Question 1

According to the existing IFRS and the CICA Handbook Part II guidelines, which of the following is NOT an essential characteristic of a liability?
A)It embodies a duty or responsibility.
B)The transaction or event that obliges the entity has occurred.
C)The obligation is enforceable on the obligor entity.
D)The entity has little or no discretion to avoid the duty.

Accepted Answer

The enforceability of an obligation is not a required characteristic of a liability under IFRS or CICA Handbook Part II. The focus is on the existence of a present obligation resulting from past events, regardless of enforceability.

Question 2

Accounting for GST includes
A)crediting GST Payable to record GST paid on inventory for resale.
B)crediting GST Recoverable to record GST collected from customers.
C)debiting GST Recoverable to record GST paid to suppliers.
D)debiting GST Payable to record GST collected from customers.

Accepted Answer

GST Recoverable is debited to record GST paid to suppliers, as it represents an asset or a receivable that can be claimed back from the tax authorities.

Question 3

Corporation income taxes payable
A)must always be approved by an external auditor.
B)are reviewed and approved by Canada Revenue Agency (CRA).
C)also apply to proprietorships and partnerships.
D)are always the same under GAAP and Canadian tax laws.

Accepted Answer

Corporation income taxes payable are reviewed and approved by Canada Revenue Agency (CRA) as they are the governmental agency responsible for administering tax laws in Canada. Option A is incorrect as an external auditor may audit or review the financial statements, but they do not approve taxes payable. Option C is incorrect as proprietorships and partnerships do not pay corporation income taxes, as these are only applicable to corporations. Option D is incorrect as GAAP (Generally Accepted Accounting Principles) and Canadian tax laws have different rules and regulations on income taxes payable.

Question 4

Accumulating rights to benefits (for employees)
A)are rarely mandated by provincial labour law.
B)include vested rights that do not depend on the employee's continued service.
C)are rights that do not accrue with employee service.
D)are not accrued as an expense in the period earned.

Accepted Answer

Accumulating rights to benefits often include vested rights that do not depend on the employee's continued service. This means that the employee is entitled to these benefits regardless of whether they leave their job or not. This type of benefit is not always mandated by provincial labour law and is typically accrued as an expense in the period earned.

Question 5

Which of the following are included in the employer's "Payroll Tax Expense"?
A)employee income tax deducted, employer portion of CPP/QPP and EI
B)employer portion of CPP/QPP and EI, union dues
C)employer portion of CPP/QPP and EI only
D)employer portion of EI, union dues, and employee income tax deducted

Accepted Answer

The employer's "Payroll Tax Expense" includes the employer portion of CPP/QPP and EI only. Union dues and employee income tax deducted are not considered payroll tax expenses for the employer.

Question 6

Which of the following statements is NOT true about recognition and subsequent accounting for financial liabilities?
A)They are initially recognized at their fair value.
B)After acquisition, they continue to be accounted for at fair value.
C)After acquisition, they are generally accounted for at amortized cost.
D)Short term liabilities, such as accounts payable, are usually recorded at their maturity
Value.

Accepted Answer

Financial liabilities are generally accounted for at amortized cost after acquisition, not fair value, unless they are designated as at fair value through profit or loss.

Question 7

Which of the following is a current liability?
A)preferred dividends in arrears
B)stock dividends distributable
C)preferred cash dividends payable
D)stock splits

Accepted Answer

Preferred cash dividends payable is a current liability because it represents the amount owed to preferred stockholders for dividends declared but not yet paid. Preferred dividends in arrears may eventually become a current liability if they become payable in the current period, but this is not always the case. Stock dividends distributable and stock splits do not represent amounts owed to any party and are not liabilities.

Question 8

Regarding zero-interest-bearing notes,
A)they do not have an interest component.
B)the debtor receives the future value of the note and pays back the present value.
C)any interest is never recognized until the note is repaid.
D)the debtor receives the present value of the note and pays back the future value.

Accepted Answer

Zero-interest-bearing notes are issued at a discount, meaning the debtor receives the present value of the note and pays back the future value. They do not have an interest component, and any interest is never recognized until the note is repaid. Therefore, the best choice is D.

Question 9

Regarding Provincial Sales Tax (PST) Non-Financial and Current Liabilities 13- 11
A)the purchaser includes any PST paid in the cost of the goods or services.
B)all PST paid is recorded in a "PST Expense" account.
C)all PST paid is recorded in a "PST Recoverable" account.
D)for statement of financial position presentation, a PST registrant "nets" any PST paid
Against any PST collected from customers.

Accepted Answer

The purchaser includes any PST paid in the cost of the goods or services, as PST is a non-recoverable tax for most businesses and is included in the cost of the asset or expense.

Question 10

Goods and Services Tax (GST)
A)is a value added tax.
B)is a sales tax charged by each province on all taxable goods.
C)in some provinces, is an income tax.
D)must be collected by all businesses in Canada.

Accepted Answer

GST is a value added tax, which means that it is a tax on the value added to a product or service at each stage of the production process. It is a federal tax, meaning that it is collected by the federal government and applies to all provinces and territories in Canada. It is not charged by each province on all taxable goods, nor is it an income tax. While most businesses are required to register for and collect GST, there are some exemptions and thresholds.

Question 11

Under IFRS, even if the entity plans to refinance long term debt, the current portion must be reported as a current liability UNLESS
A)long term financing has been completed after the statement of financial position date, but
Before the financial statements are released.
B)management intends to refinance the debt on a long-term basis.
C)at statement of financial position date, the entity expects to refinance under an existing
Agreement for at least a year, and the decision is solely at its discretion.
D)management intends to discharge the debt by issuing shares.

Accepted Answer

Under IFRS, a current liability can be classified as non-current if the entity has the discretion to refinance the obligation for at least a year under an existing agreement at the statement of financial position date.

Question 12

Which of the following may be classified as a current liability?
A)stock dividends distributable
B)accounts receivable credit balances
C)losses expected to be incurred within the next twelve months in excess of the company's
Insurance coverage
D)tenant's rent deposit not returnable until the end of a long-term lease

Accepted Answer

The answer of Which of the following may be classified...

Question 13

Which of the following should NOT be included in the current liabilities section of the statement of financial position?
A)trade accounts payable
B)current portion of long term debt to be retired by non-current assets
C)short-term zero-interest-bearing notes payable
D)a liability due on demand (callable debt)

Accepted Answer

The current portion of long-term debt to be retired by non-current assets is a long-term liability, not a current liability, and should be included in the non-current liabilities section of the statement of financial position. The other options (trade accounts payable, short-term zero-interest-bearing notes payable, and a liability due on demand) are all examples of current liabilities that should be included in the current liabilities section.

Question 14

Among Oslo Corp.'s short-term obligations, on its most recent statement of financial position date, are notes payable totalling $250,000 with the Provincial Bank.These are 90-day notes, renewable for another 90-day period.These notes should be classified on Oslo's statement of financial position as
A)current liabilities.
B)deferred charges.
C)long-term liabilities.
D)shareholders' equity.

Accepted Answer

The notes payable are short-term and due within 90 days, making them current liabilities. The fact that they are renewable for another 90-day period does not change their current nature.

Question 15

Which of the following statements is FALSE?
A)Under IFRS, a company may exclude a short-term obligation from current liabilities if, at
Statement of financial position date, the entity expects to refinance under an existing
Agreement for at least a year, and the decision is solely at its discretion.
B)Cash dividends should be recorded as a liability when they are declared by the board of
Directors.
C)Under the cash basis method, warranty costs are charged to expense as they are paid.
D)Federal income taxes withheld from employees' payroll cheques should be recorded as
A long-term liability.

Accepted Answer

Federal income taxes withheld from employees' payroll checks should be recorded as a current liability, not a long-term liability, as they are expected to be settled within the normal operating cycle.

Question 16

Stock dividends distributable should be classified on the
A)income statement as an expense.
B)statement of financial position as an asset.
C)statement of financial position as a liability.
D)statement of financial position as an item of shareholders' equity.

Accepted Answer

Stock dividends distributable are classified on the statement of financial position as an item of shareholders' equity, reflecting the company's commitment to distribute additional shares to shareholders without requiring immediate cash outflow.

Question 17

Non-accumulating rights to benefits, such as parental leave, are generally accounted for by
A)the full accrual method.
B)the event accrual method.
C)the cash method.
D)financial statement note disclosure only.

Accepted Answer

The answer of Non-accumulating rights to benefits, such as parental...

Question 18

A constructive obligation arises when
A)the entity is legally obligated to honour the obligation.
B)the entity makes an unconditional promise to pay money in the future.
C)past or present company practice reveals the entity acknowledges a potential economic
Burden.
D)the entity has a conditional obligation which becomes unconditional if an uncertain future
Event occurs.

Accepted Answer

A constructive obligation arises from past or present company practices that indicate the entity acknowledges a potential economic burden, even if not legally enforceable.

Question 19

Which of the following is generally NOT used as a basis for calculating bonuses or profit sharing amounts?
A)a percentage of the employees' regular pay rates
B)the company's pre-tax income
C)productivity increases
D)gross sales

Accepted Answer

Gross sales are generally not used as a basis for calculating bonuses or profit sharing amounts as they do not take into account the expenses and costs associated with generating those sales. Instead, factors such as individual or team productivity, company profits, and specific performance goals are often used as the basis for determining bonus or profit sharing amounts.

Question 20

A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should
A)be accrued during the period when the compensated time is expected to be used by
Employees.
B)be accrued during the period following vesting.
C)be accrued during the period when earned.
D)not be accrued unless a written contractual obligation exists.

Accepted Answer

A liability for compensated absences should be accrued during the period when the benefits are earned by employees, as this reflects the obligation the employer has to pay for these benefits.

Quiz 2: Intermediate Accounting Volume 2

According to the existing IFRS and the CICA Handbook Part II guidelines, which of the following is NOT an essential characteristic of a liability?

Accounting for GST includes

Corporation income taxes payable

Accumulating rights to benefits (for employees)

Which of the following are included in the employer's "Payroll Tax Expense"?

Which of the following statements is NOT true about recognition and subsequent accounting for financial liabilities?

Which of the following is a current liability?

Regarding zero-interest-bearing notes,

Regarding Provincial Sales Tax (PST) Non-Financial and Current Liabilities 13- 11

Goods and Services Tax (GST)

Under IFRS, even if the entity plans to refinance long term debt, the current portion must be reported as a current liability UNLESS

Which of the following may be classified as a current liability?

Which of the following should NOT be included in the current liabilities section of the statement of financial position?

Among Oslo Corp.'s short-term obligations, on its most recent statement of financial position date, are notes payable totalling $250,000 with the Provincial Bank.These are 90-day notes, renewable for another 90-day period.These notes should be classified on Oslo's statement of financial position as

Which of the following statements is FALSE?

Stock dividends distributable should be classified on the

Non-accumulating rights to benefits, such as parental leave, are generally accounted for by

A constructive obligation arises when

Which of the following is generally NOT used as a basis for calculating bonuses or profit sharing amounts?

A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should