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Study Resources (Accounting)

51) Using the data provided below, determine what amounts will appear on the income statement that is prepared by "nature of expenses." Distribution expense (1) 23,000 Cost of goods sold (2) 70,000 General and administrative expense (3) 25,000 Note 1 — Distribution costs include $13,000 of employee wages and $10,000 of depreciation. Note 2 — Cost of goods.
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15) Sing Songs Ltd. started operations on January 1, 2010.  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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1) Which of the following statements is correct about financial information? A) All users require the same kind of information. B) Forward looking information is useful for evaluating management stewardship. C) Trade offs are necessary in accounting. D) Historical cost information is useful for pricing the value of a company's shares. 2) How does accounting.
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17) Sing Songs Ltd. started operations on January 1, 2010.  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 Explain why.
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11) Which statement is correct about expenses in the income statement? A) The nature of expense format classifies expenses based on their source. B) Some nature of expense categories are cost of sales, administration or warehouse. C) Expenses must be classified by their function. D) Expenses should be classified in decreasing order of magnitude. 12).
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11) Financial statements under the IFRS Framework do not help users with what kind of objective(s)? A) Alleviating moral hazard. B) Forecasting future product growth. C) Prediction of future earnings. D) Evaluating the riskiness of an investment. 12) Which statement best explains the qualitative characteristic of "relevance"? A) Financial reports should be understandable to the users.
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6) Explain how accounting information helps security markets? 7) Explain the accounting implications of the following concepts about efficient securities markets: a) Accounting information competes with other sources of information. b) Accounting reports and standards can assume that users have a reasonable level of sophistication. b) If publicly traded securities are efficiently priced, it.
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1) Why is determining the "cut-off" point critical in the accrual basis of accounting? A) Based on the periodicity concept, financial statements are prepared on a regular basis. B) It is important to reflect business transactions and events in the subsequent accounting period. C) The point in time at which one reporting period.
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21) Which statement best explains the meaning of "recognition" in financial reporting? A) Determining where items should be presented in the body of the financial statements. B) Presenting an item in the financial statements, rather than simply disclosing in the notes. C) Quantifying items so that they can be presented in the body.
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23) Xavier Computer Limited was started in early 2010 and continued to operate until early 2013, 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 50% declining-balance depreciation for the firm's only asset, a computer.
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54) Prepare a multiple-step income statement using the following data for Bella Inc for the year ended December 31, 2012. Sales revenue $300,000 Rental revenue 35,000 Loss on sale of short-term investments 19,000 Distribution expense 23,000 Cost of goods sold 150,000 General and administrative expense 25,000 Depreciation expense 20,000 Interest income 5,000 Income tax expense (25% rate on all items) 55) Determine the missing amounts in the statement.
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18) Explain how financial information prepared using accrual accounting provides better information to predict future cash flows than financial information prepared using the cash basis of accounting. 19) What is meant by the "going concern assumption" in financial accounting? Explain the implications to financial accounting if the going concern assumption is.
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20) 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 21) What is meant by "quality of earnings"? Discuss if earnings quality should be assessed by comparing earnings to cash flows. 22) Computer Consulting Limited.
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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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11) 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. ABC is permitted to use its patent during the appeal process. Provide two arguments to support ABC capitalizing.
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21) 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 should have.
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46) IFRS requires certain line items to be presented in the statement of comprehensive income (rather than just disclosed in the notes). Identify whether the following items are required in the statement of comprehensive income. 47) Identify whether each of the following items of operating expense is described according to its.
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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 accounting is the.
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1) Which statement is correct about accrual accounting? A) Accounting estimates or professional judgment are not necessary with accrual accounting. B) A true measure of economic or accounting income is possible with accrual accounting. C) An accounting method that records events when they have an economic effect on the company. D) A method of.
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11) Hedley Corporation sold hardware and software for $70,000. In addition, the company will provide support on the software for 1 year and maintenance on the hardware for 3 years. The normal selling prices are as follows: Hardware 60,000 Software 5,900 Hardware Maintenance unknown a. Determine how revenue should be allocated to the various components in this.
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1) Which organization oversees accounting standards in Canada? A) Financial Accounting Standards Board. B) Institutes of Chartered Accountants in each province. C) Canadian Institute of Chartered Accountants. D) International Accounting Standards Board. 2) Which statement best describes a publicly accountable enterprise? A) An entity that has not issued debt instruments that are outstanding and traded in.
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17) The publisher of Accounting Digest received the following 12-month subscriptions during 2012. Each subscription is $100. The company has a December 31 year end. Each subscription becomes effective in the calendar month after the company receives the subscription. What amount of revenue will the company record in 2012 for.
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11) Why are excessive accruals a concern for accounting and financial reporting? A) They improve the quality of earnings of the company. B) They may represent unethical practices by the company. C) They require too much professional judgment. D) They result in standards overload. 12) Which statement is correct? A) Lower amounts of excessive accruals results.
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21) Information on the income statement is categorized into A) operating, investing and financing activities. B) current and non-current activities. C) continuing and discontinued activities. D) nature and function activities. 22) Information on the balance sheet is categorized into A) operating, investing and financing activities. B) current and non-current elements. C) continuing and discontinued activities. D) profit or loss.
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31) The following entry was recorded by Hollow Inc.: Cash 70,000 Accumulated depreciation 30,000 Gain on disposal of property, plant and equipment (PPE) 10,000 PPE 90,000 What is the effect on Hollow's financial statements? A) A cash inflow from investing activities of $70,000. B) Net assets decreased by $10,000. C) A decrease of $10,000 in using the indirect method of determining cash.
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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 the financial statements. C).
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1) Which is not a qualitative characteristic of financial information in the IFRS Framework? A) Understandability. B) Historical cost. C) Representational faithfulness. D) Comparability. 2) Which is an assumption of financial information in the IFRS Framework? A) Accrual basis of accounting. B) Historical cost. C) Timeliness. D) Financial capital maintenance. 3) Which is not an element of financial information in.
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1) Here are selected balances for BeaverCreek Inc for December 31, 2012:   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 earnings 23,800 Reserves 10,800 Revenue 17,600 Cost of sales 12,700 Income tax 700 Profit.
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1) Which statement is not correct? A) Cash accounting is straightforward. B) Cash accounting requires the same financial statements as accrual accounting. C) The cash flow statement reports performance under cash accounting. D) The income statement is the same as the cash flow statement under cash accounting. 2) Which statement is correct? A) The income statement.
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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 rules. D) To enhance.
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1) Which statement is not correct? A) Accruals involve uncertainty about future transactions and events. B) Companies must use the same accounting estimates year-over-year in preparing statements. C) A company can change its accounting policies if it provides more relevant information. D) Higher earnings quality provides users with more decision useful financial statements. 2) Which.
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30) Indicate the qualitative characteristic being described in each situation below: Qualitative characteristic Situation The degree to which different people would agree with the chosen representation in the financial reports. Information that is able to provide feedback about past performance or helps make future predictions of performance. Information that lacks errors and bias, and users.
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37) Using the conceptual frameworks and other ideas, discuss whether a change in accounting policy should be treated prospectively or retrospectively. 38) For each of the following scenarios, determine the effects (if any) of the accounting change (correction of error, change in accounting policy, or change in estimate) on the relevant.
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1) Which statement best explains "information asymmetry"? A) Information asymmetry means that there is uncertainty about the future. B) Information asymmetry means that some people have more information than others. C) Information asymmetry means that external parties need financial information. D) Information asymmetry means information is material to a decision maker. 2) Which statement best.
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3) Explain how earnings management may arise. 4) Management motivation to increase the likelihood that the company will receive a $50,000 government rebate best illustrates which of the following? A) Earnings management. B) Positive accounting theory. C) Information asymmetry. D) Efficient securities market. 1) Which statement appropriately explains the meaning of "publicly accountable enterprise"? A) Firms without.
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8) Why is it important to properly define the reporting period when using the accrual basis of accounting? 9) 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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41) 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. 42) IFRS identifies.
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12) 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. The company experiences a major labour strike. Workers are still.
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32) Explain why assets and liabilities are generally not offset against one another.  Use an example to illustrate your rationale. 33) Which concept of financial reporting is being described? Assumption Situation A reporting entity will continue its operations into the foreseeable future. Record transactions when they have been settled in cash as of the balance.
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