Title: Intermediate Accounting Revision Tests – Comprehensive Practice Questions

Below is a set of revision test questions designed for Intermediate Accounting
(14th Canadian Edition, Volume 1 by Donald E. Kieso), along with a detailed
rationale for each question. These questions target core concepts—including
the conceptual framework, revenue recognition, measurement and recognition
issues, and lease accounting—that are critical for your revision.


Revision Test Questions

Question 1: Conceptual Framework & Revenue Recognition

Question:
Which of the following best describes the primary objective of financial reporting according to the
conceptual framework?
A. To provide information useful for assessing cash flows only
B. To provide information that helps users assess an entity’s resources, claims to those resources, and
changes in them
C. To ensure that all transactions are recorded on a cash basis
D. To focus solely on profitability measures

Answer Space: ____________________



Question 2: Revenue Recognition under Canadian Standards

Question:
Under IFRS 15 (which forms the basis for revenue recognition in Canadian accounting), an entity
recognizes revenue when:
A. Cash is received from the customer
B. Control of the promised goods or services is transferred to the customer
C. The earnings process is complete
D. The entity signs the contract with the customer

Answer Space: ____________________



Question 3: Bonds Issuance and Discount Accounting

Question:
A company issues $1,000,000 of bonds at a price below par because the stated interest rate is lower
than the market rate. How should the discount on bonds payable be treated in the financial statements?
A. As an immediate expense
B. As a contra-liability that is amortized to interest expense over the bond’s life
C. As a reduction in shareholders’ equity
D. As a deferred revenue item

, Answer Space: ____________________



Question 4: Journal Entries for Credit Sales

Question:
A company makes a credit sale of $50,000 with a cost of goods sold of $30,000. Prepare the journal
entries for (a) recording the sale and (b) recording the cost of goods sold.

Your Answer:
(a)
Dr. _______________________
Cr. _______________________

(b)
Dr. _______________________
Cr. _______________________



Question 5: Lease Classification

Question:
Discuss the criteria used to determine whether a lease should be classified as a finance lease (capital
lease) or an operating lease. Identify at least three key indicators.

Answer Space:




Rationale for the Revision Test

1. Question 1 Rationale:
This question tests your understanding of the fundamental objective of financial reporting—a
key concept in the conceptual framework. Option B is correct because it reflects the idea that
financial reporting is designed to inform users about an entity’s resources, obligations, and
changes in these elements. This is central to the learning objectives of Intermediate Accounting.

2. Question 2 Rationale:
Revenue recognition is one of the most critical areas in accounting. This question checks your
grasp of IFRS 15, which underpins Canadian revenue recognition practices. Recognizing revenue
when control of the promised goods or services transfers (Option B) is a major shift from earlier,
less detailed criteria. This helps you understand the timing and criteria for revenue recognition,
ensuring accuracy in financial statements.