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MGAC01H3 Study Guide - Midterm Guide: John Wiley & Sons, Debt Service Coverage Ratio, Cash Flow Statement


Department
Financial Accounting
Course Code
MGAC01H3
Professor
Daga
Study Guide
Midterm

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CHAPTER 5
FINANCIAL POSITION AND CASH FLOWS
SUMMARY OF QUESTION TYPES BY LEARNING OBJECTIVE AND LEVEL
OF DIFFICULTY
Item LO LOD Item LO LOD Item LO LOD Item LO LOD
Multiple Choice–Conceptual
1. 1 E 12. 4 M 23. 7 E 34. 9 M
2. 2 E 13. 4 E 24. 7 E 35. 9 M
3. 2 M 14. 4 M 25. 7 E 36. 10 M
4. 2 E 15. 4 M 26. 7 E 37. 10 M
5. 2 M 16. 4 E 27. 7 M 38. 10 M
6. 3 E 17. 4 E 28. 8 M 39. 10 H
7. 3 M 18. 4 E 29. 8 M 40. 11 H
8. 3 M 19. 4 M 30. 8 M *41. 12 M
9. 4 M 20. 4 E 31. 8 E *42. 12 M
10. 4 M 21. 4 E 32. 9 M *43. 12 M
11. 4 M 22. 6 E 33. 9 M
Multiple Choice–CPA Adapted
44. 4 E 47. 4 M 50. 7 M 53. 7 E
45. 4 M 48. 4 M 51. 7 E *54. 12 M
46. 4 M 49. 5 M 52. 7 E
Exercises
55. 2-5,7,9 M 58. 4 M 61. 4 M 64. 9 M
56. 2-4 E 59. 4 M 62. 4 M *65. 12 E
57. 4 E 60. 4 M 63. 7 M *66. 12 E
Problems
67. 3 M 69. 4 M 71. 8 H
68. 4 H 70. 8 H *72. 12 H
Note: E = Easy M = Medium H = Hard
Copyright © 2013 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited

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Test Bank for Intermediate Accounting, Tenth Canadian Edition
SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE
Item Type Item Type Item Type Item Type Item Type Item Type
Learning Objective 1
1. MC
Learning Objective 2
2. MC 3. MC 4. MC 5. MC 55. Ex 56. Ex
Learning Objective 3
6. MC 7. MC 8. MC 55. Ex 56. Ex 67. Pr
Learning Objective 4
9. MC 14. MC 19. MC 46. MC 57. Ex 62. Ex
10. MC 15. MC 20. MC 47. MC 58. Ex 68. Pr
11. MC 16. MC 21. MC 48. MC 59. Ex 69. Pr
12. MC 17. MC 44. MC 55. Ex 60. Ex
13. MC 18. MC 45. MC 56. Ex 61. Ex
Learning Objective 5
49. MC 55. Ex
Learning Objective 6
22. MC
Learning Objective 7
23. MC 25. MC 27. MC 51. MC 53. MC 63. Ex
24. MC 26. MC 50. MC 52. MC 55. Ex
Learning Objective 8
28. MC 29. MC 30. MC 31. MC 70. Pr 71. Pr
Learning Objective 9
32. MC 33. MC 34. MC 35. MC 55. Ex 64. Ex
Learning Objective 10
36. MC 37. MC 38. MC 39. MC
Learning Objective 11
40. MC
Learning Objective 12
*41. MC *43. MC *65. Ex *72. Pr
*42. MC *54. MC *66. Ex
Note: MC = Multiple Choice Ex = Exercise Pr = Problem
Copyright © 2013 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
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Financial Position and Cash Flows
CHAPTER STUDY OBJECTIVES
1. Understand the statement of financial position and statement of cash flows from a business
perspective. It is important to understand how users of financial statements use the statement of
financial position and the cash flow statement. For example, potential investors in a company may use
the statement of financial position to analyze a company’s liquidity and solvency in order to assess risk
of investing. In addition, the statement of financial position provides details about the company’s
financial structure. Users may use a company’s statement of cash flows to assess its earnings quality
and obtain information about its operating, investing, and financing activities.
2. Identify the uses and limitations of a statement of financial position. The statement of financial
position provides information about the nature and amounts of investments in enterprise resources,
obligations to creditors, and the owners’ equity in net resources. The statement of financial position
contributes to financial reporting by providing a basis for (1) calculating rates of return, (2) evaluating
the enterprise’s capital structure, and (3) assessing the enterprise’s liquidity, solvency, and financial
flexibility. The limitations of a statement of financial position are as follows: (1) The statement of
financial position often does not reflect current value, because accountants have adopted a historical
cost basis in valuing and reporting many assets and liabilities. (2) Judgements and estimates must be
used in preparing a statement of financial position. The collectibility of receivables, the saleability of
inventory, and the useful life of long-term tangible and intangible assets are difficult to determine. (3)
The statement of financial position leaves out many items that are of financial value to the business
but cannot be recorded objectively, such as its human resources, customer base, and reputation.
3. Identify the major classifications of a statement of financial position. The statement of
financial position’s general elements are assets, liabilities, and equity. The major classifications within
the statement of financial position on the asset side are current assets; investments; property, plant,
and equipment; intangible assets; and other assets. The major classifications of liabilities are current
and long-term liabilities. In a corporation, owners’ equity is generally classified as shares, contributed
surplus, retained earnings, and accumulated other comprehensive income.
4. Prepare a classified statement of financial position. The most common format lists liabilities and
shareholders’ equity directly below assets on the same page.
5. Identify statement of financial position information that requires supplemental disclosure.
Five types of information are normally supplemental to account titles and amounts presented in the
statement of financial position. (1) Contingencies: Material events that have an uncertain outcome. (2)
Accounting policies: Explanations of the valuation methods that are used or the basic assumptions
that are made for inventory valuation, amortization methods, investments in subsidiaries, and so on.
(3) Contractual situations: Explanations of certain restrictions or covenants that are attached to
specific assets or, more likely, to liabilities. (4) Additional information: Clarification by giving more detail
about the composition of statement of financial position items. (5) Subsequent events: Events that
happen after the date of the statement of financial position.
Copyright © 2013 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
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