INTERMEDIATE FINANCIAL
ACCOUNTING II (ACC 352) MIDTERM
EXAM PRACTICE (Questions and
answers) A+ GRADED 2025-2026
ATHABSCA UNIVERSITY
,
, ACCT 352
Intermediate Financial Accounting II
Practice Final Examination with Solutions
Part 1: Theory
Note: The questions in Part 1 are examples only. Any of the learning objectives in the textbook
that deal with accounting theory may be examined in the actual examination, so it is important to
review and understand all the objectives. The Summary of Learning Objectives and the Key Terms
at the end of each chapter and appendix are a good place to start this type of review.
When you are answering written response questions worth several marks, think about what, why,
when, and how to answer the question fully.
1. Discuss the advantages of leasing instead of purchasing assets.
Solution:
Leases usually require no down payment and interest rates are fixed. This can help preserve
scarce cash and protect against unexpected changes in interest rates.
The ability to return equipment at the end of the term and lease new equipment can help
protect against obsolescence—the lessee can always obtain the latest technology.
Leases allow for more flexibility than conventional loans. The covenants/provisions are
usually less restrictive, and can be tailored to the individual needs of the lessee.
In some cases, leasing can be cheaper than other forms of financing. Investment tax credits
and CCA deductions are of little use to the lessee if the business is not currently generating
income. The lessor, however, can claim these tax benefits and possibly lower the rental
payments.
If leases are structured as operating leases, then these obligations do not show up on the
balance sheet, which may improve the lessee’s financial ratios and compliance with other
debt covenants.
ACCOUNTING II (ACC 352) MIDTERM
EXAM PRACTICE (Questions and
answers) A+ GRADED 2025-2026
ATHABSCA UNIVERSITY
,
, ACCT 352
Intermediate Financial Accounting II
Practice Final Examination with Solutions
Part 1: Theory
Note: The questions in Part 1 are examples only. Any of the learning objectives in the textbook
that deal with accounting theory may be examined in the actual examination, so it is important to
review and understand all the objectives. The Summary of Learning Objectives and the Key Terms
at the end of each chapter and appendix are a good place to start this type of review.
When you are answering written response questions worth several marks, think about what, why,
when, and how to answer the question fully.
1. Discuss the advantages of leasing instead of purchasing assets.
Solution:
Leases usually require no down payment and interest rates are fixed. This can help preserve
scarce cash and protect against unexpected changes in interest rates.
The ability to return equipment at the end of the term and lease new equipment can help
protect against obsolescence—the lessee can always obtain the latest technology.
Leases allow for more flexibility than conventional loans. The covenants/provisions are
usually less restrictive, and can be tailored to the individual needs of the lessee.
In some cases, leasing can be cheaper than other forms of financing. Investment tax credits
and CCA deductions are of little use to the lessee if the business is not currently generating
income. The lessor, however, can claim these tax benefits and possibly lower the rental
payments.
If leases are structured as operating leases, then these obligations do not show up on the
balance sheet, which may improve the lessee’s financial ratios and compliance with other
debt covenants.
