TEST BANK & SOLUTION MANUAL
FOR MODERN ADVANCED
ACCOUNTING IN CANADA 11TH
EDITION BY HILTON, MURRAY &
HERAUF| ALL CHAPTERS 1-12|
LATEST
Modern Advanced Accounting — Practice Exam
Chapter 1: Conceptual and Case Analysis Frameworks
1. Which of the following best describes the primary objective of general-purpose
financial statements under IFRS?
A. To provide information about the liquidation value of a company
B. To provide financial information about the reporting entity that is useful to
existing and potential investors, lenders, and other creditors in making decisions
about providing resources to the entity
C. To determine the exact amount of taxes owed to the government
D. To report only the cash flows of the entity
Rationale: The conceptual framework under IFRS states that the objective of general-
purpose financial reporting is to provide financial information about the reporting entity
that is useful to existing and potential investors, lenders, and other creditors in making
decisions about providing resources to the entity .
2. Under IFRS, which of the following is a fundamental qualitative characteristic of
useful financial information?
,A. Comparability
B. Timeliness
C. Relevance
D. Verifiability
Rationale: The two fundamental qualitative characteristics are relevance and faithful
representation. Comparability, timeliness, verifiability, and understandability are
enhancing qualitative characteristics .
3. The six-step case analysis framework typically begins with:
A. Calculating financial ratios
B. Identifying the issue or problem
C. Preparing journal entries
D. Drafting the financial statements
Rationale: The case analysis framework begins with identifying the issue or problem,
followed by analyzing the data, generating alternatives, evaluating alternatives, making
a recommendation, and communicating the conclusion .
4. Which of the following is a key difference between IFRS and ASPE regarding
financial statement presentation?
A. IFRS requires a statement of comprehensive income, while ASPE does not
B. ASPE requires more extensive note disclosures than IFRS
C. IFRS prohibits the use of the equity method
D. ASPE requires consolidation of all subsidiaries
Rationale: Under IFRS, a statement of comprehensive income is required, showing both
profit or loss and other comprehensive income. ASPE does not require this statement; it
reports only net income .
5. Professional judgment in accounting is most critical when:
A. Applying a rule that directly addresses the transaction
B. A transaction's substance is not directly addressed by an accounting standard
C. The transaction has no financial impact
D. Management prefers a particular accounting treatment
Rationale: Professional judgment is applied when the substance of a transaction is not
directly addressed by a specific standard. The accountant must consider the conceptual
framework and principles to determine the appropriate treatment .
, Chapter 2: Investments in Equity Securities
6. Under IFRS 9, which of the following equity investments is NOT measured at fair
value?
A. FVTPL investments
B. FVTOCI investments
C. Significant influence investments accounted for using the equity method
D. Investments held for trading
Rationale: Equity investments with significant influence are accounted for using the
equity method, which is not a fair value measurement method. FVTPL and FVTOCI
investments are measured at fair value .
7. Which of the following statements is TRUE regarding the equity method?
A. The equity method is used for reporting gains or losses for non-strategic investments
B. The investor's share of the associate's dividends declared is reported as revenue
C. The investor's investment in the associate changes in direct relation to the
changes taking place in the associate's equity accounts
D. The equity method reports unrealized gains and losses on revaluations to fair value in
net income
Rationale: Under the equity method, the investment account is adjusted for the
investor's share of the associate's profit or loss, other comprehensive income, and
dividends. Dividends reduce the investment account rather than being recognized as
revenue .
8. What percentage of ownership is typically used as a guideline to determine that
significant influence exists under IAS 28?
A. 20% or more
B. Less than 20%
C. Between 20% and 50%
D. 25% or more
Rationale: IAS 28 provides that if an investor holds 20% or more of the voting power of
the investee, it is presumed that the investor has significant influence, unless it can be
clearly demonstrated that this is not the case .
9. Under the equity method, dividends received from the investee are:
FOR MODERN ADVANCED
ACCOUNTING IN CANADA 11TH
EDITION BY HILTON, MURRAY &
HERAUF| ALL CHAPTERS 1-12|
LATEST
Modern Advanced Accounting — Practice Exam
Chapter 1: Conceptual and Case Analysis Frameworks
1. Which of the following best describes the primary objective of general-purpose
financial statements under IFRS?
A. To provide information about the liquidation value of a company
B. To provide financial information about the reporting entity that is useful to
existing and potential investors, lenders, and other creditors in making decisions
about providing resources to the entity
C. To determine the exact amount of taxes owed to the government
D. To report only the cash flows of the entity
Rationale: The conceptual framework under IFRS states that the objective of general-
purpose financial reporting is to provide financial information about the reporting entity
that is useful to existing and potential investors, lenders, and other creditors in making
decisions about providing resources to the entity .
2. Under IFRS, which of the following is a fundamental qualitative characteristic of
useful financial information?
,A. Comparability
B. Timeliness
C. Relevance
D. Verifiability
Rationale: The two fundamental qualitative characteristics are relevance and faithful
representation. Comparability, timeliness, verifiability, and understandability are
enhancing qualitative characteristics .
3. The six-step case analysis framework typically begins with:
A. Calculating financial ratios
B. Identifying the issue or problem
C. Preparing journal entries
D. Drafting the financial statements
Rationale: The case analysis framework begins with identifying the issue or problem,
followed by analyzing the data, generating alternatives, evaluating alternatives, making
a recommendation, and communicating the conclusion .
4. Which of the following is a key difference between IFRS and ASPE regarding
financial statement presentation?
A. IFRS requires a statement of comprehensive income, while ASPE does not
B. ASPE requires more extensive note disclosures than IFRS
C. IFRS prohibits the use of the equity method
D. ASPE requires consolidation of all subsidiaries
Rationale: Under IFRS, a statement of comprehensive income is required, showing both
profit or loss and other comprehensive income. ASPE does not require this statement; it
reports only net income .
5. Professional judgment in accounting is most critical when:
A. Applying a rule that directly addresses the transaction
B. A transaction's substance is not directly addressed by an accounting standard
C. The transaction has no financial impact
D. Management prefers a particular accounting treatment
Rationale: Professional judgment is applied when the substance of a transaction is not
directly addressed by a specific standard. The accountant must consider the conceptual
framework and principles to determine the appropriate treatment .
, Chapter 2: Investments in Equity Securities
6. Under IFRS 9, which of the following equity investments is NOT measured at fair
value?
A. FVTPL investments
B. FVTOCI investments
C. Significant influence investments accounted for using the equity method
D. Investments held for trading
Rationale: Equity investments with significant influence are accounted for using the
equity method, which is not a fair value measurement method. FVTPL and FVTOCI
investments are measured at fair value .
7. Which of the following statements is TRUE regarding the equity method?
A. The equity method is used for reporting gains or losses for non-strategic investments
B. The investor's share of the associate's dividends declared is reported as revenue
C. The investor's investment in the associate changes in direct relation to the
changes taking place in the associate's equity accounts
D. The equity method reports unrealized gains and losses on revaluations to fair value in
net income
Rationale: Under the equity method, the investment account is adjusted for the
investor's share of the associate's profit or loss, other comprehensive income, and
dividends. Dividends reduce the investment account rather than being recognized as
revenue .
8. What percentage of ownership is typically used as a guideline to determine that
significant influence exists under IAS 28?
A. 20% or more
B. Less than 20%
C. Between 20% and 50%
D. 25% or more
Rationale: IAS 28 provides that if an investor holds 20% or more of the voting power of
the investee, it is presumed that the investor has significant influence, unless it can be
clearly demonstrated that this is not the case .
9. Under the equity method, dividends received from the investee are:
