Intermediate Financial Accounting Exam
Bank
Course Introduction
Intermediate Financial Accounting builds upon foundational accounting principles to deepen students understanding of financial reporting and analysis. This course focuses on the conceptual framework and regulatory environment governing accounting standards, as well as the detailed examination of assets, liabilities, equities, revenues, and expenses. Students will learn to prepare, analyze, and interpret complex financial statements while exploring issues such as revenue recognition, inventory valuation, long-term assets, and debt. Emphasis is placed on critical thinking, problem-solving, and the ethical considerations involved in financial accounting. The course is designed to equip learners with the knowledge and skills required for advanced study in accounting and for professional practice in the field.
Recommended Textbook
Intermediate Accounting Volume 1 3rd Edition by Kin Lo
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Chapter 1: Fundamentals of Financial Accounting Theory
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Sample Questions
Q1) Why is financial information required?
Answer: Governmental bodies issue proclamations requiring companies to provide financial information.
Quasi-governmental organizations issue proclamations requiring companies to provide financial information.
Accounting organizations such as the CPA or IASB issue proclamations requiring companies to provide financial information.
Q2) Management motivation to increase the likelihood that the company will receive a $50,000 government rebate best illustrates which of the following?
A)Earnings management.
B)Positive accounting theory.
C)Information asymmetry.
D)Efficient securities market.
Answer: A
Q3) Explain the meaning of generally accepted accounting principles (GAAP).
Answer: GAAP refers to broad principles and conventions of general application as well as rules and procedures that determine accepted accounting practices.
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Chapter 2: Conceptual Frameworks for Financial Reporting
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Q1) Which is not an element of financial information in the IFRS Conceptual Framework?
A)Other comprehensive income.
B)Assets.
C)Income.
D)Liabilities.
Answer: A
Q2) Which statement best explains the meaning of "presentation" in financial reporting?
A)Determining where items should be presented in the body of the financial statements.
B)Presenting an item in the body of the financial statements and in the notes.
C)Quantifying items so that they can be presented in the body of the financial statements.
D)Presenting expenses in the same accounting period as the related revenues.
Answer: A
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4
Chapter 3: Accrual Accounting
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Sample Questions
Q1) Which statement is incorrect about the cash flow statement?
A)The cash flow statement can be prepared using the direct method.
B)The cash flow statement can be prepared using the indirect method.
C)The cash flow statement provides information on the economic performance of the company.
D)The cash flow statement shows the change in cash and cash equivalents over the year.
Answer: C
Q2) Changes in accounting estimates are
A)accounted for in the same manner as accounting policy changes.
B)accounted for on a prospective basis.
C)applied to current and past reporting periods.
D)accounted for in the same manner as error corrections.
Answer: B
Q3) Explain how changes in accounting policies,changes in accounting estimates and errors are accounted for under the accrual basis of accounting.
Answer: Correction of errors and changes in accounting policies require retrospective adjustment of financial statements.Changes in estimates due to new information require prospective treatment.
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Page 5
Chapter 4: Revenue and Recognition
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Sample Questions
Q1) Which statement is correct about unintentional errors on construction contracts?
A)Unintentional underestimates or overestimates may not be errors.
B)Errors are misstatements that should not have been made based on the information available at the time.
C)Both statements are correct.
D)Neither statement is correct.
Q2) Lagory Co.started a contract in June 2017 to build a bridge at a fixed price of $14 million.The bridge was to be completed by October 2019.Total cumulative costs incurred by the end of December 2017 and 2018 were $2 million and $6 million,respectively.Lagory Co.is unable to estimate the total costs of the project prior to completion.Final costs at the end of the project totalled $11 million.How much revenue will Lagory Co.report in 2018?
A)$2,000,000
B)$3,000,000
C)$4,000,000
D)$14,000,000
Q3) Explain why accounting standards generally prescribe a smaller set of alternatives for revenue recognition.
Q4) List the five key steps in the revenue recognition process.
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Page 6
Chapter 5: Cash and Receivables
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Q1) Which statement about "cash and cash equivalents" is correct?
A)The definition for "cash and cash equivalents" used on the balance sheet differs from the definition for "cash and cash equivalents" used on the cash flow statement.
B)A change in the composition of "cash and cash equivalents" is considered a financing activity on the cash flow statement.
C)A change in the composition of "cash and cash equivalents" is considered a cash flow for purposes of the cash flow statement.
D)The definition for "cash and cash equivalents" used on the balance sheet is the same as the definition for "cash and cash equivalents" used on the cash flow statement.
Q2) A $100,000 sale transaction is made with terms of 5/10,net 30.What amount is debited to the accounts receivable account when the sale is made under the gross method of recording a discount?
A)$95,000 credit
B)$95,000 debit
C)$100,000 credit
D)$100,000 debit
Q3) Identify the two criteria for classifying an investment as a cash equivalent.
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Page 7
Chapter 6: Inventories
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Sample Questions
Q1) Which statement best depicts the inventory cost flow equation?
A)Cost of goods available for sale = Beginning inventory + Ending inventory.
B)Beginning inventory + Purchases = Cost of sales + Ending inventory.
C)Sales - Cost of goods sold = Gross margin.
D)Gross margin - Operating expenses = Operating income.
Q2) Explain the meaning of product costs and period costs.Discuss which costs should be included in the cost of inventories.
Q3) Which statement best explains the gross margin method?
A)A method for estimating cost of goods sold by applying an average gross margin to the amount of sales recorded in a period.
B)A method that assigns costs to inventories and cost of sales based on actual costs of each item.
C)A method of estimating the cost of ending inventory by applying an average sales margin to the retail price of products.
D)This method is least appropriate for inventory items that are not distinguishable from one another.
Q4) Explain how items of inventory should be grouped for purposes of testing for impairment.
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Page 8
Chapter 7: Financial Assets
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Sample Questions
Q1) Star Corp.purchases a $100,000 face value bond which matures in two years.The coupon rate is 6% and the market rate is 5%.At what amount will the bond be recorded (rounded)?
A)$5,093
B)$100,000
C)$100,100
D)$101,859
Q2) Which statement is correct about non-strategic financial assets?
A)ASPE refers to the underlying business model when categorizing these investments.
B)IFRS classifies these investments in accordance with the underlying business model.
C)IFRS classifies these investments in accordance with their nature.
D)The accounting is the same under ASPE and IFRS for these investments.
Q3) Explain the characteristics of a financial asset.Discuss if cash has the characteristics of a financial asset.Why is (or is not)cash a financial asset?
Q4) Explain why there is no one single measurement basis that is suitable for all financial assets.Does this mean that a company can choose any measurement base for any investment?
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Chapter 8: Property, plant and Equipment
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Q1) Explain what costs should be capitalized to property,plant and equipment.Include a discussion of costs incurred for acquired assets,self constructed assets and repairs.
Q2) Explain why earnings manipulation of property,plant and equipment can have long-lasting impact on the financial statements.
Q3) What issue does NOT relate to the subsequent measurement of property,plant and equipment?
A)Which model to use to record depreciation.
B)How impairment should be recorded.
C)How to classify the expenditure.
D)Whether to use the fair value model.
Q4) What is the meaning of "current value"?
A)The cost required to replace the productive capacity of an asset.
B)The value of an asset in an input market or output market on the date of measurement.
C)The value expected from the sale of an asset,net of any costs of disposal.
D)The actual cost of an asset at the time it was purchased.
Q5) Will the method of depreciation affect the net cash outflow associated with the purchase and subsequent sale of property,plant and equipment?
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Chapter 9: Intangible Assets, goodwill, mineral Resources, and Government Grants
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Q1) What is economic profit as it would be defined in finance or economics? Why is accounting net income not the same as an economist's determination of earnings,as measured from a shareholder's perspective?
Q2) Which criteria under IAS 38 would be met if the "project has a dedicated group of qualified staff"?
A)Technical feasibility.
B)Marketability of usefulness.
C)Resource adequacy.
D)Ability to use or sell.
Q3) Explain how government grants are accounted for and presented in the financial statements.
Q4) What is the appropriate treatment for re-payment of government grants under IFRS?
A)Accounted for prospectively.
B)Accounted for retrospectively.
C)Partial prospective treatment and partial retrospective treatment.
D)Full prospective treatment and full retrospective treatment.
Q5) Explain the difference between indefinite lived and finite lived intangible assets.
Q6) Explain how goodwill arises in a business.Give an example in your response.
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Chapter 10: Applications of Fair Value to Non-Current Assets
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Sample Questions
Q1) Which of the following is correct with respect to the "fair value model"?
A)A model that recognizes changes in value of the asset in the statement of changes in equity.
B)A model that recognizes changes in value of the asset in the revaluation surplus account.
C)A model that recognizes changes in value of the asset in other comprehensive income.
D)A model that recognizes changes in value of the asset in profit or loss.
Q2) Compare the proportional method and the elimination method for recording the revaluation entry.Contrast the benefits and drawbacks of each method.
Q3) When is a "disposal group" classified as held for sale?
A)When a component of an entity either has been disposed of or is classified as held for sale.
B)When the group of assets is both available for sale and expected to sell within a year.
C)When a group of assets and liabilities are to be disposed in several transactions.
D)When the carrying value for a group of current assets will be recovered through sale rather than continuing use.
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