Intermediate Financial Accounting
Final Test Solutions
Course Introduction
Intermediate Financial Accounting delves into the principles, standards, and procedures underlying external financial reporting for corporations, building upon foundations introduced in introductory accounting courses. The course provides in-depth coverage of the preparation, presentation, and analysis of financial statements in accordance with generally accepted accounting principles (GAAP), with a focus on asset, liability, and equity measurement and disclosure. Topics commonly include revenue recognition, inventory valuation, long-lived assets, intangible assets, investments, current and long-term liabilities, and stockholders equity. Students develop critical thinking and analytical skills essential for interpreting financial information and making informed business decisions.
Recommended Textbook
Intermediate Accounting 6th Edition Volume 1 by Thomas H. Beechy
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1408 Verified Questions
1408 Flashcards
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Page 2
Chapter 1: The Framework for Financial Reporting
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Sample Questions
Q1) Private placements refer to:
A)funds not disclosed by private companies.
B)debt or equity securities issued to individuals or organizations without being listed with a securities commission.
C)shares that form part of a control block.
D)indirect negotiation with the one or more creditors.
Answer: B
Q2) FASB and International Accounting Standards are secondary sources of GAAP. A)True
B)False Answer: True
Q3) IFRS standards may be modified to allow for a disclosed basis of accounting (DBA).
A)True
B)False
Answer: False
Q4) Private companies in Canada may choose between IFRS or ASPE. A)True
B)False Answer: True
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Chapter 2: Accounting Judgements
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Sample Questions
Q1) A primary objective of financial reporting is to:
A)assist investors in predicting prospective cash flows.
B)assist investors in analyzing the economy.
C)assist suppliers in determining an appropriate discount to offer a particular company.
D)enable banks to determine an appropriate interest rate for their commercial loans.
Answer: A
Q2) The primary qualitative criteria of accounting information include which of the following:
A)Comparability (including consistency).
B)Understandability.
C)Relevance.
D)Materiality.
Answer: C
Q3) The use of historical cost,rather than liquidation value,is supported by the continuity assumption.
A)True
B)False
Answer: True
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4
Chapter 3: Statements of Income and Comprehensive Income
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Sample Questions
Q1) Which of the following is true about intraperiod tax allocation?
A)It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return.
B)It is required for extraordinary items and cumulative effect of accounting changes but not for discontinued operations.
C)Its purpose is to allocate income tax expense evenly over a number of accounting periods.
D)Its purpose is to relate the income tax expense to the items which affect the amount of tax.
Answer: D
Q2) The concept of intra-period tax allocation is based on the going concern principle. A)True
B)False
Answer: False
Q3) Basic and diluted Earnings per share figures must be disclosed under both ASPE and IFRS.
Answer: FAL SE
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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) Which of the following MAY NOT appear on a company's statement of financial position?
A)Accounts receivable
B)Prepaid insurance
C)Equipment under long-term capital leases
D)Short-term investment in common stock
Q2) Consider ABC Inc's most recent segment results: \[\begin{array} { |
\hline \text { Segment } & \text { Revenues } & \text { Assets } & \text { Profits } \\
\hline \text { A } & 2000 & 500 & 500 \\
\hline \text { B } & 300 & 2000 & 200 \\
\hline \text { C } & 200 & 500 & 100 \\
\hline \text { D } & 3000 & 5000 & 300 \\
\hline & & & \\
\hline \text { Totals: } & \mathbf { 5 5 0 0 } & \mathbf { 8 0 0 0 } & \mathbf { 1 1 0 0 } \\
\hline \end{array}\] Required:
Which of the above segments would be reportable as per IFRS 8?
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Page 6
Chapter 5: The Statement of Cash Flows
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Sample Questions
Q1) Under IFRS,dividends received may be classified as:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Operating activities or financing activities.
E)Operating activities or investing activities.
Q2) A firm purchased $20,000 worth of investments classified as securities available for sale.At the end of the year,the investments were worth $23,000.What is the correct disclosure of these events in the direct method Statement of Cash Flows?
A)Investing cash outflow, $20,000
B)Add $17,000 in reconciliation of earnings and net operating cash flow
C)Investing cash outflow, $20,000; subtract $3,000 in reconciliation of earnings and net operating cash flow
D)No disclosure is needed
Q3) The Statement of Cash Flows does not report the effects of:
A)Common shares purchased for cancellation.
B)Cash dividends paid.
C)Common shares issued for cash to pay for assets or to pay debt.
D)Common shares issued as the result of a stock dividend.
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Page 7
Chapter 7: Financial Assets: Cash and Receivables
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Sample Questions
Q1) Company M assigned a receivable from AB to the XY Finance Company on a "non-notification" basis.On this basis:
A)XY need not tell M when AB makes payment to M.
B)AB will make payment to M.
C)AB need not make further contact with M about the payment situation.
D)M need not tell XY when AB makes payment to M.
Q2) Cash,as defined for financial reporting purposes,includes currency,coin,and deposits at commercial banks,which are available for immediate use.
A)True
B)False
Q3) With compounding,the interest earned each period on an amount invested at a fixed rate of interest increases over time.
A)True
B)False
Q4) Collateral securities are assets of the borrower that the secured lender can seize if the note goes into default.
A)True
B)False
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8
Chapter 8: Cost-Based Inventories and Cost of Sales
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Sample Questions
Q1) The allocation of the cost of goods available for sale during a reporting period involves the flow of costs rather than the flow of units.
A)True
B)False
Q2) Using the direct reduction method of reporting a holding loss for lower-of-cost or NRV valuation of inventory,any holding loss is merged into the cost of goods sold amount.
A)True
B)False
Q3) The relative sales value method is:
A)similar to the gross margin method. B)used to account for spoilage.
C)a retail inventory method. D)a cost allocation method.
Q4) Use of a perpetual inventory system versus a periodic inventory system may affect the application of the inventory cost flow methods. A)True
B)False
Q5) Compare and contrast the gross margin method and the retail inventory method.
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Chapter 9: Property,Plant,and Equipment; Intangibles; and Goodwill
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Sample Questions
Q1) Negative goodwill arises when one company purchases the net assets of another company for an amount less than their fair market value,and is recorded as a gain on the statement of income/comprehensive income.
A)True
B)False
Q2) CY acquired some land in exchange for 80 of its own common shares.The shares were traded widely and sold at the time for $120 per share.The land is similar to other tracts,which recently sold for $10,000.Give the entry for the acquisition of the land.Below the entry,justify the basis for the amount you used in the entry.
Q3) If an asset is purchased by giving a non-interest-bearing note payable,the use of an unrealistically low interest rate will cause the asset to be recorded at a cost that is too low and the interest expense amount reported on the income statement also will be too low.
A)True B)False
Q4) Subsequent to acquisition,the cost of capital assets Land may include title search A)True B)False
Page 10
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Chapter 10: Depreciation,Amortization,and Impairment
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Sample Questions
Q1) Recording periodic amortization on the basis of historical cost may result in holding back insufficient assets to replace fully depreciated assets if the general price:
A)rises throughout the life of the property.
B)falls throughout the life of the property.
C)remains reasonably constant during the life of the property.
D)keeps pace with dividends paid.
Q2) (Appendix) ABC adheres to IFRS and applies the revaluation model to account for its Machinery.Prior to 2009,there was no balance in the company's Revaluation Surplus (OCI) accounts relating to its long-lived assets.The following year-end data pertains to the company's machinery: \[\begin{array} { l c c l } & \text { Cost } & \text { Accumulated Depreciation } & \text { Fair Value } \\
2009 & \$ 100 & 0 & \$ 120 \\
2010 & \$ 100 & 10 & \$ 60 \\
2011 & \$ 100 & 20 & \$ 100 \end{array}\] Required:
For each year,provide the revaluation entries assuming that ABC applies:
a) The elimination method and, b) The proportional method.
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11
Chapter 11: Financial Instruments: Investments in Debt and Equity Securities
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Sample Questions
Q1) A company purchased a $20,000,8.4 percent bond (interest payable each October 1) on March 31,2014,as a short-term investment.The total cash paid was $20,300.The investment is to be classified as a FVTPL investment.
(a) Give the entry required by the company on March 31,2014.
(b) Give any adjusting entry the company required on December 31,2014,end of reporting period.If none is required,so state.
Q2) The equity method of accounting for a consolidated company probably will be used when the proportion of its voting shares held is as low as:
A)18 percent.
B)20 percent.
C)50 percent.
D)Any percent, as long as there is demonstrated significant influence.
E)23 percent.
Q3) Amortized cost investments must have contractual terms that give rise to cash flows on specific dates.
A)True
B)False
Q4) List 3 factors that exhibit evidence of the existence of significant influence.
Page 12
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