ACCT351v14 Intermediate Financial Accounting I Practice Final Examination 1 |COMPLETE ACTUAL MATERIAL PREVIEW Athabasca University

ACCT351v14Intermediate Financial Accounting IPractice Final
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Examination (with Solutions) complete material Athabasca
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ACCT 351v14 q2




IntermediateFinancialAccountingI Practice Final 2
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Examination (with Solutions) q2 q2 q2




Instructions to the Student: q2 q2 q2




1. This practice exam is intended to provide a sample of various learning concepts covered
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after the midterm exam. The practice examination questions may not be the same as the
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actual examination questions. The actual exam is based on any of the learning objectives
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from the textbook that are identified in the ACCT 351 course lessons.
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2. In order to provide the best feedback on areas that require additional study, you should write
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this practice exam as a closed-book examination without the use ofbooks ornotes.
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3. Thisexamination contributes 0%toyourgradein thiscourse. Itisdesigned witha
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comprehensive format for study purposes only.
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4. The breakdown for this examination is asfollows:
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Part Description
1 Written Response/Theory q2




2 Short Calculations q2




3 Accounts Receivable q2




4 Inventory
5 Investments
6 Assets
7 Intangibles


Note: For all journal entries, explanations are not required.
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Showcalculations whereverpossible. Ifyouneedacalculatortodeterminean amount, then
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that calculation should be shown.
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,Part 1: Written Response/Theory
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Note: The questions in Part 1 areexamples only. Any ofthe learning objectives inthe coursethat deal
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with accounting theory may be examined in the actual examination, so it is important to review and
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understand all the objectives. The Summary of Learning Objectives in the textbook is a good place to
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start this type of review.
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When youare answering written responsequestions worth severalmarks,thinkabout what, why,
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when, and how to answer the question fully.
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Complete each unrelated question. q2 q2 q2




1. When an asset isheld forsale, what basis isused to determinetheamount toreport on the
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Balance Sheet, and how is it presented on the Balance Sheet?
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Solution:
The asset isremeasuredto the lower ofits carrying value and fair value less cost to sell.
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2. Differentiatebetween aperiodic andperpetual inventorysystem. 2
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Solution:
A perpetual system records purchases to Inventory, while periodic records purchases to
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Purchases.Forperpetual,freight-in,purchasereturns/allowances/discounts arerecordedto
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Inventory while periodic records these to separate accounts. For perpetual, the Cost of Goods
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Sold is recognized and recorded at the time of each sale by debiting COGS and crediting
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Inventory. For periodic no such entry is done, and COGS is a residual amount that depends on
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separately calculating the cost of ending inventory at the end of each period, usually by costing
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the physical count. Under a perpetual inventory system, the balance of the Inventory account
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should always represent the ending inventory amount. For periodic, the Inventory balance is
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adjusted to equal the costed physical count. Even under the perpetual system, an annual count
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is needed to test the accuracy of the records.
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, 3. Explaintheconceptsofothercomprehensive income,comprehensiveincome,
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and accumulated other comprehensive income.
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Solution:
Other comprehensive income is made up of revenues, gains, expenses, and losses that
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accounting standards say are included in comprehensive income, but excluded from net
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income. Comprehensive income is the total of net income and other comprehensive
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incomeand representsthe change inequity(orthenet assets) ofany entity during a period
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from non-owner source transactions and events. Accumulated other comprehensive
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income is the balance of all past charges and credits to other comprehensive income to
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the balance sheet date. It is included in the shareholder’s equity section of the balance
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sheet.
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4. When anote is receivedfor property andthemarket rate is unknown, howis the
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transaction’s fair value determined? How is fair value determined when neither the market rate q2 q2 q2 q2 q2 q2 q2 q2 q2 q2 q2 q2 q2




nor the property’s fair value is known?
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Solution:
The fair value ofthe propertythat is given up can be used as an estimateof the fair value of the note
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received. If neither fair value is known, then a market rate must be imputed and then used to
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determine the note’s present value. The objective of calculating the appropriate interest rate is
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to approximate the rate that would have been agreed on if an independentborrower and lender
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hadnegotiated asimilartransaction.The choice of arate is affected by the prevailing rates for
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similar instruments by issuers with similar credit ratings. It is also affected by factors such as
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restrictive covenants, collateral, the payment schedule, and the existing prime interest rate.
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