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%
-The gross profit is the difference between revenue and cost of sales.

Accepted Answer

Gross profit is calculated by subtracting the cost of goods sold (COGS) from total revenue, which does not directly involve depreciation, capital cost allowance rate, residual value of the asset, or income tax rate in its calculation.

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%
-The statement of comprehensive income includes items such as profit for the year and gain or loss on property revaluation.

Accepted Answer

The statement of comprehensive income includes all non-owner changes in equity, which encompasses profit or loss for the year and items of other comprehensive income such as gains or losses on property revaluation.

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%
-Both, distribution costs and administrative expenses are part of the cost of goods sold in the statement of income.

Accepted Answer

Distribution costs and administrative expenses are not part of the cost of goods sold; they are typically listed separately on the income statement. Cost of goods sold primarily includes the direct costs attributable to the production of the goods sold by a company.

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%
-The statement of changes in equity includes four sections: share capital, contributed surplus, retained earnings and total other comprehensive income/ (loss) for the year.

Accepted Answer

The statement of changes in equity typically includes sections for share capital, contributed surplus, retained earnings, and other comprehensive income/(loss), reflecting changes in these equity components over a reporting period.

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%
-The statement of retained earnings makes the link between the statement of income and the statement of changes in equity.

Accepted Answer

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

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%
-The assets section of the statement of financial position includes current assets, non-current assets and equity.

Accepted Answer

The assets section of the statement of financial position includes current assets and non-current assets, but not equity. Equity is listed under a separate section of the statement of financial position.

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%
-Prepaid expenses are considered a liability account.

Accepted Answer

Prepaid expenses are considered an asset account because they represent goods or services that have been paid for by a company but not yet consumed or used.

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%
-The difference between non-current assets and administrative expense gives the net capital assets which is the amount shown on the statement of financial position.

Accepted Answer

Non-current assets minus accumulated depreciation (not administrative expense) gives the net book value of the assets, which is the amount shown on the statement of financial position. Administrative expenses are operational expenses and do not directly reduce the value of non-current assets on the balance sheet.

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%
-Intangible assets include items such as trademarks, goodwill and patents.

Accepted Answer

Intangible assets are non-physical assets that have a useful life and are used in operations, including trademarks, goodwill, patents, and copyrights, among others.

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%
-Current liabilities include accounts such as trade and other payables and accrued expenses.

Accepted Answer

Current liabilities typically include accounts such as trade and other payables and accrued expenses, which are obligations a company needs to settle within a 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%
-Current liabilities are debts that must be paid within a twelve-month period.

Accepted Answer

Current liabilities are indeed debts or obligations that a company must pay within a one-year period, typically within the company's operating cycle.

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%
-Equity includes accounts such as share capital and retained earnings.

Accepted Answer

Equity typically includes accounts like share capital and retained earnings, which represent the owners' interest in the company.

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%
-Retained earnings represent the amount of debt that a business owes to its shareholders.

Accepted Answer

Retained earnings represent the portion of net income that a company retains and does not distribute to its shareholders as dividends. It is not a measure of debt.

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%
-The treasurer of a public company usually prepares the auditors' report.

Accepted Answer

The auditors' report is prepared by the company's external auditors, not the treasurer. The treasurer may prepare financial statements or reports for internal use, but the auditors' report is specifically prepared by independent auditors to provide an opinion on the financial statements' accuracy and compliance with accounting standards.

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%
-Both, horizontal analysis and vertical analysis are financial management tools that can be used to analyze the statement of financial position and the statement of income.

Accepted Answer

Horizontal analysis compares financial data over a period of time to identify trends and growth patterns, while vertical analysis breaks down each item in the financial statement as a percentage of a base figure to understand the relative significance of various components, making both applicable to analyzing balance sheets and income statements.

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%
-There are two basic types of accounting methods: cash accounting and accrual accounting.

Accepted Answer

Cash accounting recognizes revenue and expenses only when money changes hands, while accrual accounting recognizes revenue when it's earned and expenses when they're billed (but not paid), which are indeed two basic types of accounting methods.

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%
-Depreciation is a tax-deductible expense that Canadian tax laws allow a business to claim for the loss in value of non-current assets due to wear and tear.

Accepted Answer

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

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%
-Depreciation is usually calculated on a straight-line basis.

Accepted Answer

Depreciation on a straight-line basis means spreading the cost of the asset evenly over its useful life, which is consistent with the given information, despite the mention of different rates which are not applied in straight-line depreciation.

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%
-Future income taxes payable is a future tax liability resulting from the difference between depreciation and capital cost allowance.

Accepted Answer

The future income taxes payable is a liability that arises due to the difference in timing between the depreciation expense recognized for accounting purposes and the capital cost allowance (CCA) claimed for tax purposes. In this case, with different rates for depreciation (20%) and CCA (50%), there will be a temporary difference that leads to a future tax liability.

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%
-_________________________ involves collecting, classifying, and recording information that arises from the multitude of transactions taking place in a business.

Accepted Answer

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

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% -The gross profit is the difference between revenue and cost of sales.

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% -The statement of comprehensive income includes items such as profit for the year and gain or loss on property revaluation.

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% -Both, distribution costs and administrative expenses are part of the cost of goods sold in the statement of income.

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% -The statement of retained earnings makes the link between the statement of income and 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% -The assets section of the statement of financial position includes current assets, non-current assets and 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% -Prepaid expenses are considered a liability account.

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% -Intangible assets include items such as trademarks, goodwill and patents.

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% -Current liabilities include accounts such as trade and other payables and accrued expenses.

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% -Current liabilities are debts that must be paid within a twelve-month period.

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% -Equity includes accounts such as share capital and retained earnings.

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% -Retained earnings represent the amount of debt that a business owes to its shareholders.

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% -The treasurer of a public company usually 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% -There are two basic types of accounting methods: cash accounting and accrual accounting.

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% -Depreciation is usually calculated on a straight-line basis.

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% -Future income taxes payable is a future tax liability resulting from the difference between depreciation and capital cost allowance.