Question 1

BRIEFLY explain how the treatment of contingencies differs under IFRS and ASPE.

Accepted Answer

Contingencies may or may not b

Question 2

A firm sells a remarkable product,which serves many household purposes.The firm is confident about its product and is so anxious to sell a large number of units that it grants a 3-year warranty.The warranty agreement specifies that any malfunction or other problem will be fixed at no cost to the customer,unless the customer has abused the product.Based on experience with other household products it has sold in the past,3% of total units sold will require service over the warranty period at an average cost of $200 per unit.The following information relates to the first two years of the product's life:   What is the balance of the warranty liability account at January 1,Year 3? Assume that the company did not revise its estimate of future warranty claims frequency.

Accepted Answer

January 1,20x3 warranty liabil

Question 3

On September 1,2020,a company signed a $6,540,one-year,non-interest-bearing note payable and received $6,000 cash.
(a)What was the imputed rate of interest? ________________%.
(b)Give the entry required at September 1,2020,to record the receipt of the cash (record on net basis).
(c)Give the adjusting entry required at the end of the accounting year,December 31,2020.
(d)Give the entry required on the due date,August 31,2021,assuming no reversing entries were made.

Accepted Answer

(a)$6,540 - $6,000 = $540 /$6,

Question 4

A company has commenced work on a non-cancellable fixed price construction contract in the amount of $6 million.Costs of $4 million have been incurred to date,and it is expected that $3.2 million in additional costs will have to be incurred to complete the contract.The company adheres to IFRS.Which of the following statements with respect to the contract are correct?

Accepted Answer

A)  There is a constructive obligation to finish the contract. 
B)  The company will have recognized $3 million in profit on the contract to date. 
C)  The company has a constructive obligation to accrue a loss of $1.2 million plus any previously recognized profit. 
D)  This is an onerous contract, so the company must accrue a loss of $1.2 million plus any previously recognized profit. 
A)  There is a constructive obligation to finish the contract. 
B)  The company will have recognized $3 million in profit on the contract to date. 
C)  The company has a constructive obligation to accrue a loss of $1.2 million plus any previously recognized profit. 
D)  This is an onerous contract, so the company must accrue a loss of $1.2 million plus any previously recognized profit.

Question 5

Accounts payable should include only obligations directly related to the primary and continuing operations of an entity.

Accepted Answer

A) True 
 B)False

Question 6

Self-insurance costs for expected losses must never be provided for.

Accepted Answer

A) True 
 B)False

Question 7

A reasonable expectation on the part of a company's stakeholders arising from a company's past practices or behaviour may constitute a constructive obligation in certain instances.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following items is not a liability?

Accepted Answer

A)  Accrued estimated warranty costs 
B)  Dividends payable in shares 
C)  Advances from customers on contracts 
D)  The portion of long-term debt due within one year 
A)  Accrued estimated warranty costs 
B)  Dividends payable in shares 
C)  Advances from customers on contracts 
D)  The portion of long-term debt due within one year

Question 9

A company may reclassify a current financial liability to a long-term one only if there is a contractual agreement in place by the reporting date to replace the financing.

Accepted Answer

A) True 
 B)False

Question 10

Normal business risks that are insured must be provided for.

Accepted Answer

A) True 
 B)False

Question 11

Loyalty points are provided (accrued)for and reversed once the points are redeemed.

Accepted Answer

A) True 
 B)False

Question 12

A firm sold $100,000 worth of goods during 2014.The firm extends warranty coverage on these goods.Historically,warranty costs have averaged 2% of total sales.During 2014,the firm incurred $1,000 to service goods sold in 2013 and $200 to service goods sold in 2014.What is warranty expense for 2014?

Accepted Answer

A)  $200 
B)  $1,200 
C)  $2,000 
D)  $3,200 
A)  $200 
B)  $1,200 
C)  $2,000 
D)  $3,200

Question 13

An administrative fee pertaining to an unsuccessful loan application is to be immediately expensed.

Accepted Answer

A) True 
 B)False

Question 14

On September 1,2020,a company purchased a machine and paid for it by signing a two-year noninterest-bearing note,face $4,000.The note is payable August 31,2022.The going rate of interest was 18% per year.The accounting period ends December 31.
(a)Compute the cost of the machine.
(b)Give all appropriate entries throughout the term of the note.
Use the net method.

Accepted Answer

(a)$4,000 x (PV1,18%,2)(.71818

Question 15

XYZ borrowed $60,000 for one year and signed an 18 percent,interest-bearing note payable.Assuming XYZ has an income tax rate of 45 percent,the net effective rate was:

Accepted Answer

A)  8.1 percent. 
B)  9.9 percent. 
C)  11.7 percent. 
D)  18 percent. 
A)  8.1 percent. 
B)  9.9 percent. 
C)  11.7 percent. 
D)  18 percent.

Question 16

Constructive obligations may arise from:

Accepted Answer

A)  Accrued Liabilities resulting from operations. 
B)  Warranty obligations. 
C)  Notes Payable. 
D)  Unearned Revenues. 
A)  Accrued Liabilities resulting from operations. 
B)  Warranty obligations. 
C)  Notes Payable. 
D)  Unearned Revenues.

Question 17

Current liabilities are usually discounted.

Accepted Answer

A) True 
 B)False

Question 18

Under IFRS,a loss contingency must be credited to a liability account only if the occurrence of the contingent event is probable and if the amount of loss can be reasonably estimated.

Accepted Answer

A) True 
 B)False

Question 19

An onerous contract is one where the unavoidable costs of meeting the contract may or may not exceed the benefits derived from the contract.

Accepted Answer

A) True 
 B)False

Question 20

On November 7,2014 local residents sued Brimley Corporation for excess chemical emissions that caused some of them to seek medical attention.The total lawsuit is $8,000,000.Brimley Corporation's lawyers believe that the lawsuit will be successful and that the amount to be paid to the residents will be $4,000,000.On its December 31,2014 financial statements Brimley should:

Accepted Answer

A)  Accrue a provision loss of $8,000,000 with no financial statement disclosure necessary. 
B)  Accrue a provision loss of $4,000,000 and note disclose. 
C)  Do nothing as the lawsuit has not yet ended. 
D)  Simply disclose the details regarding the lawsuit in a note. 
A)  Accrue a provision loss of $8,000,000 with no financial statement disclosure necessary. 
B)  Accrue a provision loss of $4,000,000 and note disclose. 
C)  Do nothing as the lawsuit has not yet ended. 
D)  Simply disclose the details regarding the lawsuit in a note.

BRIEFLY explain how the treatment of contingencies differs under IFRS and ASPE.

Accounts payable should include only obligations directly related to the primary and continuing operations of an entity.

Self-insurance costs for expected losses must never be provided for.

A reasonable expectation on the part of a company's stakeholders arising from a company's past practices or behaviour may constitute a constructive obligation in certain instances.

Which one of the following items is not a liability?

A company may reclassify a current financial liability to a long-term one only if there is a contractual agreement in place by the reporting date to replace the financing.

Normal business risks that are insured must be provided for.

Loyalty points are provided (accrued)for and reversed once the points are redeemed.

A firm sold $100,000 worth of goods during 2014.The firm extends warranty coverage on these goods.Historically,warranty costs have averaged 2% of total sales.During 2014,the firm incurred $1,000 to service goods sold in 2013 and $200 to service goods sold in 2014.What is warranty expense for 2014?

An administrative fee pertaining to an unsuccessful loan application is to be immediately expensed.

XYZ borrowed $60,000 for one year and signed an 18 percent,interest-bearing note payable.Assuming XYZ has an income tax rate of 45 percent,the net effective rate was:

Constructive obligations may arise from:

Current liabilities are usually discounted.

Under IFRS,a loss contingency must be credited to a liability account only if the occurrence of the contingent event is probable and if the amount of loss can be reasonably estimated.

An onerous contract is one where the unavoidable costs of meeting the contract may or may not exceed the benefits derived from the contract.

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 1: The Framework for Financial Reporting

BRIEFLY explain how the treatment of contingencies differs under IFRS and ASPE.

Accounts payable should include only obligations directly related to the primary and continuing operations of an entity.

Self-insurance costs for expected losses must never be provided for.

A reasonable expectation on the part of a company's stakeholders arising from a company's past practices or behaviour may constitute a constructive obligation in certain instances.

Which one of the following items is not a liability?

A company may reclassify a current financial liability to a long-term one only if there is a contractual agreement in place by the reporting date to replace the financing.

Normal business risks that are insured must be provided for.

Loyalty points are provided (accrued)for and reversed once the points are redeemed.

A firm sold $100,000 worth of goods during 2014.The firm extends warranty coverage on these goods.Historically,warranty costs have averaged 2% of total sales.During 2014,the firm incurred $1,000 to service goods sold in 2013 and $200 to service goods sold in 2014.What is warranty expense for 2014?

An administrative fee pertaining to an unsuccessful loan application is to be immediately expensed.

XYZ borrowed $60,000 for one year and signed an 18 percent,interest-bearing note payable.Assuming XYZ has an income tax rate of 45 percent,the net effective rate was:

Constructive obligations may arise from:

Current liabilities are usually discounted.

Under IFRS,a loss contingency must be credited to a liability account only if the occurrence of the contingent event is probable and if the amount of loss can be reasonably estimated.

An onerous contract is one where the unavoidable costs of meeting the contract may or may not exceed the benefits derived from the contract.

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters