1. You are currently working on a contract for one of your clients, MAC Co. Consistent with your other clients, you have decided to account for the contract using the percentage of completion method. The total fee for the contract is $1,450,000 and you have incurred costs of $585,000 to date. Based on your past experience, you have estimated that an additional $390,000 in expenditures will be necessary to complete the project. You have billed your client $330,000 to date and have received $240,000 in payments from MAC Co. Assuming that your company reports under Accounting Standards for Private Enterprises, what is the work in process asset relating to this contract?

a) $255,000

b) $300,000

c) $540,000

d) $870,000

2. How is the accrual basis of accounting applied in the preparation of financial statements using IFRS Standards?

a) It is applied in all financial statements.

b) It is applied in most financial statements.

c) It is not applied in the notes to the financial statements.

d) It is applied where specifically required in IFRS Standards.

3. Asher Company entered into an agreement on March 12 to sell 1,500 mirrors to Lakeside Company. As of March 31, Asher's year-end, 600 of the mirrors had been delivered to Lakeside Company. Asher has recognized sales revenue for all 1,500 mirrors in its year-end income statement. Under which of the following conditions is this treatment acceptable assuming that the company reports under Accounting Standards for Private Enterprises?

a) Lakeside Company is a regular customer of Asher Company.

b) The mirrors will all be delivered on April 1.

c) Lakeside Company requested that 900 mirrors be delivered at a specific date, which will follow year-end.

d) This treatment is not acceptable under any conditions.

4. General purpose financial statements provide information about the financial position, financial performance and cash flows of an entity to a wide range of users in making economic decisions. Which of the following statements is correct?

a) Notes to the financial statements are intended to help readers understand information presented in the financial statements but notes have less significance than the information set out in the body of the statements themselves.

b) Net income and cash flow are the two measures of performance disclosed in financial statements.

c) Financial statements are prepared for external users, but users are assumed to have a reasonable knowledge of business and accounting, and a willingness to study the information.

d) Estimates are an essential part of the preparation of financial statements; if a reliable estimate cannot be made, the item does not qualify for recognition or disclosure.

5. XYZ Inc., a private company, uses the percentage of completion method for revenue recognition. At the end of 20X1, the contract was 26% completed and profits of $20,000 were recognized. At the end of 20X2, the contract was 66% completed and at the end of 20X3, it was 100% completed. During 20X2, it was determined that there would be a $50,000 loss on the contract. How much of a loss should be recorded in 20X2?

a) $33,333

b) $50,000

c) $53,333

d) $70,000

6. Way to Play Day Care, a small private day care facility, has just been informed that it will receive a $10,000 government grant on January 1, 20X2 to assist with paying employee wages. The grant is contingent on Way to Play having hired 3 additional employees during 20X1. It is now December 15, 20X1 and Way to Play has already hired the required number of additional employees. How should Way to Play account for the government grant?

a) Record nothing

b) Debit cash for $10,000 and credit payroll expense for $10,000

c) Debit accounts receivable for $10,000 and credit payroll expense for $10,000

d) Debit accounts receivable for $10,000 and credit deferred revenue for $10,000

7. In working on the inventory section of an audit of a large manufacturing firm, Amy is trying to determine the correct method of accounting for some items. Specifically, finished goods inventory costed at $65 per unit was previously written down to the net realizable value of $50 per unit after selling prices decreased. However, there has been a subsequent recovery in selling price to $70 per unit in the most recent fiscal period. The storage costs of the inventory are estimated at $2 per unit per annum. There is also some uncertainty as to the correct use of inventory costing methods and the level of disclosure required on the financial statements. Based on the information provided, which one of the following statements about accounting for inventory under Accounting Standards for Private Enterprises is correct?

a) The use of the last-in, first-out method of inventory accounting is accepted.

b) Interest costs may be included in the cost of inventory.

c) The subsequent write-up of inventory of $20 per unit would be reflected as a reduction in cost of goods sold in the current period.

d) The inventory storage costs should be included in the cost of inventories.

8. The Chief Executive Officer, Duane, and the Chief Information Officer, Sylvia, were discussing the merits of implementing an executive dashboard (digital dashboard) at the company. The dashboard has an estimated price tag of about $650,000. Sylvia believes that spreadsheet software with macros serve the company just as well, at far lower cost. Which of the following can an executive dashboard do that a spreadsheet cannot?

a) Calculate key performance indicators (KPI), such as gross margin by department

b) Determine the impact on profits of changes in cost of capital (interest rates)

c) Select a random group of customers to conduct a customer survey

d) Drill down to progressively more detail using a series of specific menus

9. Which of the following statements regarding the general objective of financial statements for private companies is true?

a) To satisfy the many and varied information needs of all external users of information about an entity

b) To provide information primarily focused on the needs of investors and creditors

c) To communicate information that is useful to investors, creditors and other users in making their resource allocation decisions and/or assessing management stewardship

d) To provide information about an entity's economic resources, obligations and equity / net assets; changes in an entity's economic resources, obligations and equity / net assets; and the economic performance of the entity

10. Norman, CPA, owns a small retail store. Norman has been expanding the operations through online sales. In order to facilitate customer payments, Norman has decided to improve his acceptance of e-payments through a credit payment system. Which of the following will Norman utilize to facilitate customer payments?

a) E-cash

b) E-cheque

c) E-transfer

d) E-wallet

11. In issuing a set of annual financial statements within a reasonable length of time after the fiscal year-end, which of the following attributes of information in financial statements is being highlighted?

a) Relevance

b) Reliability

c) Comparability

d) Understandability

12. Which of the following describes the benefit versus cost constraint in preparing general purpose financial statements?

a) Preparers apply judgment in determining whether the benefits of applying specific standards exceed the costs of providing such information.

b) Preparers consider the information needs of users in meeting standards and must supply additional information to meet specific needs of certain users.

c) The benefits and costs of applying accounting standards may differ between preparers depending in part on the nature, number and information needs of the users.

d) In the standard-setting process, the information needs of users are paramount because users have no other means of acquiring relevant financial information.

13. Bob Smith provides consulting services to firms quoting a usual daily rate of $1,200 for a six-hour training session. As part of an agreement with Devtree, at a contract price of $1,600, he has agreed to provide five one-day training sessions to employees in various locations, as well as a weekly program designed for each of Devtree's 30 employees, and software that can be used with the program to track individual performance. Employees are able to take advantage of the individual meeting for up to three months following their completion of the one-day training session. Bob regularly meets with individuals not associated with Devtree to design individual programs, for which he charges an individual rate of $100. Bob might be able to sell the software for $20 per unit. Under Accounting Standards for Private Enterprises, how should the portion of the revenue earned from meeting with employees be allocated?

a) $3,000

b) Allocate nothing because the price is based on a daily rate fee whether employees are met or not

c) $80.00

d) $88.90

14. Daredevil Corporation, a private company, negotiated a bank loan with a covenant that requires that a current ratio of 2:1 be maintained. The maximum amount of the bank loan is based on 60% of accounts receivable and 40% of inventory. The price of inventory is expected to increase during the year. Which method of inventory costing would be most preferable for Daredevil if the company purchased its inventory?

a) Last in, first out

b) First in, first out

c) Weighted average

d) No preference

15. AltaVista Inc. is a large public manufacturer of auto parts. They received a government grant of $150,000 on January 1, 20X3 with the requirement to maintain employment levels of 150 employees through to December 31, 20X4. If this employment level is not maintained, AltaVista has to repay the entire grant back. AltaVista recorded this grant on January 1, 20X3 as revenue because they had no reason to think they would not maintain this workforce, since they employed over 250 people at that time. On February 28, 20X4, AltaVista lost its largest customer, who went bankrupt. As a result, to stay viable AltaVista had to lay-off 150 employees, resulting in a workforce of 100 employees remaining. How should AltaVista account for the repayment of the grant?

a) Debit retained earnings and credit cash

b) Debit revenue and credit cash

c) Debit retained earnings and credit deferred revenue

d) Debit revenue and credit deferred revenue

16. Organic Greens Limited (OGL) is a franchisor that sells franchises for organic vegetarian food restaurants. OGL reports under Accounting Standards for Private Enterprises. On December 1, 20X1, OGL signed a three-year contract with a new franchisee, Jack Richards, to open a new restaurant in downtown St. Catharines. The contract specified an initial franchise fee of $100,000 to cover assistance with site selection, obtaining financing, advertising, and personnel training. The site was selected and initial financing was secured by December 20, 20X1. Due to a shortage in the labour market over the holiday season, employees were hired on January 5, 20X2 and the restaurant opened on January 31, 20X2. Which one of the following amounts of revenue should OGL recognize in its December 31, 20X1 year-end financial statements with respect to the initial franchise fee?

a) $0

b) $33,000

c) $50,000

d) $100,000

17. Smooth Sailing Limited, a private company, was recently awarded a contract with the provincial government to perform passenger ferry service for six coastal routes. The contract is for five years and all routes must be serviced for the five-year period. Smooth Sailing dedicates a ferry to each route (i.e., due to scheduling there is no time for alternative uses for any of the six ferries). Overall, the contract is profitable; however, one route is losing money due to low passenger loads. If no improvement in this route is expected during the contract period, which of the following must Smooth Sailing do?

a) Write-down the carrying amount of the ferry dedicated to the unprofitable route to nil.

b) Consider the need to test recoverability based on the unprofitable route only.

c) Consider the need to test recoverability based on all routes.

d) Increase the amortization methods selected for the ferries.

18. On September 1, 20X1, Rainbow Inc. sold equipment to Thunder Limited. Thunder signed a three-year 3% note receivable with a face value of $150,000, due on September 1, 20X4. Interest will be due annually on September 1st. The imputed rate of interest was 5%. Rainbow Inc. has a December 31st year-end. What amount is closest to the amount to be recorded as sales revenue for this transaction?

a) $129,000

b) $141,831

c) $142,500

d) $150,000

19. Matthew, CPA, works for Fine Antiques Ltd. Fine Antiques utilizes a transaction processing system. Matthew has been asked to bring a copy of the monthly financial statements to the next management meeting. What type of transaction processing system report will Matthew need to run?

a) Detail

b) Edit

c) Summary

d) Transaction

20. Peter, CPA, works for Sports Magazine Ltd. Peter was updating a customer's credit card information into the customer database enabling the customer to utilize pre-authorized monthly payments. Peter received an automated message that the credit card number was invalid. What data entry check did Peter trigger?

a) Completeness

b) Size

c) Validity

d) Limit

21. On September 1, 20X1, Rainbow Inc. sold equipment to Thunder Limited. Thunder signed a three-year 3% note receivable with a face value of $150,000, due on September 1, 20X4. Interest will be due annually on September 1st. The imputed rate of interest was 5%. Rainbow Inc. has a December 31st year-end. Assume that the note receivable is initially set up on Rainbow's records at $141,830. What amount will be recorded as interest revenue for the year ended December 31, 20X1?

a) $1,418

b) $2,364

c) $4,255

d) $7,092

22. Dillards Ltd. (DL) is a public company and manufactures footwear. During the year, it introduced a new line of footwear targeting customers from 14 to 20 years of age. This footwear has become so popular that DL has decided to construct a new manufacturing plant. Under IFRS Standards, which of the following statements is correct?

a) DL must capitalize the interest incurred on any amounts borrowed to fund construction of the manufacturing plant.

b) DL may capitalize the interest incurred on any amounts borrowed to fund construction of the manufacturing plant.

c) DL must expense the interest incurred on any amounts borrowed to fund construction of the manufacturing plant.

d) DL would be required to capitalize the interest incurred on any amounts borrowed to fund construction as well as any costs of equity financing.

23. In which of the following circumstances can revenue be recognized under IFRS Standards:

a) FRD Inc. sold a heating and air conditioning system to a commercial builder for $120,000. The system price includes a complex installation which costs approximately 1/3 of the price of the system and cannot be performed by other local service providers. The installation has not yet been completed.

b) Redmark Ltd. sold a new computer system to ChekMart for $35,000. ChekMart is known to be in financial difficulty and is not expected to be able to pay for the system in full.

c) GNG Inc. has just begun construction of a website for Runners For Life, for which they will charge $35,000. GNG is offering website services for the first time and is unsure of the cost to complete this construction nor how far they actually are on the path to completion. GNG has incurred $2,000 of costs to date on this project.

d) Chic Apparel has shipped $30,000 of clothing and accessories to Deals R Us. Chic Apparel does not require payment from Deals R Us until the clothing has sold and will allow Deals R Us to return any unsold merchandise.

24. Sports Market Inc. (SMI) is a publicly-owned sports retailer. SMI offers loyalty points on each sale made to its customers. Customers can save up their loyalty points, which do not expire, and can redeem them for free merchandise in any of SMI's retail stores. Which of the following is the correct treatment for the loyalty program at SMI?

a) The fair value of loyalty points are recorded as a liability and an expense when issued to customers.

b) The fair value of loyalty points are recorded as part of the sale transaction when issued and deferred revenue is recorded. Upon redemption, revenue is recorded and deferred revenue is reversed. An expense is recorded for the cost of merchandise redeemed.

c) Loyalty points are only recorded when redeemed by the customer and the merchandise has been provided.

d) Loyalty points are recorded at their full redemption value as a loyalty expense when issued to customers.

25. Canadian Contractors Ltd. (CCL) is a public contracting company. On February 23, CCL agreed to purchase a crane worth $2.5 million. Due to the time it takes the vendor to construct the crane, the purchase was to be paid in two instalments, the first due on March 1 and the second on November 1 when the crane was to be delivered. In anticipation of the crane delivery, CCL began to prepare for use of the crane on March 1 in its operations by arranging storage, transportation, etc. CCL took out a loan from the Greater Ontario Bank for the whole $2.5 million on March 1. Interest on the loan is payable monthly at a rate of 6.25%. CCL invested the portion not paid to the vendor on March 1 at a rate of 3.5% until the second instalment was due on November. Which of the following is the amount of borrowing costs that CCL is required to capitalize for the year ended December 31?

a) $0

b) $45,834

c) $75,000

d) $104,167

26. Mobile Work Wear operates a fleet of 10 mobile retail units that travel to various construction sites offering work apparel and footwear. During the year, two of its mobile units have incurred losses. The fleet is broken up into three districts due to geography of their sales territories and most management reporting is performed by district. However, it is possible to determine each unit's profitability and fair values. Under IFRS Standards, which of the following is true with respect to assessing these assets for impairment?

a) Each mobile unit should be assessed for impairment.

b) Each district should be assessed for impairment.

c) The fleet as a whole should be assessed for impairment.

d) Impairment testing is not necessary solely because there are losses on two of the units.

27. In determining whether an asset held and used requires an impairment write-down, a company must determine whether or not the asset is recoverable. Under Accounting Standards for Private Enterprises (ASPE), recoverability involves which of the following?

a) Comparing the carrying amount of the asset in question to the fair value of similar assets being sold in the marketplace today.

b) Comparing the carrying amount of the asset in question to the net present value of future cash flows related to this asset.

c) Comparing the carrying amount of the asset in question to the undiscounted future cash flows related to this asset.

d) Comparing the carrying amount of the asset in question to the insured value of this asset.

28. Typically grown in South America, the cassava root has gained in popularity as cassava chips, pie and liquor have been introduced in Canada. Martens Farms Inc. (MFI) is located in Saskatchewan. Conditions on MFI's farmland are ideal for growing cassava and it harvested its first cassava root crop during the year. When the cassava crop was planted in the spring, MFI entered into a contract to sell the cassava root to a nearby facility capable of milling it into flour at a price of $74.40 per tonne. Costs incurred in planting, growing and harvesting the cassava crop totaled $35.50 per tonne. When harvested in October, the quoted market price was $52.50 per tonne. Costs of transporting the cassava root by rail to market are expected to be $4.60 per tonne and insurance during transportation is expected to cost $1.25 per tonne. On the date of harvest, the cassava root should be reported at what amount on MFI's statement of financial position prepared in accordance with IFRS Standards?

a) $35.50 per tonne

b) $52.50 per tonne

c) $46.65 per tonne

d) $74.40 per tonne

29. Which of the following is an accurate reflection of those qualitative characteristics?

a) Conservatism improves the faithful representation of financial information.

b) Comparability is achieved through the use of the same methods for the same items, either from period to period within a reporting entity or in a single period across entities.

c) Comparability, verifiability, timeliness and faithful representation are qualitative characteristics that enhance the usefulness of information.

d) Financial information is relevant if it has predictive value, confirmatory value, or both.

30. You are explaining some of the basics of financial reporting to a friend who is just starting a new business. Your description includes mention of the difficulties associated with measurement. Your friend responds by saying, "How can there be issues in measurement? A dollar spent is the same as every other dollar spent, isn't it?" Which one of the following concepts would you explain to address your friend's question?

a) Historic cost

b) Realizable value - fair value

c) Purchasing power

d) Present value

31. Lucy's Juicez Company ("Juicez") is publicly traded. On July 1, 20X1, it issued a note receivable to one of its suppliers to help it fund an expansion, in the amount of $200,000. No interest is to be charged, but when the note is repaid on June 30, 20X5, a "termination fee" of $20,000 is to be paid by the supplier. Juicez' incremental borrowing rate is 10%. Juicez has classified this note as amortized cost. Which one of the following is the value that Lucy's Juicez Company should record the note at on July 1, 20X1?

a) $136,603

b) $150,263

c) $200,000

d) $220,000

32. Financial statements group the effects of transactions and other events into broad classes according to their economic characteristics. These classes are called the elements of financial statements. Which one of the following statements is correct?

a) The statement of changes in financial position has no elements that are unique to it.

b) The elements directly related to the measurement of financial position in the balance sheet are assets and liabilities.

c) The elements directly related to the measurement of performance in the income statement are revenues and expenses.

d) One essential characteristic of a liability element is that the entity has a present legal obligation to act or perform in a certain way.

33. You, CPA, are the accountant of Delta Construction Ltd. (DCL), a private builder of houses in a large Canadian city. In processing reimbursable travel expense accounts, you note that the CEO has approved his own travel claims. Two of the expense reports are for different amounts, but include the same receipt for airfare and hotel for a business trip. When you ask the CEO if he wants you to correct the error, he replies, "No, just process them. It doesn't matter anyway, because I'm the majority shareholder." What should you do?

a) Process the expense reports as the CEO has requested.

b) Correct the error and process the revised expense reports.

c) Report the issue to your boss, the CFO.

d) Contact Canada Revenue Agency and report the issue.

34. Toddler Toys Inc. (TT) is a public company which manufactures toys. TT purchased 10,000 sheets of hard plastic in varying colours for use in its toy production. Each sheet of plastic costs $5.45 to purchase plus shipping costs of 10%. The supplier is located in Denmark and import duties on the plastic are 4% of the purchase cost. TT is eligible for a rebate of $500 from the plastic manufacturer. The plastic will be stored at a warehouse until TT is able to use the plastic in production in a month. Since TT does not have the space to store the large sheets of plastic, TT is purchasing storage space for $450 for the month. What is the value of the plastic to be recorded on TT's financial statements?

a) $56,680

b) $61,630

c) $62,080

d) $62,130

35. On September 1, 20X1, Rainbow Inc. sold equipment to Thunder Limited. Thunder signed a three-year 3% note receivable with a face value of $150,000, due on September 1, 20X4. Interest will be due annually on September 1st. The imputed rate of interest was 5%. Rainbow Inc. has a December 31st year-end. What amount is closest to the amount to be recorded as interest revenue for the year ended December 31, 20X1?

a) $1,418

b) $2,364

c) $4,255

d) $7,092

36. Organic Greens Limited (OGL) reports under Accounting Standards for Private Enterprises (ASPE). On December 1, 20X1, OGL signed a contract with a new franchisee, Jack Richards, with a franchise fee of $100,000. The site was selected, and financing was secured by December 20, 20X1. Employees were hired on January 5, 20X2, and the restaurant opened on January 31, 20X2. How much revenue should OGL recognize in the 20X1 financial statements?

a) $0

b) $33,000

c) $50,000

d) $100,000

37. General purpose financial reports provide information about a reporting entity's economic resources, claims, and changes in resources and claims. In a complete set of statements compliant with IFRS Standards, which one of the following types of necessary information is provided by a Statement of Comprehensive Income?

a) Economic resources and claims

b) Financial performance reflected by accrual accounting

c) Financial performance reflected by past cash flows

d) Changes in economic resources and claims not resulting from financial performance

38. Smooth Sailing Limited was awarded a five-year contract to operate ferries on six routes. While the overall contract is profitable, one route is incurring losses, and no improvement is expected. Which of the following actions should Smooth Sailing take?

a) Write down the ferry dedicated to the unprofitable route to nil.

b) Consider the need to test recoverability based on the unprofitable route only.

c) Consider the need to test recoverability based on all routes together.

d) Increase the amortization methods for the ferries.

39. Martens Farms Inc. (MFI) harvested cassava root at a cost of $35.50 per tonne. The market price at harvest was $52.50 per tonne. Rail transport costs are $4.60 per tonne, and insurance during transportation is $1.25 per tonne. At what amount should MFI report the cassava root under IFRS?

a) $35.50 per tonne

b) $52.50 per tonne

c) $46.65 per tonne

d) $74.40 per tonne

40. The frameworks set out in IFRS Standards "The Conceptual Framework for Financial Reporting" and in ASPE HB 1000, Financial Statement Concepts, describe the qualitative characteristics that make financial information useful to users. How do standard setters use these concepts?

a) New standards are designed to ensure they reflect all of the qualitative characteristics.

b) Standard setters use a hierarchical approach to the characteristics, with relevance being the primary characteristic.

c) Part of the process of developing standards requires standard setters to assess whether information would be material to users.

d) Standard setters acknowledge that the needs of some users of financial information are excessive.