Intermediate Accounting (Volume 1) 14th
Canadian Edition | Kieso, Weygandt, Warfield,
Wiley, Wiecek, Mcconomy COMPREHENSIVE
FINAL EXAMINATION
1. According to the new Conceptual Framework and under ASPE in the
CPA Canada Handbook, 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 other party.
D. The entity has little or no discretion to avoid the duty.
Answer: C
Rationale: For a liability to exist, the entity must have a duty or
responsibility that leaves it little or no discretion to avoid, and the
obligating event must have occurred. Whether the obligation is
enforceable on the other party is not an essential characteristic—
rather, the entity must have an obligation to transfer resources.
2. Which of the following is NOT a required component of a complete
set of financial statements under IFRS?
,A. Statement of financial position
B. Statement of changes in equity
C. Statement of retained earnings
D. Statement of cash flows
Answer: C
Rationale: Under IFRS, a complete set of financial statements includes:
statement of financial position, statement of comprehensive income (or
separate income statement plus statement of comprehensive income),
statement of changes in equity, statement of cash flows, and notes. A
separate statement of retained earnings is not required—changes in
retained earnings are shown in the statement of changes in equity.
3. The conceptual framework's qualitative characteristic of
"relevance" includes which of the following components?
A. Verifiability
B. Predictive value
C. Neutrality
D. Completeness
Answer: B
Rationale: Relevance includes predictive value (information can be used
to predict future outcomes) and confirmatory value (information
confirms or changes past evaluations). Verifiability, neutrality, and
completeness are components of faithful representation, not relevance.
,4. On December 31, 2023, Trudeau Corporation
owes 500,000onanotepayabledueFebruary15,2024.OnJanuary30,2024,
Trudeaurefinancedtheobligationbyissuinganew500,000onanotepayabled
ueFebruary15,2024.OnJanuary30,2024,Trudeaurefinancedtheobligatio
nbyissuinganew500,000 note due June 30, 2025. The financial
statements for the year ended December 31, 2023, are issued on
March 15, 2024. How should the note be classified on the December
31, 2023, statement of financial position?
A. Current liability
B. Long-term liability
C. Partially current and partially long-term
D. Contingent liability
Answer: A
Rationale: For a liability to be classified as non-current after
refinancing, the refinancing must be completed before the financial
statements are issued. Since the refinancing occurred on January 30
and statements were issued March 15, it meets the criteria. However,
the original terms (due Feb 15, 2024) would normally require current
classification, and the answer depends on whether the company has
both the intent and ability to refinance. Under IFRS, the refinancing
must be completed before the statement of financial position date;
under ASPE, before issuance. This question tests the general principle
that refinancing before issuance allows non-current classification.
5. A company has a lawsuit pending as of year-end. Legal counsel
advises that it is probable the company will lose and the damages are
, estimated to be between 1,000,000and1,000,000and2,000,000, with
$1,500,000 being the most likely amount. How should this be reported
in the financial statements?
A. Disclose only in the notes
B.
Accrue 1,000,000anddisclosetherangeC.Accrue1,000,000anddiscloseth
erangeC.Accrue1,500,000 and disclose the range
D. No accrual or disclosure required
Answer: C
Rationale: Under both IFRS and ASPE, a loss contingency is accrued
when (1) it is probable that a liability has been incurred, and (2) the
amount can be reasonably estimated. When a range exists, accrue the
best estimate (most likely amount) if determinable; otherwise, accrue
the minimum of the range and disclose the additional exposure.
6. Which of the following is NOT a criterion for revenue recognition
under IFRS 15?
A. The parties have approved the contract and are committed to
perform
B. The contract has commercial substance
C. Payment terms have been finalized and payment is guaranteed
D. The entity can identify each party's rights regarding goods or
services
Answer: C
Canadian Edition | Kieso, Weygandt, Warfield,
Wiley, Wiecek, Mcconomy COMPREHENSIVE
FINAL EXAMINATION
1. According to the new Conceptual Framework and under ASPE in the
CPA Canada Handbook, 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 other party.
D. The entity has little or no discretion to avoid the duty.
Answer: C
Rationale: For a liability to exist, the entity must have a duty or
responsibility that leaves it little or no discretion to avoid, and the
obligating event must have occurred. Whether the obligation is
enforceable on the other party is not an essential characteristic—
rather, the entity must have an obligation to transfer resources.
2. Which of the following is NOT a required component of a complete
set of financial statements under IFRS?
,A. Statement of financial position
B. Statement of changes in equity
C. Statement of retained earnings
D. Statement of cash flows
Answer: C
Rationale: Under IFRS, a complete set of financial statements includes:
statement of financial position, statement of comprehensive income (or
separate income statement plus statement of comprehensive income),
statement of changes in equity, statement of cash flows, and notes. A
separate statement of retained earnings is not required—changes in
retained earnings are shown in the statement of changes in equity.
3. The conceptual framework's qualitative characteristic of
"relevance" includes which of the following components?
A. Verifiability
B. Predictive value
C. Neutrality
D. Completeness
Answer: B
Rationale: Relevance includes predictive value (information can be used
to predict future outcomes) and confirmatory value (information
confirms or changes past evaluations). Verifiability, neutrality, and
completeness are components of faithful representation, not relevance.
,4. On December 31, 2023, Trudeau Corporation
owes 500,000onanotepayabledueFebruary15,2024.OnJanuary30,2024,
Trudeaurefinancedtheobligationbyissuinganew500,000onanotepayabled
ueFebruary15,2024.OnJanuary30,2024,Trudeaurefinancedtheobligatio
nbyissuinganew500,000 note due June 30, 2025. The financial
statements for the year ended December 31, 2023, are issued on
March 15, 2024. How should the note be classified on the December
31, 2023, statement of financial position?
A. Current liability
B. Long-term liability
C. Partially current and partially long-term
D. Contingent liability
Answer: A
Rationale: For a liability to be classified as non-current after
refinancing, the refinancing must be completed before the financial
statements are issued. Since the refinancing occurred on January 30
and statements were issued March 15, it meets the criteria. However,
the original terms (due Feb 15, 2024) would normally require current
classification, and the answer depends on whether the company has
both the intent and ability to refinance. Under IFRS, the refinancing
must be completed before the statement of financial position date;
under ASPE, before issuance. This question tests the general principle
that refinancing before issuance allows non-current classification.
5. A company has a lawsuit pending as of year-end. Legal counsel
advises that it is probable the company will lose and the damages are
, estimated to be between 1,000,000and1,000,000and2,000,000, with
$1,500,000 being the most likely amount. How should this be reported
in the financial statements?
A. Disclose only in the notes
B.
Accrue 1,000,000anddisclosetherangeC.Accrue1,000,000anddiscloseth
erangeC.Accrue1,500,000 and disclose the range
D. No accrual or disclosure required
Answer: C
Rationale: Under both IFRS and ASPE, a loss contingency is accrued
when (1) it is probable that a liability has been incurred, and (2) the
amount can be reasonably estimated. When a range exists, accrue the
best estimate (most likely amount) if determinable; otherwise, accrue
the minimum of the range and disclose the additional exposure.
6. Which of the following is NOT a criterion for revenue recognition
under IFRS 15?
A. The parties have approved the contract and are committed to
perform
B. The contract has commercial substance
C. Payment terms have been finalized and payment is guaranteed
D. The entity can identify each party's rights regarding goods or
services
Answer: C
