Intermediate Financial Accounting
Final Exam
Course Introduction
Intermediate Financial Accounting builds upon foundational accounting principles, focusing on the recognition, measurement, and reporting of assets, liabilities, equity, revenues, and expenses in accordance with generally accepted accounting principles (GAAP). The course delves into complex financial statement components such as inventories, investments, property, plant and equipment, intangibles, and long-term liabilities. Students will develop analytical skills to solve accounting problems, interpret financial statements, and understand the ethical and regulatory considerations impacting financial reporting. The course prepares learners for advanced studies in accounting and professional examinations by emphasizing critical thinking and the application of technical accounting standards.
Recommended Textbook
Intermediate Accounting 6th Edition Volume 2 by Thomas H. Beechy
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1425 Verified Questions
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Page 2
Chapter 1: The Framework for Financial Reporting
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Sample Questions
Q1) On November 7,2014 local residents sued Brimley Corporation for excess chemical emissions that caused some of them to seek medical attention.The total lawsuit is $8,000,000.Brimley Corporation's lawyers believe that the lawsuit will be successful and that the amount to be paid to the residents will be $4,000,000.On its December 31,2014 financial statements Brimley should:
A) Accrue a provision loss of $8,000,000 with no financial statement disclosure necessary.
B) Accrue a provision loss of $4,000,000 and note disclose.
C) Do nothing as the lawsuit has not yet ended.
D) Simply disclose the details regarding the lawsuit in a note.
Answer: B
Q2) A decline in value of a company's reporting currency relative to the foreign currency in which it has payables will result in a foreign exchange gain on the reporting company's books.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Accounting Judgements
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Sample Questions
Q1) The present value of any bond payable issued between interest-payment dates will include any interest accrued since the last interest payment date.
A)True
B)False
Answer: False
Q2) Bonds are said to be redeemable when they can be prematurely retired at the discretion of the issuing company and retractable when they can be prematurely retired at the investor's discretion.
A)True
B)False
Answer: True
Q3) Use of the effective interest method for amortizing bond premiums and discounts is mandatory under IFRS but not under ASPE.
A)True
B)False
Answer: True
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Chapter 3: Statements of Income and Comprehensive Income
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Sample Questions
Q1) On October 1,2019,XBC declared a dividend to its common shareholders by issuing one share of YTC,preferred share,$.60 no-par (held as a long-term investment)for each of the 15,000 common shares of XBC.On the declaration date,the YTC shares were selling at $7 per share.The YTC shares originally were purchased by XBC at $9 per share; they were transferred to the XBC shareholders on January 30,2000,when their quoted market price was $7.50 per share.Give the following entries for XBC: (a)At date of declaration:
(b)At date of payment:
Answer: (a)At date of declaration: 11ea71d0_1fe5_a02d_89cd_355887926ae9_TB2440_00 (b)At date of payment: 11ea71d0_1fe5_c73e_89cd_65e5fde29a92_TB2440_00
Q2) A property dividend causes a debit to retained earnings equal to the ___________ of the property distributed.
A) Book value
B) Fair market value
C) Original cost
D) Income tax basis
Answer: B
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Chapter 4: Statements of Financial Position and Changes in Equity; Disclosure Notes
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Sample Questions
Q1) At the end of 2014,interest on a perpetual loan is paid to the holder.The perpetual debt is shown as an equity instrument.Based on the above the interest is:
A) Deducted on the income statement
B) Added to the income statement
C) Deducted for income tax purposes
D) Added for income tax purposes
Q2) Convertible debt that is convertible to a variable number of shares at the investor's option will normally be classified as a liability.
A)True
B)False
Q3) A forward contract is:
A) A debt instrument.
B) The right to sell something in the future.
C) An obligation to buy or sell something in the future.
D) The right to buy something in the future.
Q4) Cash flow hedges do not exist under ASPE.
A)True
B)False
Q5) What are hybrid securities?
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Chapter 5: The Statement of Cash Flows
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Sample Questions
Q1) During 2013,MJB has pre-tax accounting income of $8,400.There were no permanent differences.MJB's only temporary difference for 2013 was rent revenue collected in advance of $2,400.None of this amount is recognized for book purposes.MJB's taxable income for 2013 would be:
A) $6,000
B) $8,400
C) $9,600
D) $10,800
Q2) List five permanent differences.
Q3) Financial analysts tend to ignore deferred taxes when computing the effective tax rate.
A)True
B)False
Q4) Temporary differences very seldom reverse (i.e.,turnaround)in one or more future reporting periods.
A)True
B)False
Q5) During 20014,JBC had pre-tax accounting income of $8,400,originating taxable amounts of $4,800 and originating deductible amounts of $2,400.Calculate JBC's taxable income for 2014.
Page 7
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Chapter 6: Revenue Recognition
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Sample Questions
Q1) Carry back and carry forward procedures for temporary differences are always applied,even when there are no temporary differences for deductible items,and there are no current income taxes payable.
A)True
B)False
Q2) A tax loss represents the present and deferred benefit that the company will be able to realize from the tax loss through a reduction of income taxes paid to governments.
A)True
B)False
Q3) How does the existence of a loss in the year impact the accounting of temporary differences?
Q4) Under current law,at the end of the year of loss or anytime during the next 15 years,a company may select to either carry back or carry forward-only the loss.
A)True
B)False
Q5) Taxes are recovered at the tax rate in effect during the year of the loss.
A)True
B)False
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Chapter 7: Financial Assets: Cash and Receivables
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Sample Questions
Q1) The treatment of gains and losses under Sale and Leaseback arrangements are identical under ASPE and IFRS.
A)True
B)False
Q2) Under ASPE,if a leased asset's fair value is less than its carrying value at the date of sale under a sale-and-lease-back transaction,the lessor has experienced an impairment loss.
A)True
B)False
Q3) A lease which contains a bargain purchase option,but which has a term equal to only 70% of the estimated economic life of the leased property cannot properly be classified as a finance lease by a lessee.
A)True
B)False
Q4) In an operating lease,if a non-refundable down payment is made in advance,the lessor should initially debit Cash and credit Unearned Rent (liability).
A)True
B)False
Q5) Explain what a temporary difference is and how it arises?
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Chapter 8: Cost-Based Inventories and Cost of Sales
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Sample Questions
Q1) What is the most critical value or amount in a defined benefit pension plan from the point of view of the financial statement user,and is this amount generally reported in the balance sheet for most firms? Explain.
Q2) The accrued obligation at the beginning of the year was $289,000 and the current service cost for the year is $92,000.Assuming an interest factor of 8%,what is the accrued obligation at the end of the year?
A) $404,120
B) $381,000
C) $403,860
D) $363,660
Q3) A pension plan is fully funded when the assets in the pension fund are adequate to pay the current retirees.
A)True
B)False
Q4) A pension plan that gives an employee the right to retirement benefits which are not contingent upon the employee remaining with the company provides vesting benefits to the employee.
A)True
B)False
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Chapter 9: Long-Lived Assets
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Sample Questions
Q1) In computing EPS,convertible preferred shares may increase the number of shares outstanding:
A) In a complex capital structure only if they have been converted.
B) Only in a complex capital structure, whether or not they have been converted.
C) In a simple capital structure, whether or not they have been converted.
D) In a complex capital structure and a simple capital structure, whether or not they have been. converted.
Q2) Where there are significant changes in a corporation's capital structure after year end but before the financial statement date,the transaction must be disclosed and described.
A)True B)False
Q3) Stock rights,options,and warrants determined to be dilutive when computing fully diluted earnings per share may be anti-dilutive when computing basic earnings per share.
A)True B)False
Q4) Anti-dilution must be considered only with complex capital structures. A)True B)False
Page 11
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Chapter 10: Depreciation, Amortization, and Impairment
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Sample Questions
Q1) Change in accounting estimate requires that a "catch-up adjustment" be recorded and reported in the year of the change.
A)True
B)False
Q2) The following accounting errors occurred in 20x1; they were discovered in 20x2: Purchases for 20x1 Overstated $600; ending 20x1 inventories Overstated $600; and depreciation expense for 20x1 Overstated $600.The combined effect of these errors caused 20x1 pre-tax income to be: Overstated $___________; or Understated by $___________; or No Effect
Q3) Changes in estimates and prospectively-applied accounting policy changes occur more often in practice than do retrospectively-applied accounting policy changes.
A)True
B)False
Q4) If a change in estimate and a change in principal occur on the same item and at the same time,the one that is dominant is reported.
A)True
B)False
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Page 12
Chapter 11: Financial Instruments: Investments in Bonds and Equity Securities
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Sample Questions
Q1) If business conditions are stable,an increase in the number of accounts receivable turnover from one year to the next (based upon a company's accounts receivable at year-end)might indicate:
A) that a longer discount period and a more distant due date were extended to customers in the second year.
B) a significant decrease in the volume of sales of the second year.
C) that the second year's sales were made at lower prices than the first year's sales.
D) a stiffening of the company's credit policies.
E) None of these choices are correct.
Q2) All of the following are examples of lending decisions except:
A) finance the takeover of another corporation.
B) extend normal credit terms.
C) buy corporate bonds on the open market.
D) accepting employment.
Q3) All of the following are examples of regulatory decisions except:
A) negotiating collective agreements.
B) need for rate or price increases.
C) impact of past regulatory decisions.
D) ability to withstand competition.
Page 13
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