Professional Accounting Preparation
Chapter Exam Questions
Course Introduction
Professional Accounting Preparation is designed to equip students with the essential knowledge, technical skills, and professional competencies required for a successful career in accounting. The course covers foundational concepts in financial and managerial accounting, auditing, and taxation, while emphasizing practical applications through case studies, problem solving, and ethical considerations. Students will also develop proficiency in the use of accounting software and gain insights into current standards and regulations affecting the profession. The curriculum prepares participants for professional certification exams and the transition to workplace environments, highlighting teamwork, communication, and critical thinking skills essential for accounting professionals.
Recommended Textbook
Intermediate Accounting 6th Edition Volume 2 by Thomas H. Beechy
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Page 2
Chapter 1: The Framework for Financial Reporting
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Sample Questions
Q1) Financial liabilities are initially recognized at fair value and at cost,amortized cost or fair value post-acquisition.
A)True
B)False
Answer: True
Q2) Which of the following statements is correct?
A) For companies that are self-insured, a provision must be established for events taking place prior to the reporting period if known.
B) There is no guidance for self-insurance under IFRS.
C) Contingent assets are only recorded when it is virtually certain that the benefits relating to the contingent assets will be received.
D) Contingent assets are only recorded when it is reasonably certain that the benefits relating to the contingent assets will be received.
Answer: C
Q3) Debt issue costs may be expensed or included in the cost of the debt.
A)True
B)False
Answer: True
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3
Chapter 2: Accounting Judgements
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Sample Questions
Q1) On April 1,2020,the DEF sold a $2,000,000 bond issue dated January 1,2020,to yield 9% per annum to maturity.The bonds were to be outstanding for twenty years from January 1,2020,and the stated rate of interest was 8%.Interest is paid each January 1. (a)Give the entry to record the purchase of one-fourth of these bonds as a long-term investment by NOP.Assume effective interest amortization and contra/adjunct accounts. (b)Give the December 31,2020,adjusting and closing entries for NOP.
Answer:
11ea71d0_1fea_f7a0_89cd_1b9f3572eb6e_TB2440_00
11ea71d0_1fea_f7a1_89cd_0f545ee82680_TB2440_00
11ea71d0_1fea_f7a2_89cd_43b725647be3_TB2440_00 PV @ n = 20; i = 9:
11ea71d0_1fea_f7a3_89cd_314c8e1cf3d5_TB2440_00 PV @ n = 19; i = 9:
11ea71d0_1feb_1eb4_89cd_e55626bbdbb3_TB2440_00
11ea71d0_1feb_1eb5_89cd_27fdf619af8c_TB2440_00
11ea71d0_1feb_1eb6_89cd_f5e6a9ac721c_TB2440_00
Q2) An increase in interest rates may make bond defeasance more attractive to the issuing corporation.
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) XAC received a share subscription from J.Doe for 100 of its common shares,issue price $15; one-third cash down payment.Provide the entry to record the subscription and partial payment.
Answer: 11ea71d0_1fe5_2af6_89cd_2d7d1079b92b_TB2440_00
Q2) TTSS Corporation had 1,000 common shares issued and outstanding (sold at $40 each).It then made its first-ever purchase of treasury stock by buying 200 of its own shares for $50 per share.Assume sufficient retained earnings.The entry to record this purchase using the single-transaction method would include:
A) dr. common shares $8,000
B) dr. common shares $10,000
C) dr. contributed capital from treasury stock transactions $2,000
D) dr. treasury stock $10,000
Answer: D
Q3) Legal capital is related directly to the total number of shares issued.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Statements of Financial Position and Changes in Equity; Disclosure Notes
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Sample Questions
Q1) An investor purchases a $10,000 bond convertible into common shares at a price of $50.How many shares are available for conversion?
Q2) JMR Ltd.sold $350,000 of 5% (annual interest payments)convertible 5 year bonds at 101.The market interest rate on the sale date was 7%.Each $1,000 bond was convertible into 20 shares of KER Ltd.no-par value common shares on any interest date after the end of the first year from the date of issuance.Using IFRS,prepare the journal entry at issuance using the incremental method.
Q3) S Corporation created a stock option plan for its two top executives.The plan provided that each executive would receive 1,000 options,which would enable him or her to purchase 100 shares at 75 percent of the market price on the date the options,became exercisable.The options were exercisable in two years.At the date of granting the options,the market price of the shares was $12 per share.The date of measurement for the stock option plan was the:
A) date of grant.
B) end of the first year.
C) end of the second year.
D) date the employees' exercise their options.
Q4) What is a "poison pill"?
Q5) What is convertible debt? Why would a company issue convertible debt?
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Chapter 5: The Statement of Cash Flows
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Sample Questions
Q1) An example of a "deductible amount" occurs when:
A) A gain on instalment sales is recognized for tax purposes as the receivable is collected, but was earlier recognized for accounting purposes when the sale was made.
B) Accelerated depreciation is used for tax purposes but straight-line depreciation is used for accounting purposes.
C) Product warranty costs recognized for tax purposes as the warranty conditions are met but recognized for accounting purposes earlier on the accrual basis.
D) Expenses are recognized more quickly for taxes than for accounting purposes.
Q2) In Canada,tax rates are usually enacted in the year to which they pertain.
A)True B)False
Q3) Briefly explain the three basic issues with respect to inter-period income tax allocation.
Q4) Comprehensive allocation recognizes the amount of taxes assessed in each year as the income tax expense for that year.
A)True
B)False
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Chapter 6: Revenue Recognition
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Sample Questions
Q1) Net operating tax carry backs and carry forwards never result in a cash refund of prior taxes paid but may result in a reduction in taxes for subsequent years.
A)True
B)False
Q2) JR Company incurred a loss in 2011,due in part to a fire at one of its plants.The deferred benefit of a loss carry forward was not recognized in the year as the probability of realization was less than 50%.In 2012,JR Company incurred a small loss,but due to large contracts upcoming,it was determined that the probability of realization was greater than 50%.The tax rate for 2011 was 40% and 2012 45%.JR Company should:
A) Record the deferred income tax benefit for 2012 only.
B) Record the deferred income tax benefit for both years using the 40% rate.
C) Record the deferred income tax benefit for both years using the 45% rate.
D) Record the deferred income tax benefit for 2011 only.
Q3) The amount of any unused tax losses must be disclosed on the face of the income statement.
A)True
B)False
Q4) How can a company use CCA to fully utilize losses that have been incurred?
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Page 8
Chapter 7: Financial Assets: Cash and Receivables
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Sample Questions
Q1) ABC INC.leased equipment to XYZ on January 1,2013.The lease is for a 9-year period expiring January 1,2022.The first equal annual payment of $400,000 was made on January 1,2013.The cash selling price of the equipment is $2,347,500,which is equal to the present value of the lease payments at 10 percent.ABC INC.had purchased the equipment for $2,100,000.The lease is appropriately recorded as a sales-type lease by ABC INC.What amount of interest income should ABC INC.record in 2013 as a result of the lease?
A) $194,750
B) $210,000
C) $234,750
D) $280,000
Q2) The depreciation period used by the lessee for a depreciable leased asset must be:
A) the same period that was used by the lessor.
B) the remaining life of the asset from the lease inception.
C) the term of the lease.
D) at most the term of the lease but possibly longer if title is transferred at end of lease.
Q3) Explain what a temporary difference is and how it arises?
Q4) Explain the most common methods of avoiding lease capitalization?
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Page 9
Chapter 8: Cost-Based Inventories and Cost of Sales
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Sample Questions
Q1) 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
Q2) When a pension plan is not trusteed,a company must report its pension plan assets and accrued pension liability on the balance sheet.
A)True
B)False
Q3) Employers who provide contractual termination benefits must recognize a loss and a related liability when:
A) the employees accept the termination benefit offer.
B) the termination benefit can be reasonably estimated.
C) it is probable that employees will be entitled to the benefit and the amount of the benefit can be reasonably estimated.
D) the termination occurs.
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Chapter 9: Long-Lived Assets
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Sample Questions
Q1) Anti-dilutive convertible securities would generally be used in the calculation of:
A) Basic earnings per share.
B) diluted earnings per share.
C) Basic earnings per share and diluted earnings per share.
D) Neither basic earnings per share nor diluted earnings per share.
Q2) A firm had 8,000 common shares outstanding at the end of the current period and earned $8,000 that period (net of tax).Also,options to purchase 5,000 shares at $5 each were outstanding all year.For the entire year the firm had $20,000 of 6% debt and $10,000 of 8% debt outstanding.The 8% debt is convertible into 500 common shares.The firm earns interest at 7 percent and has a 50 percent tax rate.The diluted earnings per share for the current year should be (rounded to the nearest cent):
A) $1.00
B) $0.69
C) $0.65
D) $0.72
Q3) Diluted EPS is meant to be a worst-case scenario.
A)True
B)False
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Chapter 10: Depreciation, Amortization, and Impairment
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Sample Questions
Q1) Which one of the following statements is not correct?
A) A change from an inappropriate accounting principle to a proper one should be accounted for as an accounting error.
B) Assets purchased on the 14<sup>th</sup> of the month may be depreciated from the first of the month for practical reasons.
C) Depreciation accounting is a process of allocation of periodic expense, rather than one of asset valuation.
D) Use of straight-line depreciation gives a higher total expense than accelerated methods over the total useful life of the asset.
Q2) When an accounting change is recorded and reported using the retrospective approach,the cumulative effect on Retained Earnings is recorded in that account. A)True
B)False
Q3) The failure to expense a prepaid asset is an example of a counterbalancing error. A)True
B)False
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12
Chapter 11: Financial Instruments: Investments in Bonds and Equity Securities
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Sample Questions
Q1) Longitudinal comparisons compare a company's performance over time to that of its competitors while cross-sectional comparisons compare a company's own performance from one period to another.
A)True
B)False
Q2) Which of the following analytical techniques would best be used to compare a company's performance to that of its competitors over time?
A) Cross-sectional comparison
B) Time-series analysis
C) Residual analysis
D) Statistical multivariate ratio analysis
Q3) A company issuing financial statements would most prefer to receive an auditor's opinion that is:
A) adverse.
B) qualified.
C) a disclaimer.
D) unqualified.
E) either qualified or unqualified.
Q4) What is horizontal analysis?
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