sale but does not hold title to the property. 
D) does hold title to the property but has the risks and rewards of ownership until the client
Moves in.

Question 9

Significant changes to the presentation of financial statements are currently being developed by the IASB and FASB.Which of the following best describes the focus of these changes?

Accepted Answer

A) to better highlight the company's assets, liabilities and equity. 
B) to segregate the company's operating, financing and investing activities.
Financial Position and Cash Flows 5 - 15 
C) to highlight the company's major business and financing activities. 
D) to increase the number of notes to be attached to financial statements. 
A) to better highlight the company's assets, liabilities and equity. 
B) to segregate the company's operating, financing and investing activities.
Financial Position and Cash Flows 5 - 15 
C) to highlight the company's major business and financing activities. 
D) to increase the number of notes to be attached to financial statements.

Question 10

All else being equal, which of the following statements with respect to the impact of inventory errors is NOT correct?

Accepted Answer

A) An overstatement of ending inventory will result in an understatement of income. 
B) An overstatement of ending inventory will result in an overstatement of income. 
C) An overstatement of beginning inventory will result in an understatement of income. 
D) An understatement of beginning inventory will cause cost of goods sold to be understated. 
A) An overstatement of ending inventory will result in an understatement of income. 
B) An overstatement of ending inventory will result in an overstatement of income. 
C) An overstatement of beginning inventory will result in an understatement of income. 
D) An understatement of beginning inventory will cause cost of goods sold to be understated.

Question 11

Management Discussion and Analysis (MD&A)is

Accepted Answer

A) notes on meetings between management and auditors. 
B) internal documents not released to shareholders. 
C) supplementary information included in the annual report. 
D) supplementary information included in the notes to the financial statements.
Conceptual Framework Underlying Financial Reporting 2 - 13 
A) notes on meetings between management and auditors. 
B) internal documents not released to shareholders. 
C) supplementary information included in the annual report. 
D) supplementary information included in the notes to the financial statements.
Conceptual Framework Underlying Financial Reporting 2 - 13

Question 12

Which of the following is NOT an objective of financial reporting?

Accepted Answer

A) To provide information about an entity's economic resources, obligations and equity/net
Assets 
B) To provide information that is useful to investors and creditors and other users in making
Resource allocation decisions and/or assessing management stewardship 
C) To provide information that is useful in assessing the economic performance of the entity 
D) To provide the most useful information possible even if the costs exceed the benefits 
A) To provide information about an entity's economic resources, obligations and equity/net
Assets 
B) To provide information that is useful to investors and creditors and other users in making
Resource allocation decisions and/or assessing management stewardship 
C) To provide information that is useful in assessing the economic performance of the entity 
D) To provide the most useful information possible even if the costs exceed the benefits

Question 13

Rational entity impairment model Cougar Corp.'s balance sheet includes the following asset:   After performing its annual review for impairment, Cougar obtains the following data:   Instructions Assuming Cougar uses the rational entity impairment model, 
a)Calculate the recoverable amount.
b)Calculate the impairment loss.
c)Prepare the entry to record the impairment loss.

Accepted Answer

a)Recoverable amount: $62,000,

Question 14

Macaroon Corp.has sold goods at terms 1/10, n/30.If the discount is not taken, the amount payable is $8,524.Assuming Macaroon uses the gross method, the entry to record the sale is

Accepted Answer

A) a debit and credit of $7,671.60 to Accounts Receivable and Sales respectively. 
B) a debit and credit of $8,438.76 to Accounts Receivable and Sales respectively. 
C) a debit and credit of $8,524 to Accounts Receivable and Sales respectively. 
D) debits of $8,438.76 and $85.24 to Accounts Receivable and "Forfeited Sales Discounts"
Respectively, and a credit to Sales for the total. 
A) a debit and credit of $7,671.60 to Accounts Receivable and Sales respectively. 
B) a debit and credit of $8,438.76 to Accounts Receivable and Sales respectively. 
C) a debit and credit of $8,524 to Accounts Receivable and Sales respectively. 
D) debits of $8,438.76 and $85.24 to Accounts Receivable and "Forfeited Sales Discounts"
Respectively, and a credit to Sales for the total.

Question 15

The journal entries related to a bank reconciliation

Accepted Answer

A) are taken from the "balance per bank" section only. 
B) may include a credit to Office Expense for bank service charges. 
C) may include a debit to Accounts Receivable for an NSF cheque. 
D) may include a debit to Accounts Payable for an NSF cheque. 
A) are taken from the "balance per bank" section only. 
B) may include a credit to Office Expense for bank service charges. 
C) may include a debit to Accounts Receivable for an NSF cheque. 
D) may include a debit to Accounts Payable for an NSF cheque.

Question 16

Which of the following does NOT correctly describe the concept of net realizable value (NRV)? Inventory 8 - 19

Accepted Answer

A) Estimates of NRV are based on the best evidence available at and shortly after the
Balance sheet date. 
B) NRV generally does not change over time. 
C) NRV generally changes over time. 
D) A new estimate of NRV is required at each balance sheet date. 
A) Estimates of NRV are based on the best evidence available at and shortly after the
Balance sheet date. 
B) NRV generally does not change over time. 
C) NRV generally changes over time. 
D) A new estimate of NRV is required at each balance sheet date.

Question 17

Timeliness is increased by

Accepted Answer

A) quarterly reporting. 
B) comparative financial statements. 
C) representational faithfulness. 
D) annual reporting. 
A) quarterly reporting. 
B) comparative financial statements. 
C) representational faithfulness. 
D) annual reporting.

Question 18

For calendar 2014, Gomez Corporation reported pre-tax income of $70,000.A recount of the company's inventory revealed that 2014 ending inventory was overstated by $10,000.What is Gomez's corrected pre-tax income for 2014?

Accepted Answer

A) $60,000 
B) $80,000 
C) $70,000 
D) $75,000 
A) $60,000 
B) $80,000 
C) $70,000 
D) $75,000

Question 19

Componentization Explain the concept of componentization as it applies to the recognition of PP&E assets.

Accepted Answer

Componentization refers to recognizing m

Question 20

Guitar Construction Corp.contracted to construct a building for $1,500,000.Construction began in 2014 and was completed in 2015.Data relating to the contract follow:   Revenue Recognition 6 - 17 Guitar uses the percentage-of-completion method.For the calendar years 2014 and 2015, respectively, Guitar should report gross profit of

Accepted Answer

A) $270,000 and $170,000. 
B) $900,000 and $600,000. 
C) $300,000 and $140,000. 
D) $0 and $440,000. 
A) $270,000 and $170,000. 
B) $900,000 and $600,000. 
C) $300,000 and $140,000. 
D) $0 and $440,000.

Audited financial statements are prepared by

Which of the following is NOT a method of disclosing additional information in the financial statements?

Which of the following is correct regarding vendor rebates?

Principles-based GAAP is sometimes criticized for being

When deciding whether to recognize a financial statement element (or not), and how to measure it, the accountant should

Unusual gains and losses are items on the income statement that

Which of the following elements of financial statements is NOT a component of comprehensive income?

When a realtor sells a house for a client, he/she

Significant changes to the presentation of financial statements are currently being developed by the IASB and FASB.Which of the following best describes the focus of these changes?

All else being equal, which of the following statements with respect to the impact of inventory errors is NOT correct?

Management Discussion and Analysis (MD&A)is

Which of the following is NOT an objective of financial reporting?

Macaroon Corp.has sold goods at terms 1/10, n/30.If the discount is not taken, the amount payable is $8,524.Assuming Macaroon uses the gross method, the entry to record the sale is

The journal entries related to a bank reconciliation

Which of the following does NOT correctly describe the concept of net realizable value (NRV)? Inventory 8 - 19

Timeliness is increased by

For calendar 2014, Gomez Corporation reported pre-tax income of $70,000.A recount of the company's inventory revealed that 2014 ending inventory was overstated by $10,000.What is Gomez's corrected pre-tax income for 2014?

Componentization Explain the concept of componentization as it applies to the recognition of PP&E assets.

Intermediate Accounting Volume 2

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Exam 1: Intermediate Accounting Volume 1

Audited financial statements are prepared by

Which of the following is NOT a method of disclosing additional information in the financial statements?

Which of the following is correct regarding vendor rebates?

Principles-based GAAP is sometimes criticized for being

When deciding whether to recognize a financial statement element (or not), and how to measure it, the accountant should

Unusual gains and losses are items on the income statement that

Which of the following elements of financial statements is NOT a component of comprehensive income?

When a realtor sells a house for a client, he/she

Significant changes to the presentation of financial statements are currently being developed by the IASB and FASB.Which of the following best describes the focus of these changes?

All else being equal, which of the following statements with respect to the impact of inventory errors is NOT correct?

Management Discussion and Analysis (MD&A)is

Which of the following is NOT an objective of financial reporting?

Macaroon Corp.has sold goods at terms 1/10, n/30.If the discount is not taken, the amount payable is $8,524.Assuming Macaroon uses the gross method, the entry to record the sale is

The journal entries related to a bank reconciliation

Which of the following does NOT correctly describe the concept of net realizable value (NRV)? Inventory 8 - 19

Timeliness is increased by

For calendar 2014, Gomez Corporation reported pre-tax income of $70,000.A recount of the company's inventory revealed that 2014 ending inventory was overstated by $10,000.What is Gomez's corrected pre-tax income for 2014?

Componentization Explain the concept of componentization as it applies to the recognition of PP&E assets.

Intermediate Accounting Volume 2

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