1. Financial Statements prepared in accordance with GAAP for external decision-makers are known as general purpose financial statements 

True False

2. Recognition is the process of recording an economic transaction in the accounting records.True False

3. Canadian public corporations can follow either Accounting Standards for Private Enterprise (ASPE) or International Financial Reporting Standards (IFRS)True False

4. ASPE and IFRS are rules-based while FASB (USA GAAP) is principles-based True False

5. Current liabilities such as unearned revenue and warranty obligations are NOT financial liabilities True False

6. An asset retirement obligation or site restoration obligation is associated with the retirement of a longlived asset such as a mining operation or nuclear facility True False

7. Following IFRS, provisions for events such as lawsuits should be made when it is more likely than not that a present obligation exists.True False

8. The International Accounting Standards Board (IASB) is currently considering the elimination ofcontingent liabilities due to challenges in determining the probability of occurrence and a reasonable estimate of the potential loss. True False

Professor Wallace WI 2019 - Tuesday Jan. 22nd 29. If a company uses the revenue approach (i.e. service warranty approach under IFRS) to record warranty sales, the entry on the date of the sale is Dr. cash, Cr. Unearned Revenue. True False

10. A receipt of cash by an entity for work to be performed in the future results in an increase to liabilities and an increase to assets. True False

11. If a bond is sold at a premium the sales price of the bond is less than its stated face valueTrue False

12. Bondholders, with few exceptions, have no voice in the management of the organizationTrue False

13. Clos Ltd. engaged RBC Dominion Securities as the lead underwriter on a bond issue. If the agreement states RBCDS will underwrite the bonds on a best efforts basis, Clos will receive the net bond proceeds on the date the agreement is signed.True False

14. Pictou Inc. recently issued Cdn$25,000,000 of junk bonds. This bond issue has a higher risk of default and higher yield than an investment grade bond. True False

15. Bonds with a maturity date of 2025 that have a callable feature are reported as Current Liabilities in the 2015 financial statements (IFRS)True False

16. On January 1, 2015, Oxnard Corp. issued ten-year, 10% bonds, face value of $500,000, interest payable semi-annually on June 30 and December 31. On January 1, 2015 the market rate was 12%. The issue price for the bonds is $442,648.True False

17. The annual coupon rate on a $150,000 bond is 4%. Interest is paid semi-annually. Investors holding this bond will receive $6,000 in cash on June 1 and December 1. True False

18. If President Groarke leases a car from the Ford Motor Company, he is the lessor and Ford is the lesseeTrue False

19. Some companies, such as Rogers Communications have more than one

. Nain Inc. had 100,000 common shares outstanding at December 31, 2015. They reported common shares of $300,000 and retained earnings of $1,500,000 on the December 31, 2015 Statement of Financial Position. Nain announced a 2-for-1 stock split on January 15, 2016. The reported balance in common shares will increase to $600,000 and the balance in retained earnings will be 1,200,000 after the split. True False

21. Bombardier Inc.'s market capitalization was $6.849 B at November 10, 2017. Market capitalization is reported in the Shareholders' Equity section of the Statement of Financial Position. True False

22. The three major business activities are operating, investing and planning True False

23. Bondex Inc. repaid $5 million of its outstanding bank loan (a liability) on December 10, 2017. This transaction is an example of an investing activity True False

24. Dividends are recorded as an expense item on the Income StatementTrue False

25. Aye Corp. was organized on January 2, 2014 with authorized capital of 1,000,000 no par common shares. The initial share issue on February 1, 2014 was done at $10 per share. On March 1, 2014, Aye's corporate lawyer accepted 7,000 common shares (fair value - $85,000) in settlement of legal services. Aye Corp.'s shareholders' equity will increase as the result of the payment to the lawyer. True False

26. Which of the following is NOT a key characteristic of liabilities?A They embody a duty or responsibilityB They result from past transactions or economic events C They are valued at the lower of cost and marketD They are unavoidable 27. ________________ and ____________ are normally reported as current financial liabilities on a classified Balance SheetA Accounts payable, unearned revenueB Interest payable, product warrantiesC Interest payable, accounts payableD Income taxes payable, unearned revenue What is one advantage to an organization of issuing debt rather than equity? 

A Interest payments are tax deductible 

B There is no obligation to make interest payments

C There is no obligation to repay the principal

D Creditor rights and claims come after all classes of shareholders

29. When an organization incurs a liablity for a lease but does not report that liability on the Balance Sheet the organization is using _______________________ 

A Accrual basis of accounting 

B Cash basis of accounting

C Leveraged financing 

D Off-balance sheet financing 

30. On August 1, 2014, Coffin Ltd. borrowed $2,400,000 from Ridge Bank. The loan carries an interest rate of 5% and requires four annual payments plus interest beginning August 1, 2015. Coffee madethe first payment on August 1, 2015. What is the amount of interest payable at December 31, 2015?[CPA Adapted]

A $120,000

B $90,000

C $50,000

D $37,50031.

Jordan Corp., which operates in Ontario, sells a variety of products. For most of these products, Jordan must charge 13% HST, for some they only have to charge 5% GST; while a few are tax exempt. During June of this year, the company reported sales of $200,000, on which 70% were charged 13% HST, 25% were charged only 5% GST, and the rest were tax exempt sales. What was the total amount of HST collected in June? [CPA adapted]

A $10,000

B $18,200

C $20,700

D $26,000 

32. Trius Inc. borrowed $2,500,000 from its bank on December 1, 2013. The term is 10 years, with annual payments of $250,000 plus interest due starting December 1, 2014. If Trius does not meet certain loan covenants the entire amount outstanding is demand. Trius was not in compliance at December 31, 2015 (year-end). After considerable negotiations, the bank agreed it would not demand payment. The agreement was signed January 20, 2016. Trius Inc. issued its audited financial statements on January 30, 2016. How should Trius report the bank loan (Trius follows IFRS. Assume December 2014 payment made)?

A $250,000 - current liability; $2,000,000 -long-term liability

B $2,250,000 - long-term liability

C $2,250,000 - current liability

D $500,000 - current liability; $1,750,000 - long-term liability

33. Vectors Inc. purchased a new building for $600,000. They paid $80,000 in cash and financed the remainder with a 10-year, 3.25% mortgage. What effect does this transaction have on Vectors' debt/equity ratio? [Assume no changes in shareholders' equity] 

A Debt/equity ratio increases 

B Debt/equity ratio decreases 

C Debt/equity ratio remains the same 

D Not possible to determine what happens

34. When should a company recognize a contingent liability if the company follows ASPE? 

A When the amount of the loss is known with certainty

B When it is likely an asset has been impaired or a liability incurred

C When it is more likely than not that an asset has been impaired or a liability incurred

D When the amount of loss can be reasonably estimated and it is likely that an asset has been impaired or liability incurred

35. In which of the following situations would you NOT recognize a contingent liability (assume all the criteria for recognizing a contingency under IFRS are met)? 

A The threat that assets will be expropriated by a foreign government

B Recent lawsuits against Volkswagen related to compliance with emission requirements

C Holdco Inc. guaranteed the debt of one of its subsidiary companies - BCo Ltd.

D Notification from the company tax accountant that a substantial income tax refund will be forthcoming