Intermediate Financial Accounting
Test Bank
Course Introduction
Intermediate Financial Accounting builds on foundational accounting principles to deepen students understanding of financial reporting and analysis. The course examines the application of Generally Accepted Accounting Principles (GAAP) to complex business transactions, including revenue recognition, inventory valuation, investments, long-term assets, and liabilities. Students analyze financial statements and disclosures, explore professional judgment in financial decisions, and apply accounting standards to real-world scenarios, preparing them for advanced work in accounting and finance fields.
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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Chapter 1: Fundamentals of Financial Accounting Theory
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33 Verified Questions
33 Flashcards
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Sample Questions
Q1) Which statement appropriately explains the meaning of "publicly accountable enterprise"?
A)Firms without equity,debt or other securities traded in public markets.
B)Firms with equity,debt or other securities traded in public markets.
C)Firms with assets and liabilities that provide goods and services in public markets.
D)New firms entering the public markets to provide goods and services.
Answer: B
Q2) Which statement best explains the relationship between the efficient securities market hypothesis and accounting?
A)Security prices adjust slowly when accounting reports are publicly released.
B)The timeliness of accounting information is irrelevant to securities markets.
C)Accounting information competes with other sources of information.
D)Security prices are unaffected when accounting reports are publicly released.
Answer: C
Q3) 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) Lean Ltd.had a balance of $52,300 in the office supplies account at the start of the year.During the year,purchases of $141,700 were made and debited to the office supplies account.At the end of the year,a physical count of the office supplies indicated $41,800 on hand.What was the office supplies expense for the year?
A)$141,700
B)$152,200
C)$183,500
D)$194,000
Answer: B
Q2) Discuss some of the conceptual framework concepts involved in determining whether to capitalize or expense an expenditure.
Answer: Consider whether the expenditure satisfies the definition of an asset: Does the expenditure represent a resource controlled by the entity? Will the expenditure provide future economic benefits to the entity?
Consider whether the expenditure satisfies the definition of an expense: Is the expenditure an ordinary activity of the entity?
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Chapter 3: Accrual Accounting
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) Which statement is not correct?
A)Cash accounting is straightforward.
B)Cash accounting requires the same financial statements as accrual accounting.
C)The cash flow statement reports performance under cash accounting.
D)The income statement is the same as the cash flow statement under cash accounting.
Answer: B
Q2) Which statement is not correct about expenses in the income statement?
A)The function of expense format classifies expenses based on their use.
B)Some function of expense categories are depreciation,employee costs,raw materials consumed.
C)The nature of expense format classifies expenses based on their source.
D)Some function of expense categories are cost of sales,administration or warehouse. 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) Which of the following is TRUE when goods are sold on on an installment basis?
A)Revenue is recognized at time of the initial sale.
B)Cost of goods sold is debited for the cost of the merchandise sold.
C)Revenue is not recognized until all monies due under the contract have been collected.
D)The deferred gross profit liability is debited as cash is collected.
Q2) Which statement is correct about the impact of estimation errors on construction contracts?
A)Underestimating future costs decreases the percentage complete ratio.
B)Overestimating future costs increases the percentage complete ratio.
C)Underestimating future costs increases the profit recognized in future periods.
D)Underestimating future costs increases the profit recognized in the current period.
Q3) Which of the following is TRUE when goods are sold on consignment?
A)The customer has taken physical possession of the asset.
B)The selling entity has the present right to payment for the asset.
C)The significant risks and rewards of ownership have been transferred.
D)The customer has accepted the asset.
Q4) List the five key steps in the revenue recognition process.
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Page 6
Chapter 5: Cash and Receivables
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) Define "cash" and explain how funds that are subject tor restrictions should be accounted for in the accounting records.
Q2) What are the general recognition criteria for non-cash assets under GAAP?
A)If the item meets the definition of an asset,it must have an indefinite life.
B)If the item meets the definition of an expense,it must be measurable.
C)In order for the item to be an asset,it will have future economic benefits,be under the entity's control,and result form past transactions.
D)Future transactions can be recorded under GAAP.
Q3) XYZ Company estimates their allowance for doubtful accounts (ADA)by aging their accounts receivable.At the end of 2018,the balance in the ADA was $165,000.During 2019,XYZ wrote off $16,000 and collected a $14,500 receivable that had been previously written off as uncollectable.At the end of 2019,the aging schedule indicated that the balance in the ADA should be $187,000.How much is the bad debts expense for 2019?
Q4) Which statement is not correct?
A)Factoring with recourse creates a liability on the balance sheet.
B)Factoring with recourse reduces a current ratio that is >1.
C)Factoring with recourse negatively impacts working capital.
D)Factoring without recourse reduces a current ratio that is >1.
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Chapter 6: Inventories
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) A retailer has a standard mark-up of 50% on invoiced cost.At the year end,200 out of 5,000 products had been discounted by 20% of retail price. Required:
Calculate the estimated costs as a percentage of retail price,separately for regular and discounted products.
Q2) 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?
Q3) 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 overstated by $1,000.
B)Cost of sales is overstated by $1,000.
C)Ending inventory is understated by $1,000.
D)Beginning inventory is overstated by $1,000.
Q4) Explain how a manufacturing company can manipulate earnings by including non-production costs in inventories.What does an auditor or financial statement user do to detect this type of manipulation?
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Page 8
Chapter 7: Financial Assets
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137 Flashcards
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Sample Questions
Q1) 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
Q2) Fiesta Corp.purchases a $500,000 face value bond which matures in two years.The coupon rate is 6% and the market rate is 7%.How much premium or discount will be amortized in the first year?
A)$4,367.24
B)$9,039.40
C)$30,000.00
D)$34,367.24
Q3) Explain the nature of and the appropriate accounting treatment for at fair value through profit or loss securities and at fair value through OCI securities.
Q4) Explain the nature of and the appropriate accounting treatment for investments in subsidiaries,joint ventures,and associates.
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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) Polar Sky Railway (PSR),a transportation company,has substantial investments in property,plant,and equipment.In 2017,the company exchanged some of these assets with other companies.[Note: any depreciation expense prior to the following transaction has already been properly recorded.] PSR transported some luxury automobiles from the port in Vancouver to Winnipeg "for free." The company does not usually transport cars on this route,so a fair value was not determinable.However,there were negligible incremental costs because doing this involved simply attaching a few extra railcars to an existing train bound for Winnipeg.For doing this,PSR received two luxury cars,which the company awarded to executives as perquisites (perks).These cars had a retail value totaling $450,000.
Required:
Record the journal entry for the above transaction on PSR's books.State your reason(s)for the chosen accounting method.
Q2) Which of the following is not a characteristic of a property,plant and equipment (PPE)?
A)No physical substance.
B)Identifiable.
C)Non-monetary.
D)Provides future cash flows.
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Page 10
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) Explain four differences in the recognition of externally acquired intangibles versus internally developed intangibles.
Q2) 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?
Q3) Which statement is correct?
A)In the development phase,the mineral site is ready for mineral production.
B)In the development phase,the mineral site is assessed for commercial viability.
C)In the development phase,the mineral site is assessed for technical viability.
D)In the development phase,the six criteria required for capitalization are met.
Q4) Which of the following is correct with respect to the accounting for re-payment of government grants?
A)Accounted for prospectively under IFRS.
B)Accounted for retrospectively under ASPE.
C)Accounted for prospectively under ASPE
D)Accounted for retrospectively under IFRS.
Q5) Explain the difference between indefinite lived and finite lived intangible assets.
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Chapter 10: Applications of Fair Value to Non-Current Assets
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121 Verified Questions
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Sample Questions
Q1) Which statement is correct about using the "fair value less point of sale costs" approach for biological assets?
A)The exception to "cost less depreciation" can be made at any subsequent measurement date.
B)Fair value may not be available for initial recognition,but could be used for subsequent measurement.
C)Fair value may be available for initial recognition,but then not be used for subsequent measurement.
D)Under this accounting method,fair value can only be higher than cost.
Q2) Which statement is not correct?
A)Accounting for biological assets is covered by the requirements of IAS 41.
B)Biological assets include grapes,milk,wine,cheese and lumber.
C)End of processing activities are covered under the requirements of IAS 18.
D)Post harvesting processing activities are covered under the requirements of IAS 2.
Q3) Explain the accounting for assets related to the agricultural industry.
Q4) Explain when a non-current asset is impaired.
Q5) Explain how non-current assets such as definite lived intangibles,indefinite lived intangibles and goodwill are tested for impairment under IFRS.
Page 12
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