Advanced Accounting Question Bank
Course Introduction
Advanced Accounting is a comprehensive course designed to deepen students' understanding of complex accounting concepts and practices beyond the foundational level. The course delves into topics such as consolidated financial statements, accounting for business combinations, international accounting standards, partnerships, foreign currency transactions, and segment reporting. Emphasis is placed on the application of accounting principles to real-world scenarios, including mergers and acquisitions, intercompany transactions, and the preparation and analysis of consolidated financial reports. Through case studies and problem-solving exercises, students will develop analytical skills and learn to navigate the challenges faced by accountants in multinational and multifaceted organizational environments.
Recommended Textbook
Modern Advanced Accounting in Canada9th Edition by Darrell Herauf
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12 Chapters
713 Verified Questions
713 Flashcards
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Page 2
Chapter 1: Conceptual and Case Analysis Frameworks for Financial Reporting
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Sample Questions
Q1) The formula for the current ratio is:
A) current assets - current liabilities
B) current assets/current liabilities
C) total debt/shareholders' equity
D) net income/shareholders' equity
Answer: B
Q2) The CPA Canada Handbook - Accounting is the handbook of Canadian accounting standards. Why do companies in Canada ensure that their financial reporting is consistent with Canadian GAAP?
A) Their bank requires them to do so.
B) Their auditors require them to do so.
C) Reporting under the CPA Canada Handbook - Accounting is required by public companies' boards of directors.
D) Compliance with the CPA Canada Handbook - Accounting pronouncements is usually required by many legal statutes.
Answer: D
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Chapter 2: Investments in Equity Securities
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Sample Questions
Q1) Any unallocated positive acquisition differential is normally:
A) pro-rated across the Associate's identifiable net assets.
B) charged to Retained Earnings.
C) recorded as Goodwill.
D) expensed during the year following the acquisition.
Answer: C
Q2) Which of the following statements is TRUE regarding the equity method?
A) The equity method is used for reporting gains or losses for non-strategic investments.
B) The investor's share of the associate's dividends declared is reported as revenue.
C) The investor's investment in the associate changes in direct relation to the changes taking place in the associate's equity accounts.
D) The equity method reports unrealized gains and losses on revaluations to fair value in net income.
Answer: C
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Chapter 3: Business Combinations
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Sample Questions
Q1) IFRS 10 Consolidated Financial Statements outlines the requirements for identifying the company that is the acquirer in a business combination when it's not clear who that is. Which is NOT a consideration in determining which company is the acquirer?
A) If the means of payment is cash, which party is paying the cash.
B) Relative holdings of voting shares in the combined entity.
C) Voting rights of the respective parties after the combination of their businesses.
D) Any by-laws or provisions of the incorporation acts of each company that details the manner in which a business combination will occur at law.
Answer: D
Q2) During an acquisition, when should intangible assets NOT be recognized apart from Goodwill?
A) The assets have been identified but not accounted for by the subsidiary.
B) The assets have been identified and accounted for by the subsidiary.
C) The assets can be sold, licensed or exchanged.
D) The assets have been accounted for by the subsidiary but have no Fair Value on the date of acquisition.
Answer: D
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Page 5
Chapter 4: Consolidation of Non-Wholly Owned
Subsidiaries
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Sample Questions
Q1) When the parent forms a new subsidiary:
A) there should be no acquisition differential.
B) gain or loss will usually arise.
C) push down accounting rules must be followed.
D) it should not be included in the company's consolidated financial statements as this would effectively be double-counting.
Q2) A business combination involves a contingent consideration. As a result, two years after the acquisition date, the acquirer was required to issue an additional 40,000 common shares at a time when the fair value of the common shares was $4 per share. What effect would this transaction have on the balance in the common shares account in the consolidated financial statements on the date of acquisition?
A) It would increase by $160,000.
B) It would not change.
C) It would decrease by $160,000.
D) It is not possible to determine the effect from the information provided.
Q3) Why might the fair value of the non-controlling interest in a subsidiary on the date that it is acquired in a business combination not be proportionate to the price per share paid by the parent company to acquire control? How do the IFRS recognize this?
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Chapter 5: Consolidation Subsequent to Acquisition Date
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Sample Questions
Q1) Prepare a consolidated balance sheet for Par Inc. as at June 30, 2021.
Q2) GNR Inc. owns 100% of NMX Inc. During the year, NMX Inc. earned a net income of $40,000 and paid dividends of $10,000. Assuming that GNR Inc. uses the cost method, what effect would the above information have on GNR's investment in NMX account?
A) An increase of $10,000
B) An increase of $30,000
C) An increase of $40,000
D) No effect.
Q3) If the parent company uses the equity method to record its investment in a subsidiary in its internal accounting records, which of the following statements is FALSE?
A) The parent's net income equals consolidated net income.
B) The parent's retained earnings will be equal to consolidated retained earnings.
C) Only the parent's share of the subsidiary's income, dividends and amortization of acquisition differential are recorded in the investor's records.
D) The parent's net income equals consolidated net income attributable to the shareholders of the parent.
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Page 7
Chapter 6: Intercompany Inventory and Land Profits
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Sample Questions
Q1) Which of the following methods does NOT call for the elimination of ALL intercompany profits?
A) Identifiable net asset method
B) Fair value enterprise method
C) Proportionate consolidation method
D) Partial goodwill method
Q2) How would any management fees charged by a Parent Company to its Subsidiary be accounted for during the consolidation process?
A) The Parent Company would only record its pro rata share of any management revenues.
B) The Parent Company's profit on the rendering of management services would be charged to retained earnings.
C) Both the Parent's management fees and the subsidiary's related expense would be eliminated when preparing Consolidated Financial Statements.
D) No special accounting treatment is required, since this would have no effect on Consolidated Net Income.
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Chapter 7: A Intercompany Profits in Depreciable Assets B
Intercompany
Bondholdings
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Sample Questions
Q1) Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2020 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% bonds maturing on January 1, 2030.
There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used.
Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company. During 2020, Paddy earned a net income of $80,000 and paid dividends of $20,000. What amount would be shown on Duff's 2020 Consolidated Statement of Financial Position under bonds payable?
A) $110,000
B) $111,000
C) $112,000
D) $220,000
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Page 9
Chapter 8: Consolidated Cash Flows and Changes in Ownership
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Sample Questions
Q1) P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares, which it accounts for using the equity method. On December 31, 2018, the shareholder's equity section of Q Corp. was comprised of $15,000 in common shares and retained earnings with the amount of $450,000. Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year ended December 31, 2019.
There have been no goodwill impairment losses since acquisition. On January 1, 2020, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January 1, 2019, the investment account had a balance of $420,000. The acquisition differential was to be allocated as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
How much of the acquisition differential was allocated to equipment on January 1, 2019?
A) Nil
B) $6,000
C) $18,000
D) $36,000
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Page 10
Chapter 9: Other Consolidation Reporting Issues
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Q1) On December 31, 2020, XYZ Inc. has an account payable of $2,000 for operating expenses incurred during the year. These expenses are only tax deductible when paid. XYZ normally pays for its operating expenses one month after they are incurred. Assuming a 20% tax rate, these expenses shall result in:
A) a deferred tax liability of $2,000.
B) a deferred tax liability of $400.
C) a deferred tax asset of $400.
D) a deferred tax asset of $2,000.
Q2) According to Canadian GAAP, what is the key feature of a joint arrangement?
A) One venturer has a controlling interest in the joint arrangement.
B) More than one venturer has a controlling interest in the joint arrangement.
C) Joint control, namely, no one venturer can unilaterally control the venture regardless of the size of the equity contribution.
D) The two largest equity contributors will have joint control over the venture.
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Chapter 10: Foreign Currency Transactions
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Q1) On January 1, 2020, Canadian Music International (CMI), a manufacturer of high-end recording equipment based in Toronto, shipped US$120,000 worth of inventory to its main U.S. distributor in Chicago, with full payment of these goods due by February 28, 2020. CMI has a January 31 year end. A list of significant dates and exchange rates is shown below. \(\begin{array}{|l|l|}
\hline \text { Transaction Date: January 1, 2020 } & \text { US \$1= CDN \$1.141 } \\
\hline \text { Year-End Date: January 31, 2020 } & \text { US \$1=CDN } \$ 1.142 \\
\hline \text { SettlementDate: February 28,2020 } & \text { US } \$ 1=\text { CDN } \$ 1.145\\\hline
\end{array}\) The invoice price billed by CMI was US$120,000.
What is the amount of CMI's foreign exchange gain or loss on February 28th?
A) CDN$360 loss.
B) CDN$120 gain.
C) CDN$360 gain.
D) CDN$480 gain.
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Chapter 11: Translation and Consolidation of Foreign Operations
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Q1) Which of the following statements is correct?
A) If the functional currency of the foreign operation is different than the parent's functional currency, dividends must be translated using closing rates.
B) If the functional currency of the foreign operation is different than the parent's functional currency, dividends must be translated using average rates.
C) If the functional currency of the foreign operation is different than the parent's functional currency, dividends must be translated using historical rates.
D) If the functional currency of the foreign operation is the same as the parent's functional currency, dividends must be translated using average rates.
Q2) The risk exposure that occurs between the time of entering into a transaction and the time of settling it is referred to as:
A) translation (accounting) exposure.
B) transaction exposure.
C) economic exposure.
D) business risk.
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Chapter 12: Accounting for Not-For-Profit and Public Sector Organizations
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Sample Questions
Q1) A not-for-profit organization receives a restricted contribution of $20,000 to be used for a specific project. During the current year, $14,000 is spent toward the project with the balance to be spent next year. How much donation revenue should the not-for-profit organization recognize in the current year, if the organization uses the restricted fund method of reporting and did not have a fund for this project?
A) $6,000
B) $14,000
C) $20,000
D) $34,000
Q2) Which of the following financial statements are NOT required by not-for-profit organizations for external reporting purposes?
A) A Statement of Financial Position.
B) A Statement of Changes in Members' Equity.
C) A Statement of Cash Flows.
D) A Statement of Operations.
Q3) Describe what fund accounting is and why is it used for not-for-profit organizations.
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