International Accounting Final Exam
Course Introduction
International Accounting explores the principles, standards, and practices of accounting as they apply in a global context. The course examines the regulatory frameworks governing financial reporting across different countries, with an emphasis on the convergence and divergence between International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). Students will analyze issues related to cross-border transactions, currency translation, international taxation, and the challenges faced by multinational corporations in financial statement preparation and consolidation. The course aims to develop a comprehensive understanding of how economic, cultural, and legal factors influence accounting practices worldwide, equipping students with the knowledge to interpret and compare financial information from diverse international entities.
Recommended Textbook
Financial Accounting and Reporting A Global Perspective 5th Edition by Herv Stolowy
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Page 2
Chapter 1: Accounting: the Language of Business
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Q1) Accounting is used to:
A) Record economic variables.
B) Record principally economic variables but can also describe non-financial parameters.
C) Describe non-financial parameters.
D) None of these.
Answer: B
Q2) Initial financial resources are provided by:
A) Customers
B) Managers
C) Suppliers
D) Capital providers
Answer: D
Q3) The type of accounting which deals with a detailed account of how resources are acquired,managed,and used by the firm is known as.
A) Regulated accounting.
B) Managerial accounting.
C) Financial accounting.
D) None of the above.
Answer: B
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Chapter 2: Introduction to Financial Statements
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Q1) Which items are traditionally listed first in North America?
A) Short-term
B) Valuable
C) Long-term
D) None of these.
Answer: A
Q2) Which of the following sections form the statement of financial position/balance sheet?
A) Assets,liabilities and profit
B) Assets,liabilities and shareholders' equity
C) Assets and profit
D) Liabilities and profit
Answer: B
Q3) The statement of financial position/balance sheet is a set of two lists showing:
A) Resources on one side and obligations to external parties on the other side.
B) Revenues on one side and expenses on the other side.
C) Profit on one side and loss on the other side.
D) None of these.
Answer: A
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Page 4
Chapter 3: Financial Statements: Interrelations and Construction
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Q1) Proponents of using national standardized charts of accounts argue that:
A) It facilitates the mobility of qualified accountants since all firms use the same basic structure.
B) It facilitates inter-company comparability of published accounts.
C) It reduces the cost of designing accounting software packages.
D) All of these.
Answer: D
Q2) The term 'credit' is synonymous with 'increase'.
A)True
B)False
Answer: False
Q3) Which of the following equations is correct?
A) Using balance sheet accounts:
Sum of debit balances - Sum of credit balances = Net income
B) Using trial balance accounts:
Sum of debit balances = Sum of credit balances
C) Using income statement accounts:
Sum of credit balances - Sum of debit balances = Net income
D) All of these.
Answer: D
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Chapter 4: Accounting Principles and End-Of-Period Adjustments
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Q1) Why is it necessary to know the income generated by the managers' decisions and actions?
A) In order to know the performance potential of the firm and evaluate the quality of the management and of their decisions as agents of the shareholders.
B) In order to provide a basis for the state to levy taxes based on income.
C) In order to share the income between partners or shareholders.
D) All of these
Q2) The going concern principle is a key reason for valuing assets and resources or liabilities at their historical costs rather than at their ____ value.
A) Replacement
B) Present
C) Liquidation
D) Discounted
Q3) Assets and liabilities should not be offset except when offsetting is specifically required or permitted by an accounting standard.
A)True
B)False
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Page 6
Chapter 5: Regulation of Accounting and Financial Reporting
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Q1) IAS 1 specifies that: 'an entity shall disclose the amount expected to be recovered or settled after more than ____ months for each asset and liability line item that combines amounts expected to be recovered or settled: (a)no more than ____ months after the reporting period,and (b)more than ____ months after the reporting period'
A) Three
B) Six
C) Twelve
D) Twenty-four
Q2) Which of the following is a financial liability?
A) Bank overdraft
B) Debt to tax authorities
C) Advance payment received from customers
D) Accounts payable
Q3) Which type of companies traditionally publish an annual report?
A) Listed companies
B) Small companies
C) Foreign companies
D) All companies
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Chapter 6: Revenue Recognition Issues
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Q1) Loss carry-back means that the losses of one period can be used to offset profits made in previous periods,allowing a tax refund.
A)True
B)False
Q2) Which of the following equations is correct?
A) Taxable income = Taxable revenues + Deductible expenses or costs
B) Taxable income = Revenues - Expenses
C) Taxable income = Taxable revenues - Deductible expenses or costs
D) Taxable income = Revenues + Expenses
Q3) Which method is preferred by the IASB to account for long-term contracts?
A) Completion method
B) Fixed price method
C) Completed contract method
D) Cost plus method
Q4) Which accounting principle is designed to prevent abuses of flexibility in revenue recognition?
A) Consistency principle
B) Accrual principle
C) Going concern principle
D) Matching principle
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Chapter 7: Tangible Fixed Assets
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Q1) Acquisition cost is the amount of cash or cash equivalents paid,or the fair value of the other consideration given,to acquire an asset at the time of its acquisition.
A)True
B)False
Q2) IAS 16 defines an 'impairment loss' as 'the amount by which the carrying amount of an asset exceeds its recoverable amount.'
A)True
B)False
Q3) Fixed assets can be divided into which three categories?
A) Buildings,equipment and goodwill
B) Ordinary,financial and extraordinary
C) Tangible,intangible and financial
D) None of these
Q4) What is another name for tangible assets?
A) Plant assets
B) Operational assets
C) Property,plant and equipment
D) All of these
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Chapter 8: Intangible Assets
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Q1) Intangible assets are usually considered to have no physical substance and to be linked to legal rights.
A)True
B)False
Q2) Which of the following examples is not an example of research activities?
A) The search for alternative materials,devices,products,processes,systems,or services.
B) Activities aimed at obtaining new knowledge.
C) The design,construction,and testing of pre-production or pre-use prototypes and models.
D) The formulation,design,evaluation,and final selection of possible alternatives for new or improved materials,devices,products,processes,systems,or services.
Q3) The IASB accounting standard currently regulating goodwill accounting is:
A) IAS 22
B) SFAS 142
C) IFRS 3
D) None of these
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Chapter 9: Inventories
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Q1) Any cost that does not flow to the income statement by way of a cascade of inventory accounts is recognized in the period incurred and is thus called a 'product cost'.
A)True
B)False
Q2) The periodic inventory system relies on periodic physical counting.
A)True
B)False
Q3) According to IAS 2,what should the cost of inventories comprise?
A) Costs of purchase
B) Costs of conversion
C) Costs incurred in bringing the inventories to their present condition and location
D) All of the previous costs
Q4) Which of the following equations is correct?
A) Beginning inventory - Purchases - Cost of goods sold = Ending inventory
B) Beginning inventory - Purchases + Cost of goods sold = Ending inventory
C) Beginning inventory + Purchases + Cost of goods sold = Ending inventory
D) Beginning inventory + Purchases - Cost of goods sold = Ending inventory
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Chapter 10: Financial Instruments in the Statement of Financial Position
and Fair Value Accounting
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Q1) Held-to-maturity investments are valued at fair value through profit or loss in the balance sheet.
A)True
B)False
Q2) The more a receivable exceeds the contractual credit terms,the less likely it is to be uncollectible.
A)True
B)False
Q3) What is (are)the advantage(s)to the seller of notes receivable?
A) A note is a contract and thus offers a higher level of guarantee of payment to the seller than a simple combination 'order,delivery,acknowledgment of receipt plus invoice'.
B) A note is a regular financial instrument and thus can be endorsed over to a third party.
C) A note is a negotiable credit instrument.The seller can sell a note to a financial institution before its maturity date.
D) All of the above
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Chapter 11: Shareholders Equity
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Q1) Which right(s)is (are)held by each shareholder?
A) Influence management decision making by participating in and voting in general assembly meetings
B) Receive dividends and a proportionate share of any eventual liquidation surplus
C) First pass at acquiring additional shares (proportionately to the current holding)in the case of a new issue of shares
D) All of these
Q2) Incorporating a corporation or increasing its capital are operations that incur significant costs.These costs include legal costs,auditors' fees,bankers' commissions,etc.How are the costs handled?
A) They are considered to be a period cost and recognized in the corresponding income statement
B) They are capitalized as an intangible asset and amortized.
C) They are written off against the total accumulated share premium.
D) All of these.
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Chapter 12: Liabilities and Provisions
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Q1) Which element(s)regarding the finance leases should be disclosed?
A) For each class of asset,the net carrying amount at the balance sheet date.
B) Contingent rents recognized in income for the period.
C) Reconciliation between the total of future minimum lease payments at the balance sheet date,and their present value.
D) All of these
Q2) What is the term IAS 17 uses for a lease that transfers substantially all the risks and rewards incidental to ownership of an asset?
A) Simple lease
B) Finance lease
C) Operating lease
D) Legal lease
Q3) Who can be liability funds providers?
A) Financial institutions
B) Suppliers
C) Tax authorities
D) All of these.
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14
Chapter 13: Business Combinations
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Q1) When excess resources are created through operations,what can management decide to do to create value for the shareholders?
A) Invest in marketable securities.
B) Repurchase shares.
C) Issue large dividends.
D) All of these
Q2) What is a contractual arrangement called where two or more parties undertake an economic activity that is subject to joint control?
A) Subsidiary
B) Parent company
C) Associate
D) Joint venture
Q3) According to IFRS 10 (new standard),control exists if,and only if,the investor has A) Power over the investee
B) Exposure,or rights,to variable returns from its involvement with the investee
C) The ability to use its power over the investee to affect the amount of the investor's return
D) All of these
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Chapter 14: Income Statement Analysis
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Q1) How is the operating profit calculated?
A) Operating profit = Value added + Reversal of provisions - Depreciation expenses and movement in provisions + Other operating revenues - Other operating expenses
B) Operating profit = EBITDA + Reversal of provisions- Depreciation expenses and movement in provisions + Other operating revenues - Other operating expenses
C) Operating profit = Commercial margin + Reversal of provisions - Depreciation expenses and movement in provisions + Other operating revenues - Other operating expenses
D) Operating profit = EBITDA - Reversal of provisions + Depreciation expenses and movement in provisions - Other operating revenues + Other operating expenses
Q2) Which of the following items is not a key intermediate balance?
A) Market value added
B) Value added
C) Gross operating profit
D) Commercial margin
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Chapter 15: Balance Sheet Analysis
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Sample Questions
Q1) Acme Company sells manufactured products for a price of 10 CU per unit.The credit terms received from suppliers of materials are 90 days.It grants credit to its customers for 30 days.Its inventory of finished products turnover is 6;its raw material inventory turnover is 12.Its transformation process takes a week (5 working days;the work is distributed evenly over the five days but all materials consumed are put in production on the first day).Its manufacturing value added to raw materials purchased is 50%.Its gross margin is 40%.Its net margin before tax is 10%.All costs other than materials are paid cash.The working capital need to sell one unit is likely to be:
A) 1,282.5 CU
B) 1,522.5 CU
C) 1,273.5 CU
D) - 912.5 CU
Q2) How is the working capital need calculated?
A) Working capital + Net cash
B) Fixed assets - Current liabilities
C) Current assets (except cash)- Current liabilities
D) Long-term debt - Current assets
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Chapter 16: Statement of Cash Flows Construction
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Q1) Which of the following statements is not correct?
A) The direct method presents receipt and payment flows separately for each category of operating activities: selling,purchasing,securing employees labor,etc.
B) The direct method provides information which may be useful in estimating future cash flows and which is not available under the indirect method but is difficult to implement.
C) The vast majority of businesses report cash flows from operating activities using the indirect method.
D) Most standards recommend the indirect method while allowing the direct method.
Q2) Which of the following transactions is not included in investing activities in the statement of cash flows?
A) Receipt of repayment of loans and advances.
B) Purchase of fixed assets.
C) Loans and advances made.
D) Repayment of debts.
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18
Chapter 17: Statement of Cash Flows Analysis and Earnings
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Q1) A business entity that shows a positive cash flow from operations,a negative cash flow (i.e. ,a cash outflow)from investing and a negative cash flow (i.e. ,a cash outflow)from financing is a business entity which:
A) Is profitable,does not prepare itself for future challenges and reimburses its debt.
B) Is incurring a loss,prepares itself for the future and has obtained new long-term funds from external sources.
C) May be profitable or may experience a loss,probably invests more than it divests and probably has reimbursed some of its debt.
D) May be profitable or may experience a loss,probably divests more than it invests and has issued new common stock for an amount in excess of the amount of dividends paid to current shareholders.
Q2) What ratio is used to calculate 'cash flow yield'?
A) Operating cash flow/Net sales
B) Operating cash flow/Interest paid
C) Operating cash flow/Net income
D) Operating cash flow/Average current liabilities
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Page 19
Chapter 18: Ratio Analysis, financial Analysis and Beyond
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Q1) Euphoria Corp.operates in a world where there are no taxes of any kind.Euphoria Corporation's balance sheet on 31 December X1 shows shareholders' equity at 5,000 CU,long-term debt at 5,000 CU (interest on these loans is 5%)and accounts payable at 5,000 CU.The income statement for X1 shows that for sales of 15,000 CU the gross margin was 8,000 CU.The COGS includes 2,500 CU of depreciation expenses.Selling General and Administrative expenses amount to 5,500 CU which include,among other items,a 500 CU personnel training expenses for new technologies of production,500 CU spent on developing a new logo and its launch and total depreciation expenses of 1,500 CU.In addition Euphoria spent 1,000 CU on R&D in X1.The market expectation regarding return on long-term capital in the risk class where Euphoria operates is considered to be 15%.Intellectual investments are considered to benefit the firm for 4 years.What is the EVA of Euphoria for X1?
A) 1,275 CU
B) 1,500 CU
C) 1,725 CU
D) 1,000 CU
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