Financial Accounting Standards
Exam Questions
Course Introduction
Financial Accounting Standards is a comprehensive course designed to familiarize students with the foundational principles and regulatory frameworks that govern financial reporting and disclosure. The course explores the conceptual underpinnings of accounting standards, the role of standard-setting bodies such as the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), and the application of Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). Students will analyze key pronouncements, learn to apply accounting standards to various transaction types, and assess the implications of standards on financial statements. Emphasis is placed on ethical considerations, the standard-setting process, and current issues in financial accounting.
Recommended Textbook
Modern Advanced Accounting in Canada 6th Edition by Murray Hilton
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Page 2
Chapter 1: A Survey of International Accounting
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Sample Questions
Q1) What approach did Canada decide to take with respect to convergence with IFRSs:
A)harmonization with IFRS .
B)Substituting IFRSs for Canadian GAAP when approved by the IASB..
C)Adopting some but not necessarily all IFRSs by reviewing them on a case by case basis.
D)Reviewing them with all publically accountable entities to see which ones would be acceptable.
Answer: A
Q2) Starting in 2011,what is the definition of a private enterprise (PE)under Canadian GAAP:
A)A corporation that has no public shareholders.
B)A corporation that has less than 500 shareholders and is not listed on a stock exchange..
C)No distinction is made between private and publically accountable private enterprises for the purposes of IFRSs..
D)A profit oriented enterprise that has none of its issued and outstanding financial instruments traded in a public market and does not hold assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.
Answer: C
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Page 3
Chapter 2: Investments in Equity Securities
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Sample Questions
Q1) If the Investor sells part of its stake in the Associate,the gain or loss on the sale of these shares is calculated using which of the following?
A)The average carrying value of the Investment.
B)FIFO.
C)LIFO.
D)Specific Identification.
Answer: A
Q2) What is the amount of after-tax profit realized from upstream sales during 2002?
A)$7,200
B)$5,760
C)$1,440
D)$1,920
Answer: B
Q3) What is the amount of the Acquisition Differential?
A)($100,000)
B)$ 28,000
C)$ 80,000
D)$100,000
Answer: C
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Chapter 3: Business Combinations
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Sample Questions
Q1) In order for one company to establish control over another, A)consideration given must include cash or voting shares.
B)it must have elected the majority of the members of the Board of Directors of that company.
C)the acquisition cost must be disbursed to the subsidiary prior to exercising its control. D)consideration of some kind must be given.However,the consideration given is irrelevant to the substance of the relationship between the two companies.
Answer: D
Q2) A company has decided to purchase 100% of the voting shares of B Company for $100,000 on January 1,20x2.Immediately before the acquisition,A and B reported cash balances of $300,000 and 150,000 respectively.If Consolidated Financial Statements were prepared immediately following the acquisition,how much Cash would be reported on A's consolidated balance sheet?
A)$250,000
B)$350,000
C)$550,000
D)$450,000
Answer: D
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Chapter 4: Consolidated Statements on Date of Acquisition
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Q1) One commonly cited weakness of Consolidated Financial Statements is that:
A)they lack completeness.
B)they are of little use to end-users.
C)divergent accounting practices between Parent and its Subsidiary may often yield misleading results.
D)a poor performance by one or more subsidiaries can be masked through the aggregation process.
Q2) A company owning a majority (but less than 100%)of another's voting shares on the date of acquisition should account for its subsidiary
A)by including only its share of the fair market values of the subsidiary's net assets.
B)by including only its share of the book values of the subsidiary's net assets.
C)by including 100% of the fair market values of the subsidiary's net assets.
D)by including 100% of the fair market values of the subsidiary's net assets and accounting for any unowned portion of the subsidiary's voting shares using the Non-Controlling Interest account.
Q3) Assuming that Keen Inc.purchases 100% of Lax Inc.for $200,000,prepare the Consolidated Balance Sheet on the Date of Acquisition.
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Chapter 5: Consolidation Subsequent to Acquisition Date
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Q1) Consolidated Shareholder Equity
A)includes any Non-Controlling Interest.
B)is equal to the sum of the Shareholder Equity Sections of both the parent and the Subsidiary.
C)is equal to that of the parent company under the Equity Method.
D)is higher under the Equity Method when the subsidiary does not declare dividends.
Q2) Assuming that Davis purchases 100% of Martin for $300,000,answer the following: Required:
a)Prepare Davis' Equity Method journal entries for 2002 and 2003.
b)Compute the following as at December 31,2003:
i.Investment in Martin Inc.
ii.Goodwill
iii.The amount of unamortized acquisition differential.
Q3) Assuming that GNR Inc uses the Equity Method,what effect would the above information have on GNR's investment in NMX account?
A)An increase of $30,000.
B)An increase of $40,000.
C)An increase of $10,000
D)No effect.
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Page 7
Chapter 6: Intercompany Inventory and Land Profits
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Q1) Under which of the following Consolidation Theories would the elimination of the Parent's share of any intercompany profits be required for the preparation of Consolidated Financial Statements?
A)The Ownership Theory.
B)The Entity Theory.
C)The Proprietary Theory.
D)The Parent Theory.
Q2) Calculate the non-controlling interest (Balance Sheet)as at June 30,2010.
Q3) The amount of goodwill arising from this business combination is
A)$ 186,667.
B)-$180,000.
C)$ 168,000.
D)$ 120,000.
Q4) Intercompany profits on sales of inventory are only realized
A)once the seller receives payment for the sale.
B)once the inventory has been sold to outsiders.
C)when the inventory has been received by the purchaser.
D)when the inventory has been shipped to the purchaser.
Q5) Compute YIN's Goodwill at the date of acquisition.
Q6) Compute MAX's Goodwill at the Date of Acquisition.
Page 8
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Chapter 7: Aintercompany Profits in Depreciable Assets
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Q1) What would be the amount of consolidated patents appearing on Ting's Consolidated Statement of Financial Position as at December 31,2010?
A)$14,000
B)$16,000
C)$18,000
D)$15,000
Q2) The amount of goodwill arising from this business combination is: A)Nil.
B)$130,000
C)$72,000
D)$220,000
Q3) The amount of depreciation expense appearing on Jay's 2010 Consolidated Income Statement would be:
A)$15,000
B)$35,000
C)$34,850
D)$34,880
Q4) Prepare a schedule of Realized and Unrealized profits for 2009 and 2010 for both companies.Show your figures before and after tax.
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Chapter 8: Consolidated Cash Flows and Ownership Issues
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Sample Questions
Q1) How much of the acquisition differential was allocated to equipment?
A)$36,000
B)$18,000
C)$6,000
D)Nil.
Q2) What is the amount of the acquisition differential amortization for 2009?
A)$6,250
B)$4,375
C)$5,625
D)$12,000
Q3) What percentage of the Investment in 123 was sold by ABC?
A)14%
B)21%
C)28%
D)40%
Q4) Prepare Lime's December 31,2011 Consolidated Balance Sheet.
Q5) Compute consolidated inventory for Ash as at December 31,2009.
Q6) Compute the Goodwill on the date of the acquisition.
Q7) Prepare an acquisition differential amortization table since the acquisition date.
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Chapter 9: Other Consolidated Reporting Issues
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Sample Questions
Q1) What is the total amount of sales that would appear on the Consolidated Income Statement?
A)$1,000,000
B)$880,000
C)$920,000
D)$816,000
Q2) Assuming that Larmer is a joint venture that is owned by Roller as well as several other unrelated venturers,prepare Roller's 2013 Income Statement in accordance with current Canadian GAAP.In addition,assume that Roller acquired Larmer after its initial formation,thereby validating the acquisition differentials.
Q3) Prepare a Balance Sheet for Clarke on December 31,2010 in accordance with current Canadian GAAP,assuming that Clarke's investment in Jensen is a control investment.
Q4) What is Victor's portion of any unrealized gain or loss arising from the transfer of John's assets to Jinxtor on January 1,2010?
A)$90,000
B)$210,000
C)$300,000
D)Nil
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Chapter 10: Foreign Currency Transactions
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Sample Questions
Q1) What amount (in Canadian dollars)should ABC expect to receive from its bank on May 1,2013?
A)$72,000
B)$70,500
C)$70,950
D)$71,850
Q2) How much (in Canadian Dollars)will RXN expect to receive from the bank when its forward contract is settled?
A)$347,500
B)$337,500
C)$343,500
D)$349,500
Q3) What is the amount of the premium on this contract?
A)Nil.
B)$450
C)$900
D)$1,500
Q4) Prepare the 2013 journal entries to record the above transactions.In addition,prepare any adjusting journal entries that you deem necessary.
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Chapter 11: Translation and Consolidation of the Financial
Statements of Foreign Operations
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Q1) According to IAS 29,the term "hyper- inflationary" means:
A)an annual inflation rate of 50%.
B)an annual inflation rate of 100%.
C)a cumulative inflation rate of 100% over a 3-5 year period.
D)it does not establish a rate which is deemed to be hyper-inflation.
Q2) Which of the following rates would be used to translate the company's bond interest expense for the year?
A)$1CDN=$0.815 U.S.
B)$1CDN=$0.8175 U.S.
C)$1CDN=$0.8250 U.S.
D)$1CDN=$0.83 U.S.
Q3) Which of the following rates would be used to translate the company's current liabilities?
A)$1CDN=$0.815 U.S.
B)$1CDN=$0.8175 U.S.
C)$1CDN=$0.8250 U.S.
D)$1CDN=$0.83 U.S.
Q4) Translate Wilsen's December 31,2014 Statement of Retained Earnings.
Q6) Translate Wilsen's 2014 Income Statement. Page 13
Q5) Translate Wilsen's December 31,2014 Balance Sheet.
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Page 14
Chapter
12: Accounting for Not-For-Profit Organizations and Governments
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Questions
Q1) Net assets could be broken down into any of the following categories EXCEPT:
A)Net assets invested in capital assets
B)Net assets maintained permanently in endowments.
C)Unrestricted Net Assets
D)Net assets invested in operations.
Q2) Describe what fund accounting is and why is it used for not-for-profit organizations.
Q3) In which fund would the purchase of the asset be recorded?
A)The General Fund
B)The Operating Fund
C)The Capital Fund
D)The Encumbrance Fund
Q4) Which of the following is NOT a type of contribution as identified by the Handbook?
A)Restricted
B)Endowment
C)Unrestricted
D)Donated
Q5) Prepare the necessary journal entries to record these transactions assuming that the deferral method of accounting for contributions is used.
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