Question 1

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What appears in the equity section of the statement of financial position?

Accepted Answer

The equity section of the statement of financial position typically includes share capital and retained earnings. Share capital represents the funds raised by issuing shares, while retained earnings are the accumulated net income not distributed to shareholders as dividends. Choices A, B, and C do not accurately represent components typically found in the equity section.

Question 2

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What calculation determines the net revenue?

Accepted Answer

The answer of Cost of the asset$100,000 
Life of the...

Question 3

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What is included in the statement of changes in equity?

Accepted Answer

Contributed surplus is included in the statement of changes in equity as it represents the excess amounts paid by shareholders over the par value of the shares. Other options like other income, earnings before income taxes, and deferred income are typically included in the income statement or balance sheet, not the statement of changes in equity.

Question 4

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-Where are non-current liabilities and current liabilities included?

Accepted Answer

Non-current liabilities and current liabilities are included in the liability section of the statement of financial position. This section is separate from assets, equity, and working capital calculations.

Question 5

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What are the three sections on the statement of financial position?

Accepted Answer

The three sections on the statement of financial position (balance sheet) are the asset section, liability section, and equity section. These sections provide a snapshot of a company's financial health, showing what the company owns, owes, and the amount invested by shareholders.

Question 6

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What two items are linked by the statement of changes in equity?

Accepted Answer

The statement of changes in equity links the statement of income (which affects retained earnings) and the statement of financial position (which shows equity).

Question 7

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What do retained earnings represent?

Accepted Answer

Retained earnings represent the portion of net income that a company keeps (retains) after paying out dividends to its shareholders. It is essentially the cumulative amount of earnings not distributed as dividends but reinvested in the business or kept as a reserve for specific objectives.

Question 8

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-Which of the following are assets?

Accepted Answer

Assets are resources owned by a company that have economic value. Cash, buildings, and intangible assets are all considered assets.

Question 9

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What do typical current assets include?

Accepted Answer

Typical current assets include cash, trade receivables, and inventories because they are assets expected to be converted into cash, sold, or consumed either in a year or in the operating cycle of a business, whichever is longer.

Question 10

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What do typical current liabilities include?

Accepted Answer

Typical current liabilities include short-term obligations such as trade and other payables, accrued expenses, and taxes payable, which are due within one year.

Question 11

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What does equity include?

Accepted Answer

Equity typically includes common shares and retained earnings, representing the ownership interest in a company. Preferred shares are a part of equity, but loans to owners are a liability. Contributed surplus and future income taxes are part of shareholders' equity but are not the primary components. Mortgages are a form of debt, not equity.

Question 12

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What do non-current assets include?

Accepted Answer

Non-current assets include long-term investments or assets that are not expected to be converted into cash within a year. This includes buildings, equipment, and machinery, as they are used over a long period and are not intended for resale in the normal course of business.

Question 13

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What term refers to the estimated decrease in the value of property, plant, and equipment that is due to wear and tear and/or obsolescence?

Accepted Answer

Depreciation refers to the accounting method of allocating the cost of a tangible asset over its useful life, representing the decrease in value due to wear and tear, deterioration, or obsolescence.

Question 14

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What accounts are included in working capital?

Accepted Answer

Working capital is calculated as current assets minus current liabilities. Choice D (inventories, trade receivables, trade and other payables) correctly identifies components of current assets (inventories, trade receivables) and current liabilities (trade and other payables), which are all part of the working capital calculation.

Question 15

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-Who communicates with shareholders through the financial statements?

Accepted Answer

Company management is responsible for preparing and communicating financial statements to shareholders.

Question 16

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-Which of the following are intangible assets?

Accepted Answer

Goodwill, trademarks, and patents are examples of intangible assets because they represent non-physical assets that provide economic benefits to a business.

Question 17

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-Who prepares the auditors' report?

Accepted Answer

An independent accounting firm prepares the auditors' report to ensure an unbiased and objective examination of the company's financial statements.

Question 18

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-A company has paid $200,000 for a capital asset that has an estimated life of five years and a salvage value of $50,000. What is the accumulated depreciation at the end of year four?

Accepted Answer

The asset is depreciated using the straight-line method: (Cost - Salvage Value) / Life = ($200,000 - $50,000) / 5 = $30,000 per year. After four years, accumulated depreciation is 4 * $30,000 = $120,000.

Question 19

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-Under generally accepted accounting principles, how should corporations match the use of depreciable assets with the revenue produced?

Accepted Answer

Depreciation is the method used under generally accepted accounting principles (GAAP) to match the cost of a depreciable asset with the revenue it generates over its useful life, thereby spreading the cost of the asset over its useful life.

Question 20

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What tax liability results from the difference between depreciation and capital cost allowance?

Accepted Answer

The difference between depreciation and capital cost allowance creates a temporary difference, leading to future income taxes payable.

Quiz 2: Accounting and Financial Statements

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What appears in the equity section of the statement of financial position?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What calculation determines the net revenue?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What is included in the statement of changes in equity?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -Where are non-current liabilities and current liabilities included?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What are the three sections on the statement of financial position?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What two items are linked by the statement of changes in equity?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What do retained earnings represent?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -Which of the following are assets?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What do typical current assets include?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What do typical current liabilities include?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What does equity include?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What do non-current assets include?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What term refers to the estimated decrease in the value of property, plant, and equipment that is due to wear and tear and/or obsolescence?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What accounts are included in working capital?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -Who communicates with shareholders through the financial statements?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -Which of the following are intangible assets?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -Who prepares the auditors' report?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -Under generally accepted accounting principles, how should corporations match the use of depreciable assets with the revenue produced?

Cost of the asset$100,000 Life of the asset 5 years Depreciation rate20% Capital cost allowance rate 50% Residual value of the asset nil Income tax rate 50% -What tax liability results from the difference between depreciation and capital cost allowance?