(Test Bank) Modern Advanced Accounting In Canada

Hilton,Herauf, 10

Business

Test Bank

10th Edition

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Test Bank for Modern Advanced Accounting In Canada, The downloadable file consists of 380 pages, and the total size of the file is 1.68 MB. Purchase now only for highly discounted price.

Author(s): Hilton, Herauf

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Version 1 1 Test Bank for Modern Advanced Accounting in Canada, 10e Murray Hilton, Darrell Herauf Student name:__________ 1) In which of the following situations would professional judgment NOT be required in decision making? A) Recognition of revenue. B) The making of accounting estimates. C) Disclosure of information in the notes to the financial statements. D) Use of IFRS or ASPE for publicly traded companies in Canada. 2) Which of the following statements pertaining to generally accepted accounting principles (GAAP) is INCORRECT? A) The process of developing GAAP is political. B) If a proposal for a new financial reporting is not accepted by users, it is u nlikely to become part of GAAP. C) If an entity that follows GAAP encounters transactions that are not addressed by the CPA Canada Handbook, it is permitted to adopt accounting practices that are consistent with industry practice. D) Publicly traded comp anies are required to submit financial statements that comply with GAAP to the securities commissions under which they are registered. 3) Which of the following examples does NOT demonstrate the interrelationships of financial statement elem ents? A) A sale on account will increase assets and equity. B) Depreciation of equipment will decrease assets and decrease equity. C) The payment of a payable will decrease liabilities and increase assets. D) The contribution of capital will in crease an asset and increase equity. Version 1 2 4) Which of the following statements pertaining to GAAP for publicly accountable enterprises (PAEs) is correct? A) PAEs include not -for-profit organizations. B) Commencing in 2011, most Canadian PAEs are required to elect to report under either IFRS or ASPE on a prospective basis. C) PAEs include an entity, that as one of its primary businesses, holds assets in a fiduciary capacity for a broad group of outsiders. D) CPA Canada and the F inancial Accounting Standards Board (FASB) harmonized the accounting standards of the United States and Canada for PAEs beginning in 1998. 5) Which of the following statements pertaining to private enterprises (PEs) is INCORRECT? A) PEs may adopt either ASPE or IFRS but once a set of standards is adopted, the PEs are not permitted to apply some standards from ASPE and others from IFRS. B) The accounting standards for a PE are included in a separate part of the CPA Canada Handbook. C) PEs with annual revenues over $10,000,000, are required to report under IFRS. D) A PE is a profit -oriented enterprise that has none of its issued and outstanding financial instruments traded in a public market and does not hold assets in a fiduciary ca pacity for a broad group of outsiders as one of its primary businesses. 6) Which of the following organizations are required to use only the IFRS (Part I) in Canada?Version 1 3 A) All corporations, government agencies and private companies. B) Public companies and private companies whose shareholders' equity is in excess of $500,000,000 at any particular year -end. C) Public companies, private companies and not -for-profit organizations. D) Government business enterprises. 7) Which of the following statements pertaining to Not -for-Profit -Organizations (NFPO) is INCORRECT? A) A government NFPO has the choice to follow either the 4200 series of the CPA Canada Public Sector Accounting (PSA) Handbook or the PSA Handbook without the 4200 series. B) A non -government NFPO has a choice to follow Part I (IFRS) or Part III of the CPA Canada Handbook . C) A government NFPO has a choice to follow Part I (IFRS) of the CPA Canada Handbook or the CPA Canada Public Sector Accounting Handbook . D) A non -government NFPO that applies Part III of the CPA Canada Handbook will also apply relevant sections from Part II (ASPE) of the CPA Canada Handbook . 8) For which of the following types of organizations does the CPA Canada Handbook NOT provide specific accounting standards? A) Publicly accountable enterprises. B) Private enterprises. C) Not -for-profit organizations. D) Proprietorships. 9) Which of the following is NOT a reason why a Canadian private company would elect to report under IFRS?Version 1 4 A) The company is planning to go public in the near future. B) The company seeks comparability with public companies of a similar size. C) It is likely to be less expensive than reporting under A SPE. D) The company is a subsidiary of a Canadian public company. 10) The current ratio measures: A) liquidity. B) solvency. C) profitability of assets. D) profitability of owners' investment. 11) The formula for the current ratio is: A) current assets - current liabilities B) current assets/current liabilities C) total debt/shareholders' equity D) net income/shareholders' equity 12) The debt -to-equity ratio measures: A) liquidity . B) solvency. C) profitability of assets. D) profitability of owners' investment. 13) Which three major skills must be demonstrated to be successful as an accountant?Version 1 5 A) Knowledge, creativity and organization. B) Creativity, m athematical skills and adaptability. C) Knowledge, critical thinking and organization. D) Creativity, professionalism and interpersonal skills. 14) A generic framework for case analysis is recommended not only for integration and analysis cases in an academic setting but can also be applied to business decision -making situations. Which of the following steps in a case analysis would NOT be appropriate ? A) Identifying the needs of the users. B) Identifying and ranking the issues that must be addressed. C) Creating a list of alternatives that are relevant and viable to the situation. D) Providing all identified alternatives to the users in th e final report. 15) Explain the purpose or use of "The Conceptual Framework for Financial Reporting" ( Conceptual Framework) in relation to International Financial Reporting Standards (IFRS). 16) X Inc. and Y Inc. are virtually identical companies with identical cost structures and very similar business practices operating in the same lines of business. X Inc. and Y Inc. are both public companies based in Canada and follow IFRS. The following are the condensed income statements for both companies: X Inc. Y Inc. Sales: $1,000,000 $2,000,000 Less: Cost of Goods Sold 500,000 1,600,000 Gross Margin $500,000 $400,000 Version 1 6 Administrative Expenses 200,000 300,000 Net Income $300,000 $100,000 Required: Given the information provided, what are some possible causes for the differing results of these companies? 17) Briefly discuss the external users need for high -quality financial information. 18) Explain ways that management can mispresent the financial situation of a company. 19) Provide the procedures used to analyze a company's financial statements to determine its future prospects. 20) Rate-regulated companies a re permitted to use U.S. GAAP because IASB has not yet developed its own standards.Version 1 7 ⊚ true ⊚ false 21) ASPE is often different than IFRS due to the cost of preparing financial statements to comply with complex standards being greater than the benefit received by users of those statements. ⊚ true ⊚ false 22) IAS 1 has a mandatory requirement that Canadian companies use the titles balance sheet or income statement for their financial statements. ⊚ true ⊚ false Version 1 8 Answer Key Test name: ch 1 1) D 2) C 3) C 4) C 5) C 6) D 7) C 8) D 9) C 10) A 11) B 12) B 13) A 14) D 20) TRUE 21) TRUE 22) FALSE Version 1 1 Student name:__________ 1) Beginning on or after January 1, 2018, IFRS 9 requires all non -strategic investments to be reported using which of the following methods? A) Fair value B) Cost C) Historical D) Impaired value 2) An investment in an associate is an investment in a corporation that A) allows the investor to exercise significant influence over the strategic operating and financing policies of the investee. B) allows the investor to exercise significant influence over only the financing policies of the investee. C) allows the investor to exercise significant influence over only the operating policies of the investee. D) allows the investor to exercise significant influence over all decision making for the investee. 3) Which of the following is the primary factor used to distinguish between non -strategic investments and strategic investments? A) The rate of return. B) The amount paid for the investment. C) The level of influence over the strategic decisions of the investee company. D) The length of time the investment is held by the investor. 4) Which of the following statements is TRUE under IFRS 9?Version 1 2 A) All unrealized gains and losses on equity investments flow through other comprehensive income (OCI). B) Unrealized gains and losses on fair value through profit and loss (FVTPL) investments are included in other comprehensive income (OCI). C) Unrealized gains and losses on equity investments may be included in other comprehensive income (OCI) only if management irrevocably elects to do so on initial acquisition. D) Cumulative gains or losses in accumulated other comprehensive income (AOCI) ar e transferred to net income when the equity investment is sold. 5) Gains and losses on fair value through profit or loss (FVTPL) investments: A) are included in net income, regardless of whether they are realized or not. B) are included in net income only when the investment has become permanently impaired. C) are included in net income only when realized. D) are not recorded until the securities are sold. 6) How are realized gains from the sale of fair value thr ough other comprehensive income (FVTOCI) equity investments accounted for under IFRS 9? A) They are recycled to net income from accumulated other comprehensive income. B) They remain in accumulated other comprehensive income. C) They are transfe rred from accumulated other comprehensive income directly to retained earnings. D) They are transferred from net income to contributed surplus. 7) Which of the following statements is TRUE regarding the equity method?Version 1 3 A) The equity method is used for reporting gains or losses for non -strategic investments. B) The investor's share of the associate's dividends declared is reported in net income. C) The investor's investment in the associate changes in direct relation to the changes taking place in the associate's equity accounts. D) The equity method reports unrealized gains and losses on revaluations to fair value in net income. 8) What percentage of ownership is used as a guideline to determine that significant influence exists under IAS 28 Investments in Associates and Joint Ventures ? A) 25% or more B) 1% to 20% C) 20% to 50% D) 50% or more 9) Which of the following methods uses procedures closest to those used in preparing consolidated financial statements? A) The fair value through profit or loss (FVTPL) approach B) The cost method C) The fair value through other comprehensive income (FVTOCI) approach D) The equity method 10) Which of the followin g is NOT a possible indicator of significant influence? A) The investor can elect members to the Board of Directors. B) The investor has the right to participate in the policy -making process. C) The investor has engaged in numerous intercompany transactions with the associate. D) The associate's new CEO was previously CEO of the investor company. Version 1 4 11) Which of the following statements is CORRECT? A) Significant influence is only possible if the investor owns more than 50% o f the voting shares of the associate. B) An ownership interest between 20% and 50% always implies significant influence. C) An ownership interest of greater than 0% but less than 10% can never imply significant influence. D) Significant influence is po ssible even if the investor owns less than 20% of the voting shares of the associate. 12) The difference between the investor's cost and the investor's percentage of the carrying value of the net identifiable assets of the associate is known as: A) goodwill. B) the acquisition differential. C) the fair value increment. D) the excess book value. 13) Any unallocated positive acquisition differential is normally: A) pro -rated across the associate's identifiable net assets. B) charged to retained earnings. C) recorded as goodwill. D) expensed during the year following the acquisition. 14) When are gains on intercompany transfers of assets between an investor and an associate recognized as part of investment income that is accounted for by the investor under the equity method?Version 1 5 A) In the period when the intercompany transfer takes place. B) In the period(s) when the assets are sold to outside entities or consumed by the purchaser. C) They are never recognized. D) They are recognized only when the investment in the associate is sold. 15) ___________ Investments are classified as current if they are actively traded and intended by management to be sold with in one year. A) fair value through profit or loss (FVTPL) B) cost method C) equity method D) fair value through other comprehensive income (FVTOCI) 16) When analyzing and interpreting financial statements, although the reporting methods show different values for liquidity, solvency and profitability, the real economic situation is ________ for the four different methods. A) completely different B) identical C) almost similar except for the equity method D) almost simil ar except for the fair value methods 17) Which of the following reporting requirements under Accounting Standards for Private Enterprises (ASPE) is NOT permitted for non -strategic investments in equity instruments?Version 1 6 A) If the equity i nstruments are quoted in an active market, they are reported at fair value. B) If the equity instruments are quoted in an active market, they are reported using either the equity method or cost method. C) If the equity instruments are not quoted in an a ctive market, they are reported at cost less any reduction for impairment. D) An irrevocable election may be made to measure any equity investment at fair value. 18) When reporting under the Accounting Standards for Private Enterprises (ASP E), which of the following statements is true where the investor has significant influence over the investee? A) If the investee's equity securities are traded in an active market, the investor is permitted to use the cost method, equity method or elect to use fair value. B) The investor is permitted to use either the cost method or equity method regardless of whether the investee's equity shares are traded in an active market or not. C) If the investee's equity securities are not traded in an ac tive market, the investor is permitted to use the cost method. D) The investor may irrevocably elect to account for such investments at fair value with all fair value changes reported in other comprehensive income. 19) Which of the following statements is correct when an investment changes from significant influence to FVTPL? A) The equity method will continue to be used until the entire investment is sold. B) On the date of change, the investor is required to remeasure at fair value any investment the investor retains in the former associate. C) When the investor loses significant influence, the change in reporting method is accounted for retrospectively. D) The investor will, on a prospective basis, account for its remai ning investment using the cost method. Version 1 7 20) Using the cost method, which of the following entries would have to be made to record X's acquisition of Y's shares on January 1, 2022? A) Debit Credit Investment in Y 100,000 Cash 100,000 B) Debit Credit Investment in Y 12,000 Cash 12,000 C) Debit Credit Investment in Y 112,000 Cash 112,000 D) No entry required. 21) Using the cost method, which of the following entries would have to be made to record X's share of Y's net income for 2022? A) Debit Credit Investment in Y 6,000