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Study Resources (Accounting)

81) The following entry was recorded by Woodrow Inc.: Cash 57,000 Accumulated depreciation 33,000 Loss on disposal of property, plant and equipment (PPE) 10,000        PPE 100,000 What is the effect on Woodrow's financial statements? A) A cash inflow from financing activities of $57,000. B) Net assets increased by $57,000. C) A deduction of $10,000 in using the indirect method of determining.
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15) Computer Consulting Limited was started in early 2009 and continued to operate until early 2012, when it was wound up due to disputes between the two principal shareholders. When it started, the company used these accounting policies: 1. Use straight-line depreciation for the firm's only asset, a computer which cost.
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51) An adjusted trial balance for Wizzard Industries Limited at December 31, 2011 follows. Prepare a balance sheet at December 31, 2011, with items classified as current or non-current. Debit Credit Accounts payable 141,000 Accounts receivable 100,000 Accumulated depreciation 45,000 Advertising expense 18,000 Cash 319,000 Common stock 100,000 Cost of goods sold 370,000 Current portion of long-term loan payable 25,000 Depreciation expense 13,000 Dividends 23,000 Equipment 620,000 Income tax expense 28,000 Interest expense 34,000 Interest payable 5,000 Inventory 55,000 Long-term loan receivable 250,000 Non-current portion of.
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28) Sing Songs Ltd. started operations on January 1, 2009. During its first year of operations, the company had a choice of accounting policies: Accounting Option 1 Accounting Option 2 Inventory valuation FIFO Average cost Bad debt expense 7% of sales Allowance: 20% of closing (gross) accounts receivable Warranty expense 5% of sales Allowance: an analysis of sales and repairs Using the.
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5.1   Multiple Choice Questions 1) What is not included in 'cash and cash equivalents'? A) Canadian cash on hand. B) Demand deposits. C) Six-month term deposits. D) Three-month Treasury bills. 2) 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.
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2) Creation Construction Company (CCC) has contracted to build an office building for Property Corp. The construction started on January 1, 2012, and the project was completed on July 1, 2015. The contract price was $70 million. Due to uncertainties in the construction process, the two parties to the project.
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24) Sing Songs Ltd. started operations on January 1, 2009.  During its first year of operations, the company had a choice of accounting policies: Accounting Option 1 Accounting Option 2 Inventory valuation FIFO Average cost Bad debt expense 7% of sales Allowance: 20% of closing (gross) accounts receivable Warranty expense 5% of sales Allowance: an analysis of sales and repairs Assume that.
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7) What is meant by the 'going concern assumption' in financial accounting? Explain the implications to financial accounting if the going concern assumption is not valid. 8) Explain the difference between a cash cycle, a financing cash cycle, an investing cash cycle and an operating cash cycle. 9) Explain why estimates are.
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26) Sing Songs Ltd. started operations on January 1, 2009. During its first year of operations, the company had a choice of accounting policies: Accounting Option 1 Accounting Option 2 Inventory valuation FIFO Average cost Bad debt expense 7% of sales Allowance: 20% of closing (gross) accounts receivable Warranty expense 5% of sales Allowance: an analysis of sales and repairs Using the.
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41) Hatcher Limited, a private company, was started on January 1, 2011. For the first year, the chief accountant prepared the financial statements and a local accountant completed the necessary review of these statements. However, for the year ended December 31, 2012, an external auditor was appointed.  For each situation.
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13) Computer Consulting Limited was started in early 2009 and continued to operate until early 2012, when it was wound up due to disputes between the two principal shareholders. When it started, the company used the following accounting policies: 1. Use straight-line depreciation for the firm's only asset, a computer which.
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2) McMillan Industries Ltd. reports the following transactions and events for fiscal 2011 and 2012. a. On January 11, 2012, there was a fire and the company had insufficient fire insurance. As such a material loss will result and operations will be curtailed for the next six months. b. The allowance for.
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41) Which statement about the percentage of completion method is correct? A) This method recognizes revenue on a straight-line basis. B) This method can only be used if there are no uncertainties about how much the contract will cost or how long it will take to complete. C) This method allocates revenue, not.
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3.3   Comprehensive Problems 1) Here is the adjusted trial balance for BeaverCreek Inc at December 31, 2011:   Debit Credit Cash and cash equivalents 10,000 Trade and other receivables 41,600 Held for trading investments 1,900 Inventories 51,600 Intangible assets 3,700 Property, plant and equipment - net 116,200 Goodwill 71,000 Short term borrowings 2,000 Long term borrowings 41,500 Held for trading financial instruments 2,300 Trade and other payables 50,300 Current taxes payable 12,300 Short term provisions 1,000 Long term provisions 1,000 Deferred taxes 1,000 Share capital 150,000 Retained.
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21) The following event occurred after the company's year-end but before the completion of the audit. For this subsequent event, determine whether the event: •requires an adjustment to the year-end financial statements, •requires note disclosure, or •requires neither adjustment to recognized amounts nor disclosure. A major client unexpectedly goes bankrupt and it is determined.
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5) Based on the note disclosure provided below for BMW Group, when would the following types of revenue be recognized? a) Consignment sales of vehicles (Sales with repurchase commitments). b) Financial services. c) Lease rentals. d) Post-sale services (Multiple-component contracts). e) Sale of products. Revenues from the sale of products are recognized when the risks and.
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8) In the chart below, identify the expense recognition method that you feel is most appropriate and also explain why. Transaction Expense recognition method Why ? A. A company purchases computers for its marketing department. B. A company purchases manufacturing equipment that is expected to produce 25,000 units. C. A company incurs delivery costs on.
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26) Southtel is a builder of large digital networks. In the midst of the high-tech euphoria, the company bid and won a $48,000,000 contract to build a network for the country of Elbonia. Details on the project over the last three years are as follows: Year 1 Year 2 Year 3 Cumulative costs incurred 16,500 36,000 54,000 Additional.
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51) Which statement best explains the cost recovery method? A) An accounting method that recognizes revenue and expenses on a contract only after it is completed. B) An accounting method that recognizes revenue and expenses on a contract in proportion to the degree of progress. C) An accounting method that recognizes contract costs.
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3.2   Problems 1) Explain the meaning of the cash basis of accounting and the accrual basis of accounting. When is the cash basis appropriate? Why is the accrual basis used in financial reporting? 2) Which cycle is being described in the following situations? Cycle Situation A cycle that involves the purchase of items such as.
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18) Why is it important to properly define the reporting period when using the accrual basis of accounting? 19) The following event occurred after the company's year-end but before the completion of the audit. For this subsequent event, determine whether the event: •requires an adjustment to the year-end financial statements, •requires note disclosure,.
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21) Which statement best describes a franchise arrangement? A) An arrangement in which one party licenses its business practices to another party. B) An arrangement in which one party exchanges goods or services with another party with little or no consideration. C) An arrangement in which one party provides goods to another party.
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4) Buildings Ltd. is constructing a residential building in downtown Vancouver for a contract price of $15,000,000. Costs for this contract were initially estimated to be $12,000,000. The company uses the percentage of completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following information.
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3) Explain how 'accruals' are used in financial reporting.  Provide an example to support your discussion. 4) What is the difference between accrual accounting and cash accounting? 5) Explain why companies prepare financial statements on an annual basis. 6) Explain how financial information prepared using accrual accounting provides better information to predict future.
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4.1   Multiple Choice Questions 1) Which of the following best explains what recognition means in financial reporting? A) Recognition is the process of reporting an item that is due within 12 months in the current section of the balance sheet. B) Recognition is the process of reporting an item in the notes to.
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11) Through non-subscription sales, TV Weekly provides retailers with a 50% margin (or 100% mark up) on its magazines. The newsstand price is $8 per issue. During 2012, the company distributed 1,654,000 copies to retailers, not all of which were sold. Retailers sent a total of 390,000 unsold copies back.
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51) Which statement is correct about estimating the allowance for doubtful accounts? A) Under the income statement approach, bad debt expense is based on the accounts receivable amount. B) Under the income statement approach, bad debt expense is based on the percentage of sales. C) Under the income statement approach, bad debt expense.
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4.2   Problems 1) Explain why accounting standards generally prescribe a smaller set of alternatives for revenue recognition. 2) Discuss advantages and disadvantages of using the cash basis to recognize revenues. Provide three valid reasons in your discussion. 3) Here are the general definition and recognition criteria for assets. For each criterion, provide the.
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31) Simple Inc. had sales of $1,500,000, including: • $30,000 of goods sold that were on consignment from an unrelated company on December 28, 2011 • $10,000 of goods shipped F.O.B shipping point on December 28, 2011. • $20,000 of goods shipped F.O.B. destination point on December 31, 2011. On its income statement, what.
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71) Which statement is not correct about expenses in the income statement? A) The function of expense format classifies expenses based on their use. B) Some nature of expense categories are depreciation, employee costs, raw materials consumed. C) The nature of expense format classifies expenses based on their source. D) Some nature of expense.
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43) IFRS identifies a number of criteria to determine whether an asset can be classified as current. Satisfying any one of these criteria is sufficient. For the following list of criteria, identify whether each one is relevant for the classification of an asset as current instead of non-current. 44) IFRS identifies.
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11) What criterion is not required for a 'cash equivalent'? A) Convertibility into cash. B) Long term investment. C) Insignificant risk of change in value. D) Highly liquid investment. 12) What amount will be included in 'cash and cash equivalents'? Investment in shares of a public company $12,000 Investment in a money market fund 18,000 Bonds of a publicly traded.
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21) Which statement about internal controls over cash is correct? A) A bank reconciliation is the only control required for cash. B) A bank reconciliation is designed for detection of problems after the fact. C) A bank reconciliation is a tool to investigate employee fraud. D) A bank reconciliation is designed to prevent problems.
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6) ACME is investing in a new heavy oil rig operation in northern Alberta. ACME has hired Max Contractors to construct the facilities. The contract price is $4,450 million to be completed over four years. The following information pertains to this construction contract. (all amounts in $millions) Year 1 Year 2 Year 3 Year 4 Cumulative.
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4.3   Comprehensive Problems 1) Soorya Manufacturing makes educational toys that are sold to retailers on the following terms: Each type of toy has a fixed wholesale price, is shipped F.O.B. shipping point, and payment is due 45 days after the shipment. The retailer may return a maximum of 45% of an.
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37) Explain why a change in accounting policy requires the adjustment of both prior and future periods, whereas a change in estimate requires only adjustment of current and future periods. 38) Using the conceptual frameworks and other ideas, discuss whether a change in accounting policy should be treated prospectively or retrospectively. .
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11) Identify at least one estimate that would be required in measuring the following financial statement items. Work in process inventories Intangible assets Building Vacation pay Revenue from a 5-year construction contract 12) What is meant by 'quality of earnings'? Discuss if earnings quality should be assessed by comparing earnings to cash flows. .
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