Intermediate Accounting
Final Test Solutions
Course Introduction
Intermediate Accounting is a comprehensive course designed to deepen students' understanding of financial accounting principles and practices beyond the introductory level. The course covers topics such as revenue recognition, income measurement, valuation of assets and liabilities, accounting for investments, and preparation of complex financial statements in accordance with generally accepted accounting principles (GAAP). Students will analyze real-world financial statements, explore the impact of regulatory changes, and apply critical thinking to resolve accounting issues. This course prepares students for advanced accounting coursework, professional certification exams, and careers in accounting and finance.
Recommended Textbook
Financial Accounting 5th Canadian Edition by Walter T. Harrison
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13 Chapters
1520 Verified Questions
1520 Flashcards
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Page 2
Chapter 1: The Financial Statements
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) All of the following are considered standard financial statements except the:
A) statement of earnings
B) statement of assets
C) statement of retained earnings
D) cash flow statement
Answer: B
Q2) All corporations have to follow the same sections of the CICA Handbook.
A)True
B)False
Answer: False
Q3) Depreciation is normally associated with which asset on the balance sheet?
A) land
B) accounts receivable
C) inventory
D) equipment
Answer: D
Q4) Expenses are increases in retained earnings that result from operations.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Recording Business Transactions
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) Dividends paid to the shareholders when declared will:
A) increase assets and decrease liabilities
B) decrease assets and increase liabilities
C) have no effect on shareholders' equity
D) decrease assets and decrease shareholders' equity
Answer: D
Q2) The ledger provides a good indication of how much cash is available for the business to use.
A)True
B)False Answer: True
Q3) Every accounting transaction involves an increase in at least one account and a decrease in at least one other account.
A)True
B)False Answer: False
Q4) A credit always decreases an asset account.
A)True
B)False Answer: True
Page 4
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Chapter 3: Accrual Accounting and the Financial Statements
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) The post closing trial balance contains which of the following accounts?
A) Depreciation Expense
B) Service Revenue
C) Accumulated Depreciation
D) Dividends
Answer: C
Q2) Non-current assets are those debts payable in longer than 1 year or the entity's operating cycle which ever is longer.
A)True
B)False
Answer: False
Q3) Chance stables purchased a new baler as their annual equipment purchase. The baler was purchased for $10,000 down and a $50,000 note with an estimated life of 8 years. The baler will be worthless at the end of its life. The annual amount of depreciation on this equipment is:
A) $7,500
B) $6,250
C) $10,000
D) $50,000
Answer: A
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Chapter 4: Internal Control and Cash
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Once a petty cash fund is established, no entry is made to the Petty Cash account except to change the total amount in the fund.
A)True
B)False
Q2) To maintain effective internal control, the majority of all payments in an organization should be made using cash.
A)True
B)False
Q3) Identify and briefly describe the five components of internal control
Q4) If a bank reconciliation included $600 of outstanding cheques, the journal entry to record this reconciling item would include:
A) a credit to Cash of $600
B) a debit to Cash of $600
C) a credit to Accounts Payable of $600
D) no entry is required
Q5) The journal entry for an NSF (nonsufficient funds) cheque involves a debit to Accounts Payable.
A)True
B)False
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Chapter 5: Short-Term Investments and Receivables
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) When a note matures, the payee should record:
A) interest payable
B) interest expense
C) interest revenue
D) unearned revenue
Q2) Many companies use both the percentage-of-sales and the aging method to establish their allowance for doubtful accounts.
A)True
B)False
Q3) Using the percentage-of-sales method, you estimate that total uncollectible accounts are $4,500. The Allowance for Uncollectible Accounts prior to adjustment has a debit balance of $1,400. The amount of the adjusting entry is:
A) $1,400
B) $3,100
C) $4,500
D) $5,900
Q4) All marketable securities are considered to be short-term investments.
A)True
B)False
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Chapter 6: Inventory and Cost of Goods Sold
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) An error in the ending inventory for the year ended December 31, 2013:
A) automatically creates errors in cost of goods in the 2013 and 2014 financial statements
B) has no effect on the 2013 financial statements but will create an error in the 2014 financial statements
C) automatically creates errors in the ending inventory balance in the 2013 and 2014 financial statements
D) affects only the 2013 financial statements
Q2) FIFO income typically is less realistic compared to the net income under weighted-average cost.
A)True
B)False
Q3) A change in inventory costing method should be applied prospectively.
A)True
B)False
Q4) If ending inventory on December 31, 2013, is overstated, then:
A) cost of goods sold for the year ended December 31, 2014, will be understated
B) cost of goods sold for the year ended December 31, 2013, will be overstated
C) gross margin for the year ended December 31, 2013, will be understated
D) gross margin for the year ended December 31, 2014, will be understated
Page 8
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Chapter 7: Property, Plant, and Equipment, and Intangible Assets
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Costs of land improvements are not included in the Land account.
A)True
B)False
Q2) Most companies use an accelerated depreciation method for income tax and financial statement purposes.
A)True
B)False
Q3) Rhoundakona Corporation bought property, plant, and equipment on January 1, 2012, at a cost of $35,000. Estimated residual value is $5,000 and the estimated useful life is 8 years. The company uses straight-line depreciation. On January 1, 2015, Rhoundakona's management sells the asset for $25,000. The gain or loss on disposal is:
A) $1,250 loss
B) $1,250 gain
C) $10,000 loss
D) $25,000 gain
Q4) A change in useful life estimate is very common in Canada.
A)True
B)False
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Chapter 8: Long-Term Investments and the Time Value of Money
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) Power Generation Corp. owns 38% of Electric Limited. Net income for Electric Limited for the year ending December 31, 2014, is $450,000. The journal entry prepared by Power Generation Corp. on December 31, 2014, includes a:
A) debit to Cash for $171,000
B) credit to Long-Term Investment for $171,000
C) debit to Long-Term Investment for $450,000
D) debit to Long-Term Investment for $171,000
Q2) Barking Power Company accounts for its 35% investment in Pipeline Corporation under the equity method of accounting. The investment was made on January 1, 2014, at a cost of $625,000. Pipeline Corporation reported net income of $85,000 for the year ended December 31, 2014, and paid total dividends of $20,000 during 2014. On December 31, 2014, after making all appropriate entries, the balance in Barking Power Company's Long-Term Investment account will equal:
A) $647,750
B) $602,250
C) $583,000
D) $690,000
Q3) Briefly explain the meaning of the term "present value."
Q4) How does an investor account for a long-term investment in bonds?
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Chapter 9: Liabilities
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96 Flashcards
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Sample Questions
Q1) An example of a post retirement benefit provided by a company is medical insurance for retired workers.
A)True B)False
Q2) An accrued expense is an expense incurred by the company but not yet paid in cash.
A)True B)False
Q3) Under the effective-interest method of amortization for bonds, the cash payment on each interest payment date:
A) increases over the first half of the life of the bond, and then decreases thereafter
B) increases over the life of the bond
C) decreases over the life of the bond
D) is constant
Q4) A bond issued at a price above its maturity or par value is sold at a premium. A)True B)False
Q5) Describe the two interest rates included in setting the price of a bond.
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Chapter 10: Shareholders Equity
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Proceeds from the issuance of shares appear in which, if any, section of the cash flow statement?
A) operating activities section
B) investing activities section
C) financing activities section
D) Proceeds from the issuance of shares do not appear in the cash flow statement.
Q2) Once a share is sold, it is consider issued.
A)True
B)False
Q3) The entry to record the issuance of 12,500 common shares at $2.50 per share includes a:
A) debit to Retained Earnings for $31,250
B) credit to Retained Earnings for $31,250
C) credit to Common Shares for $31,250
D) credit to Contributed Surplus for $31,250
Q4) Common shareholders, due to their increased risk have first rights upon the organizations liquidation.
A)True
B)False
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Statement of Shareholders Equity
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71 Verified Questions
71 Flashcards
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Sample Questions
Q1) Companies issuing publicly-traded stock are required to have their financial statements audited by an external auditor. This requirement is placed on corporations by the:
A) Canada Revenue Agency
B) Provincial Securities Commissions
C) Various federal and provincial incorporating acts
D) the Prime Minister of Canada
Q2) Corrections to the beginning balance of Retained Earnings for errors found within the current period are called prior-period adjustments.
A)True
B)False
Q3) Corporations generally credit Income Tax Payable based on the amount of pretax accounting income multiplied by the income tax rate.
A)True
B)False
Q4) Operating income excludes income from discontinued operations.
A)True
B)False
Q5) Explain what is meant by the phrase "the quality of earnings." Page 13
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Page 14
Chapter 12: The Statement of Cash Flows
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127 Flashcards
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Sample Questions
Q1) Your best friend just lost his job because the company he was working for went bankrupt. He was complaining to you that even though the company had been profitable for three years in a row, it still went out of business. He asks you how this can happen.
Explain the most likely reason for the company declaring bankruptcy. Could your best friend have seen it coming? How?
Q2) Salary Expense on the income statement was $264,780 for the year ended December 31, 2013. The Salary Payable account decreased $24,370 during the same period. The amount of cash payments to employees for the year ended December 31, 2013, is:
A) $289,150
B) $264,780
C) $240,410
D) indeterminable from the information given
Q3) Minden Company purchased a piece of land in 2008 for $120,000. At the end of 2013 the land was appraised and valued at $200,000. In 2014, due to water quality issues Minden Company sold the land for $55,000. On its 2014 income statement and statement of cash flows how should the company record this sale transaction.
Q4) Why is the statement of cash flows necessary?
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Chapter 13: Financial Statement Analysis
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) Inventory turnover measures the number of times a company sells its average inventory level during a year.
A)True
B)False
Q2) Vertical analysis looks at:
A) percentage changes in the balances shown in comparative financial statements
B) the change in key financial statement ratios over a specified period of time
C) the dollar amount of the change in various financial statement amounts from year to year
D) individual financial statement items expressed as a percentage of a base (which represents 100%)
Q3) Common size statements include the relation of each item on the statement of earnings to net sales.
A)True
B)False
Q4) Common-size financial statements may identify the need for corrective action.
A)True
B)False
Q5) Identify three cash flow signs of a healthy company.
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