Question 1

Information has predictive value if it provides feedback to users on their previous assessments of the company.

Accepted Answer

Information has predictive value if it can help users form predictions about the outcomes of past, present, and future events, not just provide feedback on previous assessments.

Question 2

Dividends are an expense of doing business.

Accepted Answer

Dividends are not an expense of doing business, but rather a distribution of profits to shareholders. They are paid out of the company's after-tax earnings and are not tax-deductible.

Question 3

The objective of both IFRS and ASPE is to allow financial reporting that is useful to the financial statement users.

Accepted Answer

Both IFRS and ASPE aim to provide financial reporting that is useful to the financial statement users.

Question 4

Information is considered to be material if it would impact the decisions of a financial statement user.

Accepted Answer

Information that is material is considered significant to financial statement users as it may influence their decisions. Materiality is a key concept in financial reporting as it helps in determining which information should be included or excluded from financial statements.

Question 5

Straight-line depreciation = (cost + residual value) ÷ estimated useful life.

Accepted Answer

Straight-line depreciation = (cost - residual value) ÷ estimated useful life.

Question 6

The return on assets = net income ÷ average total assets.

Accepted Answer

The formula for calculating return on assets is net income divided by average total assets.

Question 7

Public companies are prohibited from being cross listed.

Accepted Answer

Public companies are allowed to be cross listed, which means listing their shares on multiple stock exchanges in different countries. Cross listing helps companies to expand their investor base and increase the liquidity of their shares.

Question 8

Relevance, faithful representation and cost constraint are examples of the fundamental qualitative characteristics.

Accepted Answer

Relevance and faithful representation are fundamental qualitative characteristics, but cost constraint is considered a constraint on financial reporting, not a fundamental qualitative characteristic.

Question 9

Accumulated depreciation is deducted when calculating net income.

Accepted Answer

Accumulated depreciation is not deducted when calculating net income. It is a non-cash expense that is simply used to reduce the value of the asset on the balance sheet. Net income is calculated by subtracting all expenses, including depreciation, from revenues.

Question 10

The Classified Statement of Financial Position distinguishes between current and non current assets and liabilities.

Accepted Answer

This statement is accurate. The classified statement of financial position (also known as the balance sheet) separates assets and liabilities into current (expected to be used or settled within one year) and non-current (long-term) categories.

Question 11

A significant limitation of the template method is the lack of specific retained earnings and dividends declared accounts.

Accepted Answer

The template method does not include specific accounts for retained earnings and dividends declared, which can be a limitation for financial reporting and analysis purposes.

Question 12

The sales of merchandise on credit will cause the retained earnings and long term liabilities accounts to increase.

Accepted Answer

Sales of merchandise on credit increase accounts receivable and revenue, affecting retained earnings but not directly increasing long-term liabilities.

Question 13

The template method can only be used by large companies.

Accepted Answer

The template method can be used by any company, regardless of its size. It is a design pattern that allows for the creation of a base algorithm or structure that can be customized by subclasses.

Question 14

The issuance of common shares with a value of $9,000 to purchase land will increase the common share account.

Accepted Answer

Issuing common shares will increase the common share account.

Question 15

The purchase of equipment costing $19,500 for $1,500 down and the balance on account will increase both sides of the Statement of Financial Position Statement of Financial Position equation by $18,000.

Accepted Answer

The purchase of equipment increases the assets side of the equation by $18,000 (the cost of the equipment minus the down payment) and the liabilities side of the equation by $18,000 (the balance on account). Therefore, both sides of the equation increase by 18,000 and the statement is true.

Question 16

All public companies must follow IFRS.

Accepted Answer

IFRS (International Financial Reporting Standards) is a set of accounting standards that are used globally for financial reporting. Public companies are required to follow IFRS in order to ensure consistency and comparability in their financial statements across countries and industries.

Question 17

The purchase of a three-year insurance policy should be reflected on the Statement of Financial Position under current assets.

Accepted Answer

The answer of The purchase of a three-year insurance policy...

Question 18

Revenue recognition criteria are necessary to determine when to recognize revenue when using both accrual and cash accounting methods.

Accepted Answer

Revenue recognition criteria are primarily used in accrual accounting to determine when revenue is recognized. In cash accounting, revenue is recognized when cash is received, regardless of when the services were performed or goods were delivered.

Question 19

NBV of an asset is the cost of the asset that has already been expensed.

Accepted Answer

NBV (Net Book Value) of an asset is the cost of the asset minus its accumulated depreciation, it is not the cost of the asset that has already been expensed.

Question 20

A declaration of dividends results in an increase in liabilities and a decrease in shareholders' equity.

Accepted Answer

When a company declares dividends, it creates a liability for itself to pay out the declared dividend to shareholders. This increases the liabilities of the company. At the same time, since the company is paying out cash to shareholders, it reduces the shareholder's equity, resulting in a decrease in shareholders' equity. Therefore, both of these statements are true.

Quiz 2: Nalyzing Transaction and Their Effect on Financial Statement