TEST BANK & SOLUTIONS
MANUAL
MODERN ADVANCED
ACCOUNTING IN CANADA
,Table Of Contents
Chapter 1: Conceptual And Case Analysis Frameworks
For Financial Reporting
● Financial Reporting Objectives
● Conceptual Frameworks
● Professional Judgment
● Case Analysis Methodology
● Ethical Considerations In Reporting
Chapter 2: Investments In Equity Securities
● Classification Of Equity Investments
● Significant Influence
● Equity Method Accounting
● Fair Value Measurement
● Disclosure Requirements
Chapter 3: Business Combinations
● Acquisition Method
● Identifying The Acquirer
● Measurement Of Consideration
● Recognition Of Assets And Liabilities
● Goodwill And Bargain Purchases
Chapter 4: Consolidation Of A Non-Wholly Owned
Subsidiary
● Non-Controlling Interests
● Consolidated Financial Statements
● Acquisition-Date Adjustments
● Ownership Structures
Chapter 5: Consolidation Subsequent To Acquisition
Date
● Post-Acquisition Adjustments
● Income Allocation
● Consolidated Retained Earnings
● Non-Controlling Interest Calculations
,Chapter 6: Intercompany Inventory And Land Profits
● Intercompany Transactions
● Unrealized Inventory Profits
● Land Transfers Between Affiliates
● Consolidation Eliminating Entries
Chapter 7a: Intercompany Profits In Depreciable
Assets
● Transfers Of Depreciable Assets
● Unrealized Gains And Losses
● Depreciation Adjustments
● Consolidation Procedures
Chapter 7b: Intercompany Bond Holdings
● Parent–Subsidiary Debt Transactions
● Bond Retirement Effects
● Consolidated Reporting Requirements
Chapter 8: Consolidated Cash Flows And Changes In
Ownership
● Consolidated Statement Of Cash Flows
● Ownership Changes
● Step Acquisitions
● Partial Disposals
● Equity Transactions
Chapter 9: Other Consolidation Reporting Issues
● Complex Ownership Structures
● Special-Purpose Entities
● Advanced Consolidation Topics
● Disclosure Requirements
Chapter 10: Foreign Currency Transactions
, ● Foreign Exchange Risk
● Initial Recognition
● Subsequent Measurement
● Exchange Gains And Losses
● Financial Statement Presentation
Chapter 11: Translation And Consolidation Of Foreign
Operations
● Functional Currency Determination
● Translation Methods
● Foreign Subsidiary Consolidation
● Comprehensive Income Effects
Chapter 12: Accounting For Not-For-Profit And Public
Sector Organizations
● Not-For-Profit Accounting Standards
● Fund Accounting
● Public Sector Accounting Standards (Psas)
● Financial Statement Reporting
● Accountability And Transparency
Key Topics Covered
● Financial Reporting Frameworks And Professional Judgment
● Equity Investments And Significant Influence
● Business Combinations And Goodwill
● Consolidation Accounting
● Non-Controlling Interests
● Intercompany Transactions And Eliminations
● Consolidated Financial Statements
● Foreign Currency Transactions And Translation
● Consolidated Cash Flow Statements
● Ownership Changes And Equity Transactions
● Not-For-Profit Accounting
● Public Sector Accounting Standards
● Advanced Canadian Accounting Practices
This Comprehensive Test Bank And Solutions Manual Aligns With Chapters 1–12 Of
Modern Advanced Accounting In Canada (11th Edition) And Serves As A Valuable
Resource For Advanced Accounting Instruction, Examination Preparation, And
Professional Accounting Education.
, Chapter: One
1. Which Of The Following Would Not Be A Reason To Obtain A
Greater Understanding Of Accounting Practices In Other Nations?
A. Financial Results Are Disclosed In Different Currencies.
B. One Needs To Be Aware Of Differing Disclosure Requirements From
Nation To Nation, As This Impacts The Preparation Of Financial Statements.
C. Income-Smoothing May Have Affected A Foreign Subsidiary's Results;
Such Smoothing Practices Are Not Permitted In North America.
D. Departures From The Historical Cost Principle May Be Possible In Other Nations.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-01 Describe And Apply The Conceptual Framework For Financial Reporting. Topic: 01-01 The
Conceptual Framework For Financial Reporting
2. Which Of The Following Would Be Most Affected By Financial Statements
Being Prepared Under Different Accounting Principles?
A. Reduced Comparability.
B. Reduced Reliability.
C. Increased Complexity.
D. Inaccurate Asset Valuations.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-01 Describe And Apply The Conceptual Framework For Financial Reporting. Topic: 01-01 The
Conceptual Framework For Financial Reporting
3. The Cpa Canada Handbook - Accounting Is The Handbook Of Canadian
Accounting Standards. Why Do Companies In Canada Ensure That Their Financial
Reporting Is Consistent With Canadian Gaap?
A. Their Bank Requires Them To Do So.
B. Their Auditors Require Them To Do So.
C. Reporting Under The Cpa Canada Handbook - Accounting Is Required By
Public Companies' Boards Of Directors.
D. Compliance With The Cpa Canada Handbook - Accounting
Pronouncements Is Usually Required By Many Legal Statutes.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-01 Describe And Apply The Conceptual Framework For Financial Reporting. Topic: 01-01 The
Conceptual Framework For Financial Reporting
, 4. Which Decision Has Canada Made With Respect To Financial Reporting For
Private Enterprises?
A. To Adopt The Ifrs Standards For Small And Medium-Sized Enterprises.
B. To Retain The Current Standards.
C. To Look To Us Gaap For Standards.
D. To Develop And Maintain Its Own Standards For Private Enterprises.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-05 Gaap For Private Enterprises
5. Starting In 2011, What Is The Definition Of A Private Enterprise (Pe)
Under Canadian Gaap?
A. A Corporation That Has No Public Shareholders.
B. A Corporation That Has Less Than 500 Shareholders And Is Not Listed On
A Stock Exchange.
C. A Corporation Which Is Not Profit Oriented.
D. A Profit Oriented Enterprise That Has None Of Its Issued And
Outstanding Financial Instruments Traded In A Public Market And Does Not Hold
Assets In A Fiduciary Capacity For A Broad Group Of Outsiders As One Of Its
Primary Businesses.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-05 Gaap For Private Enterprises
6. Which Enterprises Must Report Under Ifrs In Canada?
A. All Corporations, Government Agencies And Private Companies.
B. Public Companies And Private Companies Whose Shareholders' Equity
Is In Excess Of
$500,000,000 At Any Particular Year End.
C. Public Companies, Private Companies And Not-For-Profit Organizations.
D. Publicly Accountable Enterprises.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-04 Gaap For Publicly Accountable Enterprises
7. What Approach Did Canada First Decide To Take With Respect To
Convergence With Ifrs?
A. Harmonization Of Cpa Canada Handbook With Ifrs.
B. Substituting Ifrs For Canadian Gaap When Approved By The Iasb.
C. Adopting Some But Not Necessarily All Ifrss By Reviewing Them On A
Case By Case Basis.
D. Reviewing Them With All Publically Accountable Entities To See Which
Ones Would Be Acceptable.
, Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-04 Gaap For Publicly Accountable Enterprises
8. What Choice(S) Do Private Enterprises Have In Their Financial
Reporting In Canada?
A. They Have No Choice At All; They Will Need To Report Under Ifrs.
B. They May Elect To Continue With Differential Reporting.
C. They May Adopt Accounting Principles That Are Appropriate
To The Circumstances.
D. They May Elect To Report Under Either Ifrs Or Aspe But Once Adopted,
Must Use All The Standards.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-05 Gaap For Private Enterprises
, 9. For Which Of The Following Types Of Organizations Does The Cpa
Canada Handbook Not Provide Specific Accounting Standards?
A. Publicly Accountable Enterprises.
B. Private Enterprises.
C. Not-For-Profit Organizations.
D. Proprietorships.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Learning Objective: 01-03 Identify Some Of The Differences Between Ifrs And Aspe.
Topic: 01-04 Gaap For Publicly Accountable Enterprises Topic: 01-05 Gaap For Private
Enterprises Topic: 01-06 Gaap For Not-For-Profit Organizations
Topic: 01-07 Gapp For Government And Other Government Organizations
10. Which Of The Following Is Not A Reason Why A Canadian Private Company
Would Elect To Report Under Ifrs?
A. The Company Is Planning To Go Public In The Near Future.
B. The Company Seeks Comparability With Public Companies Of A Similar Size.
C. It Is Likely To Be Less Expensive Than Reporting Under Aspe.
D. The Company Is A Subsidiary Of A Canadian Public Company.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-05 Gaap For Private Enterprises
11. The Current Ratio Measures:
A. Liquidity.
B. Solvency.
C. Profitability Of Assets.
D. Profitability Of Owners' Investment.
Accessibility: Keyboard Navigation Blooms: Remember
Blooms: Understand Difficulty: Easy
Learning Objective: 01-04 Analyze And Interpret Financial Statements To Assess The Impact Of Different Accounting Methods On
Key Financial Statements Ratios.
Topic: 01-08 Analysis And Interpretation Of Financial Statements
, 12. The Formula For The Current Ratio Is:
A. Current Assets - Current Liabilities
B. Current Assets/Current Liabilities
C. Total Debt/Shareholders' Equity
D. Net Income/Shareholders' Equity
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-04 Analyze And Interpret Financial Statements To Assess The Impact Of Different Accounting Methods On
Key Financial Statements Ratios.
Topic: 01-08 Analysis And Interpretation Of Financial Statements
13. The Debt-To-Equity Ratio Measures:
A. Liquidity.
B. Solvency.
C. Profitability Of Assets.
D. Profitability Of Owners' Investment.
Accessibility: Keyboard Navigation Blooms: Remember
Blooms: Understand Difficulty: Easy
Learning Objective: 01-04 Analyze And Interpret Financial Statements To Assess The Impact Of Different Accounting Methods On
Key Financial Statements Ratios.
Topic: 01-08 Analysis And Interpretation Of Financial Statements
Short Answer Questions
14. One Of The Underlying Assumptions Of The Historical Cost Principle Is
That A Stable Unit Of Measure (Currency) Should Be Used For Financial Reporting. Is
This Always The Case?
The Historical Cost Principle Is Not Very Useful When Inflation Rates Are High. As A
Result Of The Eroding Purchase Power Associated With Periods Of High Inflation,
Many Countries Have Had To Experiment With Price-Level Adjustments. These
Adjustments Often Include Asset Revaluations To Reflect Their Current Values.
Accessibility: Keyboard Navigation Blooms: Remember
Blooms: Understand Difficulty: Easy
Learning Objective: 01-01 Describe And Apply The Conceptual Framework For Financial Reporting. Topic: 01-01 The
Conceptual Framework For Financial Reporting
Topic: 01-02 Professional Judgment
, 15. X Inc. And Y Inc. Are Virtually Identical Companies With Identical Cost
Structures And Very Similar Business Practices Operating In The Same Lines Of
Business. X Inc. Is A Public Company Based In Canada And Follows Ifrs While Y
Inc. Is A Private Enterprise Based In Canada And Follows Aspe. The Following Were
The Condensed Income Statements For Both Companies For The Last Year Before
Both Adopted Ifrs.
X
I I
N N
C C
. .
Sales: $
1 2
, ,
0 0
0 0
0 0
, ,
0 0
0 0
0 0
Less:
Cost Of $
Goods Sold 5 1
0 ,
0 6
, 0
0 0
0 ,
0 0
0
0
Gross $
Margin 5 4
0 0
0 0
, ,
0 0
0 0
0 0
Admini $
Strative 2 3
Expenses 0 0
MANUAL
MODERN ADVANCED
ACCOUNTING IN CANADA
,Table Of Contents
Chapter 1: Conceptual And Case Analysis Frameworks
For Financial Reporting
● Financial Reporting Objectives
● Conceptual Frameworks
● Professional Judgment
● Case Analysis Methodology
● Ethical Considerations In Reporting
Chapter 2: Investments In Equity Securities
● Classification Of Equity Investments
● Significant Influence
● Equity Method Accounting
● Fair Value Measurement
● Disclosure Requirements
Chapter 3: Business Combinations
● Acquisition Method
● Identifying The Acquirer
● Measurement Of Consideration
● Recognition Of Assets And Liabilities
● Goodwill And Bargain Purchases
Chapter 4: Consolidation Of A Non-Wholly Owned
Subsidiary
● Non-Controlling Interests
● Consolidated Financial Statements
● Acquisition-Date Adjustments
● Ownership Structures
Chapter 5: Consolidation Subsequent To Acquisition
Date
● Post-Acquisition Adjustments
● Income Allocation
● Consolidated Retained Earnings
● Non-Controlling Interest Calculations
,Chapter 6: Intercompany Inventory And Land Profits
● Intercompany Transactions
● Unrealized Inventory Profits
● Land Transfers Between Affiliates
● Consolidation Eliminating Entries
Chapter 7a: Intercompany Profits In Depreciable
Assets
● Transfers Of Depreciable Assets
● Unrealized Gains And Losses
● Depreciation Adjustments
● Consolidation Procedures
Chapter 7b: Intercompany Bond Holdings
● Parent–Subsidiary Debt Transactions
● Bond Retirement Effects
● Consolidated Reporting Requirements
Chapter 8: Consolidated Cash Flows And Changes In
Ownership
● Consolidated Statement Of Cash Flows
● Ownership Changes
● Step Acquisitions
● Partial Disposals
● Equity Transactions
Chapter 9: Other Consolidation Reporting Issues
● Complex Ownership Structures
● Special-Purpose Entities
● Advanced Consolidation Topics
● Disclosure Requirements
Chapter 10: Foreign Currency Transactions
, ● Foreign Exchange Risk
● Initial Recognition
● Subsequent Measurement
● Exchange Gains And Losses
● Financial Statement Presentation
Chapter 11: Translation And Consolidation Of Foreign
Operations
● Functional Currency Determination
● Translation Methods
● Foreign Subsidiary Consolidation
● Comprehensive Income Effects
Chapter 12: Accounting For Not-For-Profit And Public
Sector Organizations
● Not-For-Profit Accounting Standards
● Fund Accounting
● Public Sector Accounting Standards (Psas)
● Financial Statement Reporting
● Accountability And Transparency
Key Topics Covered
● Financial Reporting Frameworks And Professional Judgment
● Equity Investments And Significant Influence
● Business Combinations And Goodwill
● Consolidation Accounting
● Non-Controlling Interests
● Intercompany Transactions And Eliminations
● Consolidated Financial Statements
● Foreign Currency Transactions And Translation
● Consolidated Cash Flow Statements
● Ownership Changes And Equity Transactions
● Not-For-Profit Accounting
● Public Sector Accounting Standards
● Advanced Canadian Accounting Practices
This Comprehensive Test Bank And Solutions Manual Aligns With Chapters 1–12 Of
Modern Advanced Accounting In Canada (11th Edition) And Serves As A Valuable
Resource For Advanced Accounting Instruction, Examination Preparation, And
Professional Accounting Education.
, Chapter: One
1. Which Of The Following Would Not Be A Reason To Obtain A
Greater Understanding Of Accounting Practices In Other Nations?
A. Financial Results Are Disclosed In Different Currencies.
B. One Needs To Be Aware Of Differing Disclosure Requirements From
Nation To Nation, As This Impacts The Preparation Of Financial Statements.
C. Income-Smoothing May Have Affected A Foreign Subsidiary's Results;
Such Smoothing Practices Are Not Permitted In North America.
D. Departures From The Historical Cost Principle May Be Possible In Other Nations.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-01 Describe And Apply The Conceptual Framework For Financial Reporting. Topic: 01-01 The
Conceptual Framework For Financial Reporting
2. Which Of The Following Would Be Most Affected By Financial Statements
Being Prepared Under Different Accounting Principles?
A. Reduced Comparability.
B. Reduced Reliability.
C. Increased Complexity.
D. Inaccurate Asset Valuations.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-01 Describe And Apply The Conceptual Framework For Financial Reporting. Topic: 01-01 The
Conceptual Framework For Financial Reporting
3. The Cpa Canada Handbook - Accounting Is The Handbook Of Canadian
Accounting Standards. Why Do Companies In Canada Ensure That Their Financial
Reporting Is Consistent With Canadian Gaap?
A. Their Bank Requires Them To Do So.
B. Their Auditors Require Them To Do So.
C. Reporting Under The Cpa Canada Handbook - Accounting Is Required By
Public Companies' Boards Of Directors.
D. Compliance With The Cpa Canada Handbook - Accounting
Pronouncements Is Usually Required By Many Legal Statutes.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-01 Describe And Apply The Conceptual Framework For Financial Reporting. Topic: 01-01 The
Conceptual Framework For Financial Reporting
, 4. Which Decision Has Canada Made With Respect To Financial Reporting For
Private Enterprises?
A. To Adopt The Ifrs Standards For Small And Medium-Sized Enterprises.
B. To Retain The Current Standards.
C. To Look To Us Gaap For Standards.
D. To Develop And Maintain Its Own Standards For Private Enterprises.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-05 Gaap For Private Enterprises
5. Starting In 2011, What Is The Definition Of A Private Enterprise (Pe)
Under Canadian Gaap?
A. A Corporation That Has No Public Shareholders.
B. A Corporation That Has Less Than 500 Shareholders And Is Not Listed On
A Stock Exchange.
C. A Corporation Which Is Not Profit Oriented.
D. A Profit Oriented Enterprise That Has None Of Its Issued And
Outstanding Financial Instruments Traded In A Public Market And Does Not Hold
Assets In A Fiduciary Capacity For A Broad Group Of Outsiders As One Of Its
Primary Businesses.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-05 Gaap For Private Enterprises
6. Which Enterprises Must Report Under Ifrs In Canada?
A. All Corporations, Government Agencies And Private Companies.
B. Public Companies And Private Companies Whose Shareholders' Equity
Is In Excess Of
$500,000,000 At Any Particular Year End.
C. Public Companies, Private Companies And Not-For-Profit Organizations.
D. Publicly Accountable Enterprises.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-04 Gaap For Publicly Accountable Enterprises
7. What Approach Did Canada First Decide To Take With Respect To
Convergence With Ifrs?
A. Harmonization Of Cpa Canada Handbook With Ifrs.
B. Substituting Ifrs For Canadian Gaap When Approved By The Iasb.
C. Adopting Some But Not Necessarily All Ifrss By Reviewing Them On A
Case By Case Basis.
D. Reviewing Them With All Publically Accountable Entities To See Which
Ones Would Be Acceptable.
, Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-04 Gaap For Publicly Accountable Enterprises
8. What Choice(S) Do Private Enterprises Have In Their Financial
Reporting In Canada?
A. They Have No Choice At All; They Will Need To Report Under Ifrs.
B. They May Elect To Continue With Differential Reporting.
C. They May Adopt Accounting Principles That Are Appropriate
To The Circumstances.
D. They May Elect To Report Under Either Ifrs Or Aspe But Once Adopted,
Must Use All The Standards.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-05 Gaap For Private Enterprises
, 9. For Which Of The Following Types Of Organizations Does The Cpa
Canada Handbook Not Provide Specific Accounting Standards?
A. Publicly Accountable Enterprises.
B. Private Enterprises.
C. Not-For-Profit Organizations.
D. Proprietorships.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Learning Objective: 01-03 Identify Some Of The Differences Between Ifrs And Aspe.
Topic: 01-04 Gaap For Publicly Accountable Enterprises Topic: 01-05 Gaap For Private
Enterprises Topic: 01-06 Gaap For Not-For-Profit Organizations
Topic: 01-07 Gapp For Government And Other Government Organizations
10. Which Of The Following Is Not A Reason Why A Canadian Private Company
Would Elect To Report Under Ifrs?
A. The Company Is Planning To Go Public In The Near Future.
B. The Company Seeks Comparability With Public Companies Of A Similar Size.
C. It Is Likely To Be Less Expensive Than Reporting Under Aspe.
D. The Company Is A Subsidiary Of A Canadian Public Company.
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Describe How Accounting Standards In Canada Are Tailored To Different Types Of Organizations.
Topic: 01-05 Gaap For Private Enterprises
11. The Current Ratio Measures:
A. Liquidity.
B. Solvency.
C. Profitability Of Assets.
D. Profitability Of Owners' Investment.
Accessibility: Keyboard Navigation Blooms: Remember
Blooms: Understand Difficulty: Easy
Learning Objective: 01-04 Analyze And Interpret Financial Statements To Assess The Impact Of Different Accounting Methods On
Key Financial Statements Ratios.
Topic: 01-08 Analysis And Interpretation Of Financial Statements
, 12. The Formula For The Current Ratio Is:
A. Current Assets - Current Liabilities
B. Current Assets/Current Liabilities
C. Total Debt/Shareholders' Equity
D. Net Income/Shareholders' Equity
Accessibility: Keyboard Navigation Blooms: Remember
Difficulty: Easy
Learning Objective: 01-04 Analyze And Interpret Financial Statements To Assess The Impact Of Different Accounting Methods On
Key Financial Statements Ratios.
Topic: 01-08 Analysis And Interpretation Of Financial Statements
13. The Debt-To-Equity Ratio Measures:
A. Liquidity.
B. Solvency.
C. Profitability Of Assets.
D. Profitability Of Owners' Investment.
Accessibility: Keyboard Navigation Blooms: Remember
Blooms: Understand Difficulty: Easy
Learning Objective: 01-04 Analyze And Interpret Financial Statements To Assess The Impact Of Different Accounting Methods On
Key Financial Statements Ratios.
Topic: 01-08 Analysis And Interpretation Of Financial Statements
Short Answer Questions
14. One Of The Underlying Assumptions Of The Historical Cost Principle Is
That A Stable Unit Of Measure (Currency) Should Be Used For Financial Reporting. Is
This Always The Case?
The Historical Cost Principle Is Not Very Useful When Inflation Rates Are High. As A
Result Of The Eroding Purchase Power Associated With Periods Of High Inflation,
Many Countries Have Had To Experiment With Price-Level Adjustments. These
Adjustments Often Include Asset Revaluations To Reflect Their Current Values.
Accessibility: Keyboard Navigation Blooms: Remember
Blooms: Understand Difficulty: Easy
Learning Objective: 01-01 Describe And Apply The Conceptual Framework For Financial Reporting. Topic: 01-01 The
Conceptual Framework For Financial Reporting
Topic: 01-02 Professional Judgment
, 15. X Inc. And Y Inc. Are Virtually Identical Companies With Identical Cost
Structures And Very Similar Business Practices Operating In The Same Lines Of
Business. X Inc. Is A Public Company Based In Canada And Follows Ifrs While Y
Inc. Is A Private Enterprise Based In Canada And Follows Aspe. The Following Were
The Condensed Income Statements For Both Companies For The Last Year Before
Both Adopted Ifrs.
X
I I
N N
C C
. .
Sales: $
1 2
, ,
0 0
0 0
0 0
, ,
0 0
0 0
0 0
Less:
Cost Of $
Goods Sold 5 1
0 ,
0 6
, 0
0 0
0 ,
0 0
0
0
Gross $
Margin 5 4
0 0
0 0
, ,
0 0
0 0
0 0
Admini $
Strative 2 3
Expenses 0 0
