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WGU ADVANCED ACCOUNTING – MODERN
ADVANCED ACCOUNTING IN CANADA EXAM/
FINANCIAL ACCOUNTING / ADVANCED
ACCOUNTING | 2026/2027 EDITION | VERIFIED
QUESTIONS WITH DETAILED ANSWERS AND
RATIONALES | BRAND NEW!
1. Under IFRS 10, an investor is considered to control an investee
when it has all of the following EXCEPT:
A. Power over the investee
B. Exposure or rights to variable returns from its involvement
C. The ability to use its power to affect the investor's returns
D. Majority ownership of the investee's voting shares
Control under IFRS 10 requires power, exposure to variable returns, and
the ability to use power to affect returns. Majority ownership is a
common indicator of power but is not a required criterion—control can
exist through contractual arrangements, de facto control, or other
means without majority ownership.
2. A parent company acquires 100% of a subsidiary. At the acquisition
date, the fair value of the subsidiary's identifiable net assets exceeds
the purchase consideration transferred. This transaction should be
accounted for as:
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A. Goodwill
B. A bargain purchase gain recognized in profit or loss
C. A decrease in consolidated retained earnings
D. Negative goodwill amortized over 10 years
Under IFRS 3 and ASPE Section 1582, when the fair value of identifiable
net assets exceeds consideration transferred, the acquirer recognizes a
gain in profit or loss. The acquirer must first reassess whether all assets
and liabilities have been correctly identified and measured before
recognizing the bargain purchase gain.
3. On consolidation, the parent's investment in subsidiary account is:
A. Added to the subsidiary's share capital
B. Reported as an asset on the consolidated balance sheet
C. Presented as a separate line item in equity
D. Eliminated against the subsidiary's equity accounts
The consolidation process eliminates the parent's investment account
against the subsidiary's equity at the acquisition date. This reflects the
group as a single economic entity, where investments in group
companies are internal transactions.
4. A parent sells inventory to its subsidiary at a profit. At year-end, the
subsidiary still holds 40% of this inventory. The unrealized profit to be
eliminated on consolidation is:
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A. 100% of the profit
B. 60% of the profit
C. 40% of the profit
D. 0% of the profit
Intercompany profits on inventory remaining in the group at year-end
must be eliminated to the extent of the unsold inventory. The
elimination ensures consolidated inventory is reported at the group's
original cost.
5. Under the equity method, dividends received from an associate are:
A. Recognized as dividend income in profit or loss
B. Recognized as other comprehensive income
C. Recorded as a reduction of the investment carrying amount
D. Added to the investment carrying amount
Under the equity method, dividends received reduce the carrying
amount of the investment because the investor has already recognized
its share of the associate's profit. Recognizing dividend income would
result in double-counting.
6. Goodwill arising from the acquisition of an associate under the
equity method is:
A. Recognized separately as an intangible asset and amortized
B. Included in the carrying amount of the investment
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C. Recognized separately and tested for impairment annually
D. Immediately expensed
Under the equity method, any goodwill arising on acquisition of an
associate is not separately recognized but is included in the carrying
amount of the investment. The entire investment is tested for
impairment as a single unit.
7. A Canadian parent company has a foreign subsidiary whose
functional currency is the Canadian dollar. The subsidiary's financial
statements are prepared in euros. To consolidate, the subsidiary's
statements must be:
A. Remeasured into Canadian dollars using the temporal method
B. Translated using the current rate method
C. Translated using the average rate for all accounts
D. Reported without conversion
When a foreign operation's functional currency is the parent's
presentation currency (Canadian dollar), the temporal method is used to
remeasure the financial statements. This method uses historical rates
for non-monetary items and current rates for monetary items.
8. Under the temporal method, translation gains and losses are:
A. Deferred in other comprehensive income
B. Recognized in profit or loss
WGU ADVANCED ACCOUNTING – MODERN
ADVANCED ACCOUNTING IN CANADA EXAM/
FINANCIAL ACCOUNTING / ADVANCED
ACCOUNTING | 2026/2027 EDITION | VERIFIED
QUESTIONS WITH DETAILED ANSWERS AND
RATIONALES | BRAND NEW!
1. Under IFRS 10, an investor is considered to control an investee
when it has all of the following EXCEPT:
A. Power over the investee
B. Exposure or rights to variable returns from its involvement
C. The ability to use its power to affect the investor's returns
D. Majority ownership of the investee's voting shares
Control under IFRS 10 requires power, exposure to variable returns, and
the ability to use power to affect returns. Majority ownership is a
common indicator of power but is not a required criterion—control can
exist through contractual arrangements, de facto control, or other
means without majority ownership.
2. A parent company acquires 100% of a subsidiary. At the acquisition
date, the fair value of the subsidiary's identifiable net assets exceeds
the purchase consideration transferred. This transaction should be
accounted for as:
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A. Goodwill
B. A bargain purchase gain recognized in profit or loss
C. A decrease in consolidated retained earnings
D. Negative goodwill amortized over 10 years
Under IFRS 3 and ASPE Section 1582, when the fair value of identifiable
net assets exceeds consideration transferred, the acquirer recognizes a
gain in profit or loss. The acquirer must first reassess whether all assets
and liabilities have been correctly identified and measured before
recognizing the bargain purchase gain.
3. On consolidation, the parent's investment in subsidiary account is:
A. Added to the subsidiary's share capital
B. Reported as an asset on the consolidated balance sheet
C. Presented as a separate line item in equity
D. Eliminated against the subsidiary's equity accounts
The consolidation process eliminates the parent's investment account
against the subsidiary's equity at the acquisition date. This reflects the
group as a single economic entity, where investments in group
companies are internal transactions.
4. A parent sells inventory to its subsidiary at a profit. At year-end, the
subsidiary still holds 40% of this inventory. The unrealized profit to be
eliminated on consolidation is:
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A. 100% of the profit
B. 60% of the profit
C. 40% of the profit
D. 0% of the profit
Intercompany profits on inventory remaining in the group at year-end
must be eliminated to the extent of the unsold inventory. The
elimination ensures consolidated inventory is reported at the group's
original cost.
5. Under the equity method, dividends received from an associate are:
A. Recognized as dividend income in profit or loss
B. Recognized as other comprehensive income
C. Recorded as a reduction of the investment carrying amount
D. Added to the investment carrying amount
Under the equity method, dividends received reduce the carrying
amount of the investment because the investor has already recognized
its share of the associate's profit. Recognizing dividend income would
result in double-counting.
6. Goodwill arising from the acquisition of an associate under the
equity method is:
A. Recognized separately as an intangible asset and amortized
B. Included in the carrying amount of the investment
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C. Recognized separately and tested for impairment annually
D. Immediately expensed
Under the equity method, any goodwill arising on acquisition of an
associate is not separately recognized but is included in the carrying
amount of the investment. The entire investment is tested for
impairment as a single unit.
7. A Canadian parent company has a foreign subsidiary whose
functional currency is the Canadian dollar. The subsidiary's financial
statements are prepared in euros. To consolidate, the subsidiary's
statements must be:
A. Remeasured into Canadian dollars using the temporal method
B. Translated using the current rate method
C. Translated using the average rate for all accounts
D. Reported without conversion
When a foreign operation's functional currency is the parent's
presentation currency (Canadian dollar), the temporal method is used to
remeasure the financial statements. This method uses historical rates
for non-monetary items and current rates for monetary items.
8. Under the temporal method, translation gains and losses are:
A. Deferred in other comprehensive income
B. Recognized in profit or loss
