Question 1

Jacobs Corporation has the following shareholders' equity on December 31, 2014:
Shareholders' equity 
-If 10,000 common shares were reacquired for $24 per share, the journal entry to record the transaction would
A) credit Contributed Surplus-Reacquisition of Shares for $40,000.
B) credit Retained Earnings for $40,000.
C) credit Common Shares for $240,000.
D) debit Common Shares for $200,000.

Accepted Answer

The answer of Jacobs Corporation has the following shareholders' equity...

Question 2

The entry to record the reacquisition of common shares at a cost higher than the average issue cost requires a
A) debit to Common Shares.
B) debit to Loss on Repurchase of Common Shares.
C) credit to Common Shares.
D) credit to Retained Earnings.

Accepted Answer

When reacquiring common shares at a cost higher than the average issue cost, the entry involves debiting the Common Shares account to reduce the equity for the shares repurchased.

Question 3

Under IFRS the following account is included in the shareholders equity section of the balance sheet
A) Other Comprehensive Income.
B) Accumulated Other Comprehensive Income.
C) Contributed Comprehensive Income.
D) Retained Comprehensive Income.

Accepted Answer

Under IFRS, Accumulated Other Comprehensive Income is included in the shareholders' equity section of the balance sheet. It represents certain gains and losses that are not included in net income but instead are recorded directly in equity until they are realized.

Question 4

All of the following are included in comprehensive income EXCEPT
A) profit reported on the traditional income statement.
B) income tax expense.
C) dividends paid.
D) gains and losses on equity investments.

Accepted Answer

Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Dividends paid are considered distributions to owners and therefore are not included in comprehensive income.

Question 5

Which of the following statements concerning a change in accounting policy is true?
A) If a change in accounting policy is adopted retroactively, the company needs to restate closing retained earnings.
B) If a change in accounting policy is adopted retroactively, the company needs to restate opening retained earnings.
C) If a change in accounting policy is adopted prospectively, the company needs to restate closing retained earnings.
D) If a change in accounting policy is adopted prospectively, the company needs to restate opening retained earnings.

Accepted Answer

When a change in accounting policy is adopted retroactively, it requires the restatement of prior period financial statements as if the new policy had always been in place. This involves adjusting the opening balances of assets, liabilities, and equity for the earliest period presented, which includes restating opening retained earnings to reflect the cumulative effect of the change on prior periods.

Question 6

A prior period adjustment that corrects profit of a prior period requires that an entry be made to
A) an income statement account.
B) a current year revenue or expense account.
C) the retained earnings account.
D) an asset account.

Accepted Answer

Prior period adjustments are directly recorded in the retained earnings account because they correct errors made in financial statements of prior periods, not affecting the current period's income statement.

Question 7

Which of the following describes how comprehensive income should be reported?
A) Must be reported in a separate statement, as part of a complete set of financial statements.
B) Should not be reported in the financial statements but should only be disclosed in the footnotes.
C) May be reported in a separate statement, in a combined statement of earnings and comprehensive income, or within a statement of shareholders' equity.
D) May be reported in a combined statement of earnings and comprehensive income or disclosed within a statement of shareholders' equity; separate statements of comprehensive income are not permitted.

Accepted Answer

The answer of Which of the following describes how comprehensive...

Question 8

Under IFRS which of the following is NOT a choice for the Statement of Comprehensive Income?
A) The company may use an all inclusive format.
B) Items may be reported on a before tax basis.
C) The company may use a separate statement.
D) Items must be reported on a net of tax basis.

Accepted Answer

Under IFRS, items in the Statement of Comprehensive Income must be reported net of tax, not on a before tax basis. Choices A, C, and D are all acceptable practices under IFRS.

Question 9

Jacobs Corporation has the following shareholders' equity on December 31, 2014:
Shareholders' equity 
-If 10,000 common shares were reacquired for $17 per share, the journal entry to record the transaction would
A) credit Contributed Surplus for $30,000.
B) debit Retained Earnings for $30,000.
C) credit Common Shares for $170,000.
D) debit Common Shares for $170,000.

Accepted Answer

The answer of Jacobs Corporation has the following shareholders' equity...

Question 10

The general concept of "let the tax follow the profit or loss" is associated with
A) Revenue recognition criteria.
B) Intraperiod tax allocation.
C) Canada Pension Plan.
D) taxation of partnership income.

Accepted Answer

Intraperiod tax allocation involves allocating tax expense or benefit to different components of income, such as continuing operations, discontinued operations, and other comprehensive income, allowing the tax to follow the profit or loss.

Question 11

When the disposal of a significant business component occurs, the income statement should report the profit (or loss) from this event as
A) other revenue or expense.
B) cost of goods sold.
C) discontinued operations, before tax.
D) discontinued operations, net of tax.

Accepted Answer

Discontinued operations are reported separately in the income statement, net of tax, to distinguish them from the results of continuing operations. This allows users of financial statements to assess the impact of discontinuing a part of the business on the company's financial position and performance.

Question 12

The following information is available regarding a corporation's common shares: authorized 30,000 shares; issued 10,000 at $100,000; and 15,000 at $175,000. The average cost of the corporation's shares is
A) $10.
B) $11.
C) $11.67.
D) $13.75.

Accepted Answer

The answer of The following information is available regarding a...

Question 13

Jacobs Corporation has the following shareholders' equity on December 31, 2014:
Shareholders' equity 
-The average cost per common share is
A) $9.
B) $20.
C) $11.40.
D) $5.70.

Accepted Answer

The answer of Jacobs Corporation has the following shareholders' equity...

Question 14

The entry to record the reacquisition of common shares at a cost lower than the average issue cost requires a
A) credit to Contributed Surplus.
B) credit to Contributed Surplus-Reacquisition of Common Shares.
C) credit to Common Shares.
D) credit to Retained Earnings.

Accepted Answer

The answer of The entry to record the reacquisition of...

Question 15

When a company repurchases its shares but does NOT retire them, these shares would said to be
A) authorized, issued and outstanding.
B) authorized and issued, but not outstanding.
C) redeemable.
D) authorized and unissued but not outstanding.

Accepted Answer

When a company repurchases its shares but does not retire them, these shares are considered to be "authorized and issued, but not outstanding." This is because the shares remain authorized by the company and have been issued in the past, but after repurchase, they are held in the company's treasury and are not available to be bought or sold by investors, thus not considered outstanding.

Question 16

A company may reacquire its own shares for all of the following reasons EXCEPT
A) to increase trading in the company's shares in hopes of enhancing its market value.
B) to reduce the number of shares issued thereby increasing earnings per share.
C) to hold the shares as a long-term investment.
D) to have additional shares available for use in the acquisition of other companies.

Accepted Answer

Holding its own shares as a long-term investment is not a reason for a company to reacquire its shares because when a company buys back its shares, those shares are either retired or held as treasury shares. They are not considered an investment in the traditional sense, as companies cannot invest in themselves.

Question 17

Prior period adjustments are reported
A) in the notes of the current year's financial statements.
B) on the current year's balance sheet.
C) on the current year's income statement.
D) on the current year's statement of retained earnings.

Accepted Answer

Prior period adjustments are reported on the current year's statement of retained earnings as they affect the beginning balance of retained earnings.

Question 18

A prior period adjustment for understatement of profit
A) will be credited to the Retained Earnings account.
B) will be debited to the Retained Earnings account.
C) will show as a gain on the current year's Income Statement.
D) will show as an asset on the current year's Balance Sheet.

Accepted Answer

A prior period adjustment for understatement of profit is corrected by crediting the Retained Earnings account to increase it, reflecting the corrected higher profit retained in the business from previous periods.

Question 19

All of the following should occur as a result of a prior period adjustment EXCEPT
A) the cumulative effect of the correction or change should be reported as an adjustment to opening retained earnings.
B) all prior period financial statements should be corrected or restated.
C) the effects of the change should be detailed and disclosed in a note to the financial statements.
D) the unadjusted balance of retained earnings should be presented on the balance sheet.

Accepted Answer

Prior period adjustments are corrections of errors or omissions in the financial statements of prior periods. They are accounted for by adjusting the opening balance of retained earnings of the earliest period presented, not by presenting an unadjusted balance of retained earnings on the balance sheet. Choices A, B, and C are correct actions for handling prior period adjustments.

Question 20

Which of the following statements apply to discontinued operations?
1) The operations and cash flows have been (or will be) eliminated from the ongoing operations of the company as a result of the disposal transaction.
2) The company must report the profit (loss) and gain (loss) on discontinued operations net of the applicable taxes.
3) Assets (net of any related liabilities) that are held for sale as discontinued operations are valued and reported on the balance sheet at the lower of their carrying amount and fair value (less any anticipated costs of selling).
A) 1 and 2
B) 1 and 3
C) 2 and 3
D) 1, 2 and 3

Accepted Answer

All three statements correctly describe the accounting treatment for discontinued operations. Statement 1 outlines the criteria for classification as discontinued operations, statement 2 specifies the reporting requirement for profits or losses from discontinued operations, and statement 3 describes the valuation method for assets held for sale.

Quiz 14: Corporations: Additional Topics and Ifrs

Jacobs Corporation has the following shareholders' equity on December 31, 2014: Shareholders' equity -If 10,000 common shares were reacquired for $24 per share, the journal entry to record the transaction would

The entry to record the reacquisition of common shares at a cost higher than the average issue cost requires a

Under IFRS the following account is included in the shareholders equity section of the balance sheet

All of the following are included in comprehensive income EXCEPT

Which of the following statements concerning a change in accounting policy is true?

A prior period adjustment that corrects profit of a prior period requires that an entry be made to

Which of the following describes how comprehensive income should be reported?

Under IFRS which of the following is NOT a choice for the Statement of Comprehensive Income?

Jacobs Corporation has the following shareholders' equity on December 31, 2014: Shareholders' equity -If 10,000 common shares were reacquired for $17 per share, the journal entry to record the transaction would

The general concept of "let the tax follow the profit or loss" is associated with

When the disposal of a significant business component occurs, the income statement should report the profit (or loss) from this event as

The following information is available regarding a corporation's common shares: authorized 30,000 shares; issued 10,000 at $100,000; and 15,000 at $175,000. The average cost of the corporation's shares is

Jacobs Corporation has the following shareholders' equity on December 31, 2014: Shareholders' equity -The average cost per common share is

The entry to record the reacquisition of common shares at a cost lower than the average issue cost requires a

When a company repurchases its shares but does NOT retire them, these shares would said to be

A company may reacquire its own shares for all of the following reasons EXCEPT

Prior period adjustments are reported

A prior period adjustment for understatement of profit

All of the following should occur as a result of a prior period adjustment EXCEPT