Professional Accounting Preparation
Test Bank
Course Introduction
Professional Accounting Preparation is designed to equip students with the essential knowledge and practical skills required for a successful career in the accounting profession. The course covers fundamental accounting principles, financial reporting, auditing procedures, and ethical standards in accordance with industry regulations. Emphasis is placed on the analysis and preparation of financial statements, mastery of accounting software, and effective communication of financial information. Through a combination of theoretical instruction and hands-on exercises, students develop critical thinking, problem-solving, and organizational skills necessary for professional certification and effective practice in various accounting roles.
Recommended Textbook
Modern Advanced Accounting in Canada9th Edition by Darrell Herauf
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12 Chapters
713 Verified Questions
713 Flashcards
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Chapter 1: Conceptual and Case Analysis Frameworks for Financial Reporting
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18 Verified Questions
18 Flashcards
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Sample Questions
Q1) Which decision has Canada made with respect to financial reporting for private enterprises?
A) To adopt the IFRS standards for small and medium-sized enterprises.
B) To retain the current standards.
C) To look to US GAAP for standards.
D) To develop and maintain its own standards for private enterprises.
Answer: D
Q2) The debt-to-equity ratio measures:
A) liquidity.
B) solvency.
C) profitability of assets.
D) profitability of owners' investment.
Answer: B
Q3) Which of the following is NOT a reason why a Canadian private company would elect to report under IFRS?
A) The company is planning to go public in the near future.
B) The company seeks comparability with public companies of a similar size.
C) It is likely to be less expensive than reporting under ASPE.
D) The company is a subsidiary of a Canadian public company.
Answer: C
Page 3
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Chapter 2: Investments in Equity Securities
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64 Verified Questions
64 Flashcards
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Sample Questions
Q1) Which of the following statements is true regarding an investment in associate that meets the criteria to be classified as held for sale?
A) The investment in associate is to be reported as a non-current asset.
B) The intention of management is to recover the carrying value of the investment through continued operations.
C) The sale of the investment in associate must be highly probable.
D) The investment in associate is to be measured at fair value.
Answer: C
Q2) The difference between the investor's cost and the investor's percentage of the carrying value of the net identifiable assets of the associate is known as: A) Goodwill.
B) the Acquisition Differential.
C) the Fair Value Increment.
D) the Excess Book Value.
Answer: B
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Chapter 3: Business Combinations
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61 Verified Questions
61 Flashcards
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Sample Questions
Q1) Which of the following must be possible in order for a business combination to exist?
A) Control of a subsidiary's net assets that constitute a business
B) Ownership of 100 % of a subsidiary's voting shares
C) Ownership of all of a subsidiary's assets
D) Ownership of all of a subsidiary's operating assets
Answer: A
Q2) When are parent companies allowed to comprehensively revalue the assets and liabilities of a subsidiary to their fair values at the acquisition date through the use of push-down accounting, following a business combination?
A) When reporting under ASPE and there is a significant non-controlling interest
B) When reporting under ASPE and there is an insignificant (or no) non-controlling interest
C) When reporting under IFRS and there is a significant non-controlling interest
D) When reporting under IFRS and there is an insignificant (or no) non-controlling interest
Answer: B
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Chapter 4: Consolidation of Non-Wholly Owned
Subsidiaries
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Sample Questions
Q1) Which statement about the differences between consolidation methods permitted under ASPE and IFRS is true?
A) IFRS and ASPE both require the use of the fair value enterprise method or the identifiable net assets method.
B) IFRS and ASPE both require the use of the identifiable net assets method.
C) IFRS permits either the fair value enterprise method or identifiable net assets method; ASPE requires the fair value enterprise method.
D) IFRS permits either the fair value enterprise method or the identifiable net assets method; ASPE requires the identifiable net assets method.
Q2) A Co. has acquired an 80% controlling interest in B Co. If using the proportionate consolidation method, the consolidated balance sheet on the date of acquisition, will contain:
A) the parent's pro rata share of the assets and liabilities of the subsidiary at book value.
B) 100% of the assets and liabilities of the subsidiary at fair market value.
C) 100% of the assets and liabilities of the subsidiary at book value.
D) the parent's pro rata share of the assets and liabilities of the subsidiary at fair market value.
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Page 6
Chapter 5: Consolidation Subsequent to Acquisition Date
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67 Verified Questions
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Sample Questions
Q1) An impairment loss can be reversed when:
A) there is no indication that the impairment loss no longer exists or has been reduced and there has not been a change in the estimates used to determine the assets recoverable amount.
B) with the exception of goodwill, all intangible assets carrying values exceed their fair market values.
C) the intangible assets carrying values exceed their undiscounted future cash flows.
D) with the exception of goodwill, the recoverable amount is determined and compared to the carrying amount. If the recoverable amount is greater than the carrying amount then the impairment loss previously recorded is reversed.
Q2) Consolidated shareholders' equity:
A) does not include any non-controlling Interest.
B) is equal to the sum of the Shareholders' Equity Sections of the parent and the subsidiary.
C) is equal to that of the parent company under the Equity Method.
D) is higher under the Equity Method when the subsidiary does not declare dividends.
Q3) Prepare a consolidated balance sheet for Par Inc. as at June 30, 2021.
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Page 7
Chapter 6: Intercompany Inventory and Land Profits
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64 Verified Questions
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Sample Questions
Q1) What effect will the rent of $10,000 charged by the Subsidiary to the Parent Company have on the calculation of the non-controlling interest in the net income of the Subsidiary? The Parent Company owns 80% of the Subsidiary.
A) The non-controlling interest will decrease by $10,000.
B) The non-controlling interest will decrease by $8,000.
C) There is no effect on the non-controlling interest.
D) The non-controlling interest will increase by $10,000.
Q2) Which of the following methods does NOT call for the elimination of ALL intercompany profits?
A) Identifiable net asset method
B) Fair value enterprise method
C) Proportionate consolidation method
D) Partial goodwill method
Q3) When are profits from intercompany land sales realized?
A) They are realized only when sold to outsiders.
B) They are realized once legal ownership of the land has been transferred.
C) They are realized when consideration has been received for the land.
D) They are realized when an agreement is signed with respect to ownership of the land.
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Chapter 7: A Intercompany Profits in Depreciable Assets B
Intercompany
Bondholdings
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Sample Questions
Q1) Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2020 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% bonds maturing on January 1, 2030.
There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used.
Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company. During 2020, Paddy earned a net income of $80,000 and paid dividends of $20,000.
What was the pre-tax gain or loss to Duff Inc. on the intercompany sale of the bonds?
A) $20,000 loss
B) $10,000 loss
C) Nil
D) $10,000 gain
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Page 9
Chapter 8: Consolidated Cash Flows and Changes in Ownership
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Sample Questions
Q1) Which of the following statements pertaining to preferred shares is correct?
A) If the preferred shares are non-cumulative, the current year's net income would be allocated to the preferred shares whether or not preferred dividends are declared.
B) If the preferred shares are non-cumulative, only the current year's net income would be allocated to preferred shares if preferred dividends are declared, since dividends are never in arrears with non-cumulative preferred shares.
C) If the preferred shares are cumulative, the current year's net income would be allocated to the shares, only if dividends are declared in the year.
D) There can never be any dividends in arrears when preferred shares are cumulative.
Q2) What is the correct method of treating an acquisition differential arising from a Preferred Share Issue?
A) It should be treated as an adjustment to goodwill.
B) It should be pro-rated across the subsidiary's identifiable assets and liabilities.
C) It should be expensed in the current year.
D) It should be adjusted to a contributed surplus or retained earnings account.
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Page 10
Chapter 9: Other Consolidation Reporting Issues
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60 Verified Questions
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Sample Questions
Q1) JNG Corp has 4 segments, the details of which are shown below. All figures are in thousands of dollars. \(\begin{array}{|l|r|r|r|}
\hline \text { Segment } & \text { Revenues } & \text { Profits } & \text { Assets } \\
\hline \mathrm{A} & \$ 12 & \$ 6 & \$ 40 \\
\hline \mathrm{B} & \$ 60 & \$ 2 & \$ 80 \\
\hline \mathrm{C} & \$ 35 & \$ 10 & \$ 80 \\
\hline \mathrm{D} & \$ 200 & \$ 80 & \$ 20\\\hline \end{array}\) Using only the Profit test, which of the following segment(s) would be reportable?
A) A and B
B) B and D
C) C and A
D) C and D
Q2) How are intercompany transactions handled in a joint venture?
A) They are ignored.
B) They are completely eliminated.
C) Only the venturer's share of any after tax profit is eliminated.
D) Intercompany profits are treated as an adjustment to the acquisition differential.
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Chapter 10: Foreign Currency Transactions
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Sample Questions
Q1) According to IFRS 9, which of the following statements pertaining to a forward contract is true?
A) A forward contract is valued using spot rates throughout its life with any gains or losses to be deferred and amortized as they occur.
B) A forward contract is valued at fair value throughout its life with any gains or losses to be deferred and amortized as they occur.
C) A forward contract is valued using spot rates throughout its life with any gains or losses to be taken into income as they occur.
D) A forward contract is remeasured at fair value throughout its life, with any gains or losses reflected in net income as they occur.
Q2) Maplehauff Inc. sells lumber to a number of clients around the world. On December 1, 2019 the company shipped some lumber to a client in the U.S. The selling price was established at US$600,000 with payment to be received on March 1, 2020. On December 3, 2019 the company entered into a hedge with a Canadian Bank at the 90 day forward rate of US$1 = CDN$1.275. The forward contract was designated as a cash flow hedge of the amount due from the American customer. Maplehauff uses the net method to record the forward contract.
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Page 12
Chapter 11: Translation and Consolidation of Foreign Operations
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Sample Questions
Q1) Which of the following statements is correct?
A) If a foreign currency weakens with respect to the Canadian dollar, both foreign operations with a functional currency that is the Canadian dollar and not the Canadian dollar, will show a foreign exchange gain.
B) If a foreign currency weakens with respect to the Canadian dollar, both foreign operations with a functional currency that is the Canadian dollar and not the Canadian dollar, will show a foreign exchange loss.
C) If a foreign currency weakens with respect to the Canadian dollar, a foreign operation with a functional currency that is not the Canadian dollar will show a foreign exchange gain while a foreign operation with a functional currency that is the Canadian dollar will show a foreign exchange loss.
D) If a foreign currency weakens with respect to the Canadian dollar, a foreign operation with a functional currency that is not the Canadian dollar will show a foreign exchange loss while a foreign operation with a functional currency that is the Canadian dollar will show a foreign exchange gain.
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Chapter 12: Accounting for Not-For-Profit and Public Sector Organizations
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60 Verified Questions
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Sample Questions
Q1) Buana Fide is a local charity which received the following donations during 2020: \(\bullet\) A local radio station donated air time valued at $20,000. If the air time had not been donated, Buana Fide would have purchased it and used it for advertising a fundraising event and silent auction.
\(\bullet\) An anonymous donor donated land with a fair value of $50,000 as well as machinery valued at $4,000.
\(\bullet\) During a recent fund-raising campaign, volunteers spent roughly 1,000 hours soliciting donations from the public. The minimum hourly wage rate in Buana Fide's main area of operation is $8.00 per hour.
Prepare the necessary journal entries to record these transactions assuming that the restricted fund method of accounting for contributions is used and the organization has a general fund, a capital fund and an endowment fund. Note: if a journal entry is not needed, state your reason.
Q2) Describe what fund accounting is and why is it used for not-for-profit organizations.
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Page 14