Advanced Accounting Test Bank
Course Introduction
Advanced Accounting explores complex topics in financial accounting, including business combinations, consolidations, partnerships, foreign currency transactions, and the translation of foreign financial statements. The course also examines accounting for governmental and not-for-profit entities, and delves into emerging topics such as international accounting standards and ethical considerations in reporting. Through in-depth case studies and problem-solving exercises, students will develop the critical skills necessary to handle intricate accounting issues faced by corporations and other organizations.
Recommended Textbook
Intermediate Accounting Volume 2 3rd Edition by Kin Lo
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10 Chapters
1033 Verified Questions
1033 Flashcards
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Chapter 1: Current Liabilities and Contingencies
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Explain what rebates are and how they are accounted for in the financial statements.
Answer: A common form of rebate requires buyers to submit evidence of purchase to the manufacturer,who then sends the customer a cheque for the agreed-upon amount. Accounting for rebates is governed by IFRS 15,paragraphs 50-54,"variable consideration." The essence of this guidance is that in accordance with paragraph 48,the transaction price (sales revenue)recognized must be adjusted downward for the envisaged rebate to be disbursed (variable consideration).The entity's obligation for rebates is typically estimated using expected value techniques and a liability established for the amount it expects to refund.The refund liability is subsequently updated each reporting period based on current facts and circumstances with the resultant adjustment accounted for prospectively as a change in estimate.
Q2) Which statement about sales taxes is correct?
A) The consumer is responsible for remitting the tax to the government.
B) Taxes are uniformly applied to all sale transactions.
C) Businesses can deduct the GST paid on their purchases from GST collected.
D) The same products that are exempt from GST are exempt from PST.
Answer: C
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Page 3
Chapter 2: Non-Current Financial Liabilities
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) Which statement is correct about the derecognition of an obligation before maturity?
A) There will be a gain on retirement.
B) There will be a loss on retirement.
C) There will be no gain or loss on retirement.
D) There could be either a gain or loss on retirement.
Answer: D
Q2) What are "stripped bonds"?
A) Bonds that pay the market rate of interest.
B) Bonds that are unsecured.
C) Bonds that pay no interest and are sold at a discount.
D) Bonds that are sold at a premium.
Answer: C
Q3) What is the coupon rate?
A) Yield on the issue date.
B) Amount to be repaid at maturity.
C) Rate of return earned by the investor.
D) Interest rate specified in the bond indenture.
Answer: D
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4
Chapter 3: Equities
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Who uses information about "equity" and what information about equity is useful to financial statement users?
Answer: As equity has legal priority below that of liabilities in general-meaning that available funds go toward paying off liabilities prior to paying equity claims should the enterprise be liquidated-equity holders are more concerned about the equity accounts than creditors.
Equity holders who do have residual claims on the enterprise are concerned about the size of their claims,and they need to be aware of changes to their share of profits.Consequently,accounting reports need to provide detailed information about the composition of equity and changes in equity that can result in the dilution of owners' stakes in the business.
Equity holders are interested in distinguishing (i)changes in equity due to direct contributions or withdrawals of capital from (ii)changes in equity derived from return on equity capital (i.e.,income).This categorization is natural because it separates capital transactions with owners from the entity's income generating transactions with non-owners such as customers,employees,and suppliers.
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Chapter 4: Complex Financial Instruments
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) On December 15,a company enters into a foreign currency forward to buy 300,000 at C$1.60 per euro in 30 days.The exchange rate on the day of the company's year-end of December 31 was C$1.59: l.
Required:
Record the journal entries related to this forward contract.
Q2) Which step is not required for hedge accounting under IFRS?
A) Demonstration of hedge's effectiveness.
B) Identification of the risk exposure.
C) Payment of fees to the counterparty.
D) Designation of the hedging instrument.
Q3) Which statement is correct about accounting for financial instruments?
A) All financial instruments are accounted for at fair value through profit or loss.
B) All are accounted for in accordance to their economic substance.
C) All financial instruments are accounted for at amortized cost.
D) All financial instruments are accounted for at fair value through OCI.
Q4) Describe the underlying quantity that the derivative instrument derives its value from?
Q5) Briefly explain the difference between a "forward" and a "future."
Q6) Briefly describe a compound financial instrument and its advantages.
Page 6
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Chapter 5: Earnings Per Share
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113 Verified Questions
113 Flashcards
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Sample Questions
Q1) What is the formula for diluted EPS? What are dilutive and antidilutive potential ordinary shares and how do they each impact the computation of dilutes EPS?
Q2) Explain why other comprehensive income is excluded from the numerator of the EPS calculation.
Q3) What is the meaning of "out-of-the-money warrants"?
A) Warrants are out-of-the-money if the market price of the share exceeds the exercise price.
B) Warrants are out-of-the-money if the market price of the share is less than the exercise price.
C) Warrants are out-of-the-money if the market price of the share equals the exercise price.
D) Warrants are out-of-the-money when the market price means that it will be exercised.
Q4) Which statement is correct?
A) Share issuances decrease the EPS numerator.
B) Stock splits have the same effect on EPS as share issuances.
C) Share issuances increase number of shares.
D) Share issuances decrease the EPS denominator.
Q5) Explain the difference between basic and diluted EPS.
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Chapter 6: Accounting for Income Taxes
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) A company has a deferred tax liability of $112,500 at the beginning of the fiscal year relating to a taxable temporary difference of $450,000.The tax rate for the year increased from 25% to 35%.
Required:
Provide the journal entry to reflect the tax rate change.
Q2) When will a terminal loss occur?
A) When proceeds of disposal are less than undepreciated capital cost.
B) When proceeds of disposal are between undepreciated capital cost and original cost.
C) When proceeds of disposal are more than undepreciated capital cost.
D) When proceeds of disposal are less than original cost.
Q3) Summarize the IFRS rules for presentation and disclosure of taxes on discontinued operations and comprehensive income.
Q4) Which statement best describes the "deferral method"?
A) This method focuses on the balance sheet.
B) This method is an example of a "tax allocation" approach.
C) This is the same as the "accrual method" of tax accounting.
D) This method is used by companies reporting using IFRS.
Q5) Compare and contrast the two tax allocation methods.
Q6) Describe what is meant by a timing difference.
Page 8
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Chapter 7: Pensions and Other Employee Future Benefits
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Sample Questions
Q1) Carmichael Corporation has had a defined benefit pension plan for three decades.Two years ago,the company improved the benefits at a cost of $2,800,000.Pension plan assets were $84,000,000 while pension obligations were $76,000,000 at the beginning of the year.For the current year,Carmichael's pension plan incurred current service cost of $6,400,000 and interest of $8,600,000.The pension's assets earned $9,000,000,which is $400,000 below expectations.There were no actuarial gains or losses for the year.
Required:
a) Compute the pension expense for the year.
b) Record the journal entries for Carmichael's pension plan.
Q2) Saul is currently 30 years old and he plans to retire early,in 20 years' time.He would like to have an income of $60,000 per year during his retirement,which he anticipates will last for another 40 years.Assume that he receives the retirement income at the end of each of the 40 years.
Required:
Determine the amount of money he will need to have accumulated by the time he starts his retirement.Assume a discount rate of 5%.
Q3) What is the fundamental difference between a defined contribution and a defined benefit pension plan?
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Page 9
Chapter 8: Accounting for Leases
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Sample Questions
Q1) Assume that Souse agrees to lease a new machine from Laird on January 1,2017,for $40,000 per year,paid in advance (i.e.,at the beginning of the year).Executory costs are $1,000.The lease term is 11 years and the asset's useful life is 10 years.There is no bargain purchase option.The guaranteed residual value is $10,000.Which statement is correct?
A) The executor costs will be included in the minimum lease payments.
B) The guaranteed residual will be excluded in the minimum lease payments.
C) This is an operating lease because there is no bargain purchase option.
D) This is a finance lease since the lease term is for most of the economic life of the asset.
Q2) On January 1,2017,Granite Company entered a lease to rent office space.The lease requires $350,000 per year,at the beginning of each year,for 20 years.The lease is non-cancellable and non-renewable.The building's estimated useful life is 30 years,and its current fair value is estimated to be $6 million.The incremental borrowing rate is 5%.
Required:
Classify this lease and record the journal entries for the first year of the lease.
Q3) List four major risks of ownership.
Q4) List four examples of the risks and four examples of rewards of ownership.
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Chapter 9: Statement of Cash Flows
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Which statement about "cash and cash equivalents" is correct?
A) Exchanges of "cash and cash equivalents" for items that are not "cash and cash equivalents" result in cash flows for the cash flow statement.
B) Changes in the composition of "cash and cash equivalents" is considered a cash flow for purposes of the cash flow statement.
C) Changes in the composition of "cash and cash equivalents" is considered an operating activity on the cash flow statement.
D) Cash equivalents include investment in long-term bonds.
Q2) What is not a "non-cash" transaction?
A) Exchange of land with another company.
B) Conversion of preferred shares.
C) Payment of cash dividends.
D) Payment of stock dividends.
Q3) How are cash flows from discontinued operations shown in the statement of cash flows?
Q4) Describe the options available for reporting held-for-trading investments regarding their impact on the statement of cash flows.
Q5) What are the two distinct components to investing activities?
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Chapter 10: Accounting Changes
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Sample Questions
Q1) On June 30,2017,Whiggins Company received $60,000 from Carrington Finance Inc.in exchange for a promissory note.The terms of the note required Whiggins Company to repay Carrington on June 30,2019,the principal amount plus interest at 8% compounded semi-annually.
Due to financial difficulties,Whiggins could not make the repayment as scheduled.On June 30,2019,Carrington agreed to extend the terms of repayment by one year,to June 30,2020.However,accounting staff at Carrington was unaware of the change in repayment terms and did not record the effects of the note restructuring during 2019.The error was discovered on June 30,2020,when Whiggins paid Carrington $70,192 in fulfillment of the terms of the restructured note.
Carrington has a December 31 year-end.No interest had been accrued between the original repayment date and the extended repayment date.
Required:
Record any adjusting journal entries necessary to correct the error in Carrington's accounting records for the note receivable from Whiggins Company.
Q2) How should enterprises reflect changes in accounting standards?
Q3) What types of accounting changes are treated retrospectively and why?
Q4) Define "a retrospective adjustment."
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Page 12