Question 1

Explain how changes in accounting policies,changes in accounting estimates and errors are accounted for under the accrual basis of accounting.

Accepted Answer

Correction of errors and chang

Question 2

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.

Accepted Answer

The answer of IFRS requires certain line items to be...

Question 3

Explain how "accruals" are used in financial reporting.Provide an example to support your discussion.

Accepted Answer

•Accruals are accounting entries that re

Question 4

Which statement is correct about the difference between IFRS and ASPE?

Accepted Answer

A) The concept of "comprehensive income" exists under both IFRS and ASPE. 
B) A statement of compliance with ASPE is required in note disclosures. 
C) A combined statement of comprehensive income can be provided under IFRS. 
D) The concept of "comprehensive income" does not exist under ASPE. 
A) The concept of "comprehensive income" exists under both IFRS and ASPE. 
B) A statement of compliance with ASPE is required in note disclosures. 
C) A combined statement of comprehensive income can be provided under IFRS. 
D) The concept of "comprehensive income" does not exist under ASPE.

Question 5

What is meant by the phrase "true and fair view" of financial reporting?

Accepted Answer

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 the company's economic conditions and performance. 
D) The financial statements provide an accurate representation of the company's economic conditions and performance. 
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 the company's economic conditions and performance. 
D) The financial statements provide an accurate representation of the company's economic conditions and performance.

Question 6

What is an investing cash cycle?

Accepted Answer

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 to investors. 
C) A cycle where a property is purchased that has long-term future benefits for the enterprise,which ultimately results in cash inflows,and then the property is disposed of. 
D) A cycle that involves the purchase of items such as inventory;production,sales,delivery of goods or provision of services;and receipts from customers. 
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 to investors. 
C) A cycle where a property is purchased that has long-term future benefits for the enterprise,which ultimately results in cash inflows,and then the property is disposed of. 
D) A cycle that involves the purchase of items such as inventory;production,sales,delivery of goods or provision of services;and receipts from customers.

Question 7

Changes in accounting estimates

Accepted Answer

A) are accounted for in the same manner as changes in accounting policies. 
B) reduce the relevance and reliability of financial reporting. 
C) are applied to current and past reporting periods. 
D) are applied to current and future reporting periods. 
A) are accounted for in the same manner as changes in accounting policies. 
B) reduce the relevance and reliability of financial reporting. 
C) are applied to current and past reporting periods. 
D) are applied to current and future reporting periods.

Question 8

Which of the following would be accounted for as a change in accounting estimate? (More than one answer may be correct. )

Accepted Answer

A) A furniture maker decreases bad debts expense from 3% to 2% of credit sales. 
B) A manufacturer determines that credit losses are becoming material due to deteriorating economic conditions.As a result,it decides to set up an allowance for doubtful accounts at 5% of amounts over 90 days. 
C) A parking service estimates bad debts to be 10% of the value of parking violations issued.In the current year,it changes to estimating the allowance for bad debts to be equal to 20% of accounts 30 to 90 days and 50% of accounts over 90 days. 
D) A shipbuilder changes its revenue recognition policy from the point of receipt by the customer to when the ship leaves the factory shipyard.This change results from a change in shipping policy from f.o.b.destination to f.o.b.shipping point.(Recall from introductory accounting that f.o.b.means "free on board," and it refers to the point at which ownership transfers from seller to buyer. ) 
E) An electronics retailer has never accrued for warranties or product guarantees.A new consumer protection law comes into effect,giving buyers of electronic products a guarantee against defects for 180 days after purchase and the ability to return defective products to the retailer. 
A) A furniture maker decreases bad debts expense from 3% to 2% of credit sales. 
B) A manufacturer determines that credit losses are becoming material due to deteriorating economic conditions.As a result,it decides to set up an allowance for doubtful accounts at 5% of amounts over 90 days. 
C) A parking service estimates bad debts to be 10% of the value of parking violations issued.In the current year,it changes to estimating the allowance for bad debts to be equal to 20% of accounts 30 to 90 days and 50% of accounts over 90 days. 
D) A shipbuilder changes its revenue recognition policy from the point of receipt by the customer to when the ship leaves the factory shipyard.This change results from a change in shipping policy from f.o.b.destination to f.o.b.shipping point.(Recall from introductory accounting that f.o.b.means "free on board," and it refers to the point at which ownership transfers from seller to buyer. ) 
E) An electronics retailer has never accrued for warranties or product guarantees.A new consumer protection law comes into effect,giving buyers of electronic products a guarantee against defects for 180 days after purchase and the ability to return defective products to the retailer.

Question 9

What is the cash basis of accounting?

Accepted Answer

A) A method of accounting that records accounting transactions based on economic substance. 
B) A method of accounting that requires accruals for amounts due or outstanding at year-end. 
C) A method of accounting that records transactions only when cash is received or paid. 
D) An entry that reflects events in a period different from their corresponding cash flow. 
A) A method of accounting that records accounting transactions based on economic substance. 
B) A method of accounting that requires accruals for amounts due or outstanding at year-end. 
C) A method of accounting that records transactions only when cash is received or paid. 
D) An entry that reflects events in a period different from their corresponding cash flow.

Question 10

Explain why estimates are necessary in accrual accounting and why a "true" measure of income cannot be provided.

Accepted Answer

•Since accrual accounting includes infor

Question 11

Explain what is meant by "quality of earnings."

Accepted Answer

Quality of earnings conceptual

Question 12

What is the effect of overstating 2018 depreciation expense?

Accepted Answer

A) Accumulated depreciation will be understated for 2018. 
B) Net income for 2018 will be overstated. 
C) Ending retained earnings for 2018 will be understated. 
D) Ending retained earnings for 2018 will be overstated. 
A) Accumulated depreciation will be understated for 2018. 
B) Net income for 2018 will be overstated. 
C) Ending retained earnings for 2018 will be understated. 
D) Ending retained earnings for 2018 will be overstated.

Question 13

Using the data provided below,determine what amounts will appear on the income statement that is prepared by "nature of expenses."
   
Note 1 - Distribution costs include $13,000 of employee wages and $10,000 of depreciation.
Note 2 - Cost of goods sold includes $10,000 for depreciation;the remaining amount relates to the net change in inventory and purchases during the year.
Note 3 - General and administrative expenses include $20,000 of employee wages and $5,000 of depreciation.

Accepted Answer

Instead of Distribution,Cost of Goods So

Question 14

Using the data provided below,determine whether the income statement will be formatted by "function of expense" or by "nature of expense." Briefly explain your response.

Accepted Answer

The income statement will be formatted b

Question 15

What are excessive accruals?

Accepted Answer

A) Accruals that are based on professional judgment. 
B) Accruals that are based on ethical considerations. 
C) Accruals based on contractual incentives or opportunism. 
D) Accruals required by GAAP. 
A) Accruals that are based on professional judgment. 
B) Accruals that are based on ethical considerations. 
C) Accruals based on contractual incentives or opportunism. 
D) Accruals required by GAAP.

Question 16

The method of depreciation was changed from the double-declining-balance method to the straight-line method in fiscal 2019.A machine was purchased on January 1,2017,at a cost of $150,000.The machine has an estimated useful life of 10 years and a residual value of $9,000.What adjustment is needed for fiscal 2017?

Accepted Answer

A) $14,100 
B) $15,900 
C) $24,000 
D) $30,000 
A) $14,100 
B) $15,900 
C) $24,000 
D) $30,000

Question 17

Which statement is correct?

Accepted Answer

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. 
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.

Question 18

What is a financing cash cycle?

Accepted Answer

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 to investors. 
C) A cycle where a property is purchased that has long-term future benefits for the enterprise,which ultimately results in cash inflows,and then the property is disposed of. 
D) A cycle that involves the purchase of items such as inventory;production,sales,delivery of goods or provision of services;and receipts from customers. 
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 to investors. 
C) A cycle where a property is purchased that has long-term future benefits for the enterprise,which ultimately results in cash inflows,and then the property is disposed of. 
D) A cycle that involves the purchase of items such as inventory;production,sales,delivery of goods or provision of services;and receipts from customers.

Question 19

Which statement is not correct about expenses in the income statement?

Accepted Answer

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 categories are cost of sales,administration or warehouse. 
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 categories are cost of sales,administration or warehouse.

Question 20

What is classified as a "current" liability?

Accepted Answer

A) An obligation where the lender has waived the company's covenant violations before the balance sheet date. 
B) An obligation where the company has breached its covenants. 
C) An obligation not expected to be settled within the ordinary operating cycle of the business. 
D) An obligation where the lender has waived the company's covenant violations before the balance sheet date,and an obligation where the company has breached its covenant violations. 
A) An obligation where the lender has waived the company's covenant violations before the balance sheet date. 
B) An obligation where the company has breached its covenants. 
C) An obligation not expected to be settled within the ordinary operating cycle of the business. 
D) An obligation where the lender has waived the company's covenant violations before the balance sheet date,and an obligation where the company has breached its covenant violations.

Explain how changes in accounting policies,changes in accounting estimates and errors are accounted for under the accrual basis of accounting.

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.

Explain how "accruals" are used in financial reporting.Provide an example to support your discussion.

Which statement is correct about the difference between IFRS and ASPE?

What is meant by the phrase "true and fair view" of financial reporting?

What is an investing cash cycle?

Changes in accounting estimates

Which of the following would be accounted for as a change in accounting estimate? (More than one answer may be correct. )

What is the cash basis of accounting?

Explain why estimates are necessary in accrual accounting and why a "true" measure of income cannot be provided.

Explain what is meant by "quality of earnings."

What is the effect of overstating 2018 depreciation expense?

Using the data provided below,determine whether the income statement will be formatted by "function of expense" or by "nature of expense." Briefly explain your response.

What are excessive accruals?

Which statement is correct?

What is a financing cash cycle?

Which statement is not correct about expenses in the income statement?

What is classified as a "current" liability?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Revenue and Recognition

Cash and Receivables

Inventories

Financial Assets

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters

Exam 3: Accrual Accounting

Explain how changes in accounting policies,changes in accounting estimates and errors are accounted for under the accrual basis of accounting.

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.

Explain how "accruals" are used in financial reporting.Provide an example to support your discussion.

Which statement is correct about the difference between IFRS and ASPE?

What is meant by the phrase "true and fair view" of financial reporting?

What is an investing cash cycle?

Changes in accounting estimates

Which of the following would be accounted for as a change in accounting estimate? (More than one answer may be correct. )

What is the cash basis of accounting?

Explain why estimates are necessary in accrual accounting and why a "true" measure of income cannot be provided.

Explain what is meant by "quality of earnings."

What is the effect of overstating 2018 depreciation expense?

Using the data provided below,determine whether the income statement will be formatted by "function of expense" or by "nature of expense." Briefly explain your response.

What are excessive accruals?

Which statement is correct?

What is a financing cash cycle?

Which statement is not correct about expenses in the income statement?

What is classified as a "current" liability?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Revenue and Recognition

Cash and Receivables

Inventories

Financial Assets

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters