Financial Reporting
Final Test Solutions
Course Introduction
Financial Reporting is a crucial course that explores the principles and practices involved in preparing and analyzing financial statements for external stakeholders. Students will learn about the regulatory framework governing financial reporting, the use of International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), and the process of communicating a companys financial performance and position through balance sheets, income statements, cash flow statements, and notes to the accounts. The course emphasizes the interpretation and critical analysis of financial data, enabling students to assess the financial health and performance of organizations, and to make informed decisions based on financial reports.
Recommended Textbook
Intermediate Accounting 2nd Edition Volume I by Kin Lo
Available Study Resources on Quizplus 10 Chapters
1107 Verified Questions
1107 Flashcards
Source URL: https://quizplus.com/study-set/3365
Page 2
George Fisher
Chapter 1: Fundamentals of Financial Accounting Theory
Available Study Resources on Quizplus for this Chatper
33 Verified Questions
33 Flashcards
Source URL: https://quizplus.com/quiz/66822
Sample Questions
Q1) Discuss three reasons why it is important to understand accounting theory.
Answer: In order to make the best decisions possible, external investors as well as internal managers need to interpret financial and accounting information about the state of the business.
There is a misunderstanding that accounting standards are simply proclamations issued by government or quasi-governmental regulatory agencies such as the International Accounting Standards Board (IASB)that have no economic benefit to society.
Rather, financial reporting is an economic good and is therefore subject to the laws of supply and demand. Accounting standards reflect and respond to, although imperfectly, the demand for financial information and the ability of enterprises to supply that information. Financial accounting theory helps us to understand the complexities in the production and consumption (use)of accounting information. Viewed in this way, financial information can be, and is, a subject of rigorous economic analysis.
Q2) Explain the meaning of generally accepted accounting principles (GAAP).
Answer: GAAP refers to broad principles and conventions of general application as well as rules and procedures that determine accepted accounting practices.
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Conceptual Frameworks for Financial Reporting
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/66823
Sample Questions
Q1) Which of the following accurately describes the standard setting process in Canada?
A)The Accounting Standards Oversight Council approves the IFRS.
B)The Accounting Standards Board has no authority to alter IFRS.
C)The IFRS are jointly set by the Accounting Standards Board and the IASB.
D)The Public Sector Accounting Board oversees standards for private enterprises.
Answer: B
Q2) Which of the following is part of the ASPE Conceptual Framework?
A)To provide information for investors, lenders and creditors only.
B)Completeness is an attribute of representational faithfulness.
C)To provide information useful for investment decisions.
D)To provide information useful for assessing management stewardship.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Accrual Accounting
Available Study Resources on Quizplus for this Chatper
159 Verified Questions
159 Flashcards
Source URL: https://quizplus.com/quiz/66824
Sample Questions
Q1) Explain how changes in accounting policies, changes in accounting estimates and errors are accounted for under the accrual basis of accounting.
Answer: Correction of errors and changes in accounting policies require retrospective adjustment of financial statements. Changes in estimates due to new information require prospective treatment.
Q2) Which of the following is an example of a change in accounting estimate?
A)Switching from straight-line to the declining balance method of depreciation.
B)Using 3% for the allowance for bad debts, instead of 1% as stated in the company's procedures manual.
C)Using 5% for the allowance for bad debts because of the increased possibility of bankruptcy by customers.
D)Changing from weighted average to the first-in, first-out method of inventory valuation.
Answer: C
Q3) Using the conceptual frameworks and other ideas, discuss whether a change in accounting policy should be treated prospectively or retrospectively.
Answer: 11ea7f0e_5368_8642_92e1_6deda440a44f_TB2820_00_TB2820_00
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Revenue Recognition
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/66825
Sample Questions
Q1) Which of the following is an acceptable revenue-recognition method?
A)At time of shipment, if warranty uncertainty is not reliably measurable.
B)At time of shipment to the consignee, for consignment sales.
C)Installment method, if credit risk is high.
D)At the point of sale, if credit risk is very high.
Q2) In July, Telly-Rental sells a home theatre for $1,000 on an installment basis. The system costs Telly-Rental $400. Telly-Rental generally earns a gross profit of 15%. How much revenue is recorded by Telly-Rental in July?
A)$0
B)$150
C)$400
D)$1,000
Q3) Explain how revenue should be allocated to the components in a multiple deliverable sales arrangement.
Q4) How is income and expense recognized for biological assets under IFRS?
A)Changes in fair value.
B)Percentage of completion method.
C)Completed contract method.
D)Cash basis.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Cash and Receivables
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/66826
Sample Questions
Q1) Which statement is correct?
A)A transfer without recourse means that the purchaser can go back to the company for compensation of bad debts.
B)A transfer without recourse means that the purchaser of the receivables takes the collection risk.
C)A transfer without recourse means that the seller of the receivables takes the collection risk.
D)A transfer with recourse means that the purchaser of the receivables takes the collection risk.
Q2) Which statement about receivables is correct?
A)Receivables are non-monetary items.
B)Monetary items are measured at their present value.
C)Trade receivables generally have payments terms extending beyond 3 months.
D)Trade receivables should generally be recorded at their discounted present value.
Q3) Explain the differences and relationships among expenditures, assets, and expenses. Use an example to support your discussion.
Q4) Explain how a company's revenue recognition policy can be used to manipulate earnings.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Inventories
Available Study Resources on Quizplus for this Chatper
156 Verified Questions
156 Flashcards
Source URL: https://quizplus.com/quiz/66827
Sample Questions
Q1) Which statement is correct for about inventory systems?
A)The periodic inventory system provides more information to allow an enterprise to better manage its inventories.
B)Cost of goods sold is a not a calculated number under the periodic inventory system.
C)The final amounts reported in statements are the same under both the periodic and perpetual systems.
D)The periodic inventory system continuously updates information about the amount of inventory on hand.
Q2) Which statement is correct about inventory errors?
A)Misstatements in inventory can affect the beginning inventory amounts.
B)Misstatements in inventory are likely to affect only the current accounting period.
C)Misstatements in inventory are likely to only affect one reporting period.
D)Misstatements self-correct over three reporting periods.
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 why the absorption costing method is appropriate under GAAP.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Financial Assets
Available Study Resources on Quizplus for this Chatper
141 Verified Questions
141 Flashcards
Source URL: https://quizplus.com/quiz/66828
Sample Questions
Q1) Which item is an example of a real asset?
A)Share certificates.
B)Building.
C)Bonds.
D)Accounts receivable.
Q2) Star Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 7%. At what amount will the bond be recorded (rounded)?
A)$5,093
B)$98,192
C)$100,000
D)$101,703
Q3) 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
Q4) Explain the meaning of the "effective interest method."
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Property, Plant, and Equipment
Available Study Resources on Quizplus for this Chatper
127 Verified Questions
127 Flashcards
Source URL: https://quizplus.com/quiz/66829
Sample Questions
Q1) On January 1, 2011, a machine was purchased for $12,000. The machine was estimated to have a 10 year useful life and a residual value of $500. Straight-line depreciation is to be used. On January 1, 2013, the machine was then exchanged for computer equipment with a fair value of $10,000. Assuming that the exchange had commercial substance, how much would be recorded as a gain on disposal of the machine on January 1, 2013?
A)$0
B)$300
C)$400
D)$500
Q2) Explain the accounting purpose of "depreciation." Does depreciation represent the decline in value of an asset?
Q3) Using the conceptual framework, explain why there is a difference between IFRS and ASPE in accounting for interest capitalization for property, plant and equipment.
Q4) Explain what costs should be capitalized to property, plant and equipment. Include a discussion of costs incurred for acquired assets, self constructed assets and repairs.
Q5) Explain how non-monetary transactions are accounted for.
Q6) Explain derecognition of property, plant or equipment.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Intangible Assets, Goodwill, Mineral Resources, and
Government Grants
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/66830
Sample Questions
Q1) Which statement is not correct?
A)Goodwill equals the purchase price less the fair value of net assets acquired.
B)Intangible assets can be purchased or internally created.
C)Economic goodwill equals accounting goodwill and can be created by branding.
D)Intangible assets are identifiable assets without physical substance.
Q2) Which of the following is NOT a "class" of intangible assets?
A)Industrial designs.
B)Raw materials.
C)Patents.
D)Computer software.
Q3) Which statement is correct?
A)In the extraction phase, the mineral site is ready for mineral production.
B)In the extraction phase, the mineral site is prepared for resource extraction.
C)In the extraction phase, the mineral site is assessed for technical viability.
D)In the extraction phase, the six criteria required for capitalization are met.
Q4) Explain the accounting for assets in the mineral resource exploration industry.
Q5) What is economic profit as it would be defined in finance or economics? Why is accounting net income not the same as an economist's determination of earnings, as measured from a shareholder's perspective?
Q6) Explain the accounting for internally developed intangible assets. Page 11
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 10: Applications of Fair Value to Non-Current Assets
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/66831
Sample Questions
Q1) A company owns an office building that it rents out to other businesses. Due to a downturn in the economy, rental rates have dropped while vacancy rates have increased. Due to these circumstances, the company evaluated the building for impairment. The building has a cost of $70 million, accumulated depreciation of $47.05 million, and a value in use of $20 million. In addition, the company has recently received an offer to purchase the building for $22 million. Legal and other costs necessary to complete a sale of this type would amount to $200,000.
Required:
Determine the amount of impairment, if any.
Q2) Which of the following is correct with respect to the "reversal of impairment loss"?
A)It is defined as the carrying amount less recoverable amount under IFRS.
B)It is defined as the carrying amount less fair value under ASPE.
C)It is possible under IFRS if the recoverable amount subsequently rises.
D)It is possible under ASPE if the recoverable amount subsequently rises.
Q3) How is revaluation of non-current assets accounted for?
A)Revaluation surplus is always booked to profit and loss.
B)Revaluation loss is booked to other comprehensive income.
C)Cumulative revaluation loss is booked to profit and loss.
D)Revaluation surplus is not recognized in other comprehensive income.
Page 13
To view all questions and flashcards with answers, click on the resource link above.