Intermediate Financial Accounting
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Course Introduction
Intermediate Financial Accounting builds upon the foundational principles of accounting, focusing on a deeper exploration of financial reporting standards, asset and liability valuation, and income recognition. Students will analyze and interpret complex accounting topics such as revenue recognition, inventory systems, long-term assets, and liabilities, as well as investments and equity accounting. The course emphasizes the application of Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), preparing students to tackle real-world financial reporting challenges. Through case studies and problem-solving exercises, students develop skills necessary for accurate financial statement preparation and ethical financial disclosure.
Recommended Textbook
Intermediate Accounting 6th Edition Volume 1 by Thomas H. Beechy
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Chapter 1: The Framework for Financial Reporting
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Sample Questions
Q1) Choose the correct statement about audits of corporations:
A)Outside auditors are paid by the government for auditing the financial statements of corporations.
B)Revenue Canada performs audits of corporations' financial statements.
C)Public corporations (those whose stock are traded on exchanges) are subject to annual audit as to their compliance with GAAP.
D)It is the employees of the firm being audited who perform the annual audit of the financial statements of that firm.
Answer: C
Q2) Generally accepted accounting principles currently are promulgated primarily by the:
A)Canadian Academic Accounting Association (CAAA)
B)Canada Customs and Revenue Agency
C)Ontario Securities Commission (OSC)
D)Accounting Standards Board (AcSB)
Answer: D
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3
Chapter 2: Accounting Judgements
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Sample Questions
Q1) In classifying the elements of financial statements,the primary distinction between revenues and gains is the materiality of the amounts involved.
A)True
B)False
Answer: False
Q2) The recognition of periodic amortization expense on company-owned automobiles requires estimating both salvage or residual value,and the useful life of the vehicles.The use of estimates in this case is an example of:
A)Conservatism
B)Maintaining consistency
C)Invoking the materiality constraint rather than the cost benefit constraint
D)Providing relevant data at the expense of reliability
E)None of these answers are correct.
Answer: D
Q3) Recognition requires the measurement of an item for inclusion in the financial statements.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Statements of Income and Comprehensive Income
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Sample Questions
Q1) If an abandoned asset's recoverable value increases subsequent to abandonment,the asset may be written up to a maximum of the asset's original carrying value.
A)True
B)False
Answer: True
Q2) If capital assets of a manufacturing company are sold at a gain of $820,000 less related taxes of $250,000,and the gain is not considered unusual or infrequent,the income statement for the period would disclose the effect if this sale as:
A)a gain of $820,000 and an increase in income tax expense of $250,000.
B)operating income net of applicable taxes, $570,000.
C)a retroactive correction of prior years' error, net of applicable taxes, $570,000.
D)an extraordinary item net of applicable taxes, $570,000.
Answer: A
Q3) All elements of OCI must eventually be recycled to the income statement.
A)True
B)False
Answer: False
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Chapter 4: Statements of Financial Position and Changes in
Equity; Disclosure Notes
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Sample Questions
Q1) Under IFRS,the correct order to present current assets is:
A)Cash, accounts receivable, prepaid items, inventories.
B)Cash, accounts receivable, inventories, prepaid items.
C)Cash, inventories, accounts receivable, prepaid items.
D)There is no required order under IFRS; current assets may be presented by liquidity or reverse liquidity, or in whatever order provides the most benefit to financial statement users.
Q2) Only unrealized changes in the fair values of certain assets or liabilities are included in Accumulated Other Comprehensive Income.
A)True
B)False
Q3) Capital transactions are essentially transaction between owners and as a result,must never appear on the income statement.
A)True
B)False
Q4) A balance sheet is not particularly useful for determining the current market value of the assets of an entity.
A)True
B)False
6
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Chapter 5: The Statement of Cash Flows
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Sample Questions
Q1) The following information was provided by the records of QRS for the current reporting year: \(\begin{array}{|l|r|}
\hline \text { Cost of goods sold (as reported on the income statement).. } & \$ 80,000 \\
\hline \text { Inventory increase } & 20,000 \\
\hline \text { Accounts payable increase } & 3,000 \\
\hline
\end{array}\) The cash paid to suppliers was:
A)$63,000
B)$77,000
C)$80,000
D)$97,000
Q2) If a company issues both a balance sheet and an income statement with comparative figures from last year,Statement of Cash Flows:
A)Should be issued for the current year only.
B)Should be issued for each period for which an income statement is presented.
C)is no longer necessary; but may be used at the company's option.
D)Should not be issued.
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Chapter 7: Financial Assets: Cash and Receivables
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Sample Questions
Q1) Guaranteed investment certificates (GICs) denote a specified deposit made at a financial institution at a specified rate of interest for a specified period of time.
A)True
B)False
Q2) Financial assets include both derivative and non-derivative type financial instruments.
A)True B)False
Q3) If the same percentage is used,an estimate of bad debt expense based upon credit sales rather than total sales will likely be more in conformity with the matching principle. A)True
B)False
Q4) When a specific bad debt is written off as uncollectible,and subsequently collected in full,there is no effect to the income statement.
A)True B)False
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Page 8
Chapter 8: Cost-Based Inventories and Cost of Sales
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Sample Questions
Q1) The gross margin method is frequently used for all of the following except to:
A)Estimate replacement cost of ending inventory lost or damaged.
B)Test the reasonableness of an inventory valuation made by some other means.
C)Estimate ending inventory for interim financial reports.
D)Estimate the required inventory quantity needed for the next period.
Q2) To compute inventory on a lower-of-cost or market basis using the retail inventory method:
A)Markups are excluded in the computation of the cost ratio.
B)Markups and markdowns are included in the computation of the cost ratio.
C)Markups and markdowns are excluded in the computation of the cost ratio.
D)Markdowns are excluded in the computation of the cost ratio.
Q3) What types of inventory does GAAP allow to be measured at selling price in excess of cost?
Q4) Which of the following would cause an increase in the cost ratio as used in the retail inventory method?
A)Fewer employee discounts given
B)Less spoilage
C)Lower freight-in charges
D)Decreased mark-ups
Q5) Compare and contrast the gross margin method and the retail inventory method.
Page 9
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Sample Questions
Q1) Research expenditures are usually expensed while development expenditures may be capitalized if certain conditions are met.
A)True
B)False
Q2) Intangible assets have all of the following characteristics,except:
A)their ownershi
B)confers rights, but no physical substance.
C)they provide benefits to current operations only.
D)they are relatively long-lived.
E)they have no physical substance.
Q3) JP acquired a tract of land and paid for it in full by issuing (A) $400,000 of its 9 percent bonds payable after a year and (B) 50,000 of its common shares.The shares were selling at $17.82 per share.The land should be recorded at a cost of (rounded to the nearest thousands):
A)$832,000.
B)$900,000.
C)$1,258,000.
D)$1,284,000.
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Chapter 10: Depreciation,Amortization,and Impairment
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Sample Questions
Q1) Revaluation accounting is an option,not a requirement under IFRS.
A)True
B)False
Q2) In the early years of an asset's useful life,the use of double-declining balance method of amortization will result in a more favourable debt-to-equity ratio than the straight-line method would.
A)True
B)False
Q3) In which amortization method is the first year's amortization computed by applying the amortization rate to the total cost of the asset (without reducing it for residual value)?
A)Sum-of-the-years'-digits
B)Declining balance
C)Straight-line
D)Productive output
Q4) When the revaluation model is applied,impairment testing must be performed annually.
A)True
B)False
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Chapter 11: Financial Instruments: Investments in Debt and Equity Securities
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Q1) Amortized cost investments must have contractual terms that give rise to cash flows on specific dates.
A)True
B)False
Q2) It is not possible to have control over another company without owning at least half of the outstanding voting shares.
A)True
B)False
Q3) Drabble,Inc.owns 40 percent of the outstanding stock of Gilliam Company.During 2014,Drabble received a $4,000 cash dividend from Gilliam.What effect did this have on Drabble's 2014 financial statements? (Assume that Drabble has substantial influence over Gilliam )
A)Increased total assets
B)Decreased total assets
C)Increased income
D)Decreased investment account
E)Decreased income
Q4) List 3 factors that exhibit evidence of the existence of significant influence.
Page 12
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