Intermediate Accounting II
Textbook Exam Questions
Course Introduction
Intermediate Accounting II builds upon foundational accounting principles by exploring more complex topics in financial reporting and analysis. The course covers areas such as revenue recognition, accounting for income taxes, pensions and other post-employment benefits, leases, and the preparation of cash flow statements. Students will also examine accounting changes, error corrections, and disclosure requirements. Emphasizing the application of Generally Accepted Accounting Principles (GAAP), this course prepares students to interpret and analyze financial statements critically, equipping them for advanced studies in accounting and professional practice.
Recommended Textbook
Advanced Financial Accounting 6th Edition by Thomas H. Beechy
Available Study Resources on Quizplus
19 Chapters
491 Verified Questions
491 Flashcards
Source URL: https://quizplus.com/study-set/3384
Page 2
Chapter 1: Setting the Stage
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/67161
Sample Questions
Q1) How does a company usually take a "big bath" in a loss year?
A)Reduces its long-term liabilities
B)Expenses as many of its costs as possible
C)Recognizes revenue as soon as possible
D)Writes-down its assets
Answer: D
Q2) Which of the following statements about income smoothing is true?
A)Incoming smoothing can only be accomplished through revenue recognition policies.
B)Income smoothing can only be accomplished through the use of estimates.
C)IFRS provides more opportunities for income smoothing than under pre-IFRS GAAP.
D)Income smoothing through expense recognition policies is effective if there is a strong relationship between expenses and revenues.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Intercorporate Equity Investments: an Introduction
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/67160
Sample Questions
Q1) In changing from the cost method to consolidation,which of the following is not required?
A)Replacement of the "Investment in Subsidiary" account with the assets and liabilities of the subsidiary
B)Elimination of intercompany transactions and balances
C)Elimination of the subsidiary's share capital account
D)Elimination of the subsidiary's retained earnings since acquisition
Answer: D
Q2) What is securitization?
A)It is the process of issuing long-term debt for financing.
B)It is the process of issuing preferred and common shares for financing.
C)It is the process of transferring long-term liabilities to a special purpose entity.
D)It is the process of transferring receivables to a special purpose entity and issuing bonds to finance those receivables.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Business Combinations
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/67159
Sample Questions
Q1) Which of the following is not a reason why a private enterprise may be acquired as a bargain purchase?
A)It is a family business and the next generation does not want to to continue the business.
B)The owner has health problems and does not have a successor.
C)The business only has equity financing and has no debt financing.
D)The owner is no longer interested in the business.
Answer: C
Q2) How should the transaction costs of issuing shares in an acquisition be recognized?
A)Expensed
B)Capitalized as part of the cost of the shares
C)Deducted in total from shareholders' equity
D)Deducted from shareholders' equity,net of related income tax benefits
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Wholly-Owned Subsidiaries: Reporting
Subsequent to Acquisition
Available Study Resources on Quizplus for this Chatper
37 Verified Questions
37 Flashcards
Source URL: https://quizplus.com/quiz/67158
Sample Questions
Q1) DC Company purchased 100% of the outstanding common shares of FA Company on December 31,20X3 for $170,000.At that date,FA had $100,000 of outstanding common stock and retained earnings of $30,000.It was agreed that the net assets were fairly valued except that the fair value of the capital assets exceeded their net book value by $20,000 and the carrying value of the inventory exceeded its fair value by $10,000.The capital assets had a remaining useful life of eight years as of the acquisition date and have no salvage value.Inventory turns over four times a year.It is now 20X6 and DC has been very pleased with how profitable its investment in FA has been.On DC's consolidated financial statements at December 31,20X6,what balance should be reported for goodwill?
A)$10,000
B)$30,000
C)$40,000
D)$70,000
Q2) What does "one-line consolidation" refer to?
A)Cost method
B)Equity method
C)Direct method of consolidation
D)Worksheet method of consolidation
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Consolidation of Non-Wholly Owned
Subsidiaries
Available Study Resources on Quizplus for this Chatper
36 Verified Questions
36 Flashcards
Source URL: https://quizplus.com/quiz/67157
Sample Questions
Q1) Sunny Co.purchased 80% of Reuben Ltd.for $1,200,000.At the date of acquisition,the carrying value of Reuben's net identifiable assets was $1,000,000,and the fair value was $1,300,000.What is the amount of the goodwill under the entity method?
A)$0
B)$200,000
C)$240,000
D)$300,000
Q2) Olthius Ltd.purchased 60% of Fredo Ltd.for $1,500,000.At the date of acquisition,the carrying value of Fredo's net identifiable assets was $1,800,000 and the fair value was $2,200,000.What is the amount of the goodwill under the entity method?
A)$(300,000)
B)$120,000
C)$300,000
D)$400,000
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Subsequent-Year Consolidations: General Approach
Available Study Resources on Quizplus for this Chatper
36 Verified Questions
36 Flashcards
Source URL: https://quizplus.com/quiz/67156
Sample Questions
Q1) Mallard Ltd.acquired 75% of the outstanding common shares of Teal Ltd.at December 31,20X1 for $900,000.Mallard has recorded its investment using the cost method.In 2008,Teal paid out dividends of $100,000.In preparing Mallard's consolidated financial statements,what elimination is required for the dividends?
A)Reduce dividends declared by $75,000;reduce dividend income by $75,000
B)Reduce dividends declared by $100,000;reduce dividend income by $100,000
C)Reduce dividends declared by $100,000;reduce dividend income by $75,000;reduce non-controlling interest by $25,000
D)Reduce dividend declared by $100,000;reduce dividend income by $75,000;increase non-controlling interest by $25,000
Q2) Pal Co.owns 70% of the outstanding common shares of Sadd Ltd.Sadd sold an asset to Pal at a loss.There is no evidence of impairment in the value of the asset sold to Pal.Which of the following statements about the loss is true?
A)The loss should not be eliminated because this is an upstream sale.
B)The loss should not be eliminated because there is no impairment in the value of the asset.
C)The loss should not be eliminated because Pal does not own 100% of Sadd.
D)The loss should be eliminated.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Segmented and Interim Reporting
Available Study Resources on Quizplus for this Chatper
41 Verified Questions
41 Flashcards
Source URL: https://quizplus.com/quiz/67155
Sample Questions
Q1) Under IAS 34,which of the following costs is not viewed as a constructive obligation?
A)Contingent lease payments in excess of a contractual base amount
B)Year-end bonuses
C)Quantity discounts or rebates
D)Maintenance costs
Q2) Under IFRS 8,certain reconciliations,such as total reportable segment revenues to the entity's revenues,are required.Why are these reconciliations required?
A)To prove that the consolidated financial statements balance
B)To ensure that all reportable segments have been identified
C)To show the relative contribution of each segment to the total
D)To show how reportable segments were identified
Q3) Rules for interim reporting require that comparative information be presented.What comparative information should the current statement of financial position include?
A)The same quarter,last year
B)The immediate preceding quarter
C)The year end,last year
D)As budgeted for the period
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Foreign Currency Transactions and Hedges
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/67154
Sample Questions
Q1) Under IFRS,which of the following statements is true?
A)The hedge of a forecasted transaction is accounted for using a fair-value hedge.
B)The hedge of a firm commitment is accounted for using a cash-flow hedge.
C)The gain or loss on a hedging instrument under a cash-flow hedge is first reported as other comprehensive income and then reclassified to income When the hedged item affects income.
D)The gain or loss on a hedging instrument under a fair-value hedge is first reported as other comprehensive income and then reclassified to income When the hedged item affects income.
Q2) Under IFRS 8,at which exchange rate should monetary assets and liabilities be translated?
A)The exchange rate at the statement of financial position date
B)The closing rate
C)The historical rate
D)The fair value rate
Q3) Compare and contrast accounting for foreign currency transactions and hedges under IFRS and ASPE.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Reporting Foreign Operations
Available Study Resources on Quizplus for this Chatper
43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/67153
Sample Questions
Q1) Under the temporal method,at what exchange rate is amortization expense translated?
A)At the average rate for the year
B)At the historical rate when the related assets were acquired
C)At the closing rate
D)At the rate at the beginning of the fiscal period
Q2) Which of the following factors is a primary indicator used to choose a functional currency?
A)Autonomy of the subsidiary
B)Proportion of intercompany transactions
C)Sources of competitive forces and regulations
D)Ability of subsidiary to generate cash flows to service its debts
Q3) Under the temporal method,how is an exchange gain arising from the long-term debt of a foreign subsidiary,accounted for?
A)Deferred until the date of maturity
B)Recognized as a component of current income
C)As part of the cumulative translation adjustment
D)Deferred and amortized over the period to maturity
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Financial Reporting for Not-For-Profit
Organizations
Available Study Resources on Quizplus for this Chatper
46 Verified Questions
46 Flashcards
Source URL: https://quizplus.com/quiz/67152
Sample Questions
Q1) A museum has invested substantial funds in the past for its collection.During the year,the museum hired a new accountant who decided that the collection should have been capitalized and amortized to operations.The accountant needs the approval of the Treasurer to prepare the journal entries required to correct the previous financial statements.
Required: You are the treasurer of this museum.Outline your response to the accountant.
Q2) For not-for-profit organizations,the CICA Handbook ________.
A)permits disbursement basis accounting
B)permits disbursement or expense basis is accounting
C)requires expenditure basis accounting
D)requires expense basis accounting
Q3) A university needs to know the cost of delivering each of its programs.Which basis would be the most appropriate for the university to use on its statement of operations?
A)Disbursement basis
B)Expense basis
C)Expenditure basis
D)Cash basis
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Public Sector Financial Reporting
Available Study Resources on Quizplus for this Chatper
41 Verified Questions
41 Flashcards
Source URL: https://quizplus.com/quiz/67151
Sample Questions
Q1) To enhance users' abilities to evaluate a government's financial results,budget numbers are included on some of the financial statements.Which statements would include the budget numbers?
A)Statement of operations and statement of changes in net debt
B)Statement of operations and statement of cash flows
C)Statement of financial position and statement of operations
D)Statement of financial position and statement of changes in net debt
Q2) The federal government provided $500,000 to a university to develop and operate a bridging program for foreign-trained accountants.Which of the following statements about the above government transfer is correct?
A)This is a non-exchange transaction with an eligibility criteria.
B)This is a non-exchange transaction with a stipulation criteria.
C)This is an exchange transaction with an eligibility criteria.
D)This is an exchange transaction with a stipulation criteria.
Q3) What basis does the present government reporting method use?
A)Cash
B)Modified cash
C)Modified accrual
D)Full accrual
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Income Tax Allocation
Available Study Resources on Quizplus for this Chatper
4 Verified Questions
4 Flashcards
Source URL: https://quizplus.com/quiz/67168
Sample Questions
Q1) Foster Ltd.acquired 100% of Benson Ltd.The carrying values of Benson's capital assets differed from their fair values and their fair values differ from their adjusted cost bases for tax purposes.Which of the following statements is true?
A)The difference between Benson's carrying values and its fair values creates a deferred tax asset or liability that is part of the allocation of the acquisition cost.
B)The difference between Benson's fair values and its adjusted cost bases for tax purposes creates a deferred tax asset or liability that is part of the allocation of the acquisition cost.
C)The difference between Benson's carrying values and its adjusted cost bases for tax purposes creates a deferred tax asset or liability that is part of the allocation of the acquisition cost.
D)No deferred tax asset or liability arises from the above situation.
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Income Tax Allocation Subsequent to Acquisition
Available Study Resources on Quizplus for this Chatper
4 Verified Questions
4 Flashcards
Source URL: https://quizplus.com/quiz/67167
Sample Questions
Q1) Morin Co.acquired all the shares of Lightfoot Ltd.Lightfoot has a number of amortizable capital assets and has properly recorded the related deferred income taxes on its books.What deferred income tax adjustment must Morin make for its consolidated financial statements?
A)Adjustment for any changes in temporary differences due to the difference between carrying values and tax bases of Lightfoot's depreciable capital assets
B)Adjustment for any changes in temporary differences due to the amortization of fair value increments
C)Adjustment for any changes in temporary differences due to the amortization of goodwill
D)No adjustment is necessary.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Good will Impairment Test
Available Study Resources on Quizplus for this Chatper
6 Verified Questions
6 Flashcards
Source URL: https://quizplus.com/quiz/67166
Sample Questions
Q1) How should goodwill acquired in a business combination be allocated?
A)Proportionately to assets
B)Proportionately to fair-value increments
C)To cash-generating units
D)It is not allocated.
Q2) For private enterprises that have acquired goodwill in a business combination,which of the following is considered a change of circumstances for purposes of testing for goodwill impairment?
A)A large unfavourable income tax reassessment
B)Sale of a capital asset for a small loss
C)A major competitor has ceased operations
D)Retirement of the subsidiary's operations manager
Q3) Compare and contrast the goodwill impairment test under IFRS and accounting standards for private enterprises (ASPE).
Q4) How often should goodwill acquired in a business combination be tested for impairment?
A)Whenever there is an indication of impairment
B)Whenever there is a change in circumstances in the business
C)At least once a year
D)At least once every two years
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Step Purchases
Available Study Resources on Quizplus for this Chatper
6 Verified Questions
6 Flashcards
Source URL: https://quizplus.com/quiz/67165
Sample Questions
Q1) Frey Ltd.acquired 70% of Sabo Ltd.on January 1,20X4.On January 1,20X8,Frey acquired another 10% of Sabo's common shares for $250,000.
With respect to this addition purchase,which of the following is true?
A)On the consolidated statement of financial position,the goodwill balance will increase.
B)On the consolidated statement of financial position,the common shares balance will increase.
C)Frey must use the equity method to report the additional investment.
D)Frey should ignore any changes in the fair values of Sabo's net assets between January 1,20X4 and January 1,20X8.
Q2) When an inter-corporate investment is acquired in stages,when does the equity method first becomes appropriate?
A)The initial investment is made
B)The intent to control is determined
C)Significant influence is first achieved
D)When control is attained
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Decreases in Ownership Interest
Available Study Resources on Quizplus for this Chatper
4 Verified Questions
4 Flashcards
Source URL: https://quizplus.com/quiz/67164
Sample Questions
Q1) Gumble Ltd.has owned 65% of the common shares of Lopez for several years.This year,Gumble reduced its interest in Lopez to 10%.Which of the following statements is true?
A)Gumble must change from reporting under consolidation to the equity method.
B)Gumble must change from reporting under consolidation to the cost method.
C)Gumbel must change from reporting under the equity method to the cost method.
D)Gumble is not required to change its reporting method.
Q2) When a subsidiary issues shares,________.
A)no gain or loss is recognized
B)a gain or loss is always recognized
C)this reduces minority interest
D)this may increase minority interest
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: Preferred and Restricted Shares of Investee Corporation
Available Study Resources on Quizplus for this Chatper
5 Verified Questions
5 Flashcards
Source URL: https://quizplus.com/quiz/67163
Sample Questions
Q1) What is a coattail provision?
A)It allows preferred shares to be converted to common shares.
B)It allows restricted shares to become fully voting shares under limited circumstances.
C)It allows common shares to be converted to preferred shares.
D)It allows restricted shares to receive additional dividends.
Q2) Ngo Ltd.'s subsidiary has restricted shares.What must Ngo look at in determining non-controlling interest?
A)Number of shares only
B)Participation in earnings only
C)Participation in dividends only
D)Participation in earnings and dividends
Q3) Under IFRS,which of the following statements is true?
A)Preferred shares must be classified as debt.
B)Preferred shares must be classified as equity.
C)Preferred shares can be classified as debt or equity depending on the rights attached to them.
D)Preferred shares can be classified as debt or equity at the option of the issuing company.
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Intercompany Bond Holdings
Available Study Resources on Quizplus for this Chatper
6 Verified Questions
6 Flashcards
Source URL: https://quizplus.com/quiz/67162
Sample Questions
Q1) For gains on intercompany bond holdings,which method of allocating the gain emphasizes substance over form?
A)Allocate the gain to the parent company as the parent company has ultimate control
B)Allocate the gain to the bond purchasing company as the bonds will be retired under consolidation
C)Allocate the gain to the bond issuing company under the agency approach
D)Allocate the gain between the issuing and purchasing companies under the par-value approach
Q2) A subsidiary has purchased some bonds from its parent company.Under the par-value method,the non-controlling interest is allocated its share of the difference between ________.
A)the bond's market value and face value
B)the bond's face value and carrying value
C)the bond's market value and carrying value
D)the bond's par value and carrying value
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Fund Accounting
Available Study Resources on Quizplus for this Chatper
5 Verified Questions
5 Flashcards
Source URL: https://quizplus.com/quiz/67169
Sample Questions
Q1) Which statements are affected by inter-fund loans?
A)Statement of operations and consolidated statements
B)Statement of financial position of the individual funds and consolidated statements
C)Statement of operations and statement of financial position of the individual funds
D)Statement of financial position of the individual funds and statement of changes in net assets
Q2) Sparrow Pension Plan is a not-for-profit organization that administers the pension fund held for the employees of Sparrow Tech Ltd.What type of fund is the pension fund?
A)Reserve fund
B)Self-sustaining fund
C)Fiduciary fund
D)Endowment fund
To view all questions and flashcards with answers, click on the resource link above.