Exam 4: Statements of Financial Position and Changes in Equity; Disclosure Notes

Monetary assets should be disclosed at their fair value on the Balance Sheet.

The entry to accrue a loss contingency would:

Retained earnings restrictions and appropriation both limit the amount of dividends that a company can pay.

Contingent losses should only be accrued if it is likely that a loss will arise due to events that existed at the date of the financial statements and the loss can be reasonably estimated.

Counter-balancing inventory errors have no effect of the statement of comprehensive income.

Preferred shares which guarantee the shareholder only a fixed annual dividend should be classified as:

During the current year, a corporation purchased a parcel of land located in downtown Winnipeg. The company is not currently operating in Manitoba. However, the management expects to be operating at that location within twenty years. If the company does not buy the land now, it would be unable to find suitable land when needed later. The land should be classified on the current balance sheet under the caption:

The current ratio for a firm is 3.68. If the firm then purchases supplies on account, the current ratio will:

Which of the following MAY NOT appear on a company's statement of financial position?

A long-term bond payable is reported on the balance sheet at its maturity amount plus any unamortized premium or minus any unamortized discount.

A corporation reported a balance in retained earnings of $16,500 in its December 31, year 1, balance sheet. During year 1, the company incurred a net loss of $2,500, declared a cash dividend of $1,000, issued additional common shares for $5,000, and recorded a correction of prior years' error, net of tax, of $500 (credit). The balance in retained earnings at January 1, year 1, must have been:

A restriction on Retained Earnings is usually the result of a contractual or legal obligation and is intended to limit the amount of dividends paid.

Other Contributed Capital can arise when shares are retired for more than the original amount paid for the shares.

Strategic investments are not considered financial assets.

The statement of significant accounting policies, which is included in the notes to the financial statements, must include reasons for the selection of one generally accepted accounting method over another generally accepted accounting method.

When material, prepaid expenses must be shown separately on the face of the balance sheet.

Which of the following must a company NOT disclose with regards to any financial instruments which it may possess?

Under IFRS, balance sheet items may be classified as current/non-current or by order of liquidity (or reverse liquidity).

The shareholders' equity section of a consolidated statement of financial position shows the shareholder equity attributable to the parent.

Corrections of errors made in prior periods as well as the cumulative effect of retrospective changes in accounting policy are both shown as an after-tax adjustment to opening retained earnings.