International Financial Reporting Standards (IFRS)
Exam Questions
Course Introduction
This course provides a comprehensive overview of International Financial Reporting Standards (IFRS), which serve as the global language for business financial statements. Students will explore the conceptual framework of IFRS, the recognition, measurement, and disclosure requirements of key standards, and the transition challenges from local GAAP to IFRS. The course emphasizes the application of IFRS to various asset classes, liabilities, revenue recognition, and financial instruments, as well as the ethical considerations and professional judgment required in financial reporting. Through practical case studies and real-world examples, students will gain the skills needed to prepare, interpret, and analyze financial statements that comply with international standards, preparing them for careers in multinational corporations, public accounting, and regulatory agencies.
Recommended Textbook
Intermediate Accounting IFRS 6th Edition by J. David Spiceland
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Page 2
Chapter 1: Environment and Theoretical Structure of Financial Accounting
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Q1) How does SFAC No. 157 define fair value?
Answer: Fair value is defined as the price that would be received to sell assets or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Q2) The conceptual framework's recognition and measurement concepts recognize which of the following as a principle, rather than an assumption?
A)Periodicity.
B)Monetary unit.
C)Conservatism.
D)Full disclosure.
Answer: D
Q3) Which of the following best demonstrates the full disclosure principle:
A)The multi-step income statement.
B)The auditors' report.
C)The company's tax return.
D)Disclosure notes to financial statements.
Answer: D
Q4) Compute the cash balance at the end of the first year for Alpaca Corporation.
Answer: 11ea92df_7315_c472_9bd4_870d7e0adb46_TB5911_00
Page 3
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Chapter 2: Review of the Accounting Process
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Sample Questions
Q1) Adjusting journal entries are required to comply with the realization and matching principles.
A)True
B)False
Answer: True
Q2) Allowance for uncollectible accounts
Answer: \(\begin{array}{lcc} & \text { Effect } & \text { Classification } \\ \text { Allowance for uncollectible accounts } & 2 & 1 \end{array}\)
Q3) Based on the information presented above, prepare the 12/31/09 Balance Sheet for Krafty Foods.
Answer: 11ea92df_7311_0975_9bd4_df7345ae20df_TB5911_00
Q4) Sold inventory for cash.
Answer: \(\begin{array}{lccc}
\text { TRANSACTION }&\text { Account(s) } & \text { Account(s) } & \text { Transaction } \\
&\text { debited } & \text { credited } & \text { type } \\
\text { Sold inventory for cash. }&1111,6111&5211,1141&1 \end{array}\)
Page 4
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Chapter 3: The Balance Sheet and Financial Disclosures
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Sample Questions
Q1) Altoid Co.'s acid-test ratio.
Answer: Acid-test ratio: $(150 + 200 + 300) /$450 = 1.44
Q2) What is the amount of working capital for Symphony?
A)$ 98.
B)$143.
C)$128.
D)$113.
Answer: C
Q3) An example of an error would be:
A)Purchasing inventory from a related party.
B)Counting an inventory item twice when taking a physical inventory.
C)Holding back invoices so that accounts payable are understated.
D)Receiving kickbacks in exchange for issuing a purchase order to a vender. Answer: B
Q4) Accrued expenses:
A)Are generally paid in services rather than cash.
B)Result from payment before services are received.
C)Result from services received before payment.
D)Are deferred charges to expense.
Answer: C
Page 5
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Chapter 4: The Income Statement and Statement of Cash
Flows
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Q1) In the 2009 income statement for Foxtrot Co., it would report:
A)Income (loss) on its total operations for the year without separation.
B)Income (loss) on its continuing operation only.
C)Income (loss) from its continuing and discontinued operations separately.
D)Income and gains separately from losses.
Q2) Aggie Co. purchased equipment on January 1, 2004, at a cost of $650,000. The asset was estimated to have a 12-year life with a residual value of $50,000. Aggie uses straight-line depreciation. In 2009, Aggie revised its total estimated life to 10 years, with no residual value.
Required: Prepare journal entries to record Aggie's depreciation expense for 2008 and 2009. Show computations.
Q3) Briefly explain why the income statement is referred to as a change statement.
Q4) Shively Mfg. Co. sold for $18,000 equipment that cost $40,000 and had a book value of $30,000. Shively would report:
A)Operating cash inflows of $18,000.
B)Operating cash inflows of $8,000.
C)Financing cash inflows of $18,000.
D)Investing cash inflows of $18,000.
Q5) Briefly explain when and why intraperiod tax allocation is necessary.
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Chapter 5: Income Measurement
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Q1) Besides size differences, what other differences between McDonalds and its industry peer group could limit your ability to make meaningful comparisons about the performance of McDonalds from the data above?
Q2) Its return on stockholders' equity for 2009.
Q3) At December 31, 2010, Rigsby would report in its balance sheet:
A)Realized gross profit of $500,000.
B)Deferred gross profit of $400,000.
C)Realized gross profit of $400,000.
D)Cost of installment sales $1,600,000.Balance sheet: Deferred gross profit: $800,000
400,000 = $400,000
Realized gross profit of $400,000 would be reported in the income statement.
Q4) Assume that McCombs uses the percentage-of-completion method for revenue recognition.
Required: Prepare all journal entries to record costs, billings, collections, and profit recognition.
Q5) Use of the installment sales method requires that firms track the gross-profit percentage associated with a particular sale.
A)True
B)False
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Chapter 6: Time Value of Money Concepts
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Q1) LeAnn wishes to know how much she should set aside now at 7% interest in order to accumulate a sum of $5,000 in four years. She should use a table for the:
A)Present value of 1.
B)Future value of 1.
C)Present value of an ordinary annuity of 1.
D)Future value of an annuity due of 1.
Q2) Tammy wants to buy a car that costs $10,000 and wishes to know the amount of the monthly payments, which will be made at the first of the month, with interest of 12% on the unpaid balance. She should use a table for the:
A)Present value of 1.
B)Present value of an ordinary annuity of 1.
C)Present value of an annuity due of 1.
D)Future value of an annuity due of 1.
Q3) Suppose that Healdsburg wants to buy back the 7.75% notes on December 31, 2009 (i.e., 5 years early) when the going interest rate is 6%, thereby retiring the $345,154,000 in debt. How much would Healdsburg have to pay for the notes (principal only)?
Q4) The total cash interest payments in 2009 for these notes.
Q5) Provide two examples of the use of present value techniques in accounting.
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Chapter 7: Cash and Receivables
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Q1) The balance in accounts receivable at the beginning of 2009 was $300. During 2009, $1,600 of credit sales were recorded. If the ending balance in accounts receivable was $250 and $100 in accounts receivable were written off during the year, the amount of cash collected from customers during 2009 was:
A)$1,600.
B)$1,650.
C)$1,550.
D)$1,900.$300 + 1,600 100 250 = $1,550.
Q2) Hazelton Manufacturing prepares a bank reconciliation at the end of every month. At the end of May, the general ledger checking account showed a balance of $1,360 and the bank statement showed a bank balance of $1,445. Outstanding checks totaled $350 and deposits in transit were $150. The bank statement listed service charges of $30 and NSF checks totaling $85. The corrected cash balance is:
A)$1,130.
B)$1,160.
C)$1,245.
D)$1,445.$1,360 30 85 = $1,245, or $1,445 350 + 150 = $1,245
Q3) Is there any evidence in Winchester's disclosures above that are consistent with earnings management?
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Chapter 8: Inventories: Measurement
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Q1) Costs and prices regularly fall every year in the microcomputer industry. Briefly indicate your recommendation and rationale for an inventory method for a firm about to enter this industry.
Q2) What inventory balance should Badger report on its 12/31/09 balance sheet?
A)$126,000
B)$121,000
C)$120,000
D)$100,000 $126,000/1.05 = $120,000.This includes two layers, the first at $100,000 and the second at $20,000.The second is then brought forward to 12/31/09 by $20,000 1.05 = $21,000.
Q3) In a perpetual average cost system:
A)A new weighted-average unit cost is calculated each time additional units are purchased.
B)The cost allocated to ending inventory is generally the same as it would be in a periodic inventory system.
C)The moving-average unit cost is determined following each sale.
D)The average is determined by dividing the total number of units sold by the cost of units purchased during the period.
Q4) Briefly explain the advantages of dollar-value LIFO (DVL).
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Chapter 9: Inventories: Additional Issues
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Q1) So. California Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1, 2009. In preparing their insurance claim on the inventory loss, they developed the following data: Inventory January 1, 2009, $300,000; sales and purchases from January 1, 2009, to May 1, 2009, $1,300,000 and $875,000, respectively. So. California consistently reports a 40% gross profit. The estimated inventory on May 1, 2009, is:
A)$302,500.
B)$360,000.
C)$395,000.
D)$455,000.
Q2) Using the dollar-value LIFO retail method for inventory,:
A)Is the same as dollar-value LIFO, except that the inventory is measured at retail, rather than at cost.
B)Combines retail LIFO accounting with dollar-value LIFO accounting
C)Allows companies to report inventory on the balance sheet at retail prices.
D)All of these are correct.
Q3) Inventory written down due to LCM may be written back up if market values go back up.
A)True
B)False
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Chapter 10: Operational Assets: Acquisition and Disposition
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Q1) In computing the capitalized interest for 2009, Crocus' average accumulated expenditures are:
A)$ 46.30 million
B)$103.54 million
C)$122.30 million
D)$124.25 million The correct answer is: [from 2008 \(\to\) ($77.95 million 10/10) + ($30 million 9/10) + ($21 million 7/10) + ($20 million 2/10) + ($6 million 1/10) = $124.25 million.
Q2) Show the journal entry to record Plank's disposal of the fixed assets during 2009.
Q3) In Case B, Grand Forks would record a gain/(loss) of:
A)$ 5,000
B)$ 3,000
C)$(5,000)
D)$(3,000)
Q4) An exclusive 20-year right to manufacture a product or use a process is a:
A)Patent.
B)Copyright.
C)Trademark.
D)Franchise.
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Chapter 11: Operational Assets: Utilization and Impairment
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Q1) Depreciation (to the nearest dollar) for 2010, using sum-of-the-years' digits, would be:
A)$31,909.
B)$29,455.
C)$35,456.
D)$18,000.($200,000 20,000) 10/55 9/12 + ($200,000 20,000) 9/55 3/12 = $31,909
Q2) Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?
A)$ 4.5 million.
B)$8.25 million.
C)$ 12 million.
D)None of these is correct.$16.5 million [(10 + 9 + 8 + 7 + 6)/55] = $12 million
Q3) Notsofast Inc. acquired land for $500,000 on 7/1/08. It erroneously recorded the full amount as an expense. Explain what Notsofast must do when it discovers the error in 2009.
Q4) Briefly discuss the factors that determine the service life of a depreciable asset.
Q5) Briefly explain how a change in depreciation method is accounted for.
Q6) Briefly differentiate between activity-based and time-based allocation methods.
Page 13
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Chapter 12: Investments
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Q1) The total amount of additional depreciation to be recognized over the remaining life of the assets is:
A)$4.5 million.
B)$15 million.
C)$27 million.
D)None of these is correct.(in millions)
Q2) When available-for-sale securities are sold, the full amount of any gain or loss realized on the sale is included in before-tax net income.
A)True
B)False
Q3) The fair value of debt securities not regularly traded can be most reasonably approximated by:
A)Calculating the discounted present value of the principal and interest payments.
B)Determining the value using similar securities in the NASDAQ market.
C)Using the relative fair value method.
D)Calling a licensed and registered stockbroker.
Q4) Prepare the journal entry (in thousands) that Kirby made at the end of 2008 to record the information disclosed above.
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14
Chapter 13: Current Liabilities and Contingencies
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Q1) What was General's coupon liability as of December 31, 2009?
A)$7.5 million.
B)$13.5 million.
C)$16.5 million.
D)$21.0 million.100 million $.30 70% = $21 million $21 million (45 million $.30) = $7.5 million
Q2) Paul Company issues a product recall due to an apparently pre-existing and material defect discovered after the end of its fiscal year. Financial statements have not yet been issued. The action required of Paul Company for this reasonably estimable contingency for the year just ended is:
A)To disclose it in a footnote.
B)To accrue a long-term liability.
C)To accrue the liability and explain it in a footnote.
D)To do nothing relative to the contingency.
Q3) Yummy Rice Cereal offers an all-star bowl in exchange for 3 return box tops. Yummy Rice estimates that 30% will be redeemed. The bowls cost Yummy Rice $1 each. In 2009, 5,000,000 boxes of cereal were sold. By year-end 900,000 box tops had been redeemed. Required:
Calculate the liability that Yummy Rice should report at December 31, 2009.
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Chapter 14: Bonds and Long-Term Notes
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Q1) Premium on bonds payable is a contra liability account.
A)True
B)False
Q2) Crawford Inc. has bonds outstanding during a year in which the market rate of interest has risen. Crawford elected the fair value option for the bonds upon issuance. What will the company report for the bonds in its income statement for the year?
A)Interest expense and a gain.
B)Interest expense and a loss.
C)A gain and no interest expense.
D)A loss and no interest expense.
Q3) When the interest payment dates are March 1 and September 1, and notes are issued on July 1, the amount of interest expense to be accrued at December 31 of the year of issue would:
A)Not be required.
B)Be for six months.
C)Be for four months.
D)Be for ten months.
Q4) Required: What total interest expense will Morton Sales Co. report over the 10-year life of these bonds?
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Chapter 15: Leases
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Q1) What is the outstanding balance after payment #9?
A)$ 8,929.
B)$13,463.
C)$ 5,000.
D)$ 5,537.Step 1 Interest = 12% $16,901 = $2,028 Step 2 Decrease in balance = $10,000 2,028 = $7,972
Step 3 Ending balance = $16,901 7,972 = $8,929
Q2) M Corp. recorded a capital lease in February. The company's December 31 statement of cash flows using the direct method will report
A)a cash inflow from investing activities.
B)a cash outflow from financing activities.
C)a cash outflow from investing activities.
D)a cash inflow from operating activities.The company would report the acquisition of an asset and its financing with a capital lease as a significant noncash investing and financing activity in the disclosure notes to the financial statements.
Q3) What is meant by the term "minimum lease payments"?
Q4) Discuss the three major types of leases that may apply to the lessor. How do they differ?
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Chapter 16: Accounting for Income Taxes
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Q1) Estimated employee compensation expenses earned during the current period but expected to be paid in the next period causes:
A)An increase in a deferred tax asset.
B)A decrease in a deferred tax asset.
C)An increase in a deferred tax liability.
D)A decrease in a deferred tax liability.
Q2) For the current year ($ in millions), Centipede Corp. had $80 in pretax accounting income. This included bad debt expense of $6 based on the allowance method, and $20 in depreciation expense. Two million in receivables were written off as uncollectible, and MACRS depreciation amounted to $35. In the absence of other temporary or permanent differences, what was Centipede's taxable income?
A)$73 million.
B)$69 million.
C)$63 million.
D)$49 million.
Q3) When a new tax rate is enacted, what adjustment, if any, is made to the retained earnings account as a result of the change?
Q4) What is a valuation allowance for deferred tax assets and when is it used?
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Chapter 17: Pensions and Other Postretirement Benefits
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Q1) Recording pension expense might:
A)Decrease the PBO.
B)Increase current assets.
C)Increase the prior service cost-AOCI.
D)Increase the net loss-AOCI.
Q2) What is the 2009 service cost for Havana's plan?
A)$276 thousand
B)$528 thousand
C)$648 thousand
D)Cannot be determined from the given information
Q3) Mars Inc. has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $7,200. The discount rate applied by the actuary was 8%. What was the beginning PBO?
A)$ 90,000.
B)$100,000.
C)$107,200.
D)$112,000.PBO, 1/1 = $7,200/8% = $90,000
Q4) Discuss income smoothing as the term relates to pension plans.
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Chapter 18: Shareholders Equity
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Q1) A small stock dividend is defined as one that is:
A)Less than or equal to 40%.
B)Less than 40%.
C)Less than or equal to 25%.
D)Less than 25%.
Q2) What is the difference between a stock split and a stock split affected in the form of a stock dividend?
Q3) Mandatorily redeemable preferred stock is reported as a liability.
A)True
B)False
Q4) In January, 2009, Despot recorded a transaction with this journal entry: The transaction was for the:
A)Issue of 2 million shares of common stock at par value
B)Issue of common stock for $150 million in cash
C)Receipt of $20 per share for a new stock issue
D)All of these are correct.
Q5) Assuming that Stubblefield had Dividends Payable of $17,450 thousand at December 31, 2005, compute the balance in that account at December 31, 2007.
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Chapter 19: Share-Based Compensation and Earnings Per Share
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Q1) When computing diluted earnings per share, which of the following will be omitted from the calculation?
A)Dividends paid on common stock.
B)The weighted average common shares.
C)The effect of stock splits.
D)The number of common shares represented by stock purchase warrants.
Q2) No time-weighting of contingently issuable shares is required when computing basic EPS.
A)True
B)False
Q3) Which of the following statements is true regarding share appreciation rights (SAR) payable in cash?
A)Any change in estimated total compensation is recorded as a prior adjustment.
B)The total amount of compensation is not known for certain until the date the SAR is exercised.
C)The liability is adjusted only to reflect each additional year of service.
D)None of these is correct.
Q4) What is restricted stock? Describe how compensation expense is determined and recorded for a restricted stock plan.
Page 21
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Chapter 20: Accounting Changes
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Q1) Z Company has included in its consolidated financial statements this year a subsidiary acquired several years ago that was appropriately excluded from consolidation last year. This results in
A)An accounting change that should be reported prospectively.
B)A correction of an error.
C)An accounting change that should be reported by restating the financial statements of all prior periods presented.
D)Neither an accounting change nor a correction of an error.This is a change in reporting entity to be accounted for retrospectively.That is, financial statements of prior periods are restated to report the financial information for the new reporting entity in all periods.
Q2) Both changes in reporting entities and material error corrections are reported prospectively.
A)True
B)False
Q3) A company changes depreciation methods. Briefly describe the steps the company should take to report this accounting change in its current comparative financial statements.
Q4) How are accounting errors treated?
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Chapter 21: The Statement of Cash Flows
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Q1) The sale of stock and the sale of bonds are reported as financing activities. Are payments of dividends to shareholders and payments of interest to bondholders also reported as financing activities? Explain.
Q2) Payments to acquire bonds of other corporations should be classified on a statement of cash flows as:
A)A lending activity.
B)An operating activity.
C)A financing activity.
D)An investing activity.
Q3) Which of the following is reported as an operating activity in the statement of cash flows?
A)The payment of dividends.
B)The sale of office equipment.
C)The payment of interest on long-term notes.
D)The issuance of a stock dividend.
Q4) Do the statement of cash flows and its related disclosure note report only transactions that cause an increase or decrease in cash? Explain.
Q5) Why are "cash equivalents" included as part of cash in the statement of cash flows?
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Chapter 22: Appendix a Derivatives
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Q1) Hedging is used to deal with exposure to:
A)Fair value risk.
B)Cash flow risk.
C)Foreign exchange risk.
D)All of these are correct.
Q2) An assessment of a hedge's effectiveness must be made:
A)At least monthly.
B)At least every three months.
C)At least every six months.
D)At least annually.
Q3) What is a futures contract? A financial futures contract? Provide an example of each.
Q4) Which of the following is not an example of a derivative?
A)interest rate swap.
B)cash.
C)stock option.
D)forward contract.
Q5) Derivative financial instruments exist to lessen, not increase, risk.
A)True
B)False
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