Accounting Principles II Practice Exam
Course Introduction
Accounting Principles II builds upon the foundational concepts introduced in Accounting Principles I, delving deeper into financial accounting and introducing key elements of managerial accounting. The course covers topics such as the accounting for merchandise operations, internal controls, receivables, inventories, long-term assets, liabilities, shareholders' equity, and cash flow statements. It also addresses the use of accounting information in decision-making for planning, controlling, and evaluating business operations. Throughout the course, students enhance their analytical skills by interpreting financial statements and applying accounting principles to real-world business scenarios.
Recommended Textbook
Intermediate Accounting Vol. 1 4th Edition by Kin Lo
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10 Chapters
1100 Verified Questions
1100 Flashcards
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Page 2
Chapter 1: Fundamentals of Financial Accounting Theory
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33 Verified Questions
33 Flashcards
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Sample Questions
Q1) Explain the meaning of adverse selection and moral hazard. Give an example of each.
Answer: \(\bold{\text{Adverse selection:}}\) A type of information asymmetry whereby one party to a contract has an information advantage over another party. Examples: buying a resale home; buying a used car; buying shares in a company, etc.
\(\bold{\text{Moral hazard:}}\) A type of information asymmetry whereby one party to a contract cannot observe some actions relating to the fulfillment of the contractual terms by the other party. Examples: renting an apartment to a tenant; car insurance; hiring an executive - separation of ownership and management or the principal-agent problem; lending money to a company, etc.
Q2) Which statement best explains the relationship between the efficient securities market hypothesis and accounting?
A)Security prices adjust slowly when accounting reports are publicly released.
B)The timeliness of accounting information is irrelevant to securities markets.
C)Accounting information competes with other sources of information.
D)Security prices are unaffected when accounting reports are publicly released. Answer: C
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Page 3
Chapter 2: Conceptual Frameworks for Financial Reporting
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Which statement best describes a publicly accountable enterprise?
A)An entity that has not issued debt instruments that are outstanding and traded in a public market.
B)An entity that holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.
C)An entity that has not issued equity instruments that are outstanding and traded in a public market.
D)An entity that holds assets in a legal capacity for a broad group of outsiders as one of its primary businesses.
Answer: B
Q2) Which of the following characteristic of financial information alleviates "information asymmetry"?
A)Completeness.
B)Verifiability.
C)Confirmatory value.
D)Materiality.
Answer: C
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Chapter 3: Accrual Accounting
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) What is a "deferral"?
A)An entry to record payments received from customers that had been outstanding for 100 days.
B)An entry that reflects accounting events or transactions after the related cash flow.
C)An entry that reflects transactions in a period different from its corresponding cash flow.
D)An entry to record the receipt of inventory that will be paid in 60 days.
Answer: B
Q2) What is classified as a "non-current" liability?
A)An obligation expected to be settled within the ordinary operating cycle of the business.
B)An obligation where the company has breached its covenants.
C)Both A and B are non-current liabilities.
D)Both A and B are current liabilities.
Answer: D
Q3) Using the conceptual frameworks and other ideas, discuss whether a change in accounting policy should be treated prospectively or retrospectively.
Answer: 11ea833d_ff0b_84ab_94c7_bb5eb22298f9_TB6780_00
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Page 5
Chapter 4: Revenue and Recognition
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) Philips Corp. is unsure how to record the following transactions: $60,000 of goods shipped F.O.B shipping point on December 28, 2021.
$50,000 of goods shipped F.O.B. destination point on December 31, 2021.
What amount of sales related to these two transactions should Philips Corp. record in fiscal 2021?
A)$0
B)$50,000
C)$60,000
D)$110,000
Q2) What are some ways in which earnings management on construction contracts can be minimized?
A)Determining the degree of completion in a manner that best represents the underlying performance of the project.
B)Judiciously making estimates for the cost-to-cost approach that maximize earnings in the current year.
C)Underestimating future costs.
D)Not using engineering estimates or the cost-to-cost approach.
Q3) List the five key steps in the revenue recognition process.
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Chapter 5: Cash and Receivables
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) Which statement is correct?
A)Factoring without recourse creates a receivable on the balance sheet.
B)Factoring without recourse reduces a current ratio that is >1.
C)Factoring with recourse negatively impacts working capital.
D)Factoring without recourse creates a liability on the balance sheet.
Q2) Which of the following would not be an example of segregation of duties?
A)Sales employees have restricted ability to delete or modify accounts receivables.
B)Employees make sales to customers and record the credit sales in the accounts receivables.
C)Customer refunds are recorded on a written credit note.
D)Employees depositing funds to the bank do not prepare the bank reconciliation.
Q3) Medical Machines reported credit sales of $800,000, cash collections of $550,000 and bad debt write-offs of $15,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year. What was the ending balance in the accounts receivable account?
A)$450,000
B)$1,235,000
C)$1,250,000
D)$1,800,000
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Page 7
Chapter 6: Inventories
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157 Flashcards
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Sample Questions
Q1) What issues arise on the subsequent measurement of inventory?
A)Determining which expenditures to capitalize into the "inventory" account.
B)Determining which expenditures to expense into the "cost of goods sold" account.
C)Determining how much of the costs recognized in inventory should be expensed in the year.
D)Determining the appropriate valuation of inventories that remain on hand.
Q2) Which statement is correct about using a cost flow assumption?
A)An organization must use the same cost flow assumption as other organizations in its industry.
B)There is only one acceptable cost flow assumption under GAAP in Canada.
C)In Canada, organizations can use the FIFO or weighted average cost flow assumptions.
D)In Canada, organizations can use the FIFO, LIFO or weighted average cost flow assumptions.
Q3) Which statement is correct about cost allocation methods under GAAP?
A)FIFO method expenses the oldest costs first.
B)FIFO method has the oldest costs on the balance sheet.
C)FIFO method has the most recent costs in the income statement.
D)FIFO is not an acceptable cost allocation method.
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Page 8
Chapter 7: Financial Assets
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137 Flashcards
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Sample Questions
Q1) According to the above table.If Amacon classifies its investment in DEF at fair value through profit or loss, what amount will be reported in other comprehensive income at December 31, 2020?
A)$0
B)$3,000 loss.
C)$3,000 gain.
D)$5,000 gain.
Q2) A bond has a maturity value of $750,000 payable in 3 years. These bonds have a 5% coupon rate payable annually, and the market yield was 2% when the bonds were purchased.
Required:
a. Is this a discount bond or a premium bond?
b. Compute the amount required to purchase this bond at the beginning of the 3-year period
Q3) Which statement is not correct?
A)At fair value through profit or loss investments are carried at fair value.
B)At fair value through OCI investments are carried at fair value.
C)Amortized cost investments are carried at fair value.
D)Investments in equity instruments cannot be classified at fair value through OCI.
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Page 9
Chapter 8: Property, Plant and Equipment
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127 Verified Questions
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Sample Questions
Q1) On April 1, 2019, Omega Company paid $15,000 for office furniture. The furniture is expected to last 10 years with no residual value. Omega uses the double declining balance method of depreciation and fractional-year depreciation based on the number of months.
Required:
What is the depreciation expense for the year ended December 31, 2019?
Q2) Ceila Manufacturing purchased equipment on January 1, 2021 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Assuming the company uses the double-declining-balance depreciation method, what is the depreciation expense for 2021?
A)$50,000
B)$55,000
C)$100,000
D)$110,000
Q3) Explain why earnings manipulation of property, plant and equipment can have long-lasting impact on the financial statements.
Q4) Explain how non-monetary transactions are accounted for.
Q5) Explain derecognition of property, plant or equipment.
Page 10
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Chapter 9: Intangible Assets, Goodwill, Mineral Resources, and
Government Grants
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Which of the following is correct with respect to the accounting for re-payment of government grants?
A)Accounted for prospectively under IFRS.
B)Accounted for retrospectively under ASPE.
C)Partial prospective treatment and partial retrospective treatment under ASPE.
D)Partial prospective treatment and partial retrospective treatment under IFRS.
Q2) New Ventures Corp., a publicly accountable entity, capitalized the following costs:
\[\begin{array} { | l | r | r | }
\hline & \text { Jan 1 - April 30, 2021 } & \text { May 1 - Dec. 31, 2021 } \\
\hline \text { Patents } & 10,000 & 12,000 \\
\hline \text { Copyrights } & 15,000 & 32,000 \\
\hline
\end{array}\] Which statement is correct?
A)Both of these assets will have an indefinite useful life.
B)Both of these assets will have a definite useful life.
C)For both assets, the useful life will be equal to the asset's legal life.
D)For both assets, the useful life could be shorter than its legal life.
Q3) Explain the accounting requirements for externally purchased intangibles and internally developed intangibles.
Page 11
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Chapter 10: Applications of Fair Value to Non-Current Assets
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Sample Questions
Q1) What is a "component" of an entity?
A)A division of an entity that either has been disposed of or is classified as held for sale.
B)A group of assets and liabilities to be disposed of together in a single transaction.
C)A part of an entity with operations and cash flows distinguishable from the rest of the entity.
D)A group of non-current assets that have been disposed or are classified as held for sale.
Q2) What is "fair value"?
A)The present value of the future cash flows expected to be derived from an asset.
B)The amount obtainable from the sale of an asset in an arm's-length transaction less the costs of disposal.
C)The higher of an asset's fair value less costs to sell and its value in use.
D)The amount obtainable from the sale of an asset in an arm's-length transaction between knowledgeable, willing parties.
Q3) Explain the accounting under the revaluation model available under IFRS.
Q4) Explain when a non-current asset is impaired.
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Page 12