Intermediate Accounting Questions & Solutions

Written by-Mohammad Salim Hossain

B.Com(Hons),M.Com(Accounting), MBA major in Finance(BOU)Assistant Professor & Head, Department of Business Administration

Model Institute of Science & Technology (MIST), Gazipur.Examiner of National University (BBA & MBA Program)

Prominance Publication’s16, Banglabazar, Dhaka-1205

Bangladesh

For Professional BBA Students ( Principles of Finance) of all universities and Colleges.

Published By:Hussain Trakikul AzamProminance PublicationsMobile: 01718359366

All Rights reserved by the authors. This book is protected by copyright. Neither this book nor any part may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, microfilming, and recording, or by any information storage, retrieval system or otherwise, without the prior written permission of the author.

First Edition: January,2013

Price: Tk.170Network Computer49,Banglabazar, 1100

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DEDICATED TO -

ALLAH

Preface to First Edition

Bismillahir Rahmanir Rahim.

Alhamdulilah. I have great pleasure in placing the book "Intermediate Accounting" for students of BBA(Hons). and other professionals. Finance is undergoing a renaissance in response to technological changes, globalization and growing risk management concerns. In these challenging times, Principles of Finance will be helpful to make tactical decision in business concern, from this point of view I have just written this book.

The Primary objective of this book is to provide the basic concepts and applications of Principles of Finance to the needs of students appearing in the examinations of BBA (Hons), & professional examinations. Most of the information is collected from website and questions of different years in National university.

I have tried my best to make this book in a simple language, most systematic manner and free from errors and omission. I will be grateful if the mistakes and deficiencies are

pointed out to me by the readers. Constructive criticisms and suggestions for improvement are most welcome.

Mohammad Salim HossainE-mail: salimmist@yahoo.com

Mobile: 01711-385824

1st Year /2nd SemesterDetailed Syllabus

Intermediate Accounting1.Conceptual Frame work Underlying Financial Accounting: Conceptual Framework, Basic objective, Fundamental Concepts, Recognition and Measurement Concept.

2.Receivables: Recognition and valuation of Accounts Receivables, Recognition and valuation of Notes Receivables, Disposition of Accounts and Notes Receivable, Presentation and Analysis.

3.Acquisition and Disposition of property, Plant and Equipment: Acquisition of property, plant and equipments, Valuation, Costs subsequent to Acquisition, Disposition of plant Assets.

4.Depreciation, Impairments and Disposition: Depreciation, Impairments, Depletion, Presentation and analysis.

5.Intangible Assets: Intangible Assets Issues, Specifically Identifiable Intangibles, Goodwill, Impairment of Intangible Assets, R & D Cost, Presentation of Intangibles and Related costs.

6.Current Liabilities and Contingencies: Liability, Current Liability, Gain contingencies, Loss contingencies, Presentation and Analysis.

7.Revenue Recognition: Guidelines, Revenue Recognition at point of sales, Before Delivery and After Delivery.

8.Accounating for Leases: Basics of Leases, Accounting by Lessee and Lessor, Special Accounting Problems.Recommended Book:

1.D .E Keiso and JJ Weygandt. Intermediate Accounting. John Wiley and sons, Inc.

Contents

SL.NO. Name of Question & solution Pages 1. Suggestions1. BBA Question & Solution -2005

(According to Old Syllabus)BBA Question & Solution -2005(According to New Syllabus)

2. BBA Question & Solution -20063. BBA Question & Solution -20074. BBA Question & Solution -20085. BBA Question & Solution -20096. BBA Question & Solution -20107. BBA Question & Solution -20118. Chapter wise theory 9. Chapter wise formula

10. Exercise- Risk & Return11. Time Value of Money12. Cost of Capital14. Capital Budgeting15 Short term Financing

BBA First Year 2 nd Semester Intermediate Accounting

Chapter-1Conceptual Framework underlying Financial Accounting

1.Describe the basic principles of accounting?2007

2.What are the four basic assumptions that underlie the financial accounting

structure?2008,2009

3.What is conceptual framework? Why is a conceptual framework necessary in

financial reporting?2008

4. What are the primary objective of financial reporting?2009

5.How do you define conceptual framework in financial Accounting? What is

included in it?2010

6.What is meant by the term "qualitative characteristics of accounting

information"? 2011

7. What is the distinction between comparability and consistency? 2011

Chapter-2

Receivables

1.What are the basic problem that occur in the valuation of accounts receivable?

2007,2011

2.What are the two methods for recording uncollectibles?2007

3.Differentiate between interest bearing and zero interest bearing note.2007

4.What are two methods of recording accounts receivable transactions when

cash discount situation is involved? Which is more theoretically correct?2008

5. “There is no such thing as a non-interest bearing note”-Comment.2008

6. what are the methods of recording bad debts and which one is the best? Why?

2009

7.What are the major purposes of establishing an allowance for uncollectible

accounts?2010

8. Define a "compensating balance". How should a compensating balance be

reported?2011

Chapter-3

Acquisition & Disposition of property plant and Equipment

1. What are Plant assets? What are the characteristics of plant assets?

2005,2008,2011

2. What costs are included in the initial valuation of building?2008

3.Provide two example of assets that do not qualify for interest

capitalization.2009,2011

4.What interest rates should be used in determining the amount of interest to be

capitalized? How should the amount of interest to be capitalized be determined?

2009

Chapter-4

Depreciation, Impairments, and Depletion

1.Distinguish between depreciation, depletion, and amotization.2007,2010,2011

2.What is depreciation? 2008

3. What basic questions must be answered before the amount of the depreciation

charge can be computed?2008

4.What are the major causes of deprecation? 2008

5.What are the general methods used for calculating depreciation? What is the

basic difference between straight line method and activity method?2009

6.Mention the factors to be considered in calculating the depletion base?2009

7.What does the term accelerated depreciation mean? Provide a theoretical

reason to support using an accelerated depreciation method.2010

8.Name two assets that are subject to depreciation, to depletion and to

amortization.2010

9.Identify the factors that are relevant in determining the annual depreciation

charge.2011

Chapter-5

Intangible Assets

1.What is goodwill?2005,2008,2011

2.What are the major types of intangible assets?2007

3. What cost are included in the initial valuation of intangible assets? 2007

4. What is negative goodwill?2008,2011

5.What is the nature of R& D cost? Distinguish between capital and

revenue.2008

6.What are the two main characteristics of intangible assets?2009

7.Explain how, losses on impaired intangible assets should be reported in

income?2009

8.What is amortization if intangible assets? What are the factors to be

considered in estimating the useful life on an intangible asset?2009

9. what are the characteristics of intangible assets? Give and example of an asset

that has no physical existence but is not classified as an intangible asset.2010

10.Should cost incurred on internally generated intangible assets be capitalized

in assets accounts?2010

Chapter-6

Current Liabilities & Contingencies

1.What is the difference between provision and contingent liability? 2007

2.Contrast the cash basis method and the accrual method of accounting for

warranty costs.2007,2011

3.Under what conditions should a contingent liability be recorded?2008

4.Distinguish between a current liability and contingent liability. 2008

5.What is contingent liability? How should contingent liabilities be reported?

2010

Chapter-7

Revenue Recognition

1.When is revenue recognized under the cost-recovery mehod?2008

2. What is the nature of an installment sale? How do installment sales differ

from ordinary credit sales?2008

3. Explain the difference between the installment-sales method and the cost-

recovery method of revenue recognition.2009,2011

4.What are the three alternative accounting methods available to a seller that is

exposed to continued risk of ownership through return of the product?2009

5.Indentify and briefly describe the two methods generally employed to account

for the cash received in situations where the collection of the sales price is not a

reasonably assured.2009

6.For what reasons should the percentage of completion method be used over the

completed contract method whenever possible?2011

Chapter-8

Accounting for Leases

1.Explain the distinction between a direct financing lease and a sale-type lease

for a lessor.2005,

2. What are the advantages of lease transactions? 2007

3.It is possible that both lessee and lessor will carry the asset on their books and

both will depreciate the capitalized asset? Explain. 2007

4.Define lease.2008, What are the types of lease?2011

5.What criteria must be met before a lease can be properly accounted for a

capital lease on the books of the lessee? 2008

6. What are the difference between operating lease and capital lease from the

view point of the lessee?2009

7. If an operating lease requires the payment of uneven rental amounts over its

life, how should the lessee recognize rental expense?2009

8.What is a capital lease? What features may characterize a capital lease?2010

9. Distinguish between minimum rental payments and minimum lease payments,

and indicate what is included in minimum lease payments. 2011

Short notes

2010

1.Accounting Constraints. 2.Aging Schedule. 3. Plant assets. 4.Goodwill

5.Operating lease. 6.Direct-write-off method 7. Wasting assets.

2011

(i) Conceptual framework; (ii) Cost recovery method;

(iii)Revenue recognition at point of sales;(iv)Capitalization period;

(v) Zero interest bearing notes; (vi) Guarantee and warranty cost;

(vii) Capital lease.