Corporate Financial Reporting
Test Preparation
Course Introduction
Corporate Financial Reporting provides a comprehensive examination of the principles, standards, and procedures involved in the preparation and interpretation of financial statements for corporations. The course covers key topics such as the regulatory environment, International Financial Reporting Standards (IFRS), balance sheet and income statement analysis, cash flow statements, and the disclosure of financial information. Students will develop the ability to analyze and critique real-world financial reports, understand the ethical and legal responsibilities of corporate financial reporting, and interpret the implications of financial data for decision-making by investors, managers, and other stakeholders. The course emphasizes practical application of accounting theories and enhances analytical skills essential for careers in accounting, finance, and business management.
Recommended Textbook
Intermediate Accounting Volume 1 3rd Edition by Kin Lo
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10 Chapters
1103 Verified Questions
1103 Flashcards
Source URL: https://quizplus.com/study-set/3281
Page 2
Chapter 1: Fundamentals of Financial Accounting Theory
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33 Verified Questions
33 Flashcards
Source URL: https://quizplus.com/quiz/65137
Sample Questions
Q1) Explain how adverse selection and moral hazard affect the qualitative characteristics of accounting information.
Answer: Adverse selection means that users will demand information that is RELEVANT to their decisions.
Moral hazard means that users will demand information that is VERIFIABLE (representationally faithful/reliable)and not prone to manipulation by the preparers.
Q2) Discuss two ways in which a shareholder can mitigate the problem of moral hazard when investing in a company.
Answer: To mitigate this moral hazard problem,audit reports can be used to provide information to owners about the firm's performance as an indirect indicator of management performance.
Compensation can be linked to performance measures such as net income or earnings per share.
Ask management to take partial ownership of the company through stock purchase and stock option programs.The thought being that if managers share in the rewards of their efforts,they will thus be more motivated to create value for the company's owners.
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3
Chapter 2: Conceptual Frameworks for Financial Reporting
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Identify the eight major components of the conceptual framework for accounting.Explain how these components interact with the demand for and supply of financial information.
Answer: The eight components are: users of financial statements,needs/objectives of users,qualitative characteristics,elements,recognition criteria,measurement considerations,constraints and assumptions.
The conceptual framework can be viewed and better understood as a plan for the supply of accounting information to meet the demands of potential users. Analysis of the demand for accounting information requires specifying the users (target market),their information needs (customer needs),and the desirable characteristics of information (desirable product characteristics).
The supply side of a conceptual framework involves identifying the elements of financial statements (potential components),followed by criteria for recognition in the financial statements (product design),and measurement (customization to specific needs).
Whether the supply of information is able to meet the users' demands also depends on constraints on financial reporting and the suitability of assumptions made in the planning process.
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4
Chapter 3: Accrual Accounting
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) The Rihanna Company owns 1,000 shares in Abhay Corp,a public company listed on the stock exchange.The share price was as follows:
- At date of purchase,July 2,2018 = $100/share
- At year end,June 30,2019 = $100/share
- At start of next fiscal year,July 1,2019 = $95/share
- At date financial statements authorized for issue,September 1,2019 = $90/share
Materiality for the Rihanna's financial statements is $500,000.What is the appropriate treatment of the subsequent event in the June 30,2019 financial statements?
A)Adjustment in the financial statement for the decline in value of $10,000.
B)No adjustment is needed for the subsequent decline in share price to $90/share.
C)Note disclosure in the financial statements for the decline in value of $5,000.
D)Both an adjustment and note disclosure in the financial statements for the decline to $90/share.
Answer: B
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Chapter 4: Revenue and Recognition
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) The expected cost plus margin approach which involves estimating expected costs to provide the good or service and adding a profit margin typical for that good or service.
Q2) Discuss advantages and disadvantages of using the cash basis to recognize revenues.Provide three valid reasons in your discussion.
Q3) Which statement about the percentage of completion method is correct?
A)This method recognizes revenue on a straight-line basis.
B)This method can only be used if there are no uncertainties about how much the contract will cost or how long it will take to complete.
C)This method allocates revenue,not construction costs.
D)This method allocates construction costs,not revenue.
Q4) Which of the following is TRUE when goods are sold on consignment?
A)The customer has taken physical possession of the asset.
B)The selling entity has the present right to payment for the asset.
C)The significant risks and rewards of ownership have been transferred.
D)The customer has accepted the asset.
Q5) Explain how a company records revenue and expenses for a long-term contract under IFRS.Include an explanation of how changes in estimates are accounted for under this method.
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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 about recording an allowance for doubtful accounts?
A)Accounts receivable are not adjusted for known uncollectable amounts.
B)Net accounts receivable is recalculated when there are changes recorded in the Allowance for Doubtful Accounts contra account.
C)Comparability is the reason an allowance for doubtful accounts is needed.
D)An allowance for doubtful accounts does not require estimates or judgments.
Q2) Fitness Machines reported cash sales of $50,000,credit sales of $800,000 and bad debt expense of $150,000 for last year.Accounts receivable had a balance of $1,000,000 at the beginning of the year and $1,250,000 at the end of the year.Assuming there are no write-offs during the year,how much cash was collected from customers during the year?
A)$400,000
B)$450,000
C)$550,000
D)$600,000
Q3) Define "cash" and explain how funds that are subject tor restrictions should be accounted for in the accounting records.
Q4) Explain why an allowance for doubtful accounts is required under GAAP.Discuss how such an allowance should be established.
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Chapter 6: Inventories
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156 Verified Questions
156 Flashcards
Source URL: https://quizplus.com/quiz/65132
Sample Questions
Q1) At the end of 2016,a company reported cost of goods sold of $4,800,which represented 80% of the goods available for sale.The beginning inventory amount was twice as much as the ending inventory amount.What was the amount of purchases for 2016?
A)$1,200
B)$2,400
C)$3,600
D)$5,400
Q2) Which method cannot be used in Canada to allocate inventory costs between the income statement and the balance sheet?
A)Specific identification.
B)FIFO.
C)Retail inventory method.
D)LIFO.
Q3) Explain how manufacturing companies can manipulate earnings through its production process.What should an auditor or financial statement user do to detect this type of manipulation?
Q4) Explain how items of inventory should be grouped for purposes of testing for impairment.
Q5) Explain why the absorption costing method is appropriate under GAAP.
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Chapter 7: Financial Assets
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) 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
Q2) Which statement is correct about an equity instrument?
A)A contract whose value changes according to a specified variable,requires little or no initial investment and is settled at a future date.
B)A contract that gives the holder the residual interest in an entity after deducting all of its liabilities.
C)Any contract that entitles the holder to joint interest in an entity after deducting all of its liabilities,and is settled at a future date.
D)Any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity.
Q3) How does having significant influence over an investee alleviate information asymmetry?
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Chapter 8: Property, plant and Equipment
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) Francisco purchased a machine on Jan 1,2016 for $600,000.The machine had an estimated useful life of 10 years and an estimated residual value of $10,000.The company uses straight-line depreciation and records monthly depreciation.The machine was sold on December 31,2018 for $350,000.What was the gain/loss on disposal of the machine?
A)$70,000 loss.
B)$70,000 gain.
C)$73,000 loss.
D)$73,000 gain.
Q2) Ronald exchanged similar assets with Silver Company in a transaction without commercial substance.Ronald gave up equipment that had a net book value of $47,000 (fair value $49,000)and Silver exchanged equipment with a net book value of $36,000 (fair value $35,000).What is the correct value at which Ronald should record the new equipment?
A)$35,000
B)$36,000
C)$47,000
D)$49,000
Q3) Discuss how inappropriate capitalization of costs during the acquisition of PPE can manipulate earnings.
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Page 10
Chapter 9: Intangible Assets, goodwill, mineral Resources, and Government Grants
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81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/65129
Sample Questions
Q1) Explain the difference between indefinite lived and finite lived intangible assets.
Q2) Which statement is correct?
A)In the development phase,the mineral site is ready for mineral production.
B)In the development phase,the mineral site is assessed for commercial viability.
C)In the development phase,the mineral site is assessed for technical viability.
D)In the development phase,the six criteria required for capitalization are met.
Q3) Which statement does not describe the "successful efforts" method?
A)A method of accounting that capitalizes costs of mineral exploration and evaluation only if the outcome is successful.
B)A method of accounting that capitalizes costs of mineral exploration and evaluation only if the production is technically feasible.
C)A method of accounting that capitalizes costs of mineral exploration and evaluation until the production is successful.
D)A method of accounting that capitalizes costs of mineral exploration and evaluation only if the production is commercially viable.
Q4) Explain how goodwill arises in a business.Give an example in your response.
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Page 11
Chapter 10: Applications of Fair Value to Non-Current Assets
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121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/65128
Sample Questions
Q1) Which statement is not correct?
A)Accounting for biological assets is covered by the requirements of IAS 41.
B)Biological assets include grapes,milk,wine,cheese and lumber.
C)End of processing activities are covered under the requirements of IAS 18.
D)Post harvesting processing activities are covered under the requirements of IAS 2.
Q2) What are "costs of disposal"?
A)The incremental costs directly attributable to the disposal of an asset.
B)The incremental costs directly attributable to the disposal of an asset,excluding finance costs and income tax expense.
C)The incremental costs directly attributable to the disposal of an asset,excluding finance costs.
D)The amount obtainable from the sale of an asset in an arm's-length transaction between knowledgeable,willing parties.
Q3) Company Twelve purchased land for $900,000 some years ago.Fair value was $800,000 at the beginning of this year and $1,000,000 at the end of this year.
Prepare the journal entry to record this year's revaluation adjustment.
Q4) Explain how an impairment loss is recorded for non-current assets.
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