FR II--IFRS

Ch-20. Towson Company has experienced tough competition for its talented workforce, leading it to enhance the pension benefits provided to employees. As a result, Towson amended its pension plan on January 1, 2017, and granted past service costs of $250,000. Current service cost for 2017 is $52,000. Interest expense is $18,000, and interest revenue is $5,000. Actual return on assets in 2017 is $3,000. What is Towson's pension expense for 2017? (a) $65,000. (b) $302,000. (c) $317,000. (d) $315,000.

$315,000

Ch-20. At January 1, 2017, Wembley Company had plan assets of $250,000 and a defined benefit obligation of the same amount. During 2017, service cost was $27,500, the discount rate was 10%, actual return on plan assets was $25,000, contributions were $20,000, and benefits paid were $17,500. Based on this information, what would be the defined benefit obligation for Wembley Company at December 31, 2017? (a) $277,500. (b) $285,000. (c) $27,500. (d) $302,500.

$285,000

Ch-19. Lincoln Company has the following four deferred tax items at December 31, 2017. The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same tax authority. Rent collected in advance: recognized when a performance obligation is satisfied for accounting purposes and when received for tax purposes. DTA $652,000 Use of straight-line depreciation for accounting purposes and accelerated depreciation for tax purposes. DTL $330,000 Recognition of income on installment sales at the time of sale for accounting purposes and during period of collection for tax purposes. DTL $64,000 Warranty liabilities: recognized for accounting purposes at time of sale for tax purposes at time paid. DTA $37,000 On Lincoln's December 31, 2017, statement of financial position, it will report: (a) $394,000 non-current deferred tax liability and $689,000 non-current deferred tax asset. (b) $330,000 non-current liability and $625,000 current deferred tax asset. (c) $295,000 non-current deferred tax asset. (d) $295,000 current tax receivable.

$295,000 non-current deferred tax asset.

Ch-14. On January 1, Martinez Inc. issued $3,000,000, 11% bonds for $3,195,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report bonds payable of (a) $3,185,130. (b) $3,184,500. (c) $3,173,550. (d) $3,165,000.

$3,165,000

Ch-14. On January 1, Patterson Inc. issued $5,000,000, 9% bonds for $4,695,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Patterson uses the effective-interest method of amortizing bond discount. At the end of the first year, Patterson should report bonds payable of (a) $4,725,500. (b) $4,714,500. (c) $258,050. (d) $4,745,000.

$4,745,000

Ch-19. Stephens Company has a deductible temporary difference of $2,000,000 at the end of its first year of operations. Its tax rate is 40 percent. Stephens has $1,800,000 of income taxes payable. After a careful review of all available evidence, Stephens determines that it is probable that it will not realize $200,000 of this deferred tax asset. On Stephens Company's statement of financial position at the end of its first year of operations, what is the amount of deferred tax asset? (a) $2,000,000. (b) $1,800,000. (c) $800,000. (d) $600,000.

$600,000.

Ch-20. At the end of the current period, Oxford Ltd. has a defined benefit obligation of $195,000 and pension plan assets with a fair value of $110,000. The amount of the vested benefits for the plan is $105,000. What amount related to its pension plan will be reported on the company's statement of financial position? (a) $5,000. (b) $90,000. (c) $85,000. (d) $20,000.

$85,000

Ch-15. Under IFRS, a purchase by a company of its own shares results in (a) an increase in treasury shares. (b) a decrease in assets. (c) a decrease in equity. (d) All of the above.

All of the above

Ch-22. IFRS requires companies to use which method for reporting changes in accounting policies? (a) Cumulative effect approach. (b) Retrospective approach. (c) Prospective approach. (d) Averaging approach.

Cumulative effect approach.

Ch-22. Which of the following is true regarding whether IFRS specifically addresses the accounting and reporting for effects of changes in accounting policies? Direct effects Indirect effects (a) Yes Yes (b) No No (c) No Yes (d) Yes No

Direct Effects: Yes Indirect Effects: No

Ch-22. Which of the following is not classified as an accounting change by IFRS? (a) Change in accounting policy. (b) Change in accounting estimate. (c) Errors in financial statements. (d) None of the above.

Errors in financial statements.

Ch-22. Which of the following is false? (a) GAAP and IFRS have the same absolute standard regarding the reporting of error corrections in previously issued financial statements. (b) The accounting for changes in estimates is similar between GAAP and IFRS. (c) Under IFRS, the impracticability exception applies both to changes in accounting principles and to the correction of errors. (d) GAAP has detailed guidance on the accounting and reporting of indirect effects; IFRS does not.

GAAP and IFRS have the same absolute standard regarding the reporting of error corrections in previously issued financial statements.

Ch-23. In the case of a bank overdraft (a) GAAP typically includes the amount in cash and cash equivalents. (b) IFRS typically includes the amount in cash equivalents but not in cash. (c) GAAP typically treats the overdraft as a liability, and reports the amount in the financing section of the statement of cash flows. (d) IFRS typically treats the overdraft as a liability, and reports the amount in the investing section of the statement of cash flows.

GAAP typically treats the overdraft as a liability, and reports the amount in the financing section of the statement of cash flows

Ch-14. All of the following are differences between IFRS and GAAP in accounting for liabilities except (a) When a bond is issued at a discount, GAAP records the discount in a separate contra liability account. IFRS records the bond net of the discount. (b) Under IFRS, bond issuance costs reduce the carrying value of the debt. Under GAAP, these costs are recorded as an asset and amortized to expense over the terms of the bond. (c) GAAP, but not IFRS, uses the term "troubled-debt restructurings." (d) GAAP, but not IFRS, uses the term "provisions" for contingent liabilities which are accrued.

GAAP, but not IFRS, uses the term "provisions" for contingent liabilities which are accrued

Ch-17. Which of the following statements is correct? (a) IFRS permits the fair value option for the equity method of accounting. (b) GAAP permits recovery of impairment losses. (c) Under IFRS, non-trading equity investments are accounted for at amortized cost. (d) IFRS and GAAP both have a trading investment classification.

IFRS and GAAP both have a trading investment classification.

Ch-17. All of the following are key similarities between GAAP and IFRS with respect to accounting for investments except (a) IFRS and GAAP require the same accounting for equity securities. (b) IFRS and GAAP apply the equity method to signifi- cant influence equity investments. (c) IFRS and GAAP have a fair value option for financial instruments. (d) the accounting for impairment of investments is similar, although IFRS allows recovery of impairment losses.

IFRS and GAAP require the same accounting for equity securities

Ch-21. Which of the following statements is true when comparing the accounting for leasing transactions under GAAP with IFRS? (a) IFRS for leases is more "rules-based" than GAAP and includes many bright-line criteria to determine ownership. (b) IFRS requires that companies provide a year-by-year breakout of future non-cancelable lease payments due in years 1 through 5. (c) The IFRS leasing standard is the subject of over 30 interpretations since its issuance in 1982. (d) IFRS does not provide detailed guidance for leases of natural resources, sale-leasebacks, and leveraged leases.

IFRS does not provide detailed guidance for leases of natural resources, sale-leasebacks, and leveraged leases

Ch-21. All of the following statements about lease accounting under IFRS and GAAP are true except: (a) IFRS requires a year-by-year breakout of payments related to leasing arrangements. (b) IFRS is more general in its lease accounting provisions than is GAAP. (c) The IFRS leasing standard, IAS 17, is the subject of only three interpretations. (d) Finance leases under IFRS are referred to as capital leases under GAAP.

IFRS requires a year-by-year breakout of payments related to leasing arrangements.

Ch-16. Which of the following statements is correct? (a) IFRS separates the proceeds of a convertible bond between debt and equity by determining the fair value of the debt component before the equity component. (b) Both IFRS and GAAP assume that when there is choice of settlement of an option for cash or shares, share settlement is assumed. (c) IFRS separates the proceeds of a convertible bond between debt and equity, based on relative fair values. (d) Both GAAP and IFRS separate the proceeds of convertible bonds between debt and equity.

IFRS separates the proceeds of a convertible bond between debt and equity by determining the fair value of the debt component before the equity component

Ch-19. Which of the following statements is correct with regard to IFRS and GAAP? (a) Under GAAP, all potential liabilities related to uncertain tax positions must be recognized. (b) The tax effects related to certain items are reported in equity under GAAP; under IFRS, the tax effects are charged or credited to income. (c) IFRS uses an affirmative judgment approach for deferred tax assets, whereas GAAP uses an impairment approach for deferred tax assets. (d) IFRS classifies deferred taxes based on the classification of the asset or liability to which it relates.

IFRS uses an affirmative judgment approach for deferred tax assets, whereas GAAP uses an impairment approach for deferred tax assets

Ch-13. In accounting for short-term debt expected to be refinanced to long-term debt (a) GAAP uses the authorization date to determine classification of short-term debt to be refinanced. (b) IFRS uses the authorization date to determine classification of short-term debt to be refinanced. (c) IFRS uses the financial statement date to determine classification of short-term debt to be refinanced. (d) GAAP uses the date of issue, but only for secured debt, to determine classification of short-term debt to be refinanced.

IFRS uses the financial statement date to determine classification of short-term debt to be refinanced

Ch-13. A typical provision is (a) bonds payable. (b) cash. (c) a warranty liability. (d) accounts payable.

a warranty liability

Ch-17. Select the investment accounting approach with the correct valuation approach Not Held-for-Collection Held-for-Collection (a) Amortized cost Amortized cost (b) Fair value Fair value (c) Fair value Amortized cost (d) Amortized cost Fair value

Not Held-for-Collection: Fair Value Held-for-Collection: Amortized Cost

Ch-20. For 2017, Carson Majors Inc. had pension expense of $77 million and contributed $55 million to the pension fund. Which of the following is the journal entry that Carson Majors would make to record pension expense and funding? (a) Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 55,000,000 (b) Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 99,000,000 (c) Pension Expense 55,000,000 Pension Asset/Liability 22,000,000 Cash 77,000,000 (d) Pension Expense 22,000,000 Pension Asset/Liability 55,000,000 Cash 77,000,000

Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 55,000,000

Ch-20. At the end of the current year, Kennedy Co. has a defined benefit obligation of $335,000 and pension plan assets with a fair value of $245,000. The amount of the vested benefits for the plan is $225,000. Kennedy has an actuarial gain of $8,300. What account and amount(s) related to its pension plan will be reported on the company's statement of financial position? (a) Pension Liability and $74,300. (b) Pension Liability and $90,000. (c) Pension Asset and $233,300. (d) Pension Asset and $110,000.

Pension Liability and $90,000

Ch-15. Under IFRS, the amount of capital received in excess of par value would be credited to (a) Retained Earnings. (b) Contributed Capital. (c) Share Premium. (d) Par value is not used under IFRS.

Share Premium

Ch-21. Which of the following is not a criterion for a lease to be recorded as a finance lease? (a) There is transfer of ownership. (b) The lease is cancelable. (c) The lease term is for the major part of the economic life of the asset. (d) There is a bargain-purchase option.

The lease is cancelable

Ch-23. Which of the following is true regarding the statement of cash flows under IFRS (a) The statement of cash flows has two major sections— operating and non-operating. (b) The statement of cash flows has two major sections— financing and investing. (c) The statement of cash flows has three major sections— operating, investing, and financing. (d) The statement of cash flows has three major sections— operating, non-operating, and financing.

The statement of cash flows has three major sections— operating, investing, and financing

Ch-15. Which of the following does not represent a pair of GAAP/ IFRS-comparable terms (a) Additional paid-in capital/Share premium. (b) Treasury stock/Repurchase reserve. (c) Common stock/Share capital—ordinary. (d) Preferred stock/Preference shares.

Treasury stock/Repurchase reserve

Ch-14. Which of the following is stated correctly? (a) Current liabilities follow non-current liabilities on the statement of financial position under GAAP but non-current liabilities follow current liabilities under IFRS. (b) IFRS does not treat debt modifications as extinguishments of debt. (c) Bond issuance costs are recorded as a reduction of the carrying value of the debt under GAAP but are recorded as an asset and amortized to expense over the term of the debt under IFRS. (d) Under GAAP, bonds payable is recorded at the face amount and any premium or discount is recorded in a separate account. Under IFRS, bonds payable is recorded at the carrying value so no separate premium or discount accounts are used.

Under GAAP, bonds payable is recorded at the face amount and any premium or discount is recorded in a separate account. Under IFRS, bonds payable is recorded at the carrying value so no separate premium or discount accounts are used

Ch-19. Which of the following is false? (a) Under GAAP, deferred taxes are reported based on the classification of the asset or liability to which it relates. (b) Under IFRS, all potential liabilities must be recognized. (c) Under GAAP, the enacted tax rate is used to measure deferred tax assets and liabilities. (d) Under IFRS, all deferred tax assets and liabilities are classified as non-current.

Under GAAP, deferred taxes are reported based on the classification of the asset or liability to which it relates

Ch-15. Which of the following is false? (a) Under GAAP, companies cannot record gains on transactions involving their own shares. (b) Under IFRS, companies cannot record gains on transactions involving their own shares. (c) Under IFRS, the statement of stockholders' equity is a required statement. (d) Under IFRS, a company records a revaluation surplus when it experiences an increase in the price of its common stock.

Under IFRS, a company records a revaluation surplus when it experiences an increase in the price of its common stock

Ch-13. Under IFRS, a provision is the same as (a) a contingent liability. (b) an estimated liability. (c) a contingent gain. (d) None of the above.

an estimated liability.

Ch-23. Under IFRS, significant non-cash transactions (a) are classified as operating, if they are related to income items. (b) are excluded from the statement of cash flows and disclosed in a narrative form or summarized in a separate schedule. (c) are classified as an investing or financing activity. (d) are classified as an operating activity, unless they can be specifically identified with financing or investing activities.

are excluded from the statement of cash flows and disclosed in a narrative form or summarized in a separate schedule

Ch-16. Under IFRS, convertible bonds (a) are separated into the bond component and the expense component. (b) are separated into debt and equity components. (c) are separated into their components based on relative fair values. (d) All of the above.

are separated into debt and equity components

Ch-17. Under IFRS, a company (a) should evaluate only equity investments for impairment. (b) accounts for an impairment as an unrealized loss, and includes it as a part of other comprehensive income and as a component of other accumulated comprehensive income until realized. (c) calculates the impairment loss on debt investments as the difference between the carrying amount plus accrued interest and the expected future cash flows discounted at the investment's historical effectiveinterest rate. (d) All of the above.

calculates the impairment loss on debt investments as the difference between the carrying amount plus accrued interest and the expected future cash flows discounted at the investment's historical effective interest rate

Ch-15. The term reserves is used under IFRS with reference to all of the following except (a) gains and losses on revaluation of property, plant, and equipment. (b) capital received in excess of the par value of issued shares. (c) retained earnings. (d) fair value differences.

capital received in excess of the par value of issued shares

Ch-23. For purposes of the statement of cash flows, under IFRS income taxes paid are treated as (a) cash flows from operating activities unless they can be separately identified as part of investing or financing activities. (b) an operating activity in all cases. (c) an investing or operating activity, depending on whether a refund is received. (d) either operating, financing, or investing activity, but treated consistently to other companies in the same industry.

cash flows from operating activities unless they can be separately identified as part of investing or financing activities

Ch-16. Anazazi Co. offers all its 10,000 employees the opportunity to participate in an employee share-purchase plan. Under the terms of the plan, the employees are entitled to purchase 100 ordinary shares (par value $1 per share) at a 20% discount. The purchase price must be paid immediately upon acceptance of the offer. In total, 8,500 employees accept the offer, and each employee purchases on average 80 shares at $22 per share (market price $27.50). Under IFRS, Anazazi Co. will record (a) no compensation since the plan is used to raise capital, not compensate employees. (b) compensation expense of $5,500,000. (c) compensation expense of $18,700,000. (d) compensation expense of $3,740,000.

compensation expense of $3,740,000

Ch-19. Under IFRS (a) "probable" is defined as a level of likelihood of at least slightly more than 60%. (b) a company should reduce a deferred tax asset when it is likely that some or all of it will not be realized by using a valuation allowance. (c) a company considers only positive evidence when determining whether to recognize a deferred tax asset. (d) deferred tax assets must be evaluated at the end of each accounting period.

deferred tax assets must be evaluated at the end of each accounting period

Ch-23. For purposes of the statement of cash flows, under IFRS interest paid is treated as (a) an operating activity in all cases. (b) an investing or operating activity, depending on use of the borrowed funds. (c) either a financing or investing activity. (d) either an operating or financing activity, but treated consistently from period to period.

either an operating or financing activity, but treated consistently from period to period

Ch-13. The presentation of current and non-current liabilities in the statement of financial position (balance sheet) (a) is shown only on GAAP financial statements. (b) is shown on both a GAAP and an IFRS statement of financial position. (c) is always shown with current liabilities reported first in an IFRS statement of financial position. (d) includes contingent liabilities under IFRS.

is shown on both a GAAP and an IFRS statement of financial position

Ch-14. Under IFRS, bond issuance costs, including the printing costs and legal fees associated with the issuance, should be (a) expensed in the period when the debt is issued. (b) recorded as a reduction in the carrying value of bonds payable. (c) accumulated in a deferred charge account and amortized over the life of the bonds. (d) reported as an expense in the period the bonds mature or are redeemed.

recorded as a reduction in the carrying value of bonds payable

Ch-21. A lease that involves a manufacturer's or dealer's profit is a (a) direct financing lease. (b) finance lease. (c) operating lease. (d) sales-type lease.

sales-type lease.

Ch-16. All of the following are key similarities between GAAP and IFRS with respect to accounting for dilutive securities and EPS except (a) the model for recognizing stock-based compensation. (b) the calculation of basic and diluted EPS. (c) the accounting for convertible debt. (d) the accounting for modifications of share options, when the value increases.

the accounting for convertible debt.

Ch-22. Under IFRS, the retrospective approach should not be used if (a) retrospective application requires assumptions about management's intent in a prior period. (b) the company does not have trained staff to perform the analysis. (c) the effects of the change have counterbalanced. (d) the effects of the change have not counterbalanced.

the company does not have trained staff to perform the analysis

Ch-16. Mae Jong Corp. issues $1,000,000 of 10% bonds payable which may be converted into 10,000 shares of $2 par value ordinary shares. The market rate of interest on similar bonds is 12%. Interest is payable annually on December 31, and the bonds were issued for total proceeds of $1,000,000. In accounting for these bonds, Mae Jong Corp. will (a) first assign a value to the equity component, then determine the liability component. (b) assign no value to the equity component since the conversion privilege is not separable from the bond. (c) first assign a value to the liability component based on the face amount of the bond. (d) use the "with-and-without" method to value the compound instrument.

use the "with-and-without" method to value the compound instrument

Ch-21. Under IFRS, in computing the present value of the minimum lease payments, the lessee should (a) use its incremental borrowing rate in all cases. (b) use either its incremental borrowing rate or the implicit rate of the lessor, whichever is higher, assuming that the implicit rate is known to the lessee. (c) use either its incremental borrowing rate or the implicit rate of the lessor, whichever is lower, assuming that the implicit rate is known to the lessee. (d) use the implicit rate of the lessor, unless it is impracticable to determine the implicit rate.

use the implicit rate of the lessor, unless it is impracticable to determine the implicit rate

Ch-13. In determining the amount of a provision, a company using IFRS should generally measure (a) using the midpoint of the range between the lowest possible loss and the highest possible loss. (b) using the minimum amount of the loss in the range. (c) using the best estimate of the amount of the loss expected to occur. (d) using the maximum amount of the loss in the range.

using the best estimate of the amount of the loss expected to occur

Ch-17. IFRS requires companies to measure their financial assets at fair value except when based on (a) whether the equity method of accounting is used. (b) whether the financial asset is a debt investment. (c) whether the financial asset is an equity investment. (d) whether an investment is classified as trading.

whether the equity method of accounting is used