Intermediate Accounting I Question Bank
Course Introduction
Intermediate Accounting I provides a comprehensive study of the principles, concepts, and standards underlying financial accounting and reporting. The course focuses on the preparation and interpretation of financial statements in accordance with generally accepted accounting principles (GAAP), with an emphasis on asset and liability recognition, measurement, and disclosure. Students will deepen their understanding of income measurement, revenue recognition, and the time value of money, and apply critical thinking to solve practical accounting problems. This course builds on introductory accounting knowledge and prepares students for advanced topics in accounting and business decision-making.
Recommended Textbook
Intermediate Accounting Volume 1 3rd Edition by Kin Lo
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10 Chapters
1103 Verified Questions
1103 Flashcards
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Page 2
Chapter 1: Fundamentals of Financial Accounting Theory
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33 Verified Questions
33 Flashcards
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Sample Questions
Q1) Explain the meaning of adverse selection and moral hazard.Give an example of each.
Answer: Adverse selection: A type of information asymmetry whereby one party to a contract has an information advantage over another party.Examples: buying a resale home;buying a used car;buying shares in a company,etc.
Moral hazard: A type of information asymmetry whereby one party to a contract cannot observe some actions relating to the fulfillment of the contractual terms by the other party.Examples: renting an apartment to a tenant;car insurance;hiring an executiveseparation of ownership and management or the principal-agent problem;lending money to a company,etc.
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.
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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) Which of the following characteristic of financial information alleviates "information asymmetry"?
A)Completeness.
B)Verifiability.
C)Confirmatory value.
D)Materiality.
Answer: C
Q2) The underlying or fundamental objective of the accounting conceptual framework is
A)decision usefulness.
B)comparability.
C)representational faithfulness.
D)understandability.
Answer: A
Q3) Which of the following is part of the IFRS Conceptual Framework?
A)Statement of financial position.
B)Elements of financial statements.
C)Information Asymmetry.
D)Financial statement notes.
Answer: B
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Page 4
Chapter 3: Accrual Accounting
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) A correction of an accounting error does not involve
A)note disclosure.
B)retrospective adjustment.
C)retrospective restatement.
D)management bias.
Answer: D
Q2) What is the significance of the subsequent events period for accrual accounting?
A)The subsequent events period can affect the recognition of business transactions and events.
B)The subsequent events period can affect the measurement of business transactions and events.
C)The subsequent events period can affect the recognition and measurement of business transactions and events.
D)Transactions must be reported in the cut-off period before the statements are authorized.
Answer: B
Q3) Using the conceptual frameworks and other ideas,discuss whether a change in accounting policy should be treated prospectively or retrospectively.
Answer: 11ea7cc7_61a8_5891_928c_591735e66dd9_TB1320_00
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Page 5
Chapter 4: Revenue and Recognition
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) On January 1,2018 Sukhi's Cycles Inc.sells a motorcycle for $24,000.Terms offered are $10,000 cash;$7,000 due on January 1,2019,and $7,000 due on January 1,2020.The market interest rate for transactions of this type is 4.0% per annum.What is the amount of revenue that Sukhi should record at time of sale?
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 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.
Q4) What are three exceptions to the use of the percentage of completion method for construction contracts?
Q5) Discuss when it is acceptable to use the residual approach to allocate the transaction price to performance obligations.
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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) What is one way to segregate duties to improve controls over cash?
A)Request all customers to pay in cash.
B)Separate sales employees from employees who book the accounting entries.
C)Request all customers to pay by cheques made payable to "CASH."
D)Have the employee who is responsible for making cash deposits to the bank also do the bank reconciliations.
Q2) 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.
Q3) A $50,000 sale transaction is made with terms of 2/10,net 30.Assuming that the customer takes the discount,what amount is booked to the "cash discount" account under the net method of recording a discount?
A)$0
B)$1,000 debit
C)$1,000 credit
D)$49,000 debit
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Page 7
Chapter 6: Inventories
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2017 financial reporting?
A)Retained earnings is overstated by $1,000.
B)Retained earnings is understated by $1,000.
C)The retained earnings will be correctly stated.
D)Inventory is understated on the balance sheet.
Q2) Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2016,but the inventory was excluded in error during the ending inventory count.What impact will this have on fiscal 2017 financial reporting?
A)Gross margin is understated by $1,000.
B)Cost of sales is overstated by $1,000.
C)Ending inventory is understated by $1,000.
D)Beginning inventory is understated by $1,000.
Q3) What definition is used for "market" under IFRS and ASPE?
A)The amount it would cost to repurchase an item of inventory.
B)The lowest amount that can be obtained from the sale of inventory.
C)The amount required to be paid to replace an item of inventory.
D)The amount that can be obtained from selling the inventory less selling costs.
Q4) 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) Explain the nature of and the appropriate accounting treatment for investments in subsidiaries,joint ventures,and associates.
Q2) Victoria purchases a hotel with 100 similar rooms.To help finance this purchase,Victoria sells these rooms to individual investors for $200,000 each.An investor who owns a single room receives 55% of 1% of the revenue of the hotel (i.e. ,0.55%),while the hotel retains the other 0.45%.An investor who wishes to liquidate his/her investment may sell his/her room back to Victoria for the original $200,000,but cannot otherwise sell the room to other parties.
Identify all the financial assets involved in the above situation.
Q3) On January 1,2017,a company pays $100,000 to purchase 100 Government of Canada bonds that have a maturity date of December 31,2021 and an interest rate of 5%.At December 31,2017,the bonds had a quoted price of $1,022 per bond.Assume that 20 of these bonds are sold on June 30,2018 for $1,100 per bond plus accrued interest.Determine the gain or loss that would be recorded in 2018 assuming:
a.Classified at fair value through profit or loss.
b.Classified at amortized cost.
Q4) Explain the nature of and the impact on the balance sheet and the income statement of investments subsequently measured at amortized cost.
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Page 9
Chapter 8: Property, plant and Equipment
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) What is a monetary item?
A)An asset that has a fixed or determinable cash flow.
B)Assets such as land and buildings.
C)An asset arising from contractual agreements on future cash flows.
D)An asset that does not have a fixed or determinable cash flow.
Q2) Explain how non-monetary transactions are accounted for.
Q3) Ontario Ltd.purchased a machine on Jan 1,2016 for $750,000.The machine had an estimated useful life of 5 years and an estimated residual value of $50,000.The company uses straight-line depreciation and records monthly depreciation.The machine was sold on December 31,2019 for $200,000.What was the gain/loss on disposal of the machine?
A)$10,000 loss.
B)$10,000 gain.
C)$50,000 loss.
D)$50,000 gain.
Q4) What costs should not be capitalized to "building"?
A)Construction permits.
B)Engineering surveys.
C)Property transfer tax.
D)Interest during construction.
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Chapter 9: Intangible Assets, goodwill, mineral Resources, and Government Grants
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Which of the following statements is correct about intangible assets that have an indefinite life span?
A)This is an infinite lived asset.
B)The asset is expected to continue providing economic benefits for the foreseeable future.
C)Management does not know how long the asset is expected to provide economic benefits.
D)The asset has fixed and determinable cash flows.
Q2) How does IFRS require that government grants for property,plant and equipment (PPE)be recorded?
A)The government grant should be recorded directly to equity.
B)The government grant should be recorded indirectly to equity via income.
C)The government grant should not be recorded directly to equity via income.
D)The government grant should not be recorded directly to equity.
Q3) Explain four differences in the recognition of externally acquired intangibles versus internally developed intangibles.
Q4) Explain how earnings can be manipulated through choices made in the estimated useful lives for intangible assets.
Q5) Explain how goodwill arises in a business.Give an example in your response.
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Chapter 10: Applications of Fair Value to Non-Current Assets
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) Company Nine purchased land for $600,000 some years ago.Fair value was $800,000 at the beginning of this year and $350,000 at the end of this year.
Prepare the journal entry to record this year's revaluation adjustment.
Q2) Company Ten purchased land for $400,000 during the year.Fair value at the end of the year was $500,000.
Prepare the journal entry to record the revaluation adjustment.
Q3) What is a "discontinued operation"?
A)A component of an entity that either has been disposed of or is classified as held for sale.
B)A component of an entity that has been disposed of or will be sold within one year. C)A component with operations and cash flows that are not distinguishable from the rest of the entity.
D)A group of assets and liabilities to be disposed of together in separate transactions.
Q4) Company One purchased land for $900,000 some years ago.Fair value was $450,000 at the beginning of this year and $340,000 at the end of this year.
Prepare the journal entry to record this year's revaluation adjustment.
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Page 12