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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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31) Which statement is correct? A) Accounting policy changes should reflect changes in economic circumstances. B) Accounting errors are corrected prospectively in the financial statements. C) Changes in accounting estimates are corrected retrospectively in the statements. D) Correction of accounting errors proves that management bias exists in reporting. 32) A correction of an accounting error.
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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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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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Learning Objective APP. C-4 1) Hardware is electronic equipment that includes computers, monitors, printers, and the network that connects them. 2) Enterprise resource planning (ERP) systems are software systems that can integrate all of a company's functions, departments, and data into a single system. 3) One of the main disadvantages of a typical.
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2.2   Problems 1) Provide three reasons for the importance of the conceptual framework for financial reporting. 2) Identify the eight major components of the conceptual framework for accounting. Explain how these components interact with the demand for and supply of financial information. 3) Indicate the qualitative characteristic being described in each situation below: Qualitative.
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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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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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31) Which of the following is/are constraints in the financial reporting process? A) Relevance versus reliability. B) Historical cost versus fair value. C) Assets versus liabilities. D) Benefits versus costs. 32) Which is not an example of trade-offs made in financial reporting? A) Relevance versus reliability. B) Comparability versus consistency. C) Assets versus liabilities. D) Timeliness versus reliability. 33) In.
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21) Which statement is correct? A) Lower amounts of excessive accruals results in higher earnings quality. B) Excessive accruals are directly observable in financial reporting. C) It is easy to determine the contractual incentives causing excessive accruals. D) Excessive accruals improve the comparability of financial reporting. 22) Which statement correctly explains the relationship between cash.
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51) The method of depreciation was changed from the double-declining-balance method to the straight-line method in fiscal 2013. A machine was purchased on January 1, 2011 at a cost of $150,000. The machine has an estimated useful life of 10 years and a residual value of $9,000. What was booked.
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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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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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11) Which financial statement is not needed under the IFRS Framework? A) Balance sheet. B) Statement of retained earnings. C) Income statement. D) Statement of cash flows. 12) What information does the balance sheet provide to users of financial information under the IFRS Framework? A) Information about changes in liabilities over a period of time. B) Information.
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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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41) Which statement best describes a publicly accountable enterprise? A) An entity that has not issued debt instruments that are outstanding and traded in a public market. B) An entity that holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. C) An entity that.
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7) Explain the meaning of information and information asymmetry. Give an example of each 8) Explain the meaning of adverse selection and moral hazard. Give an example of each. 9) Explain the difference between moral hazard and adverse selection. 10) Discuss two ways in which a bank can mitigate the problem of moral.
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1.2   Problems 1) Why is financial information required? 2) Explain the meaning of financial accounting, managerial accounting and tax accounting. How are these accounting activities related to each other? 3) Discuss three reasons why it is important to understand accounting theory. 4) Explain the meaning of generally accepted accounting principles (GAAP). 5) Explain the process.
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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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2.1   Multiple Choice Questions 1) Which of the following is not a purpose of a conceptual framework of accounting concepts and financial reporting objectives? A) To increase the user's ability to understand financial statements. B) To increase financial statement users' confidence in financial reporting. C) To provide a foundation for detailed accounting and reporting.
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1.1   Multiple Choice Questions 1) Which statement is not correct? A) Financial accounting is the process of providing information to external parties. B) Accounting is about the communication of financial information. C) Accounting is the production of information about an enterprise and the transmission of that information to those who need the information. D) Financial.
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11) Which condition is not sufficient to recognize revenue from the sale of goods? A) When the entity has transferred ownership to the buyer. B) When the amount of revenue can be measured reliably. C) When it is probable that the economic benefits will be flow to the entity. D) When the entity retains.
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11) Which of the following is an example of hardware? A) monitor B) malware C) firewall D) operating system 12) Which of the following is an entry-level accounting software package? A) Microsoft Word B) QuickBooks C) Minitab D) Router 13) An enterprise resource planning (ERP) is a ________. A) hardware system that controls the access of employees to different levels of.
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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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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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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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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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3.1   Multiple Choice Questions 1) What is a 'cash' cycle? A) A cycle of transactions that converts cash inflows to cash outflows, or vice versa. B) A cycle where there is receipt of funding from investors, those funds are used to generate returns from investments and operations, and then the funds are returned.
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21) Which qualitative characteristic allows a company's financial performance or financial position to be understated? A) Relevance. B) Neutrality. C) Prudence. D) Understandability. 22) Which statement best explains the qualitative characteristic of 'completeness'? A) Financial statements should represent the underlying transactions, assets and liabilities. B) Omission of financial information that would influence a user's economic decision. C) Financial.
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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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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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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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11) What is meant by the phrase 'true and fair view' of financial reporting? A) The financial statements provide a true representation of the company's economic conditions and performance. B) The financial statements provide an unbiased representation of the company's economic conditions and performance. C) The financial statements provide a fair representation of.
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7) Discuss some of the conceptual framework concepts involved in determining whether to capitalize or expense an expenditure. 8) ABC Manufacturing has incurred $250,000 to defend itself against a patent infringement lawsuit from CCB Limited. CCB has won, but ABC is planning to appeal the decision and continue pursuing its case..
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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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21) Which of the following transactions is recorded in the "Receive Payments" function of QuickBooks? A) electricity bill payments B) merchandise inventory sold on account to a customer C) products sold for cash to a customer D) coupon payments to the bondholders 22) Which of the following transactions is recorded in the "Enter Bills" function.
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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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41) Changes in accounting estimates are A) accounted for in the same manner as accounting policy changes. B) accounted for on a prospective basis. C) applied to current and past reporting periods. D) accounted for in the same manner as error corrections. 42) Changes in accounting estimates are based on A) new information that has now.
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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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4) Which financial statement element is being described? Element Situation A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of economic resources embodying economic benefits. A resource controlled by an entity as a result of past events and from.
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12) How does accounting information help alleviate adverse selection and moral hazard? 13) For the situations described below, explain whether managers would be motivated to manage earnings, assets, and equity upward and liabilities downward, or alternatively, managers may be motivated to manage earnings, assets, and equity downward and liabilities upward. Situation Management motivation.
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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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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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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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