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Modern Advanced Accounting in Canada 10ce Herauf TB 01
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Consolidated Financial Statements (University of Windsor)
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Student name:__________
1) In which of the following situations would
professional judgment NOT be required in decision making?
financial statements.
A) Recognition of revenue. D) Use of IFRS or
B) The making of accounting estimates. ASPE for publicly traded
C) Disclosure of information in the notes to the companies in Canada.
2) Which of the following statements pertaining to
generally accepted accounting principles (GAAP) is
INCORRECT?
D) Publicly traded
A) The process of developing GAAP is political. companies are required to
B) If a proposal for a new financial reporting is not submit financial statements
accepted by users, it is unlikely to become part of GAAP. that comply with GAAP to
C) If an entity that follows GAAP encounters the securities commissions
transactions that are not addressed by the CPA Canada under which they are
Handbook, it is permitted to adopt accounting practices that registered.
are consistent with industry practice.
3) Which of the following examples does NOT
demonstrate the interrelationships of financial statement
elements?
and increase assets.
A) A sale on account will increase assets and equity. D) The contribution
B) Depreciation of equipment will decrease assets and of capital will increase an
decrease equity. asset and increase equity.
C) The payment of a payable will decrease liabilities
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D) CPA Canada
A) PAEs include not-for-profit organizations. and the Financial
B) Commencing in 2011, most Canadian PAEs are Accounting Standards
required to elect to report under either IFRS or ASPE on a Board (FASB) harmonized
prospective basis. the accounting standards of
C) PAEs include an entity, that as one of its primary the United States and
businesses, holds assets in a fiduciary capacity for a broad Canada for PAEs
group of outsiders. beginning in 1998.
5) Which of the following statements pertaining to
private enterprises (PEs) is INCORRECT?
its issued and outstanding
A) PEs may adopt either ASPE or IFRS but once a set financial instruments
of standards is adopted, the PEs are not permitted to apply traded in a public market
some standards from ASPE and others from IFRS. and does not hold assets in
B) The accounting standards for a PE are included in a a fiduciary capacity for a
separate part of the CPA Canada Handbook. broad group of outsiders as
C) PEs with annual revenues over $10,000,000, are one of its primary
required to report under IFRS. businesses.
D) A PE is a profit-oriented enterprise that has none of
6) Which of the following organizations are required to
use only the IFRS (Part I) in Canada?
C) Public
A) All corporations, government agencies and private companies, private
companies. companies and not-for-
B) Public companies and private companies whose profit organizations.
shareholders' equity is in excess of $500,000,000 at any D) Government
particular year-end. business enterprises.
7) Which of the following statements pertaining to Not-
for-Profit-Organizations (NFPO) is INCORRECT?
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D) A non-
A) A government NFPO has the choice to follow government NFPO that
either the 4200 series of the CPA Canada Public Sector applies Part III of the CPA
Accounting (PSA) Handbook or the PSA Handbook without Canada Handbook will
the 4200 series. also apply relevant
B) A non-government NFPO has a choice to follow sections from Part II
Part I (IFRS) or Part III of the CPA Canada Handbook. (ASPE) of the CPA
C) A government NFPO has a choice to follow Part I Canada Handbook.
(IFRS) of the CPA Canada Handbook or the CPA Canada
Public Sector Accounting Handbook.
8) For which of the following types of organizations does
the CPA Canada Handbook NOT provide specific accounting
standards?
C) Not-for-profit
A) Publicly accountable enterprises. organizations.
B) Private enterprises. D) Proprietorships.
9) Which of the following is NOT a reason why a
Canadian private company would elect to report under IFRS?
ASPE.
A) The company is planning to go public in the near D) The company is
future. a subsidiary of a Canadian
B) The company seeks comparability with public public company.
companies of a similar size.
C) It is likely to be less expensive than reporting under
10) The current ratio measures:
D) profitability of
A) liquidity. owners' investment.
B) solvency.
C) profitability of assets.
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11) The formula for the current ratio is:
D) net
A) current assets - current liabilities income/shareholders'
B) current assets/current liabilities equity
C) total debt/shareholders' equity
12) The debt-to-equity ratio measures:
D) profitability of
A) liquidity. owners' investment.
B) solvency.
C) profitability of assets.
13) Which three major skills must be demonstrated to be
successful as an accountant?
D) Creativity,
A) Knowledge, creativity and organization. professionalism and
B) Creativity, mathematical skills and adaptability. interpersonal skills.
C) Knowledge, critical thinking and organization.
14) A generic framework for case analysis is analysis would NOT be
recommended not only for integration and analysis cases in an appropriate?
academic setting but can also be applied to business decision-
making situations. Which of the following steps in a case
viable to the situation.
A) Identifying the needs of the users. D) Providing all
B) Identifying and ranking the issues that must be identified alternatives to
addressed. the users in the final report.
C) Creating a list of alternatives that are relevant and
15) Explain the purpose or use of "The Conceptual
Framework for Financial Reporting" ( Conceptual
Framework) in relation to International Financial Reporting
Standards (IFRS).
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16) X Inc. and Y Inc. are virtually identical companies IFRS. The following are
with identical cost structures and very similar business the condensed income
practices operating in the same lines of business. X Inc. and Y statements for both
Inc. are both public companies based in Canada and follow companies:
Sales: Required:
Less:
Given the information
Cost of Goods Sold
provided, what are some
Gross Margin
possible causes for the
Administrative Expenses
differing results of these
Net Income
companies?
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17) Briefly discuss the external users need for high-quality financial information.
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18) Explain ways that management can mispresent the
financial situation of a company.
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19) Provide the procedures used to analyze a company's
financial statements to determine its future prospects.
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20) Rate-regulated companies are permitted to use U.S.
GAAP because IASB has not yet developed its own
standards.
⊚ true
⊚ false
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21) ASPE is often different than IFRS due to the cost of
preparing financial statements to comply with complex
standards being greater than the benefit received by users of
those statements.
⊚ true
⊚ false
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22) IAS 1 has a mandatory requirement that Canadian
companies use the titles balance sheet or income statement for
their financial statements.
⊚ true
⊚ false
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Answer Key Canada 10ce Herauf
TB 01
Test name: Modern Advanced Accounting in
1) D
2) C
3) C
4) C
5) C
6) D
7) C
8) D
9) C
10) A
11) B
12) B
13) A
14) D
20) TRUE
21) TRUE
22) FALSE
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