Accounting Theory Exam
Solutions
Course Introduction
Accounting Theory explores the fundamental principles and concepts underpinning accounting practices, offering a critical examination of the development, structure, and function of accounting standards and policies. The course investigates the philosophical, social, and economic influences that shape accounting thought, such as ethics, decision-making, and regulation. Students will engage with various theoretical frameworks, including positive, normative, and critical approaches, and evaluate how these theories inform contemporary accounting issues and practices. By understanding the rationale behind accounting rules and procedures, students gain insight into the evolving landscape of financial reporting, disclosure, and accountability in organizations.
Recommended Textbook
Horngren's Accounting Volume 2 10th Canadian Edition by Tracie L. Miller Nobles
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7 Chapters
1392 Verified Questions
1392 Flashcards
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Page 2
Chapter 1: Partnerships
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) Refer to Table 12-3.Assuming the business incurs a net loss of $36,000,Brittney's capital account will be:
A) debited for $56,625
B) debited for $94,375
C) credited for $4,375
D) credited for $40,375
Answer: C
Q2) The balance in the partner's capital account consists of the partner's initial investment plus the partner's share of partnership net income minus the partner's withdrawals.
A)True
B)False
Answer: True
Q3) Each partner in a partnership:
A) has limited liability for the debts of the business
B) pays his or her share of the partnership business income tax
C) has co-ownership of the assets of the partnership
D) shares in a jointly held capital account
Answer: C
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Page 3
Chapter 2: Corporations: Share Capital and the Balance Sheet
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180 Verified Questions
180 Flashcards
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Sample Questions
Q1) Referring to Table 13-9,what is the total value of the common shares on December 31,2017,assuming no dividends were declared?
A) $500,000
B) $398,000
C) $260,000
D) $520,000
Answer: B
Q2) Refer to Table 13-4.The book value per share for preferred shares is:
A) $52.50
B) $56.00
C) $63.00
D) $59.50
Answer: C
Q3) The policy-making body of a corporation is called the board of directors.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Corporations: Retained Earnings and the
Income Statement
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205 Verified Questions
205 Flashcards
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Sample Questions
Q1) Refer to Table 14-5.The balance of retained earnings after the declaration of a 3-for-1 stock split is: __________.
Answer: $490,000 (same)
Q2) The denominator in the earnings per share calculation is the:
A) total number of preferred and common shares outstanding at the end of the period B) common shares outstanding at the end of the period
C) weighted-average number of common shares outstanding during the period
D) weighted-average number of common and preferred shares outstanding during the period
Answer: C
Q3) A change in accounting policy should be:
A) applied prospectively, prior periods should be restated, and the facts should be disclosed in the notes
B) applied retrospectively, prior periods should be restated, and the facts should be disclosed in the notes
C) requires note disclosure only
D) does not require any special treatment
Answer: B
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Chapter 4: Long-Term Liabilities
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) The interest rate that investors demand for loaning money is the:
A) effective interest rate
B) stated interest rate
C) contract interest rate
D) straight-line rate
Q2) The carrying value of bonds will decrease each interest period if the bonds were sold at a discount.
A)True
B)False
Q3) The proceeds from issuing bonds is equal to the present value of the:
A) maturity value of the bonds plus the present value of the periodic interest payments using the stated rate of interest
B) maturity value of the bonds plus the present value of the periodic interest payments using the effective rate of interest
C) maturity value of the bonds less the present value of the periodic interest payments using the effective rate of interest
D) periodic interest payments less the present value of the maturity value of the bonds using the effective rate of interest
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Chapter 5: Investments and International Operations
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) The Farmer Corporation engaged in the following transactions during 2017.Farmer uses a perpetual inventory system: Mar, 31 Purchased merchandise from an Dutch supplier at a cost of 100,000 Euros, The exchange rate on this date was \( \$ 1.30 \) per Euro. \(\text { Apr , } 19 \text { Paid for the merchandise. The exchange rate on this date was } \$ 1.32 \text { per Euro. }\) May 11 Sold goods toa U.S. buyer at a selling price of \( \$ 70,000 \) U.S. dollars. The exchange rate on this date was \( \$ 1.02 \) Canadian dollars for each U.S. dollar: Ignore the journal entry to record cost of goods sold. Jun. 15 Received payment from the U.S. buyer for the goods sold on June 10. The exchange rate on this date was \( \$ 1.03 \) Canadian dollars for each U.S. dollar a_Prepare the journal entries necessary to record each of the above transactions.
b_During the periods of time covered by the transactions,was the Canadian dollar getting stronger or weaker relative to the Euro and the U.S.dollar?
Q2) A stock dividend received on short-term investments increases the cost per share of the stock investment.
A)True B)False
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Page 7
Chapter 6: The Cash Flow Statement
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207 Verified Questions
207 Flashcards
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Sample Questions
Q1) Which of the following items would be reported as an operating activity?
A) purchase of land
B) payment of interest
C) payment of dividends
D) sale of common shares
Q2) The direct method cash flow statement reported $67,030 in payments for insurance during the year.The prepaid insurance account had beginning and ending balances of $13,540 and $11,780,respectively,for the same period.The amount of insurance expense reported on the income statement for the same year was:
A) $67,030
B) $65,270
C) $68,790
D) $92,350
Q3) Describe the impact on the cash flow statement of international financial reporting standards (IFRS).
Q4) Cash collections from customers equals sales on account less the increase in accounts receivable.
A)True
B)False
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Chapter 7: Financial Statement Analysis
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214 Verified Questions
214 Flashcards
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Sample Questions
Q1) Two main types of benchmarking are:
A) compare against net sales & against total assets
B) compare against Stats Canada & against net sales
C) compare against another company and against an industry average
D) compare against an industry average and against Stats Canada
Q2) Which of the following ratios is considered a measure of a company's ability to pay current liabilities?
A) price/earnings ratio
B) acid-test ratio
C) debt ratio
D) times-interest-earned ratio
Q3) Cost of goods sold for Grant Corporation for 2017 was $300,000 and net credit sales for 2017 were $625,000.Beginning inventory for 2017 was $150,000 and ending inventory for 2017 was $200,000.What was the inventory turnover?
A) 3.57
B) 1.71
C) 2.00
D) 1.50
Q4) Ratio of dividends per share to market price per share
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